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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
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COMMISSION FILE NUMBER 1-11123
THE JOHN NUVEEN COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 36-3817266
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 WEST WACKER DRIVE 60606
CHICAGO, ILLINOIS (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code:
312-917-7700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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CLASS A COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
(Title of Class) (Name of each exchange on which registered)
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Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.____
The aggregate market value of the outstanding Common Stock held by
non-affiliates of the Registrant on March 18, 1999 was $201,225,268.
The number of shares of the Registrant's Common Stock outstanding at March
18, 1999, was 31,299,536 consisting of 6,857,798 shares of Class A Common Stock,
$.01 par value, and 24,441,738 shares of Class B Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1998 are incorporated by reference into Parts II and IV of
this report. Portions of Registrant's Proxy Statement relating to the annual
meeting of stockholders to be held May 6, 1999 are incorporated by reference
into Parts I and III of this report.
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PART I
ITEM 1. BUSINESS
GENERAL
The John Nuveen Company's (the Company) principal businesses are asset
management and related research; development, marketing and distribution of
investment products and services; and municipal and corporate investment banking
services. The Company distributes its investment products, including mutual
funds (open-end funds), exchange-traded funds (closed-end funds), defined
portfolios (unit trusts), and individually managed accounts through registered
representatives associated with unaffiliated firms including broker-dealers,
commercial banks, affiliates of insurance providers, financial planners,
accountants, consultants, and investment advisers.
The Company's operations are organized around five subsidiaries including
John Nuveen & Co. Incorporated (Nuveen & Co.), a registered broker and dealer in
securities under the Securities Exchange Act of 1934, and four investment
advisory subsidiaries registered under the Investment Advisers Act of 1940.
These include Nuveen Advisory Corp. (NAC), Nuveen Institutional Advisory Corp.
(NIAC), Nuveen Asset Management Inc. (NAM) and Rittenhouse Financial Services,
Inc. (Rittenhouse). Nuveen & Co. provides investment product distribution and
related services for the Company's managed funds and defined portfolios, and
houses the Company's investment banking activities. NAC and NIAC provide
investment management for and administer the business affairs of the Nuveen
managed funds. NAM and Rittenhouse provide investment management services for
individual and institutional investors and Rittenhouse also acts as sub-adviser
and portfolio manager for a mutual fund managed by NIAC.
The Company is headquartered in Chicago, has offices in New York City, NY;
Irvine, CA; Radnor, PA and has sales representatives located nationally. The
Company is the successor to a business formed in 1898 by Mr. John Nuveen which
served as an underwriter and trader of municipal bonds. This core business was
augmented in 1961 when the Company developed and introduced its first municipal
defined portfolio, which is a fixed portfolio of municipal securities selected
and purchased by the Company and deposited in a trust. The Company introduced
its first municipal mutual fund in 1976, its first municipal money market fund
in 1981, and its first municipal exchange-traded fund in 1987. The Company began
providing individual managed account services to investors in early 1995 and
sponsored its first equity mutual fund in 1996. The Company expanded its defined
portfolio product line in mid-1997 to include portfolios with underlying assets
comprised of equity and taxable fixed-income securities.
On January 2, 1997, the Company completed the acquisition of Flagship
Resources Inc. (Flagship) and its wholly owned subsidiaries, Flagship Financial
Inc., a registered investment adviser under the Investment Advisers Act of 1940,
and Flagship Funds Inc., a registered broker-dealer under the Securities
Exchange Act of 1934. At December 31, 1996, Flagship managed over $4.2 billion
in predominantly municipal mutual funds and approximately $400 million in
managed accounts for individual investors. Upon the completion of the
acquisition, Flagship Financial Inc. became a wholly owned subsidiary of the
Company and changed its name to Nuveen Asset Management Inc. NAM now is
primarily responsible for providing private investment management services to
individual and institutional managed accounts with portfolios invested
exclusively in municipal securities and balanced portfolios of equity and
municipal securities. Flagship Funds Inc. was combined into Nuveen & Co., the
Company's broker-dealer subsidiary.
On August 31, 1997, the Company completed the acquisition of Rittenhouse,
which specializes in managing individual equity and balanced portfolios
primarily for high net worth individuals. Rittenhouse managed approximately $9.1
billion in predominately equity assets at the acquisition date. It is maintained
as a wholly-owned subsidiary of the Company.
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The Company was incorporated in the State of Delaware on March 23, 1992, as
a wholly-owned subsidiary of The St. Paul Companies, Inc. (St. Paul). Nuveen &
Co., the predecessor of the Company, had been a wholly-owned subsidiary of St.
Paul since 1974. During 1992, St. Paul sold a portion of its ownership interest
in the Company in a public offering. As of the date of this report, St. Paul
owned approximately 78% of the outstanding voting securities of the Company.
The following series of tables, including Net Assets Under Management,
Gross Sales of Investment Products, Net Flows, and Investment Advisory Fees,
provide data which should be helpful in understanding the Company's investment
products and should be referred to while reading the separate product
discussions which follow the tables.
NET ASSETS UNDER MANAGEMENT
The following table shows net assets managed by the Company at December 31
for each of the past three years. Defined portfolio assets under surveillance
are not included in net assets under management since the portfolios are not
actively managed and do not generate ongoing advisory fees.
NET ASSETS UNDER MANAGEMENT
(IN MILLIONS)
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<CAPTION>
DECEMBER 31,
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1998 1997 1996
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Managed Funds:
Mutual Funds -- Municipal(1).............................. $10,385 $ 9,753 $ 5,434
Mutual Funds -- Equity and Income......................... 1,498 1,132 496
Exchange-Traded Funds..................................... 26,223 26,117 25,434
Money Market Funds........................................ 824 970 1,004
Managed Accounts(2)......................................... 16,337 11,622 823
------- ------- -------
Total............................................. $55,267 $49,594 $33,191
======= ======= =======
</TABLE>
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(1) Includes $4.2 billion in mutual funds acquired from Flagship on January 2,
1997.
(2) Includes $9.1 billion in managed accounts acquired from Rittenhouse on
August 31, 1997.
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GROSS SALES OF INVESTMENT PRODUCTS
The following table summarizes gross sales for the Company for the past
three years, including managed funds, managed accounts, and defined portfolios:
GROSS SALES OF INVESTMENT PRODUCTS
(IN THOUSANDS)
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<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
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Mutual Funds:
Municipal(1).................................. $1,005,800 $ 600,240 $ 154,159
Equity and Income(2).......................... 547,430 350,377 494,533
---------- ---------- ----------
Total................................. 1,553,230 950,617 648,692
Exchange-Traded Funds........................... -- 125,000 --
Managed Accounts:
Municipal..................................... 878,768 488,349 134,573
Equity and Balanced(3)........................ 4,513,960 704,555 --
---------- ---------- ----------
Total................................. 5,392,728 1,192,904 134,573
---------- ---------- ----------
Total Managed Fund and Account
Sales............................... 6,945,958 2,268,521 783,265
Defined Portfolios (par value):
Primary -- Municipal.......................... 399,596 555,743 812,813
Primary -- Equity and Taxable Fixed-Income.... 315,960 82,352 --
Secondary..................................... 93,408 118,944 150,326
---------- ---------- ----------
Total................................. 808,964 757,039 963,139
---------- ---------- ----------
Total Sales........................... $7,754,922 $3,025,560 $1,746,404
========== ========== ==========
</TABLE>
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(1) The 1997 and 1998 periods include sales of funds acquired from Flagship on
January 2, 1997.
(2) Sales of Equity and Income Mutual Funds in 1996 are exclusively those of the
Nuveen Growth and Income Stock Fund sold through a special offering to
current Nuveen and Flagship fund shareholders and to current Nuveen defined
portfolio holders.
(3) The 1998 period and the last four months of 1997 include sales of
Rittenhouse accounts.
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NET FLOWS OF INVESTMENT PRODUCTS
The following table summarizes net flows (equal to sales, reinvestments and
exchanges less redemptions) of the Company's managed funds and accounts for the
past three years:
NET FLOWS
MANAGED FUNDS AND ACCOUNTS
(IN THOUSANDS)
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<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
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Mutual Funds:
Municipal(1)..................................... $ 581,893 $ 13,991 $ 64,251
Equity and Income(2)............................. 458,126 340,789 489,417
---------- ---------- --------
Total.................................... 1,040,019 354,780 553,668
Managed Accounts:
Municipal........................................ 666,443 361,524 134,573
Equity and Balanced(3)........................... 3,151,304 359,803 --
---------- ---------- --------
Total.................................... 3,817,747 721,327 134,573
---------- ---------- --------
Total.................................... $4,857,766 $1,076,107 $688,241
========== ========== ========
</TABLE>
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(1) The 1997 and 1998 periods include sales of funds acquired from Flagship on
January 2, 1997.
(2) Sales of Equity and Income Mutual Funds in 1996 are exclusively those of the
Nuveen Growth and Income Stock Fund sold through a special offering to
current Nuveen and Flagship fund shareholders and to current Nuveen defined
portfolio holders.
(3) The 1998 period and the last four months of 1997 include sales of
Rittenhouse accounts.
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INVESTMENT ADVISORY FEES
Advisory fees earned from assets managed by the Company for each of the
past three years are shown in the following table. Defined portfolios sold by
the Company do not produce ongoing advisory fees.
INVESTMENT ADVISORY FEES
(IN THOUSANDS)
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<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
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Mutual fund advisory fees(1)................................ $ 56,919 $ 51,562 $ 26,124
Less: reimbursed expenses................................... (5,068) (5,753) (629)
-------- -------- --------
Net advisory fees................................. 51,851 45,809 25,495
Exchange-traded fund advisory fees.......................... 159,638 156,392 155,172
Money market fund advisory fees............................. 3,804 4,317 4,925
Less: reimbursed expenses................................. (373) (516) (495)
-------- -------- --------
Net advisory fees................................. 3,431 3,801 4,430
Managed account advisory fees(2)............................ 57,939 15,633 748
-------- -------- --------
Total............................................. $272,859 $221,635 $185,845
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</TABLE>
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(1) The 1997 and 1998 periods include advisory fee income earned on assets
acquired from Flagship on January 2, 1997.
(2) The 1998 period and the last four months of 1997 include advisory fee income
earned on assets managed by Rittenhouse.
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MANAGED FUNDS
Overview
As of December 31, 1998, the Company offered 38 equity and income and
municipal mutual funds. These funds are actively managed and continuously offer
to sell and redeem their shares at prices based on the daily net asset values of
their portfolios. The investment objectives and asset mixes of the mutual funds
vary; however, most are managed with a view towards tax efficient results for
the investor.
The Company offers 31 national and state-specific municipal mutual funds
that invest substantially all of their assets in diversified portfolios of
intermediate-term or long-term municipal bonds rated within the four highest
investment grades.
The seven remaining mutual funds invest exclusively in U.S. equities,
European equities, or taxable fixed-income securities, or in a portfolio
combining equity, taxable fixed-income and/or municipal securities. During 1998,
the Company introduced and marketed two new equity and income funds, the Nuveen
Rittenhouse Growth Fund, which invests in a portfolio of equity securities of
U.S.-based large capitalization companies, and the Nuveen European Value Fund,
which invests in American Depository Receipts of established, well-known
European companies that are undervalued relative to their worldwide competitors.
The Company sponsors 57 exchange-traded funds that are actively managed and
invest exclusively in municipal securities. These funds do not continually offer
to sell and redeem their shares. Rather, daily liquidity is provided by the
ability to trade the shares of these funds on the New York and American Stock
Exchanges, at a price that may be above or below the share's net asset value.
The exchange-traded funds include insured and uninsured national and
single-state funds. Most of the exchange-traded funds have a "leveraged" capital
structure; these funds issue preferred stock that pays dividends at rates based
on short-term tax-free interest rates, while the capital raised by the sale of
the preferred stock is invested by the funds in longer-term municipal
securities. To the extent that the dividend rate on the preferred stock of the
exchange-traded fund increases (e.g., in the event of a rise in short-term
interest rates), the income to pay for dividends for common shareholders will be
reduced. If the preferred stock dividend rate were to exceed the rate of return
on the investment portfolio for an extended period, holders of common stock
would realize a lower rate of dividend return than if the fund were not
leveraged. If this condition persists, the exchange-traded funds' Board of
Directors may consider redeeming the outstanding preferred stock. In addition,
the Board may consider converting a fund from its exchange-traded status into an
open-end fund if the fund persistently trades on the stock exchange at deep
discounts to its net asset value per share. The Company considers either of
these actions extremely unlikely; however, if adopted, either may negatively
affect total assets under management.
While most of the exchange-traded funds have perpetual lives, five funds
(referred to as portfolios) representing approximately $880 million in assets
have a finite life and provide for a liquidating distribution of assets to
investors upon reaching a fixed termination date, beginning in the year 2017.
The relative attractiveness of the Company's mutual funds and
exchange-traded funds to investors depends upon many factors, including current
and expected market conditions, the performance histories of the funds, their
current yields and the availability of viable alternatives. Mutual fund
investors may redeem their shares at any time without prior notice.
Exchange-traded fund shares are not redeemable through the Company; rather,
liquidity is provided by other investors through the stock exchanges without
affecting the funds' assets.
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The assets under management of both the mutual funds and exchange-traded
funds are affected by changes in the market values of these assets. Changing
market conditions may cause positive or negative shifts in valuation, and
subsequently in the advisory fees earned from these assets.
The Company also has five municipal money market funds. These funds seek to
maintain a stable net asset value of $1.00 per share. In the past some money
market fund managers, including the Company, have voluntarily, and at their own
expense, taken action to protect the value of fund assets when portfolio bond
credit or related financial guarantees have deteriorated. These actions may
include purchasing securities from the fund portfolio at par and arranging for
supplemental credit and liquidity enhancements in order to preserve the value of
the fund's investment. Although the Company is under no obligation to do so,
circumstances may arise in the future in which the Company may decide to take
similar action; such action could involve substantial expense to the Company.
Advisory Fees
NAC and NIAC provide investment management services to the funds and
portfolios pursuant to investment management agreements, and receive fees based
on each fund's average daily net assets or on a combination of the average daily
net assets and gross interest income. Institutional Capital Corporation (ICAP)
performs portfolio management services on behalf of four of the equity and
income mutual funds pursuant to a sub-advisory agreement with NIAC. Rittenhouse,
a wholly-owned subsidiary of the Company, performs portfolio management services
for one of the equity and income mutual funds pursuant to a sub-advisory
agreement with NIAC.
The Company's advisory fee schedules currently provide for maximum annual
fees ranging from .45% to .55% in the case of the municipal mutual funds and
.50% to .95% in the case of the equity and income mutual funds. Maximum fees in
the case of the exchange-traded funds currently range from .50% to .65%, except
with respect to the five finite life portfolios. The investment management
agreements for these portfolios provide for annual advisory fees ranging from
.25% to .30%. Advisory fees for the money market funds range from .40% to .50%
of net asset value annually. In each case, the management fee schedules provide
for reductions in the fee rate at increased asset levels.
The Company pays ICAP a portfolio advisory fee for sub-advisory services.
This fee is based on the aggregate amount of average daily net assets in the
four funds they sub-advise at a maximum fee of .35% for the assets invested in
equity securities and a maximum fee of .20% for the assets invested in taxable
fixed-income securities. The Company pays ICAP an additional .13% for the assets
they manage in the Nuveen European Value Fund. These rates decline when
specified asset levels are reached.
Investment Management Agreements
Each managed fund has entered into an investment management agreement with
NAC or with NIAC (each, an Adviser). Although the specific terms of each
agreement vary, the basic terms are similar. Pursuant to the agreements, the
Adviser provides overall management services to each of the funds, subject to
the supervision of each fund's board of directors and in accordance with each
fund's investment objectives and policies. The investment management agreements
are approved by fund shareholders and their continuance must be approved
annually by the directors of the respective funds, including a majority of the
directors who are not "interested persons" of the Adviser, as defined in the
Investment Company Act. Amendments to such agreements typically must be approved
by fund shareholders. Each agreement may be terminated without penalty by either
party upon 60 days written notice, and terminates automatically upon its
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assignment (as defined in the Investment Company Act and the Investment Advisers
Act). Such an "assignment" will take place in the event of a change in control
of the Adviser. Under the Investment Company Act, a change in control of the
Adviser would be deemed to occur in the event of certain changes in the
ownership of the Company's voting stock. The termination of the investment
management agreements for any reason, could have a material adverse effect on
the Company's business and results of operations.
Each fund bears all expenses associated with its operations, including the
costs associated with the issuance and redemption of securities, where
applicable. The fund does not bear compensation expenses of directors and
officers of the fund who are employed by the Company. Some investment management
agreements provide that, to the extent certain enumerated expenses exceed a
specified percentage of a fund's or a portfolio's average net assets for a given
year, the Adviser will absorb such excess through a reduction in the management
fee and, if necessary, pay such expenses so that the year-to-date net expense
will not exceed the specified percentage. In addition, the Company may
voluntarily waive all or a portion of its advisory fee to a fund, and/or
reimburse expenses, for competitive reasons. During 1998, the expense ratios
specified under these arrangements ranged from .45% for certain of the money
market funds, to .75% for certain of the municipal mutual funds, to .975% for
municipal mutual funds whose portfolio bonds are insured by a third party
insurer. Expense limits on the equity and income mutual funds sponsored by the
Company range from .80% to 1.30% of the funds' average net assets. Reimbursed
expenses for mutual funds and money market funds, including voluntary waivers,
totaled $5.4 million during the year ended December 31, 1998. Although the
Company expects to continue voluntary waivers in order to keep their products
competitive, it does not expect that such amounts will have a material effect on
the results of its operations.
Portfolio Management and Research
Each Adviser is responsible for the execution of the investment policy of
the various funds it advises. Investment decisions for each fund are made by the
portfolio manager responsible for such fund. The Company has traditionally had a
very low turnover rate for its portfolio managers. The majority of the Company's
portfolio managers, as well as those employed by the sub-advisers, have devoted
most of their professional careers to the analysis, selection and surveillance
of the types of securities held in the funds they manage.
MANAGED ACCOUNTS
The Company, through its wholly-owned subsidiaries Rittenhouse and NAM,
also provides private account investment management services for individuals and
institutional accounts. The Company refers to these products as managed
accounts. At December 31, 1998, 89% of these assets under management were
managed by Rittenhouse.
Rittenhouse follows a growth stock strategy that centers on identifying
blue chip companies that are financially strong, are global leaders and have
demonstrated consistent and predictable growth in earnings and dividends. NAM
concentrates on the research, selection, and management of municipal bond
portfolios. Rittenhouse and NAM manage accounts on both a discretionary and
non-discretionary basis.
Working through independent, third-party financial advisers or other
intermediaries, Rittenhouse and NAM provide investment advisory services to
individuals, trusts, estates, charitable organizations, corporations, pension
and profit sharing plans, banks, thrifts and investment companies. These
advisers usually are
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compensated directly by their investors for services rendered and not from
Rittenhouse or the investment proceeds. Services provided by Rittenhouse and NAM
to each of the individual accounts are governed by management contracts, which
may be customized to suit a particular account. The Company generally receives
fees based on the value of the assets managed on a particular date such as the
last calendar day of a quarter.
DEFINED PORTFOLIOS
Overview
The Company is a major sponsor of defined portfolios. Each defined
portfolio consists of a fixed portfolio of securities selected and purchased by
the Company and deposited in a trust. The trustee of the portfolio is not
affiliated with the Company. Units of undivided beneficial interest in the
portfolio are sold to investors at a price equal to the per unit market price of
the securities deposited in the trust plus a sales charge. Defined portfolios
are not actively managed after the initial deposit. However, certain equity and
taxable fixed-income portfolios may add securities in proportionate amounts of
the same securities already held in order to accommodate additional inflows. New
securities are not added to municipal defined portfolios after the date of
deposit, and may be exchanged or substituted only under extremely limited
circumstances. Securities from the portfolios can only be sold pursuant to the
Company's monitoring program or for the purpose of raising cash to pay for units
that have been redeemed. The proceeds of any security sales must be distributed
to unit holders.
The Company created and introduced its first municipal bond defined
portfolio in 1961, and now sponsors nationally diversified and single-state
portfolios, uninsured portfolios, portfolios whose bonds are insured by a third
party, and portfolios of varying average maturities. At December 31, 1998, the
Company had 3,126 municipal trusts outstanding with an aggregate market value of
$10.3 billion.
In May of 1997, the Company expanded its defined portfolio product line to
include equity and taxable fixed-income defined portfolios. The Company
presently offers portfolios that invest in equities, corporate debt and treasury
securities. The equity trusts currently include portfolios based on segments of
the Dow Jones Industrial Average, on models developed in cooperation with
Standard & Poor's, and in concentrations of equities from companies in various
industry sectors. The corporate debt trusts invest in a portfolio consisting
primarily of investment grade corporate debt obligations and zero coupon U.S.
Treasury Obligations. The treasury trusts invest in a laddered portfolio of
short and intermediate-term U.S. Treasury Obligations. At December 31, 1998, the
Company had approximately 51 equity and taxable fixed-income trusts outstanding
with a market value of $416 million.
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Defined Portfolio Revenues
The following table shows the Company's defined portfolio revenues during
each of the last three years:
DEFINED PORTFOLIO REVENUES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------
1998 1997 1996
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<S> <C> <C> <C>
Distribution Revenues:
Primary -- Municipal..................................... $5,073 $7,192 $10,740
Primary -- Equity and Taxable Fixed-Income............... 1,682 496 --
Secondary................................................ 1,294 1,701 2,010
------ ------ -------
Total............................................ $8,049 $9,389 $12,750
====== ====== =======
</TABLE>
Units of the Company's defined portfolios are sold to the public through
financial advisers. For these sales, the Company earns a sales charge based on
the public offering price of the units sold. The Company's defined portfolio
revenues include the sales charge, less an applicable concession to dealers for
the placement of defined portfolio units. For certain equity trusts, the Company
receives a deferred sales charge over a period of months following the initial
sale date.
The Company realizes profits or incurs losses when the market price of
securities deposited in a trust exceeds or is less than the original cost of the
securities. After the date of deposit, the Company is the holder of all units of
the particular trust series and will realize profit or incur loss depending on
whether the public offering price increases or decreases before the units are
sold. The Company attempts to manage its exposure to interest rate fluctuations
on the securities held for deposit and on defined portfolio inventory by, among
other practices, coordinating inventory levels to the rate of sale of various
types of trusts and hedging through the use of futures contracts.
The Company maintains a secondary market for defined portfolios it
sponsors. For transactions in the secondary market, the Company earns a sales
charge less a concession reallowed to dealers. The Company, like any other
unitholder, can also tender units it holds to the defined portfolio trustee for
redemption at their redemption value.
MARKETING AND DISTRIBUTION OF INVESTMENT PRODUCTS
Distribution
The Company markets its investment products through registered
representatives associated with unaffiliated national and regional
broker-dealers, commercial banks and thrifts, broker-dealer affiliates of
insurance agencies and independent insurance dealers, financial planners,
accountants, and tax consultants (retail distribution firms). The Company's
distribution strategy is to maximize the liquidity and distribution potential of
its investment products by maintaining strong relationships with a broad array
of registered representatives. The Company has well-established relationships
with registered representatives in retail distribution firms throughout the
country. These registered representatives participate to varying degrees in the
Company's marketing programs, depending upon: their interests in distributing
investments provided by
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the Company; their perception of the relative attractiveness of the managed
funds, managed accounts and defined portfolios; the profiles of their customers
and their clients' needs; and the conditions prevalent in financial markets.
Registered representatives may reduce or eliminate their involvement in
marketing the Company's products at any time, or may elect to emphasize the
investment products of competing sponsors, or the proprietary products of their
own firm. Registered representatives may receive compensation incentives to sell
their firm's investment products or may choose to recommend to their customers
investment products sponsored by firms other than the Company. This decision may
be based on such considerations as investment performance, types and amount of
distribution compensation, sales assistance and administrative service payments
and level and quality of customer service. In addition, registered
representatives ability to distribute the Company's mutual funds is subject to
the continuation of a selling agreement between their firm and the Company. Such
agreement does not obligate the retail distribution firm to sell any specific
amount of funds and is terminable by either party upon 60 days notice. One
retail distribution firm's redeemable assets accounted for 11% of the Company's
consolidated revenues in 1998.
All of the Company's mutual funds have adopted a Flexible Sales Charge
Program which provides investors with alternative ways of purchasing fund shares
based upon their individual needs and preferences. Class A shares may be
purchased at a price equal to the fund's net asset value plus an up-front sales
charge ranging from 2.5% of the public offering price for limited-term municipal
funds to 5.75% for equity and income funds. At the maximum sales charge level,
approximately 90% to 95% of the sales charge is typically reallowed as
concessions to retail distribution firms. From time to time, the Company may
reallow all of the sales charge to retail distribution firms or waive the sales
charge and advance a sales commission to such firms in connection with marketing
programs or special promotions. Additionally, purchases of Class A shares which
equal or exceed $1 million may be made without an up-front sales charge, but are
subject to a Contingent Deferred Sales Charge (CDSC) ranging from .75% to 1% for
shares redeemed within 18 months. In order to compensate retail distribution
firms for Class A share sales which are $1 million or greater, the Company
advances a sales commission ranging from .50% to 1% at the time of sale. Class A
shares are also subject to an annual Rule 12b-1 service fee of between .20% and
.25% of assets, which is used to compensate securities dealers for providing
ongoing financial advice and other services to investors. Class B shares may be
purchased at a price equal to the fund's net asset value without an up-front
sales charge. Class B shares are subject to an annual Rule 12b-1 distribution
fee to compensate the Company for costs incurred in connection with the sale of
such shares, an annual Rule 12b-1 service fee for the ongoing services of
securities dealers and a CDSC, ranging from 5% to 1%, for shares redeemed within
a period of 6 years. The Company compensates retail distribution firms for sales
of Class B shares at the time of sale at the rate of 4% of the amount of Class B
shares sold, which represents a sales commission plus an advance of the first
year's annual Rule 12b-1 service fee. Class B shares convert to Class A shares
after they are held for eight years. Class C shares may be purchased without an
up-front sales charge at a price equal to the fund's net asset value. However,
these shares are subject to an annual Rule 12b-1 distribution fee designed to
compensate securities dealers over time for the sale of the fund shares, an
annual Rule 12b-1 service fee used to compensate securities dealers for
providing continuing financial advice and other services and a 1% CDSC for
shares redeemed within 12 months of purchase. In addition, the Company advances
a 1% sales commission to retail distribution firms at the time of sale and in
return, receives the first year's Rule 12b-1 distribution fee and Rule 12b-1
service fee. Class R shares are available for purchase at a price equal to the
fund's net asset value with no ongoing fees or CDSCs. These shares are available
primarily to clients of fee-based advisers, wrap programs and others under
certain limited circumstances.
Common shares of the exchange-traded funds are initially sold to the public
in offerings that are underwritten by a syndication group. During the year ended
December 31, 1998, no such offerings were made.
11
<PAGE> 13
Shares of the money market funds are sold to the public without sales
charges. However, each money market fund (except the Nuveen Tax-Exempt Money
Market Fund, which is marketed primarily to institutions) pays a Rule 12b-1 fee
to distributors of the fund's shares to compensate for costs associated with the
administrative services they perform.
The markets for mutual funds and money market funds are highly competitive,
with many participating sponsors. Based upon the information available, the
Company believes that it had less than a 5% share of the market with respect to
net sales of mutual funds and money market funds in each of the last three
years.
Sales of managed accounts do not impact the Company's distribution revenue
since there are no transaction-based revenues associated with these products.
The typical sales charge for defined portfolios ranges from 1.75% to 4.9%
of the public offering price (1.78% to 5.15% of the net amount invested), with
reduced sales charges at various sales breakpoints. At the maximum sales charge
level, the dealer concession ranges from 1.0% to 3.5% of the amount invested.
The sales charges for defined portfolios in the secondary market are established
based on the number of years remaining to maturity for each bond in the defined
portfolio.
The market for the sale of defined portfolios is relatively concentrated,
with only a few sponsors accounting for a majority of total sales. Based upon
the information available, the Company believes it has been one of the market
share leaders in municipal defined portfolio sales in each of the last three
years. The Company entered the equity and taxable fixed-income defined portfolio
market in 1997 and believes that its sales of these products accounted for less
than a 5% share of this market in 1997 and 1998 based on the information
available.
Relations With Distributors
The Company employs approximately 125 wholesalers and sales assistants who
work closely with individual registered representatives to help them develop
their businesses. The Company's wholesalers regularly visit the firms who
distribute the Company's products to provide product information, explain new
products and discuss ideas in response to particular investor concerns.
Advertising and Promotion
The Company provides individual registered representatives with daily
prices, weekly, monthly and quarterly sales bulletins, monthly product
statistical and performance updates, product education programs, product
training seminars, and promotional programs coordinated with its advertising
campaigns. In addition, the Company regularly coordinates its marketing and
promotional efforts with individual registered representatives. The Company also
augments its marketing efforts through magazine and newspaper advertising,
targeted direct mail and telemarketing sales programs and sponsorship of certain
sports and civic activities. For the year ended December 31, 1998, the Company
expended $19.4 million on advertising, product promotion and relationship
building efforts.
12
<PAGE> 14
INVESTMENT BANKING
Nuveen & Co. underwrites and distributes municipal and corporate bonds,
trades bonds in the secondary market and serves as remarketing agent for
variable rate bonds. The majority of its underwritings are for government and
not-for-profit entities and substantially all of its sales are to institutional
investors including casualty insurance companies, managed municipal bond funds,
sponsors of defined portfolios (including the Company), bank portfolios, trust
departments and other dealers. The constituent departments of Investment Banking
responsible for these activities include Municipal Finance, Corporate Finance,
Trading and Commitments, and Institutional Sales. Both Corporate and Municipal
Finance furnish underwriting and strategic financial advisory services to health
care corporations. In addition, Investment Banking may, on occasion, act as
financial adviser and/or broker to municipal or other not-for-profit issuers
with respect to transactions in interest rate swaps, forward transactions or
other investment agreements.
The principal sources of revenue of Investment Banking include underwriting
revenues and management fees derived from negotiated and competitive bond
underwritings, financial advisory fees, remarketing agent fees, and profits from
other principal transactions including secondary market trading and furnishing
investment securities to investment banking clients incidental to their bond
financing transactions.
The following table shows net underwriting revenues, financial advisory
fees and remarketing fees for each of the last three years:
INVESTMENT BANKING REVENUES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net Underwriting Revenues................................ $ 7,704 $ 7,229 $ 5,154
Merger and Acquisition and Other Financial Advisory
Fees................................................... 3,378 4,206 4,318
Remarketing Fees......................................... 1,885 1,974 1,626
------- ------- -------
Total.......................................... $12,967 $13,409 $11,098
======= ======= =======
</TABLE>
The Company is remarketing agent with respect to approximately 100 issues
of Variable Rate Demand Obligations (VRDOs) representing an aggregate principal
value in excess of $1.7 billion. VRDOs are municipal bonds issued with a longer
term (typically 20-30 year) maturity, having variable rates of interest and
options granted to the holders to put the obligations to the issuers on seven
days notice and receive payments of the full principal amounts. These
obligations to pay are secured by letters of credit typically issued by
commercial banks. Periodically the remarketing agents, pursuant to agreements
with the issuers, reset the interest rates at a level that the remarketing
agents anticipate will permit them, as agents, to remarket at par any VRDOs
which have been put back to them. Although remarketing agents, including the
Company, generally are only obligated to use their best efforts in locating
purchasers for the VRDOs, they frequently purchase VRDOs for resale to other
buyers within a few days. During the period that the Company holds any VRDOs, it
has, like any holder, the unconditional right secured by the letter of credit to
put the obligation to the issuer and receive payment of the full principal
amount. During temporary periods of imbalance between supply and demand for
VRDOs, the Company may hold substantial amounts of such obligations for resale.
The Company has come to expect such imbalances at year-end and, to a lesser
extent, at each calendar quarter-end.
13
<PAGE> 15
INVENTORY POSITIONS
The Company regularly purchases and holds for resale municipal securities
and defined portfolio units. Inventory positions are recorded at market value
and unrealized gains and losses are reported in the Company's operating results.
The level of inventory maintained by the Company will fluctuate daily and is
dependent upon the need to maintain municipal inventory for future defined
portfolios, and the need to maintain defined portfolio inventory to support
ongoing sales.
The market value of the Company's inventory at December 31 for each of the
last three years and the average daily inventory balances outstanding during
each year are set forth below:
INVENTORY
(IN THOUSANDS)
<TABLE>
<CAPTION>
AVERAGE DAILY INVENTORY,
INVENTORY, AT MARKET VALUE AT PAR VALUE
ON DECEMBER 31, FOR YEAR ENDED DECEMBER 31,
--------------------------- ---------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Defined Portfolios......................... $37,447 $31,926 $39,206 $27,127 $35,253 $43,121
======= ======= ======= ======= ======= =======
Municipal Securities Held for:
Deposit in Defined Portfolios............ $ 210 $ 30 $ -- $ 2,691 $ 2,776 $ 4,597
Resale................................... 2,420 542 4,553 4,491 2,086 3,202
------- ------- ------- ------- ------- -------
Total Municipal Securities........ $ 2,630 $ 572 $ 4,553 $ 7,182 $ 4,862 $ 7,799
======= ======= ======= ======= ======= =======
</TABLE>
EMPLOYEES
At December 31, 1998, the Company had 610 full-time employees. Employees
are compensated with a combination of salary, cash bonus and fringe benefits. In
addition, the Company has sought to retain its key and senior employees through
competitive compensation arrangements which include equity based incentive
awards.
COMPETITION
The Company is subject to substantial competition in all aspects of its
business. The registered representatives that distribute the Company's
investment products also distribute numerous competing products, often including
products sponsored by the retail distribution firms where they are employed.
There are relatively few barriers to entry for new investment management firms.
Investment products are sold to the public by broker-dealers, banks, insurance
companies and others, and many competing investment product sponsors offer a
broader array of investment products. Many of these institutions have
substantially greater resources than the Company. The Company competes with
other providers of products primarily on the basis of the range of products
offered, the investment performance of such products, quality of service, fees
charged, the level and type of broker compensation, the manner in which such
14
<PAGE> 16
products are marketed and distributed, and the services provided to registered
representatives and investors. In recent years, competition among securities
firms has adversely affected the profitability associated with the underwriting
of municipal securities.
REGULATION
Nuveen & Co. is registered as a broker-dealer under the Securities Exchange
Act of 1934 and is subject to regulation by the Securities and Exchange
Commission (the Commission), the National Association of Securities Dealers, the
Municipal Securities Rulemaking Board and other federal and state agencies and
self-regulatory organizations. Nuveen & Co. is subject to the Commission's
Uniform Net Capital Rule, designed to enforce minimum standards regarding the
general financial condition and liquidity of a broker-dealer. Under certain
circumstances, this rule may limit the ability of the Company to make
withdrawals of capital and receive dividends from Nuveen & Co. Nuveen & Co.'s
regulatory net capital has consistently exceeded such minimum net capital
requirements. At December 31, 1998, Nuveen & Co. had aggregate net capital, as
defined, of approximately $27.8 million, which exceeded the regulatory minimum
by approximately $24.0 million. The securities industry is one of the most
highly regulated in the United States, and failure to comply with related laws
and regulations can result in the revocation of broker-dealer licenses, the
imposition of censures or fines, and the suspension or expulsion of a firm
and/or its employees from the securities business.
Each Adviser is registered with the Commission under the Investment
Advisers Act. Each fund and defined portfolio is registered with the Commission
under the Investment Company Act. Each national fund is qualified for sale (or
not required to be so qualified) in all states in the United States and the
District of Columbia. Each single-state fund is qualified for sale (or not
required to be so qualified) in the state for which it is named and other
designated states. Virtually all aspects of the Company's investment management
business are subject to various federal and state laws and regulations. These
laws and regulations are primarily intended to benefit the investment product
holder and generally grant supervisory agencies and bodies broad administrative
powers, including the power to limit or restrict the Company from carrying on
its investment management business in the event that it fails to comply with
such laws and regulations. In such event, the possible sanctions which may be
imposed include the suspension of individual employees, limitations on the
Company's engaging in the investment management business for specified periods
of time, the revocation of the Advisers' registrations as investment advisers or
other censures and fines.
The Company's officers, directors, and employees may, from time to time,
own securities which are also held by one or more of the funds. The Company's
internal policies with respect to individual investments require prior clearance
of all transactions in municipal securities, exchange-traded fund securities and
securities of the Company. The Company also requires employees to report all
securities transactions, and restrict certain transactions so as to avoid the
possibility of conflicts of interest. Additionally, employees of Rittenhouse are
subject to their own internal policies with respect to the pre-clearance of the
purchase or sale of securities held in investor accounts.
ITEM 2. PROPERTIES
The Company conducts its principal operations through leased offices
located at its Chicago headquarters and in other United States cities. The
Company leases approximately 230,000 square feet of office space across the
country. Management believes that the Company's facilities are adequate to serve
its currently anticipated business needs.
15
<PAGE> 17
ITEM 3. LEGAL PROCEEDINGS
As previously reported most recently in the Form 10-Q for the quarter
ending September 30, 1998, a lawsuit brought in June, 1996 by certain
shareholders is currently pending in federal district court for the Northern
District of Illinois against Nuveen & Co., NAC, six Nuveen investment companies
and two of the funds' former directors seeking unspecified damages, an
injunction and other relief. The suit also seeks certification of a defendant
class consisting of all Nuveen-managed leveraged funds. The complaint is filed
on behalf of a purported class of present and former shareholders of all Nuveen
leveraged investment companies, including the funds, which allegedly engaged in
certain practices which plaintiffs allege violated various provisions of the
Investment Company Act of 1940 and common law. Plaintiffs allege among other
things, breaches of fiduciary duty and various misrepresentations and omissions
in disclosures in connection with the use and maintenance of leverage through
the issuance and periodic auctioning of preferred stock and the payment of
management and brokerage fees to NAC and Nuveen & Co. Plaintiffs filed a motion
for class certification on August 10, 1998. Defendants are opposing
certification of either a plaintiff or defendant class. The defendants are
vigorously contesting this action and have filed motions, which are pending, to
dismiss the entire action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter
ended December 31, 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the executive officers and other key
officers of the Company as of December 31, 1998 are set forth below. Executive
officers and other key officers of the Company serve at the discretion of the
Board of Directors. Unless otherwise indicated in the following descriptions,
each of the following executive officers and other key officers have held his
current position with the Company or its predecessor for more than the past five
years.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AGE PRINCIPAL POSITION
------------------ --- ------------------
<S> <C> <C>
Timothy R. Schwertfeger................... 49 Chairman, Chief Executive Officer and Director
Anthony T. Dean........................... 53 President, Chief Operating Officer and Director
John P. Amboian........................... 37 Executive Vice President, Chief Financial Officer
and Secretary
Bruce P. Bedford.......................... 58 Executive Vice President
Richard D. Hughes......................... 42 President of Rittenhouse Financial Services, Inc.
and Nuveen Asset Management Inc.
</TABLE>
<TABLE>
<CAPTION>
OTHER KEY OFFICERS
------------------
<S> <C> <C>
Alan G. Berkshire......................... 38 Vice President and General Counsel
Margaret E. Wilson........................ 43 Vice President and Controller
</TABLE>
All executive officers and other key officers of the Company are elected
for a one-year term. There are no family relationships between any of the
Registrant's executive officers, key officers and directors, and there are no
arrangements or understandings between any of these executive officers and/or
key officers and any other persons pursuant to which the executive officer or
key officer was selected.
16
<PAGE> 18
Descriptions of the business experience for the past five years of Messrs.
Schwertfeger and Amboian appear on page 6 of the Registrant's Proxy Statement
relating to the annual meeting of shareholders to be held on May 6, 1999 (the
"1999 Proxy Statement") and are incorporated herein by reference.
Mr. Dean has been President and Chief Operating Officer of the Company
since 1996; prior thereto Executive Vice President and Director of the Company
since inception; President and Chief Operating Officer since 1996; prior thereto
Executive Vice President and Director of John Nuveen & Co. Incorporated since
1989; prior thereto, Vice President of John Nuveen & Co. Incorporated since
1980; Chairman since July 1996, and prior thereto Director and President of the
Nuveen Funds advised by Nuveen Institutional Advisory Corp. since July 1994;
President and Director of the Nuveen Funds advised by Nuveen Advisory Corp.
since July 1996.
Mr. Bedford has been Executive Vice President of the Company since February
1997; prior thereto Chairman, Chief Executive Officer and Director of Flagship
Resources, Inc., Flagship Funds, Inc., Flagship Financial Inc. and the Flagship
funds from October 1984 until December 1996.
Mr. Hughes has been Vice President of the Company since May 1998. He joined
John Nuveen & Co. Incorporated in September 1997. In May 1998, Mr. Hughes was
elected Vice President, Branch Manager and Principal for John Nuveen & Co.
Incorporated and Chief Operating Officer, President and Director of Nuveen Asset
Management Inc. Mr. Hughes has served as President and Director of Rittenhouse
Financial Services, Inc. since December 1989 and has continued in such position
since the acquisition of Rittenhouse in September 1997.
Mr. Berkshire has been Secretary of the Company since May 1998; Vice
President and General Counsel of the Company since 1997. He joined Nuveen & Co.
in September 1997 as Vice President and General Counsel. Prior thereto he was a
Partner at the law firm of Kirkland & Ellis since October 1992.
Mrs. Wilson has been Vice President and Controller of the Company since May
1998. She joined John Nuveen & Co. Incorporated as Vice President in February
1998. Prior thereto, Mrs. Wilson was Chief Financial Officer at Sara Lee Bakery,
a division of Sara Lee Corporation, from November 1996 until February 1998 and a
Controller with Kraft Foods from September 1991 until November 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At December 31, 1998, there were approximately 4,800 shareholders of record
of the Company's Class A common stock. Other information required by this item
is contained in footnote 12 on page 34 of the Registrant's 1998 Annual Report to
Shareholders (the 1998 Annual Report) and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The "Five Year Financial Summary" section on page 36 of the 1998 Annual
Report is incorporated herein by reference.
17
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section on pages 11 through 20 of the 1998 Annual Report
is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The "Market Risk" section on page 19 of the 1998 Annual Report is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data on pages 21 through 34 of
the 1998 Annual Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The "Nominees for Directors" subsection and the "Nominees for Class B
Directors" subsection in the "Election of Directors" section on pages 5 through
7 of the 1999 Proxy Statement and the "Compliance with section 16(a) of the
Securities Exchange Act of 1934" subsection of the Beneficial Ownership of
Common Stock" section on pages 2 and 4 of the 1999 Proxy Statement, are
incorporated herein by reference. Information regarding the Registrant's
executive officers is included in this Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The "Executive Compensation", "Retirement Plans" and "Employment
Agreements" sections on pages 9 through 14, and the "Compensation of Directors"
subsection in the "Election of Directors" section on page 8 of the Proxy
Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The "Beneficial Ownership of the Company's Stock" section on pages 2
through 4 of the 1999 Proxy Statement is incorporated herein by reference.
18
<PAGE> 20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The "Certain Relationships" section on pages 14 and 15 of the 1999 Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FILED DOCUMENTS.
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets -- December 31, 1998 and 1997... *
Consolidated Statements of Income -- Years ended December *
31, 1998, 1997 and 1996.....................................
Consolidated Statements of Changes in Common Stockholders' *
Equity -- December 31, 1998, 1997 and 1996..................
Consolidated Statements of Cash Flows -- Years ended *
December 31, 1998, 1997 and 1996............................
Notes to Consolidated Financial Statements.................. *
2. FINANCIAL STATEMENT SCHEDULES: None
All schedules are omitted because they are not required, are
not applicable or the information is otherwise shown in the
financial statements or notes thereto.
3. EXHIBITS:
See Exhibit Index on pages E-1 through E-5 hereof.
</TABLE>
- ---------------
* Incorporated by reference to the 1998 Annual Report, which, except as
specifically incorporated by reference in this Form 10-K, shall not be deemed
to be filed with the Commission.
(b) REPORTS ON FORM 8-K.
None
19
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 30, 1999.
THE JOHN NUVEEN COMPANY
By /s/ JOHN P. AMBOIAN
------------------------------------
John P. Amboian
Executive Vice President, Chief
Financial Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 30, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman, Chief Executive Officer and Director
- ----------------------------------------------------- (Principal Executive Officer)
Timothy R. Schwertfeger
* President, Chief Operating Officer and
- ----------------------------------------------------- Director
Anthony T. Dean
* Director
- -----------------------------------------------------
Willard L. Boyd
* Director
- -----------------------------------------------------
W. John Driscoll
* Director
- -----------------------------------------------------
Duane R. Kullberg
* Director
- -----------------------------------------------------
Douglas W. Leatherdale
* Director
- -----------------------------------------------------
Paul J. Liska
/s/ MARGARET E. WILSON Vice President and Controller
- ----------------------------------------------------- (Principal Accounting Officer)
Margaret E. Wilson
</TABLE>
*By /s/ ALAN G. BERKSHIRE
--------------------------------
Alan G. Berkshire
As Attorney-in-Fact for each
of the persons indicated
20
<PAGE> 22
EXHIBIT INDEX
to
ANNUAL REPORT ON FORM 10-K
for the
FISCAL YEAR ENDED DECEMBER 31, 1998
Copies of the documents listed below which are identified with an asterisk (*)
have heretofore been filed with the Commission as exhibits to registration
statements or reports filed with the Commission and are incorporated herein by
reference and made a part hereof; the exhibit number and location of each
document so filed and incorporated herein by reference are set forth opposite
each such exhibit. Exhibits not so identified are filed herewith.
<TABLE>
<CAPTION>
Page No. of
Exhibit in
Sequential
Exhibit Exhibit No. Numbering
Designation Exhibit and Location System
- ----------- ------- ------------ ------
<S> <C> <C> <C>
* 3.1 Restated Certificate of Exhibit 3.1 to Registration
Incorporation of The John Statement on Form S-1 filed
Nuveen Company on April 2, 1992, File
No. 33-46922 (the "S-1
Registration Statement")
* 3.2 Amended and Restated By-Laws Exhibit 3.2 to the Company's
of The John Nuveen Company Form 10-K for year ended
December 31, 1993 filed on
March 29, 1994 (the "1993
Form 10-K")
*+10.1 Nuveen 1992 Special Incentive Exhibit 10.1 to Company's
Plan Form 10-K for the year ended
December 31, 1992 filed on
March 30, 1993 (the "1992
Form 10-K")
*+10.1(a) Nuveen 1996 Equity Incentive Exhibit 4.2 to Company's
Award Plan Form S-8 filed on July 10, 1996
*+10.2(a) Form of Employment Agreement Exhibit 10.2(a) to Company's
with Bruce P. Bedford Form 10-K for the year ended
December 31, 1997 and filed on
March 30, 1998 (the
"1997 Form 10-K")
</TABLE>
E-1
<PAGE> 23
<TABLE>
<CAPTION>
Page No. of
Exhibit in
Sequential
Exhibit Exhibit No. Numbering
Designation Exhibit and Location System
- ----------- ------- ------------ ------
<S> <C> <C> <C>
+10.2(b) Form of Employment Agreement --
with Richard D. Hughes
+10.2(c) Form of Employment Agreement --
with George W. Connell
*+10.3(a) Executive Officer Performance Exhibit 10.3(a) to the
Plan Company's Form 10-K for
the year ended December 31,
1996 filed on March 31, 1997
(the "1996 Form 10-K")
*+10.4 Amended and Restated Profit Exhibit 10.4 to Company's
Sharing Plan 1996 Form 10-K
+10.4(a) Amended and Restated --
Rittenhouse Financial
Services, Inc. 1997 Equity
Incentive Award Plan
*+10.5 Amended and Restated Exhibit 10.5 to 1994
Retirement Plan Form 10-K
*+10.6 Excess Benefit Retirement Plan Exhibit 10.6 to the S-1
Registration Statement
*+10.7 Deferred Bonus Plan Exhibit 10.7 to the S-1
Registration Statement
10.8(c) Lease dated January 22, 1998 --
between Overseas Partners
(333), Inc. and John Nuveen &
Co. Incorporated
**10.9 Investment Management Exhibit 10.9 to Pre-effective
Agreements between Nuveen Amendment No. 1 and Exhibits
Advisory Corp. and each 10.9 to both the 1992 and 1993
Nuveen Fund Forms 10-K
**10.10 Investment Management Exhibit 10.10 to Pre-effective
Agreement between Nuveen Amendment No. 1 and Exhibits 10.10
Institutional Advisory Corp. to both the 1992 and 1993
and each Nuveen Select Forms 10-K
Tax-Free Income Portfolio
</TABLE>
E-2
<PAGE> 24
<TABLE>
<CAPTION>
Page No. of
Exhibit in
Sequential
Exhibit Exhibit No. Numbering
Designation Exhibit and Location System
- ----------- ------- ------------ ------
<S> <C> <C> <C>
**10.10(a) Management Agreement between Exhibit 10.10(a) to the
Nuveen Investment Trust and 1996 Form 10-K
Nuveen Institutional Advisory
Corp.
*10.10(b) Investment Sub-Advisory Exhibit 10.10(b) to the
Agreement between Nuveen 1996 Form 10-K
Institutional Advisory Corp.
and Institutional Capital
Corporation
10.10(b)(i) Addendum to Investment --
Sub-Advisory Agreement
between Nuveen Institutional
Advisory Corp. and
Institutional Capital Corp.
*10.10(c) Management Agreement between Exhibit 10.10(c) to the
Nuveen Investment Trust II 1997 Form 10-K
and Nuveen Institutional
Advisory Corp.
*10.10(d) Investment Sub-Advisory Exhibit 10.10(d) to the
Agreement between Nuveen 1997 Form 10-K
Institutional Advisory Corp.
and Rittenhouse Financial
Services, Inc.
10.10(e) Management Agreement between --
Nuveen Investment Trust III
and Nuveen Institutional
Advisory Corp.
*10.12 Tax Sharing Agreement between Exhibit 10.13 to S-1
The St. Paul Companies, Inc. Registration Statement
and John Nuveen & Co.
Incorporated
*10.13 Registration Rights Agreement Exhibit 10.13 to 1992
between The John Nuveen Form 10-K
Company and The St. Paul
Companies, Inc.
*10.14 Indemnity Agreement between Exhibit 10.14 to 1992
The St. Paul Companies, Inc. Form 10-K
and The John Nuveen Company
*10.15 Credit Agreement between The Exhibit 10.15 to the 1997
John Nuveen Company and The Form 10-K
First National Bank of Chicago
</TABLE>
E-3
<PAGE> 25
<TABLE>
<CAPTION>
Page No. of
Exhibit in
Sequential
Exhibit Exhibit No. Numbering
Designation Exhibit and Location System
- ----------- ------- ------------ ------
<S> <C> <C> <C>
10.16(a) Form of Exchange Traded Fund --
Custody Agreement between The
Chase Manhattan Bank and each
Nuveen Fund
10.16(b) Form of Exchange Traded fund --
Shareholder Transfer Agency
Agreement between The Chase
Manhattan Bank and each
Nuveen Fund
10.16(c) Form of Mutual Fund Service --
Agreement for Fund Accounting
Services between Chase Global
Funds Services Company and each
Nuveen Mutual Fund
10.16(d) Form of Mutual Fund Service --
for Transfer Agency Services
Agreement between Chase Global
Funds Services Company and each
Nuveen Mutual Fund
10.16(e) Mutual Fund Service Agreement --
for Custody Services between
Chase Global Funds Services
and each Nuveen Mutual Fund
10.17 Support Services Agreement --
between Rittenhouse Financial
Services, Inc. and Rittenhouse
Trust Company
10.18 Sublease between Rittenhouse --
Financial Services, Inc. and
Rittenhouse Trust Company
10.19 Trademark License Agreement --
between Rittenhouse Financial
Services Inc., the John Nuveen
Company and Rittenhouse Trust
Company
13 Annual Report to Shareholders --
for the fiscal year ended
December 31, 1998
</TABLE>
E-4
<PAGE> 26
<TABLE>
<CAPTION>
Page No. of
Exhibit in
Sequential
Exhibit Exhibit No. Numbering
Designation Exhibit and Location System
- ----------- ------- ------------ ------
<S> <C> <C> <C>
*21 List of Subsidiaries of The Exhibit 21 to the 1997
John Nuveen Company Form 10-K
23 Consent of Independent Auditor --
24.1 Powers of Attorney --
24.2 Certified Copy of Resolutions --
of Board of Directors
Authorizing Signatures
27 Financial Data Schedule --
</TABLE>
[FN]
* Previously filed; incorporated herein by reference.
** Previously filed, other than Form of Renewal of Investment Management
Agreement, which are filed herewith.
+ Management contracts and compensatory plans and arrangements.
</FN>
E-5
<PAGE> 1
EXHIBIT 10.2(B)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
14th day of July, 1997, by and between Richard D. Hughes, an individual (the
"Executive") and The John Nuveen Company ("JNC"), a Delaware corporation.
WHEREAS, JNC is engaged in the business of providing investment
management and advisory services; and
WHEREAS, JNC has entered into a Stock Purchase Agreement dated as of
the same day hereof (the "Stock Purchase Agreement") by and among JNC, George W.
Connell, and Rittenhouse Financial Services, Inc. ("RFS"); and
WHEREAS, the Executive is currently an executive of RFS and Executive
and JNC wish Executive to remain an employee of RFS following the date on which
the transactions contemplated by the Stock Purchase Agreement are consummated
(such date of consummation being hereinafter referred to as the "Closing Date");
and
WHEREAS, the parties desire to set forth the terms and conditions under
which the Executive shall be employed by RFS from and after the Closing Date and
upon which RFS shall compensate the Executive following the Closing Date.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, JNC
and the Executive agree as follows:
ARTICLE I.
EMPLOYMENT
1.1 Office. Subject to terms hereof, RFS shall employ the Executive,
and the Executive shall serve RFS, as President of RFS, effective on and after
the Closing Date. This Agreement shall only become effective upon the occurrence
of the Closing Date. This Agreement shall terminate upon termination of the
Stock Purchase Agreement pursuant to Article VII thereof.
1.2 Responsibilities. The Executive shall manage the day-to-day
activities of RFS and will be RFS's primary representative for the development
and implementation of integrated product, operations and sales plans for RFS and
JNC and shall have such other duties as are consistent with his position as
President of RFS. The Executive shall report directly to the President of JNC or
another member of the JNC Executive Committee. The Executive shall at all times
be under the supervision and overall direction of JNC and conform to its general
practices and procedures.
<PAGE> 2
1.3 Full-Time Commitment. The Executive hereby accepts such employment
hereunder, and agrees that he will devote his full time (subject to vacation,
sick and personal time to which the Executive may be entitled), and give his
best efforts to RFS's business in accordance with the foregoing Section 1.2.
During the term of his employment hereunder, the Executive will not, without the
prior written approval of the Chief Executive Officer of JNC, accept employment
or compensation from or perform services of any nature for any business
enterprise other than RFS or JNC; provided, however, that nothing in this
Agreement shall be deemed to restrict Executive from serving on the boards of or
otherwise providing services to charitable or not-for-profit educational,
governmental or community organizations, so long as such activities do not
materially interfere with the Executive's responsibilities hereunder.
ARTICLE II.
TERM OF EMPLOYMENT
2.1 Term. (a) The employment of the Executive pursuant hereto shall
commence on the Closing Date and remain in effect for a term expiring on
December 31, 2003 (the "Term") unless sooner terminated pursuant to the
provisions hereof. Such employment term in effect at any given time is referred
to herein as the "Term".
(b)"JNC Change of Control Transaction" shall mean any of the following:
(i) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of voting securities of JNC where such
acquisition causes such Person to own 20% or more of the combined
voting power of the then outstanding voting securities of JNC entitled
to vote generally in the election of directors (the "Outstanding JNC
Voting Securities"); provided, however, that for purposes of
this subsection (i), none of the following acquisitions shall be
deemed a JNC Change of Control Transaction: (A) any acquisition
directly from JNC, (B) any acquisition by JNC, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by
JNC or any corporation controlled by JNC or (D) any acquisition by any
corporation pursuant to a transaction that complies with clauses (A),
(B) and (C) of subsection (iii) below; and provided, further, that if
any Person's beneficial ownership of the Outstanding
JNC Voting Securities reaches or exceeds 20% as a result of a
transaction described in clause (A) or (B) above, and such Person
subsequently acquires beneficial ownership of additional voting
securities of JNC, such subsequent acquisition shall be treated as an
acquisition that causes such Person to own 20% or more of the
Outstanding JNC Voting Securities; or
(ii) individuals who, as of the effective date hereof,
constitute the Board of Directors of JNC (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by JNC's
sharehold-
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<PAGE> 3
ers, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Incumbent Board; or
(iii) the approval by the shareholders of JNC of (x) a
reorganization, merger or consolidation or sale, or other disposition
of all or substantially all of the assets of JNC or (y) the acquisition
of assets or stock of another corporation in exchange for voting
securities of JNC (each of (x) and (y), a "Business Combination") or,
if consummation of such Business Combination is subject, at the time of
such approval by shareholders, to the consent of any government or
governmental agency, the obtaining of such consent (either explicitly
or implicitly by consummation); excluding, however, such a Business
Combination pursuant to which (A) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding JNC Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of such
transaction owns JNC or all or substantially all of JNC's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding JNC Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of JNC or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, (except to the extent that such ownership
existed prior to the Business Combination) an amount of, respectively,
the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power
of the then outstanding voting securities of such corporation
representing the greater of (1) 20% thereof or (2) a percentage thereof
equal to or greater than the percentage thereof held after such
transaction by the persons who were the owners of JNC's Class B stock
prior to such transaction; and (C) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) approval by the shareholders of JNC of a complete
liquidation or dissolution of JNC.
Notwithstanding the foregoing, unless a majority of the Incumbent Board
determines otherwise, no JNC Change of Control Transaction shall be deemed to
have occurred hereunder if the JNC Change of Control Transaction results from
actions or events in which the Executive is a participant in a capacity other
than solely as an officer, employee or director of RFS or JNC.
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<PAGE> 4
ARTICLE III.
COMPENSATION OF EXECUTIVE
3.1 Salary. As full compensation for his services hereunder, RFS will
pay to the Executive during the Term, a minimum base salary ("Base Salary") at
an annual rate equal to seven hundred thousand dollars ($700,000) through
December 31, 1997 and which Base Salary shall automatically increase by $100,000
on January 1st of each calendar year during the Term, up to a maximum cash Base
Salary of $1,000,000. After the Executive's Base Salary has reached such cash
maximum, future annual salary increases to which the Executive is entitled will
be provided to the Executive in the form of a combination of stock options,
restricted stock, stock units and/or other equity compensation as determined by
JNC.
3.2 Benefits: Other Compensation. The Executive shall be entitled to
such health and life insurance benefits and such profit sharing, pension, paid
vacation, sick and personal time and other fringe benefits as are available to,
and on similar terms and conditions as apply to, senior management employees of
RFS from time to time, as approved by JNC. The Executive shall also be entitled
to participate in the Rittenhouse Financial Services, Inc. 1997 Equity Incentive
Plan (as defined in the Stock Purchase Agreement). In addition, the Executive
shall be entitled to receive such disability insurance benefits as are available
to, and on similar terms and conditions as apply to, peer executives of JNC, and
to participate in the JNC scholarship program and, after the fifth anniversary
of the Closing Date, in all compensation plans and arrangements generally
applicable to peer executives of JNC. The Executive shall be entitled to receive
on the Closing Date nonqualified stock options to purchase 40,000 shares of
common stock of JNC with a 10 year term and a 4 year "cliff" vesting schedule at
an exercise price equal to (i) except in the circumstances described in clause
(ii), 120% of the closing price of JNC Class A Common Stock on the New York
Stock Exchange composite tape (the "JNC Market Price") on the last trading date
prior to the date of the Stock Purchase Agreement or (ii) if the JNC Market
Price on the last trading date immediately prior to the Closing Date is (A) less
than the JNC Market Price on the trading date immediately prior to the date of
the Stock Purchase Agreement or (B) greater than 120% of the JNC Market Price on
the date of the Stock Purchase Agreement, then 100% of the JNC Market Price on
the last trading date prior to the Closing Date.
3.3 Future Benefit Plans. In addition to benefits under Section 3.2,
the Executive shall also be entitled to participate in such other employee
benefit plans or arrangements offered to senior executives and key management
employees of RFS and approved by JNC after the Closing Date (or any JNC benefit
plans as may be mutually agreed), in accordance with the terms and conditions of
such plans and agreements.
3.4 Expenses. During the term of this Agreement, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in performing services hereunder, provided such expenses are
properly accounted for in accordance with general JNC policy, as approved by
JNC, as in effect from time to time and communicated to the Executive prior to
incurring such expense.
-4-
<PAGE> 5
3.5 Support Services. JNC shall cause RFS to provide the Executive with
working space and other services commensurate with Executive's position. The
Executive shall continue to occupy the same or comparable office space in the
greater Philadelphia, Pennsylvania area at RFS's offices and shall be provided
with support services consistent with RFS past practice but in no event greater
than those accorded someone with equivalent executive status.
ARTICLE IV.
TERMINATION
4.1 Discharge for Cause. The Executive may be terminated by RFS or JNC
from his employment hereunder for Cause. Discharge for Cause shall mean the
termination of the Executive's employment with RFS if any one or more of the
following events should occur: (a) the conviction of the Executive, by a court
of competent jurisdiction, or entry of a plea of guilty or nolo contendere, of
any crime of moral turpitude (whether or not involving RFS or JNC) which
constitutes a felony in the jurisdiction involved, (b) the Executive's fraud,
embezzlement or intentional misappropriation of any property of RFS, JNC or
their respective Affiliates (as defined in the Stock Purchase Agreement) or any
clients of any of them, (c) the commission by the Executive of an act that would
cause the Executive, RFS, JNC or any of their respective Affiliates to be
disqualified in any material manner under Section 9 of the 1940 Act, if the
Securities and Exchange Commission (the "Commission") were not to grant an
exemptive order under Section 9(c) thereof, or that would constitute grounds for
the Commission to deny, revoke or suspend registration of RFS, JNC or any of
their respective Affiliates as an investment advisor, broker/dealer or transfer
agent, as applicable, with the Commission, in each case after written notice
specifying in reasonable detail the nature of the act and the aforementioned
consequences thereof and an opportunity to cure of not less than 30 days having
been given to such Executive within 30 days after such act comes to the
attention of JNC, (d) if the Executive is an associated person of a
broker-dealer, the commission by Executive of any act that would constitute
grounds for any material order by the Commission against Executive pursuant to
Section 15(b)(4) or 15(b)(6) of the Securities Exchange Act of 1934, as amended,
in each case after written notice specifying in reasonable detail the nature of
the act and the aforementioned consequences thereof and an opportunity to cure
of not less than 30 days having been given to such Executive within 30 days
after such act comes to the attention of JNC, (e) material continued breach of
this Agreement by Executive, continued insubordination or dereliction of duties
or more than one material infraction of regulatory compliance requirements such
as JNC's code of ethics, in each case after written notice specifying in
reasonable detail the nature of the breach, insubordination or infractions and
an opportunity to cure of not less than 30 days having been given to Executive
within 30 days after such acts come to the attention of JNC, (f) continued
alcohol or other substance abuse or addiction that renders Executive incapable
of satisfactorily performing his duties, after written notice and an opportunity
to cure in the first such instance of not less than 30 days (90 days if
Executive enters an approved rehabilitation program within such 30 day period)
have been given to such Executive, or (g) gross negligence or wilful or unlawful
misconduct materially injurious to RFS or JNC or the reputation of either, in
each case after written notice specifying in reasonable detail the nature of the
misconduct and an opportunity to
-5-
<PAGE> 6
cure of not less than 30 days having been given to such Executive within 30 days
after such acts come to the attention of JNC. As used in this Section 4.1, "to
cure" shall mean to eliminate within 30 days after RFS or JNC has notified the
Executive of the circumstances constituting Cause (or, if elimination is not
possible within such 30-day period, to take substantial steps in good faith that
are likely to eliminate the circumstances constituting cause).
4.2 Retirement or Resignation. The Executive's employment under this
Agreement shall automatically terminate upon his Resignation or Retirement
during the Term. Retirement shall mean the Resignation (other than by reference
to the term Retirement used in the definition of "Resignation") of the Executive
after reaching the age of 65. Resignation shall mean the termination of the
Executive's full-time employment with JNC under this Agreement other than by
reason of a (i) Disabling Event (as defined below), (ii) for Good Reason (as
defined below), (iii) Retirement, (iv) termination by JNC without Cause, (v)
termination by JNC for Cause or (vi) expiration of the Term.
4.3 Disabling Event. In the event of a Disabling Event with respect to
the Executive, RFS or JNC may terminate the Executives employment under this
Agreement. Disabling Event shall mean the Executive's death or the Executive's
physical or mental disability, as certified by a physician satisfactory to JNC
and the Executive or his legal representative, which renders such Executive
incapable of performing his material duties and services as an employee of RFS
and which continues for more than six consecutive months or more than twelve
months in total during any twenty-four month period.
4.4 Good Reason; JNC Change of Control Transaction. (a)The Executive
may terminate his employment under this Agreement for Good Reason (as defined
below) at any time following the 30th day after the Executive has notified RFS
and JNC in writing of the circumstances constituting Good Reason if RFS and JNC
have failed within such 30-day period to eliminate (or, if elimination is not
possible within such 30-day period, to take substantial steps in good faith that
are likely to eliminate) the circumstances constituting such Good Reason. As
used herein, the Executive shall have Good Reason to terminate his employment
with RFS in the event of (i) a substantial breach by JNC or any of its
Affiliates of any of their respective material obligations to the Executive
under this Agreement with respect to the Executive (it being agreed for purposes
of this clause (i) that any diminution in or failure to pay when due, the
compensation determined to be payable hereunder or benefits to be provided to
Executive hereunder shall be deemed "substantial" and "material"); (ii) the
transfer or assignment of the Executive to any position other than President of
RFS or assignment or reduction of the Executive's duties in a manner
inconsistent with the duties and responsibilities contemplated by Section 1.2;
(iii) RFS or JNC's requiring the Executive without the Executive's consent to be
based anywhere other than a location within 25 miles of Philadelphia,
Pennsylvania ("Philadelphia Area"); (iv) the failure by RFS to obtain the
specific assumption of this Agreement by any successor or assignee of RFS or any
person acquiring substantially all of the assets of RFS; or (v) JNC's
establishing a reporting relationship in which the Executive reports to a person
or persons who are not members of the Executive Committee of JNC.
-6-
<PAGE> 7
(b) The Executive may terminate his employment under this Agreement for
any reason during the 30-day period commencing on the first anniversary of a JNC
Change of Control Transaction.
ARTICLE V.
EFFECT OF TERMINATION
5.1 Cause, Resignation, Retirement or Disabling Event. (a) If the
Executive's employment under this Agreement is terminated (i) by RFS or JNC for
Cause or (ii) by the Executive by his Resignation, RFS shall pay the Executive
the Base Salary through the date of termination, to the extent not previously
paid, and any unused vacation, unreimbursed expenses and other benefits
described in Article III hereof applicable to the period prior to termination
("Accrued Obligations"), and RFS and JNC shall have no further obligations
hereunder. Without limiting the foregoing, the Executive shall retain all
accrued benefits to the extent vested in the profit sharing and other plans in
which he participates.
(b) If the Executive's employment under this Agreement is terminated by
RFS or JNC by reason of a Disabling Event, the Executive shall receive all
Accrued Obligations and also become fully vested in his accrued benefits as of
the date of termination in the profit sharing and other plans in which he
participates, and RFS and JNC shall have no further obligations hereunder.
5.2 Without Cause; Good Reason or Change of Control. If the Executive's
employment under this Agreement is terminated (i) by RFS or JNC for any reason
other than for Cause, a Disabling Event or Retirement, (ii) by the Executive for
Good Reason, or (iii) by the Executive for any reason during the 30-day period
commencing on the first anniversary of a JNC Change of Control Transaction, the
present value of the Executive's Base Salary for the remainder of the Term
(discounted using the then prevailing "prime rate" of The Morgan Guaranty Trust
Company of New York) shall be paid to the Executive in a lump sum within 10 days
after the effective date of such termination, and other benefits provided for in
Sections 3.2 and 3.3 hereof shall continue to be paid or provided to the
Executive for the remainder of the Term (the "Severance Period"). The Executive
shall also become fully vested in his accrued benefits as of the date of
termination in the profit sharing and other plans in which he participates.
5.3 Excise Tax Treatment. In the event that the Executive becomes
entitled to any payments or benefits in connection with a JNC Change of Control
or the Executive's termination of employment, whether such payments or benefits
are made or provided pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with JNC, any person whose actions result in a JNC
Change of Control or any person affiliated with JNC or such person
(collectively, "Severance Payments"), and if any of such Severance Payments
would be subject to the excise tax ("Excise Tax") imposed under section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), RFS shall pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net amount
of the Severance Payments and the Gross-Up Payment retained by the Executive,
after deduction of any Excise Tax on the Severance Pay-
-7-
<PAGE> 8
ments and any federal, state and local income tax and Excise Tax upon the
payment provided for by this Section 5.3, shall be equal to the Severance
Payments.
ARTICLE VI.
CONFIDENTIAL INFORMATION
6.1 Acknowledgment. The Executive agrees and acknowledges that in the
course of rendering services to RFS and its clients and customers he has had and
shall continue to have access to and has become and shall become acquainted with
confidential information about the professional, business and financial affairs
of RFS and JNC and their clients and customers and may have contributed to or
may in the future contribute to such information. The Executive acknowledges
that RFS and JNC are engaged in a highly competitive business and that the
success of RFS and JNC in the marketplace depends upon their goodwill and
reputation. The Executive recognizes that in order to guard the legitimate
interests of RFS and JNC it is necessary to protect all such confidential
information, goodwill and reputation and acknowledges that the restrictions,
prohibitions and provisions of this Article VI (including without limitation the
periods of time set forth herein) are reasonable, fair and equitable in
furtherance of the foregoing, and are a material inducement to JNC to enter into
this Agreement. The Executive agrees not to challenge the enforceability of this
Article VI, nor will the Executive raise any equitable defenses thereto, which
the Executive hereby irrevocably waives.
6.2 Proprietary Information. In the course of his service to RFS the
Executive has had and shall continue to have access to confidential know-how,
business documents and information, marketing data, client lists and trade
secrets regarding JNC, RFS and their respective Affiliates and software and
other intellectual property developed or applied by JNC, RFS or their respective
Affiliates, all of which are confidential. Such information shall hereinafter be
called "Proprietary Information" and shall include any and all items enumerated
in the preceding sentence to which the Executive has had or may have access,
whether previously existing, now existing or arising hereafter, whether or not
conceived or developed by others or by the Executive alone or with others during
the period of his service to RFS, and whether or not conceived or developed
during regular working hours; provided, however, that "Proprietary Information"
shall not include (i) any information which is in the public domain, provided
such information is not in the public domain as a consequence of disclosure by
the Executive in violation of this Agreement, (ii) any information that becomes
available to the Executive after he ceases to be an employee of RFS on a
nonconfidential basis from a source other than RFS or any of its Affiliates and
(iii) information of a general nature not pertaining primarily to JNC, RFS and
their respective Affiliates which would generally be acquired in similar
employment with another company.
6.3 Fiduciary Obligations. The Executive agrees and acknowledges that
Proprietary Information is of critical importance to RFS and JNC and a violation
of this Article VI would seriously and irreparably impair and damage the
business of RFS and JNC. The Executive therefore agrees to keep at all times
whether during the Term or thereafter all Proprietary Information in a fiduciary
capacity for the sole benefit of RFS and JNC. Upon termination of the
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<PAGE> 9
Executive's employment, the Executive shall turn over and return to RFS or JNC
all property in the Executive's possession belonging to RFS or JNC,
respectively, and all files and written or electronic information and data that
is, contains or reflects Proprietary Information.
6.4 Non-Disclosure. The Executive shall not at any time, whether during
the Term or thereafter, use or disclose, directly or indirectly (except as
required by law and after consultation with JNC), any Proprietary Information to
any person other than (a) RFS, JNC or their respective Affiliates, (b)
authorized employees thereof with a legitimate need to know related to the
business of RFS, JNC or any such Affiliate at the time of such disclosure, or
(c) at the direction of RFS or JNC, and in all such cases only in the course of
the Executive's service to RFS.
Nothing herein shall prohibit Executive from providing investment
management services with respect to his own personal assets or the personal
assets of members of his immediate family or descendants thereof in accordance
with the applicable codes of ethics and personal investment policies of RFS, JNC
and their Affiliates in effect from time to time.
6.5 Equitable Remedies. Notwithstanding any other provision of this
Agreement to the contrary, the Executive acknowledges and agrees that the
services to be rendered by the Executive hereunder are of irreplaceable value
and RFS and JNC will suffer irreparable injury and damage and will have no
adequate remedy at law and could not be reasonably or adequately compensated in
damages for any breach or threatened or attempted breach by the Executive of the
provisions of this Article VI. Accordingly, the Executive expressly agrees that
RFS and JNC shall be entitled, in addition to the other rights or remedies that
may be available to it under this Agreement or at law, to a temporary and/or
permanent order enjoining or restraining the Executive from engaging in any
conduct in violation or threatened violation of the provisions of this Article
VI.
6.6 Competitive Activities. (a) So long as the Executive's Employment
under this Agreement shall not have been terminated, subject to 6.6(b) and
except as otherwise expressly consented to, approved or otherwise permitted by
JNC in writing, the Executive shall not, directly or indirectly:
(i)own, manage, operate, control or otherwise participate in
the ownership or control of any person, firm, corporation, partnership
or other entity which engages in activities which compete with RFS or
JNC in the business of providing investment products and services to
clients of RFS or JNC or otherwise compete with RFS or JNC in the
managed account or mutual fund businesses (unless his participation is
solely with respect to a unit or division which does not so engage), or
extend credit to or assist in arranging credit to establish or conduct
any such activity, or permit his name, reputation or affiliations to be
used in connection with any such business;
(ii) request, induce or attempt to influence any client or
customer of RFS, JNC or any of their respective Affiliates engaged in
the managed account or mutual fund businesses to limit, curtail or
cancel its business with RFS, JNC or any of their respective Affiliates
engaged in the managed account or mutual fund businesses or solicit any
such party for such business; or
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<PAGE> 10
(iii) hire any then current officer, director or employee of
RFS, JNC or any of their respective Affiliates engaged in the managed
account or mutual fund businesses or any then current consultant, agent
or representative with respect to the managed account or mutual fund
businesses of RFS, JNC or any of their respective Affiliates engaged in
the managed account or mutual fund businesses, or request, induce or
attempt to influence any of the foregoing to (A) terminate his
employment or such business relationship with RFS, JNC or any of such
respective Affiliates or (B) commit any act that, if committed by such
Executive, would constitute a breach of any provision hereof; provided,
however, that other than as provided in sections (i) and (ii), nothing
in this clause (iii) shall restrict or limit Executive from employing
or entering into any business arrangement with any person terminated by
RFS or JNC other than for Cause, provided that no such business can be
conducted nor any employment arrangement entered into until after such
person is no longer employed by RFS or JNC; provided further, however,
that nothing in this clause (iii) shall prohibit the Executive from
utilizing general advertising for employee positions to a broad based
population which may include one or more officers, directors or
employees of RFS or JNC or consultants, agents or representatives with
respect to the managed account or mutual fund businesses of RFS or JNC
who are not ultimately hired.
Notwithstanding any provision of this Section 6.6(a) to the contrary, nothing
herein shall prohibit the Executive from providing investment management
services with respect to his own personal assets or the personal assets of
members of his immediate family and descendants thereof in accordance with the
applicable codes of ethics and personal investment policies of RFS, JNC and
their respective Affiliates in effect from time to time. In addition, with
respect to the provisions of Section 6.6(a)(ii) as they apply to the Executive
following the termination of his employment with RFS hereunder, the restrictions
contained in Section 6.6(a)(ii) shall apply to clients and customers of RFS, JNC
or any Affiliate of either engaged in the managed account or mutual fund
businesses in existence at the time of such termination with respect to which,
to the knowledge of Executive, RFS, JNC or any such Affiliate of either had
either submitted within 12 months prior to the Executive's date of termination a
written response to such client's request for proposal or had other contacts
within twelve months prior to the Executive's date of termination, whether oral
or written, regarding retention of RFS, JNC or such Affiliate as an investment
adviser or any potential clients or customers to whom RFS, JNC or such Affiliate
has made presentations within the twelve months prior to cessation of the
Executive's employment with RFS.
(b) The provisions of Section 6.6(a)(i), (ii) and (iii) hereof shall
continue in effect for the lesser of six years after the Closing Date or two
years following the termination of such employment (the "Covenant Period"). The
parties hereby agree that, after expiration of the Covenant Period, the
Executive shall not be prohibited pursuant to Section 6.4 hereof from utilizing
his knowledge of the identity of clients in the conduct by such Executive of the
activities described in Section 6.6(a)(i).
(c) Notwithstanding Section 6.6(b), until the lesser of nine years
after the Closing Date or three years following the termination of employment,
the Executive shall neither manage or hold an executive office or directorship
of The Rittenhouse Trust Company, a Pennsylvania cor-
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<PAGE> 11
poration or RF Securities (collectively, "RTC") nor shall have any beneficial
ownership in RTC other than through a trust established for the benefit of the
Executive's spouse and children.
(d) The provisions of clauses (i), (ii), and (iii) of Section 6.6(a),
Section 6.6(b) and Section 6.6(c) are separate and distinct commitments
independent of each of the other such clauses.
(e) Notwithstanding the foregoing, Section 6.6 shall not prohibit the
Executive from owning, solely for investment purposes, less than 5% of the
outstanding securities of any class of securities registered pursuant to the
Securities Exchange Act of 1934, as amended, of any person, firm, corporation,
partnership or other entity referred to in Section 6.6(a)(i).
(f) If RFS fails to make any post-termination payment to which
Executive is entitled, Executive's obligations pursuant to Section 6.6 shall
immediately terminate and be of no further force or effect.
ARTICLE VII.
MISCELLANEOUS
7.1 Notices. All notices hereunder, to be effective, shall be in
writing and shall be deemed delivered when delivered by hand, upon confirmation
of receipt by telecopy or when sent by first-class, certified mail, postage and
fees prepaid, as follows:
(a) For notices and communications to JNC or RFS:
The John Nuveen Company
333 West Wacker Drive
Chicago, Illinois 60606
Telecopy: (312) 917-7952
Attention: Anthony T. Dean
(b) For notices and communications to the Executive:
Richard D. Hughes
106 Leighton Drive
Bryn Mawr, Pennsylvania 19010
with a copy to:
Bruce Rosenfield, Esquire
Schnader Harrison Segal & Lewis LLP
1600 Market Street, Suite 3600
Philadelphia, PA 19103
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<PAGE> 12
By notice complying with the foregoing provisions of this Section, each party
shall have the right to change the address for future notices and communications
to such party.
7.2 Modification. As of the Closing Date this Agreement (and the other
agreements and documents referred to herein) shall constitute the entire
agreement between the parties hereto with regard to the subject matter hereof,
superseding all prior understandings and agreements, whether written or oral.
Any amendment or modification shall require the written agreement of the parties
hereto.
7.3 Assignment. This Agreement and all rights hereunder are personal to
the Executive and may not, unless otherwise specifically permitted herein, be
assigned by him. If the Executive dies, payments hereunder may be made to the
Executive's estate. Notwithstanding anything else in this Agreement to the
contrary, RFS and JNC may not assign their rights and obligations under this
Agreement (except by operation of law pursuant to a merger or similar
transaction). All monetary obligations of RFS and JNC to the Executive under
this Agreement are unconditionally guaranteed by JNC or RFS, as applicable.
7.4 Captions. Captions herein have been inserted solely for convenience
of reference and in no way define, limit or describe the scope or substance of
any provision of this Agreement.
7.5 Severability. The provisions of this Agreement are severable, and
the invalidity of any provision shall not affect the validity of any other
provision. In the event that any provision of this Agreement or the application
thereof is held to be unenforceable because of the duration or scope thereof,
the parties hereto agree that the panel of arbitrators or court making such
determination shall have the power to reduce the duration and scope of such
provision to the extent necessary to make it enforceable, and that the Agreement
in its reduced form shall be valid and enforceable to the full extent permitted
by law.
7.6 Governing Law. This Agreement shall be construed under and governed
by the laws of the State of Delaware (without giving effect to the principles of
conflicts of law thereunder).
7.7 Indemnification. JNC agrees that under RFS's certificate of
incorporation and bylaws the Executive will be indemnified to the fullest extent
permitted by Delaware law, subject to the restrictions of the 1940 Act and the
Advisers Act. Any reduction or diminution of such indemnification after the
Closing Date other than pursuant to a change in indemnification mandated by
applicable Delaware or federal law shall not reduce the indemnification provided
to the Executive.
7.8 Tax Withholding. Notwithstanding anything else contained herein,
all amounts payable hereunder shall be net of amounts required by law to be
withheld as taxes or otherwise.
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<PAGE> 13
7.9 Payments.
(a) Executive shall not be required to mitigate the amount of any
payment or benefit provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for herein be
reduced by any compensation earned by other employment or otherwise.
(b) The obligation of RFS and JNC to make the payments provided for in
this Agreement and otherwise to perform its respective obligations hereunder
shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which RFS and JNC may
have against the Executive or others.
(c) In the event that RFS and JNC shall fail or refuse to make payment
of any amounts or maintain any benefits due the Executive under this Agreement
within the respective time periods provided herein, JNC shall pay to the
Executive, in addition to the payment of any other sums provided in this
Agreement, interest, compounded daily, on any amount remaining unpaid to the
Executive, at the rate from time to time announced by The Morgan Guaranty Trust
Company of New York as its "prime rate", each change in such rate to take effect
on the effective date of the change in such prime rate.
7.10 Attorneys' Fees. In the event of a lawsuit by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to recover all of its costs and expenses, including attorneys' fees (if paid to
outside counsel), incurred by the prevailing party.
