EXHIBIT 10.18
OFFICE LEASE
BOULDER TOWERS
1437 South Boulder
Tulsa, OK 74119
between
K/B FUND IV
("Landlord")
and
HELMERICH & PAYNE, INC.
("Tenant")
TABLE OF CONTENTS
PAGE
ARTICLE ONE - LEASE OF PREMISES................................................................................. 1
Section 1.01 Lease of Premises................................................................ 1
ARTICLE TWO - TERM.............................................................................................. 2
Section 2.01 Initial Term..................................................................... 2
Section 2.02 Renewal Term..................................................................... 2
Section 2.03 Term of this Lease............................................................... 3
ARTICLE THREE - TERM COMMENCEMENT DATE.......................................................................... 3
Section 3.01 Term Commencement Date........................................................... 3
ARTICLE FOUR - RENTAL........................................................................................... 5
Section 4.01 Annual Rental.................................................................... 5
Section 4.02 Additional Rental................................................................ 6
Section 4.03 Real Estate Taxes, Assessed Valuation............................................ 8
ARTICLE FIVE - SERVICES......................................................................................... 8
Section 5.01 Standard of Operations........................................................... 8
Section 5.02 Heating, Ventilating and Air Conditioning........................................ 9
Section 5.03 Electrical Service............................................................... 10
Section 5.04 Elevators........................................................................ 10
Section 5.05 Light Bulbs and Water............................................................ 11
Section 5.06 Access Control................................................................... 11
Section 5.07 Janitorial Services.............................................................. 12
Section 5.08 Interruption of Building Services................................................ 12
Section 5.09 Personnel........................................................................ 14
Section 5.10 Insurance........................................................................ 14
Section 5.11 Landlord's Insurance............................................................. 16
ARTICLE SIX - TENANT'S PARKING.................................................................................. 18
Section 6.01 Tenant's Parking................................................................. 18
ARTICLE SEVEN - USE AND ACCESS.................................................................................. 21
Section 7.01 Use.............................................................................. 21
Section 7.02 Environmental.................................................................... 21
Section 7.03 Access........................................................................... 24
Section 7.04 Storage Space.................................................................... 24
|
-i-
TABLE OF CONTENTS
(continued)
PAGE
Section 7.05 Building Directory............................................................... 24
Section 7.06 Tenant Interior Signage.......................................................... 25
ARTICLE EIGHT - REPAIRS AND MAINTENANCE......................................................................... 25
Section 8.01 Landlord's obligation to Repair and Maintain..................................... 25
Section 8.02 Tenant's obligations............................................................. 25
ARTICLE NINE - FIRE AND CASUALTY................................................................................ 26
Section 9.01 Damage or Destruction............................................................ 26
Section 9.02 Waiver of Subrogation Rights..................................................... 28
ARTICLE TEN - LIABILITY......................................................................................... 29
Section 10.01 Indemnity by Tenant.............................................................. 29
Section 10.02 Indemnity by Landlord............................................................ 29
Section 10.03 Disclaimer of Consequential Damage............................................... 29
ARTICLE ELEVEN - ALTERATIONS AND FIXTURES....................................................................... 30
Section 11.01 Alterations by Tenant and Landlord............................................... 30
Section 11.02 Tenant's Property................................................................ 31
ARTICLE TWELVE - CONDEMNATION................................................................................... 31
Section 12.01 Total Taking..................................................................... 31
Section 12.02 Partial Taking................................................................... 31
Section 12.03 Claims of Landlord and Tenant.................................................... 32
Section 12.04 Distribution of the Award........................................................ 33
Section 12.05 Temporary Taking of Premises..................................................... 33
Section 12.06 Landlord's Obligation to Restore................................................. 33
ARTICLE THIRTEEN - REMEDIES AND DEFAULTS........................................................................ 34
Section 13.01 Default by Tenant................................................................ 34
Section 13.02 Default by Landlord.............................................................. 35
ARTICLE FOURTEEN - BANKRUPTCY................................................................................... 35
Section 14.01 Bankruptcy by Tenant............................................................. 35
ARTICLE FIFTEEN - COMPLIANCE WITH LAWS.......................................................................... 36
Section 15.01 Tenant's Compliance with Laws.................................................... 36
Section 15.02 Landlord's Compliance with Laws.................................................. 36
ARTICLE SIXTEEN - ASSIGNMENT AND SUBLETTING..................................................................... 36
|
-ii-
TABLE OF CONTENTS
(continued)
PAGE
Section 16.01 Assignment and Subletting by Tenant.............................................. 36
Section 16.02 Assignment by Landlord........................................................... 37
Section 16.03 No Personal Liability............................................................ 37
ARTICLE SEVENTEEN - LANDLORD'S ACCESS........................................................................... 37
Section 17.01 Landlord's Right to Use Certain Facilities....................................... 38
Section 17.02 Data Center Space................................................................ 38
Section 17.03 Other Data Center Space Renovations.............................................. 38
Section 17.04 Emergency Main Frame............................................................. 39
Section 17.05 Generator........................................................................ 39
Section 17.06 Landlord's Access to Premises.................................................... 39
ARTICLE EIGHTEEN - NAME OF BUILDING AND TENANTS EXTERIOR SIGNAGE................................................ 40
Section 18.01 Name............................................................................. 40
ARTICLE NINETEEN - QUIET ENJOYMENT.............................................................................. 40
Section 19.01 Landlord's Covenant of Quiet Enjoyment........................................... 40
ARTICLE TWENTY - NON-WAIVER..................................................................................... 40
Section 20.01 Non-Waiver By Either Party....................................................... 40
ARTICLE TWENTY-ONE - NOTICES.................................................................................... 40
Section 21.01 Notices to Landlord or Tenant.................................................... 40
ARTICLE TWENTY-TWO - PARTIAL INVALIDITY......................................................................... 41
Section 22.01 Severability Clause.............................................................. 41
ARTICLE TWENTY-THREE - BROKERAGE................................................................................ 42
Section 23.01 Brokerage........................................................................ 42
ARTICLE TWENTY-FOUR - SUBORDINATION, NONDISTURBANCE............................................................. 42
Section 24.01 Subordination.................................................................... 42
Section 24.02 Nondisturbance................................................................... 42
ARTICLE TWENTY-FIVE - RULES AND REGULATIONS..................................................................... 42
Section 25.01 General.......................................................................... 42
ARTICLE TWENTY-SIX - MISCELLANEOUS.............................................................................. 43
Section 26.01 Certain Miscellaneous Provisions................................................. 43
Section 26.02 Holding Over..................................................................... 43
|
-iii-
TABLE OF CONTENTS
(continued)
PAGE
Section 26.03 Estoppel Certificate............................................................. 43
Section 26.04 Attorneys' and Professional Fees................................................. 43
Section 26.05 Governing Law.................................................................... 43
Section 26.06 Dish............................................................................. 43
Section 26.07 Force Majeure Event.............................................................. 45
Section 26.08 Signage Rights................................................................... 46
Section 26.09 Lease Termination................................................................ 46
Section 26.10 15th Floor Sublease and Assignment Rights........................................ 46
|
-iv-
TABLE OF CONTENTS
(continued)
PAGE
EXHIBIT A.................................................................................................. A --1
EXHIBIT A1................................................................................................. A-1 - 1
EXHIBIT A2................................................................................................. A-2 - 1
EXHIBIT B.................................................................................................. B - 1
EXHIBIT C.................................................................................................. C - 1
EXHIBIT D.................................................................................................. D - 1
EXHIBIT E.................................................................................................. E - 1
EXHIBIT F.................................................................................................. F - 1
EXHIBIT G.................................................................................................. G - 1
EXHIBIT H.................................................................................................. H - 1
EXHIBIT I.................................................................................................. I - 1
EXHIBIT J.................................................................................................. J - 1
EXHIBIT K.................................................................................................. K - 1
EXHIBIT L.................................................................................................. L - 1
EXHIBIT M.................................................................................................. M - 1
EXHIBIT N.................................................................................................. N - 1
EXHIBIT O.................................................................................................. O - 1
EXHIBIT P.................................................................................................. P - 1
Addendum One
Addendum Two
|
Certain exhibits which detail leasehold parking and other information have
been omitted herefrom; however, the Registrant will furnish supplementally a
copy of any such omitted exhibit free of charge upon request.
-v-
LEASE
LEASE, effective as of the ____ day of May, 2003 ("Effective Date")
between K/B FUND IV, a Delaware general partnership, with an office at 1437
South Boulder, Tulsa, Oklahoma 74119 ("Landlord"), and HELMERICH & PAYNE, INC.,
a Delaware corporation ("Tenant").
ARTICLE ONE - LEASE OF PREMISES
Section 1.01 Lease of Premises.
(a) Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, upon and subject to the covenants, agreements, terms, provisions
and conditions of this Lease, for the term and at the rent hereinafter stated,
the premises referred to in subsection (b) below (the "Leased Premises" and
"Premises") in the building, together with parking spaces as hereinafter
provided and certain non-exclusive rights to the parking garage and related
improvements known as the Boulder Towers, 1437 South Boulder, Tulsa, Oklahoma
74119 (the "Building").
(b) The Premises shall include a total of 92,344 rentable square
feet (rsf) of demised office space as more particularly described on the Floor
Plans attached hereto as Exhibit "A-1" ("Office Space"), approximately 3,617
rentable square feet of data center space in the basement level of the Building
as more particularly described on Exhibit A-1 hereto ("Data Center Space"), and
approximately 18,724 rentable square feet of storage space as more particularly
described on Exhibit "A-2" hereto ("Storage Space"). The Office Space shall
include all of the fourteenth (14th) floor of the Building (approximately 30,447
rsf), all of the thirteenth (13th) floor of the Building (approximately 30,447
rsf), and all of the fourth (4th) floor of the Building (approximately 31,450
rsf (each a "Full Floor"). The Premises shall also include any additional space
Tenant may lease at the Building pursuant to any provision of this Lease (when
added to the Premises) and all fixtures, equipment, improvements, installations
and appurtenances which at the commencement of or during the term of this Lease
are attached to, situated or located in, or used in connection with such space
leased by Tenant, but excluding any personal property or trade fixtures of
Tenant. The rentable area of the Premises (including the Office Space, Data
Center Space and the Storage Space) described above is approximately 114,685
rentable square feet. The rentable area of the Building is 521,802 rentable
square feet. The terms "rentable square feet" and "rentable area" shall be
computed by measuring from the outside face of the exterior of the Premises for
full floors and for partial floors from the exterior face of the Premises to the
center of partitions which separate the Premises from adjoining premises.
Notwithstanding the foregoing, Tenant shall have the right to measure the
Premises within sixty (60) days from the Effective Date using the same standards
(i.e. add-on factors and other similar assumptions) as used by Landlord. Upon
Landlord's verification of Tenant's measurement, the rental area of the Premises
will be adjusted and rent shall be adjusted for the entire term of this Lease
based on Tenant's measurement.
(c) This Lease includes the right of Tenant to use the Common
Building Facilities (as defined below) in common with other tenants in the
Building and the parking spaces in the Building Parking Garage and Additional
Parking Area (as provided for in Article Six).
(d) The term "Common Building Facilities" shall mean all of the
common facilities in or around the Building designed and intended for use by all
tenants in the Building in common with Landlord and each other, including, but
not limited to, the parking garage constructed on the land as described on
Exhibit J hereto (the "Building Parking Garage") the other parking areas as
described on Exhibit K hereto (the "Additional Parking Area"), hallways,
elevators, fire stairs, telephone and electric closets, aisles, walkways, truck
docks, plazas, courts, restrooms, service areas, lobbies, landscaped areas, and
all other common and service areas of the land and the Building intended for
such use. Floors wholly occupied by Tenant shall not have any facilities which
shall be used in common with other tenants, except for (i) fire stairs and (ii)
mechanical, equipment and janitorial rooms (iii) HVAC System including fans and
ducts, and (iv) general service areas for Landlord's exclusive use serving the
Building generally. Use of the Common Building Facilities is subject to rules
and regulations reasonably promulgated and generally applied to all tenants
uniformly by the Landlord. The rules and regulations promulgated by Landlord
shall not modify or amend or be inconsistent with the provisions of this Lease,
nor shall such rules or regulations require the payment or expenditure of
additional monies by Tenant.
(e) The term "Boulder Towers" and "Building" means all of the land
and improvements thereon included within the office projects known as the
Boulder Towers, 1437 South Boulder Street, Tulsa, Oklahoma as described on
Exhibit "A".
The words "The Boulder Towers Complex" and "Complex" mean the Building,
Common Building Facilities and any and all driveways, roadways, sidewalks,
landscaped area and other facilities and amenities from time to time located
within The Boulder Towers Complex which are all for the common use of all
occupants and business visitors of The Boulder Towers.
(f) Landlord is the owner of fee simple title to the Building and
the Complex and the person executing this Lease on behalf of Landlord has the
full authority to execute this Lease.
ARTICLE TWO - TERM
Section 2.01 Initial Term. This Lease is effective as of the date
hereof. The initial term of this Lease (the "Initial Term") shall commence on
the Term Commencement Date (as defined in Section 3.01 below) and shall
terminate on midnight of last day of the seventy-second (72nd) month following
the (i) the Term Commencement Date, if the Term Commencement Date occurs on the
first day of a calendar month, or (ii) if not, the first day of the calendar
month immediately following the calendar month containing the Term Commencement
Date (the "Expiration Date") or on such earlier date on which the term may
expire or be terminated pursuant to the provisions of this Lease or pursuant to
law.
Section 2.02 Renewal Term.
(a) Provided Tenant is not then in default in any of its material
obligations under this Lease after applicable notice and curative periods have
expired, Tenant shall have the option to renew the term of this Lease as to all
of the Premises for a one (1) five (5) year renewal term (the "Renewal Term").
Such option shall be exercised by written notice to Landlord given at least nine
(9) months prior to the expiration of the Initial Term. The Renewal Term shall
be on the
-2-
same covenants, agreements, terms, provisions and conditions as are contained
herein for the Initial Term, except as expressly provided herein to the contrary
and except for such as are, by their terms, inapplicable to a Renewal Term.
Tenant shall have no further renewal options following the Renewal Term. The
rent payable during the Renewal Term shall be as provided in Article 4 and the
amount of the rent payable during the Renewal Term for Office Space shall be the
Fair Market Value Rate for comparable buildings in the Tulsa area as provided in
Exhibit "E" hereto; provided, however, such Fair Market Value Rate shall not in
any event exceed $15.00 per rentable square foot per year. Additionally, in the
event Tenant exercises its renewal option as set forth in this Paragraph 2.02,
then upon the commencement of the Renewal Term, Landlord shall immediately pay
Tenant an allowance of $344,055 to be used by Tenant for any purpose, including
the reduction of Annual Rental or Additional Rental under this Lease.
(b) At any time after the Renewal Term has become effective and
the rent payable during such Renewal Term determined, Landlord and Tenant, upon
request of either, shall execute an agreement supplementary hereto setting out
the date to which such Renewal Term shall extend, the Annual Rental payable
during such Renewal Term and the Premises for such Renewal Term.
Section 2.03 Term of this Lease. The words "Term of this Lease" and
"Term" shall mean the Initial Term and the Renewal Term which may become
effective pursuant to Section 2.02.
ARTICLE THREE - TERM COMMENCEMENT DATE
Section 3.01 Term Commencement Date.
(a) Subject to Sections 3.01(c) and (d) of this Lease, Rent shall
commence and the Term Commencement Date shall occur fourteen (14) days following
the Substantial Completion of the Tenant Improvements in accordance with Exhibit
B hereto (such date being the "Term Commencement Date"). Notwithstanding the
foregoing, upon the Substantial Completion of the Tenant Improvements in
portions of the Premises, Landlord shall deliver such completed portions of the
Premises (but only in Half Floor or Full Floor increments) to Tenant for Tenant
to move furniture and equipment into such completed portions of the Premises.
Prior to the Term Commencement Date Tenant shall not pay any Rent while moving
or installing furniture and equipment in such completed portions of the
Premises. Notwithstanding anything in this Lease to the contrary, if at any time
prior to the Term Commencement Date, Tenant commences business operations from
any completed portion of the Premises, then all terms and provisions of the
Lease shall be in full force and effect and Tenant shall pay a proportionate
share of the Rent for the use of such completed portion of the Premises;
provided, however, that such commencement of business operations from any
completed portion of the Premises shall not trigger the Term Commencement Date.
If Tenant commences business operations from any portion of the Premises prior
to the Term Commencement Date, then all other provisions of the Lease (except
for the full payment of Rent [Tenant will only be paying a proportionate share
of the Rent for the use of the portion of the Premises being used by Tenant] and
the commencement of the Term Commencement Date) shall apply and be in full force
and effect.
-3-
(b) Intentionally Deleted
(c) Landlord hereby agrees to use good faith diligent efforts to
Substantially Complete the Tenant Improvements on or before the Completion Date
(defined below). If Landlord does not Substantially Complete the Tenant
Improvements by the Completion Date, then Tenant, as Tenant's sole and exclusive
remedy (except as otherwise set forth in the following sentence), shall be to
receive from Landlord a rent credit equal to one (1) day of free Annual Rental
for every one (1) day that the Tenant Improvements are not Substantially
Completed following the Completion Date. Additionally, Tenant shall have the
right to terminate this Lease by giving Landlord ten (10) days prior written
notice in the event that Landlord fails to Substantially Complete the Tenant
Improvements for the Premises within ninety (90) days following the Completion
Date; provided, however, Tenant shall provide such prior written notice to
Landlord prior to Landlord Substantially Completing the Tenant Improvements. The
term "Completion Date" shall mean that date which is 200 days from the date of
approval of the "Final Plans" (as defined in Exhibit "B") by both Tenant and
Landlord; provided, however, the Completion Date shall be postponed one (1) day
for each day of Tenant Delay and one (1) day for each day that one or more Force
Majeure Events are experienced by Landlord and/or its contractors,
subcontractors and employees.
-4-
(d) Notwithstanding anything in Paragraph 3.01(b) to the contrary,
if Landlord does not Substantially Complete the Tenant Improvements on or before
October 15, 2003 for any reason other than Tenant Delays, then Tenant shall have
the right, in its sole and absolute discretion, to notify Landlord in writing on
or before November 1, 2003, that Tenant will not move into the Premises during
the last two (2) and one-half months of the calendar year 2003, and in such
event, except for any portions of the Premises in which Tenant has commenced
business operations, the Term Commencement Date shall be January 1, 2004 and
Tenant shall not pay Rent for the Premises until January 1, 2004 (provided the
Tenant Improvements are Substantially Completed prior to January 1, 2004). If
Landlord does not Substantially Complete the Tenant Improvements on or before
October 15, 2003 because of Tenant Delays, then Tenant shall not have the right
to delay the Term Commencement Date and/or receive an abatement of Rent for the
Premises until January 1, 2004, and in such event, the Term Commencement Date
and the payment of Rent shall commence upon the delivery of the Premises to
Tenant with the Tenant Improvements being Substantially Complete.
(e) Intentionally Deleted
(f) Intentionally Deleted.
(g) Landlord shall have no obligation to do any demolition,
construction or improvement work with respect to the Premises, except as
provided in Exhibit "B". Landlord makes no express or implied warranties as to
the current condition of the Premises (or any other space subsequently leased by
Tenant) or its suitability for the conduct of Tenant's business, except as
otherwise expressly provided in this Lease including Exhibit "F".
ARTICLE FOUR - RENTAL
Section 4.01 Annual Rental. Tenant shall pay to Landlord as rent, at
the office of the Building or elsewhere as directed from time to time by
Landlord's written notice to Tenant, a base rental (the "Annual Rental") in the
amounts set forth on Exhibit "C". The Annual Rental shall be payable in equal
monthly installments, in advance, on the first day of each and every
-5-
month of the Term of this Lease, the first such payment becoming due and payable
on the Term Commencement Date as to the space leased by Tenant on the Term
Commencement Date. Also, a prorated monthly installment shall be paid, if the
Term Commencement Date is other than the first day of a month or if the Term of
this Lease terminates on a day other than the last day of a month.
Section 4.02 Additional Rental.
(a) For calendar year 2004 and for each calendar year thereafter
Tenant shall pay as additional rental (together with all sums other than Annual
Rental payable by Tenant under this Lease), (the "Additional Rental") for each
Operating Expense Year (as hereinafter defined) Tenant's Share (as hereinafter
defined) of the increase, if any, in Operating Expenses as defined in Exhibit
"D" hereto paid, or incurred by Landlord for the operation, repair and
maintenance of the Building, Building Parking Garage, Common Building
Facilities, and the Additional Parking Area in excess of the Operating Expense
Base as hereinafter defined. As of the Effective Date of this Lease, the total
rentable area of the leasable space within the Building is 518,185 square feet
(exclusive of the Data Center Space); therefore, as of the effective date of
this Lease, the initial Tenant's Share is 21.29%. Such Additional Rental shall
be payable by Tenant to Landlord as hereinafter provided.
(b) The term "Operating Expense Year" shall mean the calendar year
2004. If a Term Commencement Date for space leased by Tenant occurs on a date
other than January 1 or the Term of this Lease terminates or expires on a date
other than December 31, the Additional Rental for the pertinent Operating
Expense Year for such space shall be prorated based upon the number of days in
such Operating Expense Year occurring after such Term Commencement Date or
before the termination or expiration of the Term of this Lease, as applicable.
(c) The term "Tenant's Share" shall mean that number, stated as a
percentage above in Section 4.02(a). In the event of any change in the area of
the Premises or the Building, Tenant's Share shall be adjusted to reflect such
change or event on a prorated, daily basis, determined by dividing the number of
rentable square feet in the Premises by the actual number of square feet of
rentable area then leased in the Building.
(d) The term "Operating Expense Base" shall mean the amount of
Operating Expenses (as defined in Exhibit "D" hereto) for the calendar year
2003. On or before April 1, 2004, Landlord will submit a statement setting forth
the computation of Operating Expenses for the calendar year 2003.
(e) Landlord's "Operating Statement" shall mean a statement
setting forth (1) the Operating Expenses for such Operating Expense Year,
showing in detail the amount of each item included in Operating Expenses, (2) a
detailed computation of any Additional Rental for such Operating Expense Year
and (3) a reconciliation of the actual Additional Rental payable by Tenant for
such year with the estimated Additional Rental paid by Tenant for such year.
Each Operating Statement shall be furnished by Landlord to Tenant not later than
April 1 of the calendar year following the Operating Expense Year to which such
statement relates.