7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same agreement, it being understood that
all of the parties need not sign the same counterpart.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto, being duly authorized, have
duly executed this Agreement as a binding contract as of the day and year first
above written.
THE JOHN NUVEEN COMPANY
By: /s/ Anthony T. Dean
--------------------------------------
Name: Anthony T. Dean
Title: President
RICHARD D. HUGHES
By: /s/ Richard D. Hughes
--------------------------------------
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<PAGE> 1
EXHIBIT 10.2(c)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
14th day of July, 1997, by and between George W. Connell, an individual (the
"Executive") and The John Nuveen Company ("JNC"), a Delaware corporation.
WHEREAS, JNC is engaged in the business of providing investment
management and advisory services; and
WHEREAS, JNC has entered into a Stock Purchase Agreement dated as of
the same day hereof (the "Stock Purchase Agreement") with the Executive, as
selling shareholder of Rittenhouse Financial Services, Inc. ("RFS"); and
WHEREAS, the Executive is currently an executive of RFS and Executive
and JNC wish Executive to remain an employee of RFS following the date on which
the transactions contemplated by the Stock Purchase Agreement are consummated
(such date of consummation being hereinafter referred to as the "Closing Date");
and
WHEREAS, the parties desire to set forth the terms and conditions under
which the Executive shall be employed by RFS from and after the Closing Date and
upon which RFS shall compensate the Executive following the Closing Date; and
WHEREAS, the Executive will remain an employee, owner, officer and
director of The Rittenhouse Trust Company and RF Securities (collectively,
"RTC") following the Closing Date.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, JNC
and the Executive agree as follows:
ARTICLE I.
EMPLOYMENT
1.1. Office. Subject to terms hereof, RFS shall employ the Executive, and
the Executive shall serve RFS, to the extent legally permitted taking into
account his position with RTC as Chief Investment Officer of RFS, effective on
and after the Closing Date. This Agreement shall only become effective upon the
occurrence of the Closing Date. This Agreement shall terminate upon termination
of the Stock Purchase Agreement pursuant to Article VII thereof.
1.2. Responsibilities. The Executive shall serve as Chief Investment
Officer of RFS to the extent legally permitted taking into account his position
with RTC and shall serve on the Investment Committee and make himself
reasonably available for such due diligence activities as RFS or JNC may
request. In performing his services pursuant to this Agreement, the Executive
<PAGE> 2
shall at all times be under the supervision, control and direction of RFS and
JNC and conform to their general policies and procedures.
1.3. Commitment at RFS and RTC. The Executive may own, manage, operate,
control and otherwise participate in the ownership or control of RTC.
Notwithstanding any provisions to the contrary contained in this Agreement,
including without limitation Sections 6.2, 6.3, 6.4 and 6.6, the Executive may
engage in those activities permitted pursuant to the Inter-Company Agreement by
and among JNC, RFS, RTC and the Executive without violating any provision of
this Agreement. During the term of his employment hereunder, the Executive will
not, without the prior written approval of the Chairman of the Board of JNC,
accept employment or compensation from or perform services of any nature (other
than as a director) for any business enterprise other than RTC, RFS, JNC or any
of their respective Affiliates (as defined in the Stock Purchase Agreement).
ARTICLE II.
TERM OF EMPLOYMENT
2.1. Term. (a) The employment of the Executive pursuant hereto shall
commence on the Closing Date and remain in effect for a term expiring on
December 31, 2002 (the "Term") unless sooner terminated pursuant to the
provisions hereof. Such employment term in effect at any given time is referred
to herein as the "Term".
(b) "JNC Change of Control Transaction" shall mean any of the following:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of JNC where such acquisition causes such Person to own
20% or more of the combined voting power of the then outstanding voting
securities of JNC entitled to vote generally in the election of directors
(the "Outstanding JNC Voting Securities"); provided, however, that for
purposes of this subsection (i), none of the following acquisitions shall
be deemed a JNC Change of Control Transaction: (A) any acquisition directly
from JNC, (B) any acquisition by JNC, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by JNC or any
corporation controlled by JNC or (D) any acquisition by any corporation
pursuant to a transaction that complies with clauses (A), (B) and (C) of
subsection (iii) below; and provided, further, that if any Person's
beneficial ownership of the Outstanding JNC Voting Securities reaches or
exceeds 20% as a result of a transaction described in clause (A) or (B)
above, and such Person subsequently acquires beneficial ownership of
additional voting securities of JNC, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 20% or more of the
Outstanding JNC Voting Securities; or
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<PAGE> 3
(ii) individuals who, as of the effective date hereof, constitute the
Board of Directors of JNC (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by JNC's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Incumbent Board; or
(iii) the approval by the shareholders of JNC of (x) a reorganization,
merger or consolidation or sale, or other disposition of all or
substantially all of the assets of JNC or (y) the acquisition of assets or
stock of another corporation in exchange for voting securities of JNC (each
of (x) and (y), a "Business Combination") or, if consummation of such
Business Combination is subject, at the time of such approval by
shareholders, to the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a Business Combination pursuant to
which (A) all or substantially all of the individuals and entities who were
the beneficial owners of the Outstanding JNC Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of such
transaction owns JNC or all or substantially all of JNC's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding JNC Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of JNC or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, (except to the extent that such ownership existed
prior to the Business Combination) an amount of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation representing the greater of (1) 20%
thereof or (2) a percentage thereof equal to or greater than the percentage
thereof held after such transaction by the persons who were the owners of
JNC's Class B stock prior to such transaction; and (C) at least a majority
of the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
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<PAGE> 4
(iv) approval by the shareholders of JNC of a complete liquidation or
dissolution of JNC.
Notwithstanding the foregoing, unless a majority of the Incumbent Board
determines otherwise, no JNC Change of Control Transaction shall be deemed to
have occurred hereunder if the JNC Change of Control Transaction results from
actions or events in which the Executive is a participant in a capacity other
than solely as an officer, employee or director of RFS or JNC.
ARTICLE III.
COMPENSATION OF EXECUTIVE
3.1. Salary. As full compensation for his services hereunder, RFS will pay
to the Executive during the Term, a base salary ("Base Salary") at an annual
rate for each 12 month period equal to five hundred thousand dollars
($500,000).
3.2. Benefits: Other Compensation. The Executive shall be entitled to such
health, life and disability insurance benefits and such profit sharing,
pension, paid vacation, sick and personal time and other fringe benefits as are
available to, and on similar terms and conditions as apply to, senior
management employees of RFS from time to time, as approved by JNC.
3.3. Future Benefit Plans. In addition to benefits under Section 3.2, the
Executive shall also be entitled to participate in such other employee benefit
plans or arrangements offered to senior executives and key management employees
of RFS and approved by JNC after the Closing Date (or any JNC benefit plans as
may be mutually agreed), in accordance with the terms and conditions of such
plans and agreements.
3.4. Expenses. During the term of this Agreement, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in performing services hereunder, provided such expenses are
properly accounted for in accordance with general JNC policy, as in effect from
time to time and communicated to the Executive prior to incurring such expense.
ARTICLE IV.
TERMINATION
4.1. Discharge for Cause. The Executive may be terminated by RFS or JNC
from his employment hereunder for Cause. Discharge for Cause shall mean the
termination of the Executive's employment with RFS if any one or more of the
following events should occur: (a) the conviction of the Executive, by a court
of competent jurisdiction, or entry of a plea of guilty or nolo contendere, of
any crime of moral turpitude (whether or not involving RFS or JNC) which
constitutes a felony in the jurisdiction involved, (b) the Executive's fraud,
embezzlement or intentional misappropriation of any property of RFS, JNC or
their respective Affiliates (as defined in the Stock Purchase Agreement) or any
clients of any of them, (c) the commission by
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<PAGE> 5
the Executive of an act that would cause the Executive, RFS, JNC or any of their
respective Affiliates to be disqualified in any material manner under Section 9
of the 1940 Act, if the Securities and Exchange Commission (the "Commission")
were not to grant an exemptive order under Section 9(c) thereof, or that would
constitute grounds for the Commission to deny, revoke or suspend registration of
RFS, JNC or any of their respective Affiliates as an investment advisor,
broker/dealer or transfer agent, as applicable, with the Commission, in each
case after written notice specifying in reasonable detail the nature of the act
and the aforementioned consequences thereof and an opportunity to cure of not
less than 30 days having been given to such Executive within 30 days after such
act comes to the attention of JNC, (d) if the Executive is an associated person
of a broker-dealer, the commission by Executive of any act that would constitute
grounds for any material order by the Commission against Executive pursuant to
Section 15(b)(4) or 15(b)(6) of the Securities Exchange Act of 1934, as amended,
in each case after written notice specifying in reasonable detail the nature of
the act and the aforementioned consequences thereof and an opportunity to cure
of not less than 30 days having been given to such Executive within 30 days
after such act comes to the attention of JNC, (e) material continued breach of
this Agreement by Executive, continued insubordination or dereliction of duties
or more than one material infraction of regulatory compliance requirements such
as JNC's code of ethics, in each case after written notice specifying in
reasonable detail the nature of the breach, insubordination or infractions and
an opportunity to cure of not less than 30 days having been given to Executive
within 30 days after such acts come to the attention of JNC, (f) continued
alcohol or other substance abuse or addiction that renders Executive incapable
of satisfactorily performing his duties, after written notice and an opportunity
to cure in the first such instance of not less than 30 days (90 days if
Executive enters an approved rehabilitation program within such 30 day period)
have been given to such Executive, or (g) gross negligence or wilful or unlawful
misconduct materially injurious to RFS or JNC or the reputation of either, in
each case after written notice specifying in reasonable detail the nature of the
misconduct and an opportunity to cure of not less than 30 days having been given
to such Executive within 30 days after such acts come to the attention of JNC.
As used in this Section 4.1, "to cure" shall mean to eliminate within 30 days
after RFS or JNC has notified the Executive of the circumstances constituting
Cause (or, if elimination is not possible within such 30-day period, to take
substantial steps in good faith that are likely to eliminate the circumstances
constituting cause).
4.2. Retirement or Resignation. The Executive's employment under this
Agreement shall automatically terminate upon his Resignation or Retirement
during the Term. Retirement shall mean the Resignation (other than by reference
to the term Retirement used in the definition of "Resignation") of the
Executive after reaching the age of 65. Resignation shall mean the termination
of the Executive's full-time employment with JNC under this Agreement other
than by reason of a (i) Disabling Event (as defined below), (ii) for Good
Reason (as defined below), (iii) Retirement, (iv) termination by JNC without
Cause, (v) termination by JNC for Cause or (vi) expiration of the Term.
4.3. Disabling Event. In the event of a Disabling Event with respect to the
Executive, RFS or JNC may terminate the Executives employment under this
Agreement. Disabling Event shall mean the Executive's death or the Executive's
physical or mental disability, as certified by
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<PAGE> 6
a physician satisfactory to JNC and the Executive or his legal representative,
which renders such Executive incapable of performing his material duties and
services as an employee of RFS and which continues for more than six consecutive
months or more than twelve months in total during any twenty-four month period.
4.4. Good Reason; JNC Change of Control Transaction. (a) The Executive may
terminate his employment hereunder for Good Reason (as defined below) at any
time following the 30th day after the Executive has notified RFS and JNC in
writing of the circumstances constituting Good Reason if RFS and JNC have
failed within such 30-day period to eliminate (or, if elimination is not
possible within such 30-day period, to take substantial steps in good faith
that are likely to eliminate) the circumstances constituting such Good Reason.
As used herein, the Executive shall have Good Reason to terminate his
employment with RFS in the event of (i) a substantial breach by JNC or any of
its Affiliates of any of their respective material obligations to the Executive
under this Agreement with respect to the Executive (it being agreed for
purposes of this Section that any diminution in or failure to pay when due, the
compensation determined to be payable hereunder or benefits to be provided to
Executive hereunder shall be deemed "substantial" and "material"); (ii) the
transfer or assignment of Executive to any position other than Chief Investment
Officer of RFS or assignment or reduction of Executive's duties in a manner
inconsistent with the duties and responsibilities contemplated by Section 1.2;
(iii) RFS or JNC's requiring the Executive without Executive's consent to be
based anywhere other than a location within 25 miles of Philadelphia,
Pennsylvania ("Philadelphia Area"); or (iv) the failure by RFS to obtain the
specific assumption of this Agreement by any successor or assignee of RFS or
any person acquiring substantially all of the assets of RFS.
(b) The Executive may terminate his employment under this Agreement for any
reason during the 30-day period commencing on the first anniversary of a JNC
Change of Control Transaction.
ARTICLE V.
EFFECT OF TERMINATION
5.1. Cause, Resignation, Retirement or Disabling Event. (a) If the
Executive's employment under this Agreement is terminated (i) by RFS or JNC for
Cause or (ii) by the Executive by his Resignation, RFS shall pay the Executive
the Base Salary through the date of termination, to the extent not previously
paid, and any unused vacation, unreimbursed expenses and other benefits
described in Article III hereof applicable to the period prior to termination
("Accrued Obligations"), and RFS and JNC shall have no further obligations
hereunder. Without limiting the foregoing, the Executive shall retain all
accrued benefits to the extent vested in the profit sharing and other plans in
which he participates.
(b) If the Executive's employment under this Agreement is terminated by RFS
or JNC by reason of a Disabling Event, the Executive shall receive all Accrued
Obligations and also become fully vested in his accrued benefits as of the date
of termination in the profit sharing and
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other plans in which he participates, and RFS and JNC shall have no further
obligations hereunder.
5.2. Without Cause; Good Reason or Change of Control. If the Executive's
employment under this Agreement is terminated (i) by RFS or JNC for any reason
other than for Cause, a Disabling Event or Retirement, (ii) by the Executive
for Good Reason, or (iii) by the Executive for any reason during the 30-day
period commencing on the first anniversary of a JNC Change of Control
Transaction, the present value of Executive's Base Salary for the remainder of
the Term (discounted using the then prevailing "prime rate" of The Morgan
Guaranty Trust Company of New York) shall be paid to the Executive in a lump
sum within 10 days after the effective date of such termination and other
benefits provided for in Sections 3.2 and 3.3 hereof shall continue to be paid
or provided to the Executive for the remainder of the Term (the "Severance
Period"). The Executive shall also become fully vested in his accrued benefits
as of the date of termination in the profit sharing and other plans in which he
participates.
5.3. Excise Tax Treatment. In the event that the Executive becomes entitled
to any payments or benefits in connection with a JNC Change of Control or the
Executive's termination of employment, whether such payments or benefits are
made or provided pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with JNC, any person whose actions result in a JNC
Change of Control or any person affiliated with JNC or such person
(collectively, "Severance Payments"), and if any of such Severance Payments
would be subject to the excise tax ("Excise Tax") imposed under section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), RFS shall pay to
the Executive an additional amount (the "Gross-Up Payment") such that the net
amount of the Severance Payments and the Gross-Up Payment retained by the
Executive, after deduction of any Excise Tax on the Severance Payments and any
federal, state and local income tax and Excise Tax upon the payment provided
for by this Section 5.3, shall be equal to the Severance Payments.
ARTICLE VI.
CONFIDENTIAL INFORMATION
6.1. Acknowledgment. The Executive agrees and acknowledges that in the
course of rendering services to RFS and its clients and customers he has had
and shall continue to have access to and has become and shall become acquainted
with confidential information about the professional, business and financial
affairs of RFS and JNC and their clients and customers and may have contributed
to or may in the future contribute to such information. The Executive
acknowledges that RFS and JNC are engaged in a highly competitive business and
that the success of RFS and JNC in the marketplace depends upon their goodwill
and reputation. The Executive recognizes that in order to guard the legitimate
interests of RFS and JNC it is necessary to protect all such confidential
information, goodwill and reputation and acknowledges that the restrictions,
prohibitions and provisions of this Article VI (including without limitation
the periods of time set forth herein) are reasonable, fair and equitable in
furtherance of the foregoing, and are a material inducement to JNC to enter
into this Agreement, subject to the provisions of Section 1.3. The Executive
agrees not to challenge the enforceability of this
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<PAGE> 8
Article VI, nor will the Executive raise any equitable defenses thereto, which
the Executive hereby irrevocably waives.
6.2. Proprietary Information. In the course of his service to RFS the
Executive has had and shall continue to have access to confidential know-how,
business documents and information, marketing data, client lists and trade
secrets regarding JNC, RFS and their respective Affiliates and software and
other intellectual property developed or applied by JNC, RFS or their
respective Affiliates, all of which are confidential. Such information shall
hereinafter be called "Proprietary Information" and shall include any and all
items enumerated in the preceding sentence to which the Executive has had or
may have access, whether previously existing, now existing or arising
hereafter, whether or not conceived or developed by others or by the Executive
alone or with others during the period of his service to RFS, and whether or
not conceived or developed during regular working hours; provided, however,
that "Proprietary Information" shall not include (i) any information which is
in the public domain, provided such information is not in the public domain as
a consequence of disclosure by the Executive in violation of this Agreement,
(ii) any information that becomes available to the Executive after he ceases to
be an employee of RFS on a nonconfidential basis from a source other than RFS
or any of its Affiliates and (iii) information of a general nature not
pertaining primarily to JNC, RFS and their respective Affiliates which would
generally be acquired in similar employment with another company. This Section
6.2 is subject to the provisions of Section 1.3.
6.3. Fiduciary Obligations. The Executive agrees and acknowledges that
Proprietary Information is of critical importance to RFS and JNC and a
violation of this Article VI would seriously and irreparably impair and damage
the business of RFS and JNC. The Executive therefore agrees to keep at all
times whether during the Term or thereafter all Proprietary Information in a
fiduciary capacity for the sole benefit of RFS and JNC, subject to the
provisions of Section 1.3. Upon termination of the Executive's employment, the
Executive shall turn over and return to RFS or JNC all property in the
Executive's possession belonging to RFS or JNC, respectively, and all files and
written or electronic information and data that is, contains or reflects
Proprietary Information.
6.4. Non-Disclosure. Subject to the provisions of Section 1.3, the
Executive shall not at any time, whether during the Term or thereafter, use or
disclose, directly or indirectly (except as required by law and after
consultation with JNC), any Proprietary Information to any person other than
(a) RFS, JNC or their respective Affiliates, (b) authorized employees thereof
with a legitimate need to know related to the business of RFS, JNC or any such
Affiliate at the time of such disclosure, or (c) at the direction of RFS or
JNC, and in all such cases only in the course of the Executive's service to
RFS.
6.5. Equitable Remedies. Notwithstanding any other provision of this
Agreement to the contrary, the Executive acknowledges and agrees that the
services to be rendered by the Executive hereunder are of irreplaceable value
and RFS and JNC will suffer irreparable injury and damage and will have no
adequate remedy at law and could not be reasonably or adequately compensated in
damages for any breach or threatened or attempted breach by the Executive of
the provisions of this Article VI. Accordingly, the Executive expressly agrees
that RFS and JNC
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shall be entitled, in addition to the other rights or remedies that may be
available to it under this Agreement or at law, to a temporary and/or permanent
order enjoining or restraining the Executive from engaging in any conduct in
violation or threatened violation of the provisions of this Article VI.
6.6. Competitive Activities. (a) So long as the Executive's Employment
under this Agreement shall not have been terminated, subject to 6.6(b) and
except as otherwise expressly consented to, approved or otherwise permitted by
JNC in writing, the Executive shall not, directly or indirectly:
(i) own, manage, operate, control or otherwise participate in the
ownership or control of any person, firm, corporation, partnership or other
entity which engages in activities which compete with RFS or JNC in the
business of providing investment products and services to clients of RFS or
JNC or otherwise compete with RFS or JNC in the managed account or mutual
fund businesses (unless his participation is solely with respect to a unit
or division which does not so engage), or extend credit to or assist in
arranging credit to establish or conduct any such activity, or permit his
name, reputation or affiliations to be used in connection with any such
business;
(ii) request, induce or attempt to influence any client or customer of
RFS, JNC or any of their respective Affiliates engaged in the managed
account or mutual fund businesses to limit, curtail or cancel its business
with RFS, JNC or any of their respective Affiliates engaged in the managed
account or mutual fund businesses or solicit any such party for such
business; or
(iii) except for those individuals listed on Schedule 1 hereto, hire
any then current officer, director or employee of RFS, JNC or any of their
respective Affiliates engaged in the managed account or mutual fund
businesses or any then current consultant, agent or representative with
respect to the managed account or mutual fund businesses of RFS, JNC or any
of their respective Affiliates engaged in the managed account or mutual
fund businesses, or request, induce or attempt to influence any of the
foregoing to (A) terminate his employment or such business relationship
with RFS, JNC or any of such respective Affiliates or (B) commit any act
that, if committed by such Executive, would constitute a breach of any
provision hereof; provided, however, that other than as provided in
sections (i) and (ii), nothing in this clause (iii) shall restrict or limit
Executive from employing or entering into any business arrangement with any
person terminated by RFS or JNC other than for Cause, provided that no such
business can be conducted nor any employment arrangement entered into until
after such person is no longer employed by RFS or JNC; provided further,
however, that nothing in this clause (iii) shall prohibit the Executive
from utilizing general advertising for employee positions to a broad based
population which may include one or more officers, directors or employees
of RFS or JNC or consultants, agents or representatives with
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<PAGE> 10
respect to the managed account or mutual fund businesses of RFS or JNC who
are not ultimately hired.
In addition, with respect to the provisions of Section 6.6(a) (ii) as they
apply to the Executive following the termination of his employment with RFS
hereunder, the restrictions contained in Section 6.6(a)(ii) shall apply to
clients and customers of RFS, JNC or any Affiliate of either engaged in the
managed account or mutual fund businesses in existence at the time of such
termination with respect to which, to the knowledge of Executive, RFS, JNC or
any such Affiliate of either had either submitted within twelve months prior to
the Executive's date of termination a written response to such client's request
for proposal or had other contacts within twelve months prior to the
Executive's date of termination, whether oral or written, regarding retention
of RFS, JNC or such Affiliate as an investment adviser or any potential clients
or customers to whom RFS, JNC or such Affiliate has made presentations within
the twelve months prior to cessation of the Executive's employment with RFS.
(b) The provisions of Section 6.6(a)(i), (ii) and (iii) hereof shall
continue in effect for the later of (i) five years after the Closing Date or
(ii) the earlier of (A) the transfer of a majority of the capital stock and
voting power of RTC to other than a Permitted Transferee or (B) the termination
by RFS of the Intercompany Agreement dated as of ______ by and among JNC, RFS,
RTC and the Executive and Support Services Agreement dated as of ______ by and
among JNC, RFS, RTC and the Executive (the "Covenant Period"). The parties
hereby agree that, after expiration of the Covenant Period, the Executive shall
not be prohibited pursuant to Section 6.4 hereof from utilizing his knowledge
of the identity of clients in the conduct by such Executive of the activities
described in Section 6.6(a)(i).
(c) The provisions of clauses (i), (ii), and (iii) of Section 6.6(a) and
Section 6.6(b) are separate and distinct commitments independent of each of the
other such clauses.
(d) Notwithstanding the foregoing, Section 6.6 shall not prohibit the
Executive from (x) owning, solely for investment purposes, less than 5% of the
outstanding securities of any class of securities registered pursuant to the
Securities Exchange Act of 1934, as amended, of any person, firm, corporation,
partnership or other entity referred to in Section 6.6(a) (i); or (y) owning
stock of Bryn Mawr Trust Company or Washington Trust Company.
(e) If RFS fails to make any post-termination payment to which Executive is
entitled, Executive's obligations pursuant to Section 6.6 shall immediately
terminate and be of no further force or effect.
ARTICLE VII.
MISCELLANEOUS
7.1. Notices. All notices hereunder, to be effective, shall be in writing
and shall be deemed delivered when delivered by hand, upon confirmation of
receipt by telecopy or when sent by first-class, certified mail, postage and
fees prepaid, as follows:
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<PAGE> 11
(a) For notices and communications to JNC or RFS:
The John Nuveen Company
333 West Wacker Drive
Chicago, Illinois 60606
Telecopy: (312) 917-7952
Attention: Timothy R. Schwertfeger
(b) For notices and communications to the Executive:
George Connell
121 Cheswold Lane
Haverford, Pennsylvania 19041
with a copy to:
Bruce Rosenfield, Esquire
Schnader Harrison Segal & Lewis LLP
1600 Market Street, Suite 3600
Philadelphia, PA 19103
By notice complying with the foregoing provisions of this Section, each party
shall have the right to change the address for future notices and
communications to such party.
7.2. Modification. As of the Closing Date this Agreement (and the other
agreements and documents referred to herein) shall constitute the entire
agreement between the parties hereto with regard to the subject matter hereof,
superseding all prior understandings and agreements, whether written or oral.
Any amendment or modification shall require the written agreement of the
parties hereto.
7.3. Assignment. This Agreement and all rights hereunder are personal to
the Executive and may not, unless otherwise specifically permitted herein, be
assigned by him. If the Executive dies, payments hereunder may be made to the
Executive's estate. Notwithstanding anything else in this Agreement to the
contrary, RFS and JNC may not assign their rights and obligations under this
Agreement (except by operation of law pursuant to a merger or similar
transaction). All monetary obligations of RFS or JNC to the Executive under
this Agreement are unconditionally guaranteed by JNC or RFS, as applicable.
7.4. Captions. Captions herein have been inserted solely for convenience of
reference and in no way define, limit or describe the scope or substance of any
provision of this Agreement.
7.5. Severability. The provisions of this Agreement are severable, and the
invalidity of any provision shall not affect the validity of any other
provision. In the event that any provision of this Agreement or the application
thereof is held to be unenforceable because of the duration or scope thereof,
the parties hereto agree that the panel of arbitrators or court making such
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<PAGE> 12
determination shall have the power to reduce the duration and scope of such
provision to the extent necessary to make it enforceable, and that the Agreement
in its reduced form shall be valid and enforceable to the full extent permitted
by law.
7.6. Governing Law. This Agreement shall be construed under and governed by
the laws of the State of Delaware (without giving effect to the principles of
conflicts of law thereunder).
7.7. Indemnification. JNC agrees that under RFS's certificate of
incorporation and bylaws the Executive will be indemnified to the fullest
extent permitted by Delaware law, subject to the restrictions of the 1940 Act
and the Advisers Act. Any reduction or diminution of such indemnification after
the Closing Date other than pursuant to a change in indemnification mandated by
applicable Delaware or federal law shall not reduce the indemnification
provided to the Executive.
7.8. Tax Withholding. Notwithstanding anything else contained herein, all
amounts payable hereunder shall be net of amounts required by law to be
withheld as taxes or otherwise.
7.9. Payments.
(a) Executive shall not be required to mitigate the amount of any payment
or benefit provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for herein
be reduced by any compensation earned by other employment or otherwise.
(b) The obligation of RFS and JNC to make the payments provided for in this
Agreement and otherwise to perform its respective obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which RFS and JNC may
have against the Executive or others.
(c) In the event that RFS and JNC shall fail or refuse to make payment of
any amounts or maintain any benefits due the Executive under this Agreement
within the respective time periods provided herein, JNC shall pay to the
Executive, in addition to the payment of any other sums provided in this
Agreement, interest, compounded daily, on any amount remaining unpaid to the
Executive, at the rate from time to time announced by The Morgan Guaranty Trust
Company of New York as its "prime rate", each change in such rate to take
effect on the effective date of the change in such prime rate.
7.10. Attorneys' Fees. In the event of a lawsuit by either party to enforce
the provisions of this Agreement, the prevailing party shall be entitled to
recover all of its costs and expenses, including attorneys' fees (if paid to
outside counsel), incurred by the prevailing party.
7.11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same agreement, it being understood that
all of the parties need not sign the same counterpart.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto, being duly
authorized, have duly executed this Agreement as a binding contract as of the
day and year first above written.
THE JOHN NUVEEN COMPANY
By: /s/ Anthony T. Dean
--------------------------------------
Name: Anthony T. Dean
Title: President
GEORGE W. CONNELL
By: /s/ George W. Connell
--------------------------------------
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<PAGE> 1
Exhibit 10.4(a)
AMENDED AND RESTATED
RITTENHOUSE FINANCIAL SERVICES, INC.
1997 EQUITY INCENTIVE AWARD PLAN
Rittenhouse Financial Services, Inc. hereby establishes the Rittenhouse
Financial Services, Inc. 1997 Equity Incentive Award Plan for the benefit of its
eligible Participants (as hereinafter defined) for the purposes hereinafter set
forth.
I. DEFINITIONS
(a) "Affiliate" shall mean, with respect to any person, any other
person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, such first person.
(b) "Award" shall mean an award of Non-Qualified Stock Options.
(c) "Beneficiary" shall mean (i) in the event of the Disability or
incompetence of a Participant, the person or persons who shall have acquired on
behalf of such Participant by legal proceeding or otherwise the right to receive
the benefits specified under this Plan, or (ii) in the event of a Participant's
death, the person, persons, trust or trusts which have been designated by such
Participant in his or her most recent written beneficiary designation filed with
the Committee to receive the benefits specified under this Plan, or, if there is
no designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Board of Directors" shall mean the Board of Directors of the
Company.
(e) "Cause" shall have the meaning specified by the Committee in
connection with the grant of any Award; provided, that if the Committee does not
so specify, "Cause" shall mean (i) the willful engaging by the Participant in
conduct which the Participant knows, or has substantial reason to believe, is
illegal to the extent of a felony violation (or the equivalent seriousness under
laws other than those of the United States) and which has effects on the Company
or the Participant materially injurious to the Company; (ii) any act or acts of
serious dishonesty or gross misconduct which result in material damage to the
Company or its business or reputation or which the Board of Directors reasonably
determines do materially and adversely affect the value, reliability or
performance of the Participant to the Company; (iii) the willful and continued
failure by the Participant to perform his or her duties to the Company (which
may include any sustained and unexcused absence of the Participant from the
performance of such duties, which absence has not been certified in writing as
due to physical or mental illness or Disability), after a written demand for
performance has been delivered to the Participant by the Board of Directors
identifying the manner in which the Participant has failed to substantially
perform his or her duties. For purposes of the proviso of the preceding
sentence: (i) no act or failure to act on the Participant's part shall be
considered "willful" unless done, or omitted to be done, in bad faith and
without reasonable belief that such action or omission was in, or not opposed
to, the
<PAGE> 2
best interests of the Company; (ii) any act or failure to act by the Participant
based upon authority given pursuant to a resolution duly adopted by the Board of
Directors of the Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, in good faith
and in the best interests of the Company; and (iii) notwithstanding the
foregoing, the Participant shall not be deemed to have been terminated with
Cause unless and until there shall have been delivered to the Participant a copy
of a resolution duly adopted by the affirmative vote of a majority of the entire
Board of Directors of the Company at a meeting of the Board called and held
after such reasonable notice to the Participant and at which the Participant has
had an opportunity, together with his or her other counsel, to be heard before
such Board, finding that in the good faith opinion of such Board, the
Participant was guilty of the conduct set forth above and specifying the
particulars thereof in detail.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean a committee of two members, one of whom
shall be selected by and serve at the pleasure of the Board of Directors, and
the second of whom shall be the Management Representative.
(h) "Common Stock" shall mean any series or class of the common stock
of the Company.
(i) "Company" shall mean Rittenhouse Financial Services, Inc., a
Delaware corporation, and its successors.
(j) "Disability" shall mean the inability of a Participant to perform
the services normally rendered to his or her Employer due to a physical or
mental impairment that can be expected to be of either permanent or indefinite
duration, as determined by the Committee, and which results in the Participant's
inability to perform his or her normal duties to the Employer.
(k) "EBITA" shall mean earnings of the Company before interest, income
taxes and amortization of goodwill.
(l) "Effective Date" of an Award shall mean the date of the grant as
specified by the Committee.
(m) "Employer" shall mean the Company with respect to its employees and
each RFS Subsidiary with respect to its employees.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(o) "Exercise Price" shall mean the price at which each share of Common
Stock covered by a Non-Qualified Stock Option may be purchased.
(p) "Fair Market Value" of a share of Common Stock shall mean on any
Valuation Date, and thereafter until recalculated by the Committee on the next
succeeding
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<PAGE> 3
Valuation Date, an amount equal to (x) the EBITA of the Company as determined by
the Committee from the financial statements of the Company, adjusted pursuant to
Appendix A to this Plan, multiplied by (y) the Multiple, as determined by the
Committee on the relevant Valuation Date, divided by (z) the number of shares of
Common Stock outstanding on the relevant Valuation Date calculated including as
shares of Common Stock any such shares issuable upon exercise of all Options
that are vested, outstanding and unexercised as of such date.
(q) "GAAP" shall mean generally accepted accounting principles as used
in the United States of America as in effect at the time any act requiring the
application of GAAP is performed.
(r) "Management Representative" shall mean (i) Richard Hughes, so long
as he is employed in an executive capacity with the Company or any of its
Affiliates and agrees to serve as such, or (ii) at any time that Richard Hughes
is not employed in an executive capacity by the Company or any of its Affiliates
or does not agree to serve as the Management Representative, the person selected
by the employees of the Company then serving as members of the Company's
Executive Committee from among William Conrad, Michael Lewers and John Waterman
so long as such selected person is employed in an executive capacity with the
Company or any of its Affiliates and agrees to serve as such; provided, however,
that in the event that at any time no person meets the above requirements to
serve as the Management Representative, the Management Representative shall be
such other person selected by the employees of the Company then serving as
members of the Company's Executive Committee.
(s) "Multiple" shall mean the multiple of EBITA fixed by the Committee
on a given Valuation Date for purposes of calculating the Fair Market Value of
the Common Stock on such Valuation Date, which multiple shall be determined by
the Committee giving due regard to the Company's performance during the prior
fiscal year and including a qualitative assessment of risk.
(t) "Non-Qualified Stock Option" or "Option" shall mean a right to
purchase a specified number of shares of Common Stock at a specified price,
which is not intended to comply with the terms and conditions for a
tax-qualified stock option as set forth in Section 422 of the Code, as such
section may be in effect from time to time.
(u) "Participant" shall mean an officer or other key employee of the
Company or a RFS Subsidiary who has been granted an Award under the Plan.
(v) "Plan" shall mean this Rittenhouse Financial Services, Inc. 1997
Equity Incentive Award Plan.
(w) "Retirement" shall mean the retirement of a Participant from the
employment of the Company or a RFS Subsidiary at (i) such Participant's normal
retirement date upon reaching age 65, or (ii) such Participant's early
retirement with the approval of the Committee.
(x) "RFS Subsidiary" shall mean any corporation 50% or more of the
voting power of which is owned, directly or indirectly, by the Company.
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<PAGE> 4
(y) "Termination of Employment" shall mean a cessation of the
employee-employer relationship between a Participant and an Employer (other than
by reason of transfer of the employee to another Employer), or the consummation
of a transaction whereby a Participant's Employer (other than the Company)
ceases to be a RFS Subsidiary (such consummation, a "Disaffiliation
Transaction"). The employment of a Participant who is on an approved leave of
absence in excess of two years shall be considered terminated as of the
commencement of such leave for all purposes of the Plan.
(z) "Valuation Date" shall mean with respect to each fiscal year or
other period the date fixed by the Committee on which the Committee shall
determine the Fair Market Value of the Common Stock applicable until the next
succeeding Valuation Date. The Committee shall establish a Valuation Date not
less frequently than annually (the "Annual Valuation Date"), beginning in fiscal
1998, which date shall occur as soon as reasonably practicable after the audited
financial statements for the prior fiscal year have been prepared and verified.
II. THE PLAN
2.1 Purposes.
The purposes of the plan are to enable the Company and RFS Subsidiaries
to attract and retain exceptionally qualified officers and other key employees
upon whom the sustained growth and profitability of the Company and RFS
Subsidiaries will depend in large measure, to provide added incentive for such
individuals to enhance the value of the Company for the benefit of its
stockholder, and to strengthen the mutuality of interests between Participants
and the Company's stockholder by providing equity-based incentive awards. The
Plan is intended to achieve these purposes through the award of Non-Qualified
Stock Options.
2.2 Administration.
The Plan shall be administered by the Committee. Any action of the
Committee with respect to the administration of the Plan shall be taken pursuant
to a majority vote or the written consent of a majority of its members. The
Committee may (i) delegate to any one or more of the members thereof or to an
officer of the Company any of its authority with respect to the Plan, and (ii)
authorize any one or more of the members thereof or any officer of the Company
to execute and deliver documents on behalf of the Committee.
Subject to the express provisions of the Plan and the right of the
Board of Directors to approve the size of any Award, which approval shall not be
unreasonably withheld, the Participant to whom an Award is granted and any usual
terms of such Award, the Committee shall have the authority to construe and
interpret the Plan, to define the terms used herein, to prescribe, amend and
rescind rules and regulations relating to administration of the Plan and to make
all other determinations necessary or advisable for the administration of the
Plan. The determinations of the Committee on the foregoing matters shall be
conclusive. The duties of the Committee shall include, but shall not be limited
to, selecting individuals for participation in the Plan, determining the types,
sizes, terms and provisions of Awards (which need not be identical),
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<PAGE> 5
making disbursements and settlements of Awards, determining whether to defer or
accelerate the vesting of, or the lapsing of restrictions or risk of forfeiture
with respect to, Non-Qualified Stock Options, construing the provisions of the
Plan, modifying the terms of any Award, and authorizing the exchange or
substitution of Awards; provided, however, that no such modification, exchange
or substitution shall be to the detriment of a Participant with respect to any
Award previously granted, and provided, further, that in no event shall the
Committee be permitted to reduce the Exercise Price of any outstanding Option or
to exchange or replace an outstanding Option with a new Option with a lower
Exercise Price, except pursuant to Section 4.1. Subject only to compliance with
the express provisions of the Plan, the Committee may act in its sole and
absolute discretion in performing the duties specifically set forth in the
preceding sentence and other duties under the Plan. The Committee shall have the
power and authority to appoint and authorize such of the Company's officers or
other persons to perform such functions in the execution and administration of
the Plan (other than the interpretation of the Plan and the adoption of rules
governing its execution and administration) as the Committee shall determine
from time to time. No member of the Committee shall be liable for any action,
failure to act, determination or interpretation made in good faith with respect
to the Plan or any transaction hereunder.
2.3 Participation.
Officers and other full-time salaried employees of the Company or a RFS
Subsidiary, including those who also serve as directors of the Company or a RFS
Subsidiary, shall be eligible to participate in the Plan upon selection and
approval by the Committee. Participation on the Committee shall not preclude any
person otherwise eligible to receive an Award hereunder from being eligible to
receive such an Award. The Committee may, in its discretion, delegate to
officers of the Company the authority to select individuals for participation in
the Plan and to whom Awards may be granted. Directors who are not officers or
employees of the Company or a RFS Subsidiary are not eligible to participate in
the Plan. An individual who has received Awards may, if otherwise eligible, be
granted additional Awards if the Committee shall so determine. Awards granted
under the Plan may be terminated or forfeited upon the occurrence of such events
or in such circumstances, including at or following a Participant's Termination
of Employment, as the Committee shall specify.
2.4 Shares Reserved for Plan.
(a) The total number of shares of Common Stock reserved and available
for issuance in connection with Awards under the Plan shall be that number
determined by the Committee in accordance with the Plan on September 4, 1997,
all of which shall be Common Stock. Except as contemplated by the provisions of
Section 4.1(a) hereof, the Committee shall not increase the number of shares
available for issuance in connection with Awards under the Plan or to any one
individual as set forth above. In no event shall Awards be outstanding at any
one time that have resulted or could result in the issuance of a number of
shares of Common Stock in excess of the number then remaining reserved and
available for issuance under the Plan. If any shares of Common Stock subject to
an Award are forfeited or such Award otherwise terminates without a distribution
of shares to the Participant, any shares counted against the number
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<PAGE> 6
of shares reserved and available under the Plan with respect to such Award
shall, to the extent of any such forfeiture or termination, again be available
for Awards under the Plan.
(b) Notwithstanding the foregoing, Awards granted through the
assumption of, or in substitution or exchange for, similar awards in connection
with the acquisition of another corporation or business entity shall not be
counted for purposes of applying the above limitations on numbers of shares
available for Awards generally or any particular kind of Award under the Plan.
(c) Any shares of Common Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
III. AWARDS UNDER THE PLAN
3.1 In General.
(a) Non-Qualified Stock Options may be awarded in accordance with the
provisions of the Plan and on such other terms and conditions as are not
inconsistent with the purposes and provisions of the Plan; provided, however,
that in no event shall Non-Qualified Stock Options be awarded following the
three-month period commencing on the date of the effectiveness of this Plan,
except for grants made during each of the seven-day periods commencing on the
first, second and third Annual Valuation Dates following the effectiveness of
this Plan. Awards granted under the Plan may be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan or any award granted under any other plan of the Company or any
RFS Subsidiary or any other right of a Participant to receive payment from the
Company or any RFS Subsidiary.
(b) After the Committee has approved the grant of an Award to a
Participant and established the applicable terms and conditions of the Award
applicable to such Participant, such Participant shall be given written
confirmation of such Award.
(c) All shares of Common Stock available for Awards hereunder shall
have been the subject of the grant of an Award hereunder not later than the
third anniversary of the effective date of this Plan. If such condition is not
satisfied, the Committee shall grant Options for that number of shares of Common
Stock then remaining available for Awards hereunder not theretofore subject of
an Award hereunder, pro rata based on the number of Options theretofore granted
thereto, to each employee of the Company who, on such third anniversary date, is
still an employee of the Company or any of its subsidiaries, who was an employee
of any of the Company or any of such subsidiaries immediately prior to the
effective date of this Plan and to whom one or more Options have theretofore
been granted under this Plan.
3.2 Non-Qualified Stock Options.
All Non-Qualified Stock Options granted pursuant to the Plan shall be
in such form as the Committee shall from time to time determine and shall be
subject to such terms, con-
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<PAGE> 7
ditions, restrictions and limitations as deemed appropriate by the Committee
and, in addition, to the following terms and conditions:
(a) All Non-Qualified Stock Options awarded under the Plan shall
represent the right to purchase whole or fractional shares of Common Stock.
(b) The Exercise Price for each share of Common Stock covered by a
Non-Qualified Stock Option shall be no less than the Fair Market Value of the
Common Stock on the Effective Date of the Award as determined and fixed by the
Committee on the relevant Valuation Date and shall be set forth in the related
Stock Option Agreement; provided, however, that in no event shall the Exercise
Price be less than the par value of the Common Stock.
(c) Each Non-Qualified Stock Option awarded under the Plan shall be
evidenced by a Stock Option Agreement in a form approved by the Committee, to be
executed between the Company and the person to whom such Option is granted,
which Stock Option Agreement shall set forth the number of Options granted and
the Exercise Price with respect thereto.
(d) The term of each Non-Qualified Stock Option shall be not more than
four years from the date of grant, as the Committee shall determine, subject to
earlier termination as provided in Section 3.2(h).
(e) Except as otherwise provided in this Section 3.2 or Section 4.1(b),
Non-Qualified Stock Options awarded to a Participant shall become exercisable on
such date or dates, and subject to such conditions, as specified by the
Committee in connection with the grant thereof. Any shares covered by an
exercisable Option that are not purchased on an applicable installment date may
be purchased at any time thereafter prior to the final expiration of the Option.
(f) Subject to the terms and conditions of the Option, during its term
an Option may be exercised only by the optionee, by a legal representative upon
the incapacity of the optionee or by the Beneficiary upon the death of the
optionee, by giving written notice of exercise to the Company prior to
expiration of the Option, specifying the number of shares to be purchased and
accompanied by the payment of the aggregate Exercise Price therefor.
(g) The aggregate Exercise Price for all shares purchased pursuant to
exercise of an Option shall be paid for at the time of such purchase and prior
to the delivery of said shares either in cash or by check, bank draft or money
order payable to the order of the Company.
(h) Except as otherwise specified by the Committee at the time of
grant, in the event of Termination of Employment of an optionee other than by
reason of the optionee's death, Disability or Retirement, or by the Employer
without Cause, any Options previously awarded, vested or unvested, to such
optionee that have not become exercisable as of the date of Termination of
Employment shall be forfeited, and all other Options that are exercisable but
have not been exercised as of the date of Termination of Employment shall be
exercisable for a period of 5 days following the date of Termination of
Employment (but not after the expiration date of the
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<PAGE> 8
Option) and shall, if not theretofore exercised, terminate upon the expiration
of such 5-day period. If Termination of Employment is by reason of the death,
Disability or Retirement of the optionee, or by the Employer without Cause, any
Options not exercised as of the date of Termination of Employment (including
Options that are otherwise not yet exercisable) may be exercised by the optionee
or the optionee's Beneficiary pursuant to their terms and the provisions of this
Plan.
(i) The grant and exercise of Options hereunder shall be subject to all
applicable rules and regulations of governmental authorities. Each Option shall
be subject to the requirement that, if at any time the Committee shall
determine, in its discretion, that the listing, registration or qualification of
the shares covered thereby upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the purchase of shares thereunder, the Company's obligation to
deliver shares upon exercise shall be conditioned upon such listing,
registration, qualification, consent or approval, which the Company shall use
its reasonable best efforts to obtain, but which shall have been effected or
obtained free of any material conditions not acceptable to the Committee.
(j) The holder of an Option granted under this Plan shall have no
rights as a stockholder with respect to any shares of Common Stock covered by
such Option until the date payment of the Exercise Price for such Option is
tendered to the Company pursuant hereto.
(k) Each Option granted under this Plan (i) shall be exercisable solely
during a single 30-day period (unless extended at the sole discretion of the
Committee) immediately following a single Annual Valuation Date determined and
fixed by the Committee at the time of grant and set forth in the related Stock
Option Agreement and shall vest on the January 1st last preceding such Annual
Valuation Date, and (ii) shall expire, to the extent not theretofore exercised,
as of the termination of the 30-day exercise period (unless extended at the sole
discretion of the Committee) referred to above; provided, however, that with
respect to each Participant as to whom the Company is unable to arrange for
commercially reasonable financing as contemplated under Section 3.2(m) in
sufficient time to allow such Participant to exercise his or her exercisable
Options during the 30-day exercise period referred to above applicable thereto,
such exercise period with respect to such unexercised Options shall be
automatically extended for an additional 30 days.
(l) Each Option granted under this Plan shall provide that the holder
thereof shall have the right to request in writing that the Company register for
sale under the Securities Act of 1933, as amended, and subject to the terms of
the following paragraph, all, but not less than all, of the shares of Common
Stock issued to such holder upon exercise of such Option or otherwise acquired
by such holder, in each case, prior to the date of delivery of such request,
which request may be made at any time following the six-month period commencing
on the date of issuance or other acquisition of the share of Common Stock last
issued thereto or acquired thereby, and which registration shall be effective
within four months of the date such request is delivered to the Company;
provided, however, that the Company shall not be obligated to so register such
shares if the Company agrees, or a designee of the Company agrees, in each case
by
-8-
<PAGE> 9
written notice to such requesting holder delivered within 30 days of the date
the request for such registration is received by the Company from such holder,
to purchase all of such shares of such holder at a price per share equal to the
Fair Market Value determined on the Current Valuation Date or the Special
Valuation Date (as such terms are defined below), as the case may be, pursuant
to this Section 3.2(l), and such holder shall be obligated to sell such shares
to the Company, or its designee, on such terms within five business days of the
Company delivering such written notice to such holder of the Company's
determination to purchase and not register such shares pursuant to the foregoing
provisions. The Company shall advise the Committee whenever it receives a
request for registration in accordance with the terms of this Section 3.2(l),
and, unless there has been a Valuation Date at which the Fair Market Value has
been determined within 30 days of the date such request is received by the
Company (the "Current Valuation Date"), the Committee shall establish a
Valuation Date within ten days of receipt of such request (the "Special
Valuation Date") for purposes of determining the Fair Market Value.
If neither the Company nor any designee of the Company elects to
purchase the shares of Common Stock of a holder subject to a request made in
accordance with the terms set forth above, the Company shall cause such shares
of Common Stock to which the request relates to be registered and sold, at such
holder's option, in an underwritten public offering of such shares. The Company
shall bear all costs and expenses of any such underwritten public offering and
shall enter into an underwriting agreement that requires the underwriter to
purchase such shares at a price per share which is not less than the Fair Market
Value as determined at the Current Valuation Date or the Special Valuation Date,
as the case may be. Without limiting the generality of the foregoing, the
Company and/or one of its affiliates may act as the underwriter contemplated by
this Section 3.2(l), subject to the otherwise applicable terms and conditions
hereof.
(m) The Company will use its reasonable best efforts to assist persons
granted Options hereunder in arranging commercially reasonable financing of the
Exercise Price of their Options on a timely basis, such that a Participant will
have available the funds needed to exercise such Participant's Options as such
Options become exercisable hereunder and pursuant to their terms, and, at the
request of a Participant, of any estimated quarterly tax payments and
withholding taxes due upon exercise thereof, which financing is expected to be
collateralized by the Common Stock issuable upon exercise of the respective
Options.
(n) The Company shall permit each Participant who so elects prior to,
or contemporaneously with, the exercise of any Option hereunder to satisfy the
applicable tax withholding obligations related to the exercise of such Option by
having the Company withhold that number of whole or fractional shares otherwise
issuable upon such exercise as have a Fair Market Value at least equal to the
amount of such required withholding and to remit, or cause to be remitted, an
amount in cash equal to the Fair Market Value of the shares of Common Stock so
withheld to the appropriate governmental authorities.
-9-
<PAGE> 10
IV. OTHER PROVISIONS
4.1 Adjustments Upon Corporate Changes.
(a) Without limiting the provisions of Section 4.1(b), in the event
that (i) the outstanding shares of Common Stock are increased, decreased,
changed into or exchanged for a different number or kind of shares or securities
of the Company upon a reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split, stock dividend, stock
consolidation or otherwise, or (ii) the Company makes any extraordinary
distribution of cash or property on the Common Stock, the Committee shall make
an appropriate and proportionate adjustment in the number and kind of shares
reserved and available for issuance under the Plan and in the number and kind of
shares subject to outstanding Non-Qualified Stock Options and the Exercise Price
thereof so as to prevent any dilution or enlargement of a Participant's rights
under this Plan.
(b) Subject to the approval of the Board of Directors, which approval
shall not be unreasonably withheld, the Committee shall be authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events affecting the Company or any
RFS Subsidiary or the financial statements of the Company or any RFS Subsidiary,
or in response to changes in applicable laws, regulations, or accounting
principles; provided, however, that no such modification shall be made to the
detriment of a Participant with respect to any Award previously granted.
4.2 Rights of Participants and Beneficiaries.
(a) Nothing contained in the Plan (or in any documents evidencing an
Award) shall confer upon any Participant any right to continue in the employ of
his or her Employer or constitute any contract or agreement of employment or
interfere in any way with the right of such Employer to reduce such
Participant's compensation from the rate in effect at the time of an Award or to
terminate such Participant's employment with or without cause, but nothing
contained herein or in any document evidencing an Award shall affect any other
contractual rights of a Participant. No Participant or other person shall have
any claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Participants.
(b) All settlements of Awards shall be made hereunder only to the
Participant or his or her Beneficiary entitled thereto pursuant to the Plan.
Neither the Company nor any RFS Subsidiary shall be liable for the debts,
contracts, or engagements of any Participant or his or her Beneficiary, and
rights relating to Awards under this Plan may not be taken in execution by
attachment or garnishment, or by any other legal or equitable proceeding while
in the hands of an Employer; nor shall any Participant or his or her Beneficiary
have any right to assign, pledge or hypothecate any benefits or rights
hereunder.
4.3 Governing Law.
This Plan and documents evidencing Awards or rights relating to Awards
shall be construed, administered and governed in all respects under and by the
laws of the State of Dela-
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<PAGE> 11
ware. If any provision of this Plan shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
4.4 Withholding.
The Company may require, as a condition to issuing or delivering shares
of Common Stock, that the Participant pay to the Company any sums that may be
required to satisfy any applicable withholding tax, in accordance with
procedures established by the Committee. Except as contemplated by the preceding
sentence, the Company shall have no obligation to advise any Participant of the
existence of any tax or the amount which the Company will be required to
withhold.
4.5 Amendment of Plan and Awards.
Notwithstanding anything herein to the contrary, the Board of Directors
may, at any time and from time to time, amend or modify any of the provisions of
the Plan and the terms and provisions of any Awards theretofore made to
Participants which have not been settled; provided, however, that any such
amendment or modification of the Plan shall be subject to the approval of the
Company's stockholders within one year after such Board action if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the
Common Stock may be listed or quoted; and provided, further, that, without the
consent of an affected Participant, no amendment or modification of the Plan or
any outstanding Award may impair the rights of such Participant under any Award
theretofore granted.
4.6 Unfunded Status of Awards.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general creditor of
the Company; provided, however, that the Committee may authorize the creation of
trusts or make other arrangements to meet the Company's obligations under the
Plan to deliver cash, shares of Common Stock, other Awards, or other property
pursuant to any Award or to provide other benefits, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan unless
the Committee otherwise determines with the consent of each affected
Participant. The trustee of any trust established under the Plan may be
authorized to dispose of trust assets and reinvest proceeds in alternative
investments, subject to such terms and conditions as the Committee may specify
and in accordance with applicable law.
4.7 Effective Date.
This Plan shall be effective as of 12:02 a.m. on September 1, 1997 and
shall remain in effect until such time as no shares remain reserved and
available for issuance and the Company has no further obligation with respect to
any Award granted under the Plan.
-11-
<PAGE> 1
EXHIBIT 10.8(c)
LEASE AGREEMENT
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS
TENANT: THE JOHN NUVEEN COMPANY,
a Delaware corporation
DATE: January 22, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
<S> <C> <C>
1. ORIGINAL PREMISES; ADDITIONAL 30TH FLOOR PREMISES AND TERM................................ 4
2. RENT...................................................................................... 7
3. REIMBURSEMENT FOR OPERATING COSTS AND TAXES............................................... 7
4. TAXES..................................................................................... 11
5. CONDITION OF THE ORIGINAL PREMISES; LANDLORD'S ORIGINAL PREMISES ALLOWANCE................ 12
6. CONDITION OF THE ADDITIONAL 30TH FLOOR PREMISES........................................... 13
7. USE....................................................................................... 14
8. CARE OF THE PREMISES...................................................................... 14
9. SERVICES.................................................................................. 16
10. DESTRUCTION OR DAMAGE TO PREMISES......................................................... 17
11. DEFAULT; REMEDIES......................................................................... 18
12. ASSIGNMENT AND SUBLETTING................................................................. 22
13. CONDEMNATION.............................................................................. 26
14. INSPECTIONS............................................................................... 26
15. SUBORDINATION AND NON-DISTURBANCE......................................................... 27
16. WAIVER OF CLAIMS; INDEMNIFICATION AND HOLD HARMLESS....................................... 28
17. INSURANCE................................................................................. 29
18. RESERVED.................................................................................. 31
19. ENTIRE AGREEMENT.......................................................................... 32
20. HOLDING OVER.............................................................................. 32
21. NOTICES................................................................................... 32
22. HEIRS, SUCCESSORS, AND ASSIGNS - PARTIES.................................................. 33
23. ATTORNEY'S FEES........................................................................... 33
24. TIME OF THE ESSENCE....................................................................... 33
25. NO ESTATE IN LAND......................................................................... 33
26. SECURITY DEPOSIT.......................................................................... 33
27. COMPLETION OF THE PREMISES - INTENTIONALLY OMITTED........................................ 33
28. PARKING AND ACCESS AREAS.................................................................. 34
29. RULES AND REGULATIONS..................................................................... 35
30. RIGHT TO RELOCATE - INTENTIONALLY OMITTED................................................. 35
31. LATE PAYMENTS - ACCORD AND SATISFACTION................................................... 35
32. ESTOPPEL CERTIFICATE...................................................................... 36
33. SEVERABILITY AND INTERPRETATION........................................................... 36
34. MULTIPLE TENANTS.......................................................................... 36
35. FORCE MAJEURE............................................................................. 36
36. QUIET ENJOYMENT........................................................................... 37
37. BROKERAGE COMMISSION; INDEMNITY........................................................... 37
38. EXCULPATION OF LANDLORD................................................................... 37
39. ORIGINAL INSTRUMENT....................................................................... 37
40. APPLICABLE LAW............................................................................ 38
41. NO RECORDATION OF LEASE................................................................... 38
42. HAZARDOUS SUBSTANCES OR MATERIALS......................................................... 38
43. LEASE BINDING UPON DELIVERY............................................................... 39
44. HEADINGS.................................................................................. 39
45. SURRENDER OF LEASE NOT MERGER............................................................. 39
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Item Page
<S> <C> <C>
46. MORTGAGEE PROTECTION...................................................................... 39
47. INTERFERENCE.............................................................................. 39
48. NO PARTNERSHIPS........................................................................... 40
49. ADA....................................................................................... 40
50. USE OF PRONOUN, RELATIONSHIP.............................................................. 40
51. RESERVED.................................................................................. 40
52. WAIVER OF JURY TRIAL...................................................................... 40
53. NO THIRD PARTY BENEFICIARY................................................................ 41
54. FINANCIAL STATEMENTS...................................................................... 41
55. RESERVED.................................................................................. 41
56. PREMISES RENEWAL OPTION................................................................... 41
57. ADDITIONAL 30TH FLOOR PREMISES RENEWAL OPTION............................................. 43
58. FIRST EXPANSION OPTION.................................................................... 44
59. SECOND EXPANSION OPTION................................................................... 45
60. RIGHT OF FIRST OFFER...................................................................... 47
61. ADDITIONAL 30TH FLOOR PREMISES CANCELLATION OPTION........................................ 48
62. ORIGINAL LEASE TERMINATION................................................................ 49
63. TENANT IDENTIFICATION..................................................................... 49
64. COMMUNICATION DISH........................................................................ 50
65. USE OF FIRE EXIT STAIRS................................................................... 50
66. TEMPORARY SPACE........................................................................... 50
67. FIRST CLASS BUILDING CONDITION............................................................ 51
</TABLE>
Exhibit "A-1" - Plan of Original Premises
Exhibit "A-2" - Plan of Additional 30th Floor Premises
Exhibit "B" - Rules and Regulations
Exhibit "C" - Estoppel Statement
Exhibit "D" - Building Standard Services
Exhibit "E" - First Expansion Space
Exhibit "F" - Second Expansion Space
Exhibit "G" - Non-Disturbance Agreement
ii
<PAGE> 4
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease"), made this 22ND day of January,
1998, by and between OVERSEAS PARTNERS (333), INC., an Illinois corporation
("Landlord") and THE JOHN NUVEEN COMPANY, a Delaware corporation ("Tenant").
INTRODUCTORY ARTICLE:
BASIC LEASE PROVISIONS
AND ENUMERATION OF EXHIBITS
A. BASIC LEASE PROVISIONS. The provisions of this Introductory Article
are intended to be in outline form and are addressed in detail in other
Paragraphs of this Lease. In the event of any conflict, inconsistency or
disagreement, the most restrictive Paragraph shall prevail.
<TABLE>
<S> <C>
TENANT'S NAME: The John Nuveen Company
a Delaware corporation
TENANT'S PRESENT ADDRESS: 333 West Wacker Drive
Suite 3300
Chicago, Illinois 60606
LANDLORD'S ADDRESS: c/o Overseas Management, Inc.
333 West Wacker Drive
Suite 880
Chicago, Illinois 60606
Attention: General Manager
with a copy to:
Overseas Partners Capital Corp.
115 Perimeter Center Place, Suite 940
Atlanta, Georgia 30346
Attention: Legal Department
COMMENCEMENT DATE: Original Premises - March 1, 1998
(Also see Paragraphs 1.a., 1.b. Additional 30th Floor Premises - June 1, 1998
and 1.d.)
EXPIRATION DATE: Original Premises - February 28, 2013
(Also see Paragraphs 1.a., 1.b., Additional 30th Floor Premises - November 13,
l.d., 56 and 57) 2005
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
PREMISES: Original Premises - such entire and/or portions
(Also see Paragraph 1.a.) of the thirtieth (30th) floor through the thirty-sixth
(36th) floor, as depicted on Exhibit "A-1")
and
Additional 30th Floor Premises - such
portion of the thirtieth (30th)
floor, as depicted on Exhibit "A-2"
(The term "Premises" in the Lease shall
mean the Original Premises and the
Additional 30th Floor Premises during such
period either or both, as the case may be,
are leased by Tenant hereunder)
</TABLE>
RENTABLE AREA:
(Also see Paragraph 1.a.):
<TABLE>
<CAPTION>
ORIGINAL PREMISES
Floor Rentable Square Footage
<S> <C>
30 6,906
31 25,761
32 25,305
33 25,305
34 25,305
35 6,267
36 6,267
-----
Total 121,116
</TABLE>
ADDITIONAL 30TH FLOOR PREMISES
<TABLE>
<CAPTION>
Floor Rentable Square Footage
<S> <C>
30 18,855
</TABLE>
(For the period that both the Original Premises and the Additional 30th
Floor Premises are leased by Tenant hereunder, the total rentable area of the
Premises shall equal 139,971 rentable square feet.)
2
<PAGE> 6
BASE RENT (Also see Paragraph 2):
ORIGINAL PREMISES
<TABLE>
<CAPTION>
PERIOD ANNUAL BASE RENT ANNUAL MONTHLY
PER RENTABLE BASE RENT BASE RENT
SQUARE FOOT
<S> <C> <C> <C>
March 1, 1998 - February 28, 1999 $18.50 $2,240,646.00 $186,720.50
March 1, 1999 - February 29, 2000 19.00 2,301,204.00 191,767.00
March 1, 2000 - February 28, 2001 19.50 2,361,762.00 196,813.50
March 1, 2001 - February 28, 2002 20.00 2,422,320.00 201,860.00
March 1, 2002 - February 28, 2003 20.50 2,482,878.00 206,906.50
March 1, 2003 - February 29, 2004 21.00 2,543,436.00 211,953.00
March 1, 2004 - February 28, 2005 21.50 2,603,994.00 216,999.50
March 1, 2005 - February 28, 2006 22.00 2,664,552.00 222,046.00
March 1, 2006 - February 28, 2007 22.50 2,725,110.00 227,092.50
March 1, 2007 - February 29, 2008 23.00 2,785,668.00 232,139.00
March 1, 2008 - February 28, 2009 23.50 2,846,226.00 237,185.50
March 1, 2009 - February 28, 2010 24.00 2,906,784.00 242,232.00
March 1, 2010 - February 28, 2011 24.50 2,967,342.00 247,278.50
March 1, 2011 - February 29, 2012 25.00 3,027,900.00 252,325.00
March 1, 2012 - February 28, 2013 25.50 3,088,458.00 257,371.50
</TABLE>
ADDITIONAL 30TH FLOOR PREMISES
<TABLE>
<CAPTION>
PERIOD ANNUAL BASE RENT ANNUAL MONTHLY
PER RENTABLE BASE RENT BASE RENT
SQUARE FOOT
<S> <C> <C> <C>
June 1, 1998 - May 31, 1999 $17.67 $333,167.88 $27,763.99
June 1, 1999 - May 31, 2000 17.95 338,447.28 28,203.94
June 1, 2000 - May 31, 2001 18.24 343,915.20 28,659.60
June 1, 2001 - May 31, 2002 18.54 349,571.76 29,130.98
June 1, 2002 - May 31, 2003 18.85 355,416.72 29,618.06
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
PERIOD ANNUAL BASE RENT ANNUAL MONTHLY
PER RENTABLE BASE RENT BASE RENT
SQUARE FOOT
<S> <C> <C> <C>
June 1, 2003 - May 31, 2004 19.16 361,261.80 30,105.15
June 1, 2004 - May 31, 2005 19.49 367,483.92 30,623.66
June 1, 2005 - November 13, 2005 19.83 171,368.39* 31,157.89
</TABLE>
[FN]
(prorated based upon 5 1/2 months)
</FN>
4
<PAGE> 8
<TABLE>
<S> <C>
TENANT'S SHARE: Original Premises: 15.230%
(Also see Paragraph 3.c.) Additional 30th Floor Premises: 2.371%
(Tenant's Share for the period that both
the Original Premises and the Additional
Premises are leased hereunder shall equal
17.601%)
PERMITTED USE: General office use and such other purposes
(Also see Paragraph 7) necessary or desirable for an investment
SECURITY DEPOSIT: N/A
(Also see Paragraph 26)
BROKER(S): Overseas Management, Inc. and
(Also see Paragraph 37) Julien J. Studley, Inc.
</TABLE>
B. ENUMERATION OF EXHIBITS. The following exhibits are attached hereto
and incorporated herein by this reference, as though set forth in full herein:
<TABLE>
<S> <C>
EXHIBIT "A-1" Plan of Original Premises
EXHIBIT "A-2" Plan of Additional 30th Floor Premises
EXHIBIT "B" Building Rules and Regulations (See Paragraph 29)
EXHIBIT "C" Estoppel Statement (See Paragraph 32)
EXHIBIT "D" Building Standard Services (See Paragraph 9)
EXHIBIT "E" First Expansion Space (See Paragraph 58)
EXHIBIT "F" Second Expansion Space (See Paragraph 59)
EXHIBIT "G" Non-Disturbance Agreement (See Paragraph 15)
</TABLE>
1. ORIGINAL PREMISES; ADDITIONAL 30TH FLOOR PREMISES AND TERM
a. Landlord hereby rents and leases to Tenant, and Tenant hereby rents
and leases from Landlord, the space(s) described in the Introductory Article of
this Lease as shown and outlined on the floor plan(s) attached hereto as Exhibit
"A-1" (the "Original Premises") and Exhibit "A-2" (the "Additional 30th Floor
Premises"). The term "Premises" herein shall mean the Original Premises and the
Additional 30th Floor Premises for the period that either or both, as the case
may be, are leased by Tenant hereunder, located in the building (the "Building")
having an address of 333 West Wacker Drive, Chicago, Illinois. The Building and
the land upon which the Building is located is hereinafter referred to as the
"Property." For all purposes under this Lease, Landlord and Tenant have agreed
that the Premises shall be deemed to include the rentable square footage of area
set forth in the Introductory Article. Landlord and Tenant
5
<PAGE> 9
acknowledge to each other that each party has had the opportunity to measure the
rentable square footage contained in the Premises and waive any claims after the
date of this Lease to adjust the rental or amounts due under this Lease
resulting from any error in the measurement of the square footage of the
Premises.
b. The term of this Lease (the "Term") as it relates to the Original
Premises and the Additional 30th Floor Premises, as the case may be, and except
as provided below, shall commence as of the respective Commencement Date set
forth in the Introductory Article, and end at midnight on the date set forth in
the Introductory Article as the "Expiration Date," or on such earlier date
pursuant to the provisions of this Lease or law, unless otherwise extended
pursuant to the terms of this Lease. This Lease shall be effective and
enforceable between Landlord and Tenant upon full execution thereof and delivery
to Tenant, whether such execution and delivery occurs on, prior to, or after the
Commencement Date.
c. Subject to the terms herein provided, the lease of the Premises
shall include the appurtenant right to use, in common with others, on a
non-exclusive basis, public lobbies, entrances, stairs, corridors, elevators,
and other public portions of the Building. All the windows and outside walls of
the Premises, and any space in the Premises used for shafts, pipes, conduits,
ducts, telephone ducts and equipment, electric or other utilities, sinks or
other Building facilities, and the use thereof and access thereto through the
Premises for the purposes of operation, maintenance, inspection, display and
repairs, are hereby reserved to Landlord.
d. Notwithstanding anything contained herein to the contrary, the lease
of the Additional 30th Floor Premises to Tenant is subject to the existing
Tenant, Bain and Company, Inc., ("Bain") delivering the Additional 30th Floor
Premises to Landlord in accordance with a lease termination agreement for the
Additional 30th Floor Premises between Landlord and Bain which has been executed
by Bain. Pursuant to the lease termination agreement, Bain has agreed that its
lease for the Additional 30th Floor Premises is to terminate May 31, 1998 unless
Bain because of reasons beyond its control, is not able to relocate its business
by that date, then the lease terminates not later than September 1, 1998.
Landlord agrees that it will diligently pursue the delivery by Bain of the
Additional 30th Floor Premises to Landlord, but shall not require Landlord to
make any payments to Bain except as may be expressly provided for in the lease
termination agreement.
Landlord and Tenant are desirous of the Additional 30th Floor Premises
being delivered to Tenant by June 1, 1998 or as soon thereafter as is
practicable. In the event Landlord is not able to deliver the Additional 30th
Floor Premises to Tenant on or before September 30, 1998, then by September 30,
1998, Landlord shall provide Tenant with a written notice setting forth
Landlord's good faith estimate of the date on which Landlord then expects to
deliver the Additional 30th Floor Premises to Tenant (the "Estimated Delivery
Date"). If the Estimated Delivery Date is later than December 31, 1998, Tenant
shall have the period of sixty (60) days after the date of said notice in which
to deliver to Landlord a written election (the "Alternate Space Election
Notice") in which to elect to continue to wait for the delivery of the
Additional 30th Floor Premises or, in lieu thereof to substitute for the
Additional 30th Floor Premises the "Additional 29th Floor Premises" as hereafter
defined. If Tenant elects to substitute the
6
<PAGE> 10
Additional 29th Floor Premises, Landlord shall use all diligent efforts to
deliver such space to Tenant within thirty (30) days after receipt of Tenant's
Alternative Space Election Notice. In the event Tenant does not give the
Alternate Space Election Notice within the sixty (60) day period, Tenant shall
be deemed not to have elected to substitute the Additional 29th Floor Premises
for the Additional 30th Floor Premises and to continue to await delivery of the
Additional 30th Floor Premises. Landlord covenants that it will continue its
efforts to obtain possession of the Additional 30th Floor Premises as provided
above. If by the Estimated Delivery Date, the Additional 30th Floor Premises
have not been delivered by Landlord to Tenant, then Tenant shall have the right,
exercisable within fifteen (15) days after the Estimated Delivery Date to give
Landlord the Alternate Space Election Notice. If at any time prior to delivery
of the Additional 29th Floor Premises to Tenant, Landlord delivers to Tenant the
Additional 30th Floor Premises, then an election by Tenant to substitute the
Additional 29th Floor Premises for the Additional 30th Floor Premises shall be
null and void. The Additional 30th Floor Premises Expiration Date shall be
extended on a day for day basis for each day that the Additional 30th Floor
Premises Commencement Date is delayed beyond June 1, 1998.
The term "Additional 29th Floor Premises" shall mean a contiguous space
on the 29th floor consisting, of not less than 18,855 square feet of rentable
area. Tenant, however, when it gives the Alternate Space Election Notice may
elect to lease additional space on the 29th floor up to the entire 29th floor.
If Tenant elects to substitute the Additional 29th Floor Premises for the
Additional 30th Floor Premises then all space leased on the 29th floor shall be
leased at the Base Rent per square foot as is provided herein for the Additional
30th Floor Premises and the Landlord's Allowance shall be increased by $8.28 per
square foot for each square foot of rentable area in the Additional 29th Floor
Premises in excess of 18,855 square feet and subject to all of the other terms
and conditions as provided in this Lease for the Additional 30th Floor Premises.
Any portion of the 29th floor not leased by Tenant pursuant to the provisions of
this paragraph to continue to be deemed the First Expansion Space and subject to
the provisions of paragraph 58 of this Lease. Moreover, the Additional 30th
Floor Premises shall thereafter constitute the Second Expansion Space subject to
the provisions of paragraph 59 of this Lease. Promptly after receipt of Tenant's
Alternate Space Election Notice, Landlord will prepare an amendment to this
Lease revising the rent and all other terms consistent with the foregoing and
with the substitution of the Additional 29th Floor Premises for the Additional
30th Floor Premises. The amendment shall provide for the necessary changes to
this Lease including without limitation, the revised rent, Tenant's Share and a
revised Additional 30th Floor Premises Termination Fee to take into account the
square foot area of the Additional 29th Floor Premises if Tenant elects to lease
more than 18,855 square feet as well as revised Commencement and Expiration
Dates for the Additional 29th Floor Premises.
In the event Tenant has not elected to substitute the
Additional 29th Floor Premises for the Additional 30th Floor Premises but rather
has either agreed to accept the delivery of the Additional 30th Floor Premises
when delivered by Landlord, or shall have been deemed to make such election as
provided above, but Landlord has been unable to deliver the Additional 30th
Floor Premises to Tenant by May 31, 1999, then Tenant shall have the option to
terminate this Lease with respect to the Additional 30th Floor Premises by
written notice given to Landlord prior to the delivery of the Additional 30th
Floor Premises to Landlord.
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In the event the Additional 30th Floor Premises is not delivered on
June 1, 1998, then the Additional 30th Floor Premises Termination Date set forth
in Paragraph 61 shall be delayed on a day for day basis for each day between
June 1, 1998 and the actual Commencement Date of the Additional 30th Floor
Premises.
2. RENT
a. Tenant shall pay to Landlord at the office of the Building or at
such other place as Landlord may designate in writing, without demand, deduction
or setoff, an annual rental "Annual Base Rent" in the amounts set forth in the
Introductory Article. For the period that both the Original Premises and the
Additional 30th Floor Premises are leased by Tenant hereunder, the Annual Base
Rent shall be the sum of the Base Rent for the Original Premises and the Base
Rent for the Additional 30th Floor Premises (together with any Base Rent payable
pursuant to any provisions of this Lease for additional space added by any
expansion options or other rights granted to Tenant herein).
b. Annual Base Rent shall be due and payable in equal monthly
installments (the "Monthly Base Rent") in advance on the first (1st) day of each
calendar month during the Term. The term "Rent" as used herein shall mean the
Monthly Base Rent, Additional Rent (as that term is herein defined) and any
additional amounts or charges due from Tenant hereunder.
c. Should this Lease commence at any time other than the first day of a
calendar month, or terminate at any time other than the last day of a calendar
month, the amount of Rent due from Tenant shall be proportionately adjusted
based on that portion of the month that this Lease is in effect.
3. REIMBURSEMENT FOR OPERATING COSTS AND TAXES
a. The Monthly Base Rent provided for herein is based, in part, upon
Landlord's estimate of "Operating Costs," as hereinafter defined.
b. The term "Operating Costs" shall mean all operating expenses of the
Building, which shall include all expenses, costs, and disbursements of every
kind and nature which Landlord (i) shall pay; or (ii) become obligated to pay in
connection with the ownership, operation, management, maintenance, repair and
security of the Building during the Term.
Landlord shall be permitted to contract with its affiliates for
supplies, materials, and services used for the operation, maintenance, and
management of the Building and its affiliates shall be permitted to subcontract
for the acquisition of said supplies, materials, and services; provided,
however, Landlord's payments to any affiliates for such supplies, services, and
materials shall not exceed the costs normally charged by unaffiliated third
parties for such supplies, materials, and services. If any costs paid by
Landlord to affiliates for the acquisition of said supplies, materials and
services exceed the costs normally charged by unaffiliated third
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parties, the excess shall be excluded from Operating Costs.
Expressly excluded from the definition of the term "Operating Costs"
are:
i. Costs of capital improvements, except that Operating Costs shall
include the cost during the Term, as reasonably amortized by Landlord
with interest on the unamortized amount, at the rate of two percent
(2%) per annum above the prime rate of interest charged from time to
time by First Chicago NBD Bank (but in no event at a rate which is more
than the highest lawful rate allowable in the State of Illinois), of
(1) any capital improvement which is reasonably expected to reduce any
component cost included within Operating Costs; and (2) any capital
improvements which are necessary to keep the Property in compliance
with all governmental rules and regulations applicable from time to
time thereto;
ii. Legal fees, allowances, space planner fees, real estate brokers'
leasing commissions, advertising and promotional expenses and any other
expenses or costs incurred in connection with the leasing of the
Building, or portions thereof;
iii. Reimbursements paid by specific tenants or other third parties for
direct costs incurred at their request;
iv. Depreciation;
v. Principal, interest, and other costs related to financing the Property;
vi. The cost of any repairs or general maintenance paid by the proceeds of
insurance policies carried by Landlord on the Property;
vii. The wages and salaries of any supervisory or management employee of
Landlord not in any manner involved in the day-to-day operation and
maintenance of the Building; provided, however, to the extent any such
wages and salaries of any supervisory or management employee of
Landlord are incurred with respect to the Building and any other
properties with which such employee is involved, there shall be
excluded from Operating Costs a fair and reasonable percentage (as
reasonably determined by Landlord) thereof that is properly allocable
to such other properties;
viii. Managing agents' fees in excess of rates customarily charged for
building management of like quality in the Chicago Loop market for
first-class office buildings;
ix. Any expense for which Landlord is actually compensated through proceeds
of insurance or for which Landlord would have been so
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compensated had Landlord maintained insurance in an amount and type
which a reasonably prudent owner of a comparable first-class office
building located in the Chicago area would normally maintain, provided
that all costs that are not recoverable under such insurance or as a
result of any deductible amount shall be included in Operating Costs;
x. Cost of repairs, alterations or replacements caused by the exercise of
the rights of eminent domain to the extent Landlord receives net
condemnation proceeds therefor;
xi. The cost of any special services rendered or costs reimbursed to a
tenant which are not generally reimbursed or rendered to other tenants
in the Building;
xii. Legal fees incurred with regard to enforcing the obligations of tenants
under other leases in the Building (excepting legal fees in seeking to
enforce Building rules and regulations); provided, however, the
foregoing shall not prevent Landlord from recovering such legal fees as
otherwise permitted under this Lease or other leases with such tenants;
xiii. Operating Costs and Taxes relating solely to the operation of the
commercial space on the ground floor and mezzanine level in the
Building;
xiv. Costs of initial improvements to, or alterations of any tenant's
premises; and
xv. Costs incurred to remove, encapsulate or otherwise contain Hazardous
Substances or Materials (as defined in Paragraph 42 below) existing as
of the completion of the construction of the Building.
c. The term "Tenant's Share" shall mean the percentage set forth in the
Introductory Article, being the percentage calculated by dividing the rentable
area contained in the Premises by 795,267 (100% of the rentable square foot
office area of the Building). If less than one hundred percent (100%) of the
Building's rentable areas shall have been occupied by tenant(s) at any time
during any calendar year, Operating Costs shall be determined for such calendar
year to be an amount equal to the like expense which would normally be expected
to be incurred had such occupancy been one hundred percent (100%) throughout
such calendar year.
d. Landlord shall provide Tenant with an estimate of the projected
Operating Costs and the projected Taxes (as defined herein), all for such
current calendar year, and Tenant shall thereafter pay, as "Additional Rent" (as
herein defined), Tenant's Share of the projected Operating Costs and the
projected Taxes. Such projected Operating Costs and Taxes shall be payable in
advance on a monthly basis by paying one-twelfth (1/12th) of such projected
Operating Costs and Taxes during each month of such respective calendar year. If
Landlord has
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not furnished Tenant such estimate by January 1st of a calendar year, Tenant
shall continue to pay on the basis of the prior year's estimate until the month
after such estimate is given.
e. Landlord shall, within a period of ninety (90) days (or as soon
thereafter as practical) after the close of each respective calendar year
provide Tenant an unaudited statement of such calendar year's actual Operating
Costs (such unaudited statement shall be herein referred to as the "Final Annual
Statement of Operating Costs"). If the actual Operating Costs are greater than
the projected Operating Costs paid by Tenant during the applicable calendar
year, as shown on the Final Annual Statement of Operating Costs, Tenant shall
pay Landlord, within thirty (30) days of such statement's receipt, Tenant's
Share of the difference thereof. If such calendar year's projected Operating
Costs paid by Tenant are greater than the actual Operating Costs as shown on the
Final Annual Statement of Operating Costs, Landlord shall credit such excess
against Additional Rent next due hereunder and continue to credit against
Additional Rent, if necessary, until fully credited.
f. Anything herein to the contrary notwithstanding, in no event shall
the Base Rent payable hereunder as set forth in the Introductory Article ever be
reduced on account of Operating Costs.
g. (i) Tenant, at its sole cost and expense, shall have the right for a
period of one hundred eighty (180) days after receipt of the Final
Annual Statement of Operating Costs to review Landlord's books and
records with respect to actual annual Operating Costs for the period
covered by the Final Annual Statement of Operating Costs. Such review
shall take place in Landlord's manager's office in the Building or at
such other place as designated by Landlord. Tenant shall give Landlord
not less than ten (10) days written notice of the date on which Tenant
intends to conduct such review. In the event Tenant either fails to
give written notice or thereafter fails to complete such inspection
within thirty (30) days after the date for the inspection set forth in
Tenant's written notice, then Tenant's right to review Landlord's books
and records shall terminate on such 30th day and the Final Statement of
Operating Costs in question shall be binding on Tenant. The results of
such review shall be for the benefit of Landlord and Tenant only, shall
be maintained in confidence by Tenant, and shall not be disseminated or
furnished to any other person or entity. Tenant may use a qualified
nationally recognized independent certified public accountant
designated by Tenant (to be paid on an hourly and not a contingent fee
basis), to aid Tenant in conducting the audit.
(ii) If, as a result of Tenant's review, Tenant claims that any particular
items or amounts shall be incorrectly included as Operating Costs under
this Lease or Tenant claims any mathematical errors exist in the Final
Statement of Operating Costs or that Landlord has not kept books and
records showing Operating Costs in accordance with an appropriate
system of accounts and sound accounting practices consistently
maintained and applied, Tenant
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may give written notice to Landlord within thirty (30) days after the
one hundred eighty (180) day review period. Said notice may only
contest Landlord's Final Statement of Operating Costs for the reasons
included in this subparagraph g.(ii) and said notice shall clearly
reflect the reasons for the disagreement and the amount claimed by
Tenant as owed from Landlord. Tenant and Landlord shall then meet in
an effort to resolve the differences in their respective findings.
(iii) If a resolution is not reached within twenty (20) days of Tenant's
written notice, then Landlord and Tenant shall, acting in good faith,
mutually designate a qualified nationally recognized independent
certified public accountant, to audit the actual annual Operating Costs
for the period in question. The findings of said accountant shall be
binding on both the Landlord and Tenant.
(iv) If as a result of such audit it is determined that the amount of
Additional Rent due from Tenant shall be less than that shown due on
the Landlord's statement, Landlord shall make such adjustments as
necessary to correct such statement and, at Landlord's option, Landlord
shall either credit Additional Rent next due hereunder or refund to
Tenant any over payments of Additional Rent made by Tenant.
(v) In the event such audit discloses (a) errors made during the prior
calendar year which, when totaled, establish that the sum overcharged
to and paid by Tenant exceeds five percent (5%) of the actual (as
distinguished from estimated) amount of Tenant's Share of Operating
Costs, the audit conducted pursuant to paragraphs (i) and (iii) above
shall be at the expense of Landlord (not to exceed $10,000.00), or (b)
no errors or an error which equals or is less than five percent (5%),
the audit shall be at the expense of Tenant and, additionally, Tenant
shall pay for any out-of-pocket costs incurred by Landlord in
connection with the audit conducted pursuant to paragraph (iii) above
(not to exceed $10,000.00).
h. For the purposes of this Lease, Additional Rent shall mean and refer
to any and all amounts due from Tenant under Paragraphs 3 and 4 hereof.
i. The failure of Landlord to provide any statement contemplated herein
within the time period set forth with respect to such statement shall not
eliminate or limit Tenant?s obligation to pay the amounts due for any calendar
year, as reflected on such statement, as and when such statement is ultimately
issued, provided that such statement is furnished to Tenant within eighteen (18)
months following the close of the applicable calendar year.
4. TAXES
a. Tenant shall pay, in addition to and not in lieu of any other costs
or charges due
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hereunder, Tenant's Share of all taxes (ad valorem and otherwise), assessments,
and governmental charges whether federal, state, county, or municipal, and
whether by taxing districts or authorities presently taxing the Building or by
others, subsequently created or otherwise, and any other taxes (other than
federal, state and local income taxes) and assessments attributable to any
portion of the Building or its operation or any Rent or any personal property in
connection with the operation of the Building paid by Landlord in each calendar
year of the Term or portion thereof, and any reasonable consultants and legal
fees incurred with respect to issues, concerns or appeals involving the taxes of
the Building (collectively the "Taxes"). Should the State of Illinois, or any
political subdivision thereof, or any other governmental authority having
jurisdiction over the Property and/or the Building, (a) impose a tax,
assessment, charge or fee, which Landlord shall be required to pay, by way of
substitution for such real estate taxes and ad valorem personal property taxes,
or (b) impose an income or franchise tax or a tax on rents in substitution for
or as a supplement to a tax levied against the Property and/or the Building
and/or the personal property used in connection with the Property or Building,
all such taxes, assessments, fees or charges (hereinafter defined as "in lieu of
taxes") shall be deemed to constitute Taxes hereunder. Except as hereinabove
provided with regard to "in lieu of taxes", Taxes shall not include any
inheritance, estate succession, transfer, gift, franchise, net income or capital
stock tax. The amount of Taxes attributable to any calendar year of the Lease
Term shall be the amount of Taxes paid during such calendar year. Tenant shall
pay Tenant's Share of Taxes in accordance with Paragraph 3.d. herein.
b. Landlord shall, within a period of one hundred twenty (120) days (or
as soon thereafter as practical) after receipt of the final tax bill for each
applicable calendar year, provide Tenant an unaudited statement of such calendar
year's actual Taxes (such unaudited statement shall be herein referred to as the
"Final Annual Statement of Taxes"). If the actual Taxes are greater than the
projected Taxes paid by Tenant during the applicable calendar year as shown on
the Final Annual Statement of Taxes, Tenant shall pay Landlord, within thirty
(30) days of such statement's receipt, Tenant's Share of the difference thereof.
If such calendar year's projected Taxes paid by Tenant are greater than the
actual Taxes as shown on the Final Annual Statement of Taxes, Landlord shall
credit such excess against Additional Rent next due hereunder and continue to
credit against Additional Rent, if necessary, until fully credited.
c. Landlord shall pay all Taxes to the taxing authority within the time
period permitted prior to any penalty but if Taxes are paid late so that a
penalty is due, then so long as Tenant has timely paid Tenant's Share of all
Taxes, the penalty shall not be included in "Taxes". Upon Tenant's written
request, Landlord shall provide Tenant with a copy of the tax bill and paid
receipt promptly after receipt thereof by Landlord.
5. CONDITION OF THE ORIGINAL PREMISES; LANDLORD'S ORIGINAL PREMISES ALLOWANCE
Except for that portion of the Original Premises shown on Exhibit A-1
and marked "New Original Premises", Tenant is currently in possession of the
Original Premises pursuant to that certain lease dated August 10, 1984, as
amended, executed by and between Landlord's predecessor-in-interest and Tenant
(the "Original Lease"). Landlord is delivering the New
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Original Premises to Tenant on the date hereof. Tenant hereby accepts the entire
Original Premises "as is." Tenant agrees that no representations respecting the
Original Premises or the Building, or the condition thereof, and that no
promises to decorate, alter, repair or improve the Original Premises, either
before or after the execution hereof, have been made by Landlord or its agents
to Tenant, except as contained in Paragraph 49 below and as otherwise contained
in this Lease.
Landlord agrees to pay to Tenant a sum ("Landlord's Allowance") up to
Two Million Five Hundred Seventy Eight Thousand Three Hundred Forty Nine and
25/100 Dollars ($2,578,349.25) (subject to adjustment pursuant to Paragraph 1d)
toward the cost of any improvements Tenant desires to complete in the Original
Premises and the Additional 30th Floor Premises and the cost of any plans and
drawings and plan review fees in connection with said improvements. Until
Landlord delivers either the Additional 30th Floor Premises or the Additional
29th Floor Premises the Landlord's Allowance shall not exceed Two Million Four
Hundred Twenty Two Thousand Three Hundred Twenty and No/100 Dollars
($2,422,320.00). Tenant shall have the right to allocate up to $551,860.00 of
the Landlord's Allowance toward the costs of purchasing and installing
telecommunications wiring in the Original Premises and the Additional 30th Floor
Premises, and costs associated with moving in connection with the Original
Premises and the Additional 30th Floor Premises. Any such improvements shall be
completed and constructed in accordance with the provisions of Paragraph 8
below. Prior to commencing any such work, Tenant shall (i) submit to Landlord
for review by it and its engineers plans and specifications showing such work in
reasonable detail and obtain Landlord's prior written approval (Tenant shall pay
to Landlord all costs incurred by Landlord in connection with such review of
such plans and specifications); and (ii) comply, at Tenant's sole cost and
expense, with such other requests as Landlord may reasonably make in connection
with such work. Provided that no default exists under the Lease, Landlord shall
disburse portions of the Landlord's Allowance to Tenant within thirty (30) days
following written request from Tenant, which request shall be accompanied by
paid invoices and such other supporting documentation as Landlord may reasonably
require, including (if applicable), but not limited to, general contractors'
sworn affidavits and partial or final waivers of lien, as the case may be, in
form and substance satisfactory to Landlord from Tenant's contractors and all
subcontractors and material suppliers; provided, however, (i) through December
31, 2001, in no event shall Landlord be required to pay an amount exceeding
$595,550.00 (plus any unused portions of such amount from any prior calendar
year[s]) (the "Annual Maximum Amount") of the Landlord's Allowance; provided,
however, in calendar year 1998 the Annual Maximum Allowance Amount shall equal
$751,579.25, and (ii) for each calendar year beginning January 1, 2002, Tenant
must advise Landlord by June 30 of the prior calendar year of the amount of the
Landlord's Allowance that Tenant will be seeking in the next calendar year (the
"Estimated Allowance Amount") (e.g., Tenant shall advise Landlord on or before
June 30, 2001 of the amount of Landlord's Allowance Tenant shall be seeking in
the calendar year 2002). Notwithstanding the foregoing, in the event that in
connection with any such work completed in the Original Premises and/or the
Additional 30th Floor Premises in any such calendar year Tenant's expenses
exceed the Annual Maximum Amount or the Estimated Allowance Amount, as
applicable, Landlord hereby agrees to reimburse Tenant any such excess in the
next following calendar year(s), subject to and in accordance herewith. Tenant
hereby agrees to request bids from at least two (2) of Landlord's
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designated pre-approved general contractors in the bidding in connection within
the construction of the improvements to be made to the Original Premises and the
Additional 30th Floor Premises, provided that Tenant shall have the right of
final selection regardless of whether either of the designated pre-approved
general contractors may have presented the lowest overall bid. Tenant shall not
be required to pay to Landlord any supervision fees or construction management
fees in connection with any work completed in connection herewith.
6. CONDITION OF THE ADDITIONAL 30TH FLOOR PREMISES
Tenant hereby agrees that Tenant shall accept possession of the
Additional 30th Floor Premises in its "as is" physical condition, provided that
any damage caused by the existing tenant as a result of its move out of the
Additional 30th Floor Premises shall be repaired by Landlord at no cost to
Tenant. Tenant agrees that no representations respecting the Additional 30th
Floor Premises or the Building, or the condition thereof, and that no promises
to decorate, alter, repair or improve the Additional 30th Floor Premises, either
before or after the execution hereof, have been made by Landlord or its agents
to Tenant, unless the same are contained in this Lease.
7. USE
Tenant (including its advisors, service partners and their employees
performing services dedicated to Tenant's business) shall use the Premises only
for the Permitted Use as set forth in the Introductory Article. The Premises
shall not be used for any illegal purposes; nor in any manner to create any
nuisance or trespass or impair the reputation or image of the Building as a
building for professional, business organizations, companies and firms; nor in
any manner to vitiate the insurance or increase the rate of insurance on the
Premises. Tenant shall also pay within thirty (30) days following written demand
any increase in premiums that may be charged because of Tenant's vacating the
Premises or as a direct result of Tenant's use of the Premises other than for
the Permitted Use. Tenant's use of the Premises shall not violate any ordinance,
law or regulation of any governmental body or the "Rules and Regulations" of
Landlord (the "Rules") as set forth in Exhibit "B" attached hereto and made a
part hereof, or cause an unreasonable amount of use of any of the services
provided in the Building. Tenant agrees, at its own expense, to promptly comply
with any and all municipal, county, state and federal statutes, regulations, or
requirements applicable or in any way relating to the use and occupancy of the
Premises. Tenant agrees to conduct its business in the manner and according to
the generally accepted business principles of the business or profession in
which Tenant is engaged.
8. CARE OF THE PREMISES
a. Repairs. Tenant will during the Term, at its sole cost and expense,
maintain the Premises and the fixtures and appurtenances therein in good order,
condition and repair, and will neither commit nor suffer any active or
permissive waste or injury thereof. At all times during the Term, Tenant shall
maintain the Premises in accordance with all laws, rules and regulations
governing its occupancy of the Premises. Tenant's responsibilities in
conjunction therewith shall include, but not be limited to, maintaining the
Premises in a first-class condition and state of repair. Tenant shall, at
Tenant's expense, but under the direction of Landlord and performed by
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Landlord's employees or agents, or with Landlord's express written consent, by
persons requested by Tenant and consented to in writing by Landlord, promptly
repair any injury or damage to the Premises or Building caused by the misuse or
neglect thereof by Tenant, by Tenant's contractors, subcontractors, customers,
employees, licensees, agents, or invitees permitted or invited (whether by
express or implied invitation) on the Premises by Tenant, or by Tenant moving in
or out of the Premises. In the event any repairs are required to be made in or
to the Premises as a result of the actions or inactions of Tenant, its agents,
contractors, servants, employees, subtenant, concessionaires, licensees,
invitees or guests, Tenant shall be responsible for payment of all such repairs,
which shall be made by Landlord or its contractors. If Tenant does not make
repairs promptly and adequately, Landlord may following reasonable prior notice
(except in the case of an emergency), but need not, make repairs, and Tenant
shall promptly pay the cost thereof as Rent in addition to the Base Rent and
Additional Rent. Tenant shall pay Landlord as Rent in addition to the Base Rent
and Additional Rent for overtime and for any other expense incurred in the event
repairs, alterations, decorating or other work in the Premises are not made, at
Tenant's request, during ordinary business hours.
b. Alterations. Tenant will not make alterations, additions or
improvements (including, but not limited to, structural alterations, additions
or improvements) in or about the Premises, without Landlord's prior written
consent, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, Tenant may without Landlord's prior written consent but upon prior
written notice to Landlord, expend up to $25,000.00 per calendar year during the
Term, to perform alterations, improvements or additions involving only design or
decorative changes which do not affect the mechanical, electrical or structural
elements of the Building or the Premises. Landlord shall give its approval or
disapproval (stating the reasons therefor) to the foregoing within fifteen (15)
business days of Tenant's request therefor, which request shall be accompanied
by reasonable detail relating to the proposed alterations, improvements or
additions, unless Landlord cannot, with due diligence, make a final
determination as to Tenant's request within said fifteen (15) business day
period, in which event Landlord shall have thirty (30) business days within
which to respond. Landlord's failure to give notice within the applicable period
as provided above shall constitute approval. In no event shall Landlord's
failure to respond be deemed approval with respect to any alterations affecting
the structure of the Building or imposing any greater burden on or use of the
Building's systems than as of the Commencement Date. If Landlord consents to
said alterations, improvements or additions, it may impose such conditions with
respect thereto as Landlord reasonably deems appropriate, including, without
limitation, requiring Tenant to furnish Landlord with security for the payment
of all costs to be incurred in connection with such work, and plans and
specifications plus permits necessary for such work. Tenant will not do anything
to or on the Premises which will increase the rate of fire or other insurance on
the Property. All alterations, additions or improvements of a permanent nature
made or installed by Tenant to the Premises shall become the property of
Landlord at the expiration or earlier termination of this Lease. Landlord
reserves the right to require Tenant, at Tenant's sole cost and expense, to
remove any improvements or additions made to the Premises by Tenant and to
repair and restore the Premises to their condition prior to such alteration,
addition or improvement, reasonable wear and tear, unrepaired casualty (or by
Tenant's contractors, subcontractors, customers, employees, licensees, agents or
invitees permitted or invited [whether by express or implied invitation]) and
condemnation
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excepted, such right may be exercised only if Landlord has specified in writing
at the time of Tenant's request to make such alteration, addition or
improvement, that such item must be removed by Tenant at the expiration or
earlier termination of the Term. Landlord shall have the right to assess an
administrative fee and a legal processing fee to cover any costs directly
related to Landlord's review of materials for any proposed Tenant alteration,
addition or improvement (other than in connection with the initial work
completed in the Original Premises and the Additional 30th Floor Premises).
c. Condition of Premises on Surrender of Premises. Prior to the
Expiration Date or upon any earlier termination of this Lease, Tenant, at
Tenant's sole cost and expense, will remove all Tenant's personal property and
repair all injury done by or in connection with installation or removal of said
personal property and surrender the Premises (together with all keys, access
cards or entrance passes to the Premises or the Building), broom clean, in as
good a condition as they were when delivered to Tenant at the beginning of the
Term, ordinary wear and tear, insured casualty not caused by Tenant (by Tenant's
contractors, subcontractors, customers, employees, licensees, agents or invitees
permitted or invited [whether by express or implied invitation]) and
condemnation excepted. All property of Tenant remaining in the Premises after
expiration of the Term or earlier termination of this Lease shall be
conclusively deemed to be abandoned, shall thereupon at the election of
Landlord, become the property of Landlord and Landlord may remove and dispose of
such property in any way Landlord sees fit without liability to Tenant. Tenant
shall reimburse Landlord for the cost of removing and storing such abandoned
property. The foregoing notwithstanding, Landlord shall continue to have the
right (which shall survive termination or expiration of the Lease) to require
Tenant to remove any improvements or additions made to the Premises by Tenant
pursuant to (b) above.
d. Contractors Doing Work. In doing any work related to the
installation of Tenant's furnishings, fixtures, or equipment in the Premises,
Tenant will use only union contractors or workers consented to by Landlord in
writing prior to the time such work is commenced. Landlord may condition its
consent upon its receipt from such contractors or workers of acceptable (i) lien
waivers; and (ii) evidence that such contractors have contractor's liability
insurance with at least $5,000,000 coverage; automobile liability insurance with
at least $1,000,000 coverage; and worker's compensation insurance in the
statutory amounts required by the State of Illinois which coverage shall be
obtained from carriers satisfactory to Landlord. Landlord shall have the right
to periodically review and modify the coverages required hereunder. Landlord and
Landlord's property manager shall be named additional insureds on the policies
required hereunder. Tenant shall within thirty (30) days of filing promptly bond
off or remove any lien or claim of lien for material or labor claimed against
the Premises or the Building, or both, by such contractors or workers if such
claim should arise, and Tenant shall and does hereby indemnify and hold harmless
Landlord from and against any and all claims, loss, cost, damage, expense or
liabilities including, but not limited to, reasonable attorney's fees, incurred
by Landlord, as a result of or in any way related to such claims or such liens.
e. Landlord's Right to do Work. Landlord shall also have the right, at
any time upon reasonable prior notice (except in the case of an emergency),
without the same constituting an actual or constructive eviction and without
incurring any liability to Tenant therefor (except as
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otherwise provided herein), to reasonably change the arrangement and/or location
of entrances or passageways, doors and doorways, corridors, elevators, toilets
or other public parts of the Building, and to reasonably close entrances, doors,
corridors, elevators or other facilities. Notwithstanding the foregoing, in the
event that any of the foregoing actions by Landlord cause the Premises to be
rendered untenantable or inaccessible for a period in excess five (5)
consecutive business days after written notice to Landlord and on account
thereof Tenant ceases doing business in the Premises or a portion thereof, the
obligation to pay Monthly Base Rent and Additional Rent shall thereafter abate
on a proportionate basis for so long as and to the extent Tenant's ability to
conduct its business in the Premises or such portion thereof is affected.
9. SERVICES
Landlord shall furnish the services described in Exhibit "D", attached
hereto and by reference made a part hereof (certain costs of which services
shall be reimbursed to Landlord in accordance with Paragraph 3 herein). Landlord
will provide to Tenant heating or air conditioning service after the Building
Operating Hours (defined in Exhibit "D"), if Tenant gives Landlord written
notice of the desire for such service by 4:00 p.m. on the business day on which
Tenant desires the service, and by 4:00 p.m. on the second (2nd) business day
prior to any Saturday, Sunday or holiday on which Tenant desires such service.
Such service will be provided by Landlord at such rates as shall be established
by Landlord from time to time. As of the date of this Lease, such rates are
$65.00 per floor per hour. Such rates shall be subject to increase by Landlord,
in connection with increased costs of administrative services, labor, equipment
and utilities.
10. DESTRUCTION OR DAMAGE TO PREMISES
a. If the Premises or the Building are totally destroyed (or so
substantially damaged as to be wholly untenantable or not usable or not expected
to be repaired within one hundred eighty (180) days in the determination of
Landlord's architect or engineer) by storm, fire, earthquake or other casualty,
Landlord shall have the option to terminate this Lease as of the date of the
occurrence of the storm, earthquake, fire or other casualty by giving written
notice to Tenant within one hundred twenty (120) days from the date of such
damage or destruction and Rent shall be apportioned on a per diem basis and paid
to the date of such occurrence; provided, however, if only the Premises and no
other portions of the Building are so damaged, Landlord's election to terminate
this Lease, if so made, shall be made in a written notice to Tenant given at any
time within ninety (90) days after the date of such damage. In the event that
all or substantially all of the Building, including the Premises, is damaged by
fire or other casualty, Tenant shall have the right to terminate this Lease by
so notifying Landlord, in writing, within one hundred twenty (120) days of the
occurrence of such event.
In the event that neither Landlord nor Tenant elects to terminate the
Lease as aforesaid or in the event of a partial destruction (i.e., damage
expected to be repaired within one hundred eighty (180) days in the
determination of Landlord's architect or engineer), Landlord shall commence the
process of restoration of the Premises to a substantially similar condition as
existed immediately prior to the damage within thirty (30) days from the date of
receipt by
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Landlord of all of the insurance proceeds paid with respect to such casualty,
and shall use commercially reasonable efforts to complete said restoration of
the Premises within one hundred eighty (180) days of the date of receipt by
Landlord of all of the insurance proceeds paid with respect to such casualty, as
described above, subject to delays caused by Tenant; provided, however, that
Landlord shall not be obligated to expend for such repair an amount in excess of
the aggregate of any deductible and the net insurance proceeds available for
repair as a result of such damage and in no event shall Landlord be required to
repair or replace any alteration or improvement made by or for the Tenant, nor
any trade fixtures, furniture, equipment or other personal property belonging to
the Tenant. Landlord shall have no liability to Tenant, and Tenant shall not be
entitled to terminate this Lease by virtue of any delays in completion of such
repairs. If Landlord elects or is obligated to restore the Premises, Rent shall
abate with respect to the untenantable portion of the Premises from the date of
such casualty until the earlier of (i) forty-five (45) days following the date
of substantial restoration thereof, and (ii) the date Tenant reoccupies the
Premises for the purpose of conducting business therefrom. Notwithstanding such
abatement, Tenant shall remain obligated to perform and discharge all of its
remaining covenants under this Lease during the period of abatement to the
extent reasonably practicable.
b. If such damage or destruction occurs within one (1) year of the
expiration of the Term, either party may, at its option on written notice to the
other party within thirty (30) days of such destruction or damage, terminate
this Lease as of the date of such destruction or damage.
c. Rent shall not abate if the damage or destruction of the Premises,
whether total or partial, is the result of the willful misconduct or the
negligence of Tenant, its contractors, subcontractors, agents, employees, guests
or invitees, except to the extent Landlord receives rent loss insurance proceeds
therefor (provided that Tenant shall be responsible for the costs of the
deductible). Landlord hereby represents to Tenant that Landlord shall maintain
rent loss insurance or self-insure therefor.
d. Notwithstanding the foregoing, in the event Landlord commences the
restoration and, within one (1) year after the fire or casualty, the Premises
have not been substantially restored by Landlord, Tenant may terminate this
Lease by written notice to Landlord given within thirty (30) days after the end
of said one (1) year period. If Tenant shall give notice of termination pursuant
to this Paragraph 10, such notice shall specify a date for the expiration of
this Lease, which date shall not be more than thirty (30) days after the giving
of such notice and the Term of this Lease shall expire on such date as fully and
completely as if such date were the date set forth above for the termination of
this Lease unless Landlord shall have substantially completed restoration of and
delivered the Premises to Tenant for occupancy, prior to such date. Upon
termination of the Lease, Tenant shall forthwith quit, surrender and vacate the
Premises without prejudice, however, to the rights and remedies of either party
against the other under the Lease provisions in effect prior to such fire or
other casualty, and any Base Rent, Additional Rent or other rent owing shall be
paid up to the date of such fire or other casualty and Tenant shall be relieved
of its obligations hereunder to pay rent accruing from and after the date of
such fire or other casualty and any payment of rent made by Tenant which was on
account of any period subsequent to such date shall be returned to Tenant.
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11. DEFAULT; REMEDIES
a. The occurrence of any of the following shall constitute an event of
default hereunder by Tenant:
i. The Rent or any other sum of money due of Tenant hereunder
is not paid when due and such failure continues for five (5) days after written
notice to Tenant;
ii. Reserved;
iii. Tenant fails to bond off or otherwise remove (in a manner
acceptable to Landlord) any lien filed against the Premises or the Building by
reason of Tenant's actions, within thirty (30) days after Tenant has notice of
the filing of such lien;
iv. Tenant fails to observe, perform and keep any of the other
covenants, agreements, provisions, stipulations, conditions and Rules herein
contained, to be observed, performed and kept by Tenant and persists in such
failure after thirty (30) days' written notice by Landlord requiring that Tenant
remedy, correct, desist or comply (or if any such failure to comply on the part
of Tenant would reasonably require more than thirty (30) days to cure, Tenant
shall not be in default if Tenant commences to cure the default within said
thirty (30) day notice period and thereafter promptly, effectively and
continuously proceeds to cure the default and, in all such events, cures such
default no later than ninety (90) days after such notice);
v. If the interest of Tenant in this Lease shall be levied on
under execution or other legal process;
vi. If any voluntary petition in bankruptcy or for corporate
reorganization or any similar relief shall be filed by Tenant;
vii. If any involuntary petition in bankruptcy shall be filed
against Tenant under any federal or state bankruptcy or insolvency act and shall
not have been dismissed within ninety (90) days from the filing thereof;
viii. If a receiver shall be appointed for Tenant or any of
the property of Tenant by any court and such receiver shall not have been
dismissed within ninety (90) days from the date of his appointment; or
ix. If Tenant shall make an assignment for the benefit of
creditors, or if Tenant shall admit in writing Tenant's inability to meet
Tenant's debts as they mature.
b. Upon the occurrence of an event of default, Landlord shall have the
option to do and perform any one or more of the following:
i. Terminate this Lease and the Term created hereby, in which
event Landlord may forthwith repossess the Premises and be entitled to recover
forthwith, in addition
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to any other sums or damages for which Tenant may be liable to Landlord, as
damages a sum of money equal to the excess of the value of the Rent provided to
be paid by Tenant for the balance of the Term over the fair market rental value
of the Premises, after deduction of all anticipated expenses of reletting, for
said period. Should the fair market rental value of the Premises, after
deduction of all anticipated expenses of reletting, for the balance of the Term
exceed the value of the Rent provided to be paid by Tenant for the balance of
the Term, Landlord shall have no obligation to pay to Tenant the excess or any
part thereof or to credit such excess or any part thereof against any other sums
or damages for which Tenant may be liable to Landlord; or
ii. Terminate Tenant's right of possession and may repossess
the Premises by forcible entry and detainer suit, by taking peaceful possession
or otherwise, without terminating this Lease, in which event Landlord may, but
shall be under no obligation to, relet the same for the account of Tenant, for
such rent and upon such terms as shall be satisfactory to Landlord. For the
purpose of such reletting, Landlord is authorized to decorate, repair, remodel
or alter the Premises. If Landlord shall fail to relet the Premises, Tenant
shall pay to Landlord as damages a sum equal to the amount of the Rent reserved
in this Lease for the balance of the Term. If the Premises are relet and a
sufficient sum shall not be realized from such reletting after paying all of the
costs and expenses of all decoration, repairs, remodeling, alterations and
additions and the expenses of such reletting and of the collection of the rent
accruing therefrom to satisfy the Rent provided for in this Lease, Tenant shall
satisfy and pay the same upon demand therefor from time to time. Tenant shall
not be entitled to any rents received by Landlord in excess of the Rent provided
for in this Lease. Tenant agrees that Landlord may file suit to recover any sums
falling due under the terms of this Paragraph 11 from time to time and that no
suit or recovery of any portion due Landlord hereunder shall be any defense to
any subsequent action brought for any amount not theretofore reduced to judgment
in favor of Landlord; or
iii. As agent of Tenant, do whatever Tenant is obligated to do
by the provisions of this Lease, including, but not limited to, entering the
Premises, without being liable to prosecution or any claims for damages, in
order to accomplish this purpose. Tenant agrees to reimburse Landlord
immediately upon demand for any expenses which Landlord may incur in thus
effecting compliance with this Lease on behalf of Tenant, and Tenant further
agrees that Landlord shall not be liable for any damages resulting to Tenant
from such action, whether caused by the negligence of Landlord or otherwise; or
iv. Landlord may declare the entire amount of Base Rent,
Additional Rent and other sums which would have become due and payable during
the remainder of the Term of this Lease to be due and payable immediately
without notice to Tenant, and thereafter Landlord may terminate this Lease and
recover from Tenant, as full liquidated damages, all damages Landlord may incur
by reason of Tenant's default, which damages shall be limited to (a) the amounts
due and owing prior to such termination, plus (b) the cost of recovering the
Premises, plus (c) reasonable attorney's fees and costs, plus (d) a sum which,
at the date of such termination, equals the present value discounted at ten
percent (10%) per annum of (i) the Base Rent, Additional Rent and all other sums
which would have been due and payable by Tenant hereunder for the remainder of
the Term (including any Extended Term, if the Term of the Lease has been
extended) less (ii) the fair market rental value of the Premises for the same
period,
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accounting for the cost, time and other factors necessary to relet the Premises,
all of which amounts shall be immediately due and payable; provided, however, if
Landlord elects to pursue this remedy, Landlord shall do so exclusively and
shall not thereafter pursue any of the other remedies set forth in section
11(b)(i)-(iii) to collect Base Rent and Additional Rent due from Tenant. The
foregoing limitation of remedies is without prejudice to Landlord's right to
enforce Tenant's indemnity obligation with respect to claims, damages and
liabilities (other than Base Rent and Additional Rent) resulting to Landlord by
or through Tenant's use and occupancy of the Premises. Landlord and Tenant agree
that such amounts constitute a good faith reasonable estimate of the damages
which might be suffered by Landlord upon the occurrence of an event of default
and that it is impossible to estimate more precisely such damages. Landlord's
receipt of the aforesaid amount is intended not as a penalty but as full
liquidated damages.
c. Pursuit by Landlord of any of the foregoing remedies shall not
preclude the pursuit of general or special damages incurred, or of any of the
other remedies provided herein, at law or in equity; provided, however,
Landlord's election to pursue the remedy in Paragraph 11 (b) (iv) shall be
exclusive of any other remedies available to Landlord except as provided in said
Paragraph 11 (b) (iv).
d. No act or thing done by Landlord or Landlord's employees or agents
during the Term shall be deemed an acceptance of a surrender of the Premises.
Except as provided herein, neither the mention in this Lease of any particular
remedy, nor the exercise by Landlord of any particular remedy hereunder, at law
or in equity, shall preclude Landlord from any other remedy Landlord might have
under this Lease, at law or in equity. Any waiver of or redress of or any
violation of any covenant or condition contained in this Lease or any of the
Rules now or hereafter adopted by Landlord, shall not prevent a subsequent act,
which would have originally constituted a violation, from having all the force
and effect of an original violation. The receipt by Landlord of Rent with
knowledge of the breach of any covenant in this Lease shall not be deemed a
waiver of such breach.
e. Landlord's reentry, demand for possession, notice that the tenancy
hereby created will be terminated on the date therein named, institution of an
action of unlawful detainer or ejectment or the entering of a judgment for
possession in such action or any other act or acts resulting in the termination
of Tenant's right to possession of the Premises shall not relieve Tenant from
Tenant's obligation to pay all sums due hereunder during the balance of the
Term, except as herein expressly provided. Landlord may collect and receive any
Base Rent, Additional Rent, or charges due from Tenant, and the payment thereof
shall not constitute a waiver of or affect any notice or demand given, suit
instituted or judgment obtained by Landlord, or be held to waive, affect,
change, modify or alter the rights or remedies which Landlord has in equity or
at law by virtue of this Lease.
f. The Base Rent is calculated for the Term of this Lease and a
substantial portion of the Base Rent includes reimbursement to Landlord of
direct out-of-pocket investment costs and expenses with respect to leasing the
Premises to the Tenant that Landlord has incurred or will incur during the Term
for tenant improvements, leasing commissions and other costs, various tenant
concessions, and other similar direct costs and expenses relating to Landlord's
investment
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in the Premises, the aggregate amount of which Landlord has amortized over the
entire Term. Tenant acknowledges that Landlord will suffer damages, including,
but not limited to, such unreimbursed direct out-of-pocket costs and expenses
unless Tenant pays to Landlord all the Base Rent due to Landlord for the entire
Term.
g. In the event Landlord commences any proceedings for nonpayment of
Base Rent, Additional Rent or other sums due hereunder, Tenant will not
interpose any counterclaim of whatever nature or description which is not
directly related to the Lease in any such proceeding. This shall not, however,
be construed as a waiver of the Tenant's right to assert such claims in any
separate action or actions brought by the Tenant.
h. Except as expressly provided in this Lease, Tenant hereby waives any
and every form of demand and notice prescribed by statute or other law,
including without limitation the notice of any election of remedies made by
Landlord under this Paragraph 11, demand for payment of any rent, or demand for
possession.
i. All rights and remedies of Landlord created or otherwise existing at
law or in equity are cumulative and the exercise of one or more rights or
remedies shall not be taken to exclude or waive the right to exercise any other.
j. Tenant shall have the right following five (5) business days' prior
written notice to Landlord to file a claim against Landlord for money damages or
file an action for specific performance or injunction by reason of any
unreasonable refusal, withholding or delaying by Landlord of any consent,
approval or statement of satisfaction, provided that Landlord has not within
said five (5) business day period otherwise given Tenant its consent, approval
or statement of satisfaction. If the result of any such action shall be adverse
to Landlord, Landlord shall be liable to Tenant for Tenant's reasonable expenses
and attorney's fees thereby incurred.
k. In the event that after the Commencement Date Landlord defaults in
the performance of any of its covenants or agreements hereunder and such default
continues for thirty (30) days after Tenant gives Landlord written notice
thereof or, if such default cannot, with due diligence, be cured within said
thirty (30) day period if Landlord shall fail to commence to cure such default
within said thirty (30) day period or shall thereafter fail to diligently and
continuously pursue the curing thereof, Tenant shall have the right following
five (5) business days' prior written notice to Landlord to perform such
covenant or agreement itself and any amounts expended by Tenant in so doing
shall be paid by Landlord to Tenant within five (5) days of Tenant's written
demand therefor and supporting documentation as reasonably requested by Landlord
of such expenditures. In the event that Landlord fails to make such payment to
Tenant within said five (5) day period or in the event that Landlord fails to
pay to Tenant when due any other liquidated amount which Landlord is required to
pay to Tenant pursuant hereto and such failure continues for a period of five
(5) days after notice thereof from Tenant, Tenant shall have the right to
off-set such amounts against the Monthly Base Rent due Landlord hereunder,
provided, however, that the maximum amount that Tenant has the right to off-set
against Annual Base Rent under this Paragraph 11.k. in any calendar year shall
be an amount equal to ten percent (10%) of the aggregate Annual Base Rent due
and payable in such calendar year. Without
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limitation of any other rights or remedies of Landlord hereunder or at law or in
equity, in the event that Landlord disputes, in good faith, any claim made by
Tenant under this Paragraph 11.k., Landlord shall have the right to submit such
dispute to arbitration, which dispute shall then be decided in accordance with
the then applicable Arbitration Rules of the American Arbitration Association.
The award rendered by the arbitrators shall be final, and judgment may be
entered upon it in accordance with applicable law in any court having
jurisdiction thereto. The costs of such arbitration shall be paid by the party
against whom judgment was rendered.
12. ASSIGNMENT AND SUBLETTING
a. Except as otherwise provided in this Paragraph 12, Tenant shall not
sublet any part of the Premises, nor assign this Lease or any interest herein,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. For illustration only, without limiting in any respect
the reasons Landlord may withhold its consent, the following are examples of
reasons Landlord may withhold its consent: (i) the proposed subtenant or
assignee may, in Landlord's judgment unreasonably burden the Building, its
amenities or services (ii) the financial statements or the business experience
of any proposed assignee are unsatisfactory to Landlord, (iii) the proposed use
of the Premises conflicts with other uses within the Building, (iv) the
prospective assignee or sublessee is an existing tenant of the Building and in
Landlord's judgment such sublease or assignment may affect Landlord's lease
relationship with such tenant, or (v) Tenant's proposed subletting or assignment
will in Landlord's judgment compete with Landlord's ability to lease other
vacant space in the Building; provided, however, if Landlord is unable to
provide to such prospective third party suitable alternative space in the
Building by a direct lease with Landlord, then Tenant's proposed subletting or
assignment shall not be deemed to compete with Landlord as aforesaid.
Notwithstanding the foregoing, Landlord shall not withhold its consent to a
prospective sublessee based upon the circumstance of the prospective sublessee
being an existing tenant in the Building if the aggregate of all of the space
which has previously been sublet by Tenant when added to the space which is the
subject of the then-pending request for consent is less than 25,761 rentable
square feet space in the Building and Landlord is unable to provide to such
prospective sublessee suitable alternative space in the Building by a direct
lease with Landlord. Any sublease or assignment made without Landlord's consent
shall be void. Consent by Landlord to one assignment or sublease shall not
destroy or waive this provision, and all later assignments and subleases shall
likewise be made only upon prior written consent of Landlord. If a sublease or
assignment is consented to by Landlord, any sublessees or assignees shall become
liable directly to Landlord for all obligations of Tenant hereunder without
relieving or in any way modifying Tenant's liability hereunder.
If Tenant desires to assign this Lease or sublet the Premises or any
part thereof, Tenant shall give Landlord written notice at least thirty (30)
days in advance of the date on which Tenant desires to make such assignment or
sublease, which notice shall specify: (a) the name and business of the proposed
assignee or sublessee; (b) the amount and location of the space in the Premises
affected; (c) the proposed effective date of the subletting or assignment; and
(d) the proposed rental to be paid to Tenant by such sublessee or assignee. If
Tenant shall give such notice, Tenant shall pay within thirty (30) days after
demand Landlord's reasonable out-of-pocket costs, including attorneys' fees
incurred to consider and as necessary to document such
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transaction.
If Tenant notifies Landlord of Tenant's intent to sublease or assign
this Lease, Landlord shall within fifteen (15) days from receipt of such notice
(a) consent to such proposed assignment or subletting; (b) deny such consent (if
Landlord shall fail to notify Tenant in writing of such election within said
fifteen (15) day period, Tenant shall provide Landlord with a notice of such
failure which notice shall specifically advise Landlord that unless Landlord
either consents to said proposed assignment or subletting or denies such consent
within five (5) days from receipt of such notice that Landlord shall be deemed
to have given such consent and in the event Landlord does not respond to Tenant
within said five (5) day period, then Landlord shall be deemed to have elected
to so consent).
Notwithstanding any other provision of this Lease to the contrary,
Landlord acknowledges that Tenant may exercise any right granted to Tenant under
this Lease and lease from Landlord portions or all of the space hereinafter
described and referred to as the First Expansion Space, Second Expansion Space
or First Offer Space which, at the time Tenant leases such space from Landlord,
may not be necessary for Tenant's needs (such space being defined as the
"Reserved Space"). Tenant shall have the right to lease such space from Landlord
and to sublet all or a portion thereof for a term not exceeding thirty-six (36)
months from the date of delivery of the respective Reserved Space to Tenant;
provided, however, at no time may the aggregate of any such Reserved Space which
is sublet to a third party exceed 25,761 rentable square feet. The proposed
sublessee shall be subject to the approval of Landlord, which approval shall not
be unreasonably withheld; it is specifically understood and acknowledged that
Landlord may not withhold its approval of the proposed sublessee based upon the
fact that the proposed sublessee is an existing tenant of the Building. The
foregoing right is a specific and limited exception to the provisions of this
Lease prohibiting Tenant from entering into any sublease of any portion of the
Premises and shall not be applicable in the event Tenant has entered into or
thereafter seeks to enter into any sublease for more than 25,761 rentable square
feet of space of the Premises as provided below. In the event Tenant has entered
into or proposes at any point thereafter to enter into the subleases described
in the immediately-following paragraph then the right to sublet the Reserved
Space shall be null and void.
In the event that Tenant or any Permitted Assignee (hereinafter
defined) seeks to assign or sublet, in the aggregate, for any one assignment or
subletting or for all assignments and subleases taken together (other than to
Permitted Assignees) more than 25,761 rentable square feet of space in the
Premises, Landlord shall have the right to terminate this Lease as to that
portion of the Premises which Tenant is seeking to assign or sublet which is in
excess of 25,761 rentable square feet or which would cause the aggregate amount
of all space so assigned or sublet to exceed 25,761 rentable square feet,
whether by requesting Landlord's consent thereto or otherwise. Landlord may
exercise such right to terminate by giving written notice to Tenant at any time
within thirty (30) days after Tenant has indicated its desire to enter into any
such assignment or sublease. In the event that Landlord exercises such right to
terminate, Landlord shall be entitled to recover possession of and Tenant shall
surrender such portion of the Premises on the later of (i) the proposed date for
possession by such assignee or subtenant, or (ii) ninety (90) days after the
date of Landlord's notice of termination to Tenant. In the event that Landlord
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elects to recapture the space, Tenant shall have the right to withdraw such
request to sublease or assign by giving written notice to Landlord within five
(5) business days of the date of receipt of Landlord's election to terminate
this Lease with respect to the space described in the sublease or assignment
notice and Tenant shall thereafter have the right to continue to lease such
space.
In the event that Landlord consents to any assignment or sublease of
any portion of the Premises, as a condition of Landlord's consent, if Landlord
so elects to consent, Tenant shall pay to Landlord sixty-six and two-thirds
percent (66-2/3%) of all net profit derived by Tenant from such assignment or
sublease. Tenant shall furnish Landlord with a sworn statement, certified by an
independent certified public accountant, setting forth in detail the computation
of net profit (which computation shall be based upon generally accepted
accounting principles), and Landlord, or its representatives shall have access
to the books, records and papers of Tenant in relation thereto, and may make
copies thereof. Any rent in excess of that paid by Tenant hereunder realized by
reason of such assignment or subletting after deducting therefrom all
out-of-pocket reasonable expenses of Tenant incurred in connection therewith,
including leasing commissions and improvements costs and allowances, shall
constitute such net profit. If a part of the consideration for such assignment
shall be payable other than in cash, the payment to Landlord shall be payable in
accordance with the foregoing percentage of the cash and other non-cash
considerations in such form as is satisfactory to Landlord. Such percentage of
Tenant's net profits shall be paid to Landlord promptly by Tenant upon Tenant's
receipt from time to time of periodic payments from such assignee or subtenant
or at such other time as Tenant shall realize its net profits from such
assignment or sublease.
If this Lease is canceled, the area of the Premises is reduced or a
sublease or assignment is made where the consent of Landlord is required, as
herein provided, Tenant shall pay Landlord a charge equal to the actual
out-of-pocket costs incurred by Landlord, in Landlord's reasonable judgment, for
all of the necessary legal, management, leasing or accounting services required
to accomplish such cancellation, reduction of area of the Premises, assignment
or subletting, as the case may be.
Any physical alterations necessary with respect to any such assignment,
subletting or reduction of the area of the Premises shall be subject to the
provisions of this Lease regarding alterations and shall be at Tenant's sole
cost and expense and subject to applicable building codes. No acceptance by
Landlord of any rent or any other sum of money from any assignee, sublessee, or
other category of transferee shall release Tenant from any of its obligations
under this Lease or be deemed to constitute Landlord's consent to such
assignment, sublease or transfer.
b. The joint and several liability of Tenant named herein and any
immediate and remote successor in interest of Tenant (by assignment or
otherwise), and the due performance of the obligations of this Lease on Tenant's
part to be performed or observed, shall not in any way be discharged, released
or impaired by any (i) agreement which modifies any of the rights or obligations
of the parties under this Lease, (ii) stipulation which extends the time within
which an obligation under this Lease is to be performed, (iii) waiver of the
performance of an obligation required under this Lease, or (iv) failure to
enforce any of the obligations set forth in this Lease; provided, however, that
(a) in the case of any modification of this Lease made after the date of an
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assignment or other transfer of this Lease by Tenant, if such modification
increases the obligations of Tenant or reduces the rights of Tenant, then Tenant
named herein and each respective assignor or transferor shall not be liable
under or bound by any such increase or reduction; and (b) in the case of any
waiver by Landlord of a specific obligation of an assignee or transferee of
Tenant, such waiver shall also be deemed a waiver of such obligation with
respect to the immediate and remote assignors or transferors of such assignee or
transferee.
c. Tenant shall have no right whatsoever to encumber any of the
Tenant's rights, title or interest under this Lease, without the prior written
consent of the Landlord.
d. Nothing in this Lease shall in any way restrict Landlord's right to
assign or encumber this Lease in its sole and absolute discretion. Should the
Landlord assign this Lease as provided for above, or should Landlord encumber
all or any portion of the Building and should the holder of such encumbrance
succeed to the interest of Landlord, such successor shall be deemed to recognize
the rights of Tenant under this Lease and Tenant shall be bound to said assignee
or any such holder under all the terms, covenants and conditions of this Lease
for the balance of the Lease Term remaining after such succession and Tenant
shall attorn to such succeeding party as its Landlord under this Lease promptly
under any such succession. Tenant agrees that should any party so succeeding to
the interest of Landlord require a separate agreement of attornment regarding
the matters covered by this Lease, then Tenant shall enter into such attornment
agreement, provided the same does not substantially modify any of the provisions
of this Lease and has no material adverse effect upon Tenant's continued
occupancy of the Premises.
e. Notwithstanding anything contained herein to the contrary, Tenant
shall have the right, upon prior written notice to Landlord, to assign or sublet
portions of the Premises to Permitted Assignees provided that such assignment or
subletting shall not relieve Tenant of its obligations hereunder and in the
event of an assignment hereunder such assignee assumes, pursuant to an
agreement, in form and substance satisfactory to Landlord, the obligations of
the Tenant hereunder. As used herein a "Permitted Assignee" shall include any
corporation owned by Tenant, any parent corporation of Tenant or any corporation
owned by a parent corporation of Tenant or any surviving corporation pursuant to
a merger or consolidation of Tenant with such corporation or any corporation
which acquires all or substantially all of the assets of Tenant, provided in
each case that Landlord is reasonably satisfied with the financial condition of
such entity, it being understood that if such entity has a net worth at least
equal to that of Tenant's at the time of such assignment or subletting, the
financial condition of such entity shall be deemed satisfactory to Landlord.
13. CONDEMNATION
If all or a substantial part of the Premises is taken by virtue of
eminent domain or other similar proceeding, or are conveyed in lieu of such
taking, this Lease shall expire on the date when title or right of possession
shall vest, and any Rent paid for any period beyond said date shall be repaid to
Tenant within thirty (30) days after said date. If all or a part of the Building
other than the Premises is taken by virtue of eminent domain or other similar
proceeding, or is
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conveyed in lieu of such taking rendering the remaining part of the Building not
subject to such condemnation shall be substantially and adversely affected
thereby, then Landlord, in its sole discretion may terminate this Lease. If
there is a partial taking where this Lease is not terminated, the Rent shall be
adjusted in proportion to the rentable square footage of the Premises taken, as
reasonably determined by an architect or engineer mutually agreed upon by
Landlord and Tenant. In any event, Landlord shall be entitled to, and Tenant
shall not have any right to claim, any award made in any condemnation
proceeding, action or ruling relating to the Building or the Property; provided
however, in the event of a termination of this Lease Tenant shall be entitled to
make a separate claim in any condemnation proceeding, action or ruling relating
to the Premises for Tenant's moving expenses, loss of goodwill and the
unamortized value of leasehold improvements in the Premises actually paid for by
Tenant without contribution by Landlord, to the extent such claim does not in
any manner impact upon or reduce Landlord's claim or award in such eminent
domain proceeding, action or ruling and Tenant shall likewise have no claim
against Landlord for the value of any unexpired portion of this Lease.
In addition to the rights of Tenant set forth in this Section, if
twenty-five percent (25%) or more of the rentable area of the Premises is taken
as described above, Tenant shall have the right to terminate this Lease upon
giving Landlord ninety (90) days' prior written notice, which notice must be
given within thirty (30) days after the date when title or the right of
possession is vested in the governmental authority; provided, however, if
Landlord, within sixty (60) days after Tenant's notice, offers Tenant another
space in the Building of comparable size, finish and relative location in the
Building to the portion of the Premises so taken, acceptable to Tenant, this
Lease shall not terminate and Tenant shall relocate to said other space.
14. INSPECTIONS
Landlord, its agents, employees, contractors and subcontractors, may
enter the Premises at reasonable hours, upon reasonable prior notice to Tenant
(except in the case of an emergency) to (a) exhibit the Premises to prospective
purchasers (with a representative of Tenant present) or tenants of the Premises
or the Building; any such exhibiting of the Premises to prospective tenants
shall only be during the last twenty-four (24) months of the Term and with a
representative of Tenant present and with not more than four (4) persons from
said prospective tenant present; (b) inspect the Premises to see that Tenant is
complying with its obligations hereunder; and (c) make repairs or alterations
(i) required of Landlord under the terms hereof; (ii) to any adjoining space in
the Building; or (iii) to any systems serving the Building which run through the
Premises; and (d) to perform any and all of Landlord's obligations under this
Lease, or any other lease, where entry to such Premises is reasonably required
for such performance. In addition to the foregoing, Landlord, its agents,
employees, contractors and/or sub-contractors may enter the Premises at any time
if an emergency requires such entry. Any such entry shall not constitute an
eviction of Tenant or be deemed as disturbing Tenant's quiet enjoyment of the
Premises and no abatement of rent shall result because of such entry and/or
performance. Landlord shall be allowed to take all material into and upon
Premises that may be required therefor without the same constituting an eviction
of Tenant in whole or in part; and the Base Rent and Additional Rent reserved
shall in no way abate while said decorations, repairs, alterations, improvements
or additions are being made. If Tenant shall not be personally present
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to open and permit an entry into the Premises, at any time, when for any reason
an entry therein shall be necessary or permissible, Landlord or Landlord's
agents may enter the same by a pass key, or when for any reason an entry therein
shall be necessary and entry by pass key is not possible, may forcibly enter the
same, without rendering Landlord or such agents liable therefor (if during such
entry Landlord or such agents shall accord reasonable care to Tenant's
property), and without in any manner affecting the obligations and covenants of
this Lease. All entries shall, where possible, be performed at such times and in
such fashion so as not to unreasonably interfere with the conduct and operation
of Tenant's business. Nothing herein contained, however, shall be deemed or
construed to impose upon Landlord any obligation, responsibility or liability
whatsoever, for the care, supervision or repair of the Premises or Building
other than as herein provided.
If for a reason other than a violation of this Lease by Tenant, or the
act, omission or negligence of Tenant, Landlord performs work within the
Premises and such work causes interference to Tenant's business operations such
that Tenant cannot reasonably operate for business at all or a portion of the
Premises, and does not operate at all or a portion of the Premises in excess of
five (5) consecutive business days after the notice to Landlord, the Base Rent
and Additional Rent reserved under this Lease shall abate for that portion of
the Premises which is not useable by Tenant from the end of said period until
the earlier of the date Tenant recommences to use that portion of the Premises
or the date Landlord's work diminishes or stops such that Tenant can again
reasonably operate for business within the Premises.
15. SUBORDINATION AND NON-DISTURBANCE
a. Notwithstanding anything contained herein to the contrary, this
Lease shall be subject and subordinate to any underlying land leases or
mortgages which may now or hereafter affect this Lease, the Building or the
Property and also to all renewals, modifications, extensions, consolidations,
and replacements of such underlying land leases and such mortgage provided that
Tenant obtains from such Mortgagee (as hereinafter defined) the benefits of a
SNDA (as defined in Paragraph 15[e] below). In confirmation of the subordination
set forth in this Paragraph 15, Tenant shall, at Landlord's request, execute and
deliver such further instruments as may be desired by the holder(s) of the
mortgage (a "Mortgagee") or by any lessor under any such underlying land leases.
Notwithstanding the foregoing, Landlord or such Mortgagee shall have the right
to subordinate or cause to be subordinated, in whole or in part, any such
underlying land leases or mortgage to this Lease (but not in respect to priority
of entitlement of insurance or condemnation proceeds). If any such underlying
land leases or mortgage terminates for any reason or any such mortgage is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant
shall, notwithstanding any subordination, deliver to Mortgagee or the Landlord
within ten (10) days of written request an attornment agreement, providing that
such Tenant shall continue to abide by and comply with the terms and conditions
of this Lease.
b. If any proceedings are brought for the foreclosure of, or in the
event of exercise of the power of sale or conveyance in lieu of foreclosure
under any deed to secure debt, Tenant shall at the option of the purchaser at
such foreclosure or other sale, attorn to such purchaser and recognize such
person as landlord under this Lease. Tenant agrees that the institution of any
suit,
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action or other proceeding by a Mortgagee or a sale of the Property pursuant to
the powers granted to a Mortgagee under its mortgage, shall not, by operation of
law or otherwise, result in the cancellation or the termination of this Lease or
of the obligations of the Tenant hereunder.
c. If such purchaser requests and accepts such attornment, from and
after the time of such attornment, Tenant shall have the same remedies against
such purchaser for the breach of an agreement contained in this Lease that
Tenant might have had against Landlord if the mortgage had not been terminated
or foreclosed, except that such purchaser shall not be (i) liable for any act or
omission of the prior Landlord; (ii) subject to any offsets or defenses which
Tenant might have against the prior Landlord; (iii) bound by any Rent or
security deposit which Tenant might have paid in advance to the prior Landlord;
(iv) obligated to cure any default of any prior Landlord under the Lease that
occurred prior to the time that such purchaser succeeded to the interest of
Landlord in the Property; or (v) bound by any amendment or modification of the
Lease made without the prior written consent of such purchaser.
d. As used in this Paragraph 15, the term "mortgage(s)" shall also
include deed(s) of trust.
e. Landlord shall obtain a non-disturbance agreement (the "SNDA") with
respect to this Lease from the present Mortgagee in the form of Exhibit G. Upon
Tenant's written request, Landlord shall use reasonable efforts to obtain a SNDA
from any future Mortgagee (collectively the "Lender"). The non-disturbance
agreement shall be in such form as customarily used by the Lender.
Notwithstanding the foregoing, Landlord shall not be obligated to commence any
litigation, pay any money, enter into any amendments to this Lease, take any
other action of any kind or nature whatsoever or attempt beyond one good faith
request to secure any such non-disturbance agreement. Landlord's sending a
letter to the Lender requesting the non-disturbance agreement shall be deemed a
good faith request. If such Lender for any reason fails or refuses to respond to
Landlord's request or having responded, fails to enter into such non-disturbance
agreement, or agrees to enter it subject to other conditions, or if Landlord
secures any such non-disturbance agreement and Tenant fails or is unwilling for
any reason whatsoever to execute same, Landlord shall have no further obligation
with respect thereto, including, without limitation, making any further requests
(written or oral) or compelling Lender to respond to the request therefor or
compelling Lender to execute a non-disturbance agreement.
16. WAIVER OF CLAIMS; INDEMNIFICATION AND HOLD HARMLESS
a. Except arising from the negligence or willful act of Landlord, its
partners and their respective officers, agents, servants and employees ,Landlord
and Landlord's partners, and their respective officers, agents, servants and
employees shall not be liable for any damage either to person or property or
resulting from the loss of use thereof sustained by Tenant or by other persons
due to the Building or any part thereof or any appurtenances thereof becoming
out of repair, or due to the happening of any accident or event in or about the
Building, including the Premises, or due to any act or neglect of any tenant or
occupant of the Building or of any other person or entity. This provision shall
apply particularly, but not exclusively, to damage caused by gas, electricity,
snow, frost, steam, sewage, sewer gas or odors, fire, water or by the bursting
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or leaking of pipes, faucets, sprinklers, plumbing fixtures and windows, and
shall apply without distinction as to the person whose act or neglect was
responsible for the damage and whether the damage was due to any of the causes
specifically enumerated above or to some other cause of an entirely different
kind. Tenant further agrees that all personal property upon the Premises, or
upon loading docks, receiving and holding areas, or freight elevators of the
Building, shall be at the risk of Tenant only, and that Landlord shall not be
liable for any loss or damage thereto or theft thereof.
b. Tenant hereby indemnifies and holds harmless Landlord from and
against any injury, expense, damage, liability or claim, imposed on Landlord by
any person whomsoever, whether due to damage to the Premises, claims for
injuries to the person or property of any other tenant of the Building or of any
other person in or about the Building, the Property for any purpose whatsoever,
or administrative or criminal action by a governmental authority, if such
injury, expense, damage, liability or claim results either directly or
indirectly from the act, omission, negligence, misconduct or breach of any
provisions of this Lease by Tenant, the agents, servants, or employees of
Tenant, or any other person entering in the Building or upon the Premises under
express or implied invitation or consent of Tenant.
c. Tenant shall report in writing to Landlord any defective condition
in or about the Premises known to Tenant, and further agrees to attempt to
contact Landlord as soon as practicable in such instance.
d. Except to the extent arising out of the intentional or negligent
acts of Tenant or Tenant's agents, employees, contractors or invitees, Landlord
shall indemnify, defend and hold Tenant harmless from and against any and all
claims, liabilities, losses, damages and expenses in connection with all losses,
including loss of life and injury to persons or property, arising out of any
occurrence in the Building other than within the Premises or the premises of any
tenant in the Building which occurrence arose out of the negligent act or
omission of Landlord or Landlord's employees, agents or contractors.
e. Each party further agrees to reimburse the other for any costs or
expenses, including, but not limited to, court costs and attorney's fees, which
the party seeking such reimbursement may incur in investigating, handling or
litigating any claim or any action by a governmental authority relating to
actions of Tenant or Landlord, as the case may be.
17. INSURANCE
a. Tenant, at its sole cost and expense, shall, commencing on the date
Tenant is given access to the Premises for any purpose, and during the entire
Term hereof, procure, pay for and keep in full force and effect:
i. Comprehensive General Liability or Commercial General
Liability insurance with respect to the Premises and the operations on
or on behalf of Tenant, in, on or about the Premises, including but not
limited to personal injury, product liability (if applicable), blanket
contractual, broad form property damage liability coverage, liquor
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liability (if applicable), with minimum limits of $3,000,000 per
occurrence, $5,000,000 in the aggregate, which may be satisfied, in
part, by Tenant's excess liability umbrella liability coverage. Not
more frequently than once in each three (3) years, if, in the
reasonable opinion of Landlord, the amount of liability insurance
required hereunder is not adequate in comparison to that carried for
comparable properties of similar usage Tenant shall increase said
insurance coverage as reasonably required by Landlord; provided,
however, that in no event shall the amount of liability insurance
increase by more than fifty percent (50%) greater than the amount
thereof during the preceding three (3) years of the Lease Term.
However, the failure of Landlord to require any additional insurance
coverage shall not be deemed to relieve Tenant from any obligations
under this Lease. The insurance policy shall contain the following
provisions:
(1) An endorsement naming Landlord and any other
parties in interest designated by Landlord as an
additional insured;
(2) An endorsement stating "such insurance as is afforded
by this policy for the benefit of Landlord and any
other additional insured shall be primary as respects
any liability or claims arising out of the occupancy
of the Premises by Tenant, or Tenant?s operations and
any insurance carried by Landlord, or any other
additional insured shall be non-contributory".
(3) Coverage must be on an "occurrence basis".
ii. Automobile Liability Insurance for all owned, non-owned
and hired vehicles with a minimum limit of $1,000,000 per accident.
iii. Workers' Compensation coverage as required by law,
together with Employers Liability coverage with a limit of not less
than $500,000.
iv. Property insurance covering (i) all improvements on the
Premises providing protection against any risk included within the
classification "All Risk", including sprinkler leakage, earthquake and
flood, (ii) all personal property of Tenant located in or at the
Premises, including but not limited to fixtures, furnishings, equipment
and furniture, providing protection against any peril included within
the classification "All Risk", including sprinkler leakage, earthquake
and flood; and (iii) loss of income or business interruption insurance
providing protection for a twelve (12) month period. With respect to
improvements or alterations permitted under this Lease, Tenant shall
carry or cause to be carried builder?s risk insurance or an
installation floater. Insurance shall be written on a replacement cost
basis for all property indicated above.
v. All insurance required to be carried by Tenant hereunder
shall be with companies rated A:X, or better, in the most recent
edition of Best?s Insurance Guide and licensed to provide the relevant
insurance in the State of Illinois. Tenant shall deliver to Landlord at
least fifteen (15) days prior to the time when such insurance is
required to be carried by Tenant, and thereafter at least thirty (30)
days prior to the expiration or renewal
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date of any policy maintained by Tenant, copies of the policies or
certificates evidencing such insurance. All policies and certificates
delivered pursuant to this paragraph shall contain liability limits not
less than those set forth in this Paragraph 17, and shall list the
additional insureds and shall specify all endorsements and special
coverages required by this Paragraph 17. Each such policy shall contain
an unqualified thirty-(30)-day notice of cancellation, non-renewal or
material amendment thereof. For the purposes of this Paragraph 17, the
term "Lease" shall mean the period from the Commencement Date through
the later date to occur of (i) of the expiration or termination of the
Lease Term, or (ii) the date Tenant surrenders physical possession of
the Premises to Landlord. Any insurance required pursuant to this Lease
may be provided by means of a so-called "blanket" policy, so long as
the Premises are specifically covered (by rider, endorsement or
otherwise), the limits of the policy are applicable on a "per location"
basis to the Premises, and the policy otherwise complies with the
provisions of this Lease. In no event shall the limits of any policy be
considered as limiting the liability of Tenant under this Lease.
Landlord may, at any time, inspect and/or copy any and all insurance
policies required hereunder.
b. If Tenant fails to procure, maintain and/or pay for at the times and
for the durations specified in this Lease, any insurance required by this
agreement, or fails to carry insurance required by any governmental
requirements, Landlord may (but without obligation to do so) at any time or from
time to time, and without notice, procure such insurance and Tenant agrees to
pay the sums so paid by Landlord together with interest thereon as provided
elsewhere herein and any costs or expenses incurred by Landlord in connection
therewith, within ten (10) days following Landlord?s written demand to Tenant
for such payment.
c. Tenant shall have included in all policies of insurance respectively
obtained by it with respect to the Building or Premises a waiver by the insurer
of all rights of subrogation against Landlord in connection with any loss or
damage thereby insured against, and Landlord shall have included in all property
insurance policies required to be maintained by Landlord under this Lease a
waiver by the insurer of all rights of subrogation against the Tenant in
connection with any loss or damage thereby insured against. To the full extent
permitted by law, Landlord as to its property insurance policies and Tenant as
to all its policies, each waives all right of recovery against the other for,
and agrees to release the other from liability for, loss or damage to the extent
such loss or damage results from a cause covered by valid and collectible
insurance in effect at the time of such loss or damage; provided however, that
the foregoing release by each party is conditioned upon the other party's
carrying insurance with the above described waiver of subrogation to the extent
required above, and if such coverage is not obtained or maintained by either
party, then the other party's foregoing release shall be deemed to be rescinded
until such waiver is either obtained or reinstated.
d. Landlord shall maintain such fire and extended coverage and
comprehensive public liability insurance with respect to Landlord's interest in
the Property and the Premises in such coverages, amounts and insurance companies
as Landlord, in its reasonable business
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judgment giving consideration to what other owners of first-class office
buildings maintain, deems appropriate.
18. RESERVED
19. ENTIRE AGREEMENT
This Lease contains the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties not embodied herein shall be of any force and effect. The failure of
either party to insist in any instance on strict performance of any covenant or
condition hereof, or to exercise any option herein contained, shall not be
construed as a waiver of such covenant, condition or option in any other
instance. This Lease (except for changes to the Rules pursuant to Paragraph 29
hereof) cannot be changed or terminated orally, and can be modified only in
writing, executed by each party hereto. Tenant acknowledges and agrees that
Tenant has not relied upon any statement, representation, prior written
promises, or prior oral promises, agreements or warranties, except such as are
expressed herein.
20. HOLDING OVER
Tenant shall pay to Landlord an amount as Rent equal to two hundred
percent (200%) of one-twelfth (1/12) of the Base Rent and two hundred percent
(200%) of one-twelfth (1/12) of the Additional Rent paid by Tenant during the
previous calendar year herein provided during each month or portion thereof for
which Tenant shall retain possession of the Premises or any part thereof after
the expiration or termination of the Term or of Tenant's right of possession,
whether by lapse of time or otherwise, and also shall pay all damages sustained
by Landlord, whether direct or consequential, on account thereof. At the option
of Landlord, expressed in a written notice to Tenant and not otherwise, such
holding over shall constitute a renewal of this Lease for a period of one (1)
year commencing thirty (30) days after such notice from Landlord (unless Tenant
relinquishes possession of the Premises within such thirty [30] day period as
herein required) at the greater of (i) the rental rates then prevailing for
similar space in the Building, and (ii) two hundred percent (200%) of the Annual
Base Rent and two hundred percent (200%) of the Additional Rent paid by Tenant
during the previous calendar year. The provisions of this Paragraph 20 shall not
be deemed to limit or constitute a waiver of any other rights or remedies of
Landlord provided herein or at law.
21. NOTICES
a. Any notice by either party to the other shall be valid only if in
writing and shall be deemed to be duly given only upon delivery or refusal of
the addressee to accept delivery (i) if to Tenant, at the Premises, attention:
General Counsel, and (ii) if to Landlord, at Landlord's address set forth in the
Introductory Article, or at such other address for either party as that party
may designate by notice in writing to the other. Notice may be given by personal
delivery, certified mail post-prepaid, return receipt requested or by recognized
overnight or same day courier delivery service or by personal delivery.
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b. Tenant hereby appoints as its agent to receive service of all
dispossessory or distraint proceedings, an employee of Tenant at the Premises at
the time of such service.
c. If there is a default by Landlord under this Lease, Tenant covenants
to give notice by registered mail to, in addition to Landlord, any Mortgage or
beneficiary under a deed of trust encumbering the Premises, whose address shall
have been furnished to Tenant.
22. HEIRS, SUCCESSORS, AND ASSIGNS - PARTIES
a. The provisions of this Lease shall bind and inure to the benefit of
Landlord and Tenant, and their respective successors, heirs, legal
representatives and permitted assigns, including the Permitted Assignee, it
being understood that the term "Landlord" as used in this Lease means only the
owner (or the ground lessee) for the time being of the Building of which the
Premises are a part, so that in the event of any sale or sales of said Building
(or of any lease thereof), Landlord named herein shall be and hereby is entirely
released of all covenants and obligations of Landlord hereunder accruing
thereafter, and it shall be deemed without further agreement that the purchaser,
or the new ground lessee, as the case may be, has assumed and agreed to carry
out any and all covenants and obligations of Landlord hereunder during the
period such party has possession of the Building. Tenant shall be bound to any
such succeeding party for performance by Tenant of all the terms, covenants, and
conditions of this Lease and agrees to execute any attornment agreement not in
conflict with the terms and provisions of this Lease at the request of such
party.
b. The terms "Landlord" and "Tenant" and pronouns relating thereto, as
used herein, shall include male, female, singular and plural, corporation,
partnership or individual, as may fit the particular parties.
23. ATTORNEY'S FEES
In the event of any law suit or court action between Landlord and
Tenant arising out of or under this Lease or the terms and conditions stated
herein, the prevailing party in such law suit or court action shall be entitled
to and shall collect from the non-prevailing party the reasonable attorney's
fees and court costs actually incurred by the prevailing party with respect to
said lawsuit or court action. In case Landlord shall, without fault on its part,
be made a party to any litigation commenced against Tenant or by Tenant against
a third party and Landlord is joined or impleaded therein, then Tenant shall pay
all reasonable costs, expenses and attorneys' fees incurred or paid by Landlord
in connection with such litigation.
24. TIME OF THE ESSENCE
It is understood and agreed between the parties hereto that time is of
the essence of all the terms, provisions, covenants and conditions of this
Lease.
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25. NO ESTATE IN LAND
Tenant has only a usufruct under this Lease, not subject to levy or
sale. No estate shall pass out of Landlord by this Lease.
26. SECURITY DEPOSIT - INTENTIONALLY OMITTED
27. COMPLETION OF THE PREMISES - INTENTIONALLY OMITTED
28. PARKING AND ACCESS AREAS
a. Landlord reserves the unrestricted right, from time to time, to
expand or change the perimeters of the Building or the Property, any parking
areas, driveways, access roads, or other areas, any or all of which may now or
hereafter be located on the Property, or on land adjacent to the Property, or to
construct new or additional buildings, parking areas, driveways, access roads or
other areas, and to connect other structures (including, without limitation,
parking decks) to the Building by way of surface or aerial walkways, or
otherwise; provided, however, that the square footage of and access to the
Premises shall not be impaired in any substantial or material aspect.
Notwithstanding the foregoing, in the event that any of the foregoing actions by
Landlord cause the Premises to be rendered untenantable or reasonable access to
the Premises to be denied for a period in excess five (5) consecutive business
days after written notice to Landlord and on account thereof Tenant ceases doing
business in the Premises or a portion thereof, the obligation to pay Monthly
Base Rent and Additional Rent shall thereafter abate on a proportionate basis
for so long as and to the extent Tenant's ability to conduct its business in the
Premises or such portion thereof is affected.
b. If at any time, in Landlord's opinion, it becomes necessary either,
(i) for purposes of expanding, repairing, restoring, constructing or
reconstructing all or any portion of the Property, preventing the acquisition of
public rights in the parking areas, driveways, access roads or other areas which
may now or hereafter be located on or serve the Property, or (ii) for purposes
of expanding, repairing, restoring, constructing or reconstructing any
buildings, parking decks or other improvements now or hereafter placed,
constructed, erected or maintained on the Property or on any land adjoining the
Property, Landlord may, alone or in concert with the owners of land adjoining
the Property, temporarily close off portions of such parking areas, driveways,
access roads or other areas, erect private boundary marks or take such other
action as Landlord deems necessary or desirable for such purposes. The exercise
by the Landlord, from time to time, of its rights hereunder shall not be deemed
an eviction of Tenant or a disturbance of Tenant's use of the Premises. Landlord
reserves the right, from time to time, to dedicate portions of the parking
areas, driveways, access roads, or other areas which may now or hereafter be
located on the Property to the public. Tenant acknowledges and agrees that
neither the Building nor Tenant has the benefit of any easements for light and
air and that no such easements (either express or implied) are intended to be
granted by this Lease.
c. Tenant expressly acknowledges and agrees that nothing contained in
this Lease shall authorize or permit, nor is it intended to authorize or permit,
Tenant or any of its agents,
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employees or invitees to use the parking garage for any purpose whatsoever
unless such use is authorized or permitted by agreements with or through
Landlord outside the terms and provisions of this Lease or as set forth in
subparagraph d. below. Use of the parking garage is subject to such charges,
limitations, rules, regulations and conditions from time to time imposed by
Landlord and subject to reservation of certain parking spaces for particular
tenants.
d. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord seven (7) parking spaces within the Building for the entire Term of the
Lease, for a rental equal to the market rent for each such space as reasonably
established by Landlord from time to time. The current monthly rent for each
such space is Two Hundred Thirty and 00/100 Dollars ($230.00). The rent for said
spaces shall be payable monthly on the first (1st) day of each calendar month
during the Term, without any deduction or set-off whatsoever. In the event that
Tenant elects at any time not to rent any such parking space (which Tenant may
do at any time upon thirty [30] days' prior written notice to Landlord) or fails
to timely pay the rent herein provided with respect thereto and such failure
continues for in excess of five (5) days after written notice from Landlord,
Landlord shall, without limitation of any of its other rights or remedies
hereunder or at law, have the right to lease any such space to any other party
or person whatsoever and thereafter Tenant shall have no further rights
hereunder with respect to any such parking space. In the event, due to the
actions of Landlord, Tenant is unable to use any parking space for more than two
(2) consecutive business days, then commencing with the third (3rd) consecutive
business day of such interference, the monthly rent (prorated on a daily basis)
then applicable to the parking space which is unable to be used shall abate
until such time as the interference ceases.
e. Landlord shall have the right to undertake any measures or
promulgate and enforce any rules and regulations which Landlord deems necessary
or appropriate, including, by way of illustration but not limitation,
restricting access to such parking spaces, or parking fines against or towing
the automobiles of violating parties.
29. RULES AND REGULATIONS
The Rules and Regulations (collectively "Rules") set forth on Exhibit
"B" are incorporated into and made a part of this Lease. Landlord agrees that
the Rules shall be applied, insofar as applicable, to all tenants of the
Building in a nondiscriminatory manner. Landlord may from time to time amend,
modify, delete or add new and additional reasonable Rules for the use,
operation, safety, cleanliness and care of the Premises and the Building. Such
new or modified Rules shall be effective upon notice thereof to Tenant. Tenant
will cause its employees and agents, or any others permitted by Tenant to occupy
or enter the Premises to abide by the Rules at all times. In the event of any
breach of any Rules and failure to cure as permitted hereunder, Landlord shall
have all remedies provided for in this Lease in the event of default by Tenant
and shall, in addition, have any remedies available at law or in equity,
including but not limited to, the right to enjoin any breach of the Rules.
Landlord shall not be responsible to Tenant for the nonobservance of the Rules
by any other tenant or person. Tenant shall comply with all such rules provided,
however, that such rules shall not contradict or abrogate any right or privilege
herein expressly granted to Tenant.
30. RIGHT TO RELOCATE - INTENTIONALLY OMITTED
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31. LATE PAYMENTS - ACCORD AND SATISFACTION
Any payment due of Tenant hereunder not received by Landlord within ten
(10) days of the date when due shall be assessed a five percent (5%) charge for
Landlord's administrative and other costs in processing and pursuing the payment
of such late payment, and shall be assessed an additional five percent (5%)
charge for the aforesaid costs of Landlord for each month thereafter until paid
in full. No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of Rent then due shall be deemed to be other than on
account of the earliest stipulated Rent or other sums then due and payable under
this Lease; nor shall any endorsement or statements on any check or any letter
or other writing accompanying any check or payment be deemed an accord and
satisfaction. Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or other sums then due
under this Lease or pursue any other remedy provided in this Lease.
32. ESTOPPEL CERTIFICATE
At any time, each of Landlord and Tenant shall, within ten (10) days of
the request, execute, acknowledge and deliver to the requesting party,
Landlord's Mortgagee, prospective Mortgagee or any prospective purchaser of the
Building, an Estoppel Certificate in the form of Exhibit "C", or in such other
form which such party requires, evidencing whether or not (a) this Lease is in
full force and effect; (b) this Lease has been amended in any way; (c) Tenant
has accepted and is occupying the Premises; (d) there are any existing defaults
on the part of Landlord or Tenant hereunder or defenses or offsets against the
enforcement of this Lease to the knowledge of the executing party (specifying
the nature of such defaults, defenses or offsets, if any) (e) the date to which
Rent and other amounts due hereunder, if any, have been paid; and (f) any such
other information reasonably requested. Each certificate delivered pursuant to
this Paragraph 32 may be relied on by the requesting party, any prospective
purchaser or transferee of either Landlord's or Tenant's interest hereunder, or
any Mortgagee or prospective Mortgagee.
33. SEVERABILITY AND INTERPRETATION
a. If any clause or provision of this Lease shall be deemed illegal,
invalid or unenforceable under present or future laws effective during the Term,
the remainder of this Lease shall not be affected by such illegality, invalidity
or unenforceability, and in lieu of each clause or provision of this Lease that
is illegal, invalid or unenforceable, there shall be added as a part of this
Lease a clause or provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
b. Should any provisions of this Lease require judicial interpretation,
it is agreed that the court interpreting or construing the same shall not apply
a presumption that the terms of any such provision shall be more strictly
construed against one party or the other by reason of the rule of construction
that a document is to be construed most strictly against the party who itself or
through its agent prepared the same, it being agreed that the agents of all
parties hereto have participated in the preparation of this Lease.
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34. MULTIPLE TENANTS
If more than one individual or entity comprises and constitutes Tenant,
then all individuals and entities comprising Tenant are and shall be jointly and
severally liable for the due and proper performance of Tenant's duties and
obligations arising under or in connection with this Lease.
35. FORCE MAJEURE
Notwithstanding any provision in this Lease to the contrary, Landlord
or Tenant, as the case may be, shall be excused for the period of any delay and
shall not be deemed in default with respect to the performance of any of the
terms, covenants, and conditions of this Lease when prevented from so doing by
causes beyond its control, other than due to financial or economic problems, but
which shall include, but not be limited to, all labor disputes, governmental
regulations or controls, fire or other casualty, inability to obtain any
material or services, or acts of God.
36. QUIET ENJOYMENT
So long as Tenant is in full compliance with the terms and conditions
of this Lease, Landlord shall warrant and defend Tenant in the quiet enjoyment
and possession of the Premises during the Term against any and all claims made
by, through or under Landlord, subject to the terms of this Lease.
37. BROKERAGE COMMISSION; INDEMNITY
Overseas Management, Inc. ("OMI") has acted as agent for Landlord in
this transaction and Julien J. Studley, Inc. ("Studley") has acted as agent for
Tenant in this transaction. Both OMI and Studley are to be paid a commission by
Landlord. Tenant warrants that there are no other claims for brokers'
commissions or finder's fees in connection with its execution of this Lease.
Tenant hereby indemnifies Landlord and holds Landlord harmless from and against
all claims, loss, cost, damage or expense, including, but not limited to,
reasonable attorney's fees actually incurred without regard to any statutory
presumption and court costs, incurred by Landlord as a result of or in
conjunction with a claim of any real estate agent or broker, if made by, through
or under Tenant relative to this Lease. Landlord hereby indemnifies Tenant and
holds Tenant harmless from and against all claims, loss, cost, damage or
expense, including, but not limited to, reasonable attorney's fees actually
incurred without regard to any statutory presumption and court costs, incurred
by Tenant as a result of or in conjunction with a claim of any real estate agent
or broker, if made by, through or under Landlord, relative to this Lease.
38. EXCULPATION OF LANDLORD
a. Notwithstanding any provision in this Lease to the contrary,
Landlord and Landlord's managing agent's liability with respect to or arising
from or in connection with this
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Lease shall be limited solely to Landlord's interest in the Building. Neither
Landlord, any of the partners of Landlord, any officer, director, principal,
trustee, policyholder, shareholder, attorney nor employee of Landlord or its
managing agent shall have any personal liability whatsoever with respect to this
Lease.
b. Landlord and Landlord's managing agent shall have absolutely no
personal liability with respect to any provision of this Lease or any obligation
or liability arising from this Lease or in connection with this Lease. Tenant
shall look solely to the equity of the Landlord in the Building for the
satisfaction of any money judgment to Tenant. Such exculpation of liability
shall be absolute and without exception whatsoever.
39. ORIGINAL INSTRUMENT
Any number of counterparts of this Lease may be executed, and each such
counterpart shall be deemed to be an original instrument.
40. APPLICABLE LAW
This Lease has been made under and shall be construed, interpreted and
enforced under and in accordance with the laws of the State of Illinois.
41. NO RECORDATION OF LEASE
Without the prior written consent of Landlord, neither this Lease nor
any memorandum hereof shall be recorded or placed on public record.
42. HAZARDOUS SUBSTANCES OR MATERIALS
Neither Tenant, its successors or assigns, nor any permitted assignee
or sublessee, licensee or other person or entity acting by or through Tenant,
shall (either with or without negligence) cause or permit the escape, disposal
or release of any "Hazardous Substances or Materials" (as hereinafter defined).
Tenant shall not allow the storage or use of such Hazardous Substances or
Materials in any manner not sanctioned by law and by the highest standards
prevailing in the industry for the storage and use of such Hazardous Substances
or Materials, nor allow to be brought into the Building, the Property or the
Premises any such Hazardous Substances or Materials except to use in the
ordinary course of Tenant's business, relative to office copiers and then only
if such Hazardous Substances or Materials are not prohibited by (and are only in
amounts permitted by) law, after notice is given to Landlord of the identity of
such Hazardous Substances or Materials. Without limitation, Hazardous Substances
or Materials shall include any biologically or chemically active substance and
any waste, substance or material described in Section 101 (14) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, as amended from time to time, 42 U.S.C. Section
6901 et seq., any applicable state or local laws and the regulations adopted
under these acts. If any lender or governmental agency shall ever require
testing to ascertain whether or not there has been any release of Hazardous
Substances or Materials, then the costs thereof shall be
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reimbursed by Tenant to Landlord upon demand as additional charges if such
requirement applies to the Premises. In addition, Tenant shall execute
affidavits, representations and the like from time to time at Landlord's
reasonable request concerning Tenant's best knowledge and belief regarding the
presence of Hazardous Substances or Materials on the Premises, the Building and
the Property. Tenant indemnifies and covenants and agrees at its sole cost and
expense, to protect, indemnify and save Landlord harmless against and from any
and all damages, losses, liabilities, obligations, penalties, claims,
litigation, demands, defenses, judgments, suits, proceedings, costs, or expenses
of any kind or of any nature whatsoever (including without limitation,
reasonable attorney's fees and expert's fees) which may at any time be imposed
upon, incurred by or asserted or awarded against Landlord arising from or out of
any Hazardous Substances or Materials on, in, under or affecting the Premises,
the Building and the Property or any part thereof as a result of any act or
omission by Tenant, or Tenant's employees, agents or invitees, or Tenant's
successors or assigns, or any permitted assignee, permitted sublessee or
licensee or other person or entity acting at the direction with the consent of
Tenant. The within covenants shall survive the expiration or earlier termination
of the Lease Term.
In the event that Hazardous Substances or Materials are found in or on
the Building other than the Premises, which are present as the result of the act
of Landlord, Landlord, at its sole cost and expense, will protect, indemnify,
defend and save Tenant harmless against and from any and all damages, losses,
liabilities, obligations, penalties, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, or expenses of any kind or of any nature
whatsoever (including without limitation, reasonable attorney's fees and
expert's fees) from any governmental or private action or claim seeking to
impose monetary liability or injunctive relief against Tenant, or seeking to
require affirmative action on the part of the Tenant to remove, remediate, or
abate contamination caused by the Hazardous Substances for Materials, or to
dispose of the Hazardous Substances or Materials.
43. LEASE BINDING UPON DELIVERY
This Lease shall not be binding until and unless all parties have duly
executed said Lease and a fully executed counterpart of said Lease has been
delivered to Tenant.
44. HEADINGS
The headings in this Lease are included for convenience only and shall
not be taken into consideration in any construction or interpretation of any
part of this Lease.
45. SURRENDER OF LEASE NOT MERGER
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation hereof, shall not work a merger and may, at the option of Landlord,
terminate all or any existing subleases or subtenants, or may, at the option of
Landlord, operate as an assignment to Landlord of any or all such subleases or
subtenants. No surrender of the Premises prior to the Expiration Date or earlier
termination as provided herein, or of the remainder of the Term of this Lease,
shall be valid unless accepted in writing by Landlord.
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46. MORTGAGEE PROTECTION
If there is a default by Landlord under this Lease, Tenant shall offer
any mortgagee under a mortgage, or beneficiary under a deed of trust encumbering
the Premises, an opportunity to cure the default, under the terms of Paragraph
21 above, within the same period accorded to Landlord, including time to obtain
possession of the Premises by power of sale or judicial foreclosure, if such
should prove necessary to effect a cure. Notwithstanding the foregoing, any
failure by Tenant to give the notice provided for in Paragraph 21 to any such
mortgagee or beneficiary shall not constitute a default by Tenant under the
terms of this Lease; provided, however, in the event Tenant does not give such
notice, Tenant shall not be entitled to act under any provisions of this Lease
empowering Tenant to any setoff or deduction from Base Rent or Additional Rent.