-6-
(f) Beginning with January 1, 2005, and for each calendar year
thereafter during the Term of this Lease, Landlord shall provide Tenant on or
before April 1 of such year with a comparison of the projected Operating
Expenses for the year and the Operating Expense Base and the projected Tenant's
Share (subject to the five percent (5%) per year limitation set forth in Section
4.02(g) below) of any positive differences between them. Commencing on January 1
of each year, Tenant shall pay one-twelfth (1/12th) of Tenant's Share of such
positive difference each month during the year. If Tenant's Additional Rental
for Operating Expenses reflected in the Operating Statement for any Operating
Expense Year is greater than the amounts actually paid by Tenant for such
Operating Expense Year, Tenant shall pay Landlord Tenant's Share of such
difference within thirty (30) days of receipt of the Operating Statement for
such Operating Expense Year. If Tenant's Additional Rental for Operating
Expenses reflected in the Operating Statement for any Operating Expense Year is
less than the amounts actually paid by Tenant for such Operating Expense Year,
such difference shall be credited to Tenant's next payment(s) of Annual Rental,
unless the Term has expired, in which event such difference shall be paid by
Landlord to Tenant within thirty (30) days of delivery of the Operating
Statement.
(g) As defined in Exhibit "D", Operating Expenses include taxes,
utilities and insurance payable by Landlord with respect to The Boulder Towers
Complex. In no event shall the dollar amount of Tenant's Share of increases in
Operating Expenses during the Term of this Lease exceed the percentage of five
percent (5%) per year over equivalent amount for the base amount established in
2003. The Operating Statement to be provided by Landlord for each Operating
Expense Year shall separately set forth all Operating Expenses and then shall
apply the five percent (5%) cap as set forth above, if applicable, and such sum
shall be the Operating Expenses for such Operating Expense Year for the purposes
of this Lease. In no event shall Tenant's Annual Rental be reduced, nor shall
Landlord owe any amount to Tenant, if, for any reason, Operating Expenses for
any Operating Expense Year are less than the Operating Expense Base.
(h) Landlord shall permit Tenant, at any reasonable time after
reasonable notice, to inspect and do a complete audit at Tenant's sole expense
of all of the books of accounts and records of Landlord to the extent reasonably
required to establish Operating Expenses. Tenant may not request such an audit
more than once per calendar year. If Tenant shall ask for an audit to be made,
and if Operating Expenses for any period shall be found to be overstated or
understated, then Landlord shall pay Tenant the amount of overpayment, or Tenant
shall pay to Landlord the amount of the underpayment (less Tenant's actual third
party audit costs up to a maximum amount of $5,000), as the case may be,
together with interest thereon at the rate specified in Section 8.02 (b) of this
Lease, from the date of such overpayment or underpayment to the date the
overpayment or underpayment is refunded or paid. Tenant's right to make such an
audit with respect to any calendar year shall expire eighteen (18) months after
Landlord's Operating Statement for the calendar year shall have been delivered
to Tenant, and each such Operating Statement shall be final and binding on
Tenant and shall, as between the parties, be conclusively deemed correct, at the
end of such eighteen (18) months, unless prior thereto Tenant has served
Landlord with a notice challenging the accuracy of same. In no event shall
Tenant conduct an audit of Operating Expenses using an accountant or other third
party who is being paid, compensated or reimbursed on a contingency fee basis.
-7-
(i) Additional Rental shall also include any other sums due
Landlord from Tenant under the provisions of this Lease other than Annual
Rental.
(j) The term "Rent" shall mean Annual Rental and Additional
Rental.
Section 4.03 Real Estate Taxes, Assessed Valuation.
(a) If Landlord fails to pay any real estate tax or assessment
includable in Operating Expenses prior to the time that any penalty or interest
may be charged, any penalty or interest levied shall not be included by Landlord
in Operating Expenses for purposes of calculating Tenant's Additional Rental.
(b) Landlord may petition for reduction of the assessed valuation
of the Building and the land comprising the Boulder Towers Complex, claim a
refund of real estate taxes or assessments or otherwise challenge the validity
or applicability of any real estate tax, assessment or similar or related laws.
Tenant shall receive its proportionate share of any refund of real estate taxes
or assessments within 30 days from the date Landlord receives the same, or, in
its sole discretion, Tenant may apply such refund against Annual Rental or
Additional Rental under this Lease.
ARTICLE FIVE - SERVICES
Section 5.01 Standard of Operations.
(a) Landlord shall at all times operate, repair and maintain the
Building and the Building Parking Garage in a first class manner and in
accordance with a standard at least as high as conducted and customarily
followed in the operation and maintenance of office buildings similar to the
Building and with similar tenants in the Tulsa area ("Comparable Buildings")
and, without limiting the foregoing, shall provide the specific facilities,
utilities and services set forth in this Article. Notwithstanding the foregoing
in this Section 5.01(a), Landlord shall, at a minimum, operate and maintain the
Building and the Complex in the same manner as the Building is operated and
maintained on the Effective Date.
(b) The office space in the Building, other than the space
occupied by Tenant, shall be leased only to tenants who are similar in character
to those commonly found in Comparable Buildings. Ground floor retail space, if
any, may be leased to commercial occupants of the following character: banks,
restaurants, department stores, general office use, telephone switch sites, and
retail merchants and other tenants commonly found in office and retail space in
Comparable Buildings. Landlord may (but shall not be obligated to) lease space
in the Building to a first-class club facility.
(c) Tenant shall be entitled to utilize the large conference room
and the two smaller break-out rooms located on the ground floor of the Building
for its periodic special business meetings. Tenants use of these facilities
shall be free of any room charge. Tenant shall be responsible for all set-up and
clean up required by Tenant's use. Tenant's rights shall be subject to
availability and advance scheduling with Landlord and shall be exercised in
common with Landlord and other tenants in the Building. Landlord may relocate or
alter the meeting rooms; provided however that any altered or relocated meeting
rooms shall contain substantially similar
-8-
seating capacities and finishes as the current meeting rooms. Subject to
Landlord's prior written consent, such consent not to be unreasonably withheld
or delayed, Tenant shall have the right to install remote cameras in the
elevator lobbies on those Full Floors of the Leased Premises.
(d) Landlord shall at all times operate, maintain and repair the
Additional Parking Areas in a first class manner and in accordance with
standards at least as high as similar parking areas in Comparable Buildings.
Landlord will install and maintain reasonable lighting in the Building Parking
Garage and in the Additional Parking Areas with at least the same illumination
as exist in similar parking areas in Comparable Buildings.
(e) Landlord's failure to comply with its obligations in Section
5.01 (a) only shall be deemed an interruption of Building Services as set forth
in Section 5.08(a) of this Lease, which shall entitle Tenant to all remedies
expressly set forth in Section 5.08(a) of this Lease.
Section 5.02 Heating, Ventilating and Air Conditioning.
(a) Landlord shall provide a heating, ventilating and air
conditioning system ("HVAC") meeting the requirements of Exhibit "F". Landlord
shall furnish HVAC services as reasonably required for Tenant's comfortable
general office use of the Premises from 7:00 a.m. to 7:00 p.m. (Landlord shall
turn on the HVAC system of the Building by 6:00 a.m. on Tenant's floors to
enable the comfortable use and normal occupancy of the Premises to be met by
7:00 a.m.) Mondays through Fridays (excluding holidays) and from 8:00 a.m. to
1:00 p.m. on Saturday ("Business Hours"). Notwithstanding anything in this Lease
to the contrary, Tenant shall not create within the Premises a working
environment with a density greater than six (6) persons per 1,000 square feet of
rentable area. For purposes of this Lease, holidays shall be indicated in
writing by Landlord annually (the "Building Holiday Schedule") which shall not
exceed nine (9) holidays a year unless consented to by Tenant. Tenant shall make
arrangements for building services at least twenty-four (24) hours in advance if
the Building is scheduled to be closed.
(b) Landlord shall, upon 24 hours' advance notice from Tenant,
furnish Tenant HVAC services at any time or times other than the Business Hours
specified above in accordance with Exhibit "I" hereto.
(c) Except as otherwise expressly provided in this Section
5.02(c), for HVAC and humidity control systems requiring special operating hours
or other conditions which necessitate the use of self-contained units (the
"Special Systems"), Landlord shall furnish electrical power to Tenant for
Tenant's use in installing and operating, at Tenant's expense, one or more
Special Systems. Tenant shall bear any extra expense incurred by Landlord in
furnishing such power from the Building's system or in expanding the Building's
system, if necessary, to provide such electrical power, including the cost to
Landlord of providing direct and separate metering if either Landlord or Tenant
requests separate metering. Such expansion of the Building's system, if
necessary, shall be subject to the approval of Landlord, which shall not be
unreasonably withheld or delayed. Landlord shall review Tenant's HVAC plans
prior to construction of Tenant's interior improvements and notify Tenant prior
to commencement of such construction if Landlord will charge Tenant for the
installation and or use of any Special Systems. If Landlord fails to notify
Tenant of such charge prior to commencement of such construction, then
-9-
there shall be no charge to Tenant from Landlord for installation and/or use of
the Special Systems. Notwithstanding anything herein to the contrary, Tenant
shall have the right to install at anytime up to 15 supplemental HVAC units (not
to exceed 2 tons each) in conference rooms and offices in the Premises. Such
supplemental units shall not be considered Special Systems and Tenant shall not
bear any expense incurred by Landlord in furnishing power to such supplemental
units. Such supplemental units shall be in addition to any supplemental units
servicing the Data Center Space. Landlord shall repair and maintain such
supplemental units in the manner required by Section 5.01(a) of this Lease.
Section 5.03 Electrical Service.
(a) Landlord shall provide an electrical distribution system for
the Building meeting the requirements of Paragraph II of Exhibit "F". Landlord
shall cause to be furnished and pay for all electricity used in the Premises or
in operating any and all facilities serving the Premises (the cost of same to be
Operating Expenses); provided, however, that Tenant shall not create within the
Premises a working environment with a density of greater than six (6) persons
per 1,000 square feet of rentable area. If Tenant requests excess power for the
Premises in excess of that necessary for general office use in the Premises,
then Tenant shall be responsible for the actual costs incurred by Landlord in
providing for such excess power, including the cost to Landlord of providing any
separate metering, if necessary in Landlord's reasonable discretion. If separate
meters are not used, the amounts chargeable to Tenant under the preceding
provision shall be Landlord's average cost of electric power multiplied by
Tenant's excess usage, as reasonably determined by Landlord's professional
engineer and approved by Tenant's professional engineer.
(b) Landlord will notify Tenant at least seventy-two (72) hours in
advance of any planned shut down of the electrical system for repairs or
maintenance. Landlord will attempt to schedule such shut downs for weekends
starting on Friday evenings. Any such shut downs shall not entitle Tenant to any
abatement of Rent during the scheduled shut down period; provided however, in
the event that any such shutdown shall cause the Premises to be without
electrical service during Business Hours for more than one (1) business day in
any Lease Year then Rent shall abate until service is restored. Also, such
planned shutdowns will not exceed four (4) per calendar year.
Section 5.04 Elevators.
(a) Landlord shall provide at least four (4) passenger elevators
to serve the Premises during the Term of this Lease. The passenger elevators
shall be available during all Business Hours, and, at all other times, there
shall be at least one passenger elevator available to serve the Premises subject
to events beyond Landlord's reasonable control and emergencies which may arise.
In the event of such interruption, Landlord shall, as promptly as is practical
under the circumstances, use its best efforts to cause such service to be
reinstated.
(b) Subject to repairs and/or replacement of the freight
elevators, Landlord will provide a designated freight elevator in the Building
during Business Hours during the Term of this Lease. Tenant shall provide
Landlord with twenty-four (24) hours' advance notice of its need for a freight
elevator and Landlord shall endeavor to make the freight elevator available to
-10-
Tenant. Upon such 24 hour notice, Landlord will use reasonable efforts to
provide the freight elevator during Business Hours for thirty (30) consecutive
days for Tenant's initial move into and final move out of the Building. Tenant's
use of the freight elevator is limited by the Building's Rules and Regulations,
which are subject to change, as provided in this Lease. Failure to provide said
notice shall relieve Landlord of its obligation to provide a dedicated freight
elevator.
Section 5.05 Light Bulbs and Water. Landlord shall furnish and/or
install as an Operating Expense all initial and replacement fluorescent and
incandescent light bulbs and ballast in the Premises, Common Building Facilities
and Building Parking Garage, provided that they are the Building's standard
bulbs and ballasts. Tenant will comply with all of Landlord's reasonable
standards for energy efficient lighting fixtures. Landlord shall review Tenant's
lighting plans prior to construction of Tenant's leasehold improvements.
Landlord shall notify Tenant prior to the commencement of such construction if
any of Tenant's lighting is not Building standard. If Landlord fails to timely
notify Tenant, then Tenant's lighting will be deemed to be Building standard.
Landlord shall amortize the expense over the useful life of the fixtures as an
Operating Expense. Subject to repairs and/or replacements, Landlord shall
furnish water 24 hours for every day of the Term, including chilled and heated
water, at those points of supply provided for general use of all tenants in the
Building as required for lavatory and drinking purposes and such other uses as
are permitted pursuant to Section 7.01. The fire stand pipe water system shall
comply with the National Fire Protection Agency "NFPA Code" and applicable local
laws.
Section 5.06 Access Control.
(a) Landlord shall install and maintain access control for the
Building and Building Parking Garage. Landlord will provide Tenant and its
employees all necessary instructions for use of the access control system to
gain entry to the Building or Building Parking Garage. Such access control may
include electronic access control to the Building and Premises. Landlord's
access control system shall comply with the requirements of all Applicable Laws.
(b) EXCEPT FOR LOSSES OR DAMAGES CAUSED BY THE GROSS NEGLIGENCE OF
LANDLORD OR ITS EMPLOYEES, LANDLORD SHALL NOT BE LIABLE TO TENANT OR ITS
EMPLOYEES FOR LOSSES DUE TO THEFT OR BURGLARY, OR FOR DAMAGES OR INJURIES CAUSED
BY THE ENTRY OF UNAUTHORIZED PERSONS TO THE BUILDING, BUILDING PARKING GARAGE,
THE PREMISES OR OTHER PORTIONS OF THE BUILDING.
(c) Tenant, at its expense and with the prior written approval of
Landlord, which approval shall not be unreasonably withheld or delayed, may
install such additional safety, access control and security systems or devices
within or controlling access to the Premises (but not in any lobbies or other
common areas on multi-tenant floors), including, without limitation, smoke
detectors, electronic security devices and auxiliary emergency electric power
supplies, as Tenant may deem reasonably appropriate. Tenant shall have the right
by installation of a card or key system, to control access from all public
elevators to floors wholly occupied by Tenant; provided that (i) Tenant's use of
such system shall not interfere with Landlord's obligations to provide services
or perform any work under this Lease, (ii) Tenant's use of such system does not
-11-
interrupt ingress and egress of other tenants on multi-tenant floors; and (iii)
Landlord shall have reasonable access to the Premises in emergencies and
provided that such system does not interfere with the proper operating of the
elevator system or require the Landlord to incur additional costs to retrofit or
maintain the elevators in order to accommodate such a system.
(d) Tenant, at its sole cost and expense, may employ a licensed,
armed security guard within the Premises ("Guard"). Tenant agrees to indemnify,
protect, defend and hold the Landlord, and its agents, representative, employees
and contractors harmless from and against any and all actions, claims, demands,
costs and expenses, including reasonable attorney's fees and expenses for the
defense thereof, to the extent arising from the negligence and/or willful
misconduct of the Guard.
(e) Any additional safety or security systems installed by Tenant
shall be compatible with Landlord's security and safety systems, programs and
procedures and shall comply with all Applicable Laws.
Section 5.07 Janitorial Services.
(a) Landlord shall provide, as an Operating Expense, the cleaning
and janitorial services ("Janitorial Services") and window cleaning services set
forth in Exhibit "G" hereto. All such Janitorial Services are to be performed
during non-Business Hours. Tenant shall have the right to approve the company
doing the Janitorial Services in the Premises, such approval not to be
unreasonably withheld or delayed. Tenant, at its sole cost and expense, shall
have the right to hire third parties to perform additional janitorial services
within the Premises. Notwithstanding the foregoing, if Tenant is at any time
dissatisfied with the Janitorial Services for any reason whatsoever, then Tenant
shall have the right to employ its own janitorial company to provide janitorial
services to the Premises and in such event, Landlord shall deduct the cost of
the Janitorial Services for the Premises from the Operating Expenses charged to
Tenant (including a deduction of such costs included in the Operating Expense
Base).
Section 5.08 Interruption of Building Services.
(a) If, for any reason within Landlord's reasonable control there
is a failure to furnish the facilities, utilities or services specified in
Sections 5.01(a), 5.02(a), (b) and (c), 5.03(a), 5.04(a) and (b), 5.05, and
5.06(a) (collectively the "Building Services"), and, after written notice
thereof by Tenant to Landlord, Landlord does not remedy same within seven (7)
days following delivery of such written notice Landlord shall not be deemed to
be in default of its obligations to provide the Building Services, and Tenant
shall have no remedy hereunder except as may be provided in Section 5.08(a-d)
hereof, provided Landlord has commenced such cure within said seven (7) day
period and thereafter continuously and diligently prosecutes such cure to
completion. Notwithstanding the previous sentence, in the event Landlord has not
remedied the same within thirty (30) days of Tenant's written notice, Tenant
shall have the option to provide such Building Services for its own account
until Landlord remedies the default and performs such obligations in accordance
with this Lease, or, if the failure of Landlord to provide the Building Services
materially and adversely affects Tenant's use of the Premises for thirty (30)
consecutive days, then Tenant may, by written notice to Landlord given at any
time prior to the full resumption of Building Services, terminate this Lease,
and, upon giving such notice, this
-12-
Lease shall terminate and expire on the date set forth in such notice, which
date shall not be more than one hundred eighty (180) days after the date of such
notice. Notwithstanding anything in this paragraph to the contrary, should the
interruption of Building Services be caused by either (i) fire or other casualty
or (ii) condemnation or eminent domain proceeding, then the provisions of
Article 9 herein (in the event of a fire or other casualty) or Article 12 herein
(in the event of a condemnation or eminent domain proceeding), shall prevail in
determining Tenant's rights to abatement and termination and Tenant shall not
have a right to an abatement or a right to terminate this Lease under this
paragraph.
(b) In addition to Tenant's self-help remedies described in
subsection (a) above, if for any reason within Landlord's reasonable control
there is a failure to furnish the Building Services required to be furnished by
this Lease and such failure results in an imminent threat to persons, Tenant's
property or Tenant's business, Tenant may, after providing Landlord with such
notice and the first right to remedy such failure as is practical under the
circumstances, provide for its own account such Building Services to the extent
necessary to remove the threat to persons or property.
(c) Any reasonable sums expended by Tenant in exercising its
remedies described in Sections 5.08(a) or 5.08(b) above shall be reimbursed by
Landlord within thirty (30) days of Tenant's invoice therefor together with
invoices and paid receipts and other reasonable evidence of such costs.
(d) If any impairment or cessation of Building Services pursuant
to Section 5.08(a) or Section 5.08(b) adversely affects Tenant's use of part or
all of the Premises for more than one (1) business day, Rent shall thereafter
abate as to the portion of the Premises affected until such service is
reinstated.
(e) The remedies set forth in subsections (a)-(d) above shall be
Tenant's sole and exclusive remedies for interruption of Building Services
resulting from Landlord's negligent acts or omissions and failure to provide
essential services for reasons within the control of Landlord. If an impairment
or cessation of Building Services results from the failure of any utility
company or other third party service provider to furnish such services, or other
event beyond Landlord's reasonable control, Landlord shall have no liability to
Tenant except as otherwise expressly provided in this Lease and, except as
provided below, Rent shall not abate, provided Landlord immediately notifies the
service provider of such impairment or cessation and thereafter employs its best
efforts to cause such services to be reinstated. If such impairment or cessation
of Building Services resulting from the failure of any utility company or other
third party service provider to furnish such services or other events beyond
Landlord's reasonable control adversely affects part or all of the Premises for
the normal conduct of Tenant's business for more than three (3) consecutive
business days, Rent shall thereafter abate as to the portion of the Premises
adversely affected until such Building Service is fully reinstated.
Notwithstanding the foregoing, if any such interruption of Building Services
which results from the failure of any utility company or other third party
service provider to furnish such services or other events beyond Landlord's
reasonable control materially and adversely affects the Premises for the normal
conduct of Tenant's business for thirty (30) consecutive days from the
commencement of the Rent abatement period, Tenant may at any time after such
thirty (30) consecutive days, but during the Rent abatement period, terminate
this Lease by written notice to Landlord which
-13-
notice shall specify the effective date of termination which date shall not be
more than one hundred eighty (180) days after the date of Tenant's notice of
termination. Notwithstanding anything in this paragraph to the contrary, should
the interruption of facilities, utilities or services be caused by either (i)
fire or other casualty or (ii) a condemnation or eminent domain proceeding, then
the provisions of Article 9 herein (in the event of a fire or other casualty),
or Article 12 herein (in the event of a condemnation or eminent domain
proceeding), shall prevail in determining Tenant's rights to abatement and
termination and Tenant shall not have a right to an abatement or a right to
terminate this Lease under this paragraph.
Section 5.09 Personnel. Landlord shall employ and/or contract with
persons of sufficient number and experience to maintain the Building and Common
Building Facilities and to perform the services which Landlord is required to
perform under this Lease.
Section 5.10 Insurance.
(a) Tenant shall maintain at its sole cost, at all times during
the terms of this Lease the insurance coverage set forth below.
(i) Workers' Compensation Insurance as required by laws
and regulations applicable to and covering employees
of Tenant;
(ii) Employers' Liability Insurance protecting Tenant
against common law liability in the absence of
statutory liability, for employee bodily injury
arising out of the master-servant relationship with a
limit of not less than $1,000,000;
(iii) Commercial General Liability Insurance with limits of
not less than $500,000 per occurrence and $1,000,000
in the aggregate,
(iv) Automobile Liability Insurance including non-owned
and hired vehicle coverage with limits of liability
of not less than $500,000;
(v) Excess Liability Insurance over Automobile Liability,
Commercial General Liability, and Employers'
Liability coverage afforded by the primary policies
described above with minimum limits of $4,000,000 in
excess of specified limits;
(vi) All-Risk Property Insurance for the replacement value
of the leasehold improvements in the Premises,
including Tenant's initial tenant improvements as set
forth on Exhibit "B" and all other additions,
alterations and/or installations made by Tenant in
the Premises and for all contents and all personal
property of Tenant in the Premises.
(b) The Commercial General Liability Insurance and Excess
Liability Insurance required by the above shall cover the contractual liability
(to the extent available under such policies) assumed under the provisions set
forth in this Lease.
-14-
(c) Prior to commencement of the Lease and upon the written
request of Landlord, a certificate evidencing the required coverage shall be
delivered to Landlord. If commercially available, the Workers' Compensation
policy shall be endorsed to provide waiver of subrogation rights in favor of
Landlord and all partners, agents and affiliates. Such insurance may be carried
under a blanket policy covering the Premises and other locations of Tenant.
Landlord and its designated property management firm shall be named as an
additional insured on the liability coverages described in Section 5.10 (ii)-(v)
for those liabilities expressly assumed within the Premises by Tenant under the
Lease. Notwithstanding the foregoing, Landlord's additional insured status shall
be limited to (i) property damage incurred within the Premises only and personal
injury or death occurring with the Premises only, and (ii) the limits of
insurance required to be carried under Section 5.10(ii)-(v).
(d) Tenant agrees to comply with all material terms of the
insurance contracts referenced in this section. Failure of Tenant to keep the
required insurance policies in full force and effect during the term of this
Lease and during any extensions, shall constitute a breach of this Lease. In
such event, Landlord will provide Tenant written notice of such failure to keep
required insurance policies. In the event Tenant has not cured such failure
within thirty (30) days of the receipt of such notice, then Landlord shall have
the right, in addition to any other rights, upon ten (10) days notice, to
provide such insurance for Tenant and to include such insurance costs in the
next installment of Annual Rental. Nothing contained in these provisions
relating to coverage and amounts set out herein shall operate as a limitation of
tenant's liability in tort or contract under the terms of this Lease.
(e) Tenant shall have the right to Self-Insure for the insurance
required in this Paragraph 5.10, subject to and in accordance with the following
terms and conditions:
(1) (A) "Self-insure" shall mean that Tenant is
itself acting as though it were the insurance company
providing the insurance required under the provisions
hereof and Tenant shall pay any amounts due in lieu
of insurance proceeds which would have been payable
if the insurance policies had been carried, which
amounts shall be treated as insurance proceeds for
all purposes under this lease. Notwithstanding the
foregoing with regard to the insurance required by
Section 5.10(a) of this Lease, Tenant shall have the
right to maintain such deductibles and/or self
insured retentions as are included from time to time
in Tenant's insurance policies covering Tenant's
businesses and such deductibles and/or self insured
retentions shall not be considered self-insurance for
the purpose of this subsection 5.10(e).
(B) All amounts which Tenant pays or is required
to pay and all loss of damages resulting from risks
for which Tenant has elected to self-insure shall be
subject to the waiver of subrogation provisions of
Paragraph 9.02 hereof and shall not limit Tenant's
indemnification obligations set forth in this Lease.
(C) Tenant's right to self-insure and to
continue to self-insure is conditioned upon and
subject to:
-15-
(I) Tenant now having and hereafter
maintaining a tangible net worth of at least
Fifty Million Dollars ($50,000,000.00).
(D) In the event Tenant fails to fulfill the
requirements of (C) above, then Tenant shall
immediately lose the right to self-insure and shall
be required to provide the insurance specified in
this Paragraph 5.10, provided, however that Tenant's
self-insurance shall continue in full force and
effect until the insurance specified in Paragraph
5.10 is issued by a qualifying insurance company.
(E) In the event that Tenant elects to
self-insure and an event or claim occurs for which a
defense and/or coverage would have been available
from the insurance company, then Tenant shall:
(I) undertake the defense of any such
claim, including a defense of Landlord, at
Tenant's sole cost and expense; and
(II) use its own funds to pay any claim or
replace any property or otherwise provide
the funding which would have been available
from insurance proceeds but for such
election by Tenant to self-insure.
(2) If Tenant elects to self-insure, it shall provide
Landlord with a letter to that effect, and Landlord
shall acknowledge, in writing, Tenant's election to
self-insure. In the event of a casualty loss or other
event for which Tenant is otherwise liable under this
Lease that would have been covered by the insurance
required to be maintained by Tenant hereunder, Tenant
shall make funds available in the same manner as an
insurance carrier would have made such funds
available to the extent required by the terms of this
Lease.
Section 5.11 Landlord's Insurance.
(a) Landlord shall as an Operating Expense maintain at all times
during the Term of this Lease the insurance coverage set forth below with
companies reasonably satisfactory to Tenant and with a Best rating of at least
A/XII.
(i) Workers' Compensation Insurance as required by laws
and regulations applicable to and covering employees
of Landlord and the Building Management entity;
(ii) Employers' Liability Insurance protecting Landlord
against common law liability in the absence of
statutory liability, for employee bodily injury
arising out of the master-servant relationship with a
limit of not less than $1,000,000;
(iii) Commercial General Liability Insurance (with a
maximum of $25,000 deductible or retained loss limit)
including products and completed
-16-
operations with limits of not less than $500,000 per
occurrence and $1,000,000 in the aggregate,
(iv) Automobile Liability Insurance (with a maximum of
$10,000 deductible or retained loss limit) including
non-owned and hired vehicle coverage with limits of
liability of not less than $500,000;
(v) Excess Liability Insurance over Automobile Liability,
Commercial General Liability, and Employers'
Liability coverage afforded by the primary policies
described above with minimum limits of $8,000,000 in
excess of specified limits and such limit shall be
subject to increase to amounts as may be reasonably
determined by Landlord;
(vi) All-Risk Property Insurance (with a maximum of
$50,000 deductible or retained loss limits) for at
least one hundred percent (100%) of replacement value
of the Building and Complex excluding any leasehold
improvements, additions, alterations and/or
installations of Tenant in the Premises and all
contents in leased areas.
(b) The Commercial General Liability Insurance and Excess
Liability Insurance required by the above shall cover the contractual liability
of Landlord (to the extent available under such policies) assumed under the
provisions set forth in this Lease.
(c) Tenant shall be named as an additional insured on the
liability coverages described in Section 5.11(a)(ii)-(v); provided, however,
Tenant's additional insured status shall not extend to property damage or
personal injury or death occurring within the Premises. Prior to commencement of
the Lease, a certificate evidencing the required coverage shall be delivered to
Tenant naming Tenant as additional insured as aforesaid. This certificate shall
provide that any change restricting or reducing coverage or the cancellation of
any policies under which certificates are issued shall not be valid as respects
Tenant's interest therein until Tenant has received thirty (30) days' written
notice of such change or cancellation. Further, such insurance policies shall
provide primary coverage to Tenant and shall not be concurrent or in excess over
other valid insurance which may be available to Tenant. If commercially
available, the Workers' Compensation policy shall be endorsed to provide waiver
of subrogation rights in favor of Tenant and all agents and affiliates and their
respective officers, directors and employees. Such insurance may be carried
under a blanket policy covering the Premises and other locations of Landlord,
provided that amount of insurance coverage required to be carried by Landlord in
this Lease is not reduced by payments under the blanket policy for other
locations.
(d) Landlord agrees to comply with all terms of the insurance
contracts referenced in this section. Failure of Landlord to keep the required
insurance policies in full force and effect during the Term of this Lease and
during any extensions, shall constitute a breach of this Lease and Tenant shall
have the right, in addition to any other rights, upon ten (10) days notice, to
cancel and terminate this Lease without further cost to Tenant. Nothing
contained in these provisions relating to coverage and amounts set out herein
shall operate as limitation of Landlord's liability in tort or contract under
the terms of this Lease.
-17-
ARTICLE SIX - TENANT'S PARKING
Section 6.01 Tenant's Parking.
(a) At all times during the Term Landlord, at its expense, will
provide Tenant with free parking spaces in an amount equal to 256 spaces,
fifty-five (55) of which shall be reserved covered parking located in the
Building Parking Garage and specifically identified on Exhibit "J", and the
remaining 201 parking spaces shall be located on surface lots numbered 1 through
15 on Exhibit "K". Landlord shall clearly mark (using Tenant's name) each of the
55 spaces within the Building Parking Garage as reserved for Tenant. There shall
be no charge for such parking spaces. In the event the rentable square footage
of Tenant's Premises is increased or decreased, the parking for Tenant shall be
proportionally adjusted. Tenant shall have no claim on any additional parking
not expressly assigned to it in this paragraph. Both the Building Parking Garage
and at least 201 parking spaces in the Additional Parking Area shall be
available for use 24 hours a day. Landlord shall keep and maintain the
Additional Parking Area in a clean and first-class condition. In addition,
Landlord shall provide at least 50 visitor parking spaces for the use of all
tenants in the Building as depicted on Exhibit "L". Landlord shall not be
obligated to provide personnel to perform parking service but shall provide
access control to the Building Parking Garage, provided Landlord shall not be
liable to Tenant for losses due to the theft or burglary, or for injury to
persons or property done by unauthorized persons. Currently the parking
configuration at the Building and for the Additional Parking Area is on an open,
first come, first serve basis.
(b) If Tenant, its permitted assignees or subtenants and/or their
respective employees, licensees and guests at any time during the Term are not
able to use the Building Parking Garage and/or Additional Parking Area for the
parking spaces provided, Landlord shall take whatever steps are necessary to
provide Tenant with the required number of parking spaces as set forth in
Section 6.01(a). Except in the event of a casualty or condemnation as set forth
in paragraph (e) below, if at any time during the Term, (i) Landlord grants
reserved parking spaces in the Additional Parking Area to any tenant in the
Building, or (ii) Landlord does not provide Tenant with the required 201 parking
spaces in the Additional Parking Area, and if Landlord, within forty-eight (48)
hours following written notice from Tenant, does not provide Tenant with the 201
parking spaces as required by this Lease, then, instead of the first come, first
serve open parking system at the Building for Tenant, Landlord shall reserve for
Tenant's sole use, 201 parking spaces in the Additional Parking Area (excluding
the visitor parking areas as set forth on Exhibit K hereto) which are located
closest to the twenty-four (24) hour ingress and egress entrance to and from the
Building ("Reserved Spaces"). The parties hereby acknowledge and agree that
Landlord shall be deemed to have not provided Tenant with the required 201
parking spaces in the Additional Parking Area as set forth in romanette (ii) in
the preceding sentence, if, and only if, two (2) times in any calendar month
during the Term, Tenant notifies Landlord that there is not adequate parking for
Tenant's employees in the Additional Parking Area, Landlord's property manager
or designee confirms that there is not adequate parking for Tenant's employees
in the Additional Parking Area, and Landlord does not provide such required
parking within the forty-eight (48) hour cure period as set forth in the
preceding sentence.
(c) The parties hereby acknowledge and agree that Landlord shall
be deemed to have not provided Tenant with the required 55 spaces in the
Building Parking Garage if and only if
-18-
two times in any calendar month during the Term Tenant provides written
notification to Landlord that the required 55 spaces are not available for use
by Tenant's employees in the Building Parking Garage, Landlord's property
manager or designee confirms that the required 55 spaces are not available for
use by Tenant`s employees in the Building Parking Garage, and Landlord does not
provide such required parking spaces within 48 hours of delivery of Tenant's
written notification. If the Landlord is deemed to have not provided Tenant and
its employees with the required 55 parking spaces in the Building Parking Garage
as aforesaid, then the Rent shall abate for the Premises until Tenant is
provided the use of such 55 parking spaces in the Building Parking Garage;
provided further, if Landlord fails to provide the required 55 spaces in the
Building Parking Garage for the use of Tenant and its employees for 30
consecutive days, then Tenant may, at any time after such 30 consecutive days,
but during the rent abatement period, terminate this Lease by written notice to
Landlord, which notice shall specify the effective date of termination, and
which date shall not be more than 180 days after the date of Tenant's notice of
termination.
(d) After Tenant is granted the Reserved Spaces as provided in the
previous paragraph, and Landlord fails to provide to Tenant for Tenant's use 201
parking spaces in the Additional Parking Area in the Reserved Spaces following
48 hours prior written notice from Tenant, then such failure to provide to
Tenant for Tenant's use 201 parking spaces in the Additional Parking Area in the
Reserved Spaces shall result in Rent abating for the Premises until Tenant is
provided the use of such 201 parking spaces in the Additional Parking Area in
the Reserved Spaces. Additionally, if Landlord fails to provide to Tenant for
Tenant's use 201 parking spaces in the Additional Parking Area in the Reserved
Spaces following 48 hours prior written notice from Tenant, and such failure to
provide to Tenant for Tenant's use 201 parking spaces in the Additional Parking
Area in the Reserved Spaces continues for thirty (30) consecutive days, then
Tenant may at any time after such thirty (30) consecutive days, but during the
Rent abatement period, terminate this Lease by written notice to Landlord which
notice shall specify the effective date of termination which date shall not be
more than one hundred eighty (180) days after the date of Tenant's notice of
termination.
(e) Notwithstanding the foregoing, if a casualty or condemnation
adversely affects the Building Parking Garage and/or Additional Parking Area,
then Landlord can relocate (i) the Building Parking Garage spaces to visitor
parking spaces described in Exhibit L hereto, or other visitor parking spaces
designated by Landlord from time to time (provided that such visitor lot(s)
shall be moved to either Lot 2 and/or Lot 7, at Landlord's reasonable
discretion), for up to one hundred eighty (180) days, and (ii) the surface
parking spaces in the Additional Parking Area within a one (1) mile radius of
Building for up to ninety (90) days. If Tenant's original parking spaces are not
restored within (i) one hundred eighty (180) days for those Tenant parking
spaces located within the Building Parking Garage, or (ii) ninety (90) days for
those Tenant parking spaces located within the Additional Parking Area, then
Tenant shall have right to terminate this Lease, prior to the restoration of
such original parking spaces, by providing written notice to Landlord, which
notice shall specify the effective date of termination which date shall not be
more than one hundred eighty (180) days after the date of Tenant's notice of
termination. Notwithstanding anything to the contrary in this Section 6, in the
event Tenant is not able to use the Additional Parking Area for the parking
spaces provided herein due to a casualty or condemnation, then Landlord, at its
sole cost and expense, shall use its best efforts to immediately provide
alternative parking for Tenant within a one (1) mile radius of the Building
-19-
(with a reasonable number of parking shuttles to transport Tenant's employees to
and from such parking areas and the Building) until Tenant is once again able to
use the Additional Parking Area for the parking spaces provided herein.
Notwithstanding anything to the contrary in this Section 6, if Landlord
immediately provides such alternative parking for Tenant (i) in the visitor
parking area described in Exhibit L hereto, or other visitor parking spaces as
described above, for the parking spaces within the Building Parking Garage, and
(ii) within a one (1) mile radius of the Building (with a reasonable number of
parking shuttles, at Landlord's cost and expense, to transport Tenant's
employees to and from such parking areas and the Building) for the parking
spaces within the Additional Parking Area, then Landlord shall be deemed to have
provided Tenant with the required parking under this Lease; provided, however,
Tenant shall still have the right to terminate this Lease as provided above in
this paragraph if Tenant's original fifty-five (55) parking spaces are not
restored within (i) one hundred eighty (180) days for Tenant's parking spaces
located within Building Parking Garage, or (ii) ninety (90) days for Tenant's
two hundred and one (201) parking spaces located within the Additional Parking
Area. In the event Tenant is not able to use the Building Parking Garage and/or
Additional Parking Area for the parking spaces provided in this Lease due to a
casualty or condemnation, and if Landlord is unable to immediately provide (i)
alternative parking in the visitor parking area described in Exhibit L hereto,
or other visitor parking spaces as described above, for the Tenant parking
spaces located within the Building Parking Garage, and/or (ii) alternative
parking within a one (1) mile radius of the Building for the Tenant parking
spaces located within the Additional Parking Area, then such failure to
immediately provide parking in the Building Parking Garage and/or Additional
Parking Area, as applicable, shall result in Rent abating for the Premises until
Tenant is provided the use of such parking spaces in the Additional Parking Area
and the Building Parking Garage, and if such failure continues for thirty (30)
consecutive days, then Tenant may at any time after such thirty (30) consecutive
days, but during the Rent abatement period, terminate this Lease by written
notice to Landlord which notice shall specify the effective date of termination
which date shall not be more than one hundred eighty (180) days after the date
of Tenant's notice of termination.
(f) Landlord covenants to Tenant that it will not separately
(without also selling the Building and Building Parking Garage and other
Additional Parking Area) (i) sell or convey any of the Additional Parking Area
set forth on Exhibit K hereto to any other party, or (ii) enter into a ground
lease for any of the Additional Parking Area set forth on Exhibit K hereto with
any other party; provided, however, (i) Landlord may sell or convey, or enter
into a ground lease for, any of the Additional Parking Area, if Landlord
provides to Tenant substitute parking at no greater distance than the Additional
Parking Area lot that is being sold or leased, and (ii) subject to Section
6.01(a) Landlord may, in its sole and absolute discretion, enter into a ground
lease for lots 1, 5 and 12 in the Additional Parking Area that is terminable by
Landlord, in its sole discretion, upon thirty (30) days notice.
(g) Except as otherwise expressly provided in this Section 6.01,
Landlord shall not be financially liable for the unauthorized use of Tenant's
parking, provided that it has immediately taken reasonable measures to insure
the availability of such parking. Tenant shall use reasonable efforts to ensure
that its employees restrict their use of parking to Tenant's parking spaces. In
the event Landlord fails within forty-eight (48) hours of Tenant's written
notice to remove an unauthorized vehicle from the parking area's provided for
tenants of the Building or from Tenant's contiguous covered parking spaces,
Tenant at its risk may cause such vehicle to be
-20-
towed by a licensed car towing company at the expense of Landlord. Landlord
shall keep and maintain the Additional Parking Area in a safe condition.
(h) Landlord hereby agrees to reserve seven (7) parking spaces in
the visitor parking area described in Exhibit L hereto (five (5) spaces in the
front row and two (2) spaces in the second row) for Tenant's sole use. Landlord
shall have the right during the Lease Term if the visitor parking area described
in Exhibit L hereto is routinely full to reallocate up to fifteen (15) parking
spaces in the Additional Parking Area to be used for visitor parking for the
Building.;
ARTICLE SEVEN - USE AND ACCESS
Section 7.01 Use.
(a) Tenant, its Affiliates (as defined in Section 16.01), and
permitted assignees and subtenants, shall have the right to use the Premises for
general office purposes, including data centers and storage consistent with
general office use.
(b) To the extent Tenant's use as set forth in subsection (a)
above or any other special uses to which Tenant is permitted by Landlord for the
Premises require a specific Certificate of Occupancy, or a special entry on the
general Certificate of Occupancy for the Building, Tenant shall obtain the same
at its sole expense and shall provide Landlord with a copy upon request; and
Tenant shall be responsible for obtaining any special health, safety or other
governmental permit, approval or license required in connection with any such
specific use as well as the building permits for Tenant's work and Certificate
of Occupancy (if required) for the Premises. Landlord shall cooperate with
Tenant and shall execute all applications, authorizations and other instruments
reasonably required to enable Tenant to fulfill its responsibilities under this
subsection. Notwithstanding the foregoing, Landlord will obtain all necessary
permits, approvals and licenses, including all certificates of occupancy for the
construction of the Tenant Improvements (as defined in Exhibit B). Tenant shall
use the Premises so that (i) no unreasonable noise, smell (including those
resulting from food preparation) or vibrations will emanate from the Premises
into common areas or areas leased by other tenants or occupants of the Building;
(ii) other occupants of the Building are not unreasonably disturbed or
interfered with in their use and enjoyment of their premises, the Building or
the Common Building Facilities; (iii) all Applicable Laws will be complied with;
(iv) such use will not create design load or other problems for the structural,
mechanical, electrical, plumbing or HVAC systems of the Building; (v)
ventilation, fire hazard and special waste disposal problems are addressed to
Landlord's reasonable satisfaction; and (vi) Landlord's other concerns for the
safe and efficient operation, maintenance and repair of the Building and Common
Building Facilities are addressed to Landlord's reasonable satisfaction.
Section 7.02 Environmental.
(a) As of the Effective Date, Landlord represents and warrants to
Tenant that the Premises are free of any exposed toxic and hazardous materials
in concentrations, or levels sufficient that by current applicable governmental
standards to cause the specific material to be classified or identified as toxic
or hazardous material. Prior to commencement of construction of any improvements
above the ceiling grid in the Premises, Tenant shall deliver to Landlord and
-21-
Landlord shall review all of Tenant's plans and construction documents and
determine whether such construction (as set forth in the plans and construction
documents) will disturb or expose any encapsulated, sealed or enclosed hazardous
materials located in the Building or Complex. If Landlord determines that such
plans and/or construction will disturb any such hazardous materials, then Tenant
will use reasonable efforts to modify its plans and/or construction documents so
as not to disturb such hazardous materials. If Tenant is unable through
reasonable efforts to successfully modify such plans and/or documents or if such
modifications will require additional cost or delay in construction of Tenant's
leasehold improvements, then Tenant shall not perform such leasehold
improvements to the Premises and in the case of the Tenant Improvements this
Lease will automatically terminate without liability to either party. In the
case of other improvements to the Premises other than Tenant Improvements,
Tenant shall have the right to construct such improvements if it elects to
accept such additional costs or delays. Except in the case of an emergency (when
Tenant shall provide such plans (if any) and/or construction documents to
Landlord as soon as reasonably possible) and prior to the commencement of the
work to be performed by Landlord pursuant to Exhibit "B", Tenant shall provide
Landlord reasonable documentation of any alteration or addition to be made above
the ceiling grid by Tenant to the Premises. Landlord, within ten (10) days of
its receipt of such documentation, will determine whether such alteration or
addition will disturb or expose any encapsulated hazardous substances.
(b) Tenant its contractors, agents and their respective employees
shall not incorporate into or use, or otherwise place, expose, disturb or
dispose of at the Premises or within the Boulder Towers Complex any hazardous
materials in concentrations or levels sufficient so that by the then applicable
EPA, OSHA or other applicable governmental standards the specific materials
would be classified or identified as toxic or hazardous materials except for the
limited purposes of use and storage only where (i) such materials are in small
quantities, properly labeled and contained, (ii) such materials are handled and
disposed of in accordance with the generally accepted industry standard for
safety, storage, use and disposal, (iii) such materials are used for use in the
ordinary course of business (i.e., as with office cleaning supplies), (iv)
Tenant complies with Landlord's Hazard Communication Program (a copy of which is
available at the Landlord's office).
(c) Landlord its contractors, property manager, agents and their
respective employees shall not dispose of at the Premises or disturb or expose
or incorporate into or use or otherwise place any toxic or hazardous materials
in the Building in concentration or levels sufficient that by then applicable
governmental standards cause the specific material so identified to be
classified or identified as toxic or hazardous materials and shall otherwise
deal with all existing toxic or hazardous materials (as described in Section
7.02(a)) at the Premises and in the Building in a manner that will not adversely
affect Tenant's access, use or occupancy of the Premises and the Building
Parking Garage and Additional Parking Areas. Any remediation or control at the
Premises or the Building will be in accordance with all applicable governmental
laws, rules, and regulations. If Landlord ever has knowledge of the presence in
the Premises or the Building of such toxic or hazardous materials which affect
the Premises, Landlord shall notify Tenant in writing promptly after receiving
such knowledge. If Tenant ever has knowledge of the presence in the Premises of
such toxic or hazardous materials which affect the Premises, Tenant shall notify
Landlord in writing promptly after receiving such knowledge. For purposes of
this Lease, hazardous or toxic materials shall mean hazardous or toxic chemicals
or any materials or wastes
-22-
containing hazardous or toxic chemicals or materials at levels or content which
causes such materials or wastes to be classified as hazardous or toxic as then
prescribed by the then current levels or contents as set from time to time by
EPA or OSHA or as identified under 29-CFR-1910 or 29-CFR-1925 or other
applicable governmental laws, rules and regulations.