47. INTERFERENCE
Landlord shall have no liability to Tenant nor shall Tenant have any
right to terminate this Lease or, except as specifically otherwise set forth
herein, claim any offset against or reduction in any sum to be paid hereunder
because of interference with, or impairment to any extent, of light, air,
visibility, or view, or because of damage or inconvenience due to noise,
vibration or other matters resulting from the excavation, construction, repair
or addition of or to, buildings adjacent to or near the Building. No easement of
light or air is granted in this Lease or otherwise; provided, however, Landlord
agrees that it shall not permanently interfere with the access of the Premises
to light and air.
48. NO PARTNERSHIPS
Landlord shall not by the execution of this Lease in any way or for any
purpose become a partner of Tenant in the conduct of its business or otherwise,
or joint venturer or a member of a joint enterprise with the Tenant.
49. ADA
Tenant shall be responsible for compliance with Title III of the
American with Disabilities Act of 1990 ("ADA") within the Premises, including
without limitation, compliance related to Tenant's employer-employee obligations
at the Premises, and Landlord shall be responsible for compliance with Title III
of the ADA relative to the Common Areas of the Property, provided that Landlord
or Tenant, as the case may be, has received actual notice of any non-compliance.
Landlord hereby represents to Tenant that, to the best of Landlord's knowledge,
the Property substantially complies with the ADA.
50. USE OF PRONOUN, RELATIONSHIP
The use of the neuter singular pronoun to refer to Landlord or Tenant
shall be deemed a proper reference even though Landlord or Tenant may be an
individual, a partnership, a
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corporation, a trust or a group of two or more individuals or corporations. The
necessary grammatical changes required to make the provisions of this Lease
apply in the plural sense when there is more than one Tenant and to either
corporations, trusts, associations, partnerships, or individuals, males or
females, shall in all instances be assumed as though in each case fully
expressed.
51. RESERVED
52. WAIVER OF JURY TRIAL
TO THE EXTENT PERMITTED BY LAW, IT IS MUTUALLY AGREED BY AND BETWEEN
LANDLORD AND TENANT THAT THE RESPECTIVE PARTIES HERETO SHALL, AND THEY DO
HEREBY, WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BETWEEN THE PARTIES HERETO OR THEIR SUCCESSORS OR ASSIGNS ON ANY MATTERS ARISING
OUT OF, OR IN ANY WAY CONNECTED WITH, THIS LEASE, THE RELATIONSHIP OF LANDLORD
AND TENANT, AND/OR TENANT'S USE OF, OR OCCUPANCY OF, THE PREMISES. TENANT
FURTHER AGREES THAT IT SHALL NOT INTERPOSE ANY COUNTERCLAIM OR COUNTERCLAIMS IN
A SUMMARY PROCEEDING OR IN ANY ACTION BASED UPON NON-PAYMENT OF RENT OR ANY
OTHER PAYMENT REQUIRED BY TENANT HEREUNDER, EXCEPT A MANDATORY OR COMPULSORY
COUNTERCLAIM WHICH TENANT WOULD FORFEIT IF NOT SO INTERPOSED. THIS WAIVER IS
MADE FREELY AND VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER EACH OF THE PARTIES
HERETO HAS HAD THE BENEFIT OF ADVICE FROM LEGAL COUNSEL ON THIS SUBJECT.
53. NO THIRD PARTY BENEFICIARY
This Agreement is only intended to benefit, and is only enforceable by
and against the parties hereto, their successors and assigns and no provisions
herein are intended to benefit or be enforceable by any persons not a party to
or successor or assign to any of the parties herein.
54. FINANCIAL STATEMENTS
Upon Landlord?s written request therefor, but not more often than once
per year, Tenant shall promptly furnish to Landlord a financial statement with
respect to Tenant for its most recent fiscal year prepared in accordance with
generally accepted accounting principles and certified to be true and correct by
Tenant, which statement Landlord agrees to keep confidential and not use except
in connection with proposed sale or loan transactions.
55. RESERVED
56. PREMISES RENEWAL OPTION
a. Provided that (i) Tenant is not in default under the Lease at the
time the option to
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renew described below is exercised, or at the commencement of the renewal
period, and (ii) Tenant and not a sublessee or assignee is actually occupying at
least 75,000 rentable square feet of the Premises other than the Reserved Space
(as defined in Paragraph 12), on both the date Tenant provides Landlord Tenant's
Renewal Notice (as defined below), other than the Reserved Space, and at the
commencement of the Renewal Term (as defined below), and subject to the right of
Tenant to nullify the exercise of such renewal option, Tenant shall have the
right to extend the Term of Lease with respect to any space that Tenant is then
actually occupying as of the date of Tenant's Renewal Notice (as used in this
Paragraph 56 such occupied area is referred to as the "Premises") for one (1)
additional five (5) year period (the "Renewal Term") commencing on March 1, 2013
upon the same terms and conditions as are contained in the Lease, except the
Annual Base Rent for the Premises for the Renewal Term shall be equal to the
current Market Rent (as hereinafter defined) per annum for the Premises as of
the commencement of the Renewal Term and for a term equal to the Renewal Term,
as reasonably determined by Landlord; provided, however, in no event shall the
Annual Base Rent payable during the Renewal Term be less than the Annual Base
Rent paid by Tenant during the calendar year immediately preceding the
commencement of the Renewal Term. Landlord shall give Tenant notice ("Landlord's
Renewal Notice") of Landlord's good faith determination of the Annual Base Rent
for the Renewal Term not later than thirty (30) days after Landlord's receipt of
Tenant's Renewal Notice. In the event that Tenant disagrees with Landlord's
determination of the Annual Base Rent, Tenant agrees to notify Landlord in
writing within thirty (30) days after receipt of Landlord's Renewal Notice and
thereafter Landlord and Tenant agree to negotiate such Annual Base Rent in good
faith. In the event that Landlord and Tenant fail to agree upon the
determination of Annual Base Rent for the Renewal Term by the date which is
thirty (30) days after the date of Landlord's Renewal Notice, Tenant shall have
the right by written notice to Landlord given within thirty (30) days of
Landlord's Renewal Notice, to (a) nullify its exercise of the option to extend
the Term in which event Tenant's exercise of the option to extend shall be null
and void and neither Landlord nor Tenant shall have any further rights or
liabilities with respect thereto or (b) request that the Annual Base Rent be
determined by arbitration in accordance with the terms of this Section 56 and as
provided below.
If Landlord and Tenant are unable to agree on the Annual Base Rent for
the Renewal Term and Tenant requests arbitration, then within ten (10) days
thereafter, each of Landlord and Tenant shall designate an independent real
estate broker or sales person duly licensed in the State of Illinois and having
not less than ten (10) years of commercial office leasing experience for first
class buildings in downtown Chicago and shall notify each other in writing of
such designation. Within the next ten (10) days, such brokers or salespersons
shall designate a third independent real estate broker or sales person with the
same credentials and reasonably acceptable to both Landlord and Tenant and shall
notify Landlord and Tenant of such designation. After their appointment, all
three such brokers or salespersons shall be directed to determine,
independently, the Market Rent in accordance with this Paragraph 56. Within
sixty (60) days after the designation of the third broker or salesperson, each
of the three brokers or salespersons shall submit its written determination of
the Market Rent in accordance with this Paragraph 56 to both Landlord and
Tenant. If the Annual Base Rent determined by any two or all three of such
brokers or salespersons is identical, then the Annual Base Rent for purposes for
the subject Renewal Term shall be such identical amount. If the Annual Base Rent
as
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determined by each such broker or salesperson is different from the others, but
two of such determinations are within five percent (5%) of each other, then the
Annual Base Rent shall be the arithmetic mean of such two amounts. In all other
cases, the highest and lowest of such determination shall be disregarded and the
Annual Rent shall be equal to the middle, or remaining, determination.
Except if the Annual Base Rent so determined is within five percent
(5%) of the Annual Base Rent determined by Landlord as provided above (the "Cost
Threshold), Landlord shall pay all costs associated with the broker or
salesperson designated by Landlord, and Tenant shall be all costs associated
with the broker or salesperson designated by Tenant. Landlord and Tenant shall
share equally all costs associated with the third broker or salesperson. In the
event the Annual Base Rent determined by the immediately preceding paragraph
does not vary from the Annual Base Rent established by Landlord by more than the
Threshold Amount, then Tenant shall pay all costs associated with all three
brokers or salespersons.
Tenant's failure to give the notice of nullification described above
within thirty (30) days of Landlord's Renewal Notice shall constitute acceptance
by Tenant of, and Tenant's agreement to pay, the Annual Base Rent specified for
the Renewal Term.
b. The option to extend described above shall be exercised, if at all,
by written notice to Landlord given not earlier than June 1, 2011 and not later
than September 1, 2011 ("Tenant's Renewal Notice"). In the event Tenant fails to
timely exercise the option to extend as aforesaid, Tenant shall have no further
right to extend the Term.
c. As used herein the term "Market Rent" shall mean the annual rental
rate per square foot of rentable area for the leasing of comparable space in the
Class A West Loop building market to comparable tenants, taking into
consideration any and all lease concessions whatsoever, including, without
limitation, rental abatements and tenant improvement allowances.
d. Landlord shall have no obligation to make improvements, decorations,
repairs, alterations or additions to the Premises as a condition to Tenant's
obligation to pay Annual Base Rent or Additional Rent for the Renewal Term,
except to the extent the same is determined to be a factor of the Market Rent.
e. Within thirty (30) days of request of Landlord, Landlord and Tenant
shall execute an Amendment to Lease, which shall have been prepared by Landlord
and shall be in form and substance satisfactory to Landlord and Tenant
confirming the extension of the Term, the Annual Base Rent and the Monthly Base
Rent.
f. Tenant shall have no further right to extend the Term.
57. ADDITIONAL 30TH FLOOR PREMISES RENEWAL OPTION
a. Provided that (i) Tenant is not in default under the Lease at the
time the option to renew described below is exercised, or at the commencement of
the renewal period, and (ii) no portion of the Additional 30th Floor Premises,
other than the Reserved Space, as defined in
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Paragraph 12, is being subleased on both the date Tenant provides Landlord
Tenant's Additional 30th Floor Premises Renewal Notice (as defined below) and at
the commencement of the Additional 30th Floor Premises Renewal Term (as defined
below), and subject to the right of Tenant to nullify the exercise of such
renewal option, Tenant shall have the right to extend the term of the lease of
the Additional 30th Floor Premises for the period commencing on November 14,
2005 through February 28, 2013 (the "Additional 30th Floor Premises Renewal
Term") upon the same terms and conditions as are contained in the Lease, except
the Annual Base Rent for the Additional 30th Floor Premises for the Additional
30th Floor Premises Renewal Term shall be equal to the Annual Base Rent per
rentable square foot then payable under this Lease for the Original Premises and
shall increase thereafter as provided in the Introductory Article of this Lease.
b. The option to extend described above shall be exercised, if at all,
by written notice to Landlord given not later than May 1, 2004 ("Tenant's
Additional 30th Floor Premises Renewal Notice"). In the event Tenant fails to
timely exercise the option to extend as aforesaid, Tenant shall have no further
right to extend the term of the lease of the Additional 30th Floor Premises.
c. Landlord shall have no obligation to make improvements, decorations,
repairs, alterations or additions to the Additional 30th Floor Premises as a
condition to Tenant's obligation to pay Annual Base Rent or Additional Rent for
the Additional 30th Floor Premises during the Additional 30th Floor Premises
Renewal Term.
d. Within thirty (30) days of request of Landlord, Landlord and Tenant
shall execute an Amendment to Lease, which shall have been prepared by Landlord
and shall be in form and substance satisfactory to Landlord and Tenant
confirming the extension of the term of the lease of the Additional 30th Floor
Premises, the Annual Base Rent and the Monthly Base Rent.
58. FIRST EXPANSION OPTION
Subject to the terms and conditions of this Paragraph 58, Tenant shall
have the right (the "First Expansion Option") to lease additional space commonly
known as Suite 2950 containing approximately 10,285 rentable square feet located
on the twenty-ninth (29th) floor of the Building, as shown on Exhibit "E"
attached hereto (the "First Expansion Space"). Tenant's right to exercise the
First Expansion Option and to add the First Expansion Space to the Premises
shall be subject to the condition that (i) no default shall exist under the
Lease at the time Tenant notifies Landlord it intends to exercise the First
Expansion Option or on the First Expansion Space Occupancy Date (as hereinafter
defined), (ii) Tenant and not a sublessee or assignee is actually occupying at
least 100,000 rentable square feet of the Premises, other than the Reserved
Space (as defined in Paragraph 12) on both the date that Tenant exercises the
First Expansion Option and on the First Expansion Space Occupancy Date, and
(iii) Tenant has not exercised the Additional 30th Floor Premises Cancellation
Option (as defined in Paragraph 61 below).
a. Tenant shall exercise the First Expansion Option by giving written
notice to Landlord on or before March 1, 2000 to the effect that Tenant is
exercising the First Expansion Option to lease the First Expansion Space (the
"First Expansion Space Notice"). Within sixty
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(60) days following Landlord's receipt of the First Expansion Space Notice,
Landlord shall specify in a written notice to Tenant the occupancy date (the
"First Expansion Space Occupancy Date") for the First Expansion Space, which
date shall not be prior to March 1, 2001 nor later than March 1, 2003. If Tenant
does not provide Landlord with its First Expansion Space Notice on or before
March 1, 2000, Tenant shall conclusively be deemed to have elected not to lease
the First Expansion Space and shall have no further rights under this Paragraph
58 to lease the First Expansion Space.
b. If Tenant exercises the First Expansion Option, then commencing upon
the First Expansion Space Occupancy Date, the First Expansion Space shall become
part of the Premises, subject to the same terms and conditions as are contained
in the Lease, and any renewals thereof, except as hereinafter provided:
(i) The Annual Base Rent for the First Expansion Space shall
be the current Market Rent (as defined in Paragraph 56.c. above) for a term
equal to the balance of the Term as of the First Expansion Space Occupancy Date,
as reasonably determined by Landlord.
(ii) Landlord shall not be liable to Tenant in the event that
Landlord does not deliver possession of the First Expansion Space to Tenant on
account of a holding over by the prior tenant of the First Expansion Space in
violation of the terms of such tenant's lease, provided that Landlord shall use
reasonable efforts to obtain possession of the First Expansion Space from such
other tenant (and Tenant hereby agrees to join in any action brought for
possession of the First Expansion Space upon Landlord's request and at
Landlord's sole cost and expense) and the First Expansion Space Occupancy Date
shall not be deemed to occur until Landlord shall actually deliver the right of
possession of the First Expansion Space to Tenant. Landlord agrees that if
Landlord cannot deliver possession of the First Expansion Space on the First
Expansion Space Occupancy Date, then Landlord shall, in good faith, negotiate
with Tenant for delivery of alternative space in the Building for Tenant's use
during the period between the First Expansion Space Occupancy Date and the
actual date of delivery of possession of the First Expansion Space to Tenant.
(iii) Landlord shall have no obligation to make improvements,
decorations, repairs, alterations, or additions to the First Expansion Space as
a condition to Tenant's obligation to pay Annual Base Rent or Additional Rent
for the First Expansion Space, except to the extent same is determined to be a
factor of the Market Rent.
(iv) Commencing on the First Expansion Space Occupancy Date,
the First Expansion Space shall become part of the Premises under the Lease, and
the Annual Base Rent and Additional Rent for the First Expansion Space shall
commence. Tenant's Share shall be appropriately adjusted effective on the First
Expansion Space Occupancy Date. If the First Expansion Space Occupancy Date is
other than on the first day of a month, Monthly Base Rent for the first month
shall be appropriately adjusted and if the date on which Tenant's Share is to be
increased is on other than the first day of a calendar year, such share shall be
increased only for that portion of the calendar year commencing on the First
Expansion Space Occupancy Date.
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(v) Within thirty (30) days of request of Landlord, Landlord
and Tenant shall execute an Amendment to Lease, which shall have been prepared
by Landlord and shall be in form and substance satisfactory to Landlord and
Tenant confirming the adjustments to the Premises, the Annual Base Rent, the
Monthly Base Rent, Tenant's Share and adding the First Expansion Space to the
Premises.
59. SECOND EXPANSION OPTION
Subject to the terms and conditions of this Paragraph 59, Tenant shall
have the right (the "Second Expansion Option") to lease additional space
commonly known as Suite 2900 containing approximately 15,477 rentable square
feet located on the twenty-ninth (29th) floor of the Building, as shown on
Exhibit "F" attached hereto (the "Second Expansion Space"). Tenant's right to
exercise the Second Expansion Option and to add the Second Expansion Space to
the Premises shall be subject to the condition that (i) no default shall exist
under the Lease at the time Tenant notifies Landlord it intends to exercise the
Second Expansion Option or on the Second Expansion Space Occupancy Date (as
hereinafter defined), and (ii) Tenant and not a sublessee or assignee is
actually occupying 100,000 rentable square feet of the Premises, other than the
Reserved Space (as defined in Paragraph 12), is being subleased on both the date
that Tenant exercises the Second Expansion Option and on the Second Expansion
Space Occupancy Date.
a. Tenant shall exercise the Second Expansion Option by giving written
notice to Landlord on or before March 1, 2006 specifying whether Tenant will
lease the Second Expansion Space (the "Second Expansion Space Notice"). Within
sixty (60) days following Landlord's receipt of the Second Expansion Space
Notice, Landlord shall specify in a written notice to Tenant the occupancy date
(the "Second Expansion Space Occupancy Date") for the Second Expansion Space,
which date shall not be prior to March 1, 2007 nor later than March 1, 2009. If
Tenant does not provide Landlord with its Second Expansion Space Notice on or
before March 1, 2006, Tenant shall conclusively be deemed to have elected not to
lease the Second Expansion Space and shall have no further rights under this
Paragraph 59 to lease any portion of the Second Expansion Space.
b. If Tenant exercises the Second Expansion Option, then commencing
upon the Second Expansion Space Occupancy Date, the Second Expansion Space shall
become part of the Premises, subject to the same terms and conditions as are
contained in the Lease, and any renewals thereof, except as hereinafter
provided:
(i) The Annual Base Rent for the Second Expansion Space shall
be the current Market Rent for a term equal to the balance of the Term as of the
Second Expansion Space Occupancy Date, as reasonably determined by Landlord.
(ii) Landlord shall not be liable to Tenant in the event that
Landlord does not deliver possession of the Second Expansion Space to Tenant on
account of a holding over by the prior tenant of the Second Expansion Space in
violation of the terms of such tenant's lease, provided that Landlord shall use
reasonable efforts to obtain possession of the Second Expansion
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Space from such other tenant (and Tenant hereby agrees to join in any action
brought for possession of the Second Expansion Space upon Landlord's request and
at Landlord's sole cost and expense) and the Second Expansion Space Occupancy
Date shall not be deemed to occur until Landlord shall actually deliver the
right of possession of the Second Expansion Space to Tenant. Landlord agrees
that if Landlord cannot deliver possession of the Second Expansion Space on the
Second Expansion Space Occupancy Date, then Landlord shall, in good faith,
negotiate with Tenant for delivery of alternative space in the Building for
Tenant's use during the period between the Second Expansion Space Occupancy Date
and the actual date of delivery of possession of the Second Expansion Space to
Tenant.
(iii) Landlord shall have no obligation to make improvements,
decorations, repairs, alterations, or additions to the Second Expansion Space as
a condition to Tenant's obligation to pay Annual Base Rent or Additional Rent
for the Second Expansion Space, except to the extent same is determined to be a
factor of the Market Rent.
(iv) Commencing on the Second Expansion Space Occupancy Date,
the Second Expansion Space shall become part of the Premises under the Lease,
and the Annual Base Rent and Additional Rent for the Second Expansion Space
shall commence. Tenant's Share shall be appropriately adjusted effective on the
Second Expansion Space Occupancy Date. If the Second Expansion Space Occupancy
Date is other than on the first day of a month, the Monthly Base Rent for the
first month shall be appropriately adjusted and if the date on which Tenant's
Share is to be increased is on other than the first day of a calendar year, such
share shall be increased only for that portion of the calendar year commencing
on the Second Expansion Space Occupancy Date.
(v) Within thirty (30) days of request of Landlord, Landlord
and Tenant shall execute an Amendment to Lease, which shall have been prepared
by Landlord and shall be in form and substance satisfactory to Landlord and
Tenant confirming the adjustments to the Premises, the Annual Base Rent, the
Monthly Base Rent, Tenant's Share and adding the Second Expansion Space to the
Premises.
60. RIGHT OF FIRST OFFER
a. If at any time during the Term (other than during the last eighteen
[18] months of the Term, unless same has been previously extended pursuant to
this Lease) any space that becomes available on any of the High Rise Floors (as
defined in Paragraph 55 above) for leasing to third parties (and which is not
subject to the rights as of the date of this Lease of existing tenants in the
Building as described below or any Pre-Existing Rights [as defined below]) (any
such space is hereinafter referred to as the "First Offer Space"), then Landlord
shall so notify Tenant, which notice shall specify the location and size of such
First Offer Space, the commencement date of the lease of such First Offer Space
(the "First Offer Commencement Date") (which date shall be not earlier than
thirty (30) days after said notice) and the Market Rent for such First Offer
Space based upon a term equal to the balance of the Term as of the applicable
First Offer Commencement Date. Within ten (10) days after Tenant's receipt of
such notice, Tenant shall give written notice to Landlord as to whether or not
it desires to lease such First Offer Space with any such lease of any such First
Offer Space to be either solely upon the
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terms set forth in said Landlord's notice or that Tenant desires to lease such
space but on terms other than as set forth in Landlord's notice. In the event
Tenant advises Landlord that Tenant desires to lease such First Offer Space on
terms which differ from that of Landlord's notice, during a period of no more
than ten (10) days from Tenant's notice, Landlord and Tenant shall negotiate in
good faith in an attempt to reach mutually acceptable terms for any such First
Offer Space. If Tenant does not desire to lease such First Offer Space or Tenant
fails to deliver such written notice to Landlord within such ten (10) day
period, Landlord shall have the right to lease such First Offer Space to any
third party free and clear of any rights of Tenant in such space, which leasing
may include an expansion right or first offer or similar opportunity to lease
any portion of the First Offer Space not actually leased to such party (but
which was offered to Tenant as the First Offer Space) (any such rights are
herein referred to as "Pre-Existing Rights"). If Landlord does not lease the
First Offer Space to any third party within twelve (12) months following
Tenant's receipt of Landlord's initial notice that any such First Offer space is
available, or the lease to any third party terminates, such space shall again
become subject to the rights of Tenant under this Paragraph 60. Tenant's right
to add any First Offer Space to the Premises shall be subject to the condition
that no default which remains uncured shall exist under this Lease at the time
of Tenant's notice to Landlord or on the First Offer Commencement Date.
b. In the event Tenant timely exercises its right to lease any
such First Offer Space, then commencing upon the applicable First Offer
Commencement Date, any such First Offer Space shall become part of the Premises,
subject to the same terms and conditions as are contained in this Lease, and any
renewals hereof, except as hereinafter provided:
(1) Landlord shall have no obligation to make
improvements, decorations, repairs, alterations, or additions to any such First
Offer Space as a condition to Tenant's obligation to pay Rent for the First
Offer Space, except to the extent same is determined to be a factor of the
Market Rent.
(2) Commencing on the applicable First Offer
Commencement Date, such First Offer Space shall become part of the Premises
hereunder and the Annual Base Rent for such First Offer Space shall commence.
Tenant's Share shall be appropriately adjusted effective as of the applicable
First Offer Commencement Date and Additional Rent with respect to such First
Offer Space shall commence. If the applicable First Offer Commencement Date is
other than on the first day of a month, the Monthly Base Rent for the first
month shall be appropriately adjusted and if the date on which Tenant's Share is
to be increased is on other than the first day of a calendar year, Tenant's
Share shall be increased only for that portion of the calendar year commencing
with the applicable First Offer Commencement Date.
(3) Within thirty (30) days of request of Landlord,
Landlord and Tenant shall execute an Amendment to Lease, which shall have been
prepared by Landlord and shall be in form and substance reasonably satisfactory
to Landlord and Tenant confirming the adjustments to the Premises, the Annual
Base Rent and Tenant's Share and adding such First Offer Space to the Premises.
(4) Landlord shall not be liable to Tenant in the
event that Landlord
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does not deliver possession of any such First Offer Space to Tenant on account
of the holding over by any prior tenant of such First Offer Space in violation
of the term of such tenant's lease, provided that Landlord shall use reasonable
efforts to obtain possession of such First Offer Space from such other tenant
(and Tenant hereby agrees to join in any action brought for possession of such
First Offer Space upon Landlord's request and at Landlord's own cost and
expense) and the applicable First Offer Commencement Date shall not be deemed to
occur until Landlord shall actually deliver the right of possession of such
First Offer Space to Tenant.
61. ADDITIONAL 30TH FLOOR PREMISES CANCELLATION OPTION
Tenant shall have an option (herein referred to as the "Additional 30th
Floor Premises Cancellation Option") to terminate this Lease solely with respect
to the Additional 30th Floor Premises, effective as of December 31, 2001 (the
"Additional 30th Floor Premises Termination Date") by notifying Landlord of its
election, in a written notice (herein referred to as the "Additional 30th Floor
Premises Termination Notice"), given on or before October 31, 2000. In the event
that Tenant does not give its notice exercising such Additional 30th Floor
Premises Cancellation Option prior to October 31, 2000, all further rights of
Tenant with respect to the Additional 30th Floor Premises Cancellation Option
shall terminate. Additionally, the Additional 30th Floor Premises Cancellation
Option is subject to the following terms, conditions and limitations:
(i) Simultaneously with the giving of the Additional 30th
Floor Premises Termination Notice and as a condition precedent to such notice
being effective and valid, Tenant shall deliver to Landlord a certified check in
the amount of One Million Eighty-One Thousand Seven Hundred Eighty-Eight and
00/100 Dollars ($1,081,788.00) (the "Additional 30th Floor Premises Termination
Fee").
(ii) Tenant shall have the right to exercise the Additional
30th Floor Premises Cancellation Option only if at the time of such exercise no
uncured default exists under a material provision of the Lease. Additionally, if
a default shall occur at any time after the election by Tenant of the Additional
30th Floor Premises Cancellation Option, but prior to the Additional 30th Floor
Premises Termination Date that is not cured prior to the Additional 30th Floor
Premises Termination Date, the exercise by Tenant of the Additional 30th Floor
Premises Cancellation Option shall, subject to Landlord's prior written consent,
remain in effect, however, Landlord shall have the right to recover from Tenant
all actual damages (including, without limitation, reasonable attorneys' fees)
arising from such default.
(iii) If Tenant exercises the Additional 30th Floor Premises
Cancellation Option as herein provided, the term of the Lease solely with
respect to the Additional 30th Floor Premises shall expire on the Additional
30th Floor Premises Termination Date.
62. ORIGINAL LEASE TERMINATION
Effective as of the day prior to Commencement Date (the "Original Lease
Termination Date"), the Original Lease (as defined in Paragraph 5 above) shall
terminate as if such date were
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the date set forth in the Original Lease as the expiration date of the Original
Lease; provided, however, Landlord and Tenant shall perform all covenants
required of it to be performed through the Original Lease Termination Date.
Tenant shall pay to Landlord Tenant's proportionate share of taxes and operating
expenses and any other charges payable pursuant to the Original Lease which
accrue on or prior to the Original Lease Termination Date. The termination of
the Original Lease shall not affect those certain Storage Space Agreements
between Landlord and Tenant which will remain in full force and effect in
accordance with their respective terms.
63. TENANT IDENTIFICATION
During the Term of this Lease, Tenant (but not any sublessee, successor
or assign of Tenant [unless, as to such successor or assign, only the "Nuveen"
name is identified on such signs]) shall have the right to maintain the three
(3) existing identification signs located on the Building exterior. The
continuing appearance and condition of said signs shall be subject to Landlord's
review. If Landlord reasonably determines said signs require replacement, Tenant
shall replace same, at its sole cost and expense, within sixty (60) days
following Landlord's written request. Tenant agrees that when such signs are
required to be removed, Tenant shall, at its sole cost and expense, remove same
and make all repairs made necessary by such removal, the provisions of this
sentence shall survive the termination of the other provisions of this Paragraph
63. The Tenant's name shall continue to be located at the top of a column on the
directory of the Building and to be in such larger print as currently exists.
The names of employees, officers and directors of Tenant on said directory may
be in a style of print, reasonably satisfactory to Landlord, which is different,
but not larger than the balance of names on said directory. Tenant shall have
the exclusive use of the column on said directory on which the Nuveen name first
appears. Landlord agrees that it shall not grant to any other office tenant in
the Building the right to maintain any signs outside or on the Building, or to
have elevator identification for the High Rise Floors of the Building, provided,
however, that Landlord shall have the absolute right (i) upon ten (10) days'
prior written notice to Tenant to provide exterior sign identification for
retail tenants in the Building so long as such exterior sign identification
shall not obstruct or materially diminish the visual impact of the
identification signs permitted to Tenant hereunder, (ii) to place building
address identification on the exterior of the Building and (iii) to provide
major tenants in the low-rise and/or mid-rise section of the Building elevator
identification in the lobby of the Building. Tenant shall have the benefit of
the foregoing provisions of this Paragraph 63 only for so long as Tenant is
occupying for its own use (i.e., excluding subleased portions of the Premises)
at least 75,000 rentable square feet in the Premises. If at any time Tenant
ceases to so occupy at least 75,000 rentable square feet in the Premises, the
provisions of this Paragraph 63 shall be void and of no further force and effect
except as otherwise expressly provided.
64. COMMUNICATION DISH
During the Term of this Lease and provided that Tenant is occupying for
its own use at least 62,000 rentable square feet in the Premises, Tenant shall
have the right to license from Landlord space for a communications dish (both
receiving and transmitting) at such location on the roof of the Building
contiguous to the Premises as Landlord and Tenant reasonably agree
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upon. Such license shall be for an annual rental reasonably determined by
Landlord based on then current market rentals in the Class A West Loop building
market for similar licenses and shall be subject to such conditions,
requirements and obligations (such as Landlord's approval of the size and design
of such communications dish, indemnities and undertakings for repair and
maintenance and other similar controls) as Landlord may reasonably require for
the protection of Landlord, the Building and other tenants in the Building or as
Landlord's mortgagee may reasonably require. In the event Tenant elects to use
any such roof space, Landlord and Tenant shall enter into a License Agreement
prepared by Landlord in form reasonably satisfactory to Landlord and Tenant
within thirty (30) days following Tenant's election thereof.
65. USE OF FIRE EXIT STAIRS
Landlord agrees that Tenant shall have the right to use the fire exit
stairs for its internal access among the floors in the Premises and shall have
the right, provided that and only for as long as the same does not violate any
applicable governmental laws, ordinances, codes, rules and regulations, to lock
the door entering such fire stairs on the bottom full floor of the Premises
occupied by Tenant. Tenant shall indemnify, defend and hold Landlord harmless
from all claims, costs, damages and expenses which may arise out of or be
connected in any way with Tenant's employee's daily use of such fire exit stairs
for internal access but not which may arise from the use in the emergency
situation for which such stairs are originally, primarily intended.
66. TEMPORARY SPACE
Upon Tenant's written request and to the extent available, Landlord
shall provide Tenant with temporary space (the "Temporary Space") in the
Building for periods of not more than ninety (90) days each and for an aggregate
of 365 days to be used by Tenant subject to each and every term and condition of
this Lease except that no Monthly Base Rent shall be payable for the Temporary
Space; provided, however, Tenant shall be obligated to pay Additional Rent for
the Temporary Space during any period Tenant occupies any such Temporary Space.
In the event Tenant desires to continue to use any such Temporary Space after
such ninety (90) day period expires and Landlord does not require any such
Temporary Space for leasing to a third party, Tenant shall have the right to
remain in such Temporary Space until the earlier to occur of the date (i) Tenant
no longer desires to use such Temporary Space, and (ii) ten (10) days following
the date Landlord provides Tenant with written notice of Landlord terminating
Tenant's right to use such Temporary Space; in either event, any such move out
of such Temporary Space, shall be at Tenant's sole cost and expense. The
Temporary Space shall contain approximately 12,000 rentable square feet but may
be comprised of multiple spaces in the Building totalling said area with
Landlord using reasonable efforts to provide contiguous space as the Temporary
Space. Tenant acknowledges that the Temporary Space may be a different space
each time Tenant requests such space. Not less than ninety (90) days prior to
the date Tenant anticipates a need for Temporary Space Tenant shall give written
notice thereof to Landlord specifying the date for desired delivery and size
requirements. Tenant shall accept the Temporary Space in its "as-is" condition
and shall not make any alterations therein without Landlord's prior written
consent (which consent shall not be unreasonably withheld). The Temporary Space
shall be used by Tenant solely as general office space during periods of
construction and shall not be used as
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additional expansion space to the Premises for Tenant's general office use.
Notwithstanding construction in portions of the Premises and Tenant's use of the
Temporary Space, Tenant shall remain obligated to pay Rent in full for the
Premises (except as otherwise expressly provided herein). Landlord hereby agrees
that following Tenant's written request during the Term of this Lease, Landlord
shall promptly furnish to Tenant information setting forth space then available
in the Building for Tenant's use pursuant to this Paragraph 66.
67. FIRST CLASS BUILDING CONDITION
During the Term, Landlord shall keep and maintain the Building in a
first-class manner consistent with being a class "A" building in the downtown
Chicago office market.
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed under seal, on the day and year first above written.
TENANT:
THE JOHN NUVEEN COMPANY,
a Delaware corporation
/s/ Alan G. Berkshire
------------------------------------------
Authorized Signature
Alan B. Berkshire
------------------------------------------
Type Name of Signatory
Date Executed by Tenant: 01/22/98
------------------
LANDLORD:
OVERSEAS PARTNERS (333), INC.,
an Illinois corporation
By: /s/ David R. Byard
------------------------------------------
Its:
------------------------------------------
Date Executed by Landlord: 01/31/98
----------------
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EXHIBIT "A-1"
PLAN OF ORIGINAL PREMISES
[TO BE ATTACHED]
A-1-1
<PAGE> 60
EXHIBIT "A-2"
PLAN OF ADDITIONAL 30TH FLOOR PREMISES
[TO BE ATTACHED]
A-2-1
<PAGE> 61
EXHIBIT "B"
RULES AND REGULATIONS
1. No sign, picture, advertisement or notice shall be displayed by
Tenant on any part of the Premises or the Building unless the same is first
approved by Landlord. Any such sign, picture, advertisement or notice approved
by Landlord shall be painted or installed for Tenant by Landlord at Tenant's
expense. No awnings, curtains, blinds, shades or screens shall be attached to or
hung in, or used in connection with any window or door of the Premises without
the prior consent of the Landlord, including approval by Landlord of the
quality, type, design, color and manner of attachment.
2. Tenant agrees that its use of electrical current shall never exceed
the capacity of existing feeders, risers or wiring installation.
3. Tenant shall not do or permit to be done in or about the Premises or
the Building anything which shall increase the rate of insurance on the Building
or obstruct or interfere with the rights of other lessees of Landlord or annoy
them in any way, including, but not limited to, using any musical instrument,
making loud or unseemly noises, or singing, etc., nor use the Premises for
sleeping or, lodging, by any person at any time except with permission of
Landlord. Tenant will be permitted to use for its own employees within the
Premises a conventional coffee-maker. No part of the Building or Premises shall
be used for gambling, immoral or other unlawful purposes. No intoxicating
beverage shall be sold in the Building or Premises without prior written consent
of Landlord. No area outside of the Premises shall be used for storage purposes
at any time.
4. No bicycles, motorcycles or other motorized vehicles, birds or
animals of any kind shall be brought into the Building. All vehicles shall be
parked only in areas designated therefor by Landlord. Bicycles may be parceled
in areas, if any, specifically provided therefor.
5. The sidewalks, entrances, passages, corridors, halls, elevators, and
stairways in the Building shall not be obstructed by Tenant or used for any
purposes other than those for which same were intended as ingress and egress. No
windows, floors or skylights that reflect or admit light into the Building shall
be covered or obstructed by Tenant. Toilets, wash basins and sinks shall not be
used for any purpose other than those for which they were constructed, and no
sweeping, rubbish, or other obstructing or improper substances shall be thrown
therein. Any damage resulting to same, or to heating apparatus, from misuse by
Tenant or its employees, shall be borne by Tenant.
6. Only one key for each office in the Premises and three (3) keys for
each washroom on a floor where Tenant is not a full floor occupant will be
furnished Tenant without charge. No additional lock, latch or bolt of any kind
shall be placed upon any door nor shall any changes be made in existing locks or
mechanisms thereof without written consent of Landlord. At the termination of
the Lease, Tenant shall return to Landlord all keys furnished to Tenant by
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Landlord, or otherwise procured by Tenant, and in the event of loss of any keys
so furnished, Tenant shall pay to Landlord the cost thereof.
7. Landlord shall have the right to prescribe the weight, position and
manner of installation of heavy articles such as safes, machines and other
equipment which Tenant may use in the Premises. No safes, furniture, filing
cabinets, boxes, large parcels or other kind of freight shall be taken to or
from the Premises or allowed in any elevator, hall or corridor at any time
except by permission of and at times allowed by Landlord. Tenant shall make
prior arrangements with Landlord for use of freight elevator for the purpose of
transporting such articles and such articles may be taken in or out of the
Building only between or during such hours as may be arranged with and
designated by Landlord. The persons employed to move the same must be approved
by Landlord. In no event shall any weight exceeding 50 pounds per square foot of
floor space be placed upon any floor by Tenant, without prior written approval
of Landlord.
8. Tenant shall not cause or permit any gases, liquids or odors to be
produced upon or permeate from the Premises, and no flammable, combustible,
explosive, toxic or other hazardous fluid, chemical or substance shall be
brought into the Building.
9. The Building shall be open to Tenant, its employees, and business
visitors, between the hours of 7:00 a.m. and 6:00 p.m., on all days except
Saturdays, Sundays and holidays and on Saturdays between the hours of 8:00 a.m.
and 1:00 p.m. Landlord may implement a card access security system to control
access during other times. Landlord shall not be liable for excluding any person
from the Building during other times, or for admission of any person to the
Building at any time, or for damages or loss for theft resulting therefrom to
any person, including Tenant.
10. Unless explicitly permitted by the Lease, Tenant shall not employ
any person other than Landlord's contractors and employees for the purpose of
cleaning and taking care of the Premises. Landlord shall not be responsible for
any loss, theft, mysterious disappearance of or damage to, any property, however
occurring. Only persons authorized by the Landlord may furnish ice, drinking
water, towels, and other similar services within the Building and only at hours
and under regulations fixed by Landlord.
11. No connection shall be made to the electric wires or gas or
electric fixtures, without the consent in writing on each occasion of Landlord.
All glass, locks and trimmings in or upon the doors and windows of the Premises
shall be kept whole and in good repair. Tenant shall not injure, overload or
deface the Building, the woodwork or the walls of the Premises, nor permit upon
the Premises any noisome, noxious, noisy or offensive business.
12. If Tenant requires wiring for a bell or buzzer system, such wiring
shall be done by the electrician of the Landlord only, and no outside wiring men
shall be allowed to do work of this kind unless by the written permission of
Landlord or its representatives. If telegraph or telephonic service is desired,
the wiring for same shall be approved by Landlord, and no boring or cutting for
wiring shall be done unless approved by Landlord or its representatives, as
stated. The electric current shall not be used for power or heating unless
written permission to do so
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shall first have been obtained from Landlord or its representatives in writing,
and at an agreed cost to Tenant.
13. Tenant and its employees and invitees shall observe and obey all
parking and traffic regulations as imposed by Landlord.
14. Canvassing, peddling, soliciting and distribution of handbills or
any other written materials in the Building are prohibited, and Tenant shall
cooperate to prevent the same.
15. Landlord shall have the right to change the name of the Building
and to change the street address of the Building, provided that in the case of a
change in the street address, Landlord shall give Tenant not less than 180 days'
prior notice of the change, unless the change is required by governmental
authority.
16. Landlord may waive any one or more of these Rules and Regulations
for the benefit of any particular lessee, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of any other
lessee, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the other lessees of the Building.
17. These Rules and Regulations are supplemental to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease to which the same are
attached.
18. Landlord reserves the right to make such other and reasonable Rules
and Regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Property, and for the preservation of good
order therein.
19. Tenant acknowledges that "smoking" is prohibited in all common
areas of the Building, except in areas that are designated by Landlord as
"Designated Smoking Areas". Tenant agrees to comply in all respects with
Landlord's prohibition and regulation of smoking and to enforce compliance
against its employees, agents, invitees and other persons under the control and
supervision of Tenant on the Premises or the Building. Notwithstanding anything
in this Lease to the contrary, no liability shall attach to the Landlord for any
failure to enforce this provision (or similar provisions in other leases).
B-3
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EXHIBIT "C"
ESTOPPEL STATEMENT
RE: Lease Dated: Amended:
Landlord: OVERSEAS PARTNERS (333), INC.
Tenant:
Premises: 333 West Wacker Drive
Chicago, Illinois 60606
As Tenant under the above-referenced Lease, the undersigned hereby
acknowledges for the benefit of Overseas Partners (333), Inc., which has or is
about to acquire the property in which the Premises are located, the truth and
accuracy of the following statements pertaining to the Lease.
1. Tenant has accepted, is satisfied with, and is in full possession of
said Premises, including all improvements, additions and alterations thereto
required to be made by Landlord under the Lease.
2. The Lease is in full force and effect, and Tenant is paying the full
rent stipulated in the Lease with no offsets, defenses or claims.
3. Landlord has not been and is not presently in default under any of
the terms, covenants or provisions of the Lease.
4. Landlord has complied with all of the requirements and conditions
precedent to the commencement of the term of the Lease as specified in the
Lease.
5. The fixed annual base rent under the Lease is $_______ and no monies
have been paid to Landlord in advance of the due date set forth in the Lease
described above, except .________________________________.
6. The Lease is for a term of ______ years expiring __________, and
Tenant has been in occupancy and paying rent since the term commenced on
____________________.
7. No monetary or other considerations, including but not limited to
rental concessions by Landlord, tenant improvements in excess of building
standard, or Landlord's assumption of prior lease obligations of Tenant, have
been granted to Tenant by Landlord for entering into the Lease, except
________________________.
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8. Tenant has not been and is not presently in default under any of the
terms, covenants or provisions of the Lease.
9. Tenant has delivered to Landlord a security deposit in the amount of
$___________.
10. Tenant acknowledges (a) that there have been no modifications or
amendments to the Lease other than herein specifically stated, (b) it has no
notice of a prior assignment, hypothecation or pledge of rents or of the Lease,
and (c) the Lease represents the entire agreement between Landlord and Tenant,
(d) no prepayment or reduction of rent and no modification, termination, or
acceptance of surrender of the Lease will be valid as to Overseas Partners
(333), Inc. without the consent of said company, and (e) notice of the proposed
assignment of Landlord's interest in the Lease may be given it by certified or
registered mail, return receipt requested, at the Premises, or as otherwise
directed below.
TENANT:
By:____________________________________
Title:_________________________________
Date:__________________________________
(Address to which notices are
to be sent to Tenant if other
than to the Premises)
_______________________________________
_______________________________________
_______________________________________
_______________________________________
C-2
<PAGE> 66
EXHIBIT "D"
BUILDING STANDARD SERVICES
Landlord shall furnish the following services to Tenant during the Term
(the "Building Standard Services"):
(a) Hot and cold domestic water and common-use restrooms and toilets at
locations provided for general use and as reasonably deemed by Landlord to be in
keeping with the first-class standards of the Building.
(b) Subject to curtailment as required by governmental laws, rules or
mandatory regulations and subject to the design conditions hereinafter provided,
central heat and air- conditioning in season, at such temperatures and in such
amounts as are reasonably deemed by Landlord to be in keeping with the
first-class standards of the Building. Such heating and air conditioning shall
be furnished between 8:00 a.m. and 7:00 p.m. on weekdays (from Monday through
Friday, inclusive) and between 8:00 a.m. and 1:00 p.m. on Saturdays, all
exclusive of Holidays, as defined below (the "Building Operating Hours").
(c) Electric lighting service for all public areas and special service
areas of the Building in the manner and to the extent reasonably deemed by
Landlord to be in keeping with the first-class standards of the Building.
(d) Tenant shall pay for the use of all electrical service to the
Premises (other than the electrical service necessary for Landlord to fulfill
its obligation to provide heating and air conditioning as provided in
sub-paragraph 7.A.[b] hereof) provided that Landlord can make satisfactory
arrangements with the utility company supplying electricity to the Premises for
separate metering and billing. Tenant shall be billed directly by such utility
company and Tenant agrees to pay each bill promptly in accordance with its
terms. In the event that for any reason Tenant cannot be billed directly,
Landlord shall forward each bill received by it with respect to the Premises to
Tenant and Tenant shall pay it promptly in accordance with its terms.
If the Premises cannot be separately metered for any reason, Tenant
shall pay Landlord as Additional Rent, in monthly installments at the time
prescribed for monthly installments of Rent, an annual amount, as estimated by
Landlord from time to time, which Tenant would pay for such electricity if the
same were separately metered to the Premises by the local electric utility
company and billed to Tenant at such utility company's then current rates.
(e) Janitor service shall be provided five (5) days per week, exclusive
of Saturdays, Sundays and Holidays (as hereinbelow defined), in accordance with
Schedule 1 attached hereto.
(f) Sufficient electrical capacity to operate (i) incandescent lights,
typewriters, calculating machines, photocopying machines and other machines of
the same low voltage electrical consumption (120 volts), provided that the total
rated electrical design load for said lighting and machines of low electrical
voltage shall not exceed 1.25 watts per square foot of rentable area; and (ii)
lighting (120 volts), provided that the total rated electrical design load for
D-1
<PAGE> 67
said lighting shall not exceed 1.40 watts per square foot of rentable area (each
such rated electrical design load to be hereinafter referred to as the "Building
Standard rated electrical design load").
Should Tenant's total rated electrical design load exceed the Building
Standard rated electrical design load for either low or high voltage electrical
consumption, or if Tenant's electrical design requires low voltage or high
voltage circuits in excess of Tenant's share of the Building Standard circuits,
Landlord will (at Tenant's expense) install such additional circuits and
associated high voltage panels and/or additional low voltage panels with
associated transformers shall be hereinafter referred to as the "additional
electrical equipment"). If the additional electrical equipment is installed
because Tenant's low or high voltage rated electrical design load exceeds the
applicable Building Standard rated electrical design load, then a meter shall
also be added (at Tenant's expense) to measure the electricity used through the
additional electrical equipment.
The design and installation of any additional electrical equipment (or
any related meter) required by Tenant shall be subject to the prior approval of
Landlord (which approval shall not be unreasonably withheld). All expenses
incurred by Landlord in connection with the review and approval of any
additional electrical equipment shall also be reimbursed to Landlord by Tenant.
Tenant shall also pay on demand the actual metered cost of electricity consumed
through the additional electrical equipment (if applicable), plus any expenses
incurred by Landlord in connection with the metering thereof.
If any of Tenant's electrical equipment requires conditioned air in
excess of Building Standard air conditioning, the same shall be installed by
Landlord or Tenant, at Tenant's option (on Tenant's behalf), subject to
Landlord's reasonable approval and supervision and Tenant shall pay all design,
installation, metering and operating costs relating thereto.
(g) All Building Standard fluorescent and incandescent bulb replacement
in all public areas, toilet and restroom areas, and stairwells.
(h) Non-exclusive multiple elevator cab passenger service to the
Premises during Building Operating Hours (as hereinabove defined) and at least
one (1) elevator cab passenger service to the floor(s) on which the Premises are
located twenty-four (24) hours per day and non-exclusive freight elevator
service during Building Operating Hours (all subject to temporary cessation for
ordinary repair and maintenance and during times when life safety systems
override normal building operating systems) with such freight elevator service
available at other times upon reasonable prior notice and the payment by Tenant
to Landlord of any additional expense actually incurred by Landlord in
connection therewith. Landlord agrees to continue good faith discussions with
Tenant concerning alterations to improve the elevator cabs serving the High Rise
Floors such that the quality thereof is consistent with other comparable first
class buildings.
To the extent the services described above require electricity and
water supplied by public utilities, Landlord's covenants thereunder shall only
impose on Landlord the obligation to use its best efforts to cause the
applicable public utilities to furnish same. Failure by Landlord to
D-2
<PAGE> 68
furnish the services described herein, or any cessation thereof, shall not
render Landlord liable for damages to either person or property, not be
construed as an eviction of Tenant, nor work an abatement of rent, nor relieve
Tenant from fulfillment of any covenant or agreement hereof. In addition to the
foregoing, should any of the equipment or machinery, for any cause, fail to
operate, or function properly, Tenant shall have no claim for rebate of rent
(except as otherwise provided herein) or damages on account of an interruption
in service occasioned thereby or resulting therefrom; provided, however,
Landlord agrees to use reasonable efforts to promptly repair said equipment or
machinery and to restore said services during normal business hours.
Notwithstanding the foregoing, in the event that any interruption or
discontinuance in the furnishing of any of the services set forth in this
Exhibit "D" is caused by Landlord's negligence or willful misconduct and as a
result of such interruption, the Premises are rendered untenantable for a period
in excess of five (5) consecutive business days after written notice to Landlord
and such interruption materially and adversely affects Tenant's ability to
conduct its business in the Premises, or any portion thereof, and on account
thereof Tenant ceases doing business in the Premises, or such portion thereof,
the obligation to pay Monthly Base Rent and Additional Rent shall thereafter
abate on a proportionate basis for so long as and to the extent Tenant's ability
to conduct its business in the Premises, or such portion thereof, is affected.
Landlord agrees to provide Tenant not less than twenty-four (24) hours'
notice before Landlord shuts down the tenant cooling tower.
The following dates shall constitute "Holidays" as that term is used in
this Lease: New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, and any other holiday generally recognized as
such by landlords of office space in the metropolitan Chicago office market, as
determined by Landlord in good faith. If in the case of any specific holiday
mentioned in the preceding sentence, a different day shall be observed than the
respective day mentioned, then that day which constitutes the day observed by
national banks in Chicago, Illinois on account of said holiday shall constitute
the Holiday under this Lease.
D-3
<PAGE> 69
SCHEDULE 1 TO LEASE
FOR
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS
JANITORIAL SERVICES
I. Nightly - Monday through Friday (Holidays Excluded).
A. Dust mop, using a treated mop, all stone, ceramic
tile, terrazzo and other types of unwaxed flooring.
B. Dust mop, using a treated mop, all vinyl, asbestos,
asphalt, rubber and similar types of flooring. This
includes removal of gum and other similar substances
using a scraping device.
C. Vacuum all carpeted areas.
D. Dust mop all private and public stairways and vacuum if carpeted.
E. Hand dust and wipe clean with a chemically treated
cloth all furniture, file cabinets, fixtures, window
sills (do not disturb papers on desks).
F. Dust and sanitize, using a disinfectant solution, all telephones.
G. Remove finger marks from all painted surfaces near light switches,
entrance doors, etc.
H. Remove all gum and foreign matter on sight.
I. Empty and clean all waste receptacles and remove waste paper
and waste materials to a designated area.
J. Damp dust interiors of all waste disposal receptacles and wash
as necessary.
K. Clean and sanitize using a disinfectant solution, all
water fountains and water coolers.
L. Spot mop floors for spillages, etc.
D-S-1
<PAGE> 70
M. Empty and damp clean all ash trays and screen all sand urns.
N. Remove finger marks and dust doors of elevator hatchways.
O. Clean all low ledges, shelves, bookcases, etc., that are in office
spaces.
P. Upon completion of work, all slop sinks are to be
thoroughly cleaned and cleaning equipment and
supplies stored neatly in locations designated by
Building Manager's Office.
Q. All cleaning operations shall be scheduled so that a
minimum of lights are to be left on at all times.
Upon completion of cleaning, all lights are to be
turned off. All entrance doors are to be kept locked
during the cleaning operation.
II. Weekly.
A. Hand dust all door louvers and other ventilating louvers within
reach.
B. Dust all baseboards.
C. Wipe clean all bright work.
D. Dust all chair rails.
E. Move and vacuum clean once a week underneath all furniture that
can be moved.
F. In high traffic resilient tile areas, damp mop if
necessary and apply spray buffing solution in a fine
mist and buff with a synthetic pad.
G. Damp mop all non-carpeted private and public stairways.
III. Monthly.
A. Dust all picture frames, charts and venetian blinds which are
not reached in nightly cleaning.
IV. Quarterly.
A. Dust all vertical surfaces such as walls, partitions,
doors and other surfaces not reached in nightly cleaning.
B. Dust exterior of lighting fixtures.
C. Dust all air conditioning louvers, grills, etc.
D-S-2
<PAGE> 71
D. Wash all baseboards.
E. Strip all resilient flooring using diluted stripping
solution. Machine scrub floor using pad to remove all
floor finish. Thoroughly rinse with clear water and
apply two coats of floor finish.
V. Lavatories.
A. Nightly - Monday through Friday.
1. Clean, sanitize using disinfectant solution,
and polish all vitreous fixtures including
toilet bowls, urinals and wash basins.
2. Clean and polish all chrome and stainless steel fittings.
3. Clean and sanitize both sides of toilet seats.
4. Clean and polish all glass and mirrors.
5. Empty all containers and disposals and insert new liners
where required.
6. Wash and sanitize using a disinfectant solution, exteriors
of all containers.
7. Empty all sanitary containers and sanitize
interiors using a disinfectant solution.
8. Dust horizontal surfaces of all partitions.
9. Spot clean all partitions and remove all graffiti.
10. Spot clean walls, doors, light switches, etc.
11. Refill all dispensers to normal limits
including napkins, soap, tissue, towels,
etc.
12. Wet mop and sanitize tile floors.
13. Vacuum entire carpeted areas.
14. Remove all rubbish.
B. Weekly.
D-S-3
<PAGE> 72
1. Wet mop tile floors.
C. Bi-Weekly.
1. Machine scrub tile floors as required.
D. Monthly.
1. Wash partitions.
E. Quarterly.
1. Dust all HVAC grills and louvers.
2. Wash ceramic tile walls.
VI. Other.
Any special cleaning required (i.e., other than services
expressly provided for above) will be the sole responsibility of Tenant.
D-S-4
<PAGE> 73
EXHIBIT "E"
FIRST EXPANSION SPACE
E-1
<PAGE> 74
EXHIBIT "F"
SECOND EXPANSION SPACE
F-1
<PAGE> 75
EXHIBIT "G"
NON-DISTURBANCE AGREEMENT
G-1
<PAGE> 1
EXHIBIT 10.9
FORM OF RENEWAL OF INVESTMENT MANAGEMENT AGREEMENTS
DATED MAY 5, 1998
BETWEEN THE FUNDS LISTED BELOW AND NUVEEN ADVISORY CORP.
Attached is a copy of a Form of Renewal of Investment Management Agreement,
dated May 5, 1998, by and between each of the funds listed below (which were
active as of December 31, 1998) and Nuveen Advisory Corp. Copies of agreements,
identical in nature except for the name of the fund, were entered into by the
following funds:
FUND NAME
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Florida Investment Quality Municipal Fund, Inc.
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Select Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen Florida Quality Income Municipal Fund, Inc.
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Ohio Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Arizona Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen Michigan Premium Income Municipal Fund, Inc.
<PAGE> 2
FUND NAME (CON'T)
Nuveen Insured New York Premium Income Municipal Fund, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen Maryland Premium Income Municipal Fund
Nuveen Massachusetts Premium Income Municipal Fund
Nuveen Pennsylvania Premium Income Municipal Fund 2
Nuveen Virginia Premium Income Municipal Fund
Nuveen Washington Premium Income Municipal Fund
Nuveen Connecticut Premium Income Municipal Fund
Nuveen Georgia Premium Income Municipal Fund
Nuveen Missouri Premium Income Municipal Fund
Nuveen North Carolina Premium Income Municipal Fund
Nuveen California Premium Income Municipal Fund
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Municipal Value Fund, Inc.
Nuveen California Municipal Value Fund, Inc.
Nuveen New York Municipal Value Fund, Inc.
Nuveen Municipal Income Fund, Inc.
Nuveen Select Maturities Municipal Fund
Pursuant to the instructions to Item 601 of Regulation S-K, the Registrant is
filing only the representative of the Renewal of Investment Management Agreement
by and between each of the above listed funds, as of December 31, 1998, and
Nuveen Advisory Corp. Copies of the actual Renewal of Investment Management
Agreements by and between each of the above funds and Nuveen Advisory Corp. have
not been attached.
<PAGE> 3
EXHIBIT 10.9
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENTS
DATED MAY 5, 1998
BETWEEN THE FUNDS LISTED BELOW AND NUVEEN ADVISORY CORP.
Attached is a copy of a Form of Renewal of Investment Management Agreement,
dated May 5, 1998, by and between each of the funds listed below (which were
active as of December 31, 1998) and Nuveen Advisory Corp. Copies of agreements,
identical in nature except for the name of the fund, were entered into by the
following funds:
FUND NAME
Nuveen Flagship Municipal Trust
Nuveen Tax-Exempt Money Market Fund, Inc.
Nuveen Tax-Free Reserves, Inc.
Nuveen California Tax-Free Fund, Inc.
Nuveen Tax-Free Money Market Fund, Inc.
Nuveen Flagship Multistate Trust I
Nuveen Flagship Multistate Trust II
Nuveen Flagship Multistate Trust III
Nuveen Flagship Multistate Trust IV
Nuveen Taxable Funds Inc.
Pursuant to the instructions to Item 601 of Regulation S-K, the Registrant is
filing only the representative of the Renewal of Investment Management Agreement
by and between each of the above listed funds, as of December 31, 1998, and
Nuveen Advisory Corp. Copies of the actual Renewal of Investment Management
Agreements by and between each of the above funds and Nuveen Advisory Corp. have
not been attached.
<PAGE> 4
[NAME OF FUND]
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 5th day of May, 1998 by and between [Fund Name], a
___________________ corporation (the "Fund"), and Nuveen Advisory Corp., a
Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1998 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
August 1, 1999 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1999 and ratify and confirm the Agreement in all respects.
[FUND NAME]
By: ------------------
Vice President
ATTEST:
------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: ------------------
Vice President
ATTEST:
------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT 10.10
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENTS
DATED MAY 18, 1998
BETWEEN THE FUNDS LISTED BELOW AND NUVEEN INSTITUTIONAL ADVISORY CORP.
Attached is a copy of a Form of Renewal of Investment Management Agreement,
dated May 18, 1998, by and between each of the funds listed below (which were
active as of December 31, 1998) and Nuveen Institutional Advisory Corp. Copies
of agreements, identical in nature except for the name of the fund, were entered
into by the following funds:
FUND NAME
Nuveen Select Tax-Free Income Portfolio
Nuveen Select Tax Free Income Portfolio 2
Nuveen Insured California Select Tax-Free Income Portfolio
Nuveen Insured New York Select Tax-Free Income Portfolio
Nuveen Select Tax-Free Income Portfolio 3
Pursuant to the instructions to Item 601 of Regulation S-K, the Registrant is
filing only the representative of the Renewal of Investment Management Agreement
by and between each of the above listed funds, as of December 31, 1998, and
Nuveen Institutional Advisory Corp. Copies of the actual Renewal of Investment
Management Agreements by and between each of the above funds and Nuveen
Institutional Advisory Corp. have not been attached.
<PAGE> 2
[NAME OF FUND]
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 18th day of May, 1998 by and between [Name of Fund], a
_____________________ business trust (the "Fund"), and Nuveen Institutional
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1998 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Trustees, at a meeting called for the purpose of reviewing
the Agreement, have approved the Agreement and its continuance until August 1,
1999 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1999 and ratify and confirm the Agreement in all respects.
[NAME OF FUND]
By: ___________________
Vice President
ATTEST:
_________________________
Assistant Secretary
NUVEEN INSTITUTIONAL
ADVISORY CORP.
By: ___________________
Vice President
ATTEST:
________________________
Assistant Secretary
<PAGE> 1
EXHIBIT 10.10(A)
NUVEEN INVESTMENT TRUST
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 18th day of May, 1998 by and between Nuveen Investment
Trust, a Massachusetts business trust (the "Fund"), and Nuveen Institutional
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Management Agreement (the "Agreement") pursuant to which the Adviser furnishes
investment advisory and management services and certain other services to the
Fund; and
WHEREAS, the Board of Trustees, at a meeting called for the purpose of reviewing
the Agreement, have approved the Agreement and its continuance until August 1,
1999 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement, the parties hereto do hereby approve the continuance of the Agreement
in effect until August 1, 1999 and do ratify and confirm the Agreement in all
respects.
NUVEEN INVESTMENT TRUST
By: ____________________
Vice President
ATTEST:
__________________________
Assistant Secretary
NUVEEN INSTITUTIONAL
ADVISORY CORP.
By: ____________________
Vice President
ATTEST:
___________________________
Assistant Secretary
<PAGE> 1
EXHIBIT 10.10(b)(i)
ADDENDUM TO
INVESTMENT SUB-ADVISORY AGREEMENT
ADDENDUM made this 17th day of May, 1998, to the Investment Sub-Advisory
Agreement (the "Agreement") dated May 16, 1996 by and between Nuveen
Institutional Advisory Corp., a Delaware corporation ("Manager"), and
Institutional Capital Corporation, a Delaware corporation ("Sub-Adviser").
WHEREAS, the Agreement provides, among other things, that sub-advisory fees
for all Initial Portfolios and all subsequently created portfolios for which
Sub-Adviser agrees with Manager to become sub-adviser shall be as set forth in
Section 5 of the Agreement; and
WHEREAS, the Manager desires to engage the Sub-Adviser to serve as
sub-adviser for certain newly created portfolios, and Sub-Adviser desires to
accept such engagement, with the modifications to the sub-advisory fee
arrangement as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Effect on Agreement. All provisions of the Agreement not specifically
amended by this Addendum shall remain in full force and affect, and shall apply
to this Addendum as appropriate.
2. Defined Terms. All capitalized terms not otherwise defined in this
Addendum shall have the same meaning as set forth in the Agreement.
3. New Portfolios. Manager is the investment manager for the Nuveen
Tax-Deferred Investment Trust (the "T-D Trust"), an open-end series management
investment company registered or to be registered under the 1940 Act. Manager
desire to engage Sub-Adviser to serve as sub-adviser for three of the series of
the T-D Trust: the Balanced Portfolio, the Growth and Income Portfolio, and the
European Value Portfolio. Manager is also the investment manager for the Nuveen
European Value Fund, an open-end series management investment company registered
or to be registered under the 1940 Act (together with the European Value
Portfolio, the "European Funds").
4. Supplemental Fee. Manager and Sub-Adviser agree that, in addition to the
sub-advisory fee for each new Portfolio or Fund payable under the Agreement
("Basic Fee"), Manager shall pay Sub-Adviser an additional amount in respect of
the Balanced Portfolio, the Growth and Income Portfolio and the European Funds,
as set forth in the table below (each, a "Supplemental Fee"), for the period
until the net assets of such Portfolio or such Funds, as the
<PAGE> 2
case may be, first reaches the threshold amount set forth in the table. The
Basic Fee for purposes of this Addendum shall be calculated on a daily basis as
the effective (blended) rate calculated under the breakpoint schedules set forth
in Section 5 of the Agreement by reference to the average daily market value
of the equity and fixed-income assets, respectively, of all Nuveen-sponsored
investment products for which the Sub-Adviser serves as sub-adviser, including
for all purposes the assets of the new Portfolios and Funds.
<TABLE>
<CAPTION>
New Portfolio or Funds Threshold Amount Supplemental Fee
- ---------------------- ---------------- ----------------
<S> <C> <C>
Balance Portfolio $50 million 0.10% of net assets
Growth and Income $100 million 0.08% of net assets
Portfolio
European Funds $50 million 0.13% of net assets
</TABLE>
Once the net assets of the Balanced Portfolio, the Growth and Income Portfolio
or the European Funds reach the respective threshold amount set forth above on
any day, the sub-advisory fee for the Balanced portfolio, the Growth and Income
portfolio or the European Funds, as the case may be, shall thereafter be the
Basic Fee as calculated pursuant to the Agreement.
5. Recoupment by Manager of Supplemental Fee.
a. Beginning on the day after the net assets of the Balanced
Portfolio, the Growth and Income Portfolio or the European Funds, as the case
may be, reach the threshold amount set forth above, there shall be no further
obligation to pay the Supplemental Fee in respect of such Portfolio or Funds,
and the Sub-Adviser shall waive the sub-advisory fee payable thereafter in
respect of such Portfolio or Funds, determined as set forth in the Agreement,
and the Manager shall retain such amounts, for such period of time until the
amount of sub-advisory fees so waived shall equal the aggregate amount of the
Supplemental Fee previously paid hereunder by Manager to Sub-Adviser with
respect to such Portfolio or Funds. At the Manager's option, it may also elect
to recoup the aggregate amount of any Supplemental Fee it is entitled to recoup
hereunder with respect to such Portfolio or Funds by reducing the amounts
otherwise payable by Manager to Sub-Adviser under the Agreement in respect of
the Nuveen Growth and Income Fund. Once the Manager shall have recouped the
aggregate amount of the Supplemental Fee in respect of the Balanced Portfolio,
the Growth and Income Portfolio or the European Funds (as the case may be)
pursuant to this paragraph, the Manager shall resume paying Sub-Adviser the
sub-advisory fee payable under the Agreement in respect of such Portfolio or
Funds.
b. If Sub-Adviser shall either resign or be terminated for cause as
sub-adviser for the Balanced Portfolio, the Growth and Income Portfolio or one
or both of the European Funds, Sub-Adviser agrees to pay to Manager the amount
of any unrecouped Supplemental Fee previously received in respect of such
Portfolios or Funds at the same time as it ceases to serve as sub-adviser.
2
<PAGE> 3
c. If Sub-Adviser shall be terminated as sub-adviser for the Balanced
Portfolio, the Growth and Income Portfolio or one or both of the European Funds
other than for cause, Sub-Adviser shall be entitled to retain the amount of any
unrecouped Supplemental Fee.
IN WITNESS WHEREOF, the Manager and the Sub-Adviser have caused this
Addendum to be executed as of the day and year first above written.
NUVEEN INSTITUTIONAL ADVISORY CORP.
By: /s/ Alan G. Berkshire
-----------------------------
ATTEST: Title: Vice President
-----------------------------
Gifford R. Zimmerman
- -------------------------------------
Title: Vice President
------------------------------
INSTITUTIONAL CAPITAL CORPORATION
By: /s/ Pamela H. Conroy
-----------------------------
Title: Senior Vice President
-----------------------------
3
<PAGE> 1
EXHIBIT 10.10(e)
MANAGEMENT AGREEMENT
BETWEEN
NUVEEN INVESTMENT TRUST III
AND
NUVEEN INSTITUTIONAL ADVISORY CORP.
NUVEEN INVESTMENT TRUST III, a Massachusetts business trust registered
under the Investment Company Act of 1940 ("1940 Act") as an open-end
diversified management series investment company ("Trust"), hereby appoints
NUVEEN INSTITUTIONAL ADVISORY CORP., a Delaware corporation registered under
the Investment Advisers Act of 1940 as an investment adviser, of Chicago,
Illinois ("Manager"), to furnish investment advisory and management services
and certain administrative services with respect to the portion of its assets
represented by the shares of beneficial interest issued in the series listed in
Schedule A hereto, as such schedule may be amended from time to time (each such
series hereinafter referred to as "Fund"). Trust and Manager hereby agree that:
1. Investment Management Services. Manager shall manage the investment
operations of Trust and each Fund, subject to the terms of this Agreement and
to the supervision and control of Trust's Board of Trustees ("Trustees").
Manager agrees to perform, or arrange for the performance of, the following
services with respect to each Fund:
(a) to obtain and evaluate such information relating to economies,
industries, businesses, securities and commodities markets, and individual
securities, commodities and indices as it may deem necessary or useful in
discharging its responsibilities hereunder;
(b) to formulate and maintain a continuous investment program in a
manner consistent with and subject to (i) Trust's agreement and declaration of
trust and by-laws; (ii) the Fund's investment objectives, policies, and
restrictions as set forth in written documents furnished by the Trust to
Manager; (iii) all securities, commodities, and tax laws and regulations
applicable to the
<PAGE> 2
(c) unless otherwise directed by the Trustees, to determine from time to
time securities, commodities, interests or other investments to be purchased,
sold, retained or lent by the Fund, and to implement those decisions, including
the selection of entities with or through which such purchases, sales or loans
are to be effected;
(d) to use reasonable efforts to manage the Fund so that it will qualify as
a regulated investment company under subchapter M of the Internal Revenue Code
of 1986, as amended;
(e) to make recommendations as to the manner in which voting rights, rights
to consent to Trust or Fund action, and any other rights pertaining to Trust or
the Fund shall be exercised;
(f) to make available to Trust promptly upon request all of the Fund's
records and ledgers and any reports or information reasonably requested by the
Trust; and
(g) to the extent required by law, to furnish to regulatory authorities any
information or reports relating to the services provided pursuant to this
Agreement.
Except as otherwise instructed from time to time by the Trustees, with
respect to execution of transactions for Trust on behalf of a Fund, Manager
shall place, or arrange for the placement of, all orders for purchases, sales,
or loans with issuers, brokers, dealers or other counterparts or agents selected
by Manager. In connection with the selection of all such parties for the
placement of all such orders, Manager shall attempt to obtain most favorable
execution and price, but may nevertheless in its sole discretion as a secondary
factor, purchase and sell portfolio securities from and to brokers and dealers
who provide Manager with statistical, research and other information, analysis,
advice, and similar services. In recognition of such services or brokerage
services provided by a broker or dealer, Manager is hereby authorized to pay
such broker or dealer a commission or spread in excess of that which might be
charged by another broker or dealer for the same transaction if the Manger
determines in good faith that the commission or spread is reasonable in relation
to the value of the services so provided.
Trust hereby authorizes any entity or person associated with Manager that
is a member of a national securities exchange to effect any transaction on the
exchange for the account of a Fund to the extent permitted by and in accordance
with Section 11(a)
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<PAGE> 3
of the Securities Exchange Act or 1934 and Rule 11a2-2(T) thereunder. Trust
hereby consents to the retention by such entity or person of compensation for
such transactions in accordance with Rule 11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate orders for its other
customers together with any securities of the same type to be sold or purchased
for Trust or one or more Funds in order to obtain best execution or lower
brokerage commissions. In such event, Manager shall allocate the shares so
purchased or sold, as well as the expenses incurred in the transaction, in a
manner it considers to be equitable and fair and consistent with its fiduciary
obligations to Trust, the Funds, and Manager's other customers.
Manager shall for all purposes be deemed to be an independent contractor
and not an agent of Trust and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent Trust in any way.
2. Administrative Services. Subject to the terms of this Agreement and
to the supervision and control of the Trustees, Manager shall provide to the
Trust facilities, equipment, statistical and research data, clerical,
accounting and bookkeeping services, internal auditing and legal services, and
personnel to carry out all management services required for operation of the
business and affairs of the Funds other than those services to be performed by
the Trust's Distributor pursuant to the Distribution Agreement, those services
to be performed by the Trust's Custodian pursuant to the Custody Agreement,
those services to be performed by the Trust's Transfer Agent pursuant to the
Transfer Agency Agreement, those services to be provided by the Trust's
Custodian pursuant to the Accounting Agreement and those services normally
performed by the Trust's counsel and auditors.
3. Use of Affiliated Companies and Subcontractors. In connection with
the services to be provided by Manager under this Agreement, Manager may, to
the extent it deems appropriate, and subject to compliance with the
requirements of applicable laws and regulations, make use of (i) its affiliated
companies and their directors, trustees, officers, and employees and (ii)
subcontractors selected by Manager, provided that Manager shall supervise and
remain fully responsible for the services of all such third parties in
accordance with and to the extent provided by this Agreement. All costs and
expenses associated with services provided by any such third parties shall be
borne by Manager or such parties.
4. Expenses Borne by Trust. Except to the extent expressly assumed by
Manager herein or under a separate agreement between Trust and Manager and
except
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<PAGE> 4
to the extent required by law to be paid by Manager, Manager shall not be
obligated to pay any costs or expenses incidental to the organization,
operations or business of the Trust. Without limitation, such costs and
expenses shall include but not be limited to:
(a) all charges of depositories, custodians and other agencies for
the safekeeping and servicing of its cash, securities, and other property;
(b) all charges for equipment or services used for obtaining price
quotations or for communication between Manager or Trust and the custodian,
transfer agent or any other agent selected by Trust;
(c) all charges for and accounting services provided to Trust by
Manager, or any other provider of such services;
(d) all charges for services of Trust's independent auditors and for
services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated with
Manager, all expenses incurred in connection with their services to Trust,
and all expenses of meetings of the Trustees or committees thereof;
(f) all expenses incidental to holding meetings of holders of units
of interest in the Trust ("Shareholders"), including printing and of
supplying each record-date Shareholder with notice and proxy solicitation
material, and all other proxy solicitation expense;
(g) all expenses of printing of annual or more frequent revisions of
Trust prospectus(es) and of supplying each then-existing Shareholder with a
copy of a revised prospectus;
(h) all expenses related to preparing and transmitting certificates
representing Trust shares;
(i) all expenses of bond and insurance coverage required by law or
deemed advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident to the
purchase, sale, or lending of portfolio securities;
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<PAGE> 5
(k) all taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including all stamp or
other transfer taxes;
(l) all expenses of registering and maintaining the registration of
Trust under the 1940 Act and, to the extent no exemption is available,
expenses of registering Trust's shares under the 1933 Act, of qualifying
and maintaining qualification of Trust and of Trust's shares for sale
under securities laws of various states or other jurisdictions and of
registration and qualification of Trust under all other laws applicable to
Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a
Fund; and
(n) all fees, dues and other expenses incurred by Trust in
connection with membership of Trust in any trade association or other
investment company organization.
5. Allocation of Expenses Borne by Trust. Any expenses borne by Trust
that are attributable solely to the organization, operation or business of a
Fund shall be paid solely out of Fund assets. Any expense borne by Trust which
is not solely attributable to a Fund, nor solely to any other series of shares
of Trust, shall be apportioned in such manner as Manager determines is fair and
appropriate, or as otherwise specified by the Board of Trustees.
6. Expenses Borne by Manager. Manager at its own expense shall furnish
all executive and other personnel, office space, and office facilities required
to render the investment management and administrative services set forth in
this Agreement.
In the event that Manager pays or assumes any expenses of Trust or a Fund
not required to be paid or assumed by Manager under this Agreement, Manager
shall not be obligated hereby to pay or assume the same or similar expense in
the future; provided that nothing contained herein shall be deemed to relieve
Manager of any obligation to Trust or a Fund under any separate agreement or
arrangement between the parties.
7. Management Fee. For the services rendered, facilities provided, and
charges assumed and paid by Manager hereunder, Trust shall pay to Manager out
of the assets of each Fund fees at the annual rate for such Fund as set forth
in Schedule B to this Agreement. For each Fund, the management fee shall accrue
on each calendar
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<PAGE> 6
day, and shall be payable monthly on the first business day of the next
succeeding calendar month. The daily fee accrual shall be computed by
multiplying the fraction of one divided by the number of days in the calendar
year by the applicable annual rate of fee, and multiplying this product by the
net assets of the Fund, determined in the manner established by the Board of
Trustees, as of the close of business on the last preceding business day on
which the Fund's net asset value was determined.
8. State Expense Limitation. If for any fiscal year of a Fund, its
aggregate operating expenses ("Aggregate Operating Expenses") exceed the
applicable percentage expense limit imposed under the securities law and
regulations of any state in which Shares of the Fund are qualified for sale (the
"State Expense Limit"), the Manager shall pay such Fund the amount of such
excess. For purposes of this State Expense Limit, Aggregate Operating Expenses
shall (a) include (i) any fees or expenses reimbursements payable to Manager
pursuant to this Agreement and (ii) to the extent the Fund invests all or a
portion of its assets in another investment company registered under the 1940
Act, the pro rata portion of that company's operating expenses allocated to the
Fund, and (iii) any compensation payable to Manager pursuant to any separate
agreement relating to the Fund's administration, but (b) exclude any interest,
taxes, brokerage commissions, and other normal charges incident to the purchase,
sale or loan of securities, commodity interests or other investments held by the
Fund, litigation and indemnification expense, and other extraordinary expenses
not incurred in the ordinary course of business. Except as otherwise agreed to
by the parties or unless otherwise required by the law or regulation of any
state, any reimbursement by Manager to a Fund under this section shall not
exceed the management fee payable to Manager by the Fund under this Agreement.
Any payment to a Fund by Manager hereunder shall be made monthly, by
annualizing the Aggregate Operating Expenses for each months as of the last day
of the month. An adjustment for payments made during any fiscal year of the Fund
shall be made on or before the last day of the first month following such fiscal
year of the Fund if the Annual Operating Expenses for such fiscal year (i) do
not exceed the State Expense Limitation or (ii) for such fiscal year there is no
applicable State Expense Limit.
9. Retention of Sub-Adviser. Subject to obtaining the initial and periodic
approvals required under Section 15 of the 1940 Act, Manager may retain one or
more sub-advisers at Manager's own cost and expense for the purpose of
furnishing one or more of the services described in Section 1 hereof with
respect to Trust or one or more Funds. Retention of a sub-adviser shall in no
way reduce the responsibilities or obligations of Manager under this Agreement,
and Manager shall be responsible to
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<PAGE> 7
Trust and its Funds for all acts or omissions of any sub-adviser in connection
with the performance or Manager's duties hereunder.
10. Non-Exclusivity. The services of Manager to Trust hereunder are not to
be deemed exclusive and Manager shall be free to render similar services to
others.
11. Standard of Care. The Manager shall not be liable for any loss
sustained by reason of the purchase, sale or retention of any security, whether
or not such purchase, sale or retention shall have been based upon the
investigation and research made by any other individual, firm or corporation,
if such recommendation shall have been selected with due care and in good
faith, except loss resulting from willful misfeasance, bad faith, or gross
negligence on the part of the Manager in the performance of its obligations and
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement.
12. Amendment. This Agreement may not be amended as to the Trust or any
Fund without the affirmative votes (a) of a majority of the Board of Trustees,
including a majority of those Trustees who are not "interested persons" of
Trust or of Manager, voting in person at a meeting called for the purpose of
voting on such approval, and (b) of a "majority of the outstanding shares" of
Trust or, with respect to any amendment affecting an individual Fund, a
"majority of the outstanding shares" of the Fund. The terms "interested
persons" and "vote of a majority of the outstanding shares" shall be construed
in accordance with their respective definitions in the 1940 Act and, with
respect to the latter term, in accordance with Rule 18f-2 under the 1940 Act.
13. Effective Date and Termination. This Agreement shall become effective
as to any Fund as of the effective date for that Fund specified in Schedule A
hereto. This Agreement may be terminated at any time, without payment of any
penalty, as to any Fund by the Board of Trustees of Trust, or by a vote of a
majority of the outstanding shares of that fund, upon at least sixty (60) days'
written notice to Manager. This Agreement may be terminated by Manager at any
time upon at least sixty (60) days' written notice to Trust. This Agreement
shall terminate automatically in the event of its "assignment" (as defined in
the 1940 Act). Unless terminated as hereinbefore provided, this Agreement shall
continue in effect with respect to any Fund for an initial period of two (2)
years from the effective date applicable to that Fund specified in Schedule A
and thereafter from year to year only so long as such continuance is
specifically approved with respect to that Fund at least annually (a) by a
majority of those Trustees who are not interested persons of Trust or of
Manager, voting in person at a meeting called for the purpose of voting on such
approval, and
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<PAGE> 8
(b) by either the Board of Trustees of Trust or by a "vote of a majority of the
outstanding shares" of the Fund.
14. Ownership of Records; Interparty Reporting. All records required to be
maintained and preserved by Trust pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section 31(a) of
the 1940 Act or other applicable laws or regulations which are maintained and
preserved by Manager on behalf of Trust and any other records the parties
mutually agree shall be maintained by Manager on behalf of Trust are the
property of Trust and shall be surrendered by Manager promptly on request by
Trust; provided that Manager may at its own expense make and retain copies of
any such records.
Trust shall furnish or otherwise make available to Manager such copies of
the financial statements, proxy statements, reports, and other information
relating to the business and affairs of each Shareholder in a Fund as Manager
may, at any time or from time to time, reasonably require in order to discharge
its obligations under this Agreement.
Manager shall prepare and furnish to Trust as to each Fund statistical
data and other information in such form and at such intervals as Trust may
reasonably request.
15. Non-Liability of Trustees and Shareholders. Any obligation of Trust
hereunder shall be binding only upon the assets of Trust (or the applicable
Fund thereof) and shall not be binding upon any Trustee, officer, employee,
agent or Shareholder of Trust. Neither the authorization of any action by the
Trustees or Shareholders of Trust nor the execution of this Agreement on behalf
of Trust shall impose any liability upon any Trustee or any Shareholder.
16. Use of Manager's Name. Trust may use the name "Nuveen Investment Trust
III" and the Fund names listed in Schedule A or any other name derived from the
name "Nuveen" only for so long at this Agreement or any extension, renewal, or
amendment hereof remains in effect, including any similar agreement with any
organization which shall have succeeded to the business of Manager as
investment adviser. At such time as this Agreement or any extension, renewal or
amendment hereof, or such other similar agreement shall no longer be in effect,
Trust will cease to use any name derived from the name "Nuveen" or otherwise
connected with Manager, or with any organization which shall have succeeded to
Manager's business as investment adviser.
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<PAGE> 9
17. References and Headings. In this Agreement and in any such
amendment, references to this Agreement and all expressions such as
"herein," "hereof," and "hereunder" shall be deemed to refer to this
Agreement as amended or affected by any such amendments. Headings are
placed herein for convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction, or effect of
this Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
Dated: August 26, 1996
NUVEEN INVESTMENT TRUST III
ATTEST BY ______________________________
________________________________
NUVEEN INSTITUTIONAL ADVISORY
CORP.