Except for any breach or failure by Tenant to comply with its
obligations as set forth in Sections 7.02(a), 7.02(b), 7.02(c) and 7.02(d) of
this Lease, Landlord shall be responsible and liable for the existence of and
remediation of all hazardous materials which may exist now or in the future in
the Premises or the Building, the Complex or the Building Parking Garage or
Additional Parking Areas.
(d) If Tenant its agents, contractors or their respective
employees shall ever violate the provisions of Paragraph (b) above (that apply
to Tenant regarding toxic or hazardous materials), or if Tenant's acts,
negligence, breach of this provision or business operations materially expand
the scope of or materially worsen any contamination from toxic or hazardous
materials installed or introduced by Tenant in the Building, then Tenant shall
clean up, remove and dispose of the material causing the violation, in
compliance with all applicable governmental standards, laws, rules and
regulations and repair any damage to the Premises or any part of the Building or
The Boulder Towers Complex within such period as may be reasonable under the
circumstances after written notice by Landlord, provided that such work shall
commence not later than fifteen (15) days from such notice and be diligently and
continuously carried to completion by Tenant or Tenant's designated contractors.
Tenant shall notify Landlord of its method, time and procedure for any
clean-up or removal of toxic or hazardous materials under this provision; and
Landlord shall have the right to require reasonable changes in such method, time
or procedure or to require the same to be done after normal business hours or
when the Building or The Boulder Towers Complex is otherwise closed (i.e.,
weekends and holidays).
(e) If Landlord, its agents, contractors, property manager or
their respective employees shall ever violate the provisions of Paragraph (c)
above (that apply to Landlord regarding toxic or hazardous materials), or if
Landlord's acts, negligence, breach of this provision or business operations
materially expand the scope of or materially worsen any contamination from toxic
or hazardous materials installed or introduced by Landlord (including the Tenant
Improvements described in Exhibit "B") or existing in the Building, then
Landlord shall clean up, remove and dispose of the material causing the
violation, in compliance with all applicable governmental standards, laws, rules
and regulations and repair any damage to the Premises or any part of the
Building or The Boulder Towers Complex within such period as may be reasonable
under the circumstances after written notice by Tenant, provided that such work
shall commence not later than fifteen (15) days from such notice and be
diligently and continuously carried to completion by Landlord or Landlord's
designated contractors.
Landlord shall notify Tenant of its method, time and procedure for any
clean-up or removal of toxic or hazardous materials under this provision; and
Tenant shall have the right to require reasonable changes in such method, time
or procedure or to require the same to be done after normal business hours or
when the Building or The Boulder Towers Complex is otherwise closed (i.e.,
weekends and holidays). Notwithstanding the foregoing in this Section 7.02, in
the
-23-
event that Landlord's clean-up or removal pursuant to this subsection (e)
("Clean Up or Removal") adversely affects all or any portion of the Premises for
more than one (1) business day, the Rent shall abate as to the portion of the
Premises so affected until the affected portion of the Premises can be used
again for normal business purposes. If such Clean Up or Removal materially and
adversely affects Tenant's use of the Premises for thirty (30) consecutive days,
then Tenant shall have the right to terminate this Lease after written notice to
Landlord (but in all events prior to the substantial completion of such Clean Up
or Removal), which notice shall specify the effective date of termination and
which date shall not be more than one hundred eighty (180) days after the date
of Tenant's notice of termination.
Section 7.03 Access. Subject to events beyond Landlord's reasonable
control and emergencies which may arise, Tenant, its permitted subtenants and
their employees, licensees and guests, shall have access to the Premises at all
times, 24 hours per day, every day of the year, except if the Building is closed
due to an emergency or the Building is closed by governmental order, or the
Building is closed by Landlord for security or safety concerns. Except in the
event a lack of access is caused by a casualty or condemnation, a lack of
access as required hereunder shall be deemed an interruption of Building
Services as set forth in Section 5.08 hereof, which shall entitle Tenant to all
abatement and termination remedies specified in Section 5.08. Notwithstanding
anything in this paragraph to the contrary, a lack of access as required
hereunder due to an emergency beyond Landlord's reasonable control (but only for
and up to a maximum of three (3) business days) shall not be deemed an
interruption of Building Services as set forth in Section 5.08 hereof, and shall
not entitle Tenant to any abatement and/or termination remedies specified in
Section 5.08; provided, however that a lack of access due to an emergency in
excess of three (3) business days shall be deemed an interruption of Building
Services under Section 5.08 hereof. Notwithstanding anything in this paragraph
to the contrary, should the Tenant's lack of access to the Premises be caused by
either (i) fire or other casualty or (ii) condemnation or eminent domain
proceeding, then the provisions of Article 9 herein (in the event of a fire or
other casualty), or Article 12 herein (in the event of a condemnation or eminent
domain proceeding, shall prevail in determining Tenant's rights to abatement and
termination and Tenant shall not have a right to an abatement of Rent or a right
to terminate this Lease under this paragraph.
Section 7.04 Storage Space. Tenant shall have the right to lease the
Storage Space on the basement level of the Building at a rate during the Initial
Term as set forth in Exhibit "C" hereto and during the Renewal Term at an amount
equal to the Fair Market Value Rate for onsite storage which shall not in any
event exceed $6.50 per square foot per year. Landlord upon request shall advise
Tenant of the availability of any additional existing storage space in the
basement and the rental rate for such additional space shall be the same as the
rental rate for the Storage Space. The storage space leased to Tenant shall be
subject to reasonable rules and regulations by Landlord which shall not modify
or amend or be inconsistent with the provisions of this Lease, nor shall such
rules or regulations require the payment or expenditure of additional monies by
Tenant, and shall be provided by Landlord on an "AS IS" basis with limited
services appropriate for storage space.
Section 7.05 Building Directory. Landlord, at its expense, shall
maintain a Building directory in the lobby of the Building for all tenants of
the Building. Landlord shall also provide floor signage in the elevator lobby of
each of Tenant's floors as requested by Tenant at Tenant's
-24-
expense. The exact size, location, and design of such signage to be approved by
Landlord which approval shall not be unreasonably withheld. Landlord shall list
Tenant on such directory at no charge for the initial listing, such initial
listings on the directory as Tenant shall reasonably require up to Tenant's pro
rata share of the available listings. All changes, additions and subtractions to
and from Tenant's initial listings shall be at Tenant's sole expense, and Tenant
shall pay Landlord's reasonable cost for the same. Landlord reserves the right
to modify or replace the directory at any time in the future in its sole
discretion.
Section 7.06 Tenant Interior Signage. At Tenant's sole cost of
installation and maintenance, Tenant shall have the right to install, affix or
display its name and logo on any door, window or wall of the Premises without
obtaining the consent of Landlord, provided that such name or logo is not
visible from the exterior of the Building. In addition, Tenant shall, at
Tenant's sole cost of installation and maintenance, have the right to install,
affix or display its name or logo in the common areas on the floors of the
Premises subject to the approval of Landlord, which approval will not be
unreasonably withheld or delayed.
ARTICLE EIGHT - REPAIRS AND MAINTENANCE
Section 8.01 Landlord's obligation to Repair and Maintain. Landlord
shall, at its sole cost and expense, such cost and expense to be Operating
Expenses, keep and maintain in good repair and working order and make all
repairs to and perform necessary maintenance upon the Complex, Building, the
base building systems within the Premises and the Common Building Facilities and
all parts thereof, including, but not limited to, the ceilings, lighting, base
building HVAC, plumbing, walls, floors, corridors, lobbies, and base building
equipment within and serving the Premises and the Building (including the
Building Parking Garage and Additional Parking Area) which are required in the
normal maintenance and operation of the Premises and the Building and in
accordance with Landlord's operational requirements as set forth in this Lease.
Section 8.02 Tenant's obligations.
(a) Subject to the terms and provisions of Section 17.02 of this
Lease, Tenant shall maintain the Premises (except the Common Building Facilities
contained therein), including all of Tenant's additions, alterations,
installations, improvements and trade fixtures, the diesel motor for the Data
Center Space located outside the Building, and other Special Systems installed
by or on behalf of Tenant, and all of Tenant's property within the Premises and
shall repair any and all damage caused by it to the Premises, ordinary wear and
tear, damage by fire or other casualty, damage arising out of condemnation or
eminent domain proceedings and damage caused by others for whom Tenant is not
responsible excepted. Upon termination of this Lease, Tenant shall surrender and
deliver up the Premises in the same condition in which existed at the
commencement of this Lease, except for ordinary wear and tear, Tenant's
alterations, additions, installations and improvements, repairs and maintenance
assumed by Landlord, damage arising from fire or other casualty, damage arising
out of condemnation or eminent domain proceedings and damage caused by others
for whom Tenant is not responsible and which damage Tenant is otherwise not
obligated to repair or restore under this Lease. Notwithstanding the foregoing
in this Section 8.02(a), Tenant, at Landlord's sole risk and cost, shall
maintain the Liebert units currently located in the Data Center Space ("Liebert
Units"), and the diesel motor for the Data
-25-
Center Space located outside the Building ("Diesel Motor"). Tenant shall enter
into quarterly maintenance contracts with a contractor reasonably acceptable to
both Landlord and Tenant for the maintenance of the Liebert Units and the Diesel
Motor. Landlord shall reimburse Tenant within thirty (30) days of delivery of an
invoice from Tenant for all maintenance costs incurred by Tenant for maintenance
of the Liebert Units, and the Diesel Motor. If Tenant fails to enter into such
quarterly maintenance contracts for the Liebert Units and the Diesel Motor, then
Tenant shall be solely responsible for all maintenance, repair and replacement
costs for the Liebert Units and the Diesel Motor. Notwithstanding the foregoing
in this Section 8.02(a), Landlord shall pay all maintenance, repair and
replacement costs of the Liebert Units and the Diesel Motor.
(b) If Tenant fails to perform any maintenance or repair required
under this Section 8.02, Landlord may, following thirty (30) days' written
notice to Tenant, perform the same and Tenant shall reimburse Landlord for the
reasonable cost of such maintenance and/or repair within thirty (30) days of
Landlord's invoice therefore, together with invoices and paid receipts and other
reasonable evidence of such costs. If such amounts are not paid by Tenant within
the thirty (30) day period, interest shall accrue on such sums based on Chase
Manhattan Bank's New York published prime rate or in the event Chase Manhattan
Bank no longer publishes a prime rate, another major bank substituted by
Landlord, plus 150 basis points (the "Default Rate"). In addition, if Tenant's
failure to maintain or repair causes an imminent threat to persons or property,
Landlord may, after providing Tenant with such notice as is reasonable under the
circumstances, perform such maintenance or repair and Tenant shall reimburse
Landlord for the reasonable cost of such maintenance and/or repair within thirty
(30) days of Landlord's invoice therefor, together with invoices and paid
receipts and other reasonable evidence of such costs. If such amounts are not
paid by Tenant within the thirty (30) day period, interest shall accrue on such
sums until paid at the Default Rate.
ARTICLE NINE - FIRE AND CASUALTY
Section 9.01 Damage or Destruction.
(a) If the Building or any part thereof should be destroyed or
damaged by fire or other casualty during the Term of this Lease, then (unless
this Lease is terminated by Landlord or Tenant as hereinafter provided) Landlord
shall within sixty (60) days of the date of the casualty, proceed to diligently
and continuously reconstruct, restore and repair the Building and the base
building systems and Building standard improvements contained in the Premises,
as the case may be, to a condition substantially equivalent to their former
condition. If Landlord fails to commence or diligently and continuously proceed
with such action within this period of time or if the restoration is not
substantially completed within one-hundred and eighty (180) days of the
casualty, then Tenant, as its sole and exclusive remedy for such failure (in
addition to Section 9.01(c)), may forthwith terminate this Lease (effective no
later than one hundred eighty (180) days after the date of Tenant's notice)
prior to the substantial completion of such restoration.
(b) Notwithstanding anything to the contrary in Section 9.01 (a),
Landlord's obligation to restore shall be limited to the insurance proceeds it
receives; provided however, such limitation shall not impair or limit Tenant's
right to terminate the Lease for Landlord's failure to timely commence or to
complete restoration as provided in Section 9.01 (a).
-26-
(c) Commencing with the date of such damage, the Rent provided for
herein shall abate pro rata to the extent that, and for so long as, any portion
of the Premises is adversely affected for the use described in Section 7.01(a)
or for so long as damage to Common Building Facilities adversely affects the
performance of Tenant's business; provided however that upon substantial
completion by Landlord of its restoration work, Rent shall commence on the
expiration of a reasonable time thereafter required for Tenant to substantially
complete its restoration work under Section 9.01 (e).
(d) It is agreed that if the Building is totally destroyed by any
cause or is so substantially destroyed such that reconstruction would require
more than one hundred eighty (180) days, as reasonably estimated by Landlord's
architect or contractor, either Landlord or Tenant may elect to terminate this
Lease by giving the other party written notice of such election within thirty
(30) days after the giving of the notice from Landlord hereinafter provided.
Such termination shall be effective as of the date of such election. In the
event of any substantial casualty, Landlord shall within thirty (30) days
thereafter, give Tenant written notice of the estimated time required to repair
the same as reasonably estimated by Landlord's contractor or architect.
(e) For any casualty to the Premises only, or any casualty to the
Building and Premises in which Landlord is obligated to restore the Building or
otherwise elects to restore the Building, Tenant, subject to Sections 9.01(a),
(c) and (d) above, shall promptly commence and diligently prosecute to
completion the restoration of all leasehold improvements, alterations,
installations, additions and trade fixtures which are damaged or destroyed to a
completion substantially equivalent to their condition on the date of the
casualty; provided, however, that in the event such casualty referred to in this
Section 9.01(e) shall occur in the last two Lease Years, then Tenant shall have
the right to terminate this Lease within thirty (30) days following such
casualty upon written notice to Landlord, which notice shall specify the
effective date of termination and which date will not be more than one hundred
eighty (180) days after the date of Tenant's notice of termination.
Notwithstanding anything to the contrary in this Paragraph 9.01,
Landlord and Tenant agree to the following:
(1) In the event that a casualty materially and adversely affects
Tenant's use of the Data Center Space for 150 consecutive days ("150 Day
Period"), then Landlord, at its sole cost and expense, shall have the right
prior to the expiration of the 150 Day Period to relocate the Data Center Space
to other space in the Building and to construct new Data Center Space. In such
event, Landlord, at its sole cost and expense, shall construct such new Data
Center Space within the 150 Day Period so that such space shall be in
substantially the same condition as existed in the original Data Center Space
prior to the casualty. Such new Data Center Space shall include the Liebert
Units, Diesel Motor and electronic switching equipment located in the Data
Center Space (the "Switching Equipment"), and Landlord shall insure that the new
Data Center Space shall be located within 300 feet of Tenant's satellite dishes,
or Landlord shall move such satellite dishes to a location mutually acceptable
to Landlord and Tenant which is within 300 feet of the new Data Center Space.
During the construction of the new Data Center Space, Rent for the Data Center
Space shall abate. Upon substantial completion of construction of such new Data
Center Space within the 150 Day Period and the commencement of operations in the
-27-
Data Center Space, (i) the term "Data Center Space" as defined in Section
1.01(b) of this Lease shall be amended to be the new Data Center Space, and any
necessary adjustments to Annual Rental for the Data Center Space shall be made
in accordance with Exhibit "C" to this Lease; and (ii) Tenant shall no longer
have the right to an abatement of Rent or the right to terminate this Lease
under this Section 9.01 because of the casualty affecting the Data Center Space.
(2) In the event that a casualty materially and adversely affects
Tenant's use of the Storage Space for 120 consecutive days (120 Day Period),
then Landlord, at its sole cost and expense, shall have the right prior to the
expiration of the 120 Day Period to relocate the Storage Space to other space in
the Building. In such event, Landlord, at its sole cost and expense, shall
construct such new Storage Space within the 120 Day Period so that such space
shall be in substantially the same condition as existed in the original Storage
Space prior to the casualty. During the construction of the new Storage Space,
Rent for the Storage Space shall abate. Upon substantial completion of
construction of such new Storage Space within the 120 Day Period, (i) the term
"Storage Space" as defined in Section 1.01(b) of this Lease shall be amended to
be the new Storage Space, and any necessary adjustments to Annual Rental for the
Storage Space shall be made in accordance with Exhibit "C" to this Lease; and
(ii) Tenant shall no longer have the right to an abatement of Rent or the right
to terminate this Lease under this Section 9.01 because of the casualty
affecting the Storage Space.
(3) In the event Landlord fails to complete the new Data Center
Space or Storage Space within the 150 Day Period or 120 Day Period respectively,
then Tenant may terminate this Lease at any time prior to the Substantial
Completion of the Data Center Space (either the old or new Data Center Space) or
the Storage Space (either the old or new Storage Space), such termination date
to be no more than one hundred eighty (180) days after the date of Tenant's
termination notice to Landlord.
Section 9.02 Waiver of Subrogation Rights. Notwithstanding anything in
this Lease to the contrary, Landlord, Tenant, and all parties claiming under
them, each mutually waive, release and discharge each other from responsibility
for any and all rights of recovery, claim, action or cause of action against the
other for any loss or damage that may occur to the Premises, the Building, the
Complex, the Common Building Facilities, or any personal property of Landlord or
Tenant, arising from any cause that would be insured against under the terms of
any insurance required to be carried hereunder. The foregoing waiver, release
and discharge shall apply regardless of the cause or origin of such claim,
including, but not limited to, the negligence of a party, or such party's
agents, officers, employees or contractors. Any fire, extended coverage or
property insurance policy required to be maintained by Tenant in this Lease with
respect to the Premises, or Landlord with respect to the Building, the Complex,
the Common Building Facilities, shall contain, in the case of Tenant's policies,
a waiver of subrogation provision or endorsement in favor of Landlord (but only
for liabilities expressly assumed by Tenant in this Lease), and in the case of
Landlord's policies, a waiver of subrogation provision or endorsement in favor
of Tenant, or, in the event that such insurers cannot or shall not include or
attach such waiver of subrogation provision or endorsement, Tenant and Landlord
shall obtain the approval and consent of their respective insurers, in writing,
to the terms of this Lease. Tenant agrees to indemnify, protect, defend and hold
harmless each and all of the Landlord Indemnitees (defined below) from and
against any claim, suit or cause of action asserted or brought by Tenant's
insurers for, on behalf of, or in the name of Tenant, including, but not limited
to, claims for
-28-
contribution, indemnity or subrogation, brought in contravention of this
paragraph. Landlord agrees to indemnify, protect, defend and hold harmless each
and all of the Tenant Indemnitees (defined below) from and against any claim,
suit or cause of action asserted or brought by Landlord's insurers for, on
behalf of, or in the name of Landlord, including, but not limited to, claims for
contribution, indemnity or subrogation, brought in contravention of this
paragraph. The mutual releases, discharges and waivers contained in this
provision shall apply EVEN IF THE LOSS OR DAMAGE TO WHICH THIS PROVISION APPLIES
IS CAUSED SOLELY OR IN PART BY THE NEGLIGENCE OF LANDLORD INDEMNITEES OR TENANT
INDEMNITEES.
ARTICLE TEN - LIABILITY
Section 10.01 Indemnity by Tenant. To the extent permitted by law,
Tenant agrees to indemnify, protect, defend and hold Landlord, its affiliates
and their respective agents, employees, officers and directors (the "Landlord's
Indemnitees") harmless against any and all actions, claims, demands, costs and
expenses, including reasonable attorney's fees and expenses for the defense
thereof, to the extent arising from Tenant's negligence, from the undertaking of
any alterations, work or repairs to the Premises or the Complex (if any) by
Tenant or from any willful or negligent act of Tenant, its agents, contractors,
servants, employees, customers or invitees, in or about the Premises, but only
to the extent of Landlord's liability, if any, in excess of amounts, if any,
paid to Landlord under insurance covering such claims or liabilities. In case of
any action or proceeding brought against the Landlord's Indemnitees by reason of
any such claim, upon notice from Landlord, Tenant covenants to defend such
action or proceeding by counsel reasonably satisfactory to Landlord.
Section 10.02 Indemnity by Landlord. To the extent permitted by law,
Landlord agrees to indemnify, protect defend and hold the Tenant, its affiliates
and their respective agents, employees, officers and directors ("Tenant's
Indemnitees") harmless against any and all actions, claims, demands, costs and
expenses, including reasonable attorney's fees and expenses for the defense
thereof, arising from Landlord's negligence, from the undertaking of any
alterations, work or repairs to the Premises or the Complex by Landlord, its
contractors, agents, or their respective employees, or from any willful or
negligent act of Landlord, its agents, contractors, servants, employees,
customers or invitees, in or about the Premises and the Complex, but only to the
extent of Tenant's liability, if any, in excess of amounts, if any, paid to
Tenant under the insurance required to be carried pursuant to the terms of this
Lease and covering such claims or liabilities. In case of any action or
proceeding brought against the Tenant's Indemnities by reason of any such claim,
upon notice from Tenant, Landlord covenants to defend such action or proceeding
by counsel reasonably satisfactory to Tenant.
Section 10.03 Disclaimer of Consequential Damage. Notwithstanding
anything in this Lease to the contrary, neither Landlord nor Tenant shall in any
event or occurrence be liable to the other for special, indirect or
consequential damages resulting or arising out of this Lease, including without
limitation, loss of use, profit or business, however caused. The provisions of
this Section shall control over any conflicting provision of this Lease.
-29-
ARTICLE ELEVEN - ALTERATIONS AND FIXTURES
Section 11.01 Alterations by Tenant and Landlord.
(a) Tenant may make such alterations in or additions to the
Premises as it shall from time to time elect to make without obtaining the
consent of Landlord; provided, however, that any material alteration in or
addition to the Premises (it being expressly agreed that decorations,
redecorating, substitutions and nonstructural changes which are not visible from
the exterior of the Building and do not adversely affect the base building HVAC
or mechanical, electrical or plumbing systems or penetrate above the ceiling
grid shall not be deemed material the "Permitted Alterations") shall be subject
to the prior written consent of Landlord in each instance, which consent shall
not be unreasonably withheld or delayed, except as to changes visible from the
exterior of the Building or changes which impair or cause load design problems
for the structural, HVAC, mechanical, electrical or plumbing systems of the
Building, as to which Landlord may withhold consent in its sole discretion.
Subject to the approval of Landlord, which will not be unreasonably withheld,
Tenant may use contractors of its own selection and there shall be no overhead
or supervision fees to Landlord for any such work. Tenant shall reimburse
Landlord for any reasonable out-of-pocket fees or expenses paid to third-party
architects, engineers, consultants and/or other professionals in evaluating any
alteration requested by Tenant pursuant to this Section 11.01. Notwithstanding
the foregoing, Tenant shall not make any material alterations or changes to the
Liebert Units, Diesel Motor and Switching Equipment and the Building systems,
including the fire suppression system, located within the Data Center Space.
(b) In addition to the work to be performed by Landlord pursuant
to Exhibit "B", any other alterations or additions made by Tenant in the
Premises shall be constructed and completed in a good and workmanlike manner at
Tenant's expense by contractors approved by Landlord, such approval not to be
unreasonably withheld or delayed. Except for Permitted Alterations, Tenant shall
furnish to Landlord in advance the plans and specifications for any alterations
and/or additions to the Premises and any other information which Landlord may
reasonably request pertaining to such alterations or additions. Landlord shall
determine (within the time period specified in Section 7.02(a)) whether or not
such proposed alterations or additions will disturb the areas in the Building
which are identified as possibly containing enclosed hazardous materials as
referred to in Section 7.02. If Landlord reasonably determines that such plans
and/or construction will disturb any such hazardous materials, then Tenant shall
have the right to modify its plans and/or alterations and/or additions to the
Premises so as to not disturb such hazardous materials. If Tenant elects not to
modify such plans and/or documents or if such modifications will require
additional cost or delay (which is not acceptable to Tenant) in construction of
Tenant's alterations or additions, then Tenant shall not perform alterations or
additions to the Premises. Tenant shall obtain all necessary governmental
permits, licenses and approvals and shall comply with all Applicable Laws and
the reasonable requirements of Landlord as to work schedule, noise abatement,
safety, security, elevator access, trash removal and other activities to
minimize disruption and annoyance to other tenants in the Building.
(c) Tenant shall pay all taxes and assessments levied with respect
to Tenant's above standard leasehold improvements, alterations, additions,
installations, trade fixtures and personal property in the Premises.
-30-
(d) Tenant shall indemnify and hold harmless Landlord from and
against any and all losses, damages, costs and expenses (includes costs of suit
and attorneys' fees), liabilities, or causes of action arising out of or
relating to mechanics, materialmen's or other liens or claims (and all costs or
expenses associated therewith) asserted, filed or arising out of any
alterations, additions, installations, or improvements made by Tenant to the
Premises (not including the work to be performed by Landlord on behalf of Tenant
pursuant to Exhibit "B" hereto). All contracts with materialmen, contractors,
artisans, mechanics, laborers and other parties hereafter contracting with
Tenant for the furnishing of any labor, services, materials, supplies or
equipment with respect to any portion of the Premises must provide that they
look solely to Tenant for payment for same.
Section 11.02 Tenant's Property.
(a) Tenant, at its expense, may, at any time and from time to
time, install in and remove from the Premises its trade fixtures, logos, trade
names, equipment, movable partitions, walls and wall systems (excluding the
Virginia Panel Wall System which shall remain the property of Landlord),
furniture and furnishings and all of Tenant's other personal property, provided
such installation or removal is accomplished without material damage to the
Premises or the Building and Tenant promptly repairs any damage thereto.
(b) Upon the expiration of this Lease, Tenant shall remove all of
Tenant's personal property and trade fixtures and Tenant shall promptly repair
any damage to the Premises or the Building. If Tenant fails to remove any
personal property of Tenant that Tenant may remove upon the termination of this
Lease, any such property not so removed shall, at Landlord's election, become
the property of Landlord or be removed by Landlord at Tenant's expense.
Notwithstanding the foregoing Tenant shall have no obligation to remove walls,
wall systems, ceilings or floor coverings in the Premises. Notwithstanding
anything in the Lease to the contrary, if requested by Landlord in writing,
Tenant, shall be responsible, at its sole cost and expense, for removing the
internal stairwell between the thirteenth (13th) and fourteenth (14th) floors
upon the completion or earlier termination of this Lease and Tenant shall
promptly restore such floor area to substantially the same condition that
existed prior to installation of such stairwell.
ARTICLE TWELVE - CONDEMNATION
Section 12.01 Total Taking. If all of the Building or the Premises
shall be taken by condemnation or in any other manner for any public or
quasi-public use or purpose (other than for temporary use or occupancy), the
Term of this Lease shall terminate as of the date of vesting of title (the "Date
of the Taking"), and, subject to a proration and apportionment of Annual Rental
and proration, apportionment and reconciliation of Additional Rental and other
sums due hereunder as of the Date of the Taking, no further Rent shall be due
hereunder.
Section 12.02 Partial Taking. If a part of the Premises shall be so
taken, then Landlord shall give Tenant prompt written notice thereof and the
part so taken shall no longer constitute part of the Premises, but this Lease
shall continue in force and effect as to the part not so taken; provided,
however, that Tenant may elect to terminate this Lease (a) if a partial taking
of the Premises occurs and Landlord is not able to provide alternate premises in
the Building
-31-
reasonably acceptable to Tenant for the normal conduct of Tenant's business for
the portion of the Premises taken or if, in the good faith, reasonable judgment
of Tenant, the remaining portion of the Premises cannot be economically and
practicably used by Tenant for the conduct of its business or (b) if a partial
taking has a material and adverse effect upon (i) the normal conduct by Tenant
of its business in the Premises, or (ii) the parking for Tenant and its visitors
and Landlord does not relocate such parking pursuant to Section 6.01(d) of this
Lease. Tenant shall give notice of any election to terminate to Landlord not
later than sixty (60) days after notice of such taking is given by Landlord to
Tenant. Upon the date specified in Tenant's notice (which shall be a date as
soon thereafter as is practical for Tenant to relocate from the Building, but in
no event more than one hundred eighty (180) days thereafter), the Term of this
Lease shall terminate and, subject to a proration and apportionment of Annual
Rental and proration, apportionment and reconciliation of Additional Rental and
other sums due hereunder as of the date of the termination, no further rent
shall be due hereunder. Upon a partial taking and the Term of this Lease
continuing in force as to any part of the Premises, the Annual Rental or any
Additional Rental shall be reduced proportionately based upon the part or parts
of the Premises and/or other parts of the Building so taken. If a part of the
Building is taken, and either (i) Landlord's architect or contractor reasonably
estimates that reconstruction would require more than one hundred eighty (180)
days; (ii) in Landlord's good faith, reasonable judgment the remaining portion
of the Building cannot be restored to a functional whole or cannot be restored
so as to be efficient and economically viable to own, operate and maintain as a
commercial office building or (iii) the cost of restoration will require more
than the condemnation proceeds paid to Landlord, then Landlord may elect to
terminate this Lease by delivering written notice of such election to Tenant not
later than sixty (60) days following the Date of the Taking, and this Lease
shall terminate as of a date mutually acceptable to Landlord and Tenant, but in
no event more than one hundred eighty (180) days following such notice, subject
to a proration and apportionment of Annual Rental and proration, apportionment
and reconciliation of Additional Rental and other sums due hereunder.
Section 12.03 Claims of Landlord and Tenant. Landlord shall be entitled
to receive the entire award in any proceeding with respect to any taking (other
than for temporary use and occupancy) provided for in this Article and Tenant
shall receive no part of such award, except as hereinafter expressly provided.
Tenant shall have the right to make a separate claim with the condemning
authority for (a) any moving expenses incurred by Tenant as a result of such
condemnation; (b) any costs incurred and paid by Tenant in connection with the
layout work, tenant's work or any alteration or improvement made by and paid for
by Tenant to the Premises including the work performed by Landlord on behalf of
Tenant pursuant to Exhibit "B"; (c) the value of any of Tenant's property taken;
and (d) any other separate claim which Tenant may hereafter be permitted to
make. Notwithstanding the foregoing, Tenant's separate claim shall not be
reduced or adversely affected by the amount of Landlord's award. If Tenant shall
not be permitted to make a separate claim in such proceeding, Landlord will at
Tenant's request, prosecute all claims in such proceeding on behalf of both
Landlord and Tenant in which event Tenant may, if it so elects and at its
expense, join with Landlord in such proceeding, retain co-counsel, attend
hearings, present arguments and generally participate in the conduct of the
proceeding; provided, however, that if Landlord incurs any additional expense
because of Tenant's exercising its rights under this sentence, Tenant will bear
such additional expense.
-32-
Section 12.04 Distribution of the Award. The aggregate amount of all
awards received in any proceeding relating to any taking (other than awards to
Tenant pursuant to Section 12.03 or for temporary use or occupancy) is
hereinafter called the "Award." The Award shall be distributed to the parties
based on the apportionment of the Award in such proceeding.
Section 12.05 Temporary Taking of Premises. If all or any part of the
Premises shall be temporarily taken by condemnation or otherwise for any public
or quasi-public use or purpose (unless Tenant shall have elected to terminate
the Term of this Lease in accordance with the option provided in the last
sentence of this Section), this Lease shall nevertheless remain in full force
and effect. Tenant shall continue to be responsible for all of its obligations
hereunder insofar as such obligations are not affected by such taking; provided,
however, that Tenant shall not be liable for the payment of Rent or other sums
for the part of the Premises so temporarily taken. The Award claims of Landlord
and Tenant shall be handled as provided in Section 12.03. In the event of a
temporary taking which meets the requirement of subsection (a) or (b) of Section
12.02 for a period in excess of seventy-five (75) consecutive days, Tenant may
terminate the Term of this Lease upon notice to Landlord given within thirty
(30) days after such taking or, in the case of an indefinite temporary taking
under subsection (a) of Section 12.02, within thirty (30) days after such
seventy-five (75) day period has expired.
Section 12.06 Landlord's Obligation to Restore.
(a) In the event of a taking which taking does not result in the
termination of this Lease, Landlord shall, at its expense to the extent of the
amount of the Award or Awards to Landlord (subject to Landlord's right of
termination of Section 12.02), proceed with due diligence to repair, alter
and/or restore the remaining part of the Building and the base building systems
and Building standard improvements within the Premises substantially to their
former condition to the extent feasible to constitute a complete and tenantable
Building and Premises (assuming Tenant performs its restoration pursuant to
Section 12.06(b)). Upon the expiration of any temporary taking which did not
result in a termination of this Lease, Landlord, with due diligence, shall
restore the base building systems and Building standard improvements within the
Premises to their former condition as aforesaid.
(b) In the event of a taking which does not result in the
termination of this Lease and to the extent that any Award or Awards to Tenant
shall be sufficient for the purpose, Tenant shall restore, with due diligence,
Tenant's alterations, improvements, installations, additions and trade fixtures
in the remaining portion of the Premises. Upon the expiration of or temporary
taking of the Premises which did not result in a termination of this Lease,
Tenant shall restore, with due diligence, Tenant's above Building standard
alterations, additions, installations and trade fixtures as aforesaid. Tenant
shall not be obligated to commence its restoration until Landlord has
substantially completed its restoration obligation.
(c) During any period of restoration of the Building and the base
building systems or Building standard improvements or Tenant's alterations,
improvements, installations, additions and trade fixtures within the Premises
pursuant to subsection (a) above, the Rent provided for herein shall abate pro
rata to the extent that, and for so long as Tenant's use or occupancy of any
portion of the Premises is adversely affected.
-33-
ARTICLE THIRTEEN - REMEDIES AND DEFAULTS
Section 13.01 Default by Tenant.
(a) Any of the following shall be an "Event of Default" by Tenant
under this Lease:
(i) Tenant fails or refuses to pay any installment of
Annual Rental or Additional Rental and such failure
or refusal continues for more than ten (10) days
following delivery of written notice to Tenant;
provided, however, following the fourth (4th) notice
of nonpayment of Annual Rental and/or Additional
Rental given by Landlord in any lease year, Landlord
shall not be required to give any written notice for
any subsequent failure of Tenant to timely pay any
installment of Annual Rental or Additional Rental
occurring during such calendar year; or
(ii) Tenant fails or refuses to perform any of its other
covenants under this Lease, and such failure or
refusal continues beyond a reasonable time to cure
such nonperformance, not to exceed thirty (30) days
after the receipt by Tenant of written notice from
Landlord unless additional time, up to a maximum of
ninety (90) days in the aggregate is required to cure
the default which despite diligent and continuous
effort, cannot by its very nature be cured within
thirty (30) days, provided cure is commenced as soon
as commercially reasonable and is diligently
prosecuted to completion.
(b) Following an Event of Default and which is not cured within
the cure periods set out above, Landlord shall have the following remedies in
addition to those other remedies at law or in equity which are not inconsistent
therewith:
(i) Landlord may terminate this Lease and forthwith
repossess the Premises and be entitled to recover
forthwith as damages a sum of money equal to the
total of (a) the cost of recovering the Premises, (b)
the unpaid rent earned through the date of
termination, plus interest thereon at the Default
Rate from the due date, and (c) any other sum of
money and damages owed by Tenant to Landlord under
this Lease at the time of termination.
(ii) Landlord may terminate Tenant's right of possession
(but not the Lease) and may repossess the leased
premises by self-help, forcible entry or detainer
suit or otherwise, without demand or notice of any
kind to Tenant and without terminating this Lease, in
which event Landlord may relet the same for the
account of Tenant, such right to relet being on the
following terms and conditions: (a) Landlord shall
only relet on commercially reasonable terms and rent,
and if the Premises are relet in whole or in part,
Tenant shall be entitled to a credit in the net
amount of the Annual Rental or Additional Rental
received by Landlord as a result (after deducting all
reasonable costs incurred by Landlord in finding a
new tenant, including brokerage fees, agent's
commissions, redecorating costs, construction
-34-
allowance, lease concessions, parking, attorneys'
fees and any other reasonable costs and expenses
incident thereto). Tenant shall remain obligated to
pay the amount of any deficiency in the Annual Rental
or any Additional Rental obtained on such reletting,
but if the Annual Rental or any Additional Rental
obtained on such reletting is greater than that
provided for herein plus Landlord's costs, such
excess rentals shall be the sole property of
Landlord, and (b) Landlord shall have the right to
collect from Tenant amounts equal to said
deficiencies provided for above by suits or
proceedings brought from time to time on one or more
occasions without Landlord being obligated to wait
until the expiration of the term of this Lease;
provided, however, Landlord shall not have the right
to accelerate payments of future rents. Any rentals
not paid by Tenant when due shall bear interest at
the Default Rate. No such reletting or other action
of Landlord shall be construed as an election on the
part of Landlord to terminate this Lease unless a
written notice of such intention is given to Tenant
by Landlord. Notwithstanding the foregoing in this
Section 13.01(b)(ii), Landlord will use reasonable
efforts to mitigate its damages resulting from
Tenant's default.
(c) An election by Landlord of its remedies to terminate Tenant's
right of possession under Section 13.01(b)(ii) shall not prohibit Landlord from
subsequently exercising its rights to terminate the Lease under Section
13.01(b)(i).
Section 13.02 Default by Landlord. Landlord shall be in default
hereunder ("Landlord's Default") in the event Landlord fails or refuses to
perform any of its obligations hereunder beyond (i) the specific times provided
in this Lease for the performance of its obligation(s) or (ii) a reasonable time
to cure such nonperformance not to exceed thirty (30) days following the receipt
by Landlord of written notice from Tenant of the alleged failure to perform (or
such shorter time period in the event of an emergency) unless additional time up
to a maximum of ninety (90) days in the aggregate is required to cure the
default which despite diligent and continuous effort, cannot by its very nature
be cured within thirty (30) days, provided such cure is commenced as soon as
commercially reasonable and is diligently prosecuted to completion. In the event
of a Landlord's Default which has not been cured by Landlord following notice
from Tenant, Tenant may, at anytime prior to such default being cured, terminate
this Lease no later than one hundred eighty (180) days from the date of Tenant's
written notice of termination to Landlord. In addition to the right to terminate
this Lease, Tenant may pursue any remedy at law or equity available to it under
the circumstances and arising directly from Landlord's Default.
ARTICLE FOURTEEN - BANKRUPTCY
Section 14.01 Bankruptcy by Tenant. If at any time during the Term of
this Lease a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or substantially all of Tenant's
assets is filed against Tenant in any court pursuant to any statute either of
the United States or of any state and Tenant fails to secure a discharge thereof
within ninety (90) days, or if Tenant voluntarily files a petition in bankruptcy
or makes an assignment for the benefit of creditors covering all or
substantially all of
-35-
Tenants assets or petitions for or enters into an arrangement with creditors
covering all or substantially all of Tenant's assets, the term of this Lease, at
the option of Landlord, exercised within thirty (30) days after notice of the
happening of any one or more of such events, shall terminate on such date as
Landlord shall specify by notice to Tenant, with the same effect as if the date
of termination were the Expiration Date of this Lease, but Tenant shall remain
liable for rent and/or damages attorneys' fees as provided in Article Thirteen
and other damages as may be provided to landlords under the United States
Bankruptcy Code (or any successor thereto). However, if a petition for
reorganization or for an arrangement is filed by or against Tenant, Landlord may
not terminate the term of this Lease so long as Tenant is not in default
hereunder and, provided this Lease is assumed or affirmed in such reorganization
or arrangement proceeding within the time periods provided by law.
ARTICLE FIFTEEN - COMPLIANCE WITH LAWS
Section 15.01 Tenant's Compliance with Laws. Tenant, at, its expense,
shall comply with all applicable laws, rules, orders, ordinance, regulations and
other requirements, present or future (collectively, "Applicable Laws"),
affecting the non-structural portions of the Premises that are promulgated by
any governmental authority or agency having jurisdiction over the Premises
and/or the Building. Tenant shall not at any time use or occupy the Premises so
as to violate the Certificate of Occupancy for the Building or the Complex.
Nothing contained in this Section 15.01, however, shall be deemed to impose any
obligation upon Tenant to make any structural changes to the Premises or
Building or repairs to the Building (unless necessitated by reason of a
particular use by Tenant of the Premises other than those uses specified in
Section 7.01(a) of this Lease) or Complex or to any changes or modifications to
the Building or Complex outside of the Premises. Tenant shall be responsible for
compliance with all current and future requirements for handicap accessibility
within the Premises.
Section 15.02 Landlord's Compliance with Laws. Landlord shall be
responsible for complying with all Applicable Laws affecting the Building, the
Common Building Facilities and the Complex (excluding the non-structural
portions of the Premises) or relating to the performance by Landlord of any
duties or obligations to be performed by it hereunder. Without limiting the
foregoing, Landlord shall comply or cause the Building (excluding the
non-structural portions of the Premises) to comply with all present and future
environmental, energy conservation and fire and safety laws, handicap
requirements, and other mandatory regulations and codes, as the same are
interpreted from time to time.
ARTICLE SIXTEEN - ASSIGNMENT AND SUBLETTING
Section 16.01 Assignment and Subletting by Tenant.
(a) Except as permitted pursuant to this Section 16.01, any
attempted assignment or subletting by Tenant of this Lease of all or any part of
the Premises shall be null and void.
(b) Except for an assignment to an "Affiliate" pursuant to Section
16.01 (c) below, if Tenant desires to assign this Lease or sublease all or any
part of the Premises, Tenant shall notify Landlord in writing at least thirty
(30) days prior to the effective date of any proposed assignment or sublease,
describing the terms of the proposed assignment or sublease and the identity of
the proposed assignee or sublessee and available financial information
concerning the
-36-
business and history of the proposed assignee or sublessee (and any additional
information which Landlord may reasonably request). Landlord shall have fifteen
(15) days from receipt of all of the foregoing to elect to (i) reject such
proposed assignment or sublease; or (ii) consent to the proposed assignment or
sublease; provided, however, Landlord will not unreasonably withhold its consent
to a proposed assignment or sublease.
(c) Tenant (and any permitted subtenant or assignee) shall have
the right, without the consent of Landlord, to assign this Lease or sublet the
Premises or any portion thereof to, or to permit occupancy of any portion of the
Premises by, any Affiliate (as hereinafter defined), any entity that acquires
substantially all of the assets of Tenant, any entity into which Tenant is
merged and any entity resulting from a consolidation of Tenant with some other
entity. The term "Affiliate" shall mean any corporation or other entity
controlled by, under common control with or which controls Tenant or in which
Tenant, directly or indirectly, has a fifty (50%) percent or greater voting or
ownership interest. However, such subletting or assignment shall not relieve
Tenant of any of its obligations under this Lease. Tenant shall provide written
notice to Landlord within thirty (30) days of any assignment or subletting of
any portion of the Premises to any Affiliate.
(d) Any assignee of this Lease must execute a written assumption
agreement assuming all of the obligations of Tenant accruing from and after the
date of assignment.
(e) No assignment or sublease shall relieve the Tenant which was
the assignor or sublessor from any of its obligations or liabilities under this
Lease; the original Tenant and any subsequent assignee of Tenant's interest
under this Lease shall always remain liable under this Lease.
(f) Anything to the contrary notwithstanding any and all sums
collected by Tenant (Assignor or Sublessor) in excess of Annual Rental and
Additional Rentals payable hereunder and after deducting all reasonable costs
incurred by Tenant including brokerage fees, agents' commissions, redecorating
costs, construction allowance, lease concessions and other necessary
expenditures, such excess shall be shared in equal amounts between Tenant and
Landlord.
Section 16.02 Assignment by Landlord. Landlord shall have the
continuing right to transfer, sell and/or assign all of its rights and
obligations under this Lease and in the Building, land and Common Building
Facilities and to assign, in whole or in part, (but only if Landlord sells the
Building) the Rent payable by Tenant under this Lease (subject to the terms of
this Lease). Upon the transfer of the entire estate and interest of Landlord
under this Lease, the transferor shall have no liability for obligations to
Tenant relating to events occurring after and to claims occurring after the date
of such transfer provided that transferee has signed a written agreement to
assume liability for such obligations and Tenant has been provided with a copy
of such agreement. Transferor shall remain responsible for its unfilled
obligations and liabilities to Tenant under this Lease based on events occurring
prior to the transfer. "Landlord" shall mean the then-current owner of
Landlord's.
Section 16.03 No Personal Liability. Tenant specifically agrees to look
solely to Landlord's interest in the Building and the Complex for the recovery
of any judgment from Landlord, its officers, employees or agents, it being
agreed that Landlord shall never be
-37-
personally liable for any such judgment. In addition, Landlord specifically
agrees to limit any right of recovery from Tenant, and its affiliates and their
respective officers, directors, employees, or agents to the amount of the
limitation imposed upon Tenant in the above sentence and Tenant, and its
affiliates and their respective officers, directors, employees, or agents shall
not be personally liable for any judgment in excess of such limitation. The
provisions contained in the foregoing sentence is not intended to, and shall
not, limit any right that either party might otherwise have to obtain injunctive
relief against the other party or its successors in interest.
ARTICLE SEVENTEEN - LANDLORD'S ACCESS
Section 17.01 Landlord's Right to Use Certain Facilities. Landlord may
install, use and maintain utility and other pipes, ducts, lines, flues and
conduits in and through the Premises and serving other portions of the Building
and/or Premises, provided that except for the water and sewer lines in the Data
Center Space, such installations are concealed within the permanent walls,
floors, columns and ceilings of the Premises and in the shafts provided in the
Premises for such installations, not damaging the appearance or reducing the
floor area of the Premises or affecting Tenant's layout, and provided further,
that the installation work is performed in accordance with Section 5.01 of this
Lease. Any damage to the Premises resulting from Landlord's exercise of the
foregoing rights shall be repaired by Landlord, at Landlord's expense. In the
event such work adversely affects Tenant's use of the Premises all Rent shall
abate for the portions of the Premises so affected as provided in Section
5.08(d).