ATTEST BY ________________________________
________________________________
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<PAGE> 10
NUVEEN INVESTMENT TRUST III
MANAGEMENT AGREEMENT
SCHEDULE A
The Funds of the Trust currently subject to this Agreement and the
effective date of each are as follows:
FUND EFFECTIVE DATE INITIAL TERM
Nuveen Income Fund November 27, 1998 Until August 1, 2000
<PAGE> 11
NUVEEN INVESTMENT TRUST III
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of this Agreement shall be calculated
with respect to each Fund in accordance with the following schedule applicable
to the average daily net assets of the Fund:
NUVEEN INCOME FUND
AVERAGE DAILY NET ASSET VALUE FUND MANAGEMENT FEE
For the first $125 million .6000 of 1%
For the next $125 million .5875 of 1%
For the next $250 million .5750 of 1%
For the next $500 million .5625 of 1%
For the next $1 billion .5500 of 1%
For assets over $2 billion .5250 of 1%
<PAGE> 1
EXHIBIT 10.16(A)
EXCHANGE TRADED FUND CUSTODY AGREEMENT
THIS AGREEMENT is made this ___ day of __________, 1998 by and between
[NAME OF FUND]. a closed-end investment company organized as a Massachusetts
business trust (the "Fund"), and THE CHASE MANHATTAN BANK, a New York banking
corporation ("Chase").
W I T N E S S E T H
WHEREAS, the Fund is registered as a closed-end diversified, management
investment company under the Investment Company act of 1940 (the "1940 Act")
WHEREAS, the Fund desires to retain Chase to serve as the Fund's
custodian and Chase is willing to act as custodian hereunder.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints Chase to act as custodian of
its portfolio securities, cash and other property on the terms set forth in this
Agreement. Chase accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided in Section 23 of
this Agreement.
2. DELIVERY OF DOCUMENTS. The Fund has furnished Chase with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of Chase as Custodian of the portfolio securities, cash and other
property of the Fund and approving this Agreement;
(b) Incumbency and signature certificates identifying and containing
the signatures of the Fund's officers and/or the persons authorized to sign
Proper Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Articles of Incorporation filed with the State of
Minnesota and all amendments thereto (such Articles of Incorporation as
currently in effect and from time to time, be amended, are herein called the
"Articles");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws"),
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(e) Resolutions of the Fund's Board of Directors appointing the
investment advisor of the Fund and resolutions of the Fund's Board of Directors
and the Fund's Shareholders approving the proposed Investment Advisory Agreement
between the Fund and the advisor (the "Advisory Agreement");
(f) The Advisory Agreement
(g) The Fund's Notification of Registration filed pursuant to Section
8(a) of the 1940 Act and the Securities Act of 1933, as amended ("the 1933 Act")
with the SEC; and
(h) The Fund's most recent prospectus and statement including all
amendments and supplements thereto (the "Prospectus").
Upon request the Fund will furnish Chase with copies of all amendments
of or supplements to the foregoing, if any. The Fund will also furnish Chase
upon request with a copy of the opinion of counsel for the Fund with respect to
the validity of the Shares of the Fund and the status of such Shares under the
1933 Act filed with the SEC, and any other applicable federal law or regulation.
3. DEFINITIONS.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means the Fund's President, Treasurer and any other person,
whether or not any such person is an officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Proper Instructions on
behalf of the Fund as set forth in resolutions of the Fund's Board of Directors.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means a book-entry system authorized by the U.S. Department
of Treasury, its successor or successors and its nominee or nominees.
(c) "Proper Instructions". Proper Instructions as used herein means a
writing signed or initialed by two or more persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if Chase reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all such oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and Chase are satisfied that such
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<PAGE> 3
procedures afford adequate safeguards for the Fund's assets. For purposes of
this Section, Proper Instructions shall include instructions received by Chase
pursuant to any three-party agreement which requires a segregated asset account
in accordance with Section 9.
(d) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property of the Fund
which the Fund may from time to time deposit, or cause to be deposited, with
Chase or which Chase may from time to time hold for the Fund;
(ii) all income in respect of any such securities or other
property; and
(iii) all proceeds of the sales of any of such securities or
other property.
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee or
nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Directors approving deposits by Chase
therein.
4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Fund will deliver or
cause to be delivered to Chase all securities and all moneys owned by it,
including payments of interest, principal and capital distributions and cash
received by it from the issuance of its Shares, at any time during the period of
this Agreement, except for securities and monies to be delivered to any
subcustodian appointed pursuant to Section 7 hereof. Chase will not be
responsible for such securities and such monies until actually received by it.
All securities delivered to Chase or to any such subcustodian (other than in
bearer form) shall be registered in the name of the Fund or in the name of a
nominee of the Fund or in the name of Chase or any nominee of Chase (with or
without indication of fiduciary status) or in the name of any subcustodian or
any nominee of such subcustodian appointed pursuant to Paragraph 7 hereof, or
with a Securities Depository or its nominee pursuant to Section 8 hereof, or
shall be properly endorsed and in form for transfer satisfactory to Chase.
5. VOTING RIGHTS. With respect to all securities, however registered,
it is understood that the voting and other rights and powers shall be exercised
by the Fund. Chase's only duty shall be to mail for delivery on the next
business day to the Fund any documents received, including proxy statements and
offering circulars, with any proxies for securities registered in a nominee name
executed by such nominee. Where warrants, options, tenders or other securities
have fixed expiration dates, the Fund understands that in order for Chase to
act, Chase must receive the Fund's instructions at its offices in New York,
addressed as Chase may from time to time request, by no later than noon (NY City
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<PAGE> 4
time) at least two business days prior to the last scheduled date to act with
respect thereto (or such earlier date or time as Chase may reasonably notify the
Fund). Absent Chase's timely receipt of such instructions, such instruments will
expire without liability to Chase.
6. RECEIPT AND DISBURSEMENT OF MONEY.
(a) Chase shall open and maintain a custody account for the Fund,
subject only to draft or order by Chase acting pursuant to the terms of this
Agreement, and shall hold in such account, subject to the provisions hereof, all
cash received by it from or for the Fund other than cash maintained by the Fund
in a bank account established and used in accordance with Rule 17f-3 under the
1940 Act. Funds held by Chase for the Fund may be deposited by Chase to the
Fund's credit at Chase or in such other banks or trust companies as Chase may in
its discretion deem necessary or desirable; provided, however, that every such
bank or trust company shall be qualified to act as a custodian under the 1940
Act, and that each such bank or trust company shall be approved by vote of a
majority of the Board of Directors of the Fund. Such funds shall be deposited by
Chase in its capacity as Custodian and shall be withdrawable by Chase only in
that capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) Chase shall make payments of
cash to, or for the account of, the Fund from such cash only (i) for the
purchase of securities, options, futures contracts or options on futures
contracts for the Fund as provided in Section 13 hereof; (ii) in the case of a
purchase of securities effected through a Book-Entry System or Securities
Depository, in accordance with the conditions set forth in Section 8 hereof;
(iii) in the case of repurchase agreements entered into between the Fund and
Chase, or another bank, or a broker-dealer which is a member of The National
Association of Securities Dealers, Inc. ("NASD"), either (a) against delivery of
the securities either in certificate form or through an entry crediting Chase's
account at the Federal Reserve Bank with such securities or (b) against delivery
of the receipt evidencing purchase by the Fund of securities owned by Chase
along with written evidence of the agreement by Chase to repurchase such
securities from the Fund; (iv) for transfer to a time deposit account of the
Fund in any bank, whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund; (v) for the payment of dividends
or other distributions on shares declared pursuant to the governing documents of
the Fund, or for the payment of interest, taxes, administration, distribution or
advisory fees or expenses which are to be borne by the Fund under the terms of
this Agreement, any Advisory Agreement, or any administration agreement; (vi)
for payments in connection with the conversion, exchange or surrender of
securities owned or subscribed to by the Fund and held by or to be delivered to
Chase; (vii) to a subcustodian pursuant to Section 7 hereof; (viii) for such
common expenses incurred by the Fund in the ordinary course of its business,
including but not limited to printing and mailing expenses, legal fees,
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<PAGE> 5
accountants fees, exchange fees; or (ix) for any other proper purpose, but only
upon receipt of, in addition to Proper Instructions.
(c) Chase is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian for the
Fund.
6A. ADVANCES BY CUSTODIAN. The Fund may from time to time purchase
securities for settlement payable in "next day" funds and provide for payment
for such transactions by selling securities for settlement in "same day" funds
settling on the day after settlement of the Fund's purchase transaction. Under
these circumstances the Fund may require the Custodian to advance funds in
amounts not exceeding 20% of the value of the Fund's assets at the time of the
advance for payment of the securities purchase transaction, and the Custodian
shall recover an amount equal to its advance, with interest at the rate it
customarily charges for such transactions, from the proceeds of the securities
sale. In addition to the foregoing, the Custodian may from time to time agree to
advance cash to the Fund, with interest, for the Fund's other proper corporate
purposes. If the Custodian advances cash for any purpose, the Fund shall and
hereby does grant to the Custodian a security interest in Fund securities equal
in value to the amount of the cash advance but in no event shall the value of
securities in which a security interest has been granted exceed 20% of the value
of the Fund's total assets at the time of the pledge; should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash to reasonably dispose of any securities in which it has a
security interest to the extent necessary to obtain reimbursement.
7. RECEIPT AND DELIVERY OF SECURITIES.
(a) Except as provided by Section 8 hereof, Chase shall hold and
physically segregate all securities and noncash Property received by it for the
Fund. All such securities and non-cash Property are to be held or disposed of by
Chase for the Fund pursuant to the terms of this Agreement. In the absence of
Proper Instructions, Chase shall have no power or authority to withdraw,
deliver, assign, hypothecate, pledge or otherwise dispose of any such securities
and investments, except in accordance with the express terms provided for in
this Agreement. In no case may any director, officer, employee or agent of the
Fund withdraw any securities. In connection with its duties under this Section
7, Chase may, at its own expense, enter into subcustodian agreements with other
banks or trust companies for the receipt of certain securities and cash to be
held by Chase for the account of the Fund pursuant to this Agreement; provided
that each such bank or trust company has an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
twenty million dollars ($20,000,000. Chase will be liable for acts or omissions
of any subcustodian. Chase shall employ sub-custodians upon receipt of Proper
Instructions.
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(b) Promptly after the close of business on each day Chase shall
furnish the Fund with confirmations and a summary of all transfers to or from
the account of the Fund during said day. Where securities are transferred to the
account of the Fund established at a Securities Depository or Book Entry System
pursuant to Section 8 hereof, Chase shall also by book-entry or otherwise
identify as belonging to such Fund the quantity of securities in a fungible bulk
of securities registered in the name of Chase (or its nominee) or shown in
Chase's account on the books of a Securities Depository or Book-Entry System. At
least monthly and from time to time, Chase shall furnish the Fund with a
detailed statement of the Property held for the Fund under this Agreement.
8. USE OF SECURITIES DEPOSITORY OR BOOK-ENTRY SYSTEM. The Fund shall
deliver to Chase a certified resolution of the Board of Directors of the Fund
approving, authorizing and instructing Chase on a continuous and ongoing basis
until instructed to the contrary by Proper Instructions actually received by
Chase (i) to deposit in a Securities Depository or Book-Entry System all
securities of the Fund eligible for deposit therein and (ii) to utilize a
Securities Depository or Book-Entry System to the extent possible in connection
with the performance of its duties hereunder, including without limitation
settlements of purchases and sales of securities by the Fund, and deliveries and
returns of securities collateral in connection with borrowings. Without limiting
the generality of such use, it is agreed that the following provisions shall
apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will at all times (1) be represented in an
account of Chase in the Securities Depository or Book Entry System (the
"Account") and (2) be segregated from any assets and cash controlled by Chase in
other than a fiduciary or custodian capacity but may be commingled with other
assets held in such capacities. Chase will effect payment for securities and
receive and deliver securities in accordance with accepted industry practices as
set forth in (b) below, unless the Fund has given Chase Proper Instructions to
the contrary. The records of Chase with respect to securities of the Fund
maintained in a Securities Depository or Book Entry System shall identify by
book entry those securities belonging to the Fund.
(b) Chase shall pay for securities purchased for the account of the
Fund upon (i) receipt of advice from the Securities Depository or Book Entry
System that such securities have been transferred to the Account, and (ii) the
making of an entry on the records of Chase to reflect such payment and transfer
for the account of the Fund. Upon receipt of Proper Instructions, Chase shall
transfer securities sold for the account of the Fund upon (i) receipt of advice
from the Securities Depository or Book Entry System that payment for such
securities has been transferred to the Account, and (ii) the making of an entry
on the records of Chase to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities Depository or Book Entry
System of transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by Chase and be provided to the Fund at its
request. Upon request, Chase shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in
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the form of a written advice or notice and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's transactions in a Securities
Depository or Book Entry System for the account of the Fund.
(c) Chase shall provide the Fund with any report obtained by Chase on
the Securities Depository or Book Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities Depository or Book Entry System.
(d) All Books and records maintained by Chase which relate to the Fund
participation in a Securities Depository or Book-Entry System will at all times
during Chase's regular business hours be open to the inspection of the Fund's
duly authorized employees or agents, and the Fund will be furnished with all
information in respect of the services rendered to it as it may require.
(e) Anything to the contrary in this Agreement notwithstanding, Chase
shall be liable to the Fund for any loss or damage to the Fund resulting from
any negligence, misfeasance or misconduct of Chase or any of its agents or of
any of its or their employees in connection with its or their use of the
Securities Depository or Book Entry Systems or from failure of Chase or any such
agent to enforce effectively such rights as it may have against such Securities
Depository or Book Entry System.
9. SEGREGATED ACCOUNT. Chase shall upon receipt of Proper Instructions
establish and maintain a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred cash and/or securities,
including securities maintained in an account by Chase pursuant to Section 8
hereof, (i) in accordance with the provisions of any agreement among the Fund,
Chase and a broker dealer registered under the Securities and Exchange Act of
1934 and a member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered contract market),
or of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, and (iii) for other proper corporate purposes,
but only, in the case of clause (iv), upon receipt of Proper Instructions.
10. INSTRUCTIONS CONSISTENT WITH THE ARTICLES, ETC.
(a) Unless otherwise provided in this Agreement, Chase shall act only
upon Proper Instructions. Chase may assume that any Proper Instructions received
hereunder are not in any way inconsistent with any provision of the Articles or
By-Laws or any vote
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<PAGE> 8
or resolution of the Fund's Board of Directors or any committee thereof. Chase
shall be entitled to rely upon any Proper Instructions actually received by
Chase pursuant to this Agreement. The Fund agrees that Chase shall incur no
liability for following Proper Instructions given to Chase.. In accord with
instructions from the Fund, as required by accepted industry practice or as
Chase may elect in effecting the execution of Fund instructions, advances of
cash or other Property made by Chase, arising from the purchase, sale,
redemption, transfer or other disposition of Property of the Fund, or in
connection with the disbursement of funds to any party, or in payment of fees,
expenses, claims or liabilities owed to Chase by the Fund, or to any other party
which has secured judgment in a court of law against the Fund which creates an
overdraft in the accounts or over-delivery of Property, shall be deemed a loan
by Chase to the Fund, payable on demand, bearing interest at such rate
customarily charged by Chase for similar loans.
(b) The Fund agrees that test arrangements, authentication methods or
other security devices to be used with respect to instructions which the Fund
may give by telephone, telex, TWX, facsimile transmission, bank wire or other
teleprocess, or through an electronic instruction system, shall be processed in
accordance with terms and conditions for the use of such arrangements, methods
or devices as Chase may put into effect and modify from time to time. The Fund
shall safeguard any test keys, identification codes or other security devices
which Chase makes available to the Fund and agrees that the Fund shall be
responsible for any loss, liability or damage incurred by Chase or by the Fund
as a result of Chase's acting in accordance with instructions from any
unauthorized person using the proper security device, unless such unauthorized
use is a result of Chase's negligence or willful misconduct. Chase may
electronically record, but shall not be obligated to so record, any instructions
given by telephone and any other telephone discussions with respect to the Fund.
In the event that the Fund uses Chase's Asset Management system or any successor
electronic communications or information system, the Fund agrees that Chase is
not responsible for the consequences of the failure of that system to perform
for any reason, beyond the reasonable control of Chase, or the failure of any
communications carrier, utility, or communications network. In the event that
system is inoperable, the Fund agrees that it will accept the communication of
transaction instructions by telephone, facsimile transmission on equipment
compatible to Chase's facsimile receiving equipment or by letter, at no
additional charge to the Fund.
(c) Chase shall transmit promptly to the Fund all written information
received by Chase's Corporate Actions Department from issuers of the securities
being held for the Fund. With respect to tender or exchange offers, Chase shall
transmit promptly by facsimile to the Fund all written information received by
Chase's Corporate Actions Department from issuers of the securities whose tender
or exchange is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall notify
Chase's Corporate Actions Department at least three business days prior to the
date on which Chase is to take such action or upon the date such notification is
first received by the Fund, if later. If any Property registered in the name of
a nominee of Chase is called for partial redemption by the issuer of such
property, Chase is
8
<PAGE> 9
authorized to allot the called portion to the respective beneficial holders of
the Property in such manner deemed to be fair and equitable by Chase in its sole
discretion.
11. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. Chase is authorized to
take the following action without Proper Instructions:
(a) Collection of Income and Other Payments. Chase shall:
(i) collect and receive on a timely basis for the account of
the Fund, all income and other payments and distributions, including (without
limitation) stock dividends, rights, warrants and similar items, included or to
be included in the Property of the Fund, and promptly advise the Fund of such
receipt and shall credit such income, as collected, to the Fund. From time to
time, Chase may elect, but shall not be obligated, to credit the account with
interest, dividends or principal payments on payable or contractual settlement
date, in anticipation of receiving same from a payor, central depository, broker
or other agent employed by the Fund or Chase. Any such crediting and posting
shall be at the Fund's sole risk, and Chase shall be authorized to reverse any
such advance posting in the event it does not receive good funds from any such
payor, central depository, broker or agent of the Customer. Chase agrees to
promptly notify the Fund of the reversal of any such advance posting;
(ii) endorse and deposit for collection in the name of the
Fund, checks, drafts, or other orders for the payment of money on the same day
as received;
(iii) receive and hold for the account of the Fund all
securities received by the Fund as a result of a stock dividend, share split-up
or reorganization, merger, recapitalization, readjustment or other rearrangement
or distribution of rights or similar securities issued with respect to any
portfolio securities of the Fund held by Chase hereunder;
(iv) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed or retired, or otherwise
become payable on the date such securities become payable;
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other payments and
the endorsement for collection of checks, drafts and other negotiable
instruments; and
(vi) to effect an exchange of the securities where the par
value is changed, and to surrender securities at maturity or upon an earlier
call for redemption, or when securities otherwise become payable, against
payment therefore in accordance with accepted industry practice. If any Property
registered in the name of a nominee of Chase is called for partial redemption by
the issuer of such property, Chase is authorized to allot
9
<PAGE> 10
the called portion to the respective beneficial holders of the Property in such
manner deemed to be fair and equitable by Chase in its sole discretion.
(b) Miscellaneous Transactions. Chase is authorized to deliver or cause
to be delivered Property against payment or other consideration or written
receipt therefor for examination by a dealer selling for the account of the Fund
in accordance with street delivery custom.
12. TRANSACTIONS REQUIRING INSTRUCTIONS. In addition to the actions
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, Chase, directly or through the use of a
Securities Depository or Book-Entry System, shall:
(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any issuer of securities or corporation, against receipt of such
certificates of deposit, interim receipts or other instruments or documents, and
cash, if any, as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities shall be released only upon
payment to Chase of the monies borrowed, or upon receipt of adequate collateral
as agreed upon by the Fund and Chase which may be in the form of cash or
obligations issued by the U.S. government, its agencies or instrumentalities,
except that in cases where additional collateral is required to secure a
borrowing already made, subject to proper prior authorization, further
securities may be released for that purpose; and pay such loan upon re-delivery
to it of the securities pledged or hypothecated therefore and upon surrender of
the note or notes evidencing the loan;
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<PAGE> 11
(f) Deliver securities in accordance with the provisions of any
agreement among the Fund, Chase and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any
agreement among the Fund, Chase and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Fund;
(h) Deliver securities against payment or other consideration or
written receipt therefore for transfer of securities into the name of the Fund
or Chase or a nominee of either, or for exchange or securities for a different
number of bonds, certificates, or other evidence, representing the same
aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to Chase;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to Chase;
(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund; and
(l) Deliver securities pursuant to any other proper corporate purpose,
but only upon receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board of Directors or of the Executive Committee signed
by an officer of the Funds and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
securities shall be made.
13. PURCHASE OF SECURITIES. Promptly after each purchase of securities,
options, futures contracts or options on futures contracts by the investment
advisor, the Fund shall deliver to Chase (as Custodian) Proper Instructions
specifying with respect to each such purchase: (a) the name of the issuer and
the title of the securities, (b) the number of shares of the principal amount
purchased and accrued interest, if any, (c) the
11
<PAGE> 12
dates of purchase and settlement, (d) the purchase price per unit, (e) the total
amount payable upon such purchase, (f) the name of the person from whom or the
broker through whom the purchase was made and (g) the Fund name. Chase shall
upon receipt of securities purchased by or for the Fund registered in the name
of the Fund or in the name of a nominee of Chase or of the Fund or in proper
form for transfer or upon receipt of evidence of title to options, futures
contracts or options on futures contracts purchased by the Fund, pay out of the
moneys held for the account of the Fund the total amount payable to the person
from whom or the broker through whom the purchase was made, provided that the
same conforms to the total amount payable as set forth in such Proper
Instructions. Except as specifically stated otherwise in this Agreement, in any
and every case where payment for purchase of securities for the account of the
Fund is made by Chase in advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund to so pay in advance,
Chase shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by Chase.
14. SALE OF SECURITIES. Promptly after each sale of securities by the
Fund at the instruction of the investment advisor, the Fund shall deliver to
Chase (as Custodian) Proper Instructions, specifying with respect to each such
sale; (a) the name of the issuer and the title of the security, (b) the number
of shares or principal amount sold, and accrued interest, if any, (c) the date
of sale, (d) the sale price per unit, (e) the total amount payable to the Fund
upon such sale, (f) the name of the broker through whom or the person to whom
the sale was made and (g) the Fund name. Chase shall deliver the securities upon
receipt of the total amount payable to the Fund upon such sale, provided that
the same conforms to the total amount payable as set forth in such Proper
Instructions. Subject to the foregoing, Chase may accept payment in such form as
shall be satisfactory to it, and may deliver securities and arrange for payment
in accordance with the customs prevailing among dealers in securities.
15. NOT IN USE.
16. RECORDS. Chase shall preserve its books and records relating to the
Funds securities for the period required by Rule31a-2 of the 1940 Act. The Fund,
or the Fund's authorized representative, shall have access to such books and
records at all times during Chase's normal business hours. Upon reasonable
request of the Fund and at the Fund's expense, copies of any such books and
records shall be provided by Chase to the Fund or the Fund's authorized
representative.
17. COOPERATION WITH ACCOUNTANTS. Chase shall cooperate with the Fund's
independent certified public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to assure that the
necessary
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information is made available to such accountants for the expression of their
unqualified opinion, including but not limited to the opinion included in the
Fund's Form N-1A, Form N-SAR and other reports to the Securities and Exchange
Commission and with respect to any other requirement of such Commission.
18. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. Chase shall
provide the Fund, at such times as the Fund may reasonably require, with reports
by independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities Depository or Book Entry System, relating to the services
provided by Chase under this Agreement; such reports, shall be of sufficient
scope and in sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the reports shall
so state.
19. CONFIDENTIALITY. Chase agrees on behalf of itself and its employees
to treat confidentially and as the proprietary information of the Fund all
information relative to the Fund's assets held under this Agreement, and not to
use such information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where Chase may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Fund.
20. EQUIPMENT FAILURES. In the event of equipment failures beyond
Chase's control, Chase shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall not have liability
with respect thereto.
21. RIGHT TO RECEIVE ADVICE.
(a) Advice of Fund. If Chase shall be in doubt as to any action to be
taken or omitted by it, it may request, and shall receive, from the Fund
clarification or advice.
(b) Advice of Counsel. If Chase shall be in doubt as to any question of
law involved in any action to be taken or omitted by Chase, it may request
advice at its own cost from counsel of its own choosing (who may be counsel for
the Fund or Chase, at the option of Chase).
(c) Conflicting Advice. In case of conflict between directions or
advice received by Chase pursuant to sub-paragraph (a) of this paragraph and
advice received by Chase
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<PAGE> 14
pursuant to subparagraph (b) of this paragraph, Chase shall be entitled to rely
on and follow the advice received pursuant to the latter provision alone.
(d) Protection of Chase. Chase shall be protected in any action or
inaction which it takes or omits to take in reliance on any directions or advice
received pursuant to subparagraphs (a) or (b) of this section which Chase, after
receipt of any such directions or advice, in good faith believes to be
consistent with such directions or advice. However, nothing in this paragraph
shall be construed as imposing upon Chase any obligation (i) to seek such
directions or advice, or (ii) to act in accordance with such directions or
advice when received, unless, under the terms of another provision of this
Agreement, the same is a condition to Chase's properly taking or omitting to
take such action. Nothing in this subsection shall excuse Chase when an action
or omission on the part of Chase constitutes willful misfeasance, bad faith,
negligence or reckless disregard by Chase of its duties under this Agreement.
22. NOT IN USE.
23. COMPENSATION. As compensation for the services rendered by Chase
during the term of this Agreement, the Fund will pay to Chase, in addition to
reimbursement of its out-of-pocket expenses, monthly fees as outlined in Exhibit
A.
24. INDEMNIFICATION; LIMITATION OF LIABILITY.
(a) The Fund, as sole owner of the Property, agrees to
indemnify and hold Chase and Chase's directors, officers, agents and employees
(collectively the "Indemnitees") harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties, and expenses, including
out-of-pocket and incidental expenses and legal fees ("Losses") that may be
imposed on, incurred by, or asserted against, the Indemnitees or any of them for
following any instructions or other directions upon which Chase is authorized to
rely pursuant to the terms of this Agreement.
(b) In addition to and not in limitation of paragraph (a)
immediately above, Company also agrees to indemnify and hold the Indemnitees and
each of them harmless from and against any and all Losses that may be imposed
on, incurred by, or asserted against, the Indemnitees or any of them in
connection with or arising out of Chase's performance under this Agreement,
provided the Indemnitees have not acted with negligence or bad faith or engaged
in willful misconduct.
(c) Chase shall indemnify and hold the Fund harmless from and
against any and all Losses, excluding attorneys' fees and expenses, arising out
of or attributable to Chase's breach of any material terms of this Agreement or
Chase's bad faith,
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<PAGE> 15
negligence or willful misconduct; provided the Fund in respect of such Losses,
has not acted in bad faith or with negligence or engaged in willful misconduct.
(d) Anything in this Agreement to the contrary notwithstanding
in no event shall Chase be liable for incidental, indirect, special, or
consequential losses or damages of any kind whatsoever, even if Chase is advised
of the likelihood of any such loss or damage and regardless of the form of
action in which any such loss or damage may be claimed.
25. RESPONSIBILITY OF CHASE. In the performance of its duties
hereunder, Chase shall be obligated to exercise care and diligence and to act in
good faith to insure the accuracy and completeness of all services performed
under this Agreement. Chase shall be responsible for its own negligent failure
or that of any subcustodian it shall appoint to perform its duties under this
Agreement. Chase shall not be liable for any act or omission which does not
constitute willful misconduct, bad faith, or negligence on the part of Chase or
such subcustodian or reckless disregard of such duties, obligations and
responsibilities. Chase shall not be under any duty or obligation to inquire
into and shall not be liable for or in respect of (a) the validity or invalidity
or authority or lack thereof of any advice, direction, notice or other
instrument which conforms to the applicable requirements of this Agreement, if
any, and which Chase believes to be genuine, (b) the validity of the issue of
any securities purchased or sold by the Fund, the legality of the purchase or
sale thereof or the propriety of the amount paid or received therefor, (c) the
legality of the issue or sale of any Shares of the Fund, or the sufficiency of
the amount to be received therefore, (d) the legality of the redemption of any
Shares of the Fund, or the propriety of the amount to be paid therefor, (e) the
legality of the declaration or payment of any dividend or distribution on
Shares, or (f) delays or errors or loss of data occurring by reason of
circumstances beyond Chase's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown
(except as provided in Section 20), flood or catastrophe, acts of God,
insurrection, war, riots, or failure of the mail, transportation, communication
or power supply.
26. COLLECTION OF INCOME. Chase shall collect on a timely basis all
income and other payments with respect to registered securities held hereunder
to which the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by the
issuer, such securities are held by Chase or its agent thereof and shall credit
such income, as collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, Chase shall detach and present for payment all
coupons and other income items requiring presentation as and when they become
due and shall collect interest when due on securities held hereunder. Income due
the Fund on securities loaned pursuant to the provisions of Section 9 shall be
the responsibility of the Fund. Chase will have no duty or responsibility in
connection therewith, other than to provide the Fund with such information or
data as may be
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<PAGE> 16
necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Fund is properly entitled.
27. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. Chase shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
28. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT. This Agreement shall
become effective as of its execution, shall continue in full force and effect
until terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after the date
of such delivery or mailing.
Upon termination of the Agreement, the Fund shall pay to Chase such
compensation as may be due as of the date of such termination and shall likewise
reimburse Chase for its costs, expenses and disbursements.
29. SUCCESSOR CUSTODIAN If a successor custodian shall be appointed by
the Board of Directors of the Fund, Chase shall, upon termination, deliver to
such successor custodian at the office of the custodian, duly endorsed and in
the form for transfer, all securities then held by it hereunder and shall
transfer to an account of the successor custodian all of the Fund's securities
held in a Securities Depository or Book Entry System.
If no such successor custodian shall be appointed, Chase shall, in like
manner, upon receipt of a certified copy of a vote of the Board of Directors of
the Fund, deliver at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
Chase on or before the date when such termination shall be come effective, then
Chase shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, doing business in New York, New York, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by Chase and all instruments held by
Chase relative thereto and all other property held by it under this Agreement
and to transfer to an account of such successor custodian all of the Fund's
securities held in any Securities Depository or Book Entry System. Thereafter,
such bank or trust company shall be the successor of the Custodian under this
Agreement.
In the event that securities, funds and other properties remain in the
possession of Chase after the date of termination hereof owing to failure of the
Fund to procure the certified copy of the vote referred to or of the Board of
Directors to appoint a successor custodian, Chase's sole obligation to the Fund
shall be to safekeep the Fund's assets until
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<PAGE> 17
they are transferred as directed by the Fund and Chase shall be entitled to fair
compensation for its services during such period as Chase retains possession of
such securities, funds and other properties and the provisions of this Agreement
relating to the Chase's rights shall remain in full force and effect.
30. NOTICES. All notices and other communications (collectively
referred to as "Notice" or "Notices") in this section hereunder shall be in
writing and shall be first sent by telegram, cable, telex, or facsimile sending
device and thereafter by overnight mail for delivery on the next business day.
Notices shall be addressed (a) if to Chase, at Chase's address, 4 New York
Plaza, 3rd floor, New York, New York 10004, attention Mutual Fund Custody,
facsimile number (212) 623-8997; (b) if to the Fund, at the address of the Fund
Attention: Portfolio Manager, facsimile number (312) 917-8211; or (c) if to
neither of the foregoing, at such other address as shall have been notified to
the sender of any such Notice or other communication. Notices sent by overnight
mail shall be deemed to have been given the next business day. Notices sent by
messenger shall be deemed to have been given on the day delivered, and notices
sent by confirming telegram, cable, telex or facsimile sending device shall be
deemed to have been given immediately. All postage, cable, telegram, telex and
facsimile sending device charges arising from the sending of a Notice hereunder
shall be paid by the sender.
31 FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
32. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
33. MISCELLANEOUS. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall insure to the benefit of the parties hereto and their respective
successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
17
<PAGE> 18
THE CHASE MANHATTAN BANK
Attest: ___________________________ By:___________________________
THOMAS A. DE ANGELO
VICE PRESIDENT
[NAME OF FUND]
Attest: __________________________ By:___________________________
[TITLE]
18
<PAGE> 19
CUSTODY AGREEMENTS BETWEEN
NUVEEN EXCHANGE-TRADED FUNDS
AND
CHASE MANHATTAN BANK
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Florida Investment Quality Municipal Fund
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Select Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen Florida Quality Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Ohio Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Arizona Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen Michigan Premium Income Municipal Fund, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen Insured New York Premium Income Municipal Fund, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen Maryland Premium Income Municipal Fund
Nuveen Massachusetts Premium Income Municipal Fund
Nuveen Pennsylvania Premium Income Municipal Fund 2
Nuveen Virginia Premium Income Municipal Fund
Nuveen Washington Premium Income Municipal Fund
<PAGE> 20
Nuveen Connecticut Premium Income Municipal Fund
Nuveen Georgia Premium Income Municipal Fund
Nuveen Missouri Premium Income Municipal Fund
Nuveen North Carolina Premium Income Municipal Fund
Nuveen California Premium Income Municipal Fund
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Municipal Value Fund, Inc.
Nuveen California Municipal Value Fund, Inc.
Nuveen New York Municipal Value Fund, Inc.
Nuveen Municipal Income Fund, Inc.
Nuveen Select Maturities Municipal Fund
Nuveen Select Tax-Free Income Portfolio
Nuveen Select Tax-Free Income Portfolio 2
Nuveen Insured California Select Tax-Free Income Portfolio
Nuveen Insured New York Tax-Free Income Portfolio
Nuveen Select Tax-Free Income Portfolio 3
<PAGE> 1
EXHIBIT 10.16(b)
SHAREHOLDER TRANSFER AGENCY AGREEMENT
This Agreement is made this _____ day of December, 1998 by and between The
Chase Manhattan Bank ("Chase") a banking corporation organized under the laws of
the State of New York having an office at 4 New York Plaza, New York, New York
10004, and [Name of Fund]., a closed-end investment company organized as a
business trust under the laws of the State of Massachusetts. (the "Fund").
I SERVICES
Commencing on the date first hereinabove written and in accordance with
procedures established from time to time by the Fund and Chase, Chase shall
perform the (i) shareholder account maintenance services, (ii) mailing services,
(iii) dividend and distribution payment services and (iv) recordkeeping
services (collectively, the "Standard Services") in connection with the Fund's
shares of common stock, par value $.01 per share (the "Shares"), as more fully
described herein.
A. Account Maintenance Services. Chase shall perform transfer agent,
registrar and other shareholder account maintenance services in connection with
the Shares. Such services are composed of (i) registering Share issuance,
redemption and transfers on the Fund's records of the holders of Shares (the
"Shareholders") upon receipt of instructions from, in the case of issuance and
redemption, the Fund, and in the case of a transfer, the transferor and
documentation in proper form to effect a transfer of Shares; (ii) canceling the
certificates(1) representing such Shares, if any, and if so requested,
countersigning, registering, issuing and mailing by insured first class mail new
certificates for the same or a smaller whole number of Shares; (iii) issuing
replacement certificates in lieu of certificates which have been lost, stolen or
destroyed upon receipt of a properly executed affidavit with respect to such
loss, theft or destruction and a lost certificate bond in form satisfactory to
Chase; (iv) combining certificates into larger denominations; (v) maintaining
stop transfer orders, including placing and removing the same; (vi) processing
new Shareholder accounts; (vii) posting address changes, and (viii) researching
and responding to Shareholder inquiries. Shares will be transferred and new
certificates issued in transfer upon surrender of the old certificates in form
deemed by Chase to be properly endorsed for transfer accompanied by delivery of
such documents, certifications and opinions Chase may deem necessary to evidence
the authority of the person making the transfer and payment of any applicable
stock transfer tax. Chase reserves the right to refuse to transfer Shares until
it is satisfied that the endorsement or signature on any document is valid and
genuine, and for that purpose it will require a
___________________
1 All references to certificates will include book entry services.
<PAGE> 2
signature guarantee by a member or participant in the Securities Transfer
Agents Medallion Program or such other guarantor previously approved by Chase.
Chase shall not be required to effect any transfer unless and until it has
received the approvals, documents, certifications and opinions provided for
herein. Chase's sole responsibility in connection with any redemption of Shares
shall be to register the same on the Fund's records upon receipt of instruction
from the Fund.
B. Mailing. Mailing Services provided to the Fund shall consist of (i)
annual preparation of a list of Shareholders owning Shares, (ii) semi-annual
distribution of a report to Shareholders, (iii) mailing proxies, (iv) receiving
and tabulating proxies and mailing Shareholder reports to current
Shareholders, (v) certifying Share vote totals, (vi) assisting with the annual
meeting of Shareholders, if any, and (vii) upon request of the Fund, mailing to
each Shareholder such other information relating to the Fund as the Fund may
reasonably request.
C. Dividend and Distribution Payment Services.
(1) Upon the declaration of any dividend or distribution payable either in
Shares or cash, the Fund shall notify Chase in writing setting forth the date
of payment (the "Payment Date") of such dividend or distribution, the record
date as of which Shareholders entitled to payment thereof shall be determined
(the "Record Date"), and the amount payable per Share to Shareholders of record
as of the Record Date. In the case of dividends at regular intervals, such
notification may be a standing notification setting forth the method of
calculating such dividends and the Fund or its agent shall advise Chase of the
amount of such dividend at the appropriate intervals. Chase shall notify the
Fund and the entity then acting as the custodian (which entity may be an
affiliate of Chase) for the portfolio securities and cash of the Fund (the
"Custodian") of the amount of cash required to pay the dividend or distribution
so that the Fund may instruct the custodian to make sufficient funds available
on or before the Payment Date. Upon receipt by Chase or a drawee bank selected
by Chase of such funds from the Custodian, Chase shall prepare and mail to
Shareholders, at their addresses as they appear on the records maintained by
Chase or pursuant to any written order of a Shareholder on file with Chase,
checks representing any dividend or distributions to which they are entitled,
and an accompanying distribution statement.
(2) In addition to the forgoing, dividend and distribution payment
services are composed of (i) inserting any enclosure supplied by the Fund with
each dividend or distribution check; (ii) replacing lost dividend checks; (iii)
providing photocopies of canceled checks when requested by Shareholders; (iv)
reconciling paid and outstanding checks; (v) coding as "undeliverable" certain
amounts to suppress mailing of dividend checks to same; (vi) processing and
record keeping of accumulated uncashed dividends; (vii) furnishing requested
dividend and distribution information to Shareholders; and (vii) withholding
from such payments any taxes required to be withheld by Chase under, and
remitting the same in accordance with, applicable provisions of the Internal
Revenue Code.
<PAGE> 3
D. Dividend reinvestment Plan Services. Chase will act as agent for
shareholders under the Dividend Reinvestment Plan, a copy of which is attached
hereto as Exhibit D.
E. Recordkeeping Services.
(1) Chase shall keep records relating to the Standard Services to be
performed hereunder, in such form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the rules promulgated thereunder, Chase agrees that all such records
prepared or maintained by Chase relating to the service to be performed by Chase
hereunder are the property of the Fund and will be preserved for the periods
prescribed under Rule 31a-2 of said rules and made available in accordance with
such section and rules. Chase shall forthwith upon the Fund's demand surrender
promptly to the Fund and cease to retain in its files those records and
documents created and maintained by Chase pursuant to this Agreement.
(2) Chase and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person, except
as may be required by law.
(3) In case of any requests or demands for the inspection of the
Shareholder records of the Fund, Chase will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. Chase reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
II SHARE CERTIFICATES
The Fund shall supply Chase with sufficient Share certificates. Such blank
Share certificates shall be properly signed, manually or by facsimile signature,
by duly authorized officers of the Fund, and shall bear the seal or other
facsimile thereof of the Fund. Notwithstanding the death, resignation or removal
of any officer of the Fund authorized to sign such share certificates, Chase may
continue to countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Fund. Chase shall
establish and maintain facilities and procedures reasonably acceptable to the
Fund for the safekeeping of Shares certificates and facsimile signature
imprinting devices, if any, and for the preparation or sue and for keeping
account of such certificates and devices. Chase agrees to establish and maintain
facilities and procedures that are reasonably acceptable to the Fund and Chase
for safekeeping of stock certificates, check forms and facsimile signature
imprinting devices, if any, and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
<PAGE> 4
III FEES AND EXPENSES
For the services to be performed by Chase pursuant to this Agreement, the
Fund shall pay to Chase all fees and expenses described herein:
A. Shareholder Services Fee. The Fund shall pay Chase a service fee (the
"Shareholder Service Fee") in the amount set forth in Exhibit B hereto. The
Shareholder Service Fee is payable quarterly and shall be prorated for any
period less than a full calendar quarter.
B. Out-of-Pocket Expenses. The Fund agrees to reimburse Chase for any
and all out-of-pocket expenses, including, without limiting the preceding, the
expenses described and listed in Exhibit B.
C. Additional Services. The Fund may request additional processing,
special reports, or other additional services. The Fund shall submit such
requests for additional services in writing together with such specifications
as may be reasonably required by Chase, and Chase shall respond to such
requests in the form of a price quotation. The Fund's written acceptance of the
quotation must be received prior to implementation of such request.
D. Terms of Payment. All fees, out-of-pocket expenses, or additional
charges of Chase shall be billed on a quarterly basis and shall be due and
payable within 15 days after receipt of the invoice. Chase will render, after
the close of each quarter in which services have been furnished, a statement
reflecting all of the charges for such quarter.
D. Taxes. In addition to any other charges specified hereunder, the Fund
shall pay any sales tax, use tax, transfer tax, excise tax, tariff, duty, or
any other tax or payment in lieu thereof imposed by any governmental authority
or agency as a direct result of the provision by Chase of goods or services
hereunder, except for taxes based on Chase's net income.
IV REPRESENTATIONS AND WARRANTIES
A. Chase. Chase represents and warrants to the Fund that:
(1) It is a duly organized and existing corporation having the powers of
a trust company under the laws of the State of New York;
(2) It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement;
(3) All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement;
<PAGE> 5
(4) Its entering into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of Chase; and
(5) It has and will continue to have access to the necessary facilities,
equipment and personnel to perform is duties and obligations under this
Agreement.
B. The Fund. The Fund represents and warrants to Chase that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of ;
(2) It is empowered under applicable laws and by its Certificate of
Incorporation or Declaration of Trust, its by-laws, and the Resolutions of the
Board of Directors or Trustees (the "Organization Documents") to enter into and
perform this Agreement;
(3) All requisite proceedings have been taken to authorize it to enter
into and perform this Agreement;
(4) Its entering into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of the Fund; and
(5) The Fund is validly registered as a diversified, closed-end
management investment company under the Investment Company Act of 1940, as
amended, and the issuance of Shares to subscribers at closing will be in
compliance with applicable securities laws or qualify for exemption therefrom.
V DOCUMENTS FURNISHED BY THE FUND
A. Initially Furnished Documents. The Fund has furnished to Chase the
following documents:
(1) A copy of the Organization Documents of the Funds, attached hereto as
Exhibit A;
(2) Copies of the Fund's notice of registration on Form , attached
hereto as Exhibit C;
(3) A certificate signed by an officer of the Fund specifying the number
of authorized Shares, the number of such authorized Shares issued and currently
outstanding, and the names, Share amounts and other applicable information
required for issuance of Shares to subscribers; and
(4) An opinion of counsel to the Fund with respect to the validity of the
authorized and outstanding Shares and whether such Shares are fully paid and
non-assessable.
B. Prospectively Furnished Documents. The Fund shall furnish the following
documents upon request by Chase:
(1) Copies of all amendments to the Organization Documents of the Fund;
(2) Copies of all subsequent amendments to the Fund's registration
statement; and
(3) Such other certificates, documents and opinions as Chase shall deem to
be appropriate or necessary for the proper performance of its duties hereunder.
<PAGE> 6
VI INDEMNIFICATION
A. Fund Indemnification Obligation. Chase shall not be responsible for,
and the Fund shall indemnify and hold Chase harmless from, any and all losses,
damages, costs, charges, reasonable attorneys' fees, payments, expenses and
liability arising out of or attributable to:
(1) All actions of Chase or its agents or subcontractors required to be
taken pursuant to this Agreement unless such actions are taken in bad faith or
with negligence or willful misconduct;
(2) The Fund's refusal or failure to comply with the terms of this
Agreement, or the Fund's lack of good faith, negligence or willful misconduct,
or the breach of any representation or warranty of the Fund hereunder;
(3) The reliance on or use by Chase or its agents or subcontractors of
information, records or documents which are received by Chase or its agents or
subcontractors and furnished to it by or on behalf of the Fund, and which have
been prepared or maintained by the Fund or any other person or firm (other than
Chase or its agents or subcontractors) on behalf of the Fund;
(4) The reliance on, or the carrying out by Chase or its agents or
subcontractors of, any instructions or requests of the Fund which are reasonably
believed to bear the proper manual or facsimile signatures of the officers of
the Fund; and
(5) The offer or sale of Shares by the Fund in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state, or in violation of any stop order or other
determination or ruling by any federal agency or any state agency with respect
to the offer or sale of such Shares in such state.
B. Chase Indemnification Obligation. Chase shall indemnify and hold the
Fund harmless from and against any and all losses, damages, costs, charges, but
excluding attorneys fees, payments and expenses, arising out of or attributable
to Chase's material breach of this Agreement, or Chase's bad faith, negligence
or willful misconduct.
C. Claims. Upon the assertion of a claim for which either Chase or the
Fund may be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion and shall keep the other
party advised with respect to all developments concerning such claim, but the
failure to give such notice shall not affect rights to indemnification hereunder
except to the extent that the indemnifying party demonstrates actual damage
caused by such failure. The party who may be required to indemnify shall have
the option to participate with the party seeking indemnification in the defense
of such claim but not to control such defense. The party seeking indemnification
shall in no case confess any claim or make any compromise in any case in which
the other party may be required to indemnify it, except with the indemnifying
party's prior written consent, which consent shall not be withheld unreasonably.
<PAGE> 7
D. Chase's Limitation of Liability. Anything in this agreement to the
contrary notwithstanding, in no event shall Chase be liable for special,
indirect, or consequential losses or damages of any kind whatsoever whether or
not Chase has been advised as to the possibility of such losses or damages and
regardless of the form of action in which any such claim for losses or damages
may be made.
E. Force Majeure. In the event either Chase or the Fund is unable to
perform its obligations under the terms of this Agreement because of acts of
God, strikes, interruption of electrical power or other utilities, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable to the other for
any damages resulting from such failure to perform or otherwise from such
causes. Chase shall use all reasonable efforts to minimize the likelihood of
all damage, loss of data, delays and errors resulting from uncontrollable
events, and should such damage, loss of data, delays or errors occur, Chase
shall use its reasonable efforts to mitigate the effects of such occurrence.
VII TERM AND TERMINATION
A. Notice. This Agreement shall remain in effect until terminated by any
party, without penalty upon 90 days' prior written notice.
B. Breach. This Agreement may be terminated by any non-breaching party if
a party is in material breach of this Agreement. In order to so terminate this
Agreement, written notice shall be given to an officer of the party in breach
of the non-breaching party's intention to terminate due to a failure to comply
with, or breach of, a material term or condition of this Agreement. Said
written notice shall specifically state the material term or condition claimed
to be breached and shall provide at least 15 days in which to correct such
alleged breach. If such breach is not corrected in the time period allowed,
then any non-breaching may terminate this Agreement immediately, upon written
notice to the other parties.
C. Expenses. Should this Agreement be terminated, all out-of-pocket
expenses reasonably incurred by Chase in connection with the movement of
records and materials to its successor or to the Fund shall be borne by the
Fund.
VIII USE OF CHASE NAME
The Fund shall not use Chase's name in any offering material, Shareholder
reports, advertisement or other material relating to the Fund, other than for
the purpose of merely identifying and describing the functions of Chase
hereunder, in a manner not approved by Chase in writing prior to such use;
provided, however, that Chase shall consent to all uses of its name required by
the Securities and Exchange Commission, any state securities commission, or any
federal or state regulatory authority; and provided, further, that in no case
will such approval be unreasonably withheld.
<PAGE> 8
IX ASSIGNMENT
Except as hereunder provided, neither this Agreement nor any rights or
obligations hereunder may be assigned by any party without the written consent
of the other parties. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and
assigns. Chase may, with the Fund's consent, subcontract for the performance
hereof with any subsidiary or other affiliate of Chase, and may, with the
Fund's consent, subcontract for the performance hereof with third parties other
than a subsidiary or affiliate of Chase; provided, however, that Chase shall be
as fully responsible to the Fund for the acts or omissions of any subcontractor
as it is for its own acts and omissions and shall be responsible for its choice
of subcontractor.
X CONFIDENTIALITY
The information contained in this Agreement is confidential and
proprietary in nature. By receiving this Agreement, the Fund agrees that none
of its trustees, officers, employees, or agents, without the prior written
consent of Chase, will divulge, furnish or make accessible to any third party,
except as required by law or any regulatory authority or as permitted by the
next sentence, any part of this Agreement or information in connection
therewith which has been or may be made available to it. The Fund agrees that
it will limit access to the Agreement and such information to only those
officers or employees with responsibilities for analyzing the Agreement, to its
counsel, to such independent consultants hired expressly for the purpose of
assisting in such analysis, and to governmental agencies. In addition, the Fund
agrees that any person to whom such information is properly disclosed shall be
informed of the confidential nature of the Agreement and the information
relating thereto, and shall be directed to treat the same appropriately. The
terms set forth in this Article X shall continue without termination.
XI MISCELLANEOUS
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute the entire Agreement between the parties hereto and supersede
[text continued on next page]
<PAGE> 9
any prior oral or written Agreement with respect to the subject matter hereof.
This Agreement may not be amended or modified in any manner except by written
instrument executed by both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the date first above
written.
THE CHASE MANHATTAN BANK
By ______________________________
Name:
Title:
[Name of Fund]
By ______________________________
Name:
Title:
<PAGE> 10
TRANSFER AGENCY AGREEMENTS BETWEEN Prepare as an
NUVEEN EXCHANGE-TRADED FUNDS attachment to
AND EXHIBIT 10.16(b)
CHASE MANHATTAN BANK
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Florida Investment Quality Municipal Fund
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Select Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen Florida Quality Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Ohio Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Arizona Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen Michigan Premium Income Municipal Fund, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen Insured New York Premium Income Municipal Fund, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen Maryland Premium Income Municipal Fund
Nuveen Massachusetts Premium Income Municipal Fund
Nuveen Pennsylvania Premium Income Municipal Fund 2
Nuveen Virginia Premium Income Municipal Fund
Nuveen Washington Premium Income Municipal Fund
<PAGE> 11
Nuveen Connecticut Premium Income Municipal Fund
Nuveen Georgia Premium Income Municipal Fund
Nuveen Missouri Premium Income Municipal Fund
Nuveen North Carolina Premium Income Municipal Fund
Nuveen California Premium Income Municipal Fund
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Municipal Value Fund, Inc.
Nuveen California Municipal Value Fund, Inc.
Nuveen New York Municipal Value Fund, Inc.
Nuveen Municipal Income Fund, Inc.
Nuveen Select Maturities Municipal Fund
Nuveen Select Tax-Free Income Portfolio
Nuveen Select Tax-Free Income Portfolio 2
Nuveen Insured California Select Tax-Free Income Portfolio
Nuveen Insured New York Tax-Free Income Portfolio
Nuveen Select Tax-Free Income Portfolio 3
<PAGE> 1
EXHIBIT 10.16(C)
MUTUAL FUNDS SERVICE AGREEMENT
O FUND ACCOUNTING SERVICES
NUVEEN FUNDS
APRIL 30, 1998
<PAGE> 2
MUTUAL FUNDS SERVICE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
1. Appointment............................................ 1
2. Representations and Warranties......................... 1
3. Delivery of Documents.................................. 3
4. Services Provided...................................... 3
5. Fees and Expenses...................................... 4
6. Limitation of Liability and Indemnification............ 6
7. Term................................................... 8
8. Notices................................................ 8
9. Waiver................................................. 9
10. Force Majeure.......................................... 9
11. Additional Funds....................................... 9
12. Amendments............................................. 9
13. Severability........................................... 10
14. Governing Law.......................................... 10
Signatures..................................................... 10
<PAGE> 3
MUTUAL FUNDS SERVICE AGREEMENT
TABLE OF CONTENTS (CONTINUED)
PAGE
Schedule A -- Fees and Expenses............................ A-1
Schedule B -- Fund Accounting Services Description......... B-1
Schedule C -- List of Nuveen Funds and Jurisdictions under
which Funds are Organized.................... C-1
<PAGE> 4
MUTUAL FUNDS SERVICE AGREEMENT
AGREEMENT made as of April 30, 1998 by and between the NUVEEN
FUNDS (each, a "Fund" and collectively, the "Funds") for the Funds listed on the
attached Schedule C, and organized under the laws of the jurisdictions set forth
on Schedule C and CHASE GLOBAL FUNDS SERVICES COMPANY ("Chase"), a Delaware
corporation.
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, each Fund wishes to contract with Chase to provide
certain services with respect to the Fund;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Funds hereby appoints Chase to provide services
for the Funds, as described hereinafter, subject to the supervision of the Board
of Directors or Trustees of the Fund (the "Board"), for the period and on the
terms set forth in this Agreement. Chase accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Section 5 of and Schedule A to this Agreement.
2. REPRESENTATIONS AND WARRANTIES.
(a) Chase represents and warrants to the Funds that:
(i) Chase is a corporation, duly organized
and existing under the laws of the State of Delaware;
(ii) Chase is duly qualified to carry on its
business in the Commonwealth of Massachusetts;
(iii) Chase is empowered under applicable laws and by
its Articles of Incorporation and By-Laws to enter into and perform this
Agreement;
(iv) all requisite corporate proceedings have been
taken to authorize Chase to enter into and perform this Agreement;
1
<PAGE> 5
(v) Chase has, and will continue to have,
access to the facilities, personnel and equipment required to fully perform
its duties and obligations hereunder;
(vi) no legal or administrative proceedings
have been instituted or threatened which would impair Chase's ability to
perform its duties and obligations under this Agreement; and
(vii) Chase's entrance into this Agreement shall not
cause a material breach or be in material conflict with any other agreement
or obligation of Chase or any law or regulation applicable to Chase;
(b) Each Fund represents and warrants to Chase that:
(i) the Fund is duly organized and existing and
in good standing under the laws of the jurisdictions set forth above its name
on Schedule C;
(ii) the Fund is empowered under applicable laws
and by its Charter Document and By-Laws to enter into and perform this
Agreement;
(iii) all requisite proceedings have been taken to
authorize the Fund to enter into and perform this Agreement;
(iv) the Fund is an investment company properly
registered under the 1940 Act;
(v) a registration statement under the Securities
Act of 1933, as amended ("1933 Act") and the 1940 Act on Form N-1A has been
filed and will be effective and will remain effective during the term of
this Agreement, and all necessary filings under the laws of the states
will have been made and will be current during the term of this
Agreement;
(vi) no legal or administrative proceedings
have been instituted or threatened which would impair the Fund's
ability to perform its duties and obligations under this Agreement;
(vii) the Fund's registration statements comply in all
material respects with the 1933 Act and the 1940 Act (including the rules and
regulations thereunder) and none of the Fund's prospectuses and/or
statements of additional information contain any untrue statement of
material fact or omit to state a material fact necessary to make the
statements therein not misleading; and
2
<PAGE> 6
(viii) the Fund's entrance into this Agreement shall
not cause a material breach or be in material conflict with any other agreement
or obligation of the Fund or any law or regulation applicable to it.
3. DELIVERY OF DOCUMENTS. Each Fund will promptly furnish to Chase such
copies, properly certified or authenticated, of contracts, documents and other
related information that Chase may request or requires to properly discharge its
duties. Such documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the appointment
of Chase to provide certain services to the Fund and approving this Agreement;
(b) The Fund's Charter Document;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission ("SEC");
(e) The Fund's registration statement including exhibits, as
amended, on Form N-1A (the "Registration Statement") under the 1933 Act and the
1940 Act, as filed with the SEC;
(f) Copies of the Investment Advisory Agreement between the Fund
and its investment adviser (the "Advisory Agreement");
(g) Opinions of counsel and auditors' reports;
(h) The Fund's prospectus(es) and statement(s) of additional
information relating to all funds, series, portfolios and classes, as
applicable, and all amendments and supplements thereto (such Prospectus(es) and
Statement(s) of Additional Information and supplements thereto, as presently in
effect and as from time to time hereafter amended and supplemented, herein
called the "Prospectuses"); and
(i) Such other agreements as the Fund may enter into from time
to time including securities lending agreements, futures and commodities account
agreements, brokerage agreements and options agreements.
4. SERVICES PROVIDED.
(a) Chase will provide the following services subject to the
control, direction and supervision of the Board and in compliance with the
objectives, policies and limitations set forth in the
3
<PAGE> 7
Funds' Registration Statement, Charter Documents and By-Laws; applicable laws
and regulations; and all resolutions and policies implemented by the Board:
(ii) Fund Accounting.
A detailed description of each of the above services is contained
in Schedule B to this Agreement.
(b) Chase will also:
(i) provide office facilities with respect to
the provision of the services contemplated herein (which may be in the offices
of Chase or a corporate affiliate of Chase );
(ii) provide or otherwise obtain personnel
sufficient for provision of the services contemplated herein;
(iii) furnish equipment and other materials, which
are necessary or desirable for provision of the services contemplated
herein; and
(iv) keep records relating to the services provided
hereunder in such form and manner as Chase may deem appropriate or advisable. To
the extent required by Section 31 of the 1940 Act and the rules
thereunder, Chase agrees that all such records prepared or maintained by
Chase relating to the services provided hereunder are the property of the
Funds and will be preserved for the periods prescribed under Rule 31a-2
under the 1940 Act, maintained at the Funds' expense, and made available
in accordance with such Section and rules.
5. FEES AND EXPENSES.
(a) As compensation for the services rendered to the Funds
pursuant to this Agreement the Funds shall pay Chase monthly fees determined as
set forth in Schedule A to this Agreement. Such fees are to be billed monthly
and shall be due and payable upon receipt of the invoice. Upon any termination
of the provision of services under this Agreement before the end of any month,
the fee for the part of the month before such termination shall be prorated
according to the proportion which such part bears to the full monthly period and
shall be payable upon the date of such termination.
(b) For the purpose of determining fees calculated as a function
of each Fund's assets, the value of the Fund's assets and net assets shall be
computed as required by its currently effective Prospectus, generally accepted
accounting principles, and resolutions of the Board.
(c) The Funds may request additional services, additional
processing, or special reports, with such specifications and requirements
documentation as may be reasonably required
4
<PAGE> 8
by Chase . If Chase elects to provide such services or arrange for their
provision, it shall be entitled to additional fees and expenses at its
customary rates and charges.
(d) Chase will bear its own expenses in connection with the
performance of the services under this Agreement except as provided herein or as
agreed to by the parties. Each Fund agrees to promptly reimburse Chase for any
services, equipment or supplies ordered by or for the Fund through Chase and for
any other expenses that Chase may incur on the Fund's behalf at the Fund's
request or as consented to by the Fund. Such other expenses to be incurred in
the operation of each Fund and to be borne by the Fund, include, but are not
limited to: taxes; interest; brokerage fees and commissions; salaries and fees
of officers, directors and trustees who are not officers, directors,
shareholders or employees of Chase, or the Fund's investment adviser or
distributor; SEC and state Blue Sky registration and qualification fees, levies,
fines and other charges; EDGAR filing fees', processing services and related
fees; postage and mailing costs; costs of share certificates; advisory and
administration fees; charges and expenses of pricing and data services,
independent public accountants and custodians; insurance premiums including
fidelity bond premiums; legal expenses; consulting fees; customary bank charges
and fees; costs of maintenance of corporate or trust existence; expenses of
typesetting and printing of Prospectuses for regulatory purposes and for
distribution to current shareholders of the Fund (the Fund's distributor to bear
the expense of all other printing, production, and distribution of Prospectuses,
and marketing materials); expenses of printing and production costs of
shareholders' reports and proxy statements and materials; expenses of proxy
solicitation, proxy tabulation and annual meetings; costs and expenses of Fund
stationery and forms; costs and expenses of special telephone and data lines and
devices; costs associated with corporate or trust, shareholder, and Board
meetings; trade association dues and expenses; reprocessing costs to Chase
caused by third party errors; and any extraordinary expenses and other customary
Fund expenses. In addition, Chase may utilize one or more independent pricing
services to obtain securities prices and to act as backup to the primary pricing
services, in connection with determining the net asset values of each Fund. The
Funds will reimburse Chase for the Funds' share of the cost of such services
based upon the actual usage, or a pro-rata estimate of the use, of the services
for the benefit of the Funds.
5
<PAGE> 9
(e) All fees, out-of-pocket expenses, or additional charges of
Chase shall be billed on a monthly basis and shall be due and payable upon
receipt of the invoice.
(f) Chase will render, after the close of each month in which
services have been furnished, a statement reflecting all of the charges for such
month. Charges remaining unpaid after thirty (30) days shall bear interest in
finance charges equivalent to, in the aggregate, the Prime Rate (as determined
by Chase) plus two percent per year and all costs and expenses of effecting
collection of any such sums, including reasonable attorney's fees, shall be paid
by the Funds to Chase.
(g) In the event that the Funds are more than sixty (60) days
delinquent in payments of monthly billings in connection with this Agreement
(with the exception of specific amounts which may be contested in good faith by
the Funds), this Agreement may be terminated upon thirty (30) days' written
notice to the Funds by Chase. The Funds must notify Chase in writing of any
contested amounts within thirty (30) days of receipt of a billing for such
amounts. Disputed amounts are not due and payable while they are being
investigated.
6. LIMITATION OF LIABILITY AND INDEMNIFICATION.
(a) Chase shall not be liable for any error of judgment or
mistake of law or for any loss or expense suffered by the Funds, in connection
with the matters to which this Agreement relates, except for a loss or expense
solely caused by or resulting from willful misfeasance, bad faith or negligence
on Chase's part in the performance of its duties or from reckless disregard by
Chase of its obligations and duties under this Agreement. In no event shall
Chase be liable for any indirect, incidental, special or consequential losses or
damages of any kind whatsoever, even if Chase has been advised of the likelihood
of such loss or damage and regardless of the form of action.
(b) Subject to Section 6(a) above, Chase shall not be
responsible for, and the Funds shall indemnify and hold Chase harmless from and
against, any and all losses, damages, costs, reasonable attorneys' fees and
expenses, payments, expenses and liabilities incurred by Chase, any of its
agents, or the Funds' agents in the performance of its/their duties hereunder,
including but not limited to those arising out of or attributable to:
(i) any and all actions of Chase or its officers
or agents required to be taken pursuant to this Agreement;
6
<PAGE> 10
(ii) the reasonable reliance on or use by Chase
or its officers or agents of information, records, or documents which are
received by Chase or its officers or agents and furnished to it or them by or
on behalf of the Funds, and which have been prepared or maintained by the Funds
or any third party on behalf of the Funds;
(iii) the Funds' refusal or failure to comply with the
terms of this Agreement or the Fund's lack of good faith, or its actions, or
lack thereof, involving negligence or willful misfeasance;
(iv) the breach of any representation or warranty of
the Funds hereunder;
(v) the taping or other form of recording of
telephone conversations or other forms of electronic communications with
investors and shareholders, or reliance by Chase on telephone or other
electronic instructions of any person acting on behalf of a shareholder or
shareholder account for which telephone or other electronic services have been
authorized;
(vi) the reliance on or the carrying out by Chase or
its officers or agents of any proper instructions reasonably believed to be duly
authorized, or requests of the Funds or recognition by Chase of any share
certificates which are reasonably believed to bear the proper signatures of the
officers of the Funds and the proper countersignature of any transfer agent or
registrar of the Funds;
(vii) any delays, inaccuracies, errors in or omissions
from information or data provided to Chase by data, corporate action pricing
services or securities brokers and dealers;
(viii) the offer or sale of shares by the Funds in
violation of any requirement under the Federal securities laws or regulations or
the securities laws or regulations of any state, or in violation of any stop
order or other determination or ruling by any Federal agency or any state agency
with respect to the offer or sale of such shares in such state (1) resulting
from activities, actions, or omissions by the Funds or its other service
providers and agents, or (2) existing or arising out of activities, actions or
omissions by or on behalf of the Funds prior to the effective date of this
Agreement;
(ix) any failure of the Funds' registration
statement to comply with the 1933 Act and the 1940 Act (including the rules and
regulations thereunder) and any other applicable laws, or any untrue statement
of a material fact or omission of a material fact necessary to make any
statement therein not misleading in a Funds' prospectuses;
7
<PAGE> 11
(x) the actions taken by the Funds, their
investment adviser, and their distributor in compliance with applicable
securities, tax, commodities and other laws, rules and regulations, or the
failure to so comply; and
(xi) all actions, inactions, omissions, or errors
caused by third parties to whom Chase or the Funds have assigned any rights
and/or delegated any duties under this Agreement at the request of or as
required by the Funds, their investment advisers, distributor, administrator or
sponsor.
(c) In performing its services hereunder, Chase shall be
entitled to reasonably rely on any oral or written instructions, notices or
other communications, including electronic transmissions, from the Funds and
their custodians, officers and directors, investors, agents and other service
providers which Chase reasonably believes to be genuine, valid and authorized,
and shall be indemnified by the Funds for any loss or expense caused by such
reliance. Chase shall also be entitled to consult with and rely on the advice
and opinions of outside legal counsel retained by the Funds, as necessary or
appropriate.
(d) Chase shall indemnify and hold the Funds harmless from and
against any and all losses, damages, costs, charges, payments, expenses and
liability, excluding attorneys' fees and costs, arising out of or attributable
to Chase's refusal or failure to comply with the material terms of this
Agreement, or Chase's lack of good faith, negligence or willful misconduct.
7. TERM. This Agreement shall become effective on the date first
hereinabove written and may be modified or amended from time to time by mutual
agreement between the parties hereto. The Agreement shall continue in effect
unless terminated by either party on 180 days' prior written notice. Upon
termination of this Agreement, the Fund shall pay to Chase such compensation and
any out-of-pocket or other reimbursable expenses which may become due or payable
under the terms hereof as of the date of termination or after the date that the
provision of services ceases, whichever is later.
8. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be deemed effective on the date of personal delivery (by
private messenger, courier service or otherwise) or upon confirmed receipt of
telex or facsimile, whichever occurs first, or upon receipt if by mail to the
parties at the following address (or such other address as a party may specify
by notice to the other):
8
<PAGE> 12
If to the Funds:
John Nuveen & Co., Incorporated
333 West Wacker Drive
Chicago, IL 60606
Attention: Controller
Fax: (312) 917-8049
If to Chase:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Attention: Karl O. Hartmann, Esq., General Counsel
Fax: 617-557-8616
9. WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
10. FORCE MAJEURE. Chase shall not be responsible or liable for any
harm, loss or damage suffered by the Funds, their investors, or other third
parties or for any failure or delay in performance of Chase's obligations under
this Agreement arising out of or caused, directly or indirectly, by
circumstances beyond Chase's control. In the event of a force majeure, any
resulting harm, loss, damage, failure or delay by Chase will not give the Funds
the right to terminate this Agreement.
11. ADDITIONAL FUNDS. In the event that John Nuveen & Company
Incorporated sponsors additional open-end management companies with respect to
which it desires Chase to provide services under the terms of this Agreement, it
shall so notify Chase in writing, and if Chase agrees in writing to provide such
services, such Fund or Funds shall be subject to the terms of this Agreement and
Schedule C shall be modified accordingly.
12. AMENDMENTS. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
9
<PAGE> 13
13. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
NUVEEN FUNDS
By:____________________________
Name:__________________________
Title:_________________________
CHASE GLOBAL FUNDS
SERVICES COMPANY
By:____________________________
Name:__________________________
Title:_________________________
10
<PAGE> 14
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE A
FEES AND EXPENSES
FUND ACCOUNTING FEES
A. For the services rendered under this Agreement, the Fund shall pay
to the Administrator an annual fee based on the following
schedule:
$1,925 per Portfolio/per month for all single class Funds
(including, money market Funds) $2,925 per Portfolio/per month for
all multi-class Funds
B. Out-of-pocket expenses, including but not limited to those in
Section 5(d), will be computed, billed and payable monthly.
A-1
<PAGE> 15
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE B
DESCRIPTION OF FUND ACCOUNTING SERVICES
I. GENERAL DESCRIPTION
Chase shall provide the following accounting services to the Fund:
A. Maintenance of the books and records for the Fund's assets,
including records of all securities transactions;
B. Calculation of each Fund's Net Asset Value in accordance with
the prospectus, and once the Fund meets eligibility
requirements, transmission to NASDAQ and to such other
entities as directed by the Fund;
C. Calculation of SEC Yield
D. Accounting for dividends and interest received and
distributions made by the Fund;
E. Production of transaction data, financial reports and such
other periodic and special reports as mutually agreed upon by
the parties;
F. Liaison with the Fund's independent auditors and with respect
to the annual audits, and as otherwise requested by the Fund;
G. Coordinating with the Fund's custodian and depository banks;
and
H. A listing of reports that will be available to the Fund is
included below, with such additional reports as may be
requested by the Fund, and as mutually agreed upon.
II. DOMESTIC FUND ACCOUNTING REPORTS
A. General Ledger Reports
1. Trial Balance Report and Rate Sheet
2. General Ledger Activity Report
B. Portfolio Reports
1. Portfolio Report
2. Cost Lot Report
3. Transaction History for Portfolio Trades
4. Amortization/Accretion Report
B-1
<PAGE> 16
5. Maturity Projection Report
6. Investment Activity/Cost Proof Report
B-2
<PAGE> 17
C. Pricing Reports
1. Pricing Report
2. Pricing Report by Market Value
3. Pricing Variance by % Change
4. NAV Report
5. NAV Proof Report
6. Money Market Pricing Report
D. Accounts Receivable/Payable Reports
1. Accounts Receivable for Investments Report
2. Accounts Payable for Investments Report
3. Interest Receivable and Aging Report
4. Dividend Receivable and Aging and Capital
Gain Payable Report
E. Other Reports
1. Dividend Distribution Report
2. Cash Availability Report
3. Settlement Journal
4. Net Income by State and AMT Report
5. Schedule D Summaries
6. Wash Sale Reports
7. Cash and Custody Reconciliation
8. Taxable Market Discount Income Summary
Report
9. Shareholder Activity Report
10. Realized Gain/Loss Report
B-3
<PAGE> 18
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE C
(AS OF NOVEMBER 24, 1997)
FLAGSHIP ADMIRAL FUNDS INC. (MARYLAND CORPORATION)
Flagship Utility Income Fund
The Golden Rainbow A James Advised Mutual Fund
NUVEEN INVESTMENT TRUST (MASSACHUSETTS BUSINESS TRUST)
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
NUVEEN INVESTMENT TRUST II (MASSACHUSETTS BUSINESS TRUST)
Nuveen Rittenhouse Growth Fund
NUVEEN FLAGSHIP MUNICIPAL TRUST (MASSACHUSETTS BUSINESS TRUST)
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST I (MASSACHUSETTS BUSINESS TRUST)
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
C-1
<PAGE> 19
NUVEEN FLAGSHIP MULTISTATE TRUST II (MASSACHUSETTS BUSINESS TRUST)
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST III (MASSACHUSETTS BUSINESS TRUST)
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST IV (MASSACHUSETTS BUSINESS TRUST)
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
NUVEEN TAX-EXEMPT MONEY MARKET FUND, INC. (MARYLAND CORPORATION)
NUVEEN TAX-FREE RESERVES, INC. (MARYLAND CORPORATION)
NUVEEN TAX-FREE MONEY MARKET FUND, INC. (MINNESOTA CORPORATION)
Nuveen Massachusetts Tax-Free Money Market Fund
Nuveen New York Tax-Free Money Market Fund
C-2
<PAGE> 20
NUVEEN CALIFORNIA TAX-FREE FUND, INC. (MARYLAND CORPORATION)
Nuveen California Tax-Free Money Market Fund
C-3
<PAGE> 1
EXHIBIT 10.16(D)
MUTUAL FUNDS SERVICE AGREEMENT
- TRANSFER AGENCY SERVICES
NUVEEN FUNDS
AUGUST 24, 1998
<PAGE> 2
MUTUAL FUNDS SERVICE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
1. Appointment................................................. 1
2. Representations and Warranties.............................. 1
3. Delivery of Documents....................................... 3
4. Services Provided........................................... 3
5. Fees and Expenses........................................... 4
6. Limitation of Liability and Indemnification................. 6
7. Term........................................................ 8
8. Notices..................................................... 9
9. Waiver...................................................... 9
10. Force Majeure............................................... 9
11. Additional Funds............................................ 10
12. Amendments.................................................. 10
13. Assignment.................................................. 10
14. Severability................................................ 10
15. Governing Law............................................... 10
Signatures.......................................................... 10
<PAGE> 3
MUTUAL FUNDS SERVICE AGREEMENT
TABLE OF CONTENTS (CONTINUED)
PAGE
Schedule A -- Fees and Expenses.............................. A-1
Schedule B -- List of Nuveen Funds and Jurisdictions under
which Funds are Organized...................... B-1
Schedule C -- Transfer Agency Services Description........... C-1
<PAGE> 4
MUTUAL FUNDS SERVICE AGREEMENT
AGREEMENT made as of August 24, 1998 by and between the NUVEEN
FUNDS (each, a "Fund" and collectively the "Funds"), for the Funds listed on
Schedule B, and organized under the jurisdictions set forth on Schedule B, and
CHASE GLOBAL FUNDS SERVICES COMPANY ("Chase"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, each Fund wishes to contract with Chase to provide
certain services with respect to the Fund;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Funds hereby appoint Chase to provide services
for the Funds, as described hereinafter, subject to the supervision of the Board
of Directors or Trustees of the Funds (the "Board"), for the period and on the
terms set forth in this Agreement. Chase accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Section 5 of and Schedule A to this Agreement.
2. REPRESENTATIONS AND WARRANTIES.
(a) Chase represents and warrants to the Funds that:
(i) Chase is a corporation, duly organized and
existing under the laws of the State of Delaware;
(ii) Chase is duly qualified to carry on its business
in the Commonwealth of Massachusetts;
(iii) Chase is empowered under applicable laws and by
its Articles of Incorporation and By-Laws to enter into and perform this
Agreement;
(iv) all requisite corporate proceedings have
been taken to authorize Chase to enter into and perform this Agreement;
1
<PAGE> 5
(v) Chase has, and will continue to have, access to
the facilities, personnel and equipment required to fully perform its duties and
obligations hereunder;
(vi) no legal or administrative proceedings have been
instituted or threatened which would impair Chase's ability to perform its
duties and obligations under this Agreement; and
(vii) Chase's entrance into this Agreement shall not
cause a material breach or be in material conflict with any other agreement or
obligation of Chase or any law or regulation applicable to Chase;
(b) Each Fund represents and warrants to Chase that:
(i) the Fund is a duly organized and existing and
in good standing under the laws of the jurisdictions set forth above its name
on Schedule B;
(ii) the Fund is empowered under applicable laws and
by its Charter Document and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to
authorize the Fund to enter into and perform this Agreement;
(iv) the Fund is an investment company properly
registered under the 1940 Act;
(v) a registration statement under the
Securities Act of 1933, as amended ("1933 Act") and the 1940 Act on Form N-1A
has been filed and will be effective and will remain effective during the term
of this Agreement, and all necessary filings under the laws of the states will
have been made and will be current during the term of this Agreement;
(vi) no legal or administrative proceedings have been
instituted or threatened which would impair the Fund's ability to perform its
duties and obligations under this Agreement;
(vii) the Fund's registration statement complies in
all material respects with the 1933 Act and the 1940 Act (including the rules
and regulations thereunder) and none of the Fund's prospectuses and/or
statements of additional information contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements therein
not misleading; and
2
<PAGE> 6
(viii) the Fund's entrance into this Agreement shall
not cause a material breach or be in material conflict with any other agreement
or obligation of the Fund or any law or regulation applicable to it.
3. DELIVERY OF DOCUMENTS. Each Fund will promptly furnish to Chase such
copies, properly certified or authenticated, of contracts, documents and other
related information that Chase may request or requires to properly discharge its
duties. Such documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the appointment
of Chase to provide certain services to the Fund and approving this Agreement;
(b) The Fund's Charter Document;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission ("SEC");
(e) The Fund's registration statement including exhibits, as
amended, on Form N-1A (the "Registration Statement") under the 1933 Act and the
1940 Act, as filed with the SEC;
(f) Copies of the Investment Advisory Agreement between the Fund
and its investment adviser (the "Advisory Agreement");
(g) Opinions of counsel and auditors' reports;
(h) The Fund's prospectus(es) and statement(s) of additional
information relating to all funds, series, portfolios and classes, as
applicable, and all amendments and supplements thereto (such Prospectus(es) and
Statement(s) of Additional Information and supplements thereto, as presently in
effect and as from time to time hereafter amended and supplemented, herein
called the "Prospectuses"); and
(i) Such other agreements as the Fund may enter into from time
to time including securities lending agreements, futures and commodities account
agreements, brokerage agreements and options agreements.
4. SERVICES PROVIDED.
(a) Chase will provide the following services subject to the
control, direction and supervision of the Board and its designated agents and in
compliance with the objectives, policies and limitations set forth in the Funds'
Registration Statement, Charter Document and By-Laws; applicable laws and
regulations; and all resolutions and policies implemented by the Board:
3
<PAGE> 7
(i) Transfer Agency.
A description of the above service is contained in Schedule C to this Agreement.
(b) Chase will also:
(i) provide office facilities with respect to the
provision of the services contemplated herein (which may be in the offices of
Chase or a corporate affiliate of Chase);
(ii) provide or otherwise obtain personnel sufficient
for provision of the services contemplated herein;
(iii) furnish equipment and other materials, which are
necessary or desirable for provision of the services contemplated herein; and
(iv) keep records relating to the services provided
hereunder in such form and manner as Chase may deem appropriate or advisable. To
the extent required by Section 31 of the 1940 Act and the rules thereunder,
Chase agrees that all such records prepared or maintained by Chase relating to
the services provided hereunder are the property of the Funds and will be
preserved for the periods prescribed under Rule 31a-2 under the 1940 Act,
maintained at the Funds' expense, and made available in accordance with such
Section and rules.
5. FEES AND EXPENSES.
(a) As compensation for the services rendered to the Funds
pursuant to this Agreement the Funds shall pay Chase monthly fees determined as
set forth in Schedule A to this Agreement. Such fees are to be billed monthly
and shall be due and payable upon receipt of the invoice. Upon any termination
of the provision of services under this Agreement before the end of any month,
the fee for the part of the month before such termination shall be prorated
according to the proportion which such part bears to the full monthly period and
shall be payable upon the date of such termination.
(b) For the purpose of determining fees calculated as a function
of each Fund's assets, the value of the Fund's assets and net assets shall be
computed as required by its currently effective Prospectus, generally accepted
accounting principles, and resolutions of the Board.
(c) The Funds may request additional services, additional
processing, or special reports, with such specifications, requirements and
documentation as may be reasonably required by Chase. If Chase elects to provide
such services or arrange for their provision, it shall be entitled to additional
fees and expenses at its customary rates and charges.
4
<PAGE> 8
(d) Chase will bear its own expenses in connection with the
performance of the services under this Agreement except as provided herein or as
agreed to by the parties. Each Fund agrees to promptly reimburse Chase for any
services, equipment or supplies ordered by or for the Fund through Chase and for
any other expenses that Chase may incur on the Fund's behalf at the Fund's
request or as consented to by the Fund. Such other expenses to be incurred in
the operation of the Fund and to be borne by the Funds, include, but are not
limited to: taxes; interest; brokerage fees and commissions; salaries and fees
of officers, directors, or trustees who are not officers, directors,
shareholders or employees of Chase, or the Fund's distributor; SEC and state
Blue Sky registration and qualification fees, levies, fines and other charges;
postage and mailing costs; costs of share certificates; advisory fees;
independent public accountants and custodians; insurance premiums including
fidelity bond premiums; legal expenses; consulting fees; customary bank charges
and fees; expenses of typesetting and printing of Prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund (the Fund's
distributor to bear the expense of all other printing, production, and
distribution of Prospectuses, and marketing materials); expenses of printing and
production costs of shareholders' reports and proxy statements and materials;
expenses of proxy solicitation and annual meetings; costs and expenses of Fund
stationery and forms; customer service telephone expenses, costs and expenses of
telephone and data lines and devices which are specially requested by the Fund;
costs associated with corporate or trust, shareholder, and Board meetings; trade
association dues and expenses; reprocessing costs to Chase caused by third party
errors; and any extraordinary expenses and other customary Fund expenses.
(e) All fees, out-of-pocket expenses, or additional charges of
Chase shall be billed on a monthly basis and shall be due and payable upon
receipt of the invoice.
(f) Chase will render, after the close of each month in which
services have been furnished, a statement reflecting all of the charges for such
month. Charges remaining unpaid after thirty (30) days shall bear interest in
finance charges equivalent to, in the aggregate, the Prime Rate (as reasonably
determined by Chase) plus two percent per year and all costs and expenses of
effecting collection of any such sums, including reasonable attorney's fees,
shall be paid by the Funds to Chase.
(g) In the event that the Funds are more than sixty (60) days
delinquent in payments of monthly billings in connection with this Agreement
(with the exception of specific
5
<PAGE> 9
amounts which may be contested in good faith by the Funds), this Agreement may
be terminated upon thirty (30) days' written notice to the Funds by Chase. The
Funds must notify Chase in writing of any contested amounts within thirty (30)
days of receipt of a billing for such amounts. Disputed amounts are not due and
payable while they are being investigated.