Section 17.02 Data Center Space. Notwithstanding the foregoing in this
Article 17, Landlord, at its sole cost, risk and expense, shall encapsulate
prior to August 1, 2003 (to the reasonable satisfaction of Tenant) all exposed
sewer and water piping which exists in the Data Center Space as of the Effective
Date in such a manner so as to prevent water damage to Tenant's computer and
satellite wiring and equipment located in the Data Center Space. Notwithstanding
anything to the contrary in this Lease, Landlord shall be fully liable and
responsible for any and all damage to Tenant's computer and satellite wiring and
equipment in the Data Center Space caused by leaks, seepage or a bursting of
Landlord's water and sewer lines in the Date Center Space. Notwithstanding
anything in this Lease to the contrary, in the event of any such damage,
Tenant's sole and exclusive remedy shall be that Landlord, at its sole cost and
expense, shall (i) immediately repair and/or replace any such computer and
satellite wiring and/or equipment located in the Data Center Space and (ii)
shall reimburse Tenant for all rental costs of a main frame computer for
Tenant's use during the time period necessary for Landlord's repair or
replacement of such computer equipment or wiring which is damaged or destroyed
due to leaks, seepage or bursting of Landlord's water and sewer lines in the
Data Center Space. Notwithstanding anything in this Lease to the contrary,
Landlord shall not be liable to Tenant for special, indirect or consequential
damages resulting or arising out of any damage or destruction to any computer
wiring and/or equipment located in the Data Center Space, including without
limitation, loss of use, profit or business, however caused.
Section 17.03 Other Data Center Space Renovations. Prior to Substantial
Completion, Landlord, at Landlord's sole cost and expense, shall (i) perform
such improvements to the Data Center Space as are necessary so that the Data
Center Space complies with the City of Tulsa Fire Code, and (ii) remove the
stored documents currently existing in the Data Center Space and more
particularly located in those crosshatched areas set forth on Exhibit M hereto.
-38-
Section 17.04 Emergency Main Frame. In the event there is any damage or
casualty adversely affecting the Data Center Space, Landlord acknowledges and
agrees that Tenant, at its sole cost and expense, shall be allowed to place a
main frame computer in the loading dock for the Building, or in in that location
set forth on Exhibit N hereto, for use by Tenant until the Data Center Space is
once again functioning and operating in substantially the same condition that
existed prior to such damage or casualty.
Section 17.05 Generator.
(a) Notwithstanding anything to the contrary contained in the
Lease, and subject to the conditions listed below, Landlord hereby grants Tenant
the right to install, at Tenant's sole cost and expense, a portable emergency
generator ("Generator") to provide an emergency power supply to the Premises on
a 24 hour, 7-day per week basis. The Generator is to be on a trailer located in
the Building Parking Garage in the location that is described on Exhibit "O"
hereto. The placement and installation of the Generator shall be subject to the
following terms and conditions:
(1) Tenant, at its sole cost and expense, shall install,
maintain, repair, replace and operate the Generator
in good working condition and in a first class
manner.
(2) Tenant must obtain (and provide Landlord with copies
of) all necessary approvals, permits and licenses
from all governmental authorities having jurisdiction
over the Generator. Tenant shall use, operate,
maintain and repair the Generator throughout the Term
in accordance with all applicable local, state and
federal laws, rules and regulations (including any
environmental laws, rules or regulations).
(b) In the event that the Generator causes soil, oil, fumes or
other debris to accumulate on the Building's brick or glass, Tenant shall
immediately clean such debris at its sole cost and expense upon receipt of
notice from Landlord.
(c) Tenant shall disconnect and remove the Generator at or prior
to the termination or expiration of this Lease and restore the Premises and all
other areas (including greenery and landscaping) in or about the Building where
any portion of the Generator is located to substantially its original condition
as of the Commencement Date, reasonable wear and tear excepted and to repair any
damage covered by such disconnection and/or removal.
Section 17.06 Landlord's Access to Premises. Landlord, and Landlord's
employees, agents and contractors, shall have the right to enter and pass
through the Premises or any part or parts thereof (i) during non-Business Hours,
to examine the Premises and to show them to underlying or ground lessees or
mortgagees and to prospective purchasers, mortgagees, lessees (during the last
year of the term of this Lease) or insurers, (and in all such cases accompanied
by a designated representative of Tenant if requested by Tenant) and (ii)
subject to 5.08 of this Lease, for maintenance and making such repairs or
changes in or to the Premises or in or to the Building or its facilities as may
be provided for or permitted by this Lease or as may be mutually agreed upon by
the parties or as Landlord may be required to make by laws and requirements of
-39-
public authorities, provided, however, that the foregoing shall be done upon
prior notice to Tenant, in a manner so as to cause little interference with
Tenant's business operations and, if required by Tenant, accompanied by a
designated representative of Tenant; (iii) during non-Business Hours to perform
Janitorial Services; and (iv) in emergencies. Tenant may designate one or more
areas in the Premises as secure areas, and Landlord shall have no access thereto
without being accompanied by a designated representative of Tenant, except in
the case of an emergency where life or property is threatened.
ARTICLE EIGHTEEN - NAME OF BUILDING AND TENANTS EXTERIOR SIGNAGE
Section 18.01 Name.
(a) It is acknowledged that the name of the Building is "Boulder
Towers". Landlord shall not, during the Term of this Lease change the name of
the Building.
(b) Subject to Addendum Two of this Lease, no sign, notice or
other advertisement shall be inscribed, painted, affixed, or displayed on the
exterior of the Complex which is visible from the exterior of the Complex
without Landlord's prior written consent, which consent will not be unreasonably
delayed or withheld.
ARTICLE NINETEEN - QUIET ENJOYMENT
Section 19.01 Landlord's Covenant of Quiet Enjoyment. Landlord
covenants and agrees, provided Tenant performs all terms, conditions and
covenants of this Lease, Tenant shall quietly hold and enjoy the Premises for
the Term of this Lease, without hindrance, claim or molestation by Landlord,
subject to the terms and provisions of this Lease.
ARTICLE TWENTY - NON-WAIVER
Section 20.01 Non-Waiver By Either Party. Failure by either party to
complain of any action, nonaction or default of the other party shall not
constitute a waiver of any aggrieved party's rights hereunder. Waiver by either
party of any right for any default of the other party shall not constitute a
waiver of any right for either a subsequent default of the same obligation or
for any other default, past, present or future.
ARTICLE TWENTY-ONE - NOTICES
Section 21.01 Notices to Landlord or Tenant. Any notice or
communication to Landlord or Tenant required or permitted to be given under this
Lease shall be effectively given only if in writing and sent by Federal Express
or other national overnight express courier service, or sent by United States
Registered or Certified Mail, postage prepaid, return receipt requested,
addressed as follows:
IF TO TENANT, AS FOLLOWS: Helmerich & Payne, Inc.
Utica at Twenty-first
Tulsa, Oklahoma 74114
Attention: Vice President/General Counsel
-40-
WITH COPY TO: With a copy to:
Real Estate Manager
Utica Square Shopping Center
1709 East 21st Street, Suite 220
Tulsa, Oklahoma 74114
Attn: Real Estate Manager
IF TO LANDLORD, K/B FUND IV
ADDRESSED AS FOLLOWS: c/o Koll Bren Schreiber Realty Advisors,
Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: Rodney Richerson
WITH COPY TO: Mayer, Brown, Rowe & Maw
700 Louisiana, Suite 3600
Houston, Texas 77002
Attention: Ronald M. Shoss
WITH A COPY TO: CB Richard Ellis
Attn: Peggy Perceful
1437 S. Boulder, Suite 170
Tulsa, Oklahoma 74119-3601
|
If notices, demands or requests are sent by registered or certified
mail, said notices, demands or requests shall be effective upon being deposited
in the United States mail. However, the time period in which a response to any
such notice, demand or request must be given shall commence to run from the date
of receipt on the return receipt of the notice, demand or request by the
addressee thereof. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given shall be deemed
to be receipt of notice, demand or request sent. Notices may also be served by
messenger to the addresses set forth in this Section 21.01. In the case of
delivery by Federal Express or other overnight courier service, notices shall be
effective upon delivery to the addresses set forth in this Section 21.01.
Either party shall have the right to change the address to which
notices shall thereafter be sent by giving notice to the other party as
aforesaid.
ARTICLE TWENTY-TWO - PARTIAL INVALIDITY
Section 22.01 Severability Clause. If any term, covenant, condition or
provision of this Lease or the application thereof to any person or
circumstance, shall ever be held to be invalid or unenforceable, then in each
such event the remainder of this Lease or the application of such term,
covenant, condition or provision to any other person or any other circumstance
(other than those as to which it shall be invalid or unenforceable) shall not be
thereby affected, and each term, covenant, condition and provision hereof shall
remain valid and enforceable to the fullest extent permitted by law.
-41-
ARTICLE TWENTY-THREE - BROKERAGE
Section 23.01 Brokerage. Landlord and Tenant mutually represent to each
other that the only broker with whom they have dealt with respect to this Lease
is Trammell Crow Company ("Broker") and Landlord agrees to pay all commissions
that may be owing to such Broker under the commission agreements between
Landlord and Broker. Landlord agrees to indemnify and hold Tenant harmless
against any claims for commissions that may be asserted in connection with this
Lease based upon acts, conversations or communications of Landlord that may be
asserted in connection with the lease of premises hereunder by any broker other
than the Broker named above. Tenant agrees to indemnify and hold Landlord
harmless against any claims for commissions that may be asserted in connection
with this Lease based upon acts, conversations or communications by Tenant that
may be asserted in connection with this Lease by any broker other than the
Broker named above.
ARTICLE TWENTY-FOUR - SUBORDINATION, NONDISTURBANCE
Section 24.01 Subordination. Landlord may, from time to time, grant
first and secondary lien deeds of trust, mortgages or other lien security
interests covering its estate in the land and the Building (herein,
collectively, a "First Mortgage") and any subordinate liens as Landlord may
elect. Tenant, subject to the provisions of Section 24.02, agrees that this
Lease shall be subject and subordinate to each First Mortgage, including any
modifications, substitutions, extensions or renewals thereof and advances
thereunder from time to time in effect. Upon the request of Landlord, and
subject to the provisions of Section 24.02. Tenant agrees to execute a
subordination agreement incorporating the provisions of this Article Twenty-Four
and otherwise in form reasonably acceptable to Tenant and Landlord.
Section 24.02 Nondisturbance. The subordination of this Lease to any
First Mortgage pursuant to Section 24.01 is expressly conditioned upon the
holder thereof expressly agreeing in the First Mortgage, or a separate
instrument recorded contemporaneously with or at a reasonable time after the
recordation of the First Mortgage, that (i) Tenant will not be named or joined
in any proceeding (or trustee's sale) to enforce the First Mortgage unless such
be required by law in order to perfect the proceeding (or sale), (ii)
enforcement of any First Mortgage shall not terminate this Lease or disturb
Tenant in the quiet possession and use of the Premises (except in the case where
Tenant is in default beyond the period, if any, provided in this Lease to remedy
such default), and (iii) any party succeeding to the interest of Landlord as a
result of the enforcement of any First Mortgage shall be bound to Tenant as to
obligations and liabilities of the Landlord as provided in this Lease, and
Tenant shall be bound to it, under all the terms, covenants, and conditions of
this Lease, including Renewal Terms, with the same force and effect as if such
party were the original Landlord under this Lease.
ARTICLE TWENTY-FIVE - RULES AND REGULATIONS
Section 25.01 General. (a) Annexed hereto as Exhibit "H" are Landlord's
Rules and Regulations for the Building. Tenant shall faithfully observe and
comply with such Rules and Regulations and such reasonable and necessary changes
therein as Landlord at any time or times hereafter may make and communicate in
writing to Tenant, provided any changes to such Rules and Regulations shall not
amend or be inconsistent with the provisions of this Lease and/or shall
-42-
not require the payment or expenditure of additional monies by Tenant. The Rules
and Regulations, as changed in accordance with this Section from time to time,
are hereinafter called the "Rules and Regulations." The provision of this Lease
shall control over any conflicting provisions of said Rules and Regulations.
ARTICLE TWENTY-SIX - MISCELLANEOUS
Section 26.01 Certain Miscellaneous Provisions. This Lease (including
the Exhibits referred to herein) contains the entire agreement between the
parties and all prior negotiations and agreements are merged into this Lease.
This Lease may not be changed, modified or amended, in whole or in part, except
by a writing, executed by the party against whom enforcement of the change,
modification or amendment is to be sought. The Article and Section headings or
titles in this Lease are inserted for convenience only and are not to be given
any effect in its construction. Wherever appropriate in this Lease, personal
pronouns shall be deemed to include the other genders and the singular to
include the plural. The covenants and agreements contained herein shall inure to
and be binding upon Landlord, its successors and assigns, and Tenant, its
successors and assigns.
Section 26.02 Holding Over. If without the written consent of Landlord,
Tenant holds over in all or any part of the Premises for at least thirty (30)
days after the expiration or termination of this Lease (or partial/termination
as to the portion of the Premises in which Tenant is holding over), Tenant shall
pay as liquidated damages one hundred fifty (150%) of the monthly rental amounts
then applicable to the Premises (or applicable portion thereof). No such holding
over shall extend the Lease and Tenant shall indemnify Landlord from any and all
claims resulting from such holding over, including those of any other tenant to
which or whom Landlord may have leased such space and any purchaser of the
Boulder Towers Complex. Tenant shall be a tenant at will and at sufferance of
Landlord for any unauthorized holding over.
Section 26.03 Estoppel Certificate. Upon the written request of the
other, Landlord and Tenant each agree to execute from time to time certificates
stating (a) if true, that the Lease is in full force and effect; (b) if true,
that the certifying party is not in default under the Lease and has no knowledge
of any default of the other party; (c) the then applicable rentable area of the
Premises, Annual Rental Additional Rental and the expiration date of the Lease;
(d) the date through which rent has been paid; (e) a covenant to send notices of
default by the other party to a designated person or entity; and (f) such other
information as is reasonably requested.
Section 26.04 Attorneys' and Professional Fees. In the event any
dispute between Landlord and Tenant is resolved by a judgment in a court of law
or by arbitration, the prevailing party shall be entitled to all of its court
costs reasonable professional's fees and reasonable attorneys' fees incurred in
connection with such action.
Section 26.05 Governing Law. This Lease shall be governed in all
respects by the laws of the State of Oklahoma without reference to those laws
dealing with conflicts of law.
Section 26.06 Dish.
(a) Tenant at its sole expense shall have the right to erect,
install, operate and maintain three (3) communication dishes (each dish not to
exceed 4.5 meters in diameter) and
-43-
two (2) additional communication dishes (not to exceed 1.8 meters and 36 inches
in diameter respectively) (the "Communication Equipment") upon the roof of the
Building in the location described on Exhibit "P" hereto. The Communication
Equipment and all areas where the related connections, cables and ancillary
facilities are located shall be deemed for all purposes of the Lease (other than
Rent) to be a part of the Premises for liability, insurance, compliance with
law, indemnity and other applicable lease provisions. The Communication
Equipment and their signals shall not be permitted to interfere, disrupt or
hinder the operation and function of any other dish or communication device
existing prior to the Effective Date. In the installment, maintenance, repair
and/or replacement of any Communication Equipment on the roof the Building,
Tenant hereby acknowledges and agrees to use Landlord's roofing contractor so
that any penetrations into the roof will not void Landlord's roof warranty.
(b) If Landlord, its agents, contractors, property manager or
their respective employees damage the Communication Equipment, then Landlord
shall immediately repair the damaged Communication Equipment. If Landlord, its
agents, contractors, property manager or their respective employees damage the
Communication Equipment and such Communication Equipment is not repaired or
replaced within two (2) business days following delivery of written notice from
Tenant of such damage, then Tenant shall receive a pro rata abatement of Rent
(depending on the impact on Tenant's business operations in the Premises) until
such Communication Equipment is repaired or replaced. If Landlord, its agents,
contractors, property manager or their respective employees damage the
Communication Equipment and such Communication Equipment is not repaired or
replaced within thirty (30) days following delivery of written notice from
Tenant of such damage, then Tenant shall have the right to terminate this Lease
prior to the repair or replacement of the Communication Equipment by delivering
written notice to Landlord, which notice shall specify the effective date of
termination, which date shall not be more than one hundred eighty (180) days
after the date of Tenant's notice of termination.
(c) On or after the Effective Date hereof, (i) Landlord shall not
allow the installation or operation of any dish or other communication equipment
on the Building or Complex that would interfere with the operation, maintenance
or function of the Communication Equipment, (ii) Landlord shall not allow any
dish or other communication equipment existing in the Complex prior to the
Effective Date to have its location or signal changed if such change would
interfere with the operation, maintenance or function of the Communication
Equipment, or (iii) Landlord, its agents, contractors, property manager or their
respective employees shall not damage or destroy the Communication Equipment or
interfere with the operation, maintenance or function of the Communication
Equipment (collectively "Landlord Control Obligations"). If Landlord breaches
any of the Landlord Control Obligations, then Landlord, at its sole cost risk
and expense, shall cure such interruption within two (2) business days of
Tenant's delivery of written notice to Landlord. If Landlord does not cure such
interruption (caused by a Landlord Control Obligation) within two (2) business
days of the delivery of Tenant's written notice to Landlord, then Landlord, at
its sole cost and expense, shall relocate the Communication Equipment to a new
location (which is mutually acceptable to Landlord and Tenant) on the Building
roof which is within 300 feet of the Data Center Space. If Landlord breaches any
of the Landlord Control Obligations and the interruption of such Communication
Equipment is not cured or relocated and operating within two (2) business days
following delivery of written notice from Tenant of such interruption, then
Tenant shall receive a pro rata abatement of Rent (depending on the impact on
Tenant's business operations in the Premises) until the interruption
-44-
of such Communication Equipment is either cured or such Communication Equipment
is relocated as set forth in the preceding sentence. If Landlord breaches any of
the Landlord Control Obligations and the interruption of such Communication
Equipment is not cured or relocated and operating within thirty (30) days
following delivery of written notice from Tenant of such interruption, then
Tenant shall have the right to terminate this Lease prior to the curing of the
interference of the Communication Equipment by delivering written notice to
Landlord, which notice shall specify the effective date of termination, which
date shall not be more than one hundred eighty (180) days after the date of
Tenant's notice of termination.
(d) Tenant shall be solely responsible for the costs and expenses
of the installation, operation, and removal of the dish and all related wiring
or cables, and shall protect and hold Landlord harmless from any costs, expenses
or claims arising therefrom. Notwithstanding anything in this Lease or Section
to the contrary, in no event shall Landlord ever be liable to Tenant for
special, indirect or consequential damages resulting or arising out of any
damage or destruction to the Communication Equipment, including without
limitation, loss of use, profit or business, however caused.
(e) Landlord represents and warrants to Tenant that as of the
Effective Date of this Lease, no additional communications equipment has been
installed on the roof of the Building Parking Garage or the Building since
January 1, 2003.
(f) Tenant shall have the right to install on the Building or
Building Parking Garage in a location mutually acceptable to Landlord and Tenant
up to three (3) additional communication antennas so that Tenant may communicate
with its nearby shopping center. The size, type, method of installation and
other similar terms shall be mutually agreed to by Landlord and Tenant at the
time of installation of such communication antennas. The installation,
maintenance, operation, repair and replacement of such communication antennas
shall be performed by Tenant, at the sole cost and expense of Tenant. Upon the
termination or earlier expiration of this Lease, Tenant shall remove such
communication antennas from the Building and/or Building Parking Garage and
shall repair any damage to the Building or Building Parking Garage caused by the
installation or removal of such communication antennas. The communication
antennas and all areas where the related connections, cables and ancillary
facilities are located shall be deemed for all purposes of the Lease (other than
Rent) to be a part of the Premises for liability, insurance, compliance with
law, indemnity and other applicable lease provisions. The communication antennas
and their signals shall not be permitted to interfere, disrupt or hinder the
operation and function of any other dish or communication device existing prior
to the Effective Date.
Section 26.07 Force Majeure Event. Subject to Articles 5, 9 and 12 any
prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of
God, acts of war, terrorism, terrorist activities, inability to obtain services,
labor, or materials or reasonable substitutes therefore, governmental actions,
civil commotions, fire, flood, earthquake or other casualty, and other causes
beyond the reasonable control of the party obligated to perform, except with
respect to the obligations imposed with regard to Rent and other charges to be
paid by Tenant or amounts to be paid by Landlord pursuant to this Lease (each a
"Force Majeure Event"), shall excuse the performance of such party for a period
equal to any such prevention, delay or stoppage and, therefore, if this Lease
specifies a time period for performance of an obligation of
-45-
either party, that time period shall be extended by the period of any delay in
such party's performance caused by a Force Majeure Event. Notwithstanding the
foregoing and subject to Articles 5, 9 and 12 of this Lease, in the event such
Force Majeure Event materially and adversely affects the Premises for 75
consecutive days, then Tenant shall have the right to terminate this Lease after
written notice to Landlord (but in all events such notice must be prior to the
end of the Force Majeure Event), which notice shall specify the effective date
of termination which date shall not be more than one hundred eighty (180) days
after the date of Tenant's notice of termination.
Section 26.08 Signage Rights. Landlord warrants that on the Effective
Date there are no signs on the north, east and south sides of the Building above
the top of the third (3rd) floor of the Building. Landlord shall have the right
to grant to any tenant leasing more than 75,000 square feet of space in the
Building signage rights on the top of the west side of the Building similar to
those signage rights granted to Tenant in Addendum One of this Lease.
Additionally, Landlord shall have the right to grant to any tenant at the
Building signage rights on (i) any monument or other sign located on ground
level outside the Building, and (ii) on any side of the Building from the ground
floor of the Building to the top of the third floor of the Building. With the
exception of the foregoing in this Section 26.08 and subject to Landlord's
limited right to terminate the Exclusive Right (as set forth in Addendum One
hereto), Landlord will have no other signage rights on the north, south and east
sides of the Building above the top of the third (3rd) floor of the Building.
Section 26.09 Lease Termination. Except as otherwise expressly set
forth in this Lease, upon termination of this Lease pursuant to the terms
hereof, neither Tenant nor Landlord will have any obligation or liability
occurring under this Lease after the termination of this Lease. Both Tenant and
Landlord shall retain all rights under the Lease for all times prior to the
termination of this Lease.
Section 26.10 15th Floor Sublease and Assignment Rights. With regard to
the Offered Space (as defined in Addendum Two to this Lease) only, Landlord
hereby acknowledges and agrees that if the tenant leasing the Offered Space
("15th Floor Tenant) (currently Oxley Petroleum) requests Landlord's consent to
any sublease or assignment of any portion of the Offered Space, then Landlord
shall immediately notify Tenant of such request and Landlord shall promptly
forward the terms of the proposed assignment or sublease to Tenant ("Proposed
Deal"). Tenant shall promptly (within five (5) business days of Tenant's receipt
of such proposed terms) notify Landlord if Tenant is interested in the Proposed
Deal and if Tenant is interested in the Proposed Deal, Landlord and Tenant shall
jointly contact the 15th Floor Tenant to attempt to persuade the 15th Floor
Tenant to enter in the Proposed Deal with Tenant. Tenant acknowledges and agrees
that under the 15th Floor Tenant's lease with Landlord, Landlord must consent to
any reasonable assignment or sublease request by the 15th Floor Tenant, and that
Tenant may assign or sublease all or a portion of the Offered Space to an
"Affiliate" of the 15th Floor Tenant (as such term is defined in the 15th Floor
Tenant's lease with Landlord) without the consent or approval of Landlord.
Notwithstanding the foregoing, if any requested Proposal Deal (which requires
Landlord's consent) is not "reasonable", as reasonably determined by Landlord,
then Landlord shall not consent to such Proposed Deal.
-46-
This LEASE is hereby executed and delivered effective as of the date
and year first above written.
"LANDLORD"
K/B FUND IV, a Delaware general partnership
By: Koll Bren Schreiber Realty Advisors, Inc.,
a Delaware corporation, as agent
By:
Rodney Richerson, Senior Vice President
"TENANT"
HELMERICH & PAYNE, INC., a Delaware
corporation
By: ___________________________________________________
Printed Name: _________________________________________
Title: ________________________________________________
-47-
EXHIBIT B
WORK LETTER (ALLOWANCE)
THIS WORK LETTER is attached as Exhibit "B" to Office Lease between K/B
FUND IV, as Landlord, and HELMERICH & PAYNE, INC., as Tenant, and constitutes
the further agreement between Landlord and Tenant as follows:
(a) Tenant Improvements. Landlord, at Tenant's cost and expense,
agrees to furnish or perform those items of construction and those improvements
(the "Tenant Improvements") specified in the Final Plans to be agreed to by
Landlord and Tenant as set forth in Paragraph (b) below; provided, however,
Landlord shall pay for the cost of such Tenant Improvements up to the extent of
the Tenant Improvement Allowance as set forth in Paragraph (e) below. Landlord
and its contractors shall construct and complete the Tenant Improvements in a
good and workmanlike manner consistent with good construction industry practice.
(b) Space Planner. Tenant has retained a space planner (the "Space
Planner") to prepare certain plans, drawings and specifications (the "Temporary
Plans") for the construction of Tenant Improvements to be installed in the
Premises by a general contractor to be mutually selected and agreed to by
Landlord and Tenant pursuant to this Work Letter. Tenant and Landlord are
working with the Space Planner to finalize and complete the Temporary Plans. The
parties hereto agree to work in good faith to approve and finalize the Temporary
Plans as soon as reasonably possible, but in no event later than May 15, 2003.
Each party shall have five (5) business days after its receipt of the proposed
Temporary Plans to review the same and notify the other party in writing of any
comments or required changes, or to otherwise give its approval or disapproval
of such proposed Temporary Plans. If either party fails to give written comments
to or approve the Temporary Plans within such five (5) business day period, then
such party shall be deemed to have approved the Temporary Plans as submitted.
The Space Planner shall redraw the proposed Temporary Plans in compliance with
each party's request and resubmit the same for to both Landlord and Tenant for
their final review and approval or comment within five (5) business days of the
Space Planner's receipt of such revised plans. Such process shall be repeated
until final approval by both parties of the proposed Temporary Plans has been
obtained. Once the Temporary Plans have been approved by Landlord and Tenant,
then the approved Temporary Plans shall be thereafter known as the "Final
Plans". The Final Plans shall include the complete and final layout, plans and
specifications for the Premises showing all doors, light fixtures, electrical
outlets, telephone outlets, wall coverings, plumbing improvements (if any), data
systems wiring, floor coverings, wall coverings, painting, any other
improvements to the Premises beyond the shell and core improvements provided by
Landlord and any demolition of existing improvements in the Premises. The
improvements shown in the Final Plans shall (i) utilize Landlord's building
standard or better materials and methods of construction, (ii) be compatible
with the shell and core improvements and the design, construction and equipment
of the Premises, and (iii) comply with all applicable laws, rules, regulations,
codes and ordinances.
(c) Bids. As soon as practicable following the approval of the
Final Plans, Landlord and Tenant shall (i) obtain at least three (3) written
non-binding itemized estimates of the costs of all Tenant Improvements shown in
the Final Plans as prepared by general contractors selected
B -- 1
and mutually approved by Landlord and Tenant, and (ii) if required by applicable
law, codes or ordinances, submit the Final Plans to the appropriate governmental
agency for the issuance of a building permit or other required governmental
approvals prerequisite to commencement of construction of such Tenant
Improvements ("Permits"). Both Landlord and Tenant acknowledge that any cost
estimates that are prepared by the general contractors shall only be estimates
and neither party shall be liable to the other for any inaccuracy in any such
estimate. Landlord and Tenant shall mutually review such bids and mutually
select a general contractor. Both parties shall signify their final approval by
signing a copy of each sheet or page of the Final Plans and delivering such
signed copy to Landlord. The construction contract to be entered into by
Landlord and the general contractor mutually selected by Landlord and Tenant
will be a cost plus contract with a total cost cap. The construction contract
will be mutually approved by Landlord and Tenant.
(d) Construction. Landlord shall commence construction of the
Tenant Improvements within ten (10) days following the later of (i) the approval
of the Final Plans, or (ii) Landlord's receipt of any necessary Permits.
Landlord shall diligently and continuously pursue completion of construction of
the Tenant Improvements (as per the Final Plans) and use its commercially
reasonable efforts to complete construction of the Tenant Improvements as soon
as reasonably practicable. Landlord shall provide Tenant with a Tenant
Improvement Allowance in an amount up to $1,439,415.00 for the Office Space and
the Data Center Space ("Office Space Allowance"), and an amount up to $18,724
for the Storage Space ("Storage Space Allowance"). The Office Space Allowance,
Data Center Space Allowance and the Storage Space Allowance shall collectively
be known as the "Tenant Improvement Allowance". Additionally, if any portion of
the (i) third floor of the Building is included in the Premises, Landlord shall
also be responsible for upgrading the ceiling and lighting on the third floor at
Landlord's sole cost and expense and not as a part of the Office Space Allowance
and (ii) thirteenth floor of the Building is included in the Premises, Landlord
shall be responsible, at Landlord's sole cost and expense, and not as a part of
the Office Space Allowance, for the demolition and removal of the existing
improvements on the thirteenth floor and preparation of a "white box" suitable
to receive Tenant Improvements.
(e) Tenant Improvement Allowance. Subject to the terms and
provisions of this Work Letter, Landlord shall pay the cost of the Tenant
Improvements ("Work") up to the amount the Tenant Improvement Allowance. If the
amount of the lowest qualified bid to perform the Work exceeds the Tenant
Improvement Allowance, Tenant shall bear the cost of such excess and shall pay
the cost of such excess to Landlord when such amounts become due and owing to
the contractors. If the cost of the Work is less than such amount, then Tenant
shall receive the remaining balance of the Tenant Improvement Allowance as a
credit against Annual Rental in the first year of the Initial Term of this
Lease. All remaining amounts due to Landlord shall be paid upon the earlier of
Substantial Completion of the Tenant Improvements or presentation of a written
statement of the sums due. The cost of the Work shall not include a construction
management fee and shall not include any other fees payable to Landlord nor
shall Tenant be responsible for any such fees. Landlord shall indemnify and hold
harmless Tenant from and against any and all losses, damages, costs and expenses
(includes costs of suit and attorneys' fees), liabilities, or causes of action
arising out of or relating to any mechanics, materialmen's or other liens or
claims (and all costs or expenses associated therewith) asserted or filed
against the
B -- 2
Premises arising out of the construction of the Tenant Improvements as set forth
in this Exhibit "B".
(f) Change Order. If Landlord shall desire any changes to the
Final Plans, Landlord shall first obtain Tenant's prior consent to such change.
If Tenant shall desire any changes to the Final Plans (a "Tenant Change Order"),
Tenant shall so advise Landlord in writing and such change shall be
automatically approved by Landlord unless such change shall (i) adversely impact
the Building's mechanical, electrical or heating, ventilation or air
conditioning systems, or (ii) adversely impact the structure of the Building, or
(iii) be visible from the exterior of the Building or (iv) result in the
penetration or puncturing of the roof or floor, in which event such approval
shall not be automatic and Landlord must approve such change in writing, such
approval by Landlord not to be unreasonably withheld or delayed. Any and all
out-of pocket third party costs of reviewing any Tenant Change Orders, and any
and all out-of-pocket third party costs of making any Tenant Change Orders shall
be at Tenant's sole cost and expense and shall be paid to Landlord upon demand
and before execution of the change order. In the event of any change to the
Final Plans or the Tenant Improvements pursuant to a Tenant Change Order, Tenant
shall instruct the Space Planner, at Tenant's sole cost and expense, to complete
all working drawings necessary to show the change, addition or alteration being
requested by Tenant. The construction contract shall include a change order
mechanism stating that any change orders to the Final Plans or the Work can only
be made with the prior written consent of Landlord, Tenant and the general
contractor; provided, however, that any such change order and the cost of any
such change order must be pre-approved by Tenant. All such proposed change
orders shall contain a specific cost attributable to such change order.
(g) Substantial Completion. "Substantial Completion" of
construction of the Tenant Improvements shall be defined as the date upon which
the Space Planner determines that the Tenant Improvements have been
substantially completed in full compliance with the Final Plans, except for such
items that constitute minor defects or adjustments which can be completed within
thirty (30) days after occupancy without adversely affecting Tenant's use of all
or any portion of the Premises (so called "Punch List" items), unless the
completion of such improvements was delayed due to any Tenant Delay (defined
below), in which case the date of Substantial Completion shall be the date such
improvements would have been completed, but for the Tenant Delays. After the
completion of the Tenant Improvements, Tenant shall, upon demand, execute and
deliver to Landlord a letter of acceptance of improvements performed on the
Premises. The term "Tenant Delay" shall include, without limitation, any delay
in the completion of construction of Tenant Improvements resulting from (i) any
delay caused by Tenant's failure to comply with the provisions of this Work
Letter, (ii) delay in work caused by submission by Tenant of any Tenant Change
Orders, which in the aggregate result in the delay in the construction of the
Tenant Improvements for more than thirty (30) days, or (iii) any delay by Tenant
in timely submitting comments or approvals to the Temporary Plans or Final Plans
or any delay caused by Tenant in the initial delivery of the Temporary Plans to
Landlord on or before May 15, 2003, or (iv) any delay caused by Tenant's
commencement of business operations in the Premises prior to the Term
Commencement Date. The failure of Tenant to take possession of or to occupy the
Premises solely due to Tenant Delay shall not serve to relieve Tenant of
obligations arising on the Term Commencement Date or delay the payment of Rent
by Tenant.
B -- 3
EXHIBIT C
ANNUAL RENTAL
Base Rent Schedule
The foregoing rental rates shall be applicable from and after the Term
Commencement Date.
For purposes of this Lease, the total Annual Rental for the Office Space payable
by Tenant under this Lease for the Initial Term is as follows:
Annual Monthly
Lease Period Amount per RSF Total Rental Installment
------------ -------------- ------------ -----------
Months 1 to 24, inclusive $ 8.25 $ 761,838.00 $ 63,486.50
Months 25 to 72, inclusive $13.50 $1,246,644.00 $103,887.00
|
For purposes of this Lease, the total Annual Rental for the Data Center Space
payable by Tenant under this Lease for the Initial Term is as follows:
Lease Period Amount per RSF Annual Data Center Rent Monthly Installment
------------ -------------- ----------------------- -------------------
Months 1 to 72 $8.50 $30,744.50 $2,562.04
|
For purposes of this Lease, the total Annual Rental for the Storage Space
payable by Tenant under this Lease for the Initial Term is as follows:
Annual Monthly
Lease Period Amount per RSF Total Rental Installment
------------ -------------- ------------ -----------
Months 1 to 18, inclusive $5.25 $ 98,301.00 $8,191.75
Months 19 to 72, inclusive $5.75 $107,663.00 $8,971.92
|
For purposes of this Lease, the total Annual Rental payable by Tenant
for Office Space under this Lease during the Renewal Term shall be the Fair
Market Value Rate for Comparable Buildings in the Tulsa area as determined as
provided in Exhibit "E" hereto; provided, however, such Fair Market Value Rate
shall not in any event exceed $15.00 per rentable square foot per year.
C -- 1
For purposes of this Lease, the total Annual Rental payable by Tenant
during the Renewal Term for the (i) Data Center Space shall be $8.50 per RSF and
(ii) Storage Space shall be equal to the amounts specified in Section 7.04 of
this Lease.
Annual Rental is payable monthly in advance to Landlord and is in
addition to Additional Rental.
C -- 2
EXHIBIT D
OPERATING EXPENSES
"Operating Expenses" as used in Section 4.02 shall mean the costs and
expenses specified below in Category A actually incurred by Landlord (without
additional markup or a handling fee on such actual costs) for a given Operating
Expense Year, to the extent properly allocable (in accordance with generally
accepted accounting principles consistently applied "GAAP") to the operation,
repair, maintenance and access control for the Building and Complex, exclusive
of the Data Center Space and special systems for other tenants in the Building.
It is agreed that any cost allocable to the items specified below in Category B
shall be excluded from Operating Expenses. Any local real estate tax incentives
or abatements which relate to any Operating Expense Year received by Landlord
from local authorities as to real estate taxes includable in Operating Expenses
shall be promptly passed through to Tenant to the extent of Tenant's Share.
A. Items Included in Operating Expense:
All costs and expenses incurred by Landlord in the operation,
repair, maintenance and access control for the Building, Common Building
Facilities (which includes, without limitation, the Building Parking Garage and
the Additional Parking Area), exclusive of the Data Center Space, and special
systems for other tenants in the Building, and the costs and expenses of the
operation, repair, maintenance and access control for The Boulder Towers Complex
of whatever kind or nature (but excluding those items specified in category B
below) and including, without limitation, the following:
(1) real estate and improvement taxes and assessments,
whether ordinary or extraordinary, anticipated or unanticipated, and all utility
district charges, rents and assessments, assessed by any governmental or
quasi-governmental body, whether federal, state, county or municipal and whether
now existing or hereafter created, and the costs and expenses incurred in any
contest of such taxes on application for reduction in same, and any assessments
and dues of any private property owner's association for property including the
Building, which are assessed, levied or charged against the Building, Common
Building Facilities, land, and/or Additional Parking Area and those assessed,
levied and/or charged against The Boulder Towers Complex or the rental and any
changes and substitutions thereto resulting from a change in law;
(2) wages, salaries, taxes, insurance and benefits
(collectively, "Personnel Costs") of all full time persons exclusively engaged
in the operation, maintenance, repair, and/or access control for the Building
and/or Common Building Facilities, Personnel Costs incurred in providing traffic
control to the Building, Common Building Facilities, and/or Additional Parking
Area incurred in the operation, maintenance, repair and access control for the
Building and The Boulder Towers Complex. Personnel costs shall not include
personnel above the grade of Building Manager and/or equally held positions;
D -- 1
(3) the cost of materials and supplies used in the
operation, repair and maintenance of the Building, Common Building Facilities
and Additional Parking Area and such costs incurred with respect to The Boulder
Towers;
(4) the cost of replacements for tools and equipment (the
full cost of which is included in Operating Expenses at the time of purchase)
used in the operation, repair, maintenance and access control for the Building
and Common Building Facilities and Additional Parking Area, and the costs
incurred with respect to The Boulder Towers Complex, it being agreed that such
equipment shall not include major air conditioning equipment, boilers, elevators
or any similar major items and provided that any sales proceeds or trade in
credit for such equipment reduce Operating Expenses;
(5) amounts charged to Landlord by independent
contractors for services (including full or part-time labor), materials,
supplies, tools and equipment furnished in connection with the operation,
repair, maintenance and access control for any part of the Building, Common
Building Facilities and the Additional Parking Area and the heating, air
conditioning, ventilating, plumbing, electrical and elevator systems of the
Building, Building Facilities and the Additional Parking Area and the amounts
charged by independent contractors for services of a similar nature with respect
to The Boulder Towers Complex;
(6) amounts paid by Landlord, or charged to Landlord by
independent contractors, for window cleaning and janitorial, rubbish removal and
porter services;
(7) water charges and sewer rents;
(8) [Intentionally omitted]
(9) holiday and other decorations for the lobby and other
public portions of the Building below the second floor, the exterior of the
Building, the Common Building Facilities and the Additional Parking Area;
(10) the cost of telephone service, postage, office
supplies, maintenance and repair and replacement of office equipment, telex,
facsimile and photocopying charges, furniture costs, rent (not exceeding market
rates) and similar charges directly related to operation of the Building
managers office and which relate solely to the operation of the Complex (whether
located on-site or off-site within the Building);
(11) the cost of licenses, permits and similar fees and
charges related to the operation, repair and maintenance and access control of
the Building (including the leased areas thereof), Common Building Facilities
and the Additional Parking Area and the cost of the same with respect to The
Boulder Towers Complex;
(12) premiums for property insurance, liability insurance,
employer's liability insurance, workers compensation insurance (provided that
only that portion of the premium attributable to the personnel described in A(2)
is included as an Operating Expense), boiler and machinery insurance, rental
abatement insurance required by Section 5.11 of the Lease and such other
insurance as is customarily carried by prudent owners of Comparable Buildings,
in amounts and with companies as Landlord reasonably determines, with respect to
the Building,
D -- 2
Common Building Facilities and the Additional Parking Area and The Boulder
Towers Complex;
(13) fees for the management of the Building and Complex,
not exceeding the greater of Three Percent (3%) of gross rentals of the
Building, or the fees customarily charged for Comparable Buildings and excluding
any leasing commissions or compensations;
(14) amortization of the cost of capital investment items
which reduce operating costs or which are required by governmental authority
under laws, rules or regulations. All such costs shall be amortized over the
reasonable life of the capital investment items, with the reasonable life and
amortization schedule being determined in accordance with general accepted
accounting principles and in no event to extend beyond the reasonable life of
the Building. In the case of installations for the purpose of reducing operating
costs, Landlord shall provide a cost justification for its practicality; and
(15) charges (including applicable taxes) for water,
sewage, electricity, gas, steam and all other utilities required in the
operation, heating, air conditioning and ventilation of the Building (including
tenanted areas thereon), the Common Building Facilities and the Additional
Parking Area, and the same with respect to The Boulder Towers Complex.
Operating Expenses shall be "net" of any reimbursement, refund
or credit received by Landlord (net of the reasonable costs and expenses of
obtaining the same, if any) with respect to any item of cost that is included in
Operating Expenses.
B. Items Excluded from Operating Expenses:
(1) the cost of any work or service performed for any
specific tenant (including Tenant) at such tenant's cost (except pursuant to
tenant pass-throughs);
(2) the cost of correcting material defects in the
construction of the Building or in the Building equipment;
(3) except as otherwise includable under A(2) above,
salaries of employees, officers and executives of Landlord,
(4) except with respect to the Common Building
Facilities, The Boulder Towers Complex and the Additional Parking Area, the cost
of any work or service performed for the exclusive benefit of any facility other
than the Building;
(5) the cost of any items for which Landlord is
reimbursed by insurance proceeds;
(6) the cost of any repairs, alterations, additions,
changes, replacements, improvements and other items which under generally
accepted accounting principles are properly classified as major capital
expenditures or which are made in order to prepare for a new tenant's occupancy;
D -- 3
(7) the cost of any capital repair in accordance with
Articles Nine and Twelve of this Lease;
(8) interest on debt or amortization payments on any
mortgage and rental under any ground lease or other underlying lease;
(9) any real estate brokerage commissions or other costs
incurred in procuring tenants;
(10) charges (including applicable taxes) for extra
electricity, steam and other utilities for which Landlord is entitled to direct
reimbursement from any tenant;
(11) except as provided in Category A above, any costs of
painting or decorating of Landlord's space in the Building (except for the
management office) or any occupied part of the Building;
(12) any expenses for repairs or maintenance if and to the
extent reimbursed pursuant to warranties and service contracts in existence on
the Term Commencement Date.
(13) the cost of changes in the Building that are required
by laws, rules or regulations due to acts or failure to act by Landlord,
including without limitation alterations required in connection with the grant
of any permit or approval to Landlord.
(14) depreciation of the Building and the Boulder Towers
Complex.
(15) remediation and clean up costs of hazardous materials
pursuant to Section 7.02 of the Lease.
(16) the cost for bringing the Building into compliance
with Applicable Laws in effect as of the Term Commencement Date.
(17) the cost of vehicles.
D -- 4
EXHIBIT 13
|
|
|
Helmerich & Payne, Inc.
|
|
ANNUAL REPORT
FOR FISCAL 2003
|
Helmerich & Payne, Inc.
Helmerich & Payne, Inc.
is the holding Company for Helmerich & Payne
International Drilling Co., an international drilling contractor with land and
offshore platform operations in the United States, South America, Africa, and
Europe. Holdings also include commercial real estate properties in the Tulsa,
Oklahoma, area and an energy-weighted portfolio of publicly-traded securities
valued at approximately $170 million as of September 30, 2003. At the end of
2002, the Company completed the spin-off of Cimarex Energy Co. to shareholders.
Cimarex, the Company’s former exploration and production division, was merged
with Key Production Company, Inc. and currently trades on the New York Stock
Exchange under the symbol XEC.
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2003
|
|
2002
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Revenues
|
|
$
|
515,284
|
|
|
$
|
551,879
|
|
|
Net Income from Continuing Operations
|
|
|
17,873
|
|
|
|
53,706
|
|
|
Net Income
|
|
|
17,873
|
|
|
|
63,517
|
|
|
Diluted Earnings per Share from Continuing Operations
|
|
|
0.35
|
|
|
|
1.07
|
|
|
Diluted Earnings per Share
|
|
|
0.35
|
|
|
|
1.26
|
|
|
Dividends Paid per Share
|
|
|
0.32
|
|
|
|
0.305
|
|
|
Capital Expenditures
|
|
|
246,301
|
|
|
|
312,064
|
|
|
Total Assets
|
|
|
1,415,835
|
|
|
|
1,227,313
|
|
1
President’s Letter
To the Co-owners of Helmerich & Payne, Inc.
It seems every year the oil and gas business plays an important role on the
stage of political and economic events. Few years can match 2003 for the sheer
number of headline stories. In the heart of the Middle East, Operation Iraqi
Freedom brought the quick overthrow of Saddam Hussein. During the time leading
up to the war, Venezuela sustained a crippling two-month nationwide strike,
threatening an important source of U.S. crude oil. In the spring, record low
natural gas inventories and declining production rates prompted Federal Reserve
Chairman Alan Greenspan to warn of a potential natural gas shortage and the
serious consequences it posed to economic recovery. Later in the summer, the
Northeast sustained a sweeping electrical blackout that stranded 50 million
customers.
With this backdrop, the President hoped to sign legislation representing the
first serious effort in decades at shaping a national energy policy. Before
failing by two votes to another Democratic filibuster, the energy bill had
mushroomed to over a thousand pages and an estimated cost of some $100 billion,
bearing only a weak resemblance to the President’s original request.