6. LIMITATION OF LIABILITY AND INDEMNIFICATION.
(a) Chase shall not be liable for any error of judgment or
mistake of law or for any loss or expense suffered by the Funds, in connection
with the matters to which this Agreement relates, except for a loss or expense
solely caused by or resulting from willful misfeasance, bad faith or negligence
on Chase's part in the performance of its duties or from reckless disregard by
Chase of its obligations and duties under this Agreement. In no event shall
Chase be liable for any indirect, incidental, special or consequential losses or
damages of any kind whatsoever, even if Chase has been advised of the likelihood
of such loss or damage and regardless of the form of action.
(b) Subject to Section 6(a) above, Chase shall not be
responsible for, and the Funds shall indemnify and hold Chase harmless from and
against, any and all losses, damages, costs, reasonable attorneys' fees and
expenses, payments, expenses and liabilities incurred by Chase, any of its
agents, or the Funds' agents in the performance of its/their duties hereunder,
including but not limited to those arising out of or attributable to:
(i) any and all actions of Chase or its officers
or agents required to be taken pursuant to this Agreement;
(ii) the reasonable reliance on or use by Chase or
its officers or agents of information, records, or documents which are received
by Chase or its officers or agents and furnished to it or them by or on behalf
of the Funds, and which have been prepared or maintained by the Funds or any
third party on behalf of the Funds;
(iii) the Funds' refusal or failure to comply with the
terms of this Agreement or the Funds' lack of good faith, or actions, or lack
thereof, involving negligence or willful misfeasance;
(iv) the breach of any representation or warranty of
the Funds hereunder;
(v) the taping or other form of recording of
telephone conversations or other forms of electronic communications with
investors and shareholders, or reasonable reliance by Chase on telephone or
other electronic instructions of any person acting on behalf of a
6
<PAGE> 10
shareholder or shareholder account for which telephone or other electronic
services have been authorized;
(vi) the reliance on or the carrying out by Chase
or its officers or agents of any proper instructions reasonably believed to be
duly authorized, or requests of the Funds or recognition by Chase of any share
certificates which are reasonably believed to bear the proper signatures of the
officers of the Funds and the proper countersignature of any transfer agent or
registrar of the Funds;
(vii) any delays, inaccuracies, errors in or omissions
from information or data provided to Chase by data, corporate action, pricing
services or securities brokers and dealers;
(viii) the offer or sale of shares by any Fund in
violation of any requirement under the Federal securities laws or regulations or
the securities laws or regulations of any state, or in violation of any stop
order or other determination or ruling by any Federal agency or any state agency
with respect to the offer or sale of such shares in such state (1) resulting
from activities, actions, or omissions by the Funds or their other service
providers and agents, or (2) existing or arising out of activities, actions or
omissions by or on behalf of the Fund prior to the effective date of this
Agreement;
(ix) any failure of a Fund's registration statement
to comply with the 1933 Act and the 1940 Act (including the rules and
regulations thereunder) and any other applicable laws, or any untrue statement
of a material fact or omission of a material fact necessary to make any
statement therein not misleading in a Fund's prospectus;
(x) the actions taken by the Funds, their investment
adviser, and their distributor in compliance with applicable securities, tax,
commodities and other laws, rules and regulations, or the failure to so comply;
and
(xi) all actions, inactions, omissions, or errors
caused by third parties to whom Chase or the Funds has assigned any rights
and/or delegated any duties under this Agreement at the request of or as
required by the Funds, their investment advisers, distributor, administrator or
sponsor.
(c) In performing its services hereunder, Chase shall be
entitled to reasonably rely on any oral or written instructions, notices or
other communications, including electronic transmissions, from the Funds and
their custodians, officers and directors, investors, agents and
7
<PAGE> 11
other service providers and shareholders which Chase reasonably believes to
be genuine, valid and authorized, and shall be indemnified by the Funds for
any loss or expense caused by such reliance. Chase shall also be entitled to
consult with and rely on the advice and opinions of outside legal counsel
retained by the Funds, as necessary or appropriate.
(d) Chase shall indemnify and hold the Funds harmless from and
against any and all losses, damages, costs, charges, payments, expenses and
liability, excluding attorneys' fees and costs, arising out of or attributable
to Chase's refusal or failure to comply with the material terms of this
Agreement, or Chase's lack of good faith, negligence or willful misconduct.
(e) Subject to the above Sections 6 (a) through 6 (d), any costs
or losses incurred by a Fund for the processing of any purchase, redemption,
exchange or other share transactions at a price per share other than the price
per share applicable to the effective date of the transaction (the foregoing
being generally referred to herein as "as of" transactions) will be handled in
the following manner:
(i) For each calendar year, if all "as of"
transactions for the year, taken in the aggregate, result in a net loss to a
Fund ("net loss"), Chase will reimburse the Fund for such net loss, except to
the extent that such net loss may be offset by application of a "net benefit" to
the Fund carried over from prior calendar years pursuant to sub-paragraph (ii)
immediately below.
(ii) For each calendar year, if all "as of"
transactions for the year, taken in the aggregate, result in a net benefit to a
Fund ("net benefit"), the Fund shall not reimburse Chase for the amount of such
net benefit; however, any "net benefit" for any calendar year may be used to
offset, in whole or in part, any "net loss" suffered by the Fund in any future
calendar year so as to reduce the amount by which Chase shall be required to
reimburse the Fund for such "net loss" in such year pursuant to sub-paragraph
(i) immediately above.
(iii) Any "net loss" for which Chase reimburses a Fund
in any calendar year shall not be carried over into future years so as to offset
any "net benefit" in such future years.
7. TERM. This Agreement shall become effective on the date first
hereinabove written for an initial term of four years. The Agreement may be
modified or amended from time to time by mutual agreement between the parties
hereto. After the initial term, the Agreement shall continue in effect unless
terminated by either party on 6 months' prior written notice. Upon termination
of this Agreement, each Fund shall pay to Chase such compensation and any
8
<PAGE> 12
reasonable out-of-pocket or other reimbursable expenses which may become due or
payable under the terms hereof as of the date of termination or after the date
that the provision of services ceases, whichever is later. If the Funds
terminate the Agreement for any reason during the first year of the initial
term, they will reimburse Chase in accordance with Schedule A.
8. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be deemed effective on the date of personal delivery (by
private messenger, courier service or otherwise) or upon confirmed receipt of
telex or facsimile, whichever occurs first, or upon receipt if by mail to the
parties at the following address (or such other address as a party may specify
by notice to the other):
If to the Funds:
John Nuveen & Co., Incorporated
333 West Wacker Drive
Chicago, IL 60606
Attention: Fund Controller
Fax: (312) 917-8049
If to Chase:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Attention: Karl O. Hartmann, Esq., General Counsel
Fax: (617) 557-8616
9. WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
10. FORCE MAJEURE. Chase shall not be responsible or liable for any
harm, loss or damage suffered by the Funds, their investors, or other third
parties or for any failure or delay in performance of Chase's obligations under
this Agreement arising out of or caused, directly or indirectly, by
circumstances beyond Chase's control. In the event of a force majeure, any
resulting harm, loss, damage, failure or delay by Chase will not give the Funds
the right to terminate this Agreement.
11. ADDITIONAL FUNDS. In the event that John Nuveen & Company
Incorporated sponsors additional open-end management companies with respect to
which it desires Chase to
9
<PAGE> 13
provide services under the terms of this Agreement, it shall so notify Chase in
writing, and if Chase agrees in writing to provide such services, such Fund or
Funds shall be subject to the terms of this Agreement and Schedule C shall be
modified accordingly.
12. AMENDMENTS. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
13. ASSIGNMENT. Chase may assign and delegate this Agreement and its
rights and obligations hereunder without the consent of the other party.
14. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
NUVEEN FUNDS
By:______________________________
Name:____________________________
Title:___________________________
CHASE GLOBAL FUNDS
SERVICES COMPANY
By:______________________________
Name:____________________________
Title:___________________________
10
<PAGE> 14
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE A
FEES AND EXPENSES
TRANSFER AGENCY FEES
A. $18.50 per municipal fund account per annum
$18.25 per equity fund account per annum
$29.00 per money market fund account per annum
B. Out-of-pocket expenses, including but not limited to those in
Section 5(d), will be computed, billed and payable monthly
Customized systems and technology charges (excluding those
projects covered under the conversion agreement) will be
negotiated individually and billed along with out-of-pocket
expenses.
C. If the Funds terminate this Agreement for any reason whatsoever
between the date of this Agreement and July 1, 1999, there will be
immediately due and owing to Chase by Nuveen a $6 million charge;
if between the date of July 1, 1999 and June 30, 2000, a $4
million charge; and if between July 1, 2000 and June 30, 2001, a
$2 million charge. In addition, the Funds will reimburse Chase for
all costs it incurs in connection with any conversion to another
transfer agent.
A-1
<PAGE> 15
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE B
(AS OF OCTOBER 22, 1998)
FLAGSHIP ADMIRAL FUNDS INC. (MARYLAND CORPORATION)
Flagship Utility Income Fund
NUVEEN INVESTMENT TRUST (MASSACHUSETTS BUSINESS TRUST)
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen European Value Fund
NUVEEN INVESTMENT TRUST II (MASSACHUSETTS BUSINESS TRUST)
Nuveen Rittenhouse Growth Fund
NUVEEN FLAGSHIP MUNICIPAL TRUST (MASSACHUSETTS BUSINESS TRUST)
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST I (MASSACHUSETTS BUSINESS TRUST)
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
B-1
<PAGE> 16
NUVEEN FLAGSHIP MULTISTATE TRUST II (MASSACHUSETTS BUSINESS TRUST)
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST III (MASSACHUSETTS BUSINESS TRUST)
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST IV (MASSACHUSETTS BUSINESS TRUST)
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky
Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
NUVEEN TAX-EXEMPT MONEY MARKET FUND, INC. (MARYLAND CORPORATION)
NUVEEN TAX-FREE RESERVES, INC. (MARYLAND CORPORATION)
NUVEEN TAX-FREE MONEY MARKET FUND, INC. (MINNESOTA CORPORATION)
Nuveen Massachusetts Tax-Free Money Market Fund
Nuveen New York Tax-Free Money Market Fund
B-2
<PAGE> 17
NUVEEN CALIFORNIA TAX-FREE FUND, INC. (MARYLAND CORPORATION)
Nuveen California Tax-Free Money Market Fund
B-3
<PAGE> 18
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE C
DESCRIPTION OF TRANSFER AGENCY SERVICES
The following is a general description of the transfer agency services
Chase shall provide to each Fund.
A. SHAREHOLDER RECORDKEEPING. Maintain records showing for each Fund
shareholder the following: (i) name, address, appropriate tax
certification and tax identifying number; (ii) number of shares of
each Fund, portfolio or class; (iii) historical information
including, but not limited to, dividends paid, date and price of
all transactions including individual purchases and redemptions,
based upon appropriate supporting documents; and (iv) any dividend
reinvestment order, application, specific address, payment and
processing instructions and correspondence relating to the current
maintenance of the account.
B. SHARE ISSUANCE. Record the issuance of shares of each Fund,
portfolio or class. Except as specifically agreed in writing
between Chase and the Fund, Chase shall have no obligation when
countersigning and issuing and/or crediting shares to take
cognizance of any other laws relating to the issue and sale of
such shares except insofar as policies and procedures of the Stock
Transfer Association recognize such laws.
C. TRANSFER, PURCHASE, EXCHANGE AND REDEMPTION ORDERS. Process all
orders for the transfer, purchase, exchange and redemption of
shares of the Fund in accordance with the Fund's current
prospectus and customary transfer agency policies and procedures,
including electronic transmissions which the Fund acknowledges it
has authorized, or in accordance with any instructions of the Fund
or its agents which Chase reasonably believes to be authorized.
D. SHAREHOLDER COMMUNICATIONS. Transmit all communications by the
Fund to its shareholders promptly following the delivery by the
Fund of the material to be transmitted by mail, telephone, courier
service or electronically.
E. PROXY MATERIALS. Assist with the mailing or transmission of proxy
materials, tabulating votes, and compiling and certifying voting
results. Services may include the provision of inspectors of
election at any meeting of shareholders.
F. SHARE CERTIFICATES. If permitted by Fund policies, and if a
shareholder of the Fund requests a certificate representing
shares, Chase as Transfer Agent, will countersign and mail a share
certificate to the investor at his/her address as it appears on
the Fund's shareholder records.
C-1
<PAGE> 19
G. RETURNED CHECKS. In the event that any check or other negotiable
instrument for the payment of shares is returned unpaid for any
reason, Chase will take such steps, as Chase may, in its
discretion, deem appropriate and notify the Fund of such action.
However, the Fund remains ultimately liable for any returned
checks or negotiable instruments of its shareholders.
H. SHAREHOLDER & BROKER-DEALER CORRESPONDENCE. Acknowledge all
correspondence from shareholders and broker-dealers relating to
share accounts and undertake such other shareholder and
broker-dealer correspondence as may from time to time be mutually
agreed upon.
I. TAX REPORTING. Chase shall issue appropriate shareholder tax forms
as required.
J. DIVIDEND DISBURSING. Chase will prepare and mail checks, place
wire transfers or credit income and capital gain payments to
shareholders. The Fund will advise Chase of the declaration of
any dividend or distribution and the record and payable date
thereof at least five (5) days prior to the record date. Chase
will, on or before the payment date of any such dividend or
distribution, notify the Fund's Custodian of the estimated
amount required to pay any portion of such dividend or
distribution payable in cash, and on or before the payment date
of such distribution, the Fund will instruct its Custodian to
make available to Chase sufficient funds for the cash amount to
be paid out. If a shareholder is entitled to receive additional
shares by virtue of any such distribution or dividend, appropriate
credits will be made to each shareholder's account.
K. ESCHEATMENT. Chase shall provide escheatment services only with
respect to the escheatment laws of the Commonwealth of
Massachusetts, including those which relate to reciprocal
agreements with other states.
L. TELEPHONE SERVICES. Chase will provide staff coverage, training
and supervision in connection with the Fund's telephone line for
shareholder inquiries, and will respond to inquiries concerning
shareholder records, transactions processed by Chase, procedures
to effect the shareholder records and inquiries of a general
nature relative to shareholder services.
M. 12B-1. Chase will calculate and process all 12b-1 payments in
accordance with each Fund's current prospectus.
N. COMMISSION PAYMENTS. Chase will calculate and process all
commission payments in accordance with each Fund's current
prospectus.
O. REQUESTS FOR INFORMATION. Chase will provide all required
information in a timely fashion in support of regulatory filings.
P. SAS 70. Chase will make available to the Funds' sponsor
independent auditor reports in compliance with SAS 70.
C-2
<PAGE> 20
Q. REGULATORY CHANGES. Chase will provide assistance with the
analysis and implementation of any changes required by regulatory
bodies.
C-3
<PAGE> 1
EXHIBIT 10.16(e)
CUSTODY AGREEMENT
THIS AGREEMENT is made this 30th day of November, 1998 by and between [Name
of Fund]., a ________________ corporation (the "Fund"), and CHASE MANHATTAN
BANK, a New York State chartered bank and trust company ("Chase").
W I T N E S S E T H
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interest in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in Income Fund, Inc.,
(this fund together with all other series subsequently established by the Fund
and made subject to this Contract in accordance with paragraph 33, being herein
referred to as the "Fund(s)):
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints Chase to act as custodian of its
portfolio securities, cash and other property on the terms set forth in this
Agreement. Chase accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided in Section 23 of
this Agreement.
2. DELIVERY OF DOCUMENTS. The Fund has furnished Chase with copies properly
certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of Chase as Custodian of the portfolio securities, cash and other
property of the Fund and approving this Agreement;
(b) Incumbency and signature certificates identifying and containing the
signatures of the Fund's officers and/or the persons authorized to sign Proper
Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Articles of Incorporation filed with the State of Minnesota
and all amendments thereto (such Articles of Incorporation as currently in
effect and from time to time, be amended, are herein called the "Articles");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws"),
(e) Resolutions of the Fund's Board of Directors appointing the investment
advisor of the Fund and resolutions of the Fund's Board of Directors and the
Fund's Shareholders approving the proposed Investment Advisory Agreement
between the Fund and the advisor (the "Advisory Agreement");
(f)The Advisory Agreement
(g) The Fund's Registration Statement on Form N-1A under the 1940 Act and
the Securities Act of 1933, as amended ("the 1933 Act") as filed with the SEC;
and
(h) The Fund's most recent prospectus and statement of additional
information including all amendments and supplements thereto (the
"Prospectus").
Upon request the Fund will furnish Chase with copies of all amendments of
or supplements to the foregoing, if any. The Fund will also furnish Chase upon
request with a copy of the opinion of counsel for
<PAGE> 2
the Fund with respect to the validity of the Shares and the status of such
Shares under the 1933 Act filed with the SEC, and any other applicable federal
law or regulation.
3. DEFINITIONS.
(a) "Authorized Person". As used in this Agreement, the term "Authorized
Person" means the Fund's President, Treasurer and any other person, whether or
not any such person is an officer or employee of the Fund, duly authorized by
the Board of Directors of the Fund to give Proper Instructions on behalf of the
Fund as set forth in resolutions of the Fund's Board of Directors.
(b). "Book-Entry System". As used in this Agreement, the term "Book-Entry
System" means a book-entry system authorized by the U.S. Department of
Treasury, its successor or successors and its nominee or nominees.
(c) "Proper Instructions". Proper Instructions as used herein means a
writing signed or initialled by two or more persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if Chase reasonably believes them to
have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all such oral instructions to
be confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and Chase are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by Chase pursuant to any
three-party agreement which requires a segregated asset account in accordance
with Section 9.
(d) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property of the Fund which
the Fund may from time to time deposit, or cause to be
deposited, with Chase or which Chase may from time to time
hold for the Fund;
(ii) all income in respect of any such securities or other
property;
(iii) all proceeds of the sales of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by Chase from time to time from or on
behalf of the Fund.
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee
or nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Directors approving deposits by Chase
therein.
4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Fund will deliver or
cause to be delivered to Chase all securities and all moneys owned by it,
including payments of interest, principal and capital distributions and cash
received for the issuance of its Shares, at any time during the period of this
Agreement, except for securities and monies to be delivered to any subcustodian
appointed pursuant to Section 7 hereof. U.S. Trust will not be responsible for
such securities and such monies until actually
<PAGE> 3
received by it. All securities delivered to Chase or to any such subcustodian
(other than in bearer form) shall be registered in the name of the Fund or in
the name of a nominee of the Fund or in the name of Chase or any nominee of
Chase (with or without indication of fiduciary status) or in the name of any
subcustodian or any nominee of such subcustodian appointed pursuant to
Paragraph 7 hereof or shall be properly endorsed and in form for transfer
satisfactory to Chase.
5. VOTING RIGHTS. With respect to all securities, however registered, it is
understood that the voting and other rights and powers shall be exercised by
the Fund. Chase's only duty shall be to mail for delivery on the next business
day to the Fund any documents received, including proxy statements and offering
circulars, with any proxies for securities registered in a nominee name
executed by such nominee. Where warrants, options, tenders or other securities
have fixed expiration dates, the Fund understands that in order for Chase to
act, Chase must receive the Fund's instructions at its offices in New York,
addressed as Chase may from time to time request, by no later than noon (NY
City time) at least one business day prior to the last scheduled date to act
with respect thereto (or such earlier date or time as Chase may reasonably
notify the Fund). Absent Chase's timely receipt of such instructions, such
instruments will expire without liability to Chase.
6. RECEIPT AND DISBURSEMENT OF MONEY.
(a) Chase shall open and maintain a custody account for the Fund, subject
only to draft or order by Chase acting pursuant to the terms of this Agreement,
and shall hold in such account, subject to the provisions hereof, all cash
received by it from or for the Fund other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under the 1940
Act. Funds held by Chase for the Fund may be deposited by it to its credit at
Chase in the Banking Department of Chase or in such other banks or trust
companies as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act, and that each such bank or trust company shall be
approved by vote of a majority of the Board of Directors of the Fund. Such
funds shall be deposited by Chase in its capacity as Custodian and shall be
withdrawable by Chase only in that capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) Chase shall make payments of
cash to, or for the account of, the Fund from such cash only (i) for the
purchase of securities, options, futures contracts or options on futures
contracts for the Fund as provided in Section 13 hereof; (ii) in the case of a
purchase of securities effected through a Book-Entry System or Securities
Depository, in accordance with the conditions set forth in Section 8 hereof;
(iii) in the case of repurchase agreements entered into between the Fund and
Chase, or another bank, or a broker-dealer which is a member of The National
Association of Securities Dealers, Inc. ("NASD"), either (a) against delivery
of the securities either in certificate form or through an entry crediting
Chase's account at the Federal Reserve Bank with such securities or (b) against
delivery of the receipt evidencing purchase by the Fund of securities owned by
Chase along with written evidence of the agreement by U.S. Trust to repurchase
such securities from the Fund; (iv) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund; (v) for the payment of
dividends or other distributions on shares declared pursuant to the governing
documents of the Fund, or for the payment of interest, taxes, administration,
distribution or advisory fees or expenses which are to be borne by the Fund
under the terms of this Agreement, any Advisory Agreement, or any
administration agreement; (vi) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund and held
by or to be delivered to Chase; (vii) to a subcustodian pursuant to Section 7
hereof; (viii) for such common expenses incurred by the Fund in the ordinary
course of its business, including but not limited to printing and mailing
expenses, legal fees, accountants fees, exchange
<PAGE> 4
fees; or (ix) for any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the Board
of Directors or of the Executive Committee of the Fund signed by an officer of
the Fund and certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which such payment is
to be made, declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
(c) Chase is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received as custodian for the Fund.
6A. ADVANCES BY CUSTODIAN. The Fund may from time to time purchase
securities for settlement payable in "next day" funds and provide for payment
for such transactions by selling securities for settlement in "same day" funds
settling on the day after settlement of the Fund's purchase transaction. Under
these circumstances the Fund may require the Custodian to advance funds in
amounts not exceeding 20% of the value of the Fund's assets at the time of the
advance for payment of the securities purchase transaction, and the Custodian
shall recover an amount equal to its advance, without interest, from the
proceeds of the securities sale. In addition to the foregoing, the Custodian
may from time to time agree to advance cash to the Fund, without interest, for
the fund's other proper corporate purposes. If the Custodian advances cash for
any purpose, the Fund shall and hereby does grant to the Custodian a security
interest in Fund securities equal in value to the amount of the cash advance
but in no event shall the value of securities in which a security interest has
been granted exceed 20% of the value of the Fund's total assets at the time of
the pledge; should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash to reasonably dispose of any
securities in which it has a security interest to the extent necessary to
obtain reimbursement.
7. RECEIPT AND DELIVERY OF SECURITIES.
(a) Except as provided by Section 8 hereof, Chase shall hold and physically
segregate all securities and noncash Property received by it for the Fund. All
such securities and non-cash Property are to be held or disposed of by Chase
for the Fund pursuant to the terms of this Agreement. In the absence of Proper
Instructions accompanied by a certified resolution authorizing the specific
transaction by the Fund's Board, Chase shall have no power or authority to
withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such
securities and investments, except in accordance with the express terms
provided for in this Agreement. In no case may any director, officer, employee
or agent of the Fund withdraw any securities. In connection with its duties
under this Section 7, Chase may, at its own expense, enter into subcustodian
agreements with other banks or trust companies for the receipt of certain
securities and cash to be held by Chase for the account of the Fund pursuant to
this Agreement; provided that each such bank or trust company has an aggregate
capital, surplus and undivided profits, as shown by its last published report,
of not less than twenty million dollars ($20,000,000) and that such bank or
trust company agrees with Chase to comply with all relevant provisions of the
1940 Act and applicable rules and regulations thereunder. Chase will be liable
for acts or omissions of any subcustodian. Chase shall employ sub-custodians
upon receipt of Proper Instructions, but only in accordance with an applicable
vote by the Board of Directors of the Fund.
(b) Promptly after the close of business on each day Chase shall furnish
the Fund with confirmations and a summary of all transfers to or from the
account of the Fund during said day. Where securities are transferred to the
account of the Fund established at a Securities Depository or Book Entry System
pursuant to Section 8 hereof, Chase shall also by book-entry or otherwise
identify as belonging to such Fund the quantity of securities in a fungible
bulk of securities registered in the name of Chase (or its nominee) or shown in
Chase's account on the books of a Securities Depository or Book-Entry System.
At least monthly and from time to time, Chase shall furnish the Fund with a
detailed statement of the Property held for the Fund under this Agreement.
<PAGE> 5
8. USE OF SECURITIES DEPOSITORY OR BOOK-ENTRY SYSTEM. The Fund shall
deliver to Chase a certified resolution of the Board of Directors of the Fund
approving, authorizing and instructing Chase on a continuous and ongoing basis
until instructed to the contrary by Proper Instructions actually received by
Chase (i) to deposit in a Securities Depository or Book-Entry System all
securities of the Fund eligible for deposit therein and (ii) to utilize a
Securities Depository or Book-Entry System to the extent possible in connection
with the performance of its duties hereunder, including without limitation
settlements of purchases and sales of securities by the Fund, and deliveries
and returns of securities collateral in connection with borrowings. Without
limiting the generality of such use, it is agreed that the following provisions
shall apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will at all times (1) be represented in an
account of Chase in the Securities Depository or Book Entry System (the
"Account") and (2) be segregated from any assets and cash controlled by Chase
in other than a fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. Chase will effect payment for securities
and receive and deliver securities in accordance with accepted industry
practices as set forth in (b) below, unless the Fund has given Chase Proper
Instructions to the contrary. The records of Chase with respect to securities
of the Fund maintained in a Securities Depository or Book Entry System shall
identify by book entry those securities belonging to the Fund.
(b) Chase shall pay for securities purchased for the account of the Fund
upon (i) receipt of advice from the Securities Depository or Book Entry System
that such securities have been transferred to the Account, and (ii) the making
of an entry on the records of Chase to reflect such payment and transfer for
the account of the Fund. Upon receipt of Proper Instructions, Chase shall
transfer securities sold for the account of the Fund upon (i) receipt of advice
from the Securities Depository or Book Entry System that payment for such
securities has been transferred to the Account, and (ii) the making of an entry
on the records of Chase to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities Depository or Book Entry
System of transfers of securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by Chase and be provided to the Fund at
its request. Upon request, Chase shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in the form of a written advice or
notice and shall furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in a Securities Depository or Book Entry
System for the account of the Fund.
(c) Chase shall provide the Fund with any report obtained by Chase on the
Securities Depository or Book Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities Depository or Book Entry System;
(d) All Books and records maintained by Chase which relate to the Fund
participation in a Securities Depository or Book-Entry System will at all times
during Chase's regular business hours be open to the inspection of the Fund's
duly authorized employees or agents, and the Fund will be furnished with all
information in respect of the services rendered to it as it may require.
(e) Anything to the contrary in this Agreement notwithstanding, Chase shall
be liable to the Fund for any loss or damage to the Fund resulting from any
negligence, misfeasance or misconduct of Chase or any of its agents or of any
of its or their employees in connection with its or their use of the Securities
Depository or Book Entry Systems or from failure of Chase or any such agent to
enforce effectively such rights as it may have against such Securities
Depository or Book Entry System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of Chase with respect to any claim
against the Securities Depository or Book Entry System or any other person
which Chase may have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss or damage.
9. SEGREGATED ACCOUNT. Chase shall upon receipt of Proper Instructions
establish and maintain a segregated account or accounts for and on behalf of
the Fund, into which account or accounts may be
<PAGE> 6
transferred cash and/or securities, including securities maintained in an
account by Chase pursuant to Section 8 hereof, (i) in accordance with the
provisions of any agreement among the Fund, Chase and a broker dealer
registered under the Securities and Exchange Act of 1934 and a member of the
NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in the case
of clause (iv), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
10. INSTRUCTIONS CONSISTENT WITH THE ARTICLES, ETC.
(a) Unless otherwise provided in this Agreement, Chase shall act only upon
Proper Instructions. Chase may assume that any Proper Instructions received
hereunder are not in any way inconsistent with any provision of the Articles or
By-Laws or any vote or resolution of the Fund's Board of Directors or any
committee thereof. Chase shall be entitled to rely upon any Proper Instructions
actually received by Chase pursuant to this Agreement. The Fund agrees that
Chase shall incur no liability in acting in good faith upon Proper Instructions
given to Chase, except to the extent such liability was incurred as a result of
Chase's negligence or willful misconduct. In accord with instructions from the
Fund, as required by accepted industry practice or as Chase may elect in
effecting the execution of Fund instructions, advances of cash or other
Property made by Chase, arising from the purchase, sale, redemption, transfer
or other disposition of Property of the Fund, or in connection with the
disbursement of funds to any party, or in payment of fees, expenses, claims or
liabilities owed to Chase by the Fund, or to any other party which has secured
judgment in a court of law against the Fund which creates an overdraft in the
accounts or over-delivery of Property, shall be deemed a loan by Chase to the
Fund, payable on demand, bearing interest at such rate customarily charged by
Chase for similar loans.
(b) The Fund agrees that test arrangements, authentication methods or other
security devices to be used with respect to instructions which the Fund may
give by telephone, telex, TWX, facsimile transmission, bank wire or other
teleprocess, or through an electronic instruction system, shall be processed in
accordance with terms and conditions for the use of such arrangements, methods
or devices as Chase may put into effect and modify from time to time. The Fund
shall safeguard any test keys, identification codes or other security devices
which Chase makes available to the Fund and agrees that the Fund shall be
responsible for any loss, liability or damage incurred by Chase or by the Fund
as a result of Chase's acting in accordance with instructions from any
unauthorized person using the proper security device except to the extent such
loss, liability or damage was incurred as a result of Chase's negligence or
willful misconduct. Chase may electronically record, but shall not be obligated
to so record, any instructions given by telephone and any other telephone
discussions with respect to the Fund. In the event that the Fund uses Chase's
Asset Management system or any successor electronic communications or
information system, the Fund agrees that Chase is not responsible for the
consequences of the failure of that system to perform for any reason, beyond
the reasonable control of Chase, or the failure of any communications carrier,
utility, or communications network. In the event that system is inoperable, the
Fund agrees that it will accept the
<PAGE> 7
communication of transaction instructions by telephone, facsimile transmission
on equipment compatible to Chase's facsimile receiving equipment or by letter,
at no additional charge to the Fund.
(c) Chase shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of securities
and expirations of rights in connection therewith and notices of exercise of
call and put options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by Chase from issuers of the securities
being held for the Fund. With respect to tender or exchange offers, Chase shall
transmit promptly by facsimile to the Fund all written information received by
Chase from issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange offer. If the Fund
desires to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify Chase at least three business
days prior to the date on which Chase is to take such action or upon the date
such notification is first received by the Fund, if later. If any Property
registered in the name of a nominee of Chase is called for partial redemption
by the issuer of such property, Chase is authorized to allot the called portion
to the respective beneficial holders of the Property in such manner deemed to
be fair and equitable by Chase in its sole discretion.
11. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. Chase is authorized to take
the following action without Proper Instructions:
(a) Collection of Income and Other Payments. Chase shall:
(i) collect and receive on a timely basis for the account
of the Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar items,
included or to be included in the Property of the Fund, and promptly advise the
Fund of such receipt and shall credit such income, as collected, to the Fund.
From time to time, Chase may elect, but shall not be obligated, to credit the
account with interest, dividends or principal payments on payable or
contractual settlement date, in anticipation of receiving same from a payor,
central depository, broker or other agent employed by the Fund or Chase. Any
such crediting and posting shall be at the Fund's sole risk, and Chase shall be
authorized to reverse any such advance posting in the event it does not receive
good funds from any such payor, central depository, broker or agent of the
Customer. Chase agrees to promptly notify the Fund of the reversal of any such
advance posting.
(ii) endorse and deposit for collection in the name of
the Fund, checks, drafts, or other orders for the payment of money on the same
day as received;
(iii) receive and hold for the account of the Fund all
securities received by the Fund as a result of a stock dividend, share split-up
or reorganization, merger, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities issued with
respect to any portfolio securities of the Fund held by Chase hereunder;
(iv) present for payment and collect the amount payable
upon all securities which may mature or be called, redeemed or retired, or
otherwise become payable on the date such securities become payable; (v) take
any action which may be necessary and proper in connection with the collection
and receipt of such income and other payments and the endorsement for
collection of checks, drafts and other negotiable instruments;
(vi) to effect an exchange of the securities where the
par value is changed, and to surrender securities at maturity or upon an
earlier call for redemption, or when securities otherwise become payable,
against payment therefore in accordance with accepted industry practice. If any
Property registered in the name of a nominee of Chase is called for partial
redemption by the issuer of such property, Chase is authorized to allot the
called portion to the respective beneficial holders of the Property in such
manner deemed to be fair and equitable by Chase in its sole discretion.
<PAGE> 8
(b) Miscellaneous Transactions. Chase is authorized to deliver or cause to
be delivered Property against payment or other consideration or written receipt
therefor for examination by a dealer selling for the account of the Fund in
accordance with street delivery custom.
12. TRANSACTIONS REQUIRING INSTRUCTIONS. In addition to the actions
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, Chase, directly or through the use of a
Securities Depository or Book-Entry System, shall:
(a) Execute and deliver to such persons as may be designated in such Proper
Instructions, proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any securities may be exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
issuer of securities or corporation, against receipt of such certificates of
deposit, interim receipts or other instruments or documents, and cash, if any,
as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust company
for the purpose of pledge or hypothecation to secure any loan incurred by the
Fund; provided, however, that securities shall be released only upon payment to
Chase of the monies borrowed, or upon receipt of adequate collateral as agreed
upon by the Fund and Chase which may be in the form of cash or obligations
issued by the U.S. government, its agencies or instrumentalities, except that
in cases where additional collateral is required to secure a borrowing already
made, subject to proper prior authorization, further securities may be released
for that purpose; and pay such loan upon re-delivery to it of the securities
pledged or hypothecated therefore and upon surrender of the note or notes
evidencing the loan; and
(f) Deliver securities in accordance with the provisions of any agreement
among the Fund, Chase and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any agreement
among the Fund, Chase and a Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Fund; and
(h) Deliver securities against payment or other consideration or written
receipt therefore for transfer of securities into the name of the Fund or Chase
or a nominee of either, or for exchange or securities for a different number of
bonds, certificates, or other evidence, representing the same aggregate face
amount or number of units bearing the same interest rate, maturity date and
call provisions, if any; provided that, in any such case, the new securities
are to be delivered to Chase;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to Chase;
(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund;
<PAGE> 9
(l) Deliver securities pursuant to any other proper corporate purpose, but
only upon receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive Committee signed by an
officer of the Funds and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made.
13. PURCHASE OF SECURITIES. Promptly after each purchase of securities,
options, futures contracts or options on futures contracts by the investment
advisor, the Fund shall deliver to Chase (as Custodian) Proper Instructions
specifying with respect to each such purchase: (a) the name of the issuer and
the title of the securities, (b) the number of shares of the principal amount
purchased and accrued interest, if any, (c) the dates of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, (f) the name of the person from whom or the broker through whom
the purchase was made and (g) the Fund name. Chase shall upon receipt of
securities purchased by or for the Fund registered in the name of the Fund or
in the name of a nominee of Chase or of the Fund or in proper form for transfer
or upon receipt of evidence of title to options, futures contracts or options
on futures contracts purchased by the Fund, pay out of the moneys held for the
account of the Fund the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Proper Instructions. Except as
specifically stated otherwise in this Agreement, in any and every case where
payment for purchase of securities for the account of the Fund is made by Chase
in advance of receipt of the securities purchased in the absence of specific
written instructions from the Fund to so pay in advance, Chase shall be
absolutely liable to the Fund for such securities to the same extent as if the
securities had been received by Chase.
14. SALE OF SECURITIES. Promptly after each sale of securities by the Fund
at the instruction of the investment advisor, the Fund shall deliver to Chase
(as Custodian) Proper Instructions, specifying with respect to each such sale;
(a) the name of the issuer and the title of the security, (b) the number of
shares or principal amount sold, and accrued interest, if any, (c) the date of
sale, (d) the sale price per unit, (e) the total amount payable to the Fund
upon such sale, (f) the name of the broker through whom or the person to whom
the sale was made and (g) the Fund name. Chase shall deliver the securities
upon receipt of the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set forth in such Proper
Instructions. Subject to the foregoing, Chase may accept payment in such form
as shall be satisfactory to it, and may deliver securities and arrange for
payment in accordance with the customs prevailing among dealers in securities.
15. NOT IN USE.
16. RECORDS. The books and records pertaining to the Fund which are in the
possession of Chase shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act, as amended, and
other applicable securities laws and rules and regulations. The Fund, or the
Fund's authorized representative, shall have access to such books and records
at all times during Chase's normal business hours, and such books and records
shall be surrendered to the Fund promptly upon request. Upon reasonable request
of the Fund, copies of any such books and records shall be provided by Chase to
the Fund or the Fund's authorized representative at the Fund's expense.
17. COOPERATION WITH ACCOUNTANTS. Chase shall cooperate with the Fund's
independent certified public accountants and shall take all reasonable action
in the performance of its obligations under this Agreement to assure that the
necessary information is made available to such accountants for the expression
of their unqualified opinion, including but not limited to the opinion included
in the Fund's Form N-1A, Form N-SAR and other reports to the Securities and
Exchange Commission and with respect to any other requirement of such
Commission.
<PAGE> 10
18. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. Chase shall provide
the Fund, at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities Depository or Book Entry System, relating to the services
provided by Chase under this Contract; such reports, shall be of sufficient
scope and in sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the reports shall
so state.
19. CONFIDENTIALITY. Chase agrees on behalf of itself and its employees to
treat confidentially and as the proprietary information of the Fund all records
and other information relative to the Fund and its prior, present or potential
Shareholders and relative to the advisors and its prior, present or potential
customers, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Fund, which approval shall
not be unreasonably withheld and may not be withheld where Chase may be exposed
to civil or criminal contempt proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when so
requested by the Fund. Nothing contained herein, however, shall prohibit Chase
from advertising or soliciting the public generally with respect to other
products or services, regardless of whether such advertisement or solicitation
may include prior, present or potential Shareholders of the Fund.
20. EQUIPMENT FAILURES. In the event of equipment failures beyond Chase's
control, Chase shall, at no additional expense to the Fund, take reasonable
steps to minimize service interruptions but shall not have liability with
respect thereto. Chase shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provisions for
back up emergency use of electronic data processing equipment to the extent
appropriate equipment is available.
21. RIGHT TO RECEIVE ADVICE.
(a) Advice of Fund. If Chase shall be in doubt as to any action to be taken
or omitted by it, it may request, and shall receive, from the Fund
clarification or advice.
(b) Advice of Counsel. If Chase shall be in doubt as to any question of law
involved in any action to be taken or omitted by Chase, it may request advice
at its own cost from counsel of its own choosing (who may be counsel for the
Fund or Chase, at the option of Chase).
(c) Conflicting Advice. In case of conflict between directions or advice
received by Chase pursuant to sub-paragraph (a) of this paragraph and advice
received by Chase pursuant to subparagraph (b) of this paragraph, Chase shall
be entitled to rely on and follow the advice received pursuant to the latter
provision alone.
(d) Protection of Chase. Chase shall be protected in any action or inaction
which it takes or omits to take in reliance on any directions or advice
received pursuant to subparagraphs (a) or (b) of this section which Chase,
after receipt of any such directions or advice, in good faith believes to be
consistent with such directions or advice. However, nothing in this paragraph
shall be construed as imposing upon Chase any obligation (i) to seek such
directions or advice, or (ii) to act in accordance with such directions or
advice when received, unless, under the terms of another provision of this
Agreement, the same is a condition to Chase's properly taking or omitting to
take such action. Nothing in this subsection shall excuse Chase when an action
or omission on the part of Chase constitutes willful misfeasance, bad faith,
negligence or reckless disregard by Chase of its duties under this Agreement.
<PAGE> 11
22. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The Fund assumes
full responsibility for insuring that the contents of each Prospectus of the
Fund complies with all applicable requirements of the 1933 Act, the 1940 Act,
and any laws, rules and regulations of governmental authorities having
jurisdiction.
23. COMPENSATION. As compensation for the services rendered by Chase during
the term of this Agreement, the Fund will pay to Chase, in addition to
reimbursement of its out-of-pocket expenses, monthly fees as outlined in
Exhibit A.
24. INDEMNIFICATION. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless Chase and its nominees from all taxes, charges,
expenses, assessments, claims, and liabilities (including, without limitation,
liabilities arising under the 1933 Act, the Securities Exchange Act of 1934,
the 1940 Act, and any state and foreign securities and blue sky laws, all as or
to be amended from time to time) and expenses, including (without limitation)
attorney's fees and disbursements (hereafter "liabilities and expenses"),
arising directly or indirectly from any action or thing which Chase takes or
does or omits to take or do (i) at the request or on the direction of or in
reliance on the advice of the Fund, or (ii) upon Proper Instructions, provided,
that neither Chase nor any of its nominees or sub-custodians shall be
indemnified against any liability to the Fund or to its Shareholders (or any
expenses incident to such liability) arising out of (x) Chase's or such
nominee's or sub-custodian's own willful misfeasance, bad faith, negligence or
reckless disregard of its duties under this Agreement or any agreement between
Chase and any nominee or subcustodian or (y) Chase's own negligent failure to
perform its duties under this Agreement. Chase similarly agrees to indemnify
and hold harmless the Fund from all liabilities and expenses arising directly
or indirectly from Chase's or such nominee's or sub-custodian's willful
misfeasance, bad faith, negligence or reckless disregard in performing its
duties under this agreement. In the event of any advance of cash for any
purpose made by Chase resulting from orders or Proper Instructions of the Fund,
or in the event that Chase or its nominee or subcustodian shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise
from its or its nominee's or sub-custodian's own negligent action, negligent
failure to act, willful misconduct, or reckless disregard, the Fund shall
promptly reimburse Chase for such advance of cash or such taxes, charges,
expenses, assessments claims or liabilities.
25. RESPONSIBILITY OF CHASE. In the performance of its duties hereunder,
Chase shall be obligated to exercise care and diligence and to act in good
faith to insure the accuracy and completeness of all services performed under
this Agreement. Chase shall be responsible for its own negligent failure or
that of any subcustodian it shall appoint to perform its duties under this
Agreement but to the extent that duties, obligations and responsibilities are
not expressly set forth in this Agreement, Chase shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith, or
negligence on the part of Chase or such subcustodian or reckless disregard of
such duties, obligations and responsibilities. Without limiting the generality
of the foregoing or of any other provision of this Agreement, Chase in
connection with its duties under this Agreement shall, so long as and to the
extent it is in the exercise of reasonable care, not be under any duty or
obligation to inquire into and shall not be liable for or in respect of (a) the
validity or invalidity or authority or lack thereof of any advice, direction,
notice or other instrument which conforms to the applicable requirements of
this Agreement, if any, and which Chase believes to be genuine, (b) the
validity of the issue of any securities purchased or sold by the Fund, the
legality of the purchase or sale thereof or the propriety of the amount paid or
received therefor, (c) the legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefore, (d) the legality of the
redemption of any Shares, or the propriety of the amount to be paid therefor,
(e) the legality of the declaration or payment of any dividend or distribution
on Shares, of (f) delays or errors or loss of data occurring by reason of
<PAGE> 12
circumstances beyond Chase's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown
(except as provided in Section 20), flood or catastrophe, acts of God,
insurrection, war, riots, or failure of the mail, transportation, communication
or power supply.
26. COLLECTION OF INCOME. Chase shall collect on a timely basis all income
and other payments with respect to registered securities held hereunder to
which the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by the
issuer, such securities are held by Chase or its agent thereof and shall credit
such income, as collected, to the Fund's custodian account. Without limiting
the generality of the foregoing, Chase shall detach and present for payment all
coupons and other income items requiring presentation as and when they become
due and shall collect interest when due on securities held hereunder. Income
due the Fund on securities loaned pursuant to the provisions of Section 9 shall
be the responsibility of the Fund. Chase will have no duty or responsibility in
connection therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Fund is properly entitled
27. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. Chase shall execute ownership
and other certificates and affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with respect to securities
of the Fund held by it and in connection with transfers of securities.
28. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT. This Agreement shall
become effective as of its execution, shall continue in full force and effect
until terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after the date
of such delivery or mailing; provided, however that Chase shall not act under
Section 8 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund has
approved the initial use of a particular Securities Depository or Book Entry
System and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the use by the
Fund of such Securities Depository and/or Book Entry System, as required in
each case by Rule 17f-4 under the Investment Company Act of 1940, as amended;
provided further, however, that the Fund shall not amend or terminate this
Agreement in contravention of any applicable federal or state regulations, or
any provision of the Articles of Incorporation, and further provided, that the
Fund may at any time by action of its Board of Directors (i) substitute another
bank or trust company for Chase by giving notice as described above to Chase,
or (ii) immediately terminate this Agreement in the event of the appointment of
a conservator or receiver for Chase by the Comptroller of the Currency or upon
the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to Chase such
compensation as may be due as of the date of such termination and shall likewise
reimburse Chase for its costs, expenses and disbursements.
29. SUCCESSOR CUSTODIAN
If a successor custodian shall be appointed by the Board of Directors of the
Fund, Chase shall, upon termination, deliver to such successor custodian at the
office of the custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an account of the
successor custodian all of the Fund's securities held in a Securities Depository
or Book Entry System.
<PAGE> 13
If no such successor custodian shall be appointed, Chase shall, in like
manner, upon receipt of a certified copy of a vote of the Board of Directors of
the Fund, deliver at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
Chase on or before the date when such termination shall be come effective, then
Chase shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, doing business in New York, New York, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by Chase and all instruments held
by Chase relative thereto and all other property held by it under this
Agreement and to transfer to an account of such successor custodian all of the
Fund's securities held in any Securities Depository or Book Entry System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in the
possession of Chase after the date of termination hereof owing to failure of
the Fund to procure the certified copy of the vote referred to or of the Board
of Directors to appoint a successor custodian, Chase shall be entitled to fair
compensation for its services during such period as Chase retains possession of
such securities, funds and other properties and the provisions of this Contract
relating to the duties and obligations of Chase shall remain in full force and
effect.
30. NOTICES. All notices and other communications (collectively referred to
as "Notice" or "Notices") in this section hereunder shall be in writing and
shall be first sent by telegram, cable, telex, or facsimile sending device and
thereafter by overnight mail for delivery on the next business day. Notices
shall be addressed (a) if to Chase, at Chase's address, 114 West 47th Street,
New York, New York, 10036-1532, facsimile number (212) 852-1488; (b) if to the
Fund, at the address of the Fund Attention: Portfolio Manager, facsimile number
(312) 917-8211; or (c) if to neither of the foregoing, at such other address as
shall have been notified to the sender of any such Notice or other
communication. Notices sent by overnight mail shall be deemed to have been
given the next business day. Notices sent by messenger shall be deemed to have
been given on the day delivered, and notices sent by confirming telegram,
cable, telex or facsimile sending device shall be deemed to have been given
immediately. All postage, cable, telegram, telex and facsimile sending device
charges arising from the sending of a Notice hereunder shall be paid by the
sender.
31. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
32. AMENDMENTS. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
33. ADDITIONAL FUNDS. In the event that the Fund establishes one or more
series of the Fund, with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Fund hereunder.
34. MISCELLANEOUS. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect their construction
or effect. This
<PAGE> 14
Agreement shall be deemed to be a contract made in New York and governed by New
York law. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
insure to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below as of the day and year first
above written.
CHASE MANHATTAN BANK
Attest: By:
------------------------ ----------------------------------
THOMAS A. DE ANGELO
VICE PRESIDENT
NUVEEN INCOME FUND, INC.
Attest: By:
------------------------ ----------------------------------
GIFFORD R. ZIMMERMAN
ASSISTANT GENERAL COUNSEL
<PAGE> 15
CUSTODY AGREEMENTS BETWEEN
NUVEEN OPEN-END FUNDS
AND
CHASE MANHATTAN BANK
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
Nuveen Dividend and Growth Fund
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen European Value Fund
Nuveen Rittenhouse Growth Fund
Nuveen Income Fund
Nuveen Tax-Exempt Money Market Fund, Inc.
Nuveen Tax-Free Reserves, Inc.
Nuveen Massachusetts Tax-Free Money Market Fund
Nuveen New York Tax-Free Money Market Fund
Nuveen California Tax-Free Money Market Fund
<PAGE> 1
EXHIBIT 10.17
SUPPORT SERVICES AGREEMENT
This Support Services Agreement (this "Agreement") is made as of
August 31, 1997 (the "Effective Date") by and between Rittenhouse Financial
Services, Inc., a Delaware corporation ("RFS"), and The Rittenhouse Trust
Company, a trust company and commercial bank organized under the laws of the
Commonwealth of Pennsylvania ("RTC").
WHEREAS, pursuant to a Stock Purchase Agreement dated as of July 14,
1997 (the "Stock Purchase Agreement"), among The John Nuveen Company, a
Delaware corporation ("JNC"), George W. Connell, and RFS, JNC is acquiring from
George W. Connell on the date hereof all of the capital stock of RFS; and
WHEREAS, RFS desires to provide to RTC, and RTC desires to receive
from RFS, certain services, as more fully described on Schedule 1 attached
hereto (the "RFS Provided Services"); and
WHEREAS, RTC desires to provide to RFS, and RFS desires to receive
from RTC, certain services, as more fully described on Schedule 2 attached
hereto (the "RTC Provided Services" and, together with the RFS Provided
Services, the "Services"); and
WHEREAS, RFS and RTC, as contemplated by Section 4.5 of the Stock
Purchase Agreement, desire to enter into this Agreement to confirm the terms
and conditions pursuant to which RFS will provide the Services.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
Services. (a) Subject to the terms of this Agreement, from and after
the Closing, RFS shall make the RFS Provided Services available to RTC in
accordance with the practices in effect as of the Closing or as otherwise
specifically set forth in Schedule 1 hereto. In consideration for the RFS
Provided Services listed on Schedule 1, RTC shall pay to RFS, JNC or an
affiliate of JNC each year for a period of ten years from the date hereof the
Fixed Annual Fee set forth on Schedule 3 attached hereto (together with
Schedule 1, the "RFS Provided Services Schedules"), payable in advance for the
first year of such period on the second business day following the date hereof
and thereafter in advance in equal quarterly installments on the first business
day following each December 31, March 31, June 30 and September 30, in each
case by wire transfer of immediately available funds, which Fixed Annual Fee in
light of the RFS's making available such RFS Provided Services shall be payable
regardless of whether and to what extent any RFS Provided Services are utilized
by RTC hereunder during the respective annual period to which such payment
relates, and the fee or other charge set forth opposite each such RFS Provided
Service on Schedule 1 (each such fee or charge a "Variable RFS Provided Service
<PAGE> 2
Fee") in respect of RFS Provided Services actually provided and received by RTC
during a billing period hereunder and each RFS Provided Service provided will
be invoiced to RTC in accordance with the billing provisions set forth in
Schedule 1 with respect to such RFS Provided Service. RTC shall give RFS
written notice of its intent to terminate any one or more of the RFS Provided
Services at least 30 days prior to the termination of the RFS Provided Service
unless Schedule 1 hereto provides for a different notice period, in which case
such different notice period shall apply to the applicable Service; provided,
however, that no such termination(s) shall relieve RTC of its obligation to pay
the Fixed Annual Fee to RFS, JNC or an affiliate of JNC as provided above and
provided further that notwithstanding anything to the contrary in this
Agreement, RTC shall not be obligated to continue to pay the Fixed Annual Fee
if (i) RFS terminates RTC's sublease of office space from RFS pursuant to the
Sublease dated the date hereof by and between RFS and RTC or any subsequent
sublease entered into pursuant to Section 1(c) (a "Sublease") or RTC is evicted
from such space (in any case other than as a result of RTC's default thereunder
or upon the Sublease's expiration at the end of the term thereof (without
acceleration of termination)), or (ii) RFS breaches the covenant set forth in
Section 1(c). RFS agrees and acknowledges that each of the RFS Provided
Services will be available for a period of at least ten years from the date
hereof and that if RTC has given RFS written notice of its intent to terminate
any of the RFS Provided Services pursuant to this Section 1(a), then RTC shall
have the right to resume at RTC's cost (including start up costs) any such RFS
Provided Service upon 30 days written notice to RFS, provided that such notice
is delivered prior to the tenth anniversary of the date hereof and provided
further that RFS shall have no obligation to provide such terminated service if
RFS no longer performs such service for itself or no longer maintains the
personnel, hardware or software necessary to perform such RFS Provided Service.
This Agreement shall continue in full force and effect with respect to any RFS
Provided Services not terminated by any such notices.
Subject to the terms of this Agreement, from and after the Closing,
RTC shall make the RTC Provided Services available to RFS in accordance with
the practices in effect as of the Closing or as otherwise specifically set
forth in Schedule 2 hereto. In consideration for the Services, RFS shall pay to
RTC the fee or other charge set forth opposite each such RTC Provided Service
on Schedule 2 (each such fee or charge a "Variable RTC Provided Service Fee"
and, together with the Variable RFS Provided Service Fee, the "Variable
Services Fees") in respect of RTC Provided Services actually provided and
received by RFS during a billing period hereunder and each RTC Provided Service
provided will be invoiced to RFS in accordance with the billing provisions set
forth in Schedule 2 with respect to such Service. RFS shall give RTC written
notice of its intent to terminate any one or more of the RTC Provided Services
at least 30 days prior to the termination of the RTC Provided Service unless
Schedule 2 hereto provides for a different notice period, in which case such
different notice period shall apply to the applicable RTC Provided Service. RTC
agrees and acknowledges that each of the RTC Provided Services will be
available for a period of at least ten years from the date hereof and that if
RFS has given RTC written notice of its intent to terminate any of the RTC
Provided Services pursuant to this Section 1(b), then RFS shall have the right
to resume at RFS's cost (including Start Up Costs) any such RTC Provided
Service upon 30 days written notice to RTC, provided that such notice is
delivered prior to the tenth anniversary of the date of and provided further
that RTC shall have no obligation to provide such terminated service if RTC no
longer performs such service for
<PAGE> 3
itself no longer maintains the personnel, hardware or software necessary to
perform such RTC Provided Service. This Agreement shall continue in full force
and effect with respect to any RTC Provided Services not terminated by any such
notices.
During the period ending on the tenth anniversary of the date hereof
RFS shall secure for RTC's benefit and shall sublease to (or shall arrange for
a lease for) RTC office space which is contiguous to office space leased,
owned, or otherwise occupied by RFS following termination of the Sublease dated
the date hereof by and between RFS and RTC. Such sublet office space shall,
unless otherwise agreed by RTC, contain the same square footage of office space
and storage space as that covered by the Sublease at the time of its expiration
and shall be of quality and appearance comparable to the contiguous office
space and storage space occupied by RFS. Such sublet shall be evidenced by a
sublease containing the terms of the Sublease between RFS and RTC dated the
date hereof, modified, mutatis mutandis, to reflect the terms of RFS's master
lease. RTC's rent and associated expenses for such space shall be a percentage
of RFS's rent and associated expenses based on the percentage of space sublet
to RTC in relation to the overall space leased by RFS. RFS covenants and agrees
that prior to leasing any office space it shall obtain from its new landlord
all necessary consents to the sublease to RTC herein described.
"Providing Party" shall mean (i) with respect to the RFS Provided
Services, RFS, and (ii) with respect to the RTC Provided Services, RTC.
"Receiving Party" shall mean (i) with respect to the RFS Provided Services,
RTC, and (ii) with respect to the RTC Provided Services, RFS.
Liability; Indemnification. Providing Party shall have no liability to
Receiving Party with respect to its furnishing any of the Services hereunder
except for its willful misconduct or gross negligence. In providing the
Services, Providing Party shall not be obligated to (i) hire any additional
employees; (ii) maintain the employment of any specific employee; (iii)
purchase, lease or license any additional equipment or software; or (iv) pay
any costs related to the transfer or conversion of Receiving Party's data to
Receiving Party or any alternate supplier of administrative services. The sole
remedy of Receiving Party in the event data owned by it is lost or damaged in
any way during processing by a third party data processor is the refund to it
of any Variable Service Fees paid for the processing of the damaged data and
any damages available from such third party data processor. Providing Party
agrees to exercise reasonable diligence to correct errors or deficiencies in
the Services. Providing Party shall not be liable to any third party in any way
for any obligation or commitment pursuant to this Agreement or for any act or
omission, and Receiving Party shall be solely liable and responsible for any
and all claims, liabilities, obligations, losses, costs, expenses, litigation,
proceedings, charges, allegations, demands, damages or judgments of any kind or
nature whatsoever ("Liabilities") related to, arising from, asserted against or
associated with Providing Party furnishing or failing to furnish to Receiving
Party any of the Services described herein. Upon the termination of any of the
Services, Receiving Party shall be obligated to return to Providing Party, as
soon as practicable, any equipment or other property of Providing Party
relating to the Services which is owned or leased by Providing Party and is or
was in Receiving Party's possession or control. Effective as of the date of
this Agreement, Receiving Party shall indemnify and hold Providing
<PAGE> 4
Party and its affiliates and their respective directors, shareholders,
officers, employees, agents, consultants, representatives, successors,
transferees and assigns harmless from and against any and all Liabilities
(including, without limitation, reasonable fees and expenses of counsel) of
whatever kind and nature related to, arising from, asserted against or
associated with Providing Party furnishing or failing to furnish the Services
provided for in this Agreement, other than Liabilities arising out of the
willful misconduct or gross negligence of Providing Party or its affiliates or
their respective directors, shareholders, officers, employees, agents,
consultants, representatives, successors, transferees or assigns.
Claims. Receiving Party's receipt of any Service performed hereunder
shall be an unqualified acceptance of, and a waiver by it of any and all claims
with respect to, such Service unless it gives Providing Party notice of claim
within 60 days after such receipt. No claim by Receiving Party against
Providing Party of any kind, whether as to service performed or for delayed
performance or non-performance, shall be greater in amount than the Variable
Service Fee paid, or payable, by Receiving Party for the Service in respect of
which such claim is made; and in no event will Providing Party be liable to
Receiving Party for any incidental or consequential damages, other than as
caused by or resulting from negligence or breach of obligations hereunder.
Additional Services. (a) If Receiving Party, and if RFS is Receiving
Party then also JNC, wants Providing Party to provide any service other than
the Services provided for in Schedule 1 hereto, Receiving Party shall notify
Providing Party in writing, and within 30 days following the giving of such
notice Providing Party, and if RFS is Providing Party then also JNC, shall
decide, in its sole discretion, whether to provide such service. If Providing
Party agrees to provide such additional service, Receiving Party shall be
invoiced for such service in accordance with billing practices reasonably
determined by mutual agreements. Notwithstanding the foregoing, any service
that is being provided by either party to the other as of the date hereof which
is not listed on Schedule 1, shall be provided by the Providing Party to the
Receiving Party upon the Receiving Party's written request to the Providing
Party within one year from the date hereof at the cost (including start up
costs) of providing such service; provided that the Providing Party shall have
no obligation to provide such service if the Providing Party no longer performs
such service for itself or no longer maintains the personnel, hardware or
software necessary to perform such service. The provision by Providing Party of
any such additional service shall be subject to all other provisions of this
Agreement and shall be deemed a Service as if such additional service had
originally been part of Schedule 1 or Schedule 2 to this Agreement, as
applicable.
Confidentiality. Any and all information which is not generally known
to the public which is exchanged between the parties in connection with this
Agreement, whether of a technical or business nature, shall be considered to be
confidential. The parties agree that confidential information shall not be
disclosed to any third party or parties without the written consent of the
other party. Each party shall take reasonable measures to protect against
nondisclosure of confidential information by its officers and employees.
Confidential information shall not include any information (i) which is or
becomes part of the public domain, (ii) which is obtained from third parties
who are not bound by confidentiality obligations or
<PAGE> 5
(iii) which is required to be disclosed by law, regulation, legal process or
the rules of any state or federal regulatory agency or the New York Stock
Exchange. The provisions of this section shall survive the termination of this
Agreement.
Assignment. Notwithstanding anything to the contrary in this
Agreement, this Agreement shall not be assignable by either party hereto to any
other person, firm or entity without the prior written consent of the other
party; provided, however, that this Agreement in its entirety, or any portion
of the rights and obligations established hereunder, may be assigned by either
party hereto to one of its directly or indirectly wholly owned subsidiaries
without the written consent of the other party, provided further that (other
than those services indicated on Schedule 1 or 2 as non-transferable) RFS may
assign either in whole or in part the rights and obligations established under
this Agreement to JNC or a direct or indirect subsidiary of JNC so long as the
assignment of such service is approved by the President of RFS in coordination
with JNC and, in the aggregate, the level and quality of service and cost of
service of such service provided to RTC remains at least comparable to the
level of service and cost of service provided by RFS to RTC. Notwithstanding
anything to the contrary herein, the Providing Party may select a new provider
of products or services (except for those services specifically indicated on
Schedule 1 or 2) so long as the assignment to such service is approved by the
President of RFS in coordination with JNC and such new provider provides, in
the aggregate, a quality of product and level and quality of service and cost
of product or service no less favorable than those provided by the existing
provider. Except as expressly provided herein, nothing herein shall create or
be deemed to create any rights as a third-party beneficiary in any person or
entity not a party to this Agreement.
Waiver, Amendment or Modification. No waiver, amendment or
modification of this Agreement shall be valid unless in writing and duly
executed by the party to be charged therewith.
Entire Agreement. This Agreement, the Schedules hereto, the Stock
Purchase Agreement and the other Transaction Agreements (as defined in the
Stock Purchase Agreement) constitute the entire agreement of the parties
concerning the subject matter hereof and supersedes all previous agreements
between the parties, whether written or oral, with respect to such subject
matter.
Governing Law. Despite any different result required by any conflicts
of law provisions, this Agreement shall be governed by the laws of the State of
Delaware.
Notices. All notices, requests, demands, waivers and other
communications (hereafter "notices") required or permitted to be given pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given (i) at the time of delivery, if delivered by hand, (ii) on the date of
transmission, if sent by facsimile, telegram or other standard form of
telecommunications or (iii) three business days after mailing, if mailed
registered or certified first-class mail, postage prepaid, return receipt
requested. Notices shall be delivered or sent, as the case may be, to the
following addresses or to such other addresses as the parties may hereafter
designate by like notice similarly provided:
<PAGE> 6
If to RFS: Rittenhouse Financial Services, Inc.
Two Radnor Corporate Center
Radnor, Pennsylvania 19087-4570
Telecopy: (610) 293-3494
Attention: Richard Hughes
With Copy to: The John Nuveen Company
333 West Wacker Drive
Chicago, Illinois 60606
Telecopy: (312) 917-7952
Attention: General Counsel
If to RTC: Rittenhouse Trust Company
Two Radnor Corporate Center
Radnor, Pennsylvania 19087-4570
Telecopy: (610) 293-3494
Attention: George Connell
with copy to: Schnader Harrison Segal & Lewis
1600 Market Street
Philadelphia, PA 19103-4252
Telecopy: (215) 246-9018
Attention: Bruce A. Rosenfield
Force Majeure. Anything else in this Agreement notwithstanding,
Providing Party shall be excused from providing Services hereunder while, and
to the extent that, its performance is prevented by fire, drought, explosion,
flood, invasion, rebellion, earthquake, civil commotion, strike or labor
disturbance, governmental or military authority, act of God, mechanical failure
or any other event or casualty beyond the reasonable control of Providing
Party, whether similar or dissimilar to those enumerated in this paragraph
(hereafter a "Casualty"). In the event of a Casualty, Providing Party shall
make alternate arrangements with respect to interrupted Services to Receiving
Party on the same basis and terms on which it makes such arrangements for
itself so long as Casualty coverage is a Service to be provided by the
Providing Party hereunder.
Independent Contractor. The relationship of RFS and RTC which is
created hereunder is that of an independent contractor. This Agreement is not
intended to create and shall not be construed as creating between RFS and RTC
the relationship of affiliate, principal and agent, joint venture, partnership,
or any other similar relationship, the existence of which is hereby expressly
denied.
Billing and Payment. (a) Providing Party shall bill Receiving Party on
a monthly basis for the Variable Service Fees due therefrom for Services
provided pursuant to the terms of this Agreement. All such bills shall contain
reasonable detail and shall be due 30 days after receipt. The failure of
Receiving Party to pay any bill within 30 days of receipt shall result in
Receiving Party owing Providing Party, JNC or an affiliate of JNC, as the case
may be, an
<PAGE> 7
additional handling charge equal to 1% per month of the amount due from the
date due to the payment date, unless a payment pursuant to Section 13(b) is 60
days or more in arrears in which case no additional handling charge shall be
due from the Receiving Party; provided, however, that no additional handling
charge shall be payable with respect to any amount that is disputed by the
Receiving Party.
During the term of this Agreement, RTC shall pay RFS, JNC or an
affiliate of JNC the Fixed Annual Fee as provided in Section 1(a). The failure
of RTC to pay the Fixed Annual Fee when due shall result in RTC owing RFS, JNC
or an affiliate of JNC, as the case may be, an additional handling charge equal
to 1% per month of the amount due from the date due to the payment date, and
any such Fixed Annual Fee shall not be subject to offset against payments due
RTC under Section 13(a) or otherwise.
Term. (a) This Agreement shall terminate, and the parties shall cease
to be obligated to provide Services, on the earlier of (i) tenth anniversary of
the date hereto, (ii) a RTC Default as described in Section 14(b), and (iii) a
material default by RFS hereunder, unless such default has been cured by RFS to
the reasonable satisfaction of RTC within 30 days after receipt of written
notice of default from RTC. Upon termination of this Agreement all payment
obligations of each Receiving Party shall cease except for any accrued and
unpaid liability for the Services previously rendered and, if applicable, any
payment described in Section 14(c). Notwithstanding the foregoing, if any
Schedules hereto provide for the provision of Services for a longer period,
such longer period shall govern the provision of such Services. If the parties
hereto cease to occupy immediately contiguous office space, then either
Providing Party may cease to provide any applicable service as indicated as
terminable in such instance on Schedule 1 and Schedule 2 hereto upon 60 days'
written notice.
Further, Providing Party's obligation to provide Services to the
Receiving Party hereunder shall terminate on not less than 30 days' prior
written notice by the terminating party in the event of the occurrence and
continuation of a material default by the Receiving Party hereunder. "RTC
Default" means (i) a material default by RTC hereunder, unless such default has
been cured by RTC to the reasonable satisfaction of RFS within 30 days after
receipt of written notice of such default, (ii) a majority of the outstanding
capital stock of RTC ceases to be owned by George W. Connell, or a Permitted
Transferee (as defined in the Inter-Company Agreement dated as of the date
hereof by and among RTC, RFS, JNC and George W. Connell), or (iii) the sale,
exchange, transfer or other disposition of any outstanding capital stock of RTC
to a competitor of JNC.
In the event that this Agreement is terminated pursuant to a RTC
Default, RTC shall make payment within five business days to RFS, JNC or an
affiliate of JNC by Wire Transfer (as defined in the Stock Purchase Agreement)
of an amount equal to the present value (applying a discount rate equal to the
then prevailing prime rate of Morgan Guaranty Trust Company of New York) of the
Fixed Annual Fees which have not been theretofore paid. In the event of
termination of this Agreement for any reason other than (i) an RTC Default or
(ii) so long as there has been no continuing RTC Default and so long as RTC has
not materially breached any of the Transaction Agreements (as defined in the
Stock Purchase Agreement) that
<PAGE> 8
is continuing, RFS's willful breach of its obligation under this Agreement to
provide research and statistical review services, RTC shall continue to pay the
Fixed Annual Fee.
Waiver. The failure of either party at any time or times to enforce or
require performance of any provision hereof shall in no way operate as a waiver
or affect the right of such party at a later time to enforce the same, except
as set forth in the first sentence of paragraph 3 hereof.
Severability. If any provision of this Agreement shall hereafter be
held to be invalid or unenforceable for any reason, that provision shall be
reformed to the maximum extent permitted to preserve the parties' original
intent, failing which it shall be severed from this Agreement with the balance
of the Agreement continuing in full force and effect. Such occurrence shall not
have the effect of rendering the provision in question invalid in any other
jurisdiction or in any other case or circumstances or of rendering invalid any
other provisions contained herein to the extent that such other provisions are
not themselves actually in conflict with any applicable law.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day and year first above written.
RITTENHOUSE FINANCIAL THE RITTENHOUSE TRUST COMPANY
SERVICES, INC.
By:/s/ GEORGE W. CONNELL By: /s/ GEORGE W. CONNELL
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
<PAGE> 1
EXHIBIT 10.18
SUBLEASE
Between
RITTENHOUSE FINANCIAL SERVICES, INC.,
as Sublessor
and
THE RITTENHOUSE TRUST COMPANY,
as Sublessee
Premises: The Public Areas and Certain Areas Located on the First
and Fourth Floors
Building No. Two of Radnor Corporate Center
100 Matsonford Road
Radnor, Pennsylvania 19087
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section
1. Demised Premises............................................................................. 1
2. Term......................................................................................... 2
3. Rent......................................................................................... 3
4. Use.......................................................................................... 4
5. Master Leases................................................................................ 5
6. Services..................................................................................... 6
7. Alterations and Repairs...................................................................... 7
8. Insurance.................................................................................... 8
9. Assignment, Subletting and Encumbrances...................................................... 8
10. Default...................................................................................... 9
11. Indemnification.............................................................................. 10
12. Remedies Cumulative.......................................................................... 11
13. Quiet Enjoyment.............................................................................. 11
14. Release...................................................................................... 11
15. Surrender of Premises........................................................................ 12
16. Notices...................................................................................... 12
17. Landlord's Consent Required.................................................................. 13
18. Time Limits.................................................................................. 14
19. Miscellaneous................................................................................ 15
</TABLE>
<PAGE> 3
SUBLEASE
SUBLEASE, dated as of August 31, 1997, between RITTENHOUSE FINANCIAL
SERVICES, INC., a Delaware corporation having an office at Two Radnor Corporate
Center, Radnor, Pennsylvania 19087-4570 ("Sublessor"), and THE RITTENHOUSE
TRUST COMPANY, a trust company and commercial bank organized under the laws of
the Commonwealth of Pennsylvania, having an office at Two Radnor Corporate
Center, Radnor, Pennsylvania 19087-4570 ("Sublessee").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Radnor Corporate Center Office and
Storage Space Leases, dated June 27, 1996, between Radnor Center Associates
("Landlord"), as Landlord and Sublessor, as Tenant, as amended by that certain
Amendment to Lease, dated December 21, 1996 (as may be further amended,
modified, renewed, extended or otherwise supplemented from time to time, the
"Master Office Lease"), Landlord has leased to Sublessor certain public areas
and certain other space located on the fourth floor of the building (the
"Building") known as, and located at, 100 Matsonford Road, Radnor, Pennsylvania
19087, all as more particularly described in the Master Office Lease; and
WHEREAS, pursuant to that certain Storage Space Lease, dated December 21,
1996, between Landlord, as Landlord and Sublessor, as Tenant (as amended,
modified, renewed, extended or otherwise supplemented from time to time, the
"Master Storage Lease"), Landlord has leased to Sublessor certain space located
on the first floor of the Building, as more particularly described in the
Master Storage Lease (the Master Office Lease and the Master Storage Lease each
being referred to herein as a "Master Lease" and collectively as the "Master
Leases"); and
WHEREAS, Sublessor desires to sublet to Sublessee, and Sublessee desires to
hire from Sublessor, a portion of the premises, facilities and property demised
under the Master Leases, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
provided, Sublessor and Sublessee hereby agree as follows:
1. DEMISED PREMISES.
1.1. Sublessor hereby sublets to Sublessee, and Sublessee hereby sublets
and hires from Sublessor, (i) that portion of the premises, facilities and
property leased or subleased by Sublessor pursuant to the Master Office Lease
as set forth on the attached Exhibit A, representing the portion of such
premises, facilities and property occupied by Sublessee as of the date hereof
(the "Master Office Subleased Area"), and (ii) that portion of the premises,
facilities and property leased or subleased by Sublessor pursuant to the Master
Storage Lease as set forth on the attached Exhibit B, representing the portion
of such premises, facilities and property occupied by Sublessee as of the date
hereof (the "Master Storage Subleased Area"; the Master Office Subleased Area
and the Master Storage Subleased Area are collectively, the "Exclusive
Prem-
<PAGE> 4
ises"), for the sublease term hereinafter stated and for the Base Rent and
Additional Rent (as hereinafter defined) set forth herein, upon and subject to
all of the terms and provisions hereinafter provided or incorporated in this
Sublease by reference.
1.2. Sublessee and its agents, employees and invitees, shall additionally
have the right to use, in a proper and lawful manner, (i) the common sidewalks,
(ii) access roads, (iii) parking areas and other outdoor areas within the
Corporate Center (as defined in the Master Office Lease), (iv) the common
entranceways, (v) lobbies and elevators furnishing access to the Exclusive
Premises, and (if the Exclusive Premises includes less than a full floor) (vi)
the common lobbies, hallways and toilet rooms on the floor on which the
Exclusive Premises is located (clauses (i) through (vi) above are collectively,
the "Common Facilities", and the Exclusive Premises and the Common Facilities
shall hereinafter be collectively, the "Premises"), all to the extent that
Sublessor has such rights to the Common Facilities as set forth in Section 1.3
of the Master Office Lease. Such use of the Common Facilities shall be subject
to the terms of this Sublease and to the Master Leases, and to such reasonable
rules, regulations, limitations and requirements as each of Landlord and
Sublessor may from time to time prescribe with respect thereto.
1.3. Sublessee agrees to accept the Premises on the Commencement Date (as
hereinafter defined) in its "as is" condition and Sublessor shall not be
obligated to perform any work or furnish any materials in, to or about the
Premises in order to prepare the Premises for occupancy by Sublessee or
otherwise. Sublessee hereby releases Sublessor from any and all liability
resulting from (i) any latent or patent defects in the Premises, (ii) the
failure of the Premises to comply with any legal requirements applicable
thereto or (iii) the status of the title to the Premises. Sublessee
acknowledges that, except as expressly set forth herein, Sublessor has made no
statements, representations, covenants or warranties with respect to (x) the
condition or manner of construction of the Building or any improvements
constructed in the Premises, (y) the uses or purposes for which the Premises
may be lawfully occupied or (z) any encumbrances, covenants, restrictions or
agreements affecting title to the Building or the Premises. Sublessee also
agrees that, in executing this Sublease, it has not relied upon or been induced
by any statements, representations, covenants or warranties of any person other
than those, if any, set forth expressly in this Sublease.
2. TERM.
2.1. The term of this Sublease shall commence as of 12:00 a.m. on September
1, 1997 (the "Commencement Date") and, unless earlier terminated or extended as
herein provided, shall expire on November 29, 2002. As used in the Sublease,
(i) "Term" shall mean the term of this Sublease, and (ii) "Expiration Date"
shall mean November 29, 2002; provided that (A) in no event shall the
Expiration Date occur later than 11:59 p.m. on the day immediately preceding
the expiration of the term of any unexpired Master Lease (as such term may be
extended pursuant to the Master Leases), and (B) in the event of a termination
of this Sublease pursuant to the terms hereof prior to a scheduled Expiration
Date, the "Expiration Date" shall mean such date of termination of this
Sublease.
<PAGE> 5
2.2. Notwithstanding anything to the contrary in this Sublease, the Term of
this Sublease shall be immediately terminated if the Term of any Master Lease
is terminated for any reason prior to the scheduled Expiration Date hereof.
2.3. References in this Sublease to the "termination" of this Sublease
include the stated expiration of the Term and any earlier termination thereof
pursuant to the provisions of this Sublease, the Master Leases or by any
applicable law. Except as otherwise expressly provided in this Sublease with
respect to those obligations of Sublessee which by their nature or under the
circumstances can only be, or under the provisions of this Sublease may be,
performed after the termination of this Sublease, the Term and estate granted
hereby shall end at noon on the date of termination of this Sublease as if such
date were the Expiration Date, and neither party shall have any further
obligation or liability to the other after such termination. Notwithstanding
the foregoing, any liability of Sublessor or Sublessee to make any payment
under this Sublease, including, without limitation, amounts payable by
Sublessee as Base Rent or Additional Rent hereunder (both as hereinafter
defined), which shall have accrued prior to the termination of this Sublease
shall survive the termination of this Sublease.
3. RENT.
3.1. The rent ("Rent") payable during the Term under this Sublease shall
consist of the following:
(a) base rent ("Base Rent") in an amount equal to the percentage calculated
by dividing the Master Office Subleased Area by the square footage of the total
space leased by Sublessor pursuant to the Master Office Lease (the "Master
Office Lease Percentage") of any minimum rent, increases in minimum rent and
any other fees, charges and amounts payable by Sublessor, as tenant, to
Landlord pursuant to Section 3 of the Master Office Lease, and the percentage
calculated by dividing the Master Storage Subleased Area by the square footage
of the total space leased by Sublessor pursuant to the Master Storage Lease
(the "Master Storage Lease Percentage") of any minimum rent, increases in
minimum rent and any other fees, charges and amounts payable by Sublessor, as
tenant, to Landlord pursuant to Section 2 of the Master Storage Lease (the term
"Sublease Percentage" shall hereinafter be used to collectively refer to (i)
the Master Office Lease Percentage with respect to that portion of the Premises
being leased by Sublessor pursuant to the Master Office Lease, and (ii) the
Master Storage Lease Percentage with respect to that portion of the Premises
being leased by Sublessor pursuant to the Master Storage Lease), which amounts
described in this Section 3.1(a) shall be payable and calculated on a monthly
basis and shall be payable by Sublessee to Sublessor. In the event that the
size of the premises leased by Sublessor pursuant to the Master Office Lease
and/or the size of the premises leased by Sublessor pursuant to the Master
Storage Lease are expanded, decreased or otherwise altered, the Master Office
Lease Percentage and the Master Storage Lease Percentage (as applicable) shall
be recalculated as follows: (i) with respect to any alteration in the size of
the premises leased by Sublessor pursuant to the Master Office Lease, by
dividing the Master Office Subleased Area by the square footage of the total
space leased by Sublessor pursuant to the Master Office Lease as so altered,
and (ii) with respect to any alteration in the size of the premises leased by
Sublessor pursuant to the Master Storage Lease, by dividing the Master Storage
<PAGE> 6
Subleased Area by the square footage of the total space leased by Sublessor
pursuant to the Master Storage Lease as so altered;
(b) additional rent ("Additional Rent") in an amount equal to (i) the
Sublease Percentage of Tenant's Share of Taxes and Operating Expenses (as such
term is defined in the Master Leases), payable and calculated at such times, in
the manner and in accordance with the terms and provisions of Section 4 of the
Master Office Lease and Section 14 of the Master Storage Lease, including,
without limitation, payment of the Sublease Percentage of Tenant's Estimated
Share (as such term is defined in the Master Leases) on the first day of each
calendar month, (ii) The Sublease Percentage of any and all other sums payable
by Sublessor to Landlord under the Master Leases, and (iii) any and all other
sums payable by Sublessee to Sublessor under this Sublease.
3.2. Base Rent shall be payable by Sublessee on the first day of each
calendar month in an amount, calculated in accordance with Section 3.1(a)
above. Additional Rent shall be payable by Sublessee at such times provided for
under Section 3.1(b) above. The Base Rent and Additional Rent shall be paid by
Sublessee to Sublessor at the office of Sublessor set forth above or such other
place as Sublessor may designate, without prior notice or demand therefor and
without any abatement, deduction or setoff. Sublessor may at any time and from
time to time by notice direct Sublessee to pay all or any portion of the Base
Rent and Additional Rent described in Section 3.1 on Sublessor's behalf
directly to the Landlord at such address as Sublessor may at any time and from
time to time direct.
3.3. Sublessee shall pay all Rent when due, in lawful money of the United
States which shall be legal tender for the payment of all debts, public and
private, at the time of payment. All sums due and payable as Rent shall from
and after three (3) days of the due date thereof bear interest at the higher of
(i) 5% above the prime rate published in the Wall Street Journal, if available
(and if not available, then such comparable substitute rate as may be selected
by Sublessor), from time to time, and (ii) the maximum legal rate of interest
permitted from time to time under law to be charged, provided, however, that no
further interest shall be payable upon such interest. All interest accrued
under this subsection as hereinabove provided shall be deemed to be Additional
Rent payable hereunder and due at such time or times as the rent with respect
to which such interest shall have accrued shall be payable under this Sublease.
4. USE.
4.1. Sublessee shall occupy and use (i) the premises leased to Sublessor by
Landlord pursuant to the Master Office Lease only for the uses permitted under
the Master Office Leases and for no other purpose, and (ii) the premises leased
to Sublessor by Landlord pursuant to the Master Storage Lease only for the uses
permitted under the Master Storage Lease and for no other purpose, and
Sublessee shall otherwise occupy and use the Premises in all respects only as
permitted under the terms and provisions of this Sublease and each of the
Master Leases, and in accordance with any and all laws, statutes, ordinances,
orders, regulations and requirements of all federal, state and local
governmental, public or quasi-public authorities, whether now or hereafter in
effect, which may be applicable to or in any way affect the Building or the
Premises or
<PAGE> 7
any part thereof and all requirements, obligations and conditions of all
instruments of record on the date of this Sublease affecting the Building or
the Premises (collectively, "Legal Requirements").
5. MASTER LEASES.
5.1. This Sublease and all of Sublessee's rights hereunder are and shall
remain in all respects limited by, and subject and subordinate to (i) all of
the terms and provisions of the Master Leases, true and complete copies of
which have been delivered to and reviewed by Sublessee, including, without
limitation, the rules and regulations listed on Exhibit E attached to the
Master Office Lease, (ii) any and all amendments to the Master Leases or
supplemental agreements relating thereto hereafter made between Landlord and
Sublessor, provided that such amendments or supplemental agreements shall have
been made in accordance with Section 5.4 hereof, and (iii) any and all matters
to which the tenancy of Sublessor, as tenant under the Master Leases, is or may
be subordinate. Sublessee shall in no case have any rights under this Sublease
greater than Sublessor's rights as tenant under the Master Leases, and
Sublessee hereby assumes all of Sublessor's obligations as Tenant under the
Master Leases, insofar as such obligations pertain to the Premises. The
foregoing provisions shall be self-operative and no further instrument shall be
necessary to effectuate such provisions unless required by Landlord or
Sublessor, in which event Sublessee shall, upon demand by Landlord or Sublessor
at any time and from time to time, execute, acknowledge and deliver to
Sublessor and Landlord any and all such instruments that Sublessor or Landlord
may reasonably require regarding such subordination.
5.2. Sublessee agrees that it shall neither act, nor omit to act, in such a
manner as to result in a default under the Master Leases, provided that in no
event shall Sublessee be responsible for acts and omissions of Sublessor or
Sublessor's agents, employees or contractors. Except as otherwise specifically
provided in this Sublease, (i) all of the terms, covenants, conditions and
agreements which Sublessor is required to observe or perform with respect to
the Premises as Tenant under the Master Leases are hereby incorporated herein
by reference and Sublessee shall observe and perform all of such terms,
covenants, conditions and agreements insofar as such terms, covenants,
conditions and agreements pertain to the Premises, as if such terms, covenants,
conditions and agreements were set forth herein at length, and (ii) Sublessor
may exercise all of the rights, powers, privileges and remedies reserved to
Landlord under the Master Leases to the same extent as if fully set forth
herein at length, including, without limitation, all rights and remedies
arising out of or with respect to any default by Sublessee in the payment of
Rent hereunder or the observance or performance of the terms, covenants,
conditions and agreements of this Sublease and the Master Leases.
Notwithstanding the foregoing, any inconsistencies between the terms of the
Master Leases incorporated by reference hereunder and the other terms of this
Sublease shall be resolved in favor of such other terms of this Sublease,
provided, however, that if such construction of terms would cause Sublessor to
be in default under the terms of the Master Leases, then such inconsistency
shall be resolved in favor of the Master Leases.
5.3. Sublessor agrees that it shall neither act, nor omit to act, in such a
manner as to result in a default under the Master Leases, provided that in no
event shall Sublessor be re-
<PAGE> 8
sponsible for acts and omissions of Sublessee or Sublessee's agents, employees
or contractors. Provided that Sublessee is not then in default under the terms
of this Sublease beyond any applicable grace periods, Sublessor agrees that,
during the Term hereof, without the prior written consent of Sublessee,
Sublessor will not consent to a termination of the Master Leases (to the extent
that Sublessor's consent is required pursuant to the Master Leases) or amend or
modify the Master Leases in any way which would materially reduce, materially
interfere with or otherwise materially impair any rights, powers or remedies of
Sublessee, decrease in any material respect the obligations of Landlord or
Sublessor which, under the terms of this Sublease, run to the benefit of
Sublessee or increase the monetary obligations of Sublessee (unless required by
Landlord as a condition to Landlord consenting to this Sublease) or increase in
any material respect any other obligations of Sublessor for which Sublessee is
responsible hereunder.
5.4. Sublessee hereby acknowledges that pursuant to Section 23 of the
Master Office Lease, Landlord may require Sublessor under certain circumstances
described therein either to elect to relocate from the premises being leased
pursuant to the Master Office Lease to other premises of comparable size within
the Corporate Center (as defined in the Master Office Lease), or to terminate
the Master Office Lease in lieu of agreeing to such relocation. Nothing in this
Sublease is intended or shall be construed to limit Sublessor's ability to make
such election using its sole and absolute discretion. Sublessor shall notify
Sublessee of its receipt of the Relocation Notice (as described in the Master
Lease) within three (3) days after receipt thereof. Sublessor shall notify
Sublessee in writing within thirty (30) days after receipt of the Relocation
Notice as to whether Sublessor shall elect to relocate to such premises or
terminate the Master Office Lease. If Sublessor elects to relocate to such
premises, upon such relocation Sublessor shall sublease a portion of such new
premises to Sublessee (which new premises shall be of reasonably comparable
size to the Premises and which shall be located within the Corporate Center).
Use and occupancy by Sublessee of the new premises shall be under and pursuant
to the same terms, conditions and provisions of this Sublease (provided that
the Master Office Lease Percentage and the Master Storage Lease Percentage are
adjusted accordingly pursuant to Section 3.1(a) hereof), and Sublessee shall
execute any and all amendments to this Sublease as Sublessor shall deem
necessary to effectuate the provisions of this Section 5.5. Sublessor shall, to
the extent Sublessor receives reimbursement for such expenses from Landlord
pursuant to Section 23 clauses (i) through (iii) of the Master Office Lease,
pay such expenses of Sublessee in connection with any such relocation as are
enumerated in said Section 23 clauses (i) through (iii). If Sublessor elects to
terminate this Sublease, this Sublease shall terminate at 11:59 p.m. on the day
immediately preceding the termination of the Master Office Lease or the
relocation of such Premises, pursuant to Section 23 of the Master Office Lease.
6. SERVICES.
6.1. (a) Except as otherwise specifically provided in this Sublease,
Sublessee shall be entitled during the Term to receive all services, utilities,
repairs and facilities which Landlord is required to provide pursuant to the
Master Leases, insofar as such services, utilities, repairs and facilities
pertain to the Premises.
<PAGE> 9
(b) Notwithstanding any provision to the contrary contained herein,
Sublessor shall not be liable, nor shall Sublessee's obligations under this
Sublease be impaired or the performance thereof excused, as a consequence of
Landlord's failure or delay in the performance of any of its obligations under
the Master Leases.
(c) If Landlord shall default in any of its obligations to Sublessor with
respect to the Premises or shall breach any of its representations or
warranties affecting the Premises, Sublessor, at Sublessee's request, shall use
all reasonable efforts to endeavor to cause Landlord to perform Landlord's
obligations under the Master Leases and, in addition, Sublessee shall be
entitled to participate, in a manner mutually agreed upon by the parties (each
in the exercise of its reasonable discretion) with Sublessor in the enforcement
of Sublessor's rights against Landlord. Any out-of-pocket costs and expenses
incurred by Sublessor in connection with the foregoing shall be reimbursed by
Sublessee promptly following notice thereof from Sublessor.
(d) The provisions of this Section 6 shall survive the expiration or
earlier termination of this Sublease.
7. ALTERATIONS AND REPAIRS.
7.1. Sublessee shall make no alterations, installations, additions or
improvements (collectively, "Alterations") in or about the Premises without the
prior written consent of Sublessor in each instance, which consent shall not be
unreasonably withheld for nonstructural interior alterations provided that
Sublessee complies with all of the provisions of the Master Leases, including,
without limitation, the provisions requiring (i) Landlord's prior written
consent, (ii) the deliverance to Landlord of reasonably detailed plans and
specifications, and (iii) that the Alterations be performed in a good and
workmanlike manner and otherwise comply with all Governmental Requirements (as
defined in the Master Office Lease), such other reasonable requirements of
Sublessor, and be performed in strict compliance with Landlord's requirements
set forth in Exhibit F of the Master Office Lease. Any Alterations consented to
by Sublessor shall be performed by Sublessee, at its sole cost and expense, and
upon termination of the Term shall be removed without damage to the Premises
upon surrender.
7.2. Sublessor shall have no obligations whatsoever to Sublessee to make
any repairs or Alterations in the Premises to any systems serving the Premises
or to any equipment, fixtures or furnishings in the Premises, or to comply with
any violations of law with respect thereto, or to restore the Premises in the
event of a fire or other casualty therein or to perform any other duty with
respect to the Premises which Landlord is required to perform under the Master
Leases. Notwithstanding the foregoing, if Landlord shall default on any of its
obligations to Sublessor under the Master Leases with respect to the Premises,
Sublessor, at Sublessee's request, shall use all reasonable efforts to endeavor
to cause Landlord to perform Landlord's obligations under the Master Leases
and, in addition, Sublessee shall be entitled to participate, in a manner
mutually agreed upon by the parties (each in the exercise of its reasonable
discretion) with Sublessor in the enforcement of Sublessor's rights against
Landlord. Any out-of-pocket costs and expenses incurred by Sublessor in
connection with the foregoing shall be reimbursed by Sublessee promptly
following notice thereof from Sublessor.
<PAGE> 10
8. INSURANCE.
8.1. Sublessee, at Sublessee's sole expense, shall maintain for the benefit
of Sublessor and Landlord such policies of insurance (and in such form) as are
required by the Master Leases with respect to the Premises which shall be
reasonably satisfactory to Sublessor and which shall contain such coverage
amounts equal to the Sublease Percentage of such coverage amounts as are
provided for under Section 9.3 of the Master Office Lease and which shall
otherwise contain terms and provisions as are set forth in said Section 9.3
(including, without limitation, the requirement that such policies shall not be
cancellable without at least thirty (30) days prior written notice to
Landlord), provided, however, that all terms and provisions contained in said
Section 9.3 which run to the benefit of Landlord shall be required herein to be
made to, and shall run to the benefit of both Landlord and Sublessor. Each such
policy shall name Landlord, Landlord's agent and Sublessor as an additional
insured.
8.2. Each party hereto hereby waives any and every claim which arises or
which may arise in its favor and the other party hereto during the Term for any
and all loss of, or damage to, any of its property located within or upon or
constituting a part of the Building, to the extent that such loss or damage is
recovered under an insurance policy or policies and to the extent such policy
or policies contain provisions permitting such waiver of claims. Each party
agrees to request its insurers to issue policies containing such provisions and
if any extra premium is payable therefor, the party which would benefit from
the provision shall have the option to pay such additional premium in order to
obtain such benefit as to coverage.
9. ASSIGNMENT, SUBLETTING AND ENCUMBRANCES.
9.1. Sublessee shall not assign, sell, transfer, pledge, mortgage or
encumber this Sublease or further sublet all or any portion of the Premises or
grant to any third party any use or occupancy rights with respect to the
Premises, without first obtaining Sublessor's prior written consent thereto,
which consent may be granted, withheld or conditioned in Sublessor's sole and
absolute discretion, and which consent, if given, will not release Sublessee
from its obligations hereunder, except as provided for in Section 14.2 hereof,
and will not be deemed a consent to any further subletting or assignment. Not
in any way in limitation of the foregoing, Sublessor may withhold its consent
to any proposed assignment by Sublessee of this Sublease if Sublessor in its
sole and absolute discretion determines that any such proposed assignee has a
net worth or has available liquidated assets or otherwise has a financial
capacity which is insufficient for such proposed assignee to meet its
obligations (contingent or otherwise) under this Sublease (including, but not
limited to, such sections of the Master Leases which are incorporated herein by
reference). Sublessee shall provide Sublessor with any financial information of
such proposed assignee as may be requested by Sublessor in making its
determination hereunder.
9.2. If Sublessee is a corporation, any sale, assignment, transfer, pledge
or other disposition of the capital stock of such corporation, whether pursuant
to a single transaction or pursuant to a series of related or unrelated
transactions, or any merger, consolidation, liquidation or other transfer by
operation of law or otherwise, resulting in any such case in a change in the
effective voting control of Sublessee as it exists on the date hereof, or if
Sublessee is a part-
<PAGE> 11
nership, any sale, assignment, transfer, pledge or other disposition of a
controlling interest in such partnership whether pursuant to a single
transaction or pursuant to a series of related or unrelated transactions, or
the admission of additional general partners, resulting in any such case in a
change in the effective control of Sublessee as it exists on the date hereof,
shall be deemed to constitute an assignment of this Sublease. Notwithstanding
the foregoing, Sublessee may, without the consent of Sublessor, transfer any
and all of its stock to "Permitted Transferees" as defined in the Inter-Company
Agreement, dated as of the date hereof, between Sublessee and Sublessor.
9.3. If Sublessor assigns, sells or transfers this Sublease, or further
subleases or assigns a Material Portion (as defined below) of the premises
leased by it (other than the Premises) pursuant to the Master Leases, Sublessee
shall, within thirty (30) days of Sublessee's receipt of notice from Sublessor
of such assignment, sale or transfer, have the right to terminate this Sublease
by providing Sublessor with thirty (30) days' written notice of such
termination. For purposes hereof, a "Material Portion" shall mean thirty-five
percent (35%) or more.
10. DEFAULT.
10.1. Each of the following shall constitute an event of default by
Sublessee under this Sublease, upon the occurrence of any such event of default
Sublessor shall have, without need of any notice, the rights and remedies
contained hereunder for events of default: (i) the commencement of levy,
execution or attachment proceedings against Sublessee, any principal (which
shall be defined as any individual or entity having a direct or indirect
ownership interest in Sublessee of more than 25%) thereof or any partner
therein or any surety or guarantor thereof (hereinafter a "Surety") or any of
the assets of Sublessee, or the application for or appointment of a liquidator,
receiver, custodian, sequester, conservator, trustee, or other similar judicial
officer; or (ii) the insolvency, under either the bankruptcy or equity
definition, of Sublessee or any principal thereof or partner therein or any
Surety; or (iii) the assignment for the benefit of creditors, or the admission
in writing of an inability to pay debts generally as they become due, or the
ordering of the winding-up or liquidation of the affairs of Sublessee or any
principal thereof or partner therein or any Surety; or (iv) the commencement of
a case by or against Sublessee or any principal thereof or partner therein or
any Surety under any insolvency, bankruptcy, creditor adjustment, debtor
rehabilitation or similar laws, state or federal, or the determination by any
of them to request relief under any insolvency, bankruptcy, creditor
adjustment, debtor rehabilitation or similar proceeding, state or federal,
including, without limitation, the consent by any of them to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequester or similar official for it or for any of its respective property or
assets (unless, in the case of involuntary proceedings, the same shall be
dismissed within thirty (30) days after institution).
10.2. If Sublessee shall fail to take possession of the Premises on the
Commencement Date, or if Sublessee fails to pay Rent or any other sums payable
to Sublessor hereunder when due and such default shall continue for three (3)
days after it is due, or if Sublessee shall fail to perform or observe any of
the other covenants, terms or conditions contained in this Sublease or in the
Master Leases within ten (10) days (or such longer period as is reasonably
re-
<PAGE> 12
quired to correct any such default, provided Sublessee promptly commences and
diligently continues to effectuate a cure, but in any event within twenty (20)
days) after written notice thereof by Sublessor, provided, however, that
Sublessor shall not be required to give any such notice more than once within
any twelve (12) month period, and provided that the events hereinafter
enumerated shall be deemed events of default under this Sublease without any
notice, grace or cure period: (a) if any of the events occur that are specified
in Section 10.1 above, or (b) if Sublessee fails to take actual bona-fide
occupancy of the Premises or manifests an intention not to take actual,
bona-fide occupancy of the Premises, or if Sublessee vacates or abandons the
Premises during the term hereof or removes or manifests an intention to remove
any of Sublessee's goods or property therefrom other than in the ordinary and
usual course of Sublessee's business, or (c) if any corporate surety or
guarantor of this Sublease merges with another entity, or liquidates or
dissolves or changes control or if any surety or guarantor of this Sublease
fails to comply with all of the provisions of its suretyship or guaranty
agreement, then, and in any of such cases (notwithstanding any former breach of
covenant or waiver thereof in a former instance) (each of the foregoing an
"Event of Default"), Sublessor, in addition to all other rights and remedies
available to it by law or equity or by any other provisions hereof, shall have
the same rights and remedies with respect to such default as are given to
Landlord under the Master Leases with respect to defaults by Sublessor under
the Master Leases, all with the same force or effect as though the provisions
of the Master Leases with respect to defaults and the rights and remedies of
Landlord thereunder in the event thereof were set forth at length herein.
11. INDEMNIFICATION.
11.1. Sublessee shall indemnify and hold harmless Sublessor, its affiliates
and the respective employees, agents, shareholders, officers and directors of
each of the foregoing, from and against any and all loss, cost, liability,
claims, damage and expenses, including, without limiting the generality of the
foregoing, reasonable attorneys' fees and expenses and court costs, penalties
and fines, whether or not due to third party claims, suits or proceedings,
incurred in connection with or arising from (i) any default by Sublessee in the
observance or performance of, or compliance with, any of the terms, covenants
or conditions of this Sublease or the terms of the Master Leases incorporated
herein on Sublessee's part to be observed, performed or complied with, (ii) any
acts, omissions or negligence of Sublessee or any of its agents, employees or
contractors, in or about the Premises or the Building either prior to, during,
or after the termination of this Sublease (including, without limitation, any
such acts, omissions or negligence relating to, or arising in connection with,
Sublessee's use or occupancy of the Premises), or (iii) the condition of the
Premises. If any action or proceeding shall be brought against Sublessor by
reason of any such claim, Sublessee shall be given prompt notice thereof and,
upon notice from Sublessor, shall resist and defend such action or proceeding
at Sublessee's sole expense and employ counsel therefor reasonably satisfactory
to Sublessor. Sublessee shall pay to Sublessor on demand all sums which may be
owing to Sublessor by reason of the provisions of this subsection. Sublessee's
obligations under this subsection shall survive the Expiration Date or earlier
termination of this Sublease.
11.2. Sublessor shall indemnify and hold harmless Sublessee, its affiliates
and the respective employees, agents, shareholders, officers and directors of
each of the foregoing,
<PAGE> 13
from and against any and all loss, cost, liability, claims, damage and
expenses, including, without limiting the generality of the foregoing,
reasonable attorneys' fees and expenses and court costs, penalty and fines,
whether or not due to third party claims, suits or proceedings (collectively,
"Losses", and each a "Loss"), incurred in connection with or arising from (i)
any default by Sublessor in the observance or performance of, or compliance
with, any of the terms, covenants or conditions of this Sublease on Sublessor's
part to be observed, performed or complied with, (ii) any default by Sublessor
in the observance or performance of, or compliance with, any of the terms,
covenants or conditions of the Master Leases on Sublessor's part to be
observed, performed or complied with which default results in a Loss incurred
by Sublessee under the Lease Guarantee executed by Sublessee and guaranteeing
Sublessor's performance under the Master Leases, or (iii) any acts, omissions
or negligence of Sublessor or any of its agents, employees or contractors, in
or about the Premises or the Building either prior to, during, or after the
termination of this Sublease. If any action or proceeding shall be brought
against Sublessee by reason of any such claim, Sublessor shall be given prompt
notice thereof and, upon notice from Sublessee, shall resist and defend such
action or proceeding at Sublessor's sole expense and employ counsel therefor
reasonably satisfactory to Sublessee. Sublessor shall pay to Sublessee on
demand all sums which may be owed to Sublessee by reason of the provisions of
this subsection. Sublessor's obligations under this subsection shall survive
the Expiration Date or earlier termination of this Sublease.
11.3. Notwithstanding anything herein to the contrary, nothing in Sections
11.1, 11.2 and 11.3 hereof shall require either party to indemnify any person
(an "indemnitee") against the indemnitee's own negligence or wilful misconduct.
12. REMEDIES CUMULATIVE.
12.1. Each right and remedy of Sublessor under this Sublease shall be
cumulative and be in addition to every other right and remedy of Sublessor
under this Sublease and now or hereafter existing at law or in equity, by
statute or otherwise.
13. QUIET ENJOYMENT.
13.1. Sublessor covenants that, as long as Sublessee shall pay the Base
Rent and Additional Rent and all other amounts Sublessee shall be required to
pay hereunder and shall duly observe, perform and comply with all of the terms,
covenants and conditions of this Sublease on its part to be observed, performed
or complied with, Sublessee shall, subject to all of the terms of the Master
Leases and this Sublease, peaceably have, hold and enjoy the Premises during
the Term without molestation or hindrance by Sublessor.
14. RELEASE.
14.1. In the event of any transfer or transfers of the tenant's interest in
the Master Leases, Sublessor herein named (and in case of any subsequent
transfer or conveyance, the then transferor of the tenant's interest in the
Master Leases) shall be automatically freed and relieved of all liability with
respect to the performance of any covenants or obligations on the part
<PAGE> 14
of Sublessor contained in this Sublease, to the extent that the performance of
any such covenants or obligations are assumed by the transferee thereunder.
14.2. In the event of any permitted transfer or transfers of Sublessee's
interest in this Sublease pursuant to and in compliance with the provisions of
Section 9 hereof, Sublessee herein named (and in case of any subsequent
permitted transfer or conveyance pursuant to and in compliance with the
provisions of Section 9 hereof, the then transferor of Sublessee's interest in
this Sublease) shall be automatically freed and relieved of all liability with
respect to the performance of any covenants or obligations on the part of
Sublessee contained in this Sublease, to the extent that the performance of any
such covenants or obligations are assumed by the transferee thereunder.
15. SURRENDER OF PREMISES.
15.1. Sublessee shall, no later than the termination of this Sublease and
in accordance with all of the terms of this Sublease and the Master Leases,
vacate and surrender to Sublessor the Premises, together with all Alterations,
in good order, condition and repair, and broom clean, reasonable wear and tear
excepted. Sublessee's obligation to observe or perform this covenant shall
survive the termination of this Sublease.
16. NOTICES.
16.1. Except as may otherwise be provided in this Sublease, all notices,
demands, statements, requests, consents, approvals and other communications
(collectively, "Notices") required or permitted to be given hereunder, or which
are to be given with respect to this Sublease, shall be in writing, duly
executed by an authorized officer or agent of the party so giving such Notice,
and either personally delivered to any duly authorized representative of the
party receiving such Notice or sent by facsimile transmission, registered or
certified mail, or by courier service, return receipt requested, addressed:
If to Sublessor, to:
Rittenhouse Financial Services, Inc.
Two Radnor Corporate Center
Radnor, Pennsylvania 19087-4570
Attn: Richard D. Hughes
Facsimile No.: (610) 293-3494
<PAGE> 15
With a copy to:
The John Nuveen Company
333 West Wacker Drive
Chicago, Illinois 60606
Attn: General Counsel
Facsimile No.: (312) 917-7952
If to Sublessee, to:
The Rittenhouse Trust Company
Two Radnor Corporate Center
Radnor, Pennsylvania 19087-4570
Attn: George W. Connell
Facsimile No.: (610) 293-3494
With a copy to:
Schnader Harrison Segal & Lewis
1600 Market Street
Philadelphia, Pennsylvania 19103-4252
Attn: Bruce A. Rosenfield
Facsimile No.: (215) 751-2205
All Notices shall be effective for all purposes upon personal delivery thereof
or, if sent by facsimile transmission, shall be effective on the date of
transmission duly shown on the confirmation slip, or, if sent by mail or air
freight or courier service, shall be effective on the date of delivery duly
shown on the return receipt. Any party may at any time change the addresses for
Notices to such party by providing a Notice in the manner set forth in this
Section 16.
17. LANDLORD'S CONSENT REQUIRED.
17.1. (a) This Sublease shall be of no force or effect unless and until
Sublessor shall have (i) obtained Landlord's written consent to this Sublease
and delivered to Sublessee an executed copy of such consent, executed by
Landlord, Sublessor and Sublessee, and (ii) have otherwise complied with the
requirements for subleasing provided for in Section 7 of the Master Office
Lease.
(b) Whenever in this Sublease the consent or approval of Sublessor is
required for any act or thing and the consent or approval of Landlord is
required under the Master Leases
<PAGE> 16
for the same act or thing, if Sublessor is required or willing to give its
consent or approval to Sublessee when such consent or approval is required
hereunder, Sublessor agrees that it will promptly forward Sublessee's request
for such a consent or approval to Landlord. If Sublessor is required or has
determined to give its consent or approval, Sublessor shall cooperate
reasonably with Sublessee in endeavoring to obtain Landlord's consent or
approval (including commencing and prosecuting an appropriate legal action if,
in Sublessor's judgment, Landlord wrongfully withholds or delays its approval
or consent) upon and subject to the following terms and conditions: (i)
Sublessee shall reimburse Sublessor for any out-of-pocket costs incurred by
Sublessor in connection with seeking such consent or approval, (ii) Sublessor
shall not be required to make any payments to Landlord or to enter into any
agreements or to modify the Master Leases or this Sublease in order to obtain
any such consent or approval and (iii) if Sublessee agrees or is otherwise
obligated to make any payments to Sublessor or Landlord in connection with such
request for such consent or approval, Sublessee shall have made arrangements
for such payments which are satisfactory to Sublessor. Except as hereinafter
expressly provided, nothing contained in this Section 17 shall be deemed to
require Sublessor to give any consent or approval because Landlord has given
such consent or approval. Whenever either party to this Sublease expressly
agrees not to unreasonably withhold its consent, such consent shall also not be
unreasonably delayed or conditioned.
18. TIME LIMITS.
18.1. Except with respect to actions to be taken by Sublessee for which
time limits are specifically set forth in this Sublease, which time limits
shall control for the purposes of this Sublease, the time limits provided in
the Master Leases for the giving or making of any Notice by Sublessor to
Landlord insofar as such Notices pertain to the Premises, or for the
performance of any act, condition or covenant by Sublessor thereunder insofar
as such act, condition or covenant by Sublessor pertains to the Premises, or
for the exercise of any right, remedy or option by Sublessor thereunder insofar
as such right, remedy or option by Sublessor pertains to the Premises, are
changed for the purposes of this Sublease, by shortening the same in each
instance by three (3) days, so that any Notice may be given or made, or any
act, condition or covenant performed, or option hereunder exercised, by
Sublessor within the time limit relating thereto contained in the Master
Leases.
18.2. Except with respect to actions to be taken by Sublessor for which
longer time limits are specifically set forth in this Sublease, which time
limits shall control for the purposes of this Sublease, the time limits
provided in the Master Leases for the giving or making of any Notice by
Landlord insofar as such Notices pertain to the Premises, or the performance of
any act, covenant or condition by Landlord thereunder insofar as such act,
covenant or condition by Landlord pertains to the Premises, or the exercise of
any right, remedy or option by Landlord thereunder insofar as such right,
remedy or option by Landlord pertains to the Premises are changed for the
purposes of this Sublease, by lengthening the same in each instance by three
(3) days, so that any Notice may be given or made, or any act, condition or
covenant performed or option hereunder exercised by Landlord within the number
of days respectively set forth above, after the time limits relating thereto
contained in the Master Leases.
<PAGE> 17
19. MISCELLANEOUS.
19.1. This Sublease shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania without regard to the
conflicts of law principles thereof.
19.2. The section headings in this Sublease and the table of contents are
inserted only as a matter of convenience for reference and are not to be given
any effect in construing this Sublease.
19.3. If any of the provisions of this Sublease or the application thereof
to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Sublease, or the application of such
provision or provisions to persons or circumstances other than those as to whom
or which it is held invalid or unenforceable, shall not be affected thereby,
and every provision of this Sublease shall be valid and enforceable to the
fullest extent permitted by law.
19.4. All of the terms and provisions of this Sublease shall be binding
upon and inure to the benefit of the parties hereto and, subject to the
provisions of Section 9 hereof, their respective successors and assigns.
19.5. Sublessor has made no representations, warranties or covenants to or
with Sublessee with respect to the subject matter of this Sublease except as
expressly provided herein and all prior negotiations and agreements relating
thereto are merged into this Sublease. This Sublease may not be amended or
terminated, in whole or in part, nor may any of the provisions be waived,
except by a written instrument executed by the party against whom enforcement
of such amendment, termination or waiver is sought and unless the same is
permitted under the terms and provisions of the Master Leases.
19.6. Sublessee agrees to be bound and obligated under the confidentiality
provisions contained in Section 29 of the Master Office Lease, and all
confidentiality provisions contained therein shall apply equally to this
Sublease.
[Remainder of Page Intentionally Left Blank]
<PAGE> 18
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease as
of the day and year first above written.
SUBLESSOR:
RITTENHOUSE FINANCIAL SERVICES, INC.
By:/s/ GEORGE W. CONNELL
--------------------------------------
Name:
Title:
SUBLESSEE:
THE RITTENHOUSE TRUST COMPANY
By:/s/ GEORGE W. CONNELL
--------------------------------------
Name:
Title:
<PAGE> 1
TRADEMARK LICENSE AGREEMENT
by and between
RITTENHOUSE FINANCIAL SERVICES, INC.
THE JOHN NUVEEN COMPANY
and
THE RITTENHOUSE TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
Page
----
DEFINITIONS
"Affected Product" ................................................ 2
"Agreement" ....................................................... 2
"Claims" .......................................................... 2
"Corporate License" ............................................... 2
"Corporate Materials" ............................................. 2
"Corporate Trademarks" ............................................ 2
"Covered Area" .................................................... 2
"Effective Date" .................................................. 2
"Indemnified Party"................................................ 2
"Indemnifying Party" .............................................. 2
"Infringement" .................................................... 2
"Inter-Company Agreement" ......................................... 2
"Laws" ............................................................ 2
"Licensee" ........................................................ 2
"Licensor" ........................................................ 3
"Non-Competing Business" .......................................... 3
"Permitted Family Transferee" ..................................... 3
"Products" ........................................................ 3
"RFS Products" .................................................... 3
"RFS Trademarks" .................................................. 3
"RFS Trademark License" ........................................... 3
"Stock Purchase Agreement" ........................................ 3
"Transaction Agreements" .......................................... 3
"Trust Products" .................................................. 3
1. License Grant ..................................................... 3
2. Standards and Inspection .......................................... 4
3. Compliance with Laws .............................................. 6
4. Notification of Third-Party Inquiries ............................. 6
5. Goodwill .......................................................... 7
6. Title and Protection .............................................. 7
7. Indemnification ................................................... 9
8. Term and Termination .............................................. 12
9. Effect of Termination ............................................. 14
-i-
<PAGE> 3
Page
10. [Intentionally Omitted] ............................................. 15
11. Insurance ........................................................... 15
12. Disclaimer of Warranties and Representations
by Licensor ......................................................... 16
13. Notices ............................................................. 16
14. Section Order and Headings .......................................... 17
15. Governing Law ....................................................... 17
16. Specific Performance ................................................ 17
17. No Joint Venture .................................................... 17
18. Assignment or Sublicense ............................................ 17
19. Waiver .............................................................. 18
20. Severability ........................................................ 18
21. Entire Agreement .................................................... 18
22. Agreement for Parties' Benefit Only ................................. 18
Schedule A Corporate Trademarks
Schedule B RFS Trademarks
-ii-
<PAGE> 4
TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement (hereinafter referred to as the
"Agreement") is made and entered into as of August 31, 1997, between Rittenhouse
Financial Services, Inc., a corporation organized under the laws of Delaware
(hereinafter referred to as "RFS" or the "Licensor"), The John Nuveen Company,
a Delaware Corporation ("JNC") and The Rittenhouse Trust Company, a trust
company and commercial bank organized under the laws of the Commonwealth of
Pennsylvania (hereinafter referred to as "RTC" or the "Licensee").
WHEREAS, Licensor is the owner of certain valuable trademarks
referred to herein as the "RFS Trademarks"; and
WHEREAS, Licensor is the owner of certain valuable trademarks
referred to herein as the "Corporate Trademarks" under which Licensee (which was
at such time an affiliate of Licensor) has promoted and identified itself to the
community at large and marketed, distributed and sold certain investment
products and services; and
WHEREAS, pursuant to a Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated July 14, 1997, among JNC, George W. Connell and
Licensor, JNC is acquiring from George W. Connell on the date hereof all of the
capital stock of Licensor; and
WHEREAS, the Licensee desires to use the RFS Trademarks and the
Corporate Trademarks in connection with the NonCompeting Business (as defined
herein) in the Covered Area (as defined herein); and
WHEREAS, subject to the terms and conditions contained herein,
Licensor is willing to grant to Licensee the right and license to use the RFS
Trademarks and Corporate Trademarks as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Licensor and Licensee
hereby agree as follows:
DEFINITIONS
Capitalized terms used and not defined herein shall have the
meanings ascribed thereto in the Stock Purchase Agreement or such other document
as specifically referenced.
<PAGE> 5
"Affected Product" shall have the meaning set forth in Section
8.d hereof.
"Agreement" shall have the meaning set forth in the preamble
hereof.
"Claims" shall have the meaning set forth in Section 7.a hereof.
"Corporate License" shall have the meaning set forth in Section 1
hereof.
"Corporate Materials" means any buildings, signs, fixtures,
vehicles, stationery, business cards, order forms, bills, brochures,
advertising, marketing, promotional and other materials used by the Licensee in
the conduct of any NonCompeting Business.
"Corporate Trademarks" means the trademarks identified on
Schedule A hereto, and "Corporate Trademark" is any one of such trademarks.
"Covered Area" means the areas or regions within the United
States set forth on Schedule F to the Inter-Company Agreement and any other area
within the United States to the extent, and only to the extent, Licensee
conducts the NonCompeting Business therein, including without limitation the
marketing, distributing or selling Trust Products in such area.
"Effective Date" shall have the meaning set forth in Section 8.a
hereof.
"Indemnified Party" shall have the meaning set forth in Section
7.d hereof.
"Indemnifying Party" shall have the meaning set forth in Section
7.d hereof.
"Infringement" shall have the meaning set forth in Section 6.c
hereof.
"Inter-Company Agreement" means that certain InterCompany
Agreement, dated as of August 31, 1997, by and among Licensee, Licensor, JNC and
George W. Connell.
"Laws" shall have the meaning set forth in Section 8.h hereof.
"Licensee" shall have the meaning set forth in the preamble
hereof.
-2-
<PAGE> 6
"Licensor" shall have the meaning set forth in the preamble
hereof.
"Non-Competing Business" shall have the meaning set forth in the
Inter-Company Agreement.
"Permitted Family Transferee" shall have the meaning set forth in
the Inter-Company Agreement.
"Products" means all investment products and services, including
without limitation managed account investment advisory and broker-dealer
services, and all other products and services whether or not heretofore or
hereafter marketed, distributed or sold by Licensor or Licensee, and "Product"
is any one of such products of services.
"RFS Trademarks" means the trademarks identified on Schedule B
hereto, and "RFS Trademark" is any one of such trademarks.
"RFS Trademark License" shall have the meaning set forth in
Section 1 hereof.
"Stock Purchase Agreement" shall have the meaning set forth in
the recitals hereof.
"Transaction Agreements" shall have the meaning set forth in the
Stock Purchase Agreement.
"Trust Products" are Products which may be marketed, distributed
or sold by or on behalf of Licensee in the NonCompeting Business (as defined in
the Inter-Company Agreement).
1. LICENSE GRANT
Licensor hereby grants to the Licensee, and Licensee hereby
accepts, a fully paid-up, non-assignable (subject to Section 18 hereof),
exclusive right and license to use the RFS Trademarks (the "RFS Trademark
License") and the Corporate Trademarks (the "Corporate License") in connection
with the Non-Competing Business in the Covered Area, including without
limitation the marketing, distribution and sale by the Licensee, including
through agents, of Trust Products and Corporate Materials in the Covered Area,
and in the case of the Corporate Trademarks the use of the Corporate Trademarks
in its corporate name and/or as a symbol of corporate identity in the Covered
Area, subject in each case to the term and termination provisions set forth in
Section 8 hereof and the terms and conditions set forth in this Section 1. In
consideration for the grant of the RFS Trademark License and the Corporate
License,
-3-
<PAGE> 7
the Licensee shall pay to Licensor, JNC or an affiliate of JNC $500,000 on the
second Business Day following the date hereof in immediately available funds by
wire transfer in lawful money of the United States of America to an account
designated by the Licensor, which payment obligation shall survive any
termination of this Agreement or any curtailment, limitation, suspension or
termination of Licensee's rights hereunder. Each of the RFS Trademark License
and the Corporate License are subject to the following terms and conditions:
a. The Licensee may use the RFS Trademarks and the Corporate
Trademarks in connection with Trust Products and any Corporate Materials related
thereto used in the Non-Competing Business in such form and manner as currently
used by Licensee, and in such other forms and manners as is permitted by Section
2.
b. The Licensee shall have no right to use any RFS Trademark or
Corporate Trademark or any reproduction, counterfeit, copy or colorable
imitation thereof, or otherwise to deal in or with any RFS Trademark or
Corporate Trademark or any reproduction, counterfeit, copy or colorable
imitation thereof, other than as expressly granted in this Agreement.
C. Nothing in this Agreement shall be construed to prevent
Licensor from using or granting any other license or right to market, distribute
or sell services or products under or from otherwise utilizing or exploiting the
"Rittenhouse" name or trademark or other name or trademark, other than the RFS
Trademarks and the Corporate Trademarks.
d. Without the prior written consent of Licensor, Licensee shall
not use or exploit any RFS Trademark or Corporate Trademark outside of the
Covered Area.
e. Licensor shall not use or exploit, or agree to permit any
third party to use or exploit, the RFS Trademarks or the Corporate Trademarks.
2. STANDARDS AND INSPECTION
a. Licensor and Licensee acknowledge and agree that Licensor
monitors and controls the standards that are maintained with respect to the
marketing, distribution and sale of Products (whether by Licensor or any
Affiliate of Licensor). In accordance with the terms of this Section 2, the
Licensee acknowledges its obligation to maintain its standards with respect to
the marketing, distribution and sale of Trust Products and the use of Corporate
Materials, the standards for which
-4-
<PAGE> 8
shall be at least equal to those standards maintained by Licensee for the same
immediately prior to the date hereof.
b. Prior to Licensee's introduction or sale of any substantially
new Trust Product not previously approved in writing by Licensor, Licensee shall
submit to Licensor, for Licensor's written approval, (i) a written description
in reasonable detail of such substantially new Trust Product and, upon the
request of Licensor (which must be made by Licensor within five business days of
the receipt by Licensor of the request for approval of such substantially new
Trust Product), any or all information relating to such substantially new Trust
Product (but only to the extent that such information is reasonably related to
Licensor's quality standards under this Agreement; and in any case such
information to be held confidential and not used by Licensor for any purpose
other than its review hereunder), and (ii) specimens or new mechanical artwork
for Corporate Materials that Licensee intends to use with such substantially new
Trust Product. After Licensor has rendered its written approval (which may be
withheld only if such substantially new Trust Product or Corporate Material
would (x) fall below the standards set forth in Section 2.a hereof or (y) be
likely to cause market confusion or be materially misleading to the relevant
purchasing or investing public, associate an RFS Trademark or Corporate
Trademark with a product or service other than a Trust Product, be materially
derogatory to Licensor or any of its Affiliates or any other Person, or
otherwise materially reflect negatively on or materially adversely affect
Licensor or any of its Affiliates or any RFS Trademark or Corporate Trademark),
the then-approved Trust Products and Corporate Materials shall be the standard
for such Trust Products and Corporate Materials marketed, distributed or sold
thereafter.
c. Without the prior written approval of Licensor, Licensee shall
not use any RFS Trademark or Corporate Trademark in connection with any Trust
Products or any Corporate Materials that deviate substantially from the approved
standard.
d. Licensor acknowledges that if Licensor does not express its
disapproval of any Corporate Materials within ten (10) business days, or any
substantially new Trust Product within twenty (20) business days, of the receipt
of written notice and description thereof (and substantially all of the
information requested pursuant to Section 2.b hereof), Licensor shall be deemed
to have given Licensee its written approval thereof. If Licensor does not
approve any such Trust Products or Corporate Materials, the reason for
disapproval shall be explained in writing to Licensee.
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e. From time to time (but not more often than semiannually), at
Licensor's reasonable written request and at its expense, Licensee shall submit
to Licensor a list and summary description of all Trust Products and Corporate
Materials then used, marketed, distributed or sold by Licensee to the extent
such Trust Products or Corporate Materials have not been included on a prior
list provided to Licensor in response to an earlier request under this Section
2.e.
f. The Licensee acknowledges and agrees that Licensor may
inspect, or cause to be inspected, at reasonable times during normal business
hours and upon reasonable notice (but not more often than (x) annually during
such time as Licensor and Licensee are sharing office space or (y) semi-annually
during such time as Licensor and Licensee are not sharing office space), each of
Licensee's facilities at which Trust Products are then being marketed,
distributed or sold.
g. The Licensee agrees that it shall incorporate provisions
consistent with this Agreement into any new agreements, and shall use
commercially reasonable efforts to do so with respect to any existing
agreements, with any third parties whom Licensee may employ or contract to
market, distribute or sell any Trust Products using the RFS Trademarks or the
Corporate Trademarks.
3. Compliance with Laws
The Licensee warrants that all Trust Products shall be marketed,
sold and distributed, on or after the date hereof, in accordance in all material
respects with all applicable United States federal, state and local laws,
executive regulations and other governmental orders. Without limiting the
foregoing, Licensee will acquire and maintain at its own cost and expense all
material governmental licenses, permits and other authorizations necessary for
its marketing, distribution and sale of Trust Products and the performance of
its activities and obligations hereunder. The Licensee warrants that the
marketing, distribution and sale of Trust Products and other exploitation of the
RFS Trademarks or Corporate Trademarks by the Licensee shall not reflect
materially adversely upon the good name of Licensor or any of its programs,
products, services or properties, or any RFS Trademarks or Corporate Trademarks.
4. Notification of Third-Party Inquiries
a. The Licensee shall immediately notify Licensor of, and forward
to Licensor copies of any written material relating to, any inquiry,
investigation or any other action by
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any governmental body or unit thereof, or any investor inquiries or complaints,
with respect to the marketing, sale or distribution of any Trust Product by
Licensee, or other exploitation of the RFS Trademarks or Corporate Trademarks by
Licensee, and all responses, if any, thereto. If Licensor wishes to take further
action with respect to any such inquiry, investigation, action, or complaint,
Licensee shall at Licensor's expense follow Licensor's reasonable instructions
in connection therewith, provided that Licensee shall not be required to take
any action that would materially derogate from the right and license granted to
Licensee hereunder.
b. The Licensor shall immediately notify Licensee of, and forward
to Licensee copies of any written material relating to, any inquiry,
investigation or any other action by any governmental body or unit thereof, or
any investor inquiries or complaints, with respect to the marketing, sale or
distribution by Licensor of any Product using or exploiting the RFS Trademarks,
Corporate Trademarks or the "Rittenhouse" name, and all responses, if any,
thereto. Licensor shall consult with and permit Licensee to join Licensor (at
Licensee's expense) in any action with respect to any such inquiry,
investigation, action or complaint if the right and license granted to Licensee
hereunder would be adversely affected by the outcome of any such inquiry,
investigation, action or complaint.
5. GOODWILL
The Licensee recognizes the great value of the goodwill
associated with all of the RFS Trademarks and Corporate Trademarks and
acknowledges that each RFS Trademark and Corporate Trademark and all rights
therein and goodwill pertaining thereto belong exclusively to Licensor, and
agrees that it will not contest that each RFS Trademark and Corporate Trademark
has and will continue to have a secondary meaning in the mind of the public to
signify Licensor.
6. TITLE AND PROTECTION
a. Title. (i) It is understood and agreed that neither Licensee
nor any Affiliate of Licensee shall acquire or claim any title to (or otherwise
represent itself to be the owner of) any RFS Trademark or Corporate Trademark by
virtue of this Agreement or otherwise, the parties intending that all
utilization of any RFS Trademark or Corporate Trademark shall at all times inure
to the exclusive benefit of Licensor. Licensee shall not file an application to
register any of the RFS Trademarks or Corporate Trademarks either in the United
States or in any other jurisdiction. These obligations shall
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<PAGE> 11
survive the expiration or earlier termination of this Agreement for any reason.
(ii) The Licensee shall not contest Licensor's (or its
Affiliates') title to or ownership of, or the validity and enforceability of,
the RFS Trademarks or Corporate Trademarks or any registrations of the RFS
Trademarks or Corporate Trademarks by Licensor (or its Affiliates), or bring any
action to cancel any such registrations thereof or contest the validity thereof.
These obligations shall survive the expiration or earlier termination of this
Agreement for any reason.
(iii) The Licensee shall not at any time do, or cause to be done,
any act or anything disparaging or ridiculing or materially adverse to the
interests of Licensor (or its Affiliates), Licensor's (or its Affiliates')
business practices or any of the RFS Trademarks or Corporate Trademarks. Nothing
herein shall be construed to prohibit any party from asserting or enforcing any
rights or remedies under any agreement or applicable law.
(iv) Licensor currently intends to use all commercially
reasonable efforts to maintain the goodwill associated with all of the RFS
Trademarks and Corporate Trademarks, to protect and enforce Licensor's right,
title and interest thereto to the fullest extent permitted under applicable law,
and not to do, or cause to be done, any act or anything disparaging or
ridiculing or materially adverse to any of the RFS Trademarks, or Corporate
Trademarks.
(v) Licensor shall use all commercially reasonable efforts to
comply with all United States federal regulations required to maintain the
validity of the RFS Trademarks and Corporate Trademarks.
b. Modifications to RFS Trademarks and Corporate Trademarks. The
Licensee acknowledges that Licensor has reserved the right to modify any or all
of the RFS Trademarks and Corporate Trademarks. Any such modifications involving
the RFS Trademarks or Corporate Trademarks shall, at all times, be and remain
the property of Licensor, provided, however, that Licensor shall not modify the
RFS Trademarks or the Corporate Trademarks in such a way as to conflict with or
violate the rights granted to Licensee hereunder.
c. Infringement. In the event that any actual, alleged or
threatened infringement by or of any RFS Trademark or Corporate Mark or
conflicting trademark applications or registrations relating to any RFS
Trademark or Corporate Trademark (an "Infringement") comes to Licensee's
attention, Licensee
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<PAGE> 12
agrees to give prompt written notice thereof to Licensor. Without regard to the
manner in which an Infringement comes to Licensor's attention, Licensor, at its
option and at Licensor's sole expense, shall then have the sole right to
determine whether or not any court or administrative proceedings shall be taken
on account of any such Infringement. The Licensee shall not institute any suit
or take any action on account of any such Infringement without the prior written
approval of Licensor, which approval shall be in the sole discretion of
Licensor. In the event of any litigation or proceeding involving a claim that
Licensee's use of any RFS Trademark or Corporate Trademark infringes any
proprietary rights of a third party, Licensor shall have sole control over such
litigation or proceeding, including prosecution, defense and settlement thereof,
and the Licensee shall cooperate fully with Licensor at Licensor's expense in
the conduct thereof, and shall take such action, including without limitation by
agreeing to be a named party in such a litigation or proceeding, as may be
reasonably requested by Licensor for purposes of conferring standing or
establishing jurisdiction. If the resolution of any such claim or action,
whether voluntary or involuntary, precludes the use of any RFS Trademark or
Corporate Trademark in connection with one or more of the Trust Products or
Corporate Materials, this Agreement shall terminate as to such Trust Products or
Corporate Materials, as the case may be, and neither party hereto shall have
with respect to such Trust Products or corporate Materials any further
obligation in connection herewith except as provided in Sections 6.a, 7 and 9
(and subject to the following proviso). Notwithstanding any of the foregoing, if
Licensor determines not to institute any suit or take any action on account of
any Infringement, Licensee shall be permitted to institute such a suit or take
any such action, provided that Licensee (i) may not settle any such suit or
action without Licensor's written consent, (ii) shall cede sole control thereof
to Licensor upon Licensor's request and (iii) shall not be so permitted to
institute such suit or take such action to the extent instituting such suit or
taking such action would violate Section 6.a(iii) hereof. At the request of
Licensee, Licensor shall cooperate (at Licensee's expense) with any suit
instituted or action taken by Licensee.
7. INDENIFICATION
a. The Licensee shall at all times during the continuance of this
Agreement, and at all times after the expiration or termination hereof,
indemnify, defend and hold Licensor and each of its officers, directors and
employees harmless from any and all claims, demands, damages, judgments,
liability, losses, costs and expenses (including reasonable attorneys' fees and
expenses and amounts paid in settlement) and actions,
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<PAGE> 13
including, without limitation, any claim or action based on negligence, gross
negligence, strict liability or any other theory of liability, whether in law
(whether common or statutory) or equity (together, "Claims") made or asserted
against or by Licensor (whether resulting from third party claims or otherwise),
or any or all of the above mentioned persons or their successors, arising or
resulting directly or indirectly (1) from Licensee's breach of any of Licensee's
obligations under this Agreement; (2) out of the marketing, distribution or sale
of any Trust Products marketed, distributed or sold by or on behalf of Licensee
at any time after the date hereof; or (3) on account of any actual or alleged
trademark infringement, or false advertising or unfair competition arising after
the date hereof from the use of any RFS Trademark or Corporate Trademark by
Licensee or any of its Affiliates or the marketing, distribution, promotion,
exploitation or sale of any Trust Products by Licensee or any of its Affiliates.
It is understood and agreed by Licensor that the aforesaid indemnification shall
not apply and the Licensee shall have no liability to Licensor or its officers,
directors or employees to the extent that the injury, damage or other occurrence
complained of was caused by the negligent act or failure to act or willful
misconduct of Licensor or any of its Affiliates, regardless of whether the
Licensee has approved, been deemed to approve or failed to deny any such action
or failure to act; provided, however, that the failure of Licensor to exercise
any rights under this Agreement, or the grant of (or failure to deny) any
approval hereunder, or the conducting of any inspection, shall not be deemed an
action or a failure to act for purposes of this sentence. Notwithstanding the
foregoing, no provision in this Agreement shall extend, limit, supersede or
otherwise affect, or be extended, limited, superseded or otherwise affected by,
the right of the Licensee to be indemnified by Licensor under the Stock Purchase
Agreement.
b. Except as set forth in Section 7.a, none of Licensee or any of
its agents, officers, directors and employees will be responsible, in any way,
to any party whatsoever, with respect to any Claims arising or resulting
directly or indirectly from the marketing, distribution, promotion, exploitation
or sale of Products using or exploiting the RFS Trademarks, the Corporate
Trademarks or the "Rittenhouse" name after the date hereof by Licensor or an
Affiliate of Licensor or on behalf of Licensor by any Person, except as provided
in the Stock Purchase Agreement. Except as set forth in Section 7.c, none of
Licensor or any of its agents, officers, directors and employees will be
responsible, in any way, to any party whatsoever, with respect to any Claims
arising or resulting directly or indirectly from the marketing, distribution,
promotion, exploitation or sale of Trust Products after the date hereof by
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<PAGE> 14
Licensee or an Affiliate of Licensee or on behalf of Licensee by any Person.
C. Licensor shall at all times during the continuance of this
Agreement, and at all times after the expiration or termination hereof,
indemnify, defend and hold Licensee and each of its officers, directors and
employees harmless from any and all Claims made or asserted against or by
Licensee (whether resulting from third party claims or otherwise), or any or all
of the above mentioned persons or their successors, arising or resulting
directly or indirectly (1) from Licensor's breach of any of Licensor's
obligations under this Agreement; or (2) on account of any actual or alleged
trademark infringement, or false advertising or unfair competition arising after
the date hereof from the use of any RFS Trademark, Corporate Trademark or the
"Rittenhouse" name by Licensor or any of its Affiliates (or any licensee of
Licensor other than the Licensee) or the marketing, distribution, promotion,
exploitation or sale of any Products by Licensor or any of its Affiliates (or
any licensee of Licensor other than Licensee). It is understood and agreed by
the Licensee that the aforesaid indemnification shall not apply and Licensor
shall have no liability to Licensee or its officers, directors or employees to
the extent that the injury, damage or other occurrence complained of was caused
by the negligent act or failure to act or willful misconduct of the Licensee or
any of its Affiliates, regardless of whether Licensor has approved, been deemed
to approve or failed to deny any such action or failure to act; provided,
however, that the failure of the Licensee to exercise any rights under this
Agreement shall not be deemed an action or failure to act for purposes of this
sentence. Notwithstanding the foregoing, no provision in this Agreement shall
extend, limit, supersede or otherwise affect, or he extended, limited,
superseded or otherwise affected by, the right of Licensor to be indemnified by
Licensee under the Stock Purchase Agreement.
d. If a Claim by a third party is made against any person
entitled to indemnification pursuant to this Section 7 (an "Indemnified Party"),
and if such Indemnified Party intends to seek indemnity with respect thereto
under this Section 7, such Indemnified Party shall promptly notify in writing
the party obligated to indemnify such Indemnified Party (the "Indemnifying
Party") of such Claims setting forth such Claims in reasonable detail, provided
that failure to give a timely notice shall not limit the indemnification
obligations of the Indemnifying Party hereunder except to the extent that the
delay in giving, or failure to give, such notice has an adverse effect upon the
ability of the Indemnifying Party to defend against such claim. The Indemnifying
Party shall have thirty (30) days, or such lesser time, if applicable, so as not
to
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<PAGE> 15
prejudice the rights of the Indemnified Party, after receipt of such notice to
undertake, conduct and control, through counsel of its own choosing and at its
own expense, the settlement or defense thereof, and the Indemnified Party shall
cooperate with it in connection therewith. If the Indemnifying Party does not
notify the Indemnified Party within thirty (30) days after the receipt of the
Indemnified Party's notice of a Claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Party shall have the right to
contest, settle or compromise the Claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement. The Indemnifying Party shall not,
except with the consent of the Indemnified Party, enter into any settlement or
consent to entry of any judgment that provides for injunctive or other
non-monetary relief affecting the Indemnified Party or does not include as an
unconditional term thereof the giving by the person or persons asserting such
Claim to all Indemnified Parties of unconditional release from all liability
with respect to such claim. Notwithstanding all of the foregoing, to the extent
that anything set forth in this Section 7.d is inconsistent with Section 6.c
hereof, such Section 6.c shall control.
e. In the event of a challenge or protest by any state attorney
general or any United States, federal, state, local or other governmental or
regulatory authority, agency or body alleging false or misleading advertising or
marketing, the Indemnified Party shall (to the extent permitted by law or such
governmental or regulatory authority, agency or body) have the right to
participate in any settlement proceedings related thereto and to be consulted by
the Indemnifying Party regarding such settlement, and the Indemnifying Party
shall use its best efforts to give the Indemnified Party five (5) days, advance
notice before the public release of any settlement or other statement of the
terms under which any such challenge or protest has been settled or compromised.
8. TERM AND TERMINATION
a. This Agreement shall be effective as of the date first written
above (the "Effective Date").
b. This Agreement shall remain in effect until the earlier of (x)
the time at which a majority of the outstanding capital stock of Licensee ceases
to be owned by George W. Connell or Permitted Family Transferees and (y) the
time at which a competitor of JNC owns any of the outstanding capital stock of
Licensee, unless sooner terminated as set forth below (the earlier of such
dates, the "License Termination Date").
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c. Licensor may terminate this Agreement if Licensee shall be in
breach of any material obligation to Licensor hereunder or under any of the
Transaction Agreements, by giving written notice to Licensee calling attention
to such breach, specifying the nature thereof and the action required to correct
the breach and stating Licensor's desire to terminate this Agreement, and such
termination shall become effective if Licensee shall have failed to remedy the
breach within thirty (30) days after receipt of such notice from Licensor of
such breach. Licensee may terminate this Agreement by giving written notice to
Licensor, and such termination shall become effective as of the fifth day after
receipt of such notice by Licensor or such later date as specified in such
notice.
d. In the event that any Trust Product marketed, distributed or
sold by Licensee bearing any RFS Trademark or Corporate Trademark becomes in the
reasonable judgment of Licensor, the subject of widespread material adverse
publicity or public image (in either case, such Trust Product being referred to
as an "Affected Product"), Licensor shall give written notice to Licensee,
including in such notice evidence of such widespread material adverse publicity
and Licensor's desire to terminate this Agreement, and Licensor may terminate
this Agreement, which termination shall become effective unless, within ten (10)
days after receipt of such notice from Licensor, Licensee shall have ceased
marketing, distributing or selling the Affected Product, provided that any
termination under this Section 8.3 shall only be to the extent reasonably
necessary to prevent material harm to or diminution in the value of the goodwill
associated with the RFS Trademarks and Corporate Trademarks.
e. If Licensee or any parent corporation of Licensee files a
petition of bankruptcy, or an order for relief under the Bankruptcy Code or
other insolvency law is entered against Licensee or any parent corporation of
Licensee or if Licensee or any parent corporation of Licensee is adjudicated as
bankrupt, or if a petition in bankruptcy is filed against Licensee or any parent
corporation of Licensee and not discharged within ninety (90) days thereafter,
or if Licensee or any parent corporation of Licensee becomes insolvent and
unable to pay its debts generally as they mature or makes a general assignment
for the benefit of its creditors or files a plan or similar arrangement pursuant
to any bankruptcy or insolvency law, or if the Licensee discontinues its
business, or if a receiver is appointed for it or its business, the licenses
hereby granted shall automatically terminate forthwith without any notice
whatsoever being necessary. Should this Agreement be so terminated, Licensee,
its administrators, successors and assigns shall have no right to sell, exploit
or in any way deal with or
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in any Product covered by this Agreement or any written or printed or tangible
matter, in each case bearing any RFS Trademark or Corporate Trademark, except
with and under the special consent and instructions in writing of Licensor or as
provided in Section 9.a.
f. Termination of any license granted herein pursuant to the
provisions of this Section 8 shall be without prejudice to any rights that
Licensor may otherwise have against Licensee or Licensee may otherwise have
against Licensor. The rights of the parties under this Section 8 shall not be
exclusive, and the exercise or nonexercise thereof shall not preclude the
exercise by any party of any other right or remedy that it may have under this
Agreement or by law against another party.
g. Upon termination of this Agreement, Licensee shall comply with
all the terms set forth in this Agreement covering obligations of Licensee upon
termination.
h. The license granted hereunder shall not terminate upon
Licensor filing a petition of bankruptcy, or an order for relief under the
Bankruptcy Code or other insolvency law being entered against Licensor or
Licensor being adjudicated as bankrupt. Without limiting the generality of the
foregoing, Licensor hereby waives any rights or remedies it may have under any
local, state, federal or foreign insolvency, bankruptcy or other laws (the
"Laws"), including without limitation 11 U.S.C. ss. 365 or any provision of any
Laws similar thereto, to reject, cancel, suspend, modify or terminate this
Agreement or any rights granted hereunder to the Licensee or any of its
sublicensees.
9. EFFECT OF TERMINATION
a. Upon the License Termination Date, the Licensee will cease use
of any RFS Trademark or Corporate Trademark or any further reference thereto,
direct or indirect, or any reproduction, counterfeit, copy or colorable
imitation thereof, in connection with the marketing, sale or distribution of
Products or any other of Licensee's products or services or other items of
tangible or intangible property, or in connection with any Corporate Materials;
1provided, however, that in the event of a termination of this Agreement or any
license granted herein pursuant to Section 8.b, Section 8.d or Section 8.e,
Licensee may continue to use such RFS Trademarks and Corporate Trademarks
pursuant to the terms of this Agreement until the earliest of (i) 60 (or 15 in
the case of use of the Corporate Trademarks), 60 or 180, in the cases of
Sections 8.b, 8.d and
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8.e, respectively, calendar days following the License Termination Date or (ii)
the date upon which all inventory existing on the License Termination Date of
Corporate Materials has been exhausted (provided that Licensee shall not have
maintained inventory of Corporate Materials at levels materially higher than
consistent with past practice prior to the date hereof).
b. The Licensee acknowledges that its use of any RFS Trademark or
Corporate Trademark (other than as permitted by Section 9.a) after termination
of the licenses granted herein to use such RFS Trademark or Corporate Trademark
will result in immediate and irreparable damage to Licensor and to the rights of
any subsequent licensee.
C. The Licensee shall not be able to claim from Licensor any
damages or compensation for losses or expenses incurred or for loss of profits
arising in any fashion from Licensor's or Licensee's termination of this
Agreement or any license granted hereunder in accordance with the terms hereof.
d. Termination of this Agreement for any reason shall not affect
those obligations that have theretofore accrued or that, from the context
hereof, are intended to survive termination of this Agreement, including without
limitation Section 7 hereof and Licensees obligation to pay the licensee fee
hereunder to Licensor, JNC or an affiliate of JNC pursuant to Section 1 hereof.
e. Except as specifically provided herein, upon termination, all
rights granted to Licensee hereunder shall forthwith revert to Licensor, and
Licensee shall immediately refrain from further use of any RFS Trademark or
Corporate Trademark and any reference thereto, direct or indirect.
10. [INTENTIONALLY OMITTED]
11. INSURANCE
Licensee shall obtain within 30 days following the execution of
this Agreement, at its own cost and expense, five million dollars ($5,000,000)
of product liability coverage, with deductibles of no more than $500,000,
protecting Licensor against any claims of a nature generally insured against
under such policies or Claims arising in any fashion from the marketing,
distribution, advertising, promotion or sale of Trust Products using any RFS
Trademark or Corporate Trademark. Within 30 days following the execution of this
Agreement, Licensee shall submit to Licensor certificates of insurance with a
thirty (30) day prior written notice of cancellation provision, with Licensor
named as an additional insured party, as evidence of such insurance coverage.
Licensee shall keep
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such policies in force during the term of this Agreement and for one year
thereafter, and submit to Licensor evidence of renewal prior to the expiration
of the original term of insurance and each renewal term thereafter.
12. DISCLAIMER OF WARRANTIES AND REPRESENTATIONS BY LICENSOR
Licensor makes no warranty or representation whatsoever, express
or implied, as to the amount of gross revenues, net revenues, profits or levels
of assets under management that Licensee will derive from or may expect with
respect to Products or the use of any RFS Trademark or Corporate Trademark.
13. NOTICES
All notices hereunder shall be sufficiently given for all
purposes hereunder if in writing and delivered personally, sent by documented
overnight delivery service or, to the extent receipt is confirmed, telecopy,
telefax or other electronic transmission service to the appropriate address or
number as set forth below. Notices to Licensor shall he addressed to:
The John Nuveen Company
333 West Wacker Drive
Chicago, Illinois 60606
Telecopy: (312) 917-7952
Attention: General Counsel
or at such other address and to the attention of such other person as Licensor
may designate by written notice to Licensee. Notices to the Licensee shall be
addressed to:
The Rittenhouse Trust Company
Two Radnor Corporate Center
Radnor, Pennsylvania 19087-4570
Telecopy: (610) 293-3494
Attention: George W. Connell
with a copy to:
Schnader Harrison Segal & Lewis
1600 Market Street
Philadelphia, Pennsylvania 19103-4252
Telecopy: (215) 751-2205
Attention: Bruce A. Rosenfield
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14. SECTION ORDER AND HEADINGS
The Section order and headings are for convenience only and shall
not be deemed to affect in any way the language, obligations or the provisions
to which they refer.
15. GOVERNING LAW
THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN THE PARTIES AND THE
ADJUDICATION AND THE ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND INTERPRETED
AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS THEREOF.
16. SPECIFIC PERFORMANCE
Licensor, Licensee and JNC each acknowledge that, in view of the
uniqueness of its business and the transactions contemplated by this Agreement,
each party would not have an adequate remedy at law for money damages in the
event that the covenants and agreements to be performed hereunder have not been
performed in accordance with their terms, and therefore agree that the other
parties shall be entitled to specific enforcement of the terms hereof in
addition to indemnification hereunder and any other equitable remedy to which
such parties may be entitled.
17. NO JOINT VENTURE
Nothing herein contained shall be construed to place the parties
in the relationship of principal and agent, partners or joint venturers, and
neither Licensor nor Licensee shall have any power to obligate or bind the other
in any manner whatsoever.
18. ASSIGNMENT OR SUBLICENSE
This Agreement and all benefits, rights and duties hereunder are
personal to the Licensee and may not be assigned or sublicensed by the Licensee;
Provided, however, that Licensee may assign or sublicense any or all of its
benefits, rights and duties hereunder to one or more wholly owned subsidiaries
of Licensee, provided that any such subsidiary shall agree to be bound by all of
the terms hereof as if such subsidiary were Licensee, and provided, further,
that no such assignment or sublicense shall relieve Licensee of any of its
obligations or duties hereunder. The Licensee shall not delegate or make this
Agreement or any rights hereunder the subject of a security interest or
otherwise encumber this Agreement or any rights
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hereunder. Licensor may assign this Agreement and the benefits hereof, upon
written notice to Licensee.
19. Waiver
The failure of any party hereto to enforce any provision of this
Agreement, or any right with respect thereto, or failure to exercise any
election provided for herein, shall in no way be considered a waiver of such
provision, right, or election, or in any way affect the validity of this
Agreement. The failure of any party hereto to enforce any provision, right or
election shall not prejudice such party from later enforcing or exercising that
provision, right, or election which it has under this Agreement.
20. Severability
In the event that any provision of this Agreement or any part
hereof is found to be invalid, the remainder of this Agreement shall be binding
on the parties and construed as if the invalid provisions or parts hereof have
been deleted from this Agreement.
21. Entire Acrreement
This Agreement, together with the Transaction Agreements, sets
forth the entire understanding of the parties in respect of the subject matter
hereof, and it may be amended or modified only in writing executed by each party
hereto. In the event of any conflict between the provisions of said agreements,
the terms of this Agreement shall govern with respect to the subject matter
hereof.
22. Agreement for Parties' Benefit Only
Except for Section 7, upon which the Indemnified Parties may
rely, this Agreement is not intended to confer upon any person not a party
hereto any rights or remedies hereunder, and no person other than the parties
hereto and the persons set forth above is entitled to rely on any
representation, warranty or covenant contained herein.
-18-
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
RITTENHOUSE FINANCIAL SERVICES, INC.
By:
-------------------------------
Name:
Title:
THE JOHN NUVEEN COMPANY
By: /s/ John P. Amboian
-------------------------------
Name: John P. Amboian
Title: Executive Vice President
THE RITTENHOUSE TRUST COMPANY
By:
-------------------------------
Name:
Title:
-19-
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
RITTENHOUSE FINANCIAL SERVICES, INC.
By: /s/ GEORGE W. CONNELL
-------------------------------
Name:
Title:
THE JOHN NUVEEN COMPANY
By:
-------------------------------
Name:
Title:
THE RITTENHOUSE TRUST COMPANY
By: /s/ GEORGE W. CONNELL
-------------------------------
Name:
Title:
-19-
<PAGE> 24
Schedule A
Corporate Trademarks
--------------------
"Rittenhouse Trust"
"The Rittenhouse Trust Company"
"Rittenhouse Trust Company"
"The Rittenhouse Trust"
"Rittenhouse Trust Securities, Inc."
-20-
<PAGE> 25
Schedule B
RFS TRADEMARKS
--------------
"Rittenhouse Trust" alone or in combination with other words, phrases and
designs
-21-
<PAGE> 1
EXHIBIT 13
------------------------------------------------------
THE JOHN NUVEEN COMPANY
------------------------------------------------------
INVESTING IN OUR
SECOND CENTURY 98
----------------------------------
1998 ANNUAL REPORT TO SHAREHOLDERS
------------------------------------------------------
<PAGE> 2
To Our Shareholders and Employees
In 1998, your Company enjoyed a record year:
- Sales grew to $7.8 billion - up 156%.
- Revenues increased to $308 million - up 14%.
- Earnings grew to $84 million - up 13%.
- Return on shareholders' equity exceeded 25%.
- Earnings per share grew by 14% to $2.43.
- Cash flow per share increased by 16% to $2.98.
- Quarterly dividends rose 13%, our sixth
consecutive annual increase since we became
a public company in 1992.
The John Nuveen Company, through its Nuveen and Rittenhouse operations,
provides customized individual accounts, mutual funds, exchange-traded funds
and defined portfolios that help financial advisers meet the needs of their
affluent investor clients. The Company also provides municipal, institutional
and corporate investment banking and asset management services. The
Company's products and services are offered through registered financial
advisers working for independent broker-dealers, banks, insurance companies,
accounting firms and financial planning specialists. The John Nuveen Company
is listed on the New York Stock Exchange and trades under the symbol "JNC."
<PAGE> 3
The John Nuveen Company
Financial Highlights
(in millions, except per share data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
December 31, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets Under Management $55,267 $49,594 $33,191 $33,042 $30,047
Gross Sales $ 7,755 $ 3,026 $ 1,747 $ 1,618 $ 1,614
Revenues $ 308 $ 269 $ 232 $ 236 $ 220
Net Income $ 84 $ 74 $ 73 $ 71 $ 58
Earnings per Share (diluted) $ 2.43 $ 2.13 $ 1.98 $ 1.87 $ 1.52
Cash Flow per Share (diluted) $ 2.98 $ 2.57 $ 2.11 $ 2.00 $ 1.62
- ---------------------------------------------------------------------------------------------------
</TABLE>
CHART 1 CHART 2
(ASSETS UNDER MANAGEMENT) (GROSS SALES)
CHART 3 CHART 4
(EARNINGS PER SHARE) (CASH FLOW PER SHARE)
P. 1
<PAGE> 4
The John Nuveen Company
- --------------------------------------------------------------------------------
OUR MISSION FOR A NEW CENTURY
- --------------------------------------------------------------------------------
To rapidly become a premier investment management firm by delivering
exceptional value to advisers who help build and manage wealth for their
investors, by achieving superior earnings growth for JNC shareholders, and
by offering rewarding careers to our employees.
- --------------------------------------------------------------------------------
Timothy R. Schwertfeger
Chairman and [PHOTO]
Chief Executive Officer
- --------------------------------------------------------------------------------
P. 2
<PAGE> 5
The John Nuveen Company
Dear Shareholders,
On behalf of all of us at the The John Nuveen Company, I am very pleased
to report on the record results and significant accomplishments achieved in
1998.
First, 1998 marked another year of record earnings - led, in large part,
by accelerating growth in products and services added since 1996.
These results reflect the impact of our new strategic direction and the
investments we made in new products, new services and new ideas during the year.
We are executing a strategic transformation of our Company, a process that
is having a positive impact on every part of our operations.
Our strategy is both simple and compelling, with two central tenets:
The first is to continue leveraging our heritage of high-quality,
long-term oriented investment expertise through a broad range of relationships
with financial advisers who serve affluent investors.
The second is to provide exceptional value to financial advisers by
recognizing and serving their diverse needs. We are now organized around
distinct lines of business - individually managed accounts, mutual funds,
defined portfolios and exchange-traded funds-that reflect the business
practices and service requirements of our key customers.
Consistently meeting our investment standards and providing exceptional
value to financial advisers is the goal of every portfolio manager, sales
representative and customer service person within the firm, and of all the rest
of us who stand behind these front line contacts.
This strategy provides a connecting link between our history and our
increasing role as a provider of investment solutions to financial advisers
looking to help their clients sustain the wealth of a lifetime.
To rapidly become a premier
investment management firm
We define premier as being considered by leading brokerage firms and financial
advisers to be one of their best and most trusted investment management
partners. It means a constant, unwavering commitment to the highest standards of
quality and dependability in all aspects of our business.
In particular, this emphasis on quality and dependability is a driving
force behind our product selection and development. It also underlies our
affiliation with a select group of seasoned investment managers chosen for their
specialization in a particular asset class or investment style, and their
sharing of our underlying commitment to quality, dependable performance and
rigorous research.
Today, these managers include Rittenhouse Financial Services for our
large-cap, growth-oriented individually managed accounts, mutual funds and
defined portfolios; Institutional Capital Corporation for our value-oriented
mutual funds; and Nuveen Advisory Corporation, for our fixed-income mutual
funds, managed
P. 3
<PAGE> 6
The John Nuveen Company
- --------------------------------------------------------------------------------
Investing in our business to enhance our performance
- --------------------------------------------------------------------------------
"Throughout 1998...sales momentum increased in every product
category...more than two-thirds of 1998 sales were in equity-based
products that have been added to the Company's product line since 1996."
- --------------------------------------------------------------------------------
PIE BAR
CHART CHART
Equity-based products dominated 1998 sales Quarterly sales show dramatic growth
Municipal 30% Quarterly Sales
(in $ millions)
Taxable Fixed Income 3%
1Q94 406.5
Equity-Based 67% 2Q94 362
3Q94 343
4Q94 386
1Q95 367
2Q95 421.1
3Q95 369.5
4Q95 157
1Q96 288.8
2Q96 311.3
3Q96 315.6
4Q96 746.3
1Q97 492.5
2Q97 611
3Q97 804
4Q97 1118.3
1Q98 1727
2Q98 1831
3Q98 1999
4Q98 2197
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
P. 4
<PAGE> 7
The John Nuveen Company
accounts and defined portfolios.
Looking more specifically at our defined portfolios, this commitment to
quality and dependability also has led to the introduction of equity investments
using criteria developed with well-known equity research firms, including
Standard & Poor's and Dow Jones, to select securities whose performance we
believe will withstand the test of time.
by delivering exceptional value to advisers
Our continued success also rests on identifying and delivering distinct,
compelling, tangible value to our most important customers - the financial
advisers who work with affluent and high net worth investors.
Value manifests itself in several ways. One of the most important, and
most visible, is the quality and dependability of our product performance.
Exceptional value is built upon a foundation of consistently competitive
investment performance.
For example, as of December 31, 44% of our 57 exchange-traded funds had
four-or five-star ratings from Morningstar. Most of these 57 funds were trading
at higher premiums or smaller discounts than their peers, creating more than
$500 million in additional market value for Nuveen fund shareholders.
Eleven Nuveen exchange-traded and open-end funds recently were recognized
by Lipper as being the No. 1 fund in their peer group in total return over the
preceding one-, five-or ten-year periods.
The Rittenhouse model equity portfolio, consisting of well-established
industry leaders with outstanding long-term records, posted a total return of
28.25% for 1998, comparing well with an S&P 500 return dominated by high tech
stocks. This represented Rittenhouse's 15th positive year in a row.
Five of our sector defined portfolios posted returns of more than 30% in
the first three months of their existence.
This consistently strong performance creates value, and has a direct
impact on product sales. Throughout 1998, total sales of funds, accounts and
portfolios reached more than $7.7 billion, a 156% increase over 1997 and one of
our best years ever. Sales momentum increased in every product category.
New investment opportunities also can create value. In 1998, we introduced
a variety of funds and portfolios designed to help advisers address specific
investor needs for more balance and diversity in their holdings. These new
offerings included:
MUTUAL FUNDS
Rittenhouse Growth Fund
European Value Fund
DEFINED PORTFOLIOS
Dow 5 and Dow 10 Portfolios
Rittenhouse Concentrated Growth Portfolio
10 Industry Sector Portfolios
P. 5
<PAGE> 8
The John Nuveen Company
- --------------------------------------------------------------------------------
INVESTING IN HIGH VALUE, HIGH GROWTH MARKET SEGMENTS
- --------------------------------------------------------------------------------
"Our primary focus remains on those advisers who work with investors
seeking to sustain wealth for themselves and their families...As our
country ages and grows wealthier, we believe financial advisers are well
positioned to help their clients through the challenges ahead."
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHART CHART
55-64 age group faster than national average
(in millions)
<S> <C> <C> <C> <C> <C>
year 55-64 total pop change in Change in HIGHLY CONFIDENT ----------------------
55-65 from total pop OF INVESTMENT 100%
prior period from prior SUCCESS
period ----------------------
80%
1955 14621 165069 Investors who
1960 15624 179979 0.0686 0.090326 work with ----------------------
1965 17076 193526 0.0929339 0.07527 financial 60%
1970 18682 203984 0.0940501 0.054039 advisers
1975 20045 215465 0.0729579 0.056284 ----------------------
1980 21754 227225 0.0852582 0.05458 40%
1985 22135 237924 0.017514 0.047085 Investors who
1990 21092 249402 -0.04712 0.048242 do not work with ----------------------
1995 21131 262755 0.001849 0.05354 financial 20%
2000 23961 274634 0.1339265 0.045209 advisers
2005 29605 285981 0.2355494 0.041317 ----------------------
2010 35283 297716 0.1917919 0.041034 0
56% 23%
</TABLE>
- --------------------------------------------------------------------------------
Our target investor market is growing Adviser-assisted investors are more
much faster than the general population confident of their investment success
- --------------------------------------------------------------------------------
P. 6
<PAGE> 9
We also took significant steps to align our internal organization in ways that
help us deliver added value to financial advisers. One example is the
restructuring of our investment management activities by combining the expertise
of our portfolio managers and research analysts. By establishing integrated
teams, each specializing in a particular type of investment or region of the
country, we are better positioned to identify and take rapid advantage of market
opportunities as they arise.
In addition, we have almost completed the consolidation of all customer
servicing activities. By combining all customer records within one organization,
our customer service representatives have increased abilities to call up entire
account histories, answer a variety of questions easily and provide faster
service without the need to transfer callers.
Our investment banking operations also made significant strides in 1998,
focusing on our proven strength in fashioning innovative financings and
establishing relationships with a variety of agencies and authorities that
represent signi?cant future opportunities.
who help build and manage
wealth for their investors
Our primary focus remains on those advisers who work with investors seeking to
sustain wealth for themselves and their families. We have found that our
individual managed account services at Rittenhouse and Nuveen Asset Management
are attractive particularly to advisers working with clients with between $1
million and $10 million to invest. Our mutual funds and defined portfolios are
focused primarily on helping advisers serve the needs of those with investment
portfolios averaging more than $250,000.
During the 1990s, it is estimated that the affluent market grew five times
faster than the population as a whole. We believe this market will continue to
grow by as much as 50% over the next ten years. As our country ages and grows
wealthier, investors will be faced with increasingly complex tax, retirement and
estate planning issues that will require careful, integrated solutions. We
believe professional investment advisers are well positioned to help their
clients through the challenging questions that lie ahead.
achieving superior earnings
growth for JNC shareholders
Prosperity in any business is ultimately defined by earnings growth. This is a
truism we recognize and a shareholder expectation we are committed to satisfy.
One result of our pattern of record earnings is that last year our
operating margin exceeded 50%. Our return on total shareholders' equity of just
over 25% is right in line with our 25-year historical average. In addition to
continued revenue growth, we remain committed to the rigorous cost controls that
make these types
P. 7
<PAGE> 10
The John Nuveen Company
- --------------------------------------------------------------------------------
INVESTING IN A CUSTOMER-FOCUSED STRATEGY
- --------------------------------------------------------------------------------
"To stand out, we must offer exceptional value to Financial advisers by
recognizing and serving their diverse needs...We are now organized around
distinct lines of business...that reflect the business practices and
service requirements of our key customers."
- --------------------------------------------------------------------------------
[FLOW CHART DEPICTING THE DECISION MAKING PROCESS
AND CHARACTERISTICS OF PERCEIVED TARGET MARKET]
- --------------------------------------------------------------------------------
We are committed to working with our customers in ways
that meet their needs and business practices.
- --------------------------------------------------------------------------------
p.8
<PAGE> 11
of results possible in a period when we also are investing to grow our
businesses.
Over time, we believe stock prices tend to track with earnings growth. Our
goal is to provide steady, predictable earnings growth that demonstrates clearly
and consistently that our business development strategies are producing
excellent results.
In addition to share price, dividends remain an important part of
shareholder return. In 1998, we were able to raise our quarterly dividend by
13%, maintaining our pattern of raising the dividend every year since our
initial public offering in 1992.
We are especially proud of our ability to raise our dividend consistently
over the past three years while investing more than $400 million in business
acquisitions, share repurchases, infrastructure improvements and new product
introductions. We will continue to look for ways to combine our capital, our
products, and our distribution strategy to grow earnings and dividends
consistently.
and offering rewarding careers to our employees
The heart of any organization is its base of professional, dedicated employees,
and we maintain a keen interest in their growth and development. For this
reason, we are supplementing our ongoing technical training with management and
leadership training programs designed to build the skills needed to take full
advantage of our opportunities.
The record results, the growing array of products, the quality service and
the exciting opportunities now before us can all be traced to the continued
dedication and hard work of the men and women who comprise all the different
parts of The John Nuveen Company. Their increased productivity and efficiency
allowed us to achieve this outstanding performance. Without their efforts, our
Company would not enjoy the advantages we have today.
READY FOR OUR SECOND CENTURY
Our Company celebrated its 100th birthday in November, capping a century of
achievement that provides a solid financial and cultural foundation for future
growth.
A century of existence might cause some companies to believe they have
seen it all and have all the answers. While we're proud of our corporate
achievements, we know that our continued success depends on our continued
evolution. Our first 100 years shows a continuous commitment to new business
growth initiatives. We will maintain this commitment as we enthusiastically
embark on our second century.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman and Chief Executive Officer
P. 9
<PAGE> 12
--------------------------------------------------
FINANCIAL REVIEW
Management's Discussion and Analysis 11
--------------------------------------------------
Consolidated Balance Sheets 21
--------------------------------------------------
Consolidated Statements of Income 22
--------------------------------------------------
Consolidated Statements of Changes in
Common Stockholders' Equity 23
--------------------------------------------------
Consolidated Statements of Cash Flows 24
--------------------------------------------------
Notes to Consolidated Financial Statements 25
--------------------------------------------------
Report of Independent Auditors 35
--------------------------------------------------
Five Year Financial Summary 36
--------------------------------------------------
Directors and Executive Officers 37
--------------------------------------------------
Shareholder Information 38
--------------------------------------------------
<PAGE> 13
The John Nuveen Company
Management's Discussion and Analysis of Financial Condition
and Results of Operations
(December 31, 1998)
DESCRIPTION OF THE BUSINESS
The Company's principal businesses are asset management and related research;
development, marketing and distribution of investment products and services; and
municipal and corporate investment banking services. The Company distributes its
investment products, including mutual funds, exchange-traded funds (closed-end
funds), defined portfolios (unit trusts) and individually managed accounts
through registered representatives associated with unaffiliated firms including
broker-dealers, commercial banks, affiliates of insurance providers, financial
planners, accountants, consultants and investment advisers.
The Company distributes individually managed accounts primarily through its
Rittenhouse Financial Services, Inc. (Rittenhouse) operating unit as well as
through Nuveen Asset Management, and distributes its mutual funds and defined
portfolios through its John Nuveen & Co. Incorporated (Nuveen & Co.) operating
unit.
The Company's primary business activities generate three principal sources of
revenue: (1) ongoing advisory fees earned on assets under management, including
mutual funds, exchange-traded funds and individually managed accounts; (2)
transaction-based revenue earned upon the distribution of mutual fund and
defined portfolio products; and (3) investment banking revenues, consisting of
underwriting and advisory fees.
The profitability of each of these lines of business, and the volume of sales
of the Company's products, are directly affected by many variables, including
investor preferences for equity, fixed-income or other investments, the
availability and attractiveness of competing products, equity market
performance, changes in interest rates, the rate of inflation, changes in income
tax rates and laws, and municipal bond new issue supply.
Assets under management include equity, taxable fixed-income and municipal
securities. Municipal assets represented 71% of assets under management in
managed funds and accounts at December 31, 1998, compared with 77% at December
31, 1997.
GENERAL INDUSTRY TRENDS
The U.S. economy in 1998 continued to expand despite financial and trade
problems in many other parts of the world. U.S. stock prices showed considerable
volatility, with the S&P 500 declining 10% in the third quarter before
rebounding strongly to finish with a total return of 29% for the year. Despite
the strong economy and resilient stock market, interest rates on Treasury
securities were driven down by investors seeking safety in the midst of global
uncertainty. The yield on the 30-year Treasury bond fell from just under 6% to
just over 5% at year end. While municipal yields did not drop as dramatically
(the Bond Buyer 20 dipped from 5.15% to 5.00%), they decreased enough to help
boost new issue volume by 29% compared with 1997.
Market volatility and uncertainty during 1998 resulted in a decrease in net
flows (equal to the sum of sales, reinvestment and exchanges less redemptions)
into equity and taxable fixed-income mutual funds industry-wide for the year
compared with the previous year. Sales of these mutual funds for the
twelve-month period ended December 31, 1998, were down approximately 25%
compared with the same period of the prior year. Equity managed accounts and
equity defined portfolio products continued to attract increased cash flows
across the industry. Municipal bond funds posted a 175% increase in net flows
industry-wide in 1998 over the prior year. This was primarily due to volatility
in the equity markets, the relative price stability of high-quality fixed-income
products and favorable pricing of municipals compared with treasury securities.
Industry sales of municipal defined portfolio products declined in 1998 as a
result of less competitive current returns.
p.11
<PAGE> 14
The John Nuveen Company
The following table compares key operating information of the Company for the
respective twelve-month periods:
FINANCIAL RESULTS SUMMARY
(in millions, except per share amounts)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Gross sales of investment
products $ 7,755 $ 3,026 $ 1,747
Assets under management(1)(2) 55,267 49,594 33,191
Gross revenues 307.5 268.9 232.5
Operating expenses 169.8 146.7 115.0
Pretax operating income 137.7 122.2 117.5
Net income 83.6 74.2 72.5
Basic earnings per share 2.57 2.23 2.03
Diluted earnings per share 2.43 2.13 1.98
Operating cash flow per share(3) 2.98 2.57 2.11
Dividends per share .98 .88 .78
- ---------------------------------------------------------------------------
</TABLE>
(1) Excludes defined portfolio products sponsored by the Company.
(2) At period end.
(3) Operating cash flow (net income plus amortization and depreciation) on a
per-share basis is calculated under the same method used for diluted earnings
per share and is presented as an additional measurement of operating
performance, not as a substitute for earnings per share.
SUMMARY OF OPERATING RESULTS
- - Gross sales for 1998 reached more than $7.7 billion, an increase of 156% from
the level of total sales in 1997. More than two-thirds of the Company's sales in
1998 were in equity-based products that have been added to the Company's product
line since 1996.
- - Gross revenues for the year ended December 31, 1998, increased 14% from the
prior year primarily due to higher advisory fee revenues. This increase resulted
from increased levels of average assets under management in funds and accounts.
Average net assets increased due to the inclusion of a full year of Rittenhouse
managed account assets which were acquired in August 1997, and the sale of funds
and accounts throughout 1997 and 1998. These increases were partially offset by
a decline in interest income earned on short-term investments as the Company
invested in the growth of its business, and a decline in distribution revenues
earned on sales of municipal defined portfolio products.
- - Operating expenses in 1998 increased over the prior year primarily due to a
full year of goodwill amortization and incremental personnel and operating
expenses resulting from the acquisition of Rittenhouse in August 1997.
The following discussion and analysis contains important information that
should be helpful in evaluating the Company's results of operations and
financial condition, and should be read in conjunction with the consolidated
financial statements and related notes.
RESULTS OF OPERATIONS
Total advisory fee income earned during any period is directly related to the
market value of the assets managed by the Company. Advisory fee income will
increase with a rise in the level of assets under management, which occurs with
the sale of fund shares, the addition of new managed accounts or deposits into
existing managed accounts, the acquisition of assets under management from other
advisory companies, or through increases in the value of portfolio investments.
Assets under management may also increase as a result of reinvestment of
distributions from funds and accounts, and from reinvestment of distributions
from defined portfolio products sponsored by the Company into shares of mutual
funds. Fee income will decline when managed assets decline, as would occur when
the values of fund portfolio investments decrease or when mutual fund
redemptions or managed account withdrawals exceed sales and reinvestments.
p.12
<PAGE> 15
The John Nuveen Company
Investment advisory fee income, net of subadvisory fees and expense
reimbursements, from assets managed by the Company is shown in the following
table:
MANAGED FUNDS AND ACCOUNTS
INVESTMENT ADVISORY FEES
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------------
December 31, 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Managed Funds:
Mutual Funds(1) $ 51,851 $ 45,809 $ 25,495
Exchange-Traded Funds 159,638 156,392 155,172
Money Market Funds 3,431 3,801 4,430
Managed Accounts(2) 57,939 15,633 748
- -------------------------------------------------------------------------
Total $272,859 $221,635 $185,845
=========================================================================
</TABLE>
(1) The 1997 and 1998 periods include advisory fee income earned on assets
acquired from Flagship Resources,Inc. on January 2, 1997.
(2) The 1998 period and the last four months of 1997 include advisory fee income
earned on assets managed by Rittenhouse.
The following table summarizes net assets under management:
MANAGED FUNDS AND ACCOUNTS
NET ASSETS UNDER MANAGEMENT(1)
<TABLE>
<CAPTION>
(in millions)
- -------------------------------------------------------------------------
December 31, 1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Managed Funds:
Mutual Funds(2) $ 11,883 $ 10,885 $ 5,930
Exchange-Traded Funds 26,223 26,117 25,434
Money Market Funds 824 970 1,004
Managed Accounts (3) 16,337 11,622 823
- -------------------------------------------------------------------------
Total $ 55,267 $ 49,594 $ 33,191
=========================================================================
</TABLE>
(1) Excludes defined portfolio product assets under surveillance.
(2) Includes $4.2 billion in mutual funds acquired from Flagship Resources, Inc.
on January 2, 1997.
(3) Includes $9.1 billion in managed accounts acquired from Rittenhouse on
August 31, 1997.
Total advisory fees for the year ended December 31, 1998, increased over the
comparable periods in 1997 and 1996 as a result of higher levels of average
assets under management relating principally to the 1997 acquisitions of
Rittenhouse and Flagship Resources, Inc. (Flagship). Mutual fund assets under
management at December 31, 1998, increased $1.0 billion from December 31, 1997,
and managed account assets under management at December 31, 1998, increased $4.7
billion from December 31, 1997. These increases reflect net sales of fund shares
and accounts over the periods and appreciation in the underlying value of the
portfolio investments. Mutual fund assets increased $5.0 billion and managed
account assets increased $10.8 billion from December 31, 1996, to December 31,
1997, primarily due to the acquisition of Flagship on January 2, 1997, and the
acquisition of Rittenhouse on August 31, 1997, respectively. Average money
market fund net assets under management decreased in both 1998 and 1997 due to
redemptions, which were driven by relatively low short-term interest rates and
strong competition from sponsors of competing money market products.
Gross sales of investment products for the years ending December 31, 1998,
1997 and 1996 are shown below:
GROSS INVESTMENT PRODUCT SALES
<TABLE>
<CAPTION>
(in millions)
- -------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Mutual Funds(1) $ 1,553 $ 951 $ 649
Defined Portfolios 809 757 963
Exchange-Traded Funds - 125 -
Managed Accounts(2) 5,393 1,193 135
- -------------------------------------------------------------------------
Total $ 7,755 $ 3,026 $ 1,747
=========================================================================
</TABLE>
(1) The 1997 and 1998 periods include sales of funds acquired from Flagship on
January 2, 1997.
(2) The 1998 period and the last four months of 1997 include sales of
Rittenhouse accounts.
Overall, gross sales of the Company's products for the years ended December
31, 1998, and December 31, 1997, increased 156% and 73%, respectively, from the
previous twelve-month periods. Net flows (equal to the sum of sales,
reinvestment and exchanges less redemptions) were $5.7 billion for the
twelve-month period ended December 31, 1998, and $1.8 billion for the
twelve-month period ended December 31, 1997,
p.13
<PAGE> 16
The John Nuveen Company
which represents an increase of 217%. Net flows in 1996 were $1.7 billion.
Mutual Funds Growing concern regarding general valuation levels and volatility
in the equity markets resulted in a 68% increase in the Company's municipal
mutual fund sales during 1998 over 1997 as investors sought to balance their
portfolios or turned to more conservative investments. Municipal mutual fund
redemptions during 1998 were 11% lower than those of the prior year. However,
distribution revenue earned on the municipal mutual fund sales in 1998 declined
compared with the prior year. This decrease is primarily the result of the
inclusion, for the 1997 period only, of 12b-1 fees earned in January 1997 under
Flagship's former mutual fund pricing structure. On February 1, 1997, the
Flagship and Nuveen municipal funds merged and adopted pricing structures more
similar to the Nuveen funds. Additionally, compensation paid by the Company to
financial advisers in 1998 on municipal mutual fund sales in excess of $1.0
million increased over 1997. Municipal mutual fund sales in 1997 also increased
when compared with 1996. This was primarily due to the integration of the
Flagship mutual funds and the Flagship distribution organization early in 1997.
Sales of the Company's equity mutual funds increased 56% in 1998 over 1997
due to the introduction of two new funds. In January 1998, the Company
introduced a new large-cap growth equity fund subadvised by Rittenhouse and in
June 1998, a new European value equity fund subadvised by Institutional Capital
Corporation (icap). Accordingly, the Company experienced an increase in
distribution revenue.
Defined Portfolios The increase in sales of defined portfolio products for the
twelve-month period ended December 31, 1998, compared with the prior year was
primarily the result of increased sales of equity and taxable fixed-income
defined portfolio products. This increase was partially offset by the decrease
of municipal defined portfolio sales, resulting from less competitive current
returns on these products. Distribution revenue for the equity and taxable
fixed-income defined portfolio products increased by $1.2 million in 1998
compared with 1997, while distribution revenue for the longer term municipal
defined portfolio products was down $2.1 million over the same period.
Sales of municipal defined portfolios and the related distribution revenue
also declined when comparing 1997 with 1996, primarily due to the same factors
affecting municipal defined portfolio sales in 1998.
Managed Accounts Sales of managed accounts increased 352% during the
twelve-month period ended December 31, 1998, when compared with 1997 primarily
due to the inclusion of twelve months of Rittenhouse account sales in 1998 and
to the continuing momentum of Rittenhouse sales through its traditional customer
base and through Nuveen's broad distribution relationships. Sales of Nuveen's
municipal managed accounts increased $390 million in 1998, an 80% increase when
compared with the prior year. Total Rittenhouse and Nuveen managed account sales
also increased in 1997 when compared with the 1996 period as Rittenhouse's
managed account business was added to the Company's for the last four months of
1997. Sales of managed accounts do not impact the Company's underwriting and
distribution revenue since there are no transaction-based revenues associated
with these products.
Other Revenues The Company records positioning profits or losses from changes in
the market value of investment products and securities held temporarily. The
Company hedges certain of these holdings against fluctuations in interest rates
using financial futures. During 1998, the Company realized net positioning gains
of $0.3 million compared with gains of $3.5 million and losses of $0.2 million
during 1997 and 1996, respectively.
p.14
<PAGE> 17
The John Nuveen Company
Investment banking revenues include both net new issue underwriting revenues
and fee income earned from various financial advisory activities. Investment
banking revenues were $13.0 million in 1998, $13.4 million in 1997 and $11.1
million in 1996. The decrease of $0.4 million in 1998 compared with 1997 was due
to lower fee revenue partially offset by higher underwriting revenues. The
increase of $2.3 million in 1997 over 1996 was due to an increase in both
negotiated underwritings and financial advisory activity.
Interest and dividend revenue declined $4.1 million and $8.0 million when
comparing the years ended December 31, 1998 and 1997 with the respective prior
years as cash balances were deployed in January 1997 for part of the acquisition
of Flagship, in August 1997 for the acquisition of Rittenhouse, for repurchases
of a portion of the Company's outstanding common shares, and for investments in
new products and systems in 1997 and 1998.
Operating Expenses Operating expenses increased $23.0 million and $31.8 million
in 1998 and 1997 over the respective prior years. The increase in 1998 was
principally due to the inclusion of twelve months of Rittenhouse operations in
the 1998 results and only four months in the 1997 results. The increase in the
1997 operating expenses over 1996 was primarily due to the inclusion of a full
year of Flagship expenses in 1997 and four months of Rittenhouse expenses in
1997 with no comparable costs incurred in 1996.
Compensation and related benefits for the year ended December 31, 1998,
increased $11.6 million, or 15% over the prior year. This increase was the
result of the inclusion of approximately 90 Rittenhouse employees in 1998, which
was partially offset by headcount reductions in other areas. Compensation and
benefits for the year ended December 31, 1997, increased $5.6 million, or 8%
over 1996 primarily due to the addition of approximately 60 Flagship employees
for the full year and 80 Rittenhouse employees for the last four months of 1997.
This increase was partially offset by a reduction in incentive plan compensation
expense.
Advertising and promotional expenditures increased for 1998 when compared
with 1997 primarily due to the inclusion of Rittenhouse advertising and
promotional expenditures and the incremental costs to support the expanded
product line offered by the Company. Advertising and promotional expenditures
increased in 1997 over 1996 primarily as a result of an advertising and
promotional campaign in the first and second quarters of 1997 to support the
launch of new equity-based growth and income mutual funds.
The increase in amortization of goodwill and deferred offering costs when
comparing 1998 with 1997 also relates to the acquisition of Rittenhouse and the
introduction of the Company's new equity mutual funds. The Company recorded $4.9
million of Rittenhouse-related goodwill amortization expense in 1998 compared
with $1.6 million in 1997. The Company is amortizing the goodwill associated
with Rittenhouse over approximately 30 years. The increase in amortization
expense when comparing 1997 with 1996 is due to the first year of amortization
expense on the Flagship-related goodwill, four months of Rittenhouse-related
goodwill amortization and the first of three years of amortization expense on
the December 1996 load-waived mutual fund offering.
Occupancy and equipment, travel and entertainment, and other operating
expenses increased $8.7 million and $7.8 million for the years ended December
31, 1998 and 1997, respectively, when compared with the prior years. The
increase in 1998 was primarily due to the addition of the Rittenhouse operations
for the full twelve-month period. The increase in 1997 was due to the addition
of the Flagship operations for the full twelve months of 1997 and Rittenhouse
operations for the four-month period ended December 31, 1997.
p.15
<PAGE> 18
The John Nuveen Company
CAPITAL RESOURCES, LIQUIDITY
AND FINANCIAL CONDITION
The Company's principal businesses are not capital intensive and, historically,
the Company has met its liquidity requirements through cash flow generated by
the Company's operations. The Company's broker-dealer subsidiary occasionally
utilizes available, uncommitted lines of credit, which exceed $400 million, to
satisfy additional periodic, short-term liquidity requirements generally for the
purpose of carrying variable rate demand obligations (VRDOs). As of December 31,
1998, the balance due on these uncommitted lines of credit was $10 million.
Additionally, in August 1997, the Company entered into a $200 million committed,
three-year revolving credit facility with a group of banks to ensure an ongoing
liquidity source for general corporate purposes including acquisitions. As of
December 31, 1998, there was no outstanding balance due on the committed credit
line.
On August 31, 1997, the Company acquired Rittenhouse, a nationally-known
equity and balanced account manager, for a cash purchase price of $145 million.
To finance the transaction the Company used $95 million of cash on hand and, for
the remainder, utilized the aforementioned committed credit line, which was
subsequently paid down during the first quarter of 1998. The acquisition has
been accounted for using the purchase method of accounting resulting in
approximately $144 million in goodwill for financial reporting purposes, which
will be amortized against earnings over approximately 30 years.
The Company completed the acquisition of Flagship on January 2, 1997, for a
total purchase price of $71.8 million, before taking into account contingent
consideration. The Company financed the acquisition using cash of $18.0 million
and preferred stock valued at $45.0 million, with the remaining balance
representing liabilities assumed and direct acquisition costs. Additional
payments in cash and common stock, which are contingent on the significant
future growth in the Company's municipal bond mutual funds, could amount to as
much as $20.0 million over a four-year period. Contingent consideration for 1998
and 1997 amounted to approximately $2.4 and $1.0 million, respectively. Goodwill
of approximately $70.0 million, before taking into account the contingent
consideration, will be amortized against earnings over approximately 30 years.
At December 31, 1998, the Company held in its treasury 7,298,720 shares of
common stock acquired in open market transactions and in transactions with its
Class B shareholder, The St. Paul Companies, Inc., as part of ongoing stock
repurchase programs. In February 1997, the Board of Directors authorized the
purchase of 3.5 million shares. At December 31, 1998, the Company has
approximately 1.0 million shares remaining to be purchased under the February
1997 repurchase program.
In August 1998, the Company announced a 13% increase in its third quarter
dividend, to $0.26 per common share, from the second quarter amount of $0.23 per
common share. During 1998, the Company paid out dividends on common shares
totaling $31.0 million and on preferred shares totaling $2.2 million, compared
with $28.3 million and $2.2 million, respectively, in 1997.
The Company is remarketing agent for various issuers of VRDOs with an
aggregate principal value of $1.7 billion as of December 31, 1998. Although
remarketing agents, including the Company, are only generally obligated to use
their best efforts in locating purchasers for the VRDOs, they frequently
repurchase VRDOs for resale to other buyers within a few days. During temporary
periods of imbalance between supply and demand for VRDOs, the Company may hold
larger than average balances of such obligations for resale. The Company has
come to expect such imbalances at year-end and, to a lesser extent, at each
calendar quarter-end. Substantially all VRDOs for which the Company is
remarketing agent are secured by letters of credit obtained by the issuer from
top-rated third-party providers, including major commercial banks and insurance
p.16
<PAGE> 19
The John Nuveen Company
companies. On December 31, 1998, and December 31, 1997, the Company held $66.8
million and $97.7 million, respectively, of VRDOs, which are classified in its
consolidated balance sheets as "Temporary Investments Arising from Remarketing
Obligations." The Company's average daily inventory of VRDOs was $14.9 million
during 1998 and $32.3 million during 1997.
To minimize interest rate risk on fixed-income defined portfolio product
inventories and securities held by the Company, the Company entered into hedging
transactions using futures contracts during 1998 and expects to continue to do
so periodically. Additionally, the Company's investment banking group will, on
occasion, act as financial adviser, broker, or underwriter to municipal or other
issuers with respect to transactions such as interest rate swaps and forward
delivery transactions.
John Nuveen & Co. Incorporated, the Company's wholly owned broker-dealer
subsidiary, is subject to the Securities and Exchange Commission Rule 15c3-1,
the "Uniform Net Capital Rule," which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital, as
these terms are defined, shall not exceed 15 to 1. At December 31, 1998, its net
capital ratio was 2.06 to 1 and its net capital was $27.8 million which is $24.0
million in excess of the required net capital of $3.8 million.
Management believes that cash provided from operations and borrowings
available under its uncommitted and committed credit facilities will provide the
Company with sufficient liquidity to meet its operating needs for the
foreseeable future.
OTHER MATTERS
Year 2000 The Company has taken a number of steps to address the Year 2000
challenge. As background, the Company first addressed this challenge in the
early 1980s because of the historical focus of the Company's broker-dealer and
investment adviser subsidiaries on municipal bonds, which typically mature 20 to
30 years after the date of issuance. As a result, in the early 1980s the Company
began developing internal software standards and other information technology
systems that required the use of four digits to represent a year. These systems
have been improved and tested over the years and remain in place, thus providing
the Company with a base of internally developed, Year 2000 ready software. The
Company outsources to service providers many administrative functions relating
to its funds and investment products, and an outside service provider serves as
transfer agent and custodian for all of the funds sponsored by the Company.
In light of the above, the Company's preparations for Year 2000 consist
essentially of examination and testing of the software packages and hardware
provided by third parties and of the systems and software of service partners,
with particular emphasis on its key service providers, to determine their degree
of Year 2000 compliance. The Company has compiled a detailed inventory of all
third-party software and hardware used in processing at Nuveen and Rittenhouse
and is in the process of obtaining certifications of the Year 2000 compliance
for each item of software and hardware (which the Company expects to complete by
the end of the second quarter in 1999). The certification process may require
follow up, which will be done as needed throughout 1999.
The most significant service providers include Chase Manhattan Bank,
CheckFree Investment Services (formerly Security APL), and JJ Kenny, a
subsidiary of Standard & Poor's Corporation. Chase serves as transfer agent and
custodian for the Company's funds and serves as trustee of the defined
portfolios sponsored by the Company. CheckFree provides the portfolio accounting
system for both Rittenhouse and Nuveen Asset Management. Kenny serves as pricing
agent for the municipal securities held by the Company's funds.
The Company is coordinating with, and monitoring the Year 2000 readiness
plans of, each of these service providers, who have shared detailed information
with the Company regarding their respective Year 2000 plans and initiatives.
Chase has
p.17
<PAGE> 20
The John Nuveen Company
certified to the Company that it has completed its internal testing and
remediation and that its systems are Year 2000 compliant. Chase has begun
testing system interfaces with its business partners, including the Company, and
this testing is expected to be completed during the second quarter of 1999.
CheckFree Investment Services has recently tested and put into production its
Year 2000 remediated systems. JJ Kenny and the Company are scheduled to begin
testing system interfaces during the second quarter of 1999.
The Company is participating in the industry wide testing of securities trade
processing systems sponsored by the Securities Industry Association. As part of
this initiative, the Company is partnering with three other firms over a
four-week period to simulate post-Year 2000 settlement of securities trades
through settlement clearinghouses used by industry participants. All of the
Company's critical systems involved in trade processing are being tested as part
of this effort. The results of this testing initiative will be reviewed by the
Securities Industry Association and are expected to be available in April 1999.
The testing of the Company's critical systems that are not involved in
securities trade processing, including general ledger and portfolio management
systems, are scheduled to be completed by June 30, 1999. Year 2000 compliance of
the CheckFree Investment Services APL Wrap host system is the most critical
Rittenhouse Year 2000 readiness matter. CheckFree has completed testing the
system interfaces with its business partners, which include the major brokers
using Rittenhouse's individual managed account services, and is also
participating in the Securities Industry Association testing program with
respect to settlement clearinghouses. Rittenhouse has completed the testing of
all of its critical internal systems that currently exist, and they appear to be
Year 2000 ready. Rittenhouse does not engage in any in-house system application
development. The Company is confident that these critical systems testing
initiatives will be successfully completed, and the Company will address
promptly any Year 2000 readiness issues identified through these efforts.
Given the Company's prior development work, the Company and its subsidiaries
do not anticipate facing the prospect of costly and time consuming redesign of
internal information technology systems, and the costs of the Company's
compliance program are not expected to be significant and will be incurred as
part of normal operations. The costs presently consist of the cost of upgrades
of software and of travel expenses to coordinate with our parent company,
subsidiaries and service partners. Therefore, the Company has not to date
specially allocated a budget for the Company's Year 2000 initiatives.
While the Company does not presently believe that challenges associated with
Year 2000 are likely to have a material effect on the Company's operations,
liquidity and financial condition, the Company has not completed the process of
assessing the compliance of all of its third-party software suppliers and key
service providers. These outside parties are at various stages of readiness for
Year 2000 and depending on the result of such assessments, it is possible the
Company could conclude that the Year 2000 challenge could affect the Company's
business to a greater extent than it currently believes likely. It is also
possible that certain service providers, despite assurances to the contrary, may
not in fact successfully modify all their key systems on a timely basis for Year
2000 and that the Company's testing of such firms' compliance may not allow the
Company to detect such problems on a timely basis. Further, there can be no
assurance that entities such as public utilities will be fully Year 2000
compliant and any interruption in basic services, such as telephone or
electrical service, would disrupt the Company's operations.
The Company is developing Year 2000 contingency plans, which are based on the
extent to which the Company's examination of the Year 2000 compliance of its
third-party software and service providers reveals problems in achieving
readiness. The Company is not aware of any such problems
p.18
<PAGE> 21
The John Nuveen Company
presently but it has not yet completed its due diligence examination. Once this
examination is completed, the Company will address any specific concerns with
providers and seek to take appropriate remedial action. We anticipate that the
majority of any specific contingency plans will be developed in accordance with
our normal disaster recovery plans. It may not be possible to develop adequate
contingency plans relating to Year 2000 challenges at service providers that are
not identified sufficiently in advance of January 1, 2000.
Market Risk The Company is exposed to market risk from changes in interest rates
which may adversely affect its results of operations and financial condition.
The Company is exposed to interest rate risk primarily in its defined portfolio
inventory and seeks to minimize the risks from these interest rate fluctuations
through the use of derivative financial instruments. The Company does not use
derivative financial instruments for trading or other speculative purposes and
is not party to any leveraged financial instruments. A discussion of the
Company's accounting policies for financial instruments is included in Note 1
(Summary of Significant Accounting Policies) of the Notes to Consolidated
Financial Statements.
The Company regularly purchases and holds for resale municipal securities and
defined portfolio units. The level of inventory maintained by the Company will
fluctuate daily and is dependent upon the need to maintain municipal inventory
for future defined portfolios, and the need to maintain defined portfolio
inventory to support ongoing sales. To minimize interest rate risk on securities
held by the Company, the Company has entered into futures contracts.
The Company invests in short-term debt instruments, classified as securities
purchased under agreements to resell. The investments are treated as
collateralized financing transactions and are carried at the amounts at which
they will be subsequently resold, including accrued interest. The Company often
holds temporary investments in VRDOs arising from remarketing activities and
related debt to meet its short-term financing needs for this product.
Substantially all VRDOs are secured by letters of credit obtained by the issuer
from highly-rated third-party providers including commercial banks and insurance
companies. The Company also invests in certain Company-sponsored equity and
fixed-income mutual funds.
The Company manages risk by restricting the use of derivative financial
instruments to hedging activities and by limiting potential interest rate
exposure. The Company does not believe that the effect of any reasonably
possible near-term changes in interest rates would be material to the Company's
financial position, results of operations or cash flows.
Recent Accounting Pronouncements In the Spring of 1998 the Financial Accounting
Standards Board (FASB) approved AICPA Statement of Position (SOP) 98-5
"Reporting of the Costs of Start-up Activities," which requires that all costs
associated with start-up activities be expensed as incurred. Start-up activities
include activities related to organizing a new entity. These costs are commonly
referred to as organization costs. Certain offering costs are not within the
scope of SOP 98-5. The pronouncement generally has the effect of requiring an
investment company sponsor to bear certain costs that were historically
capitalized as a fund asset and amortized as an expense of the fund over a
period of five years.
In October 1998, the Financial Accounting Standards Board staff announced its
position that offering costs incurred by an investment adviser in connection
with the distribution of shares of a fund do not meet the definition of an
asset, unless the adviser receives both distribution fees under a plan adopted
pursuant to Rule 12b-1 and contingent deferred sales charges (CDSCs). Absent
both Rule 12b-1 fees and CDSCs, such costs should be expensed as incurred.
Further, the FASB staff believes that initial offering costs paid by such an
p.19
<PAGE> 22
The John Nuveen Company
adviser are start-up costs and should be accounted for in accordance with
AICPA SOP 98-05, discussed above. The staff announcement applies to advisers of
closed-end investment companies that pay underwriting commissions on behalf of
shareholders. The effect of such announcement is to require that any such
underwriting commissions paid be expensed immediately at the time paid instead
of capitalized by the adviser and amortized as an expense of the adviser over an
appropriate period.
Inflation The Company's assets are, to a large extent, liquid in nature and
therefore not significantly affected by inflation. However, inflation may result
in increases in the Company's expenses, such as employee compensation,
advertising and promotional costs, and office occupancy costs. To the extent
inflation, or the expectation thereof, results in rising interest rates or has
other adverse effects upon the securities markets and on the value of financial
instruments, it may adversely affect the Company's financial condition and
results of operations. A substantial decline in the value of fixed-income or
equity investments could adversely affect the net asset value of funds managed
by the Company, which in turn would result in a decline in investment advisory
fee income.
Forward-Looking Information From time to time, information provided by the
Company or information included in its filings with the sec (including this
report on Form 10-k) may contain statements which are not historical facts but
are forward-looking statements reflecting management's expectations and
opinions. The Company's actual future results may differ significantly from
those anticipated in any forward-looking statements due to numerous factors.
These include, but are not limited to, the effects of the substantial
competition that the Company, like all market participants, faces in the
investment management business, including competition for continued access to
the brokerage firm's retail distribution systems, the Company's reliance on
revenues from investment management contracts which are renewed annually
according to their terms, burdensome regulatory developments, recent accounting
pronouncements, unforeseen developments in litigation and the previously
discussed risks with respect to Year 2000 readiness. The Company undertakes no
responsibility to update publicly or revise any forward-looking statements.
p.20
<PAGE> 23
The John Nuveen Company
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
December 31, 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 5,148 $ 8,771
Securities purchased under agreements to resell 6,000 -
Temporary investments arising from remarketing obligations 66,750 97,705
Management and distribution fees receivable 27,824 27,169
Other receivables 19,009 13,548
Securities owned (trading account), at market value:
Nuveen defined portfolios 37,447 31,926
Municipal bonds and notes 2,630 572
Deferred income tax asset, net 4,236 7,096
Furniture, equipment, and leasehold improvements, at cost less accumulated
depreciation and amortization of $29,680 and $24,808, respectively 12,824 14,788
Other investments 48,404 54,500
Goodwill, at cost less accumulated amortization of $11,186
and $3,956, respectively 203,380 209,300
Prepaid expenses and other assets 34,309 26,857
- --------------------------------------------------------------------------------------------------------
$ 467,961 $ 492,232
========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable $ - $ 15,000
Short-term loans secured by remarketing obligations 10,000 69,500
Accrued compensation and other expenses 46,400 42,111
Deferred compensation 28,816 27,414
Security purchase obligations 7,413 -
Other liabilities 26,224 20,087
- --------------------------------------------------------------------------------------------------------
Total liabilities 118,853 174,112
- --------------------------------------------------------------------------------------------------------
Redeemable preferred stock, at redemption value; 5,000,000 shares
authorized, 1,800,000 shares issued 45,000 45,000
- --------------------------------------------------------------------------------------------------------
Common stockholders' equity:
Class A Common stock, $.01 par value; 150,000,000 shares
authorized, issued 14,212,618 shares and 14,212,618 shares, respectively 142 142
Class B Common stock, $.01 par value; 40,000,000 shares
authorized, issued 24,441,738 shares and 24,441,738 shares, respectively 245 245
Additional paid-in capital 55,139 52,963
Retained earnings 451,529 403,635
Unamortized cost of restricted stock awards (79) (185)
- --------------------------------------------------------------------------------------------------------
506,976 456,800
Less common stock held in treasury, at cost (7,298,720 and
6,871,805 shares, respectively) (202,868) (183,680)
- --------------------------------------------------------------------------------------------------------
Total common stockholders' equity 304,108 273,120
- --------------------------------------------------------------------------------------------------------
$ 467,961 $ 492,232
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
p.21
<PAGE> 24
The John Nuveen Company
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Year ended December 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Investment advisory fees from assets under management $272,859 $221,635 $185,845
Underwriting and distribution of investment products 10,623 12,671 14,566
Positioning profits (losses) 300 3,491 (191)
Investment banking 12,967 13,409 11,098
Interest 6,549 10,627 18,640
Other 4,237 7,094 2,494
- ---------------------------------------------------------------------------------------------------------
Total revenues 307,535 268,927 232,452
- ---------------------------------------------------------------------------------------------------------
Expenses
Compensation and benefits 88,885 77,274 71,683
Advertising and promotional costs 19,415 18,853 12,641
Occupancy and equipment costs 12,277 12,647 11,948
Amortization of goodwill and deferred offering costs 14,093 10,865 -
Travel and entertainment 9,331 7,132 4,627
Interest and dividends 2,597 3,686 2,325
Other operating expenses 23,200 16,300 11,726
- ---------------------------------------------------------------------------------------------------------
Total expenses 169,798 146,757 114,950
- ---------------------------------------------------------------------------------------------------------
Income before taxes 137,737 122,170 117,502
- ---------------------------------------------------------------------------------------------------------
Income taxes
Current 51,268 44,697 41,833
Deferred 2,824 3,293 3,140
- ---------------------------------------------------------------------------------------------------------
Total income taxes 54,092 47,990 44,973
- ---------------------------------------------------------------------------------------------------------
Net income $ 83,645 $ 74,180 $ 72,529
=========================================================================================================
Average common and common equivalent shares outstanding
Basic 31,641 32,275 35,656
=========================================================================================================
Diluted 34,427 34,902 36,702
=========================================================================================================
Earnings per common share
Basic $ 2.57 $ 2.23 $ 2.03
=========================================================================================================
Diluted $ 2.43 $ 2.13 $ 1.98
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
p.22
<PAGE> 25
The John Nuveen Company
Consolidated Statements of Changes in Common Stockholders' Equity
(in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Unamortized
Class A Class B Additional Cost of
Common Common Paid-In Retained Restricted Treasury
Stock Stock Capital Earnings Stock Awards Stock Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $101 $286 $50,122 $319,705 $(1,611) $ (45,747) $322,856
Net income 72,529 72,529
Cash dividends paid (27,579) (27,579)
Issuance of restricted
stock awards 55 (750) 695 -
Amortization of restricted
stock awards 1,656 1,656
Purchase of treasury stock (101,074) (101,074)
Exercise of stock options (55) (940) 3,974 2,979
Other 27 (27) 527 527
- ---------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 128 259 50,649 363,715 (705) (142,152) 271,894
===============================================================================================================
Net income 74,180 74,180
Cash dividends paid (30,589) (30,589)
Issuance of restricted
stock awards 62 1,342 1,404
Amortization of restricted
stock awards 520 520
Purchase of treasury stock (54,775) (54,775)
Exercise of stock options (62) (3,671) 11,905 8,172
Other 14 (14) 2,314 2,314
- ---------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 142 245 52,963 403,635 (185) (183,680) 273,120
===============================================================================================================
Net income 83,645 83,645
Cash dividends paid (33,229) (33,229)
Issuance of earnout shares 179 562 741
Amortization of restricted
stock awards 106 106
Purchase of treasury stock (27,421) (27,421)
Exercise of stock options (2,519) 7,635 5,116
Other 1,997 (3) 36 2,030
- ---------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 $142 $245 $55,139 $451,529 $ (79) $(202,868) $304,108
===============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
p.23
<PAGE> 26
The John Nuveen Company
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 83,645 $ 74,180 $ 72,529
Adjustments to reconcile net income to net cash
provided from (used for) operating activities:
Deferred income taxes 2,860 3,293 3,140
Amortization/Depreciation:
Furniture, equipment and leasehold improvements 4,915 4,555 5,052
Goodwill 7,230 3,956 -
Net (increase) decrease in assets:
Temporary investments arising from remarketing obligations 30,955 2,130 98,450
Management and distribution fees receivable (655) (563) (1,134)
Other receivables (5,461) 19,435 422
U.S. government securities (escrow accounts) - - 1,385
Nuveen defined portfolios (5,521) 7,280 (138)
Municipal bonds and notes (2,058) 3,982 7,755
Prepaid expenses and other assets (7,452) (2,980) (18,894)
Net increase (decrease) in liabilities:
Accrued compensation and other expenses 4,289 (10,138) 34,049
Deferred compensation 1,402 3,834 598
Security purchase obligations 7,413 (2,227) (4,947)
Other liabilities 6,137 (15,326) (786)
Other 2,103 2,826 1,434
- ---------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 129,802 94,237 198,915
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Notes Payable:
New loans 14,000 76,000 -
Payments on loans (29,000) (61,000) -
Net (payments) receipts on short-term borrowings:
Securities sold under agreements to repurchase - - (25,000)
Short-term loans secured by remarketing obligations (59,500) 69,500 -
Dividends paid (33,229) (30,589) (27,579)
Proceeds from stock options exercised 5,116 8,172 3,080
Acquisition of treasury stock (27,421) (54,775) (101,074)
Other 34 - -
- ---------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities (130,000) 7,308 (150,573)
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for purchases of other companies, net of cash received - (165,369) -
Purchases of office furniture and equipment (2,951) (3,194) (2,787)
Other investments 6,096 (2,564) 16,757
Other (570) 5 -
- ---------------------------------------------------------------------------------------------------------
Net cash provided from (used for) investing activities 2,575 (171,122) 13,970
- ---------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents 2,377 (69,577) 62,312
Cash and cash equivalents:
Beginning of year 8,771 78,348 16,036
- ---------------------------------------------------------------------------------------------------------
End of year $ 11,148 $ 8,771 $ 78,348
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
p.24
<PAGE> 27
The John Nuveen Company
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Information and Basis
of Presentation The consolidated financial statements include the accounts of
The John Nuveen Company (the Company) and its wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation. Certain amounts in the prior year financial statements have been
reclassified to correspond to the 1998 presentation. These reclassifications had
no effect on net income or retained earnings as previously reported for those
years. The Company's majority shareholder is The St. Paul Companies, Inc.
John Nuveen & Co. Incorporated (Nuveen & Co.), a registered broker and dealer
in securities under the Securities Exchange Act of 1934, is sponsor/underwriter
of the Nuveen mutual funds, exchange-traded funds (closed-end funds) and defined
portfolios (unit trusts). Nuveen & Co. trades, underwrites and markets municipal
and corporate bonds. The Company has four advisor subsidiaries which are
registered under the Investment Advisers Act of 1940: Nuveen Advisory Corp.
(NAC), Nuveen Institutional Advisory Corp. (NIAC), Nuveen Asset Management (NAM)
and Rittenhouse Financial Services, Inc. (Rittenhouse). NAC and NIAC provide
investment advice to and administer the business affairs of the Nuveen family of
management investment companies. NAM and Rittenhouse provide investment
management services through individual accounts for individuals and
institutional investors. Rittenhouse also sub-advises an equity mutual fund
sponsored by Nuveen & Co.
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and related notes to the financial statements. Changes in such
estimates may affect amounts reported in future periods.
Securities Purchased Under Agreements to Resell Securities purchased under
agreements to resell are treated as collateralized financing transactions and
are carried at the amounts at which such securities will be subsequently resold,
including accrued interest. The Company's exposure to credit risks associated
with the nonperformance of counterparties in fulfilling these contractual
obligations can be directly impacted by market fluctuations that may impair the
counterparties' ability to satisfy their obligations. It is the Company's policy
to take possession of the securities underlying the agreements to resell or
enter into tri-party agreements which include segregation of the collateral by
an independent third party for the benefit of the Company. The Company monitors
the value of these securities daily and, if necessary, obtains additional
collateral to assure that the agreements are fully secured.
The Company utilizes resale agreements to invest capital not required to fund
daily operations. The level of such investments will fluctuate on a daily basis
as the Company commits capital to carry temporary investments in variable rate
demand obligations (VRDOs) and inventory positions and to finance new issue
underwritings. Such resale agreements typically mature on the day following the
day in which the Company enters into such agreements. Since these agreements are
highly liquid investments, readily convertible to cash, and mature in less than
three months, the Company includes these amounts in cash equivalents for cash
flow purposes. At December 31, 1998, the Company held $6.0 million in resale
agreements. The entire amount has been segregated for the benefit of customers
under rule 15c3-3 of the Securities and Exchange Commission.
p.25
<PAGE> 28
The John Nuveen Company
Temporary Investments Arising from Remarketing Obligations The Company is
remarketing agent for various issuers of VRDOs with an aggregate principal value
in excess of $1.7 billion at December 31, 1998. Although remarketing agents,
including the Company, are only generally obligated to use their best efforts in
locating purchasers for the VRDOs, they frequently purchase VRDOs for resale to
other buyers within a few days. During temporary periods of imbalance between
supply and demand for VRDOs, the Company may hold substantial amounts of such
obligations for resale. The Company has come to expect such imbalances at year
end and, to a lesser extent, at each calendar quarter end. Substantially all
VRDOs for which the Company is remarketing agent are secured by letters of
credit obtained by the issuer from highly-rated third-party providers including
major commercial banks and insurance companies. At December 31, 1998, and 1997,
the Company held VRDOs with a cost and market value of $66.8 million and $97.7
million, respectively. In comparison, the Company's average daily temporary
investment in VRDOs was $14.9 million during 1998 and $32.3 million during 1997.
Short-Term Loans Secured by Remarketing Obligations The Company meets its
short-term financing needs arising from its VRDOs remarketing activities by
obtaining bank loans under uncommitted lines of credit that are collateralized
by securities owned by the Company, including VRDOs.
Securities Transactions Securities transactions entered into by the Company's
broker-dealer subsidiary are recorded on a settlement date basis, which is
generally three business days after the trade date. Securities owned (trading
accounts) are valued at market value and realized and unrealized gains and
losses are reflected in income. Profits and losses are accrued on unsettled
securities transactions based on trade dates and, to the extent determinable, on
underwriting commitments, purchase and sales commitments of when-issued
securities, and delayed delivery contracts.
Furniture, Equipment and Leasehold Improvements Furniture and equipment,
primarily computer equipment, is depreciated on a straight-line basis over
estimated useful lives ranging from three to ten years. Leasehold improvements
are amortized over the lesser of the economic useful life of the improvement or
the remaining term of the lease.
Other Investments Other investments consists primarily of convertible preferred
stock in a privately held institutional equity manager and investments in
certain Company-sponsored mutual funds. The preferred stock investment is
carried at cost and is not readily marketable. Consequently, fair value cannot
be readily ascertained.
Goodwill Goodwill, representing the excess of the cost over the net tangible and
intangible assets of acquired businesses, is stated at cost and is amortized on
a straight-line basis over the estimated future periods to be benefited. The
Company periodically assesses the recoverability of the cost of its goodwill
based on a review of undiscounted cash flows of the related acquired operations.
Prepaid Expenses and Other Assets Prepaid expenses and other assets consists
primarily of commissions advanced by the Company on sales of certain mutual fund
shares. Such costs are being amortized over the lesser of the 12b-1 period (one
to eight years) or the period during which the shares of the fund upon which the
commissions were paid remain outstanding, with the exception of commissions
advanced in conjunction with the load-waived offerings of certain of the equity
and income mutual funds in late 1996 and early 1997. Those costs are being
amortized on a straight-line
p.26
<PAGE> 29
The John Nuveen Company
basis over the lesser of three years or the period during which the shares of
the fund upon which the commissions were paid remain outstanding.
Security Purchase Obligations As sponsor/underwriter of the Nuveen defined
portfolios, the Company enters into trust agreements that obligate it to
purchase certain municipal when-issued bonds reported as security purchase
obligations on the consolidated balance sheets, and deliver such bonds together
with "regular way" bonds on hand or receivable from brokers to the trustee. The
commitments to deliver these bonds are secured by irrevocable bank letters of
credit drawn by the Company in favor of the trustee. These letters of credit are
collateralized by securities owned by the Company. The liabilities reported in
the consolidated balance sheets are the amounts the Company is contractually
obligated to pay at the future settlement date of the purchase transactions,
including interest accrued through the balance sheet dates.
Derivative Financial Instruments To minimize interest rate risk on securities
held by the Company, the Company has entered into futures contracts, and other
hedge transactions, and expects to continue to do so in the future.
Additionally, the Company's investment banking group, on occasion, acts as
financial adviser, broker or underwriter to municipal or other not-for-profit
issuers with respect to transactions in interest rate swaps and forward delivery
transactions. Derivative financial instruments owned by the Company are valued
at market value and realized and unrealized gains and losses are reflected in
income.
Equity Incentive Plans The Company accounts for restricted stock and options
issued under its equity incentive plans using the accounting methods prescribed
by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and its related interpretations.
Advertising and Promotional Costs Advertising and promotional costs include
amounts related to the marketing and distribution of specific products offered
by the Company, as well as expenses associated with promoting the Company's
brands and image. The Company's policy is to expense such costs as incurred.
Supplemental Cash Flow Information The Company paid interest of $2.4 million in
1998, $2.3 million in 1997 and $1.6 million in 1996. This compares with interest
expense reported in the Company's Consolidated Statements of Income of $2.6
million, $3.7 million and $2.3 million for the respective reporting years.
2. EARNINGS PER SHARE
In 1997, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." This statement replaced the previous
calculation of primary and fully diluted earnings per share (EPS) with basic and
diluted eps. Basic EPS excludes the dilutive effects of options and convertible
securities. Diluted EPS is similar to the previously reported fully diluted EPS.
The following table sets forth a reconciliation of net income and common
shares used in the basic
p.27
<PAGE> 30
The John Nuveen Company
and diluted EPS computations for the three years ended December 31, 1998:
<TABLE>
<CAPTION>
(in thousands, except per share data)
- ------------------------------------------------------------------
Net Per-Share
Income Shares Amount
- ------------------------------------------------------------------
<S> <C> <C> <C>
1996
Basic EPS $72,529 35,656 $2.03
Dilutive effect of
Deferred stock - 137
Employee stock options - 909
Diluted EPS $72,529 36,702 $1.98
- ------------------------------------------------------------------
1997
Net income $74,180
Less: Preferred stock dividends (2,250)
Basic EPS $71,930 32,275 $2.23
Dilutive effect of
Contingent common stock - 5
Deferred stock - 178
Employee stock options - 794
Assumed conversion of
preferred stock 2,250 1,650
Diluted EPS $74,180 34,902 $2.13
- ------------------------------------------------------------------
1998
Net income $83,645
Less: Preferred stock dividends (2,250)
Basic EPS $81,395 31,641 $2.57
Dilutive effect of
Contingent common stock - 16
Deferred stock - 178
Employee stock options - 942
Assumed conversion of
preferred stock 2,250 1,650
Diluted EPS $83,645 34,427 $2.43
- ------------------------------------------------------------------
</TABLE>
Options to purchase 328,500 and 102,500 shares of the Company's common stock
were outstanding at December 31, 1998, and 1997, respectively, but were not
included in the computation of diluted earnings per share because the options'
respective exercise prices per share were greater than the average market price
of the Company's common shares during the applicable year. The weighted average
exercise prices of these options for 1998 and 1997 were $38.51 and $37.59 per
share, respectively.
3. INCOME TAXES
The provision for income taxes is different from that which would be computed by
applying the statutory federal income tax rate to income before taxes. The
principal reasons for these differences are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate applied to
income before taxes 35.0% 35.0% 35.0%
State and local income taxes, net
of federal income tax benefit 4.2 4.6 4.2
Tax-exempt interest income, net
of disallowed interest expense (.5) (.9) (1.0)
Other, net .6 .6 .1
- ---------------------------------------------------------------------
Effective tax rate 39.3% 39.3% 38.3%
=====================================================================
</TABLE>
The tax effect of significant items that gives rise to the net deferred tax
asset recorded on the Company's consolidated balance sheets is shown in the
following table:
<TABLE>
<CAPTION>
(in thousands)
- ----------------------------------------------------------------------
December 31, 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C>
Gross deferred tax asset:
Deferred compensation $12,417 $11,830
Accrued post retirement benefit obligation 3,003 2,794
Unfunded accrued pension cost
(non-qualified plan) 634 467
Book depreciation in excess of
tax depreciation 2,164 1,634
Other 1,687 735
- ----------------------------------------------------------------------
Gross deferred tax asset 19,905 17,460
- ----------------------------------------------------------------------
Gross deferred tax liability:
Deferred commissions and fund
offering costs 10,207 7,822
Goodwill amortization 4,271 675
Prepaid pension costs 1,005 690
Unrealized gain - 1,119
Other 186 58
- ----------------------------------------------------------------------
Gross deferred tax liability 15,669 10,364
- ----------------------------------------------------------------------
Net deferred tax asset $ 4,236 $ 7,096
======================================================================
</TABLE>
The future realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
p.28
<PAGE> 31
The John Nuveen Company
differences become deductible. Management believes it is more likely than not
the Company will realize the benefits of these future tax deductions.
Not included in income tax expense for 1998, 1997 and 1996, are income tax
benefits of $1,997,000, $2,308,000 and $527,000, respectively, attributable to
the vesting of restricted stock and the exercise of stock options. Such amounts
are reported on the consolidated balance sheets in additional paid-in capital.
Federal and state income taxes paid for the years ending December 31, 1998,
1997 and 1996, amounting to $47,454,000, $41,557,000 and $46,664,000,
respectively, include required payments on estimated taxable income and final
payments of prior year taxes required to be paid upon filing the final federal
and state tax returns, reduced by refunds received.
4. NOTES PAYABLE
On August 8, 1997, the Company entered into a $200 million revolving credit
facility with a group of banks that extends through August 2000. Proceeds from
borrowings under the facility are to be used for general corporate purposes
including acquisitions, share repurchases and asset purchases. The rate of
interest payable under the agreement is, at the Company's option, a function of
one of various floating-rate indices. The agreement requires the Company to pay
a facility fee at an annual rate of .09% of the maximum amount available under
the credit line. Borrowings under the agreement are unsecured. During 1998, the
weighted average interest rate relating to amounts borrowed under the credit
facility was 5.92%. At December 31, 1998, there were no outstanding borrowings
under this facility.
5. COMMITMENTS AND CONTINGENCIES
Rent expense for office space and equipment was $6,366,000, $7,293,000 and
$5,919,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Minimum rental commitments for office space and equipment, including estimated
escalation for insurance, taxes and maintenance for the years 1999 through 2013,
the last year for which there is a commitment, are as follows:
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------------
Year Commitment
- -------------------------------------------------------------------------
<S> <C>
1999 $ 6,718
2000 6,859
2001 6,787
2002 6,820
2003 6,002
Thereafter 47,668
=========================================================================
</TABLE>
The Company and its subsidiaries are named as defendants in certain legal
actions having arisen in the ordinary course of business. In the opinion of
management, based on current knowledge and after discussions with legal counsel,
the outcome of such litigation will not have a material adverse effect on the
Company's financial condition, results of operations or liquidity.
6. EMPLOYEE RETIREMENT, POSTRETIREMENT
BENEFIT AND INCENTIVE COMPENSATION PROGRAMS
The Company has a noncontributory retirement plan and a postretirement benefit
plan covering the majority of employees, including employees of certain of its
subsidiaries. Pension benefits are based on years of service and the employee's
average compensation during the highest consecutive five years of the employee's
last ten years of employment. The Company's funding policy is to contribute
annually at least the minimum amount that can be deducted for federal income tax
purposes. Additionally the Company currently maintains plans providing certain
life insurance and health care benefits for retired employees and their eligible
dependents. The cost of these benefits is shared by the Company and the retiree.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair
p.29
<PAGE> 32
The John Nuveen Company
value of assets over the two-year period ending December 31, 1998, and a
statement of the funded status as of December 31 of both years:
<TABLE>
<CAPTION>
(in thousands)
- ----------------------------------------------------------------------
Pension Postretirement
Benefits Benefits
- ----------------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in projected
benefit obligation
Obligation at January 1 $17,681 $13,212 $ 5,017 $ 5,048
Service cost 1,051 1,007 338 303
Interest cost 1,249 1,155 353 324
Participant contributions - - - -
Plan amendments - 1,064 - 252
Actuarial (gain) loss 2,724 1,880 230 (845)
Benefit payments (2,106) (637) (80) (65)
- ----------------------------------------------------------------------
Obligation at
December 31 $20,599 $17,681 $ 5,858 $ 5,017
======================================================================
Change in fair value
of plan assets
Fair value of plan assets
at January 1 $24,662 $20,839 $ - $ -
Actual return on
plan assets 5,662 4,460 - -
Benefit payments (2,106) (637) (80) (65)
Company contributions - - 80 65
- ----------------------------------------------------------------------
Fair value of plan assets
at December 31 $28,218 $24,662 $ - $ -
======================================================================
Reconciliation prepaid
(accrued) and total
amount recognized
Funded status at
December 31 $ 7,619 $ 6,981 $(5,858) $(5,017)
Unrecognized net
transition asset (539) (718) - -
Unrecognized prior-
service cost 126 114 - -
Unrecognized net gain (6,307) (5,840) (1,398) (1,697)
- ----------------------------------------------------------------------
Prepaid (accrued) cost $ 899 $ 537 $(7,256) $(6,714)
======================================================================
</TABLE>
The following table provides the amounts recognized in the consolidated
balance sheets as of December 31 of both years. Prepaid benefit cost is recorded
in prepaid expenses and other assets. Accrued benefit liability is recorded in
accrued compensation and other expenses.
<TABLE>
<CAPTION>
(in thousands)
- ----------------------------------------------------------------------
Pension Postretirement
Benefits Benefits
- ----------------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid benefit cost $ 2,431 $ 1,659 $ - $ -
Accrued benefit liability (1,532) (1,122) (7,256) (6,714)
Intangible asset - - - -
Accumulated other
comprehensive income - - - -
----------------------------------------------------------------------
Net amount recognized $ 899 $ 537 $(7,256) $(6,714)
=======================================================================
</TABLE>
The Company's qualified and non-qualified plans' assets exceed the benefit
obligation for the years ending December 31, 1998, and December 31, 1997. The
Company's postretirement benefits plan has no plan assets. The aggregate benefit
obligation for the postretirement plan is $5,858,000 as of December 31, 1998,
and $5,017,000 as of December 31, 1997.
The following table provides the components of net periodic benefit costs for
the plans for the two years ending December 31, 1998:
<TABLE>
<CAPTION>
(in thousands)
- ----------------------------------------------------------------------
Pension Postretirement
Benefits Benefits
- ----------------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost $ 1,051 $ 1,007 $ 338 $ 303
Interest cost 1,249 1,155 353 324
Expected return on
plan assets (2,175) (1,831) - -
Unrecognized net asset (179) (179) - -
Amortization of prior-
service cost (12) (12) - -
Amortization of net gain (296) (162) (69) (74)
- ----------------------------------------------------------------------
Net periodic benefit cost $ (362) $ (22) $ 622 $ 553
======================================================================
</TABLE>
The assumptions used in the measurement of the Company's benefit obligation
are shown in the following table:
<TABLE>
<CAPTION>
(in thousands)
- ----------------------------------------------------------------------
Pension Postretirement
Benefits Benefits
- ----------------------------------------------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.0% 7.5% 7.0% 7.5%
Expected return on
plan assets 9.0% 9.0% N/A N/A
Rate of compensation
increase 5.5% 5.5% N/A N/A
- ----------------------------------------------------------------------
</TABLE>
p.30
<PAGE> 33
The John Nuveen Company
For measurement purposes, a 10% annual rate of increase in the per capita
cost of covered health care benefits for pre-65 participants was assumed for
1998. The assumption is reduced to 6% by 2002 and remains at that level
thereafter. The annual assumed rate of increase for post-65 participants is 7%
for 1998 and is assumed to decrease to 6% by 1999 and remains at that level
thereafter.
Assumed health care trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in assumed health care cost
trend rates would have the following effects:
<TABLE>
<CAPTION>
(in thousands)
- --------------------------------------------------------------------
1% 1%
Increase Decrease
- --------------------------------------------------------------------
<S> <C> <C>
Effect on total service and interest cost $ 156 $(126)
Effect on the health care component of the
accumulated postretirement
benefit obligation $1,002 $(853)
- --------------------------------------------------------------------
</TABLE>
The Company also maintains a noncontributory pension plan for certain
employees whose pension benefits exceed the Section 415 limitations of the
Internal Revenue Code. Pension benefits for this plan follow the vesting
provisions of the funded plan. Funding is not made under this plan until
benefits are paid.
The Company has a profit sharing plan that covers the majority of its
employees, including employees of certain of its subsidiaries. Amounts
determinable under the plan are contributed, in part, to a profit sharing trust
qualified under the Internal Revenue Code, with the remainder paid as cash
bonuses, equity awards and matching 401(k) employee contributions.
The Company has a nonqualified deferred compensation program whereby certain
key employees can elect to defer receipt of all or a portion of their cash
bonuses until retirement, termination, death or disability. The deferred
compensation liabilities incur interest expense at the prime rate.
7. EQUITY INCENTIVE PLANS
The Company maintains two stock-based compensation programs, the Nuveen 1992
Special Incentive Plan (1992 Plan) and the Nuveen 1996 Equity Incentive Plan
(1996 Plan). The 1992 Plan was developed in connection with the Company's
initial public offering of stock and authorized the issuance of an aggregate of
5,980,000 shares of Class A common stock for the grant of equity awards,
including up to 2,340,000 shares of restricted common stock and deferred units.
Under the 1996 Plan, the Company reserved an aggregate of 3,800,000 shares of
Class A common stock for awards. Under both plans, options may be awarded at
exercise prices not less than 100% of the fair market value of the stock on the
grant date, and maximum option terms may not exceed ten years.
In February 1996, the Company awarded 190,000 restricted shares of stock
(including 160,000 shares deferred at the election of the recipients) with a
fair value of $25 per share and a three-year cliff vesting period, pursuant to
the 1996 Plan. The Company further awarded 90,500 shares of restricted stock (of
which 33,500 shares were deferred at the election of the recipients) in 1997
with three-year cliff vesting periods and with a weighted average fair value of
$27.49 per share. During 1998, the Company granted an additional 1,500 shares of
restricted stock (all of which were deferred at the election of the recipients)
with a fair value of $38 per share and a three-year cliff vesting period. All
awards are subject to restrictions on transferability, a risk of forfeiture, and
certain other terms and conditions. The value of such awards is reported as
compensation expense over the shorter of the period beginning on the date of
grant and ending on the last vesting date, or the period in which the related
employee services are rendered. Recorded compensation cost for these awards was
$163,000, $2.4 million and $5.8 million for 1998, 1997 and 1996, respectively.
The Company also awarded certain employees options to purchase the Company's
Class A common stock at exercise prices equal to or greater than the
p.31
<PAGE> 34
The John Nuveen Company
market price of the stock on the day the options were awarded. Options awarded
in 1992, under the 1992 Plan, have vested fully and generally remain exercisable
through May 27, 2002. During 1995, the Company awarded options under the 1992
Plan which vest in quarterly installments through October 1, 1999, and remain
exercisable through May 27, 2002. Options awarded during 1996, 1997 and 1998,
Pursuant to the 1996 Plan, are generally subject to three-and four-year cliff
vesting and expire after ten years. In addition, the Company awarded options to
purchase 798,600 shares of common stock in January 1999 to employees pursuant to
the Company's incentive compensation program for 1998 and for recruiting and
promotion purposes. In accordance with apb Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25), no compensation expense has been recognized for
any of the stock options awarded. There are 62,000 shares available for future
equity awards as of December 31, 1998, after consideration of the January 1999
awards.
A summary of the Company's stock option activity for the years ended
December 31, 1998, 1997 and 1996 is presented in the following table and
narrative:
<TABLE>
<CAPTION>
(in thousands, except price data)
- ------------------------------------------------------
Weighted Average
Shares Exercise Price
- ------------------------------------------------------
<S> <C> <C>
Options outstanding at
December 31, 1995 3,178 $18.11
Awarded 1,464 28.29
Exercised (166) 18.00
Forfeited 0 -
- ------------------------------------------------------
Options outstanding at
December 31, 1996 4,476 21.63
Awarded 485 29.43
Exercised (453) 18.04
Forfeited (134) 27.59
- ------------------------------------------------------
Options outstanding at
December 31, 1997 4,374 22.68
Awarded 938 35.50
Exercised (283) 18.05
Forfeited (73) 32.56
- ------------------------------------------------------
Options outstanding at
December 31, 1998 4,956 $25.23
======================================================
Options exercisable at:
December 31, 1996 2,979 $18.04
December 31, 1997 2,543 $18.09
December 31, 1998 2,319 $18.36
- ------------------------------------------------------
</TABLE>
The options awarded during 1998, 1997 and 1996, with exercise prices equal to
the market price of the stock on the date of grant, have weighted average
exercise prices of $35.08, $27.25 and $25.00, respectively. The options awarded
during 1998, 1997 and 1996, with exercise prices in excess of the stock's grant
date market value, have weighted average exercise prices of $42.67, $37.59 and
$30.00, respectively. Exercise prices for options outstanding as of December 31,
1998, ranged from $18 to $49.20 per share. The weighted average remaining
contractual life of those options is 5.89 years.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS 123) encourages, but does not require, the use
of a fair value based method of accounting for stock-based compensation plans
under which the fair value of stock options is determined on the date of grant
and is amortized to expense over the lesser of the options' vesting period or
the related employee service period. While the Company has elected to account
for its stock-based compensation plans in accordance with APB 25, SFAS 123
requires disclosure of pro forma information regarding net income and earnings
per share as if the provisions of the Statement had been applied and the Company
accounted for its employee stock option awards under the fair value method of
the Statement.
Accordingly, if the Company's compensation cost for employee stock options
awarded had been determined in this manner, the Company's 1998 net income would
have been reduced by $4.9 million, or $.15 per basic and $.14 per diluted
earnings per share. Furthermore, the Company's 1997 and 1996 net income would
have been reduced by $3.3 million and $1.5 million, respectively, translating
into a reduction of $.10 per 1997 basic and diluted earnings per share and a
reduction of $.04 per 1996 basic and diluted earnings per share. The options
awarded during 1998, 1997 and 1996, with exercise prices equal to the market
price of the stock on the date of grant, have weighted average fair values of
$8.23, $6.20 and $5.69 per share, respectively. Options awarded during
p.32
<PAGE> 35
The John Nuveen Company
1998, 1997 and 1996, with exercise prices in excess of the stock's grant date
market value have weighted average fair values of $6.26, $5.68 and $4.55 per
share, respectively. The fair value of stock option awards was estimated at the
date of grant using a Black-Scholes option pricing model with the following
assumptions for 1998, 1997 and 1996, respectively: weighted average risk-free
interest rates of 5.6%, 6.4% and 6.0%; dividend yields of 3%; weighted average
expected option lives of 7, 6 and 8 years; and volatility factor of the expected
market price of the Company's common stock of 20% for all three years. SFAS 123
only applies to those equity instruments awarded in fiscal years that begin
after December 15, 1994.
8. ACQUISITIONS AND COMMITMENTS
The Company completed the acquisition of Flagship on January 2, 1997, for a
total purchase price of $71.8 million, before taking into account contingent
consideration. Additional payments in cash and common stock, which are
contingent on the significant future growth in the Company's municipal bond
mutual funds may be made over a four year period ended December 31, 2000.
Contingent consideration for 1998 and 1997 amounted to approximately $2.4
million and $1.0 million, respectively. Goodwill of approximately $70.0 million
is being amortized over approximately 30 years.
On August 31, 1997, the Company acquired Rittenhouse for a cash purchase
price of $145 million. The acquisition has been accounted for using the purchase
method of accounting, resulting in approximately $144 million in goodwill for
financial reporting purposes, which is being amortized over approximately 30
years.
Rittenhouse established the Rittenhouse Financial Services, Inc. 1997 Equity
Incentive Award Plan (1997 Plan) in order to attract and retain officers and
other employees subsequent to the acquisition of Rittenhouse by the Company. The
1997 Plan authorizes the issuance to Rittenhouse employees of non-qualified
options to purchase shares of a newly created series of Rittenhouse common
stock, the non-voting Class B Common Stock. The exercise price for any options
granted under the 1997 Plan must be equal to or greater than the fair market
value of the Rittenhouse common stock on the date of grant, as determined and
fixed by a committee of the Rittenhouse board of directors on the relevant
valuation date. The Rittenhouse Class B Common Stock is not exchangeable for any
common stock or other securities of The John Nuveen Company. The term of each
option is no more than four years from the date of grant. In accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB25), no
compensation expense has been recognized for any of the stock options awarded
under the 1997 Plan. Each option awarded under the 1997 Plan provides that
Rittenhouse, or its designee, shall have the right to purchase any or all shares
of Rittenhouse Class B Common Stock issued upon exercise of such option at any
time following the six-month period subsequent to the date of exercise, at a
price per share equal to the fair market value most recently determined by the
committee on the valuation date last preceding the date of purchase. As
of December 31, 1998, options to acquire 154,600 shares of Rittenhouse Class B
Common Stock have been granted. These options vest in January 2001. The total
number of options authorized under the 1997 Plan is 1,200,000.
9. REDEEMABLE PREFERRED STOCK
On January 2, 1997, in connection with its acquisition of Flagship Resources,
Inc., the Company issued 1.8 million shares of 5% Cumulative Convertible
Preferred Stock to former Flagship shareholders with a redemption value of $45
million. Shares of preferred stock are convertible into approximately 1.65
million shares of the Company's Class A Common Stock on or after January 2,
1999, and are redeemable at the option of the Company at any time on or after
January 2, 2001,
p.33
<PAGE> 36
The John Nuveen Company
but not later than January 2, 2007. Dividends on preferred stock are paid
quarterly.
10. COMMON STOCK
A summary of common stock activity for the three-year period ended December 31,
1998, follows:
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------------------------
December 31, 1998 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Shares outstanding at
beginning of year 31,783 33,119 36,676
Shares issued under stock options
and other incentive plans 306 506 196
Shares acquired (733) (1,842) (3,753)
- ------------------------------------------------------------------------
Shares outstanding at end of year 31,356 31,783 33,119
========================================================================
</TABLE>
Under the February 1997 share repurchase program, the Company was authorized
to repurchase 3.5 million shares of common stock. As of December 31, 1998, there
were 1.0 million shares remaining to be repurchased under this program.
11. NET CAPITAL REQUIREMENT
Nuveen & Co. is subject to the Securities and Exchange Commission Rule 15c3-1,
the "Uniform Net Capital Rule," which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital, as
these terms are defined, shall not exceed 15 to 1. At December 31, 1998, the
Company's net capital ratio was 2.06 to 1 and its net capital was $27,808,944
which is $23,981,317 in excess of the required net capital of $3,827,627.
12. QUARTERLY RESULTS (UNAUDITED)
The following tables set forth selected quarterly financial information for each
quarter in the two-year period ending December 31, 1998:
<TABLE>
<CAPTION>
(in thousands, except per share data)
- --------------------------------------------------------------------
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $72,469 $76,360 $77,002 $81,704
Net income 19,274 20,232 20,970 23,169
Per common share
Basic EPS .59 .62 .65 .72
Diluted EPS .56 .58 .61 .68
Cash dividends .23 .23 .26 .26
Stock price range
High 365/8 3911/16 411/2 383/16
Low 323/8 353/4 335/8 319/16
- --------------------------------------------------------------------
<CAPTION>
(in thousands, except per share data)
- --------------------------------------------------------------------
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $62,584 $61,846 $67,813 $76,684
Net income 17,802 17,742 18,568 20,068
Per common share
Basic EPS .52 .53 .56 .61
Diluted EPS .50 .51 .54 .58
Cash dividends .21 .21 .23 .23
Stock price range
High 313/8 311/2 351/8 373/4
Low 263/8 285/8 307/16 347/8
- --------------------------------------------------------------------
</TABLE>
The John Nuveen Company Class A common stock, representing approximately 22%
of the Company's issued and outstanding common stock at December 31, 1998, is
listed on the New York Stock Exchange under the symbol "JNC." There are no
contractual restrictions on the Company's present ability to pay dividends on
its common stock.
p.34
<PAGE> 37
The John Nuveen Company
Report of Independent Auditors
The Board of Directors and Stockholders
The John Nuveen Company:
We have audited the accompanying consolidated balance sheets of The John Nuveen
Company (the Company) and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, changes in common stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
John Nuveen Company and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Chicago, Illinois
January 22, 1999
p.35
<PAGE> 38
The John Nuveen Company
Five Year Financial Summary
(in thousands, unless otherwise indicated)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
December 31, 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues:
Investment advisory fees from
assets under management $272,859 $221,635 $185,845 $183,135 $181,918
Underwriting and distribution of
investment products 10,623 12,671 14,566 15,339 18,149
Positioning profits (losses) 300 3,491 (191) 4,981 (8,237)
Investment banking 12,967 13,409 11,098 10,334 11,793
Interest 6,549 10,627 18,640 19,445 13,686
Other 4,237 7,094 2,494 2,973 2,992
- --------------------------------------------------------------------------------------------------------
Total revenues 307,535 268,927 232,452 236,207 220,301
- --------------------------------------------------------------------------------------------------------
Expenses:
Compensation and benefits 88,885 77,274 71,683 80,366 83,079
Advertising and promotional costs 19,415 18,853 12,641 12,677 16,151
All other 61,498 50,630 30,626 29,394 26,436
- --------------------------------------------------------------------------------------------------------
Total expenses 169,798 146,757 114,950 122,437 125,666
- --------------------------------------------------------------------------------------------------------
Income before taxes 137,737 122,170 117,502 113,770 94,635
Income taxes 54,092 47,990 44,973 43,150 36,424
- --------------------------------------------------------------------------------------------------------
Net income $ 83,645 $ 74,180 $ 72,529 $ 70,620 $ 58,211
========================================================================================================
- --------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic $ 2.57 $ 2.23 $ 2.03 $ 1.91 $ 1.54
Diluted $ 2.43 $ 2.13 $ 1.98 $ 1.87 $ 1.52
Return on average equity 25.1% 23.4% 24.4% 23.2% 20.7%
Total dividends per share $ 0.98 $ 0.88 $ 0.78 $ 0.68 $ 0.64
- --------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
- --------------------------------------------------------------------------------------------------------
Total assets $467,961 $492,232 $355,251 $402,512 $348,847
Total liabilities $118,853 $174,112 $ 83,357 $ 79,656 $ 62,915
Redeemable preferred stock $ 45,000 $ 45,000 - - -
Common stockholders' equity $304,108 $273,120 $271,894 $322,856 $285,932
- --------------------------------------------------------------------------------------------------------
NUVEEN MANAGED FUNDS
AND ACCOUNTS (IN MILLIONS)
- --------------------------------------------------------------------------------------------------------
Net Assets Under Management:
Mutual funds $ 11,883 $ 10,885 $ 5,930 $ 5,457 $ 4,731
Exchange-traded funds 26,223 26,117 25,434 25,784 23,731
Money market funds 824 970 1,004 1,113 1,242
Managed accounts 16,337 11,622 823 688 343
- --------------------------------------------------------------------------------------------------------
Total $ 55,267 $ 49,594 $ 33,191 $ 33,042 $ 30,047
NUVEEN DEFINED PORTFOLIOS (in millions)
- --------------------------------------------------------------------------------------------------------
Market value outstanding $ 10,720 $ 12,176 $ 13,571 $ 15,517 $ 16,793
- --------------------------------------------------------------------------------------------------------
GROSS SALES (in millions)
- --------------------------------------------------------------------------------------------------------
Mutual funds $ 1,553 $ 951 $ 649 $ 179 $ 263
Defined portfolios 809 757 963 1,093 1,235
Exchange-traded funds - 125 - - -
Managed accounts 5,393 1,193 135 346 116
- --------------------------------------------------------------------------------------------------------
Total $ 7,755 $ 3,026 $ 1,747 $ 1,618 $ 1,614
========================================================================================================
</TABLE>
p.36
<PAGE> 39
The John Nuveen Company
Directors and Executive Officers
BOARD OF DIRECTORS EXECUTIVE OFFICERS
Timothy R. Schwertfeger Timothy R.Schwertfeger
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
John P. Amboian John P. Amboian
Executive Vice President and Executive Vice President and
Chief Financial Officer Chief Financial Officer
Willard L. Boyd
President Emeritus
Field Museum of Natural History
W. John Driscoll
Chairman/Retired
Rock Island Company
Duane R. Kullberg
Managing Partner/Chief
Executive Officer/Retired
Andersen Worldwide
Douglas W. Leatherdale
Chairman and Chief Executive Officer
The St. Paul Companies
Paul J. Liska
Executive Vice President and
Chief Financial Officer
The St. Paul Companies
p.37
<PAGE> 40
The John Nuveen Company
Shareholder Information
<TABLE>
<S> <C>
HEADQUARTERS FORM 10-K
The John Nuveen Company
333 West Wacker Drive The annual report to the Securities and Exchange
Chicago, IL 60606 Commission on Form 10-K for the fiscal year ended
312-917-7700 December 31, 1998, will be provided upon written
request to:
Jeffrey Kratz
TRANSFER AGENT AND REGISTRAR Investor Relations
The Bank of New York The John Nuveen Company
Church Street Station 333 West Wacker Drive
P.O. Box 11258 Chicago, IL 60606
New York, NY 10286-1258
1-800-524-4458 ANNUAL MEETING
The annual shareholder's meeting for The John
STOCK EXCHANGE LISTING Nuveen Company will be Thursday, May 6, 1999, at
New York Stock Exchange 10:30 a.m. at The Northern Trust Company,
trading symbol: JNC 50 South LaSalle Street, Chicago, Illinois.
</TABLE>
p.38
<PAGE> 41
THE JOHN NUVEEN COMPANY
333 West Wacker Drive
Chicago, IL 60606
<PAGE> 1
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
The John Nuveen Company:
We consent to incorporation by reference in the registration statement
(No. 33-46922) on Form S-8 of The John Nuveen Company of our reports
dated January 22, 1999, relating to the consolidated balance sheets of
The John Nuveen Company as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in common stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1998, which reports are incorporated by reference in the December 31, 1998
annual report on Form 10-K of The John Nuveen Company.
/s/ KPMG LLP
Chicago, Illinois
March 19, 1999
<PAGE> 1
EXHIBIT 24.1
THE JOHN NUVEEN COMPANY
-----------------------
POWER OF ATTORNEY
-----------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The John
Nuveen Company, hereby constitutes and appoints JOHN P. AMBOIAN and ALAN G.
BERKSHIRE, and each of them (with full power to each of them to act alone) his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead,
in any and all capacities, to execute any such annual, periodic or special
report pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, including any and all amendments thereto, with all exhibits thereto,
and any and all other documents in connection therewith, and to file the same
with the Securities and Exchange Commission and any regulatory authority,
federal or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company has
hereunto set his hand this 18th day of March, 1999.
/S/ Timothy R. Schwertfeger
-------------------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 18th day of March, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
(SEAL) /S/ Robin D. Freeman
-------------------------------------
Notary Public
My Commission Expires: October 31, 1999
<PAGE> 2
THE JOHN NUVEEN COMPANY
-----------------------
POWER OF ATTORNEY
-----------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of the John
Nuveen Company, hereby constitutes and appoints JOHN P. AMBOIAN and ALAN G.
BERKSHIRE, and each of them (with full power to each of them to act alone) his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead,
in any and all capacities, to execute any such annual, periodic or special
report pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, including any and all amendments thereto, with all exhibits thereto,
and any and all other documents in connection therewith, and to file the same
with the Securities and Exchange Commission and any regulatory authority,
federal or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company has
hereunto set his hand this 4th day of March, 1999.
/S/ Anthony T. Dean
--------------------------------
Anthony T. Dean
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 4th day of March, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /S/ Robin D. Freeman
--------------------------------
Notary Public
My Commission Expires: October 31, 1999
<PAGE> 3
THE JOHN NUVEEN COMPANY
-----------------------
POWER OF ATTORNEY
-----------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The John
Nuveen Company, hereby constitutes and appoints JOHN P. AMBOIAN and ALAN G.
BERKSHIRE, and each of them (with full power to each of them to act alone) his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead,
in any and all capacities, to execute any such annual, periodic or special
report pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, including any and all amendments thereto, with all exhibits thereto,
and any and all other documents in connection therewith, and to file the same
with the Securities and Exchange Commission and any regulatory authority,
federal or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company has
hereunto set his hand this 5th day of March, 1999.
/S/ Willard L. Boyd
-------------------
Willard L. Boyd
STATE OF IOWA )
)SS
COUNTY OF JOHNSON )
On this 5th day of March, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known
to me to be the person whose name and signature is affixed to the foregoing
Power of Attorney and who acknowledged the same to be his voluntary act and
deed for the intent and purposes therein set forth.
(SEAL) /S/ Debra S. Paul
--------------------
Notary Public
My Commission Expires: October 10, 1999
<PAGE> 4
THE JOHN NUVEEN COMPANY
_______________________
POWER OF ATTORNEY
_______________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The John
Nuveen Company, hereby constitutes and appoints JOHN P. AMBOIAN and ALAN G.
BERKSHIRE, and each of them (with full power to each of them to act alone) his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead,
in any and all capacities, to execute any such annual, periodic or special
report pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, including any and all amendments thereto, with all exhibits thereto,
and any and all other documents in connection therewith, and to file the same
with the Securities and Exchange Commission and any regulatory authority,
federal or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company has
hereunto set his hand this 8th day of March, 1999.
/s/ W. John Driscoll
_________________________________
W. John Driscoll
STATE OF MINNESOTA )
) SS
COUNTY OF RAMSEY )
On this 8th day of March, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
(SEAL) /s/ Cheryl M. McNary
_________________________________
Notary Public
My Commission Expires: January 31, 2000
<PAGE> 5
THE JOHN NUVEEN COMPANY
_________________________
POWER OF ATTORNEY
_________________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The John
Nuveen Company, hereby constitutes and appoints JOHN P. AMBOIAN and ALAN G.
BERKSHIRE, and each of them (with full power to each of them to act alone) his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead,
in any and all capacities, to execute any such annual, periodic or special
report pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, including any and all amendments thereto, with all exhibits thereto,
and any and all other documents in connection therewith, and to file the same
with the Securities and Exchange Commission and any regulatory authority,
federal or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company has
hereunto set his hand this 9th day of March, 1999.
/S/ Duane R. Kullberg
_________________________________
Duane R. Kullberg
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 9th day of March, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /s/ Roberto J. Mauner
_________________________________
Notary Public
My Commission Expires: 12/12/99
<PAGE> 6
THE JOHN NUVEEN COMPANY
-----------------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The John
Nuveen Company, hereby constitutes and appoints JOHN P. AMBOIAN and ALAN G.
BERKSHIRE, and each of them (with full power to each of them to act alone) his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead,
in any and all capacities, to execute any such annual, periodic or special
report pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, including any and all amendments thereto, with all exhibits thereto,
and any and all other documents in connection therewith, and to file the same
with the Securities and Exchange Commission and any regulatory authority,
federal or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company has
hereunto set his hand this 9th day of March, 1999.
/S/ Douglas W. Leatherdale
-----------------------------
Douglas W. Leatherdale
STATE OF MINNESOTA )
)SS
COUNTY OF RAMSEY )
On this 9th day of March, 1998, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /S/ Mary Borowski
-----------------------------
Notary Public
My Commission Expires: January 31, 2000
<PAGE> 7
THE JOHN NUVEEN COMPANY
-----------------------
POWER OF ATTORNEY
-----------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The John
Nuveen Company, hereby constitutes and appoints JOHN P. AMBOIAN and ALAN G.
BERKSHIRE, and each of them (with full power to each of them to act alone) his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead,
in any and all capacities, to execute any such annual, periodic or special
report pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, including any and all amendments thereto, with all exhibits thereto,
and any and all other documents in connection therewith, and to file the same
with the Securities and Exchange Commission and any regulatory authority,
federal or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company has
hereunto set his hand this 12th day of March, 1999.
/s/ Paul J. Liska
---------------------------------------
Paul J. Liska
STATE OF MINNESOTA )
)SS
COUNTY OF RAMSEY )
On this 12th day of March, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
(SEAL) /s/ Mary E. Waltz
---------------------------------------
Notary Public
My Commission Expires: January 31, 2000
<PAGE> 8
THE JOHN NUVEEN COMPANY
_________________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of The
John Nuveen Company, hereby constitutes and appoints JOHN P. AMBOIAN and ALAN G.
BERKSHIRE, and each of them (with full power to each of them to act alone) his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead,
in any and all capacities, to execute any such annual, periodic or special
report pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, including any and all amendments thereto, with all exhibits thereto,
and any and all other documents in connection therewith, and to file the same
with the Securities and Exchange Commission and any regulatory authority,
federal or state, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned director of The John Nuveen Company has
hereunto set his hand this 15th day of March, 1999.
/S/ John P. Amboian
_____________________________________
John P. Amboian
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 15th day of March, 1999, personally appeared before me, a Notary
Public in and for said County and State, the person named above who is known to
me to be the person whose name and signature is affixed to the foregoing Power
of Attorney and who acknowledged the same to be his voluntary act and deed for
the intent and purposes therein set forth.
(SEAL)
/S/ Robin D. Freeman
_____________________________________
Notary Public
My Commission Expires: October 31, 1999
<PAGE> 1
EXHIBIT 24.2
CERTIFIED COPY OF RESOLUTION
The undersigned, Alan G. Berkshire, Secretary of The John Nuveen Company, a
Delaware corporation (the "Company"), does hereby certify:
1. That he is duly elected, qualified and acting Secretary of the Company,
and has custody of the corporate records and is a proper officer to make this
certification.
2. That at a meeting of the Board of Directors of the Company duly called,
convened and held on February 8, 1999, at which a quorum was present and voted
throughout, the following resolution was duly adopted by said board and said
resolution has not been amended, altered or repealed and remains in full force
and effect on the date hereof:
RESOLVED, that each member of the Board of Directors and any officer of
the Company who may be required to execute any such annual, periodic or special
report, or any amendment or amendments thereto, be, and each of them hereby is,
authorized to execute a power of attorney appointing John P. Amboian and Alan
G. Berkshire, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign the
report and any and all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed
and the seal of the Company to be hereunto appended this 30th day of March,
1999.
(SEAL)
/S/ Alan G. Berkshire
---------------------------------
Alan G. Berkshire, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JOHN
NUVEEN COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,148
<SECURITIES> 106,827
<RECEIVABLES> 46,833
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 164,808
<PP&E> 42,504
<DEPRECIATION> (29,680)
<TOTAL-ASSETS> 467,961
<CURRENT-LIABILITIES> 0
<BONDS> 0
45,000
0
<COMMON> 387
<OTHER-SE> 304,108
<TOTAL-LIABILITY-AND-EQUITY> 467,961
<SALES> 0
<TOTAL-REVENUES> 307,535
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 167,201
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,597
<INCOME-PRETAX> 137,737
<INCOME-TAX> 54,092
<INCOME-CONTINUING> 83,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,645
<EPS-PRIMARY> 2.57
<EPS-DILUTED> 2.43
</TABLE>