The energy bill represented an unworkable combination: too much pork and too
little beef. Pork barrel spending included increased subsidies for ethanol and
soybean based fuel
mandates, add-ons like aid for an energy efficient shopping mall in Syracuse,
and even money for a pet rainforest project in Iowa. While spending ballooned
to more than three times the Administration’s stated limit, one of the
President’s priorities, the approval for exploration in Alaska’s Arctic
National Wildlife Refuge, was thrown overboard early in the Congressional
2
negotiations. In the end, too little was done to streamline and open access to
high potential natural gas exploratory plays on Federal lands, and to promote
nuclear power, and to develop clean burning coal technology. All three are
important components to a balanced U.S. energy supply.
What are the prospects for the passage of an energy bill during the upcoming
election year?
Any attempt should speak clearly to the practical challenges of fueling the
world’s largest economy. Lewis Lehrman finds that voice in his piece,
“Energetic America,”
where he argues for an energy policy that promotes a
diverse supply base that is both affordable and dependable. He points out that
we are in a time when effective economic and energy policies are indispensable
to national security issues, and states, “Combined with President Bush’s
supply-side tax policy, an unselfconscious supply-side energy and regulatory
policy will lead to abundant and cheaper energy, growth of economic
opportunity, and full employment.”
However future politics get sorted out, oil and gas will remain at the center
of the energy picture for years to come. Your Company plays an important role
in providing new supplies to help meet this growing demand. As we go forward,
we look to the opportunities ahead.
|
|
|
|
|
|
|
Sincerely,
|
|
|
|
|
|
|
|
Hans Helmerich
|
|
|
|
President
|
|
|
|
|
|
December 15, 2003
|
|
|
3
Contract Drilling Operations
The Company’s first full year as a stand-alone drilling contractor was
accompanied by a number of unusual factors: high oil and natural gas prices, a
second war in the Persian Gulf, and a major strike in Venezuela, which resulted
in turmoil within PDVSA, the Company’s largest customer in South America. The
Baker Hughes U.S. Land Rig Count increased by over 30 percent in fiscal 2003,
but the journey was bumpy and cautious. The Company delivered 19 third
generation FlexRigs* to the U.S. market in 2003, expanding its capacity in this
segment by nearly one-third. One of the uncertainties ahead is the U.S.
offshore platform market, which softened considerably in 2003. The Company’s
South American markets also remain weak due in large part to socio-economic and
political factors. During 2003, the Company introduced its first generation
FlexRig into two new international markets.
U.S. Land Operations
On average, the Company worked 14 more rigs during the year than in 2002, but
lower dayrates, combined with higher training and depreciation expenses
associated with the FlexRig3 project, muted financial results for 2003 compared
to 2002. At the close of the year, 68 out of 83 available rigs were working.
The Company’s fleet of 43 FlexRigs and 11 highly mobile rigs maintained an
average utilization of 95 percent
during the year, while the remaining 29 conventional rigs had an average
utilization rate of 58 percent. Demand continues to be weakest in the
deep-drilling end of the business where soft rates are under increasing price
competition. Out of the Company’s 16 deep-rated conventional rigs, 11 were idle
at the close of the fiscal year. By contrast, the Company had only one idle
* The term “FlexRig” used throughout this Annual Report is a Company trademark Registered in the U.S. Patent and Trademark Office.
4
rig out of the remaining 13 conventional rigs rated at 20,000 feet or less. The
FlexRig, with its flexible depth capacity range of 8,000 to 18,000 feet, has
shifted the Company’s fleet capability toward the larger medium-depth segment
of the drilling market, and this is having a positive impact on the Company’s
activity rate.
At the close of 2003, the Company had 27 FlexRig3s operating, and the results
in the field continue to prove their value. Of the 173 wells completed by
FlexRig3s this past year, better than two out of three have come in ahead of
customer-estimated drilling times. The Company’s investment in employee
screening, training, and team building for the FlexRig3 is also paying
dividends. Eighteen months into the FlexRig3 project, the Company has achieved
a retention rate of 78 percent on the initial training effort. Well-trained
and stable crews have enabled the project to achieve outstanding field results,
and more customers and their non-operating partners are seeing how FlexRigs can
lower well costs, reduce well cycle times, and increase productivity.
Throughout 2003, FlexRig3s were nearly 100 percent utilized and working at
premium dayrates.
Overall, the U.S. land market appears to be in the early stages of a cyclical
transition. Drilling services, as well as other oilfield services and
supplies, typically gain more pricing power as supply and demand tighten
because of reduced industry capacity. It is in this market phase that the
distinct advantages of the FlexRig technology will be most apparent to
customers as they begin to refocus on total project costs.
5
U.S. Offshore Operations
Activity in the offshore platform segment declined by almost one-third during
2003, with five of the Company’s 12 offshore platform rigs under contract in
the Gulf of Mexico at year-end. The Company also operated one rig in the Gulf
of Mexico and two rigs offshore California under management contracts during
2003. The overall profit margin in the offshore segment is likely to come under
increasing pressure during the coming year as some of the working rigs are on
long-term projects that have reached the full development stage and will likely
alternate between operating rates and the lower standby rates. Out of the seven
rigs that are idle in the Company’s fleet, six are capable of returning to work
on short notice and the seventh will require shipyard maintenance. The Company
retains a large share of the offshore platform market and has considerable
design and construction experience in conventional, spar, and deep-water
tension-leg platform rigs. The Company is well positioned to compete for any
opportunities that emerge in the coming year; however, we expect that any
recovery in the platform market will be slow due to long project lead times.
International Operations
An average of 12 rigs were fully employed in 2003, compared to 16 rigs in 2002.
Ecuador remained the most active country with an average of seven rigs
working, followed by Venezuela with an average of four rigs, and Colombia and
Bolivia each with less than a full rig year of activity. Operations in
Venezuela are improving as seven rigs were working shortly after the close of
the fiscal year, and an eighth rig is expected to start work in the second
quarter. Despite numerous
challenges presented in Venezuela, we are encouraged by the recent increase in
activity.
6
Venezuela still has promising growth potential, and the Company has the
best-equipped and maintained rig fleet in the country.
Two first generation FlexRigs were committed to short-term international
contracts in 2003. The first is working for a U.S. based independent in
Hungary where, at year-end, it was drilling its third well after a smooth,
incident-free start-up. Having previously used a FlexRig in U.S. operations,
the customer desired to see the technology, versatility, and mobility of these
rigs employed in an important international project. The second FlexRig was
deployed for a major international operator under a multi-well contract in the
central African nation of Chad. This project is scheduled to begin drilling in
December 2003.
Outlook
Looking to 2004 and beyond, we see significant opportunities for a growing
international business and believe the Company brings a distinctive combination
of experience and innovation to this market. The FlexRig will play an important
role in capturing this potential, as we endeavor to introduce this unique
technology to international markets. While this transition year was not what we
had hoped for financially, the Company improved operating performance, expanded
its capacity, and is well positioned in high potential markets to participate
in future opportunities. The most critical dimension of quality is our
performance in the area of health, safety, and the environment (HSE) and,
during 2003, the Company logged one of its best years on record. After the
close of the fiscal year, two of our largest customers, ExxonMobil and Royal
Dutch Shell, separately recognized the Company’s land and offshore operations
for leadership and excellence in HSE.
7
Financial & Operating Review
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30
|
|
2003
|
|
2002
|
|
2001
|
|
|
|
|
|
|
|
|
SUMMARY OF CONSOLIDATED STATEMENTS OF INCOME*†
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Revenues
|
|
|
507,331
|
|
|
|
523,803
|
|
|
|
531,604
|
|
|
|
Operating
Costs
|
|
|
345,537
|
|
|
|
361,669
|
|
|
|
330,181
|
|
|
|
Depreciation
|
|
|
82,513
|
|
|
|
61,447
|
|
|
|
49,532
|
|
|
|
Operating Income
|
|
|
79,281
|
|
|
|
100,687
|
|
|
|
151,891
|
|
|
|
Income from Investments
|
|
|
7,953
|
|
|
|
28,076
|
|
|
|
10,967
|
|
|
|
Interest Expense
|
|
|
12,289
|
|
|
|
980
|
|
|
|
1,701
|
|
|
|
General and Administrative Expense
|
|
|
41,003
|
|
|
|
36,563
|
|
|
|
28,180
|
|
|
|
Income from Continuing Operations
|
|
|
17,873
|
|
|
|
53,706
|
|
|
|
80,467
|
|
|
|
Net Income
|
|
|
17,873
|
|
|
|
63,517
|
|
|
|
144,254
|
|
|
|
Diluted Earnings Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
0.35
|
|
|
|
1.07
|
|
|
|
1.58
|
|
|
|
|
Net Income
|
|
|
0.35
|
|
|
|
1.26
|
|
|
|
2.84
|
|
|
|
|
*$000’s omitted, except per share data.
|
|
|
|
Certain
prior year amounts have been reclassified to conform to current year
classifications. (see note 1)
|
|
|
|
†
All data
excludes discontinued operations except net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUMMARY FINANCIAL DATA*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash**
|
|
|
38,189
|
|
|
|
46,883
|
|
|
|
128,826
|
|
|
|
Working Capital**
|
|
|
108,913
|
|
|
|
105,852
|
|
|
|
223,980
|
|
|
|
Investments
|
|
|
158,770
|
|
|
|
150,175
|
|
|
|
203,271
|
|
|
|
Plant, Property, and Equipment, Net**
|
|
|
1,058,205
|
|
|
|
897,445
|
|
|
|
650,051
|
|
|
|
Total Assets
|
|
|
1,415,835
|
|
|
|
1,227,313
|
|
|
|
1,300,121
|
|
|
|
Long-term Debt
|
|
|
200,000
|
|
|
|
100,000
|
|
|
|
50,000
|
|
|
|
Shareholders’ Equity
|
|
|
917,251
|
|
|
|
895,170
|
|
|
|
1,026,477
|
|
|
|
Capital Expenditures**
|
|
|
246,301
|
|
|
|
312,064
|
|
|
|
184,668
|
|
|
|
|
*$000’s omitted.
|
|
|
|
** Excludes discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RIG FLEET SUMMARY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling Rigs –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Land – FlexRigs
|
|
|
43
|
|
|
|
26
|
|
|
|
13
|
|
|
|
|
United States Land – Conventional
|
|
|
40
|
|
|
|
40
|
|
|
|
36
|
|
|
|
|
United States Offshore Platform
|
|
|
12
|
|
|
|
12
|
|
|
|
10
|
|
|
|
|
International
|
|
|
32
|
|
|
|
33
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Rig Fleet
|
|
|
127
|
|
|
|
111
|
|
|
|
96
|
|
|
|
|
Rig Utilization Percentage –
|
|
|
|
United States Land – FlexRigs
|
|
|
97
|
|
|
|
96
|
|
|
|
100
|
|
|
|
|
United States Land – Conventional
|
|
|
67
|
|
|
|
78
|
|
|
|
96
|
|
|
|
|
United States Land – All Rigs
|
|
|
81
|
|
|
|
84
|
|
|
|
97
|
|
|
|
|
United States Offshore Platform
|
|
|
51
|
|
|
|
83
|
|
|
|
98
|
|
|
|
|
International
|
|
|
39
|
|
|
|
51
|
|
|
|
56
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
1999
|
|
1998
|
|
1997
|
|
1996
|
|
1995
|
|
1994
|
|
1993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
384,762
|
|
|
|
431,741
|
|
|
|
479,592
|
|
|
|
353,355
|
|
|
|
274,208
|
|
|
|
229,316
|
|
|
|
206,991
|
|
|
|
167,956
|
|
|
|
|
|
248,568
|
|
|
|
290,048
|
|
|
|
322,861
|
|
|
|
228,958
|
|
|
|
184,703
|
|
|
|
158,815
|
|
|
|
148,210
|
|
|
|
114,858
|
|
|
|
|
|
77,317
|
|
|
|
70,092
|
|
|
|
58,187
|
|
|
|
48,291
|
|
|
|
39,592
|
|
|
|
37,364
|
|
|
|
31,038
|
|
|
|
29,397
|
|
|
|
|
|
58,877
|
|
|
|
71,601
|
|
|
|
98,544
|
|
|
|
76,106
|
|
|
|
49,913
|
|
|
|
33,137
|
|
|
|
27,743
|
|
|
|
23,701
|
|
|
|
|
|
32,063
|
|
|
|
7,422
|
|
|
|
45,152
|
|
|
|
11,746
|
|
|
|
5,992
|
|
|
|
11,279
|
|
|
|
6,944
|
|
|
|
9,494
|
|
|
|
|
|
2,730
|
|
|
|
5,389
|
|
|
|
336
|
|
|
|
34
|
|
|
|
678
|
|
|
|
407
|
|
|
|
385
|
|
|
|
925
|
|
|
|
|
|
23,306
|
|
|
|
24,629
|
|
|
|
21,299
|
|
|
|
15,636
|
|
|
|
15,222
|
|
|
|
14,019
|
|
|
|
14,126
|
|
|
|
12,422
|
|
|
|
|
|
36,470
|
|
|
|
32,115
|
|
|
|
80,790
|
|
|
|
48,801
|
|
|
|
25,844
|
|
|
|
18,464
|
|
|
|
13,216
|
|
|
|
8,978
|
|
|
|
|
|
82,300
|
|
|
|
42,788
|
|
|
|
101,154
|
|
|
|
84,186
|
|
|
|
72,566
|
|
|
|
9,751
|
|
|
|
24,971
|
|
|
|
24,550
|
|
|
|
|
|
.73
|
|
|
|
.65
|
|
|
|
1.60
|
|
|
|
.97
|
|
|
|
.52
|
|
|
|
.38
|
|
|
|
.27
|
|
|
|
.18
|
|
|
|
|
|
1.64
|
|
|
|
.86
|
|
|
|
2.00
|
|
|
|
1.67
|
|
|
|
1.46
|
|
|
|
.20
|
|
|
|
.51
|
|
|
|
.50
|
|
|
|
|
|
107,632
|
|
|
|
21,758
|
|
|
|
24,476
|
|
|
|
27,963
|
|
|
|
16,892
|
|
|
|
19,543
|
|
|
|
29,447
|
|
|
|
61,656
|
|
|
|
|
|
179,884
|
|
|
|
82,893
|
|
|
|
49,179
|
|
|
|
65,802
|
|
|
|
48,128
|
|
|
|
50,038
|
|
|
|
76,238
|
|
|
|
104,085
|
|
|
|
|
|
307,425
|
|
|
|
240,891
|
|
|
|
200,400
|
|
|
|
323,510
|
|
|
|
229,809
|
|
|
|
156,908
|
|
|
|
87,414
|
|
|
|
84,945
|
|
|
|
|
|
526,723
|
|
|
|
553,769
|
|
|
|
548,555
|
|
|
|
392,489
|
|
|
|
329,377
|
|
|
|
286,678
|
|
|
|
235,067
|
|
|
|
209,877
|
|
|
|
|
|
1,200,854
|
|
|
|
1,073,465
|
|
|
|
1,053,200
|
|
|
|
987,432
|
|
|
|
786,351
|
|
|
|
707,061
|
|
|
|
624,827
|
|
|
|
610,935
|
|
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,600
|
|
|
|
|
|
955,703
|
|
|
|
848,109
|
|
|
|
793,148
|
|
|
|
780,580
|
|
|
|
645,970
|
|
|
|
562,435
|
|
|
|
524,334
|
|
|
|
508,927
|
|
|
|
|
|
65,820
|
|
|
|
78,357
|
|
|
|
217,597
|
|
|
|
114,626
|
|
|
|
83,411
|
|
|
|
89,709
|
|
|
|
59,379
|
|
|
|
27,823
|
|
|
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
32
|
|
|
|
34
|
|
|
|
30
|
|
|
|
29
|
|
|
|
30
|
|
|
|
30
|
|
|
|
36
|
|
|
|
31
|
|
|
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
|
|
9
|
|
|
|
11
|
|
|
|
11
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
40
|
|
|
|
39
|
|
|
|
44
|
|
|
|
39
|
|
|
|
36
|
|
|
|
35
|
|
|
|
29
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
89
|
|
|
|
90
|
|
|
|
77
|
|
|
|
77
|
|
|
|
76
|
|
|
|
76
|
|
|
|
71
|
|
|
|
|
|
99
|
|
|
|
79
|
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
82
|
|
|
|
68
|
|
|
|
94
|
|
|
|
99
|
|
|
|
88
|
|
|
|
73
|
|
|
|
66
|
|
|
|
48
|
|
|
|
|
|
85
|
|
|
|
69
|
|
|
|
94
|
|
|
|
99
|
|
|
|
88
|
|
|
|
73
|
|
|
|
66
|
|
|
|
48
|
|
|
|
|
|
94
|
|
|
|
95
|
|
|
|
99
|
|
|
|
63
|
|
|
|
70
|
|
|
|
66
|
|
|
|
79
|
|
|
|
70
|
|
|
|
|
|
47
|
|
|
|
53
|
|
|
|
88
|
|
|
|
91
|
|
|
|
85
|
|
|
|
84
|
|
|
|
88
|
|
|
|
68
|
|
9
Management’s Discussion & Analysis of Results of Operations and
Financial Condition
RISK FACTORS AND FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere herein. The
Company’s future operating results may be affected by various trends and
factors, which are beyond the Company’s control. These include, among other
factors, fluctuations in oil and natural gas prices, expiration or termination
of drilling contracts, currency exchange gains and losses, changes in general
economic conditions, rapid or unexpected changes in technologies, risks of
foreign operations, uninsured risks, and uncertain business conditions that
affect the Company’s businesses. Accordingly, past results and trends should
not be used by investors to anticipate future results or trends.
With the exception of historical information, the matters discussed in
Management’s Discussion & Analysis of Results of Operations and Financial
Condition include forward-looking statements. These forward-looking statements
are based on various assumptions. The Company cautions that, while it believes
such assumptions to be reasonable and makes them in good faith, assumed facts
almost always vary from actual results. The differences between assumed facts
and actual results can be material. The Company is including this cautionary
statement to take advantage of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements
made by, or on behalf
of, the Company. The factors identified in this cautionary statement and those
factors discussed under Risk Factors beginning on page 5 of the Company’s
Report on Form 10-K for fiscal 2003 are important factors (but not necessarily all important factors)
that could cause actual results to differ materially from those expressed in
any forward-looking statement made by, or on behalf of, the Company.
10
SPIN-OFF AND MERGER TRANSACTIONS
On September 30, 2002, Helmerich & Payne, Inc. completed its distribution of
100 percent of the common stock of Cimarex Energy Co. to the Company’s
shareholders and the merger of Key Production Company, Inc. into a subsidiary
of Cimarex making Key a wholly owned subsidiary of Cimarex. The Cimarex Energy
Co. stock distribution was recorded as a dividend and resulted in a decrease to
consolidated stockholders’ equity of approximately $152.2 million. The Company
and its subsidiaries continue to own and operate contract drilling and real
estate businesses, while Cimarex Energy Co. is a separate, publicly traded
company that owns and operates an exploration and production business. The
Company does not own any common stock of Cimarex Energy Co. (See note 2 of the
Consolidated Financial Statements for complete description of the transaction.)
As a result of the transaction, the Company is reporting the results of its
former exploration and production division (Cimarex Energy Co.) as
discontinued operations.
RESULTS OF OPERATIONS
All per share amounts included in the Results of Operations discussion are
stated on a diluted basis. Helmerich & Payne, Inc.’s net income for 2003 was
$17,873,000 ($0.35 per share), compared with net income of $63,517,000 ($1.26
per share) in 2002, and $144,254,000 ($2.84 per share) in 2001. Included in
net income was income from discontinued operations of $9,811,000 ($0.19 per
share) in 2002, and $63,787,000 ($1.26 per share) in 2001. Also included in the
Company’s net income, but not related to its operations, were after-tax gains
from the sale of investment securities of $3,346,000 ($0.07 per
share) in 2003, $15,206,000 ($0.30 per share) in 2002, and $691,000 ($0.01 per
share)
11
in 2001. Also included in net income is the Company’s portion of income or loss
from its equity affiliates, Atwood Oceanics, Inc. and a 50-50 joint venture
with Atwood called Atwood Oceanics West Tuna Pty. Ltd. (dissolved in 2003).
From equity affiliates, the Company recorded a loss of $0.03 per share in 2003,
and net income of $0.06 and $0.04 per share in 2002 and 2001, respectively.
Consolidated revenues were $515,284,000 in 2003, $551,879,000 in 2002, and
$542,571,000 in 2001. From 2001 to 2003 revenues attributable to contract
drilling operations fell slightly each year. However, total revenues increased
from 2001 to 2002 due to a larger gain realized on the sale of a portion of the
Company’s equity portfolio. U.S. land revenues rose steadily from 2001 to
2003, while international drilling revenues declined significantly during the
same period. Although U.S. offshore platform revenues were relatively flat
from 2001 to 2002, there was a drop of approximately 15 percent in offshore
platform revenues from 2002 to 2003. Revenue reductions in the offshore
platform business were mainly due to a drop in rig utilization to 51 percent in
2003, from 83 percent in 2002, and 98 percent in 2001. The increase in U.S.
land revenues was fueled by the Company’s increasing rig fleet due to the
construction of FlexRigs over the three-year period. The average number of
U.S. land rigs available was 76 in 2003, 57 in 2002, and 42 in 2001. Although
rig availability increased, rig utilizations fell for the Company’s U.S. land
rig fleet to 81 percent in 2003, compared with 84 percent in 2002, and 97
percent in 2001. International rig revenues declined as rig utilizations in
that sector fell to 39 percent in 2003, from 51 percent in 2002, and 56 percent
in 2001. The Company’s international rig utilization was impacted by
significant
reductions in activity in Venezuela and Colombia since 2001. Cutbacks in
drilling budgets for the government-
12
owned oil company, PDVSA, reduced drilling in Venezuela. In Colombia,
completion of development of a customer’s major oilfield has dramatically
reduced drilling activity there.
Revenues from investments were $7,953,000 in 2003, $28,076,000 in 2002, and
$10,967,000 in 2001. Included in revenues was the aggregate of pre-tax gains,
losses, and write-downs relating to the Company’s portfolio of equity
securities which were $5,529,000 in 2003, $24,820,000 in 2002, and $1,189,000
in 2001. Interest and dividend income fell in each year due to reduced cash
positions, lower interest rates, and a reduction in the Company’s equity
portfolio. Total interest and dividend income was $2,467,000 in 2003,
$3,624,000 in 2002, and $9,128,000 in 2001.
Direct operating costs in 2003 were $345,537,000 or 68 percent of operating
revenues, compared with $361,669,000 or 69 percent of operating revenues in
2002, and $330,181,000 or 62 percent of operating revenues in 2001. Direct
operating costs were lower as a percentage of revenues in 2001, primarily due
to the higher average revenue per day and lower daily direct operating costs
per day during 2001 in the U.S. land rig segment. Industry rig activity was
relatively high in 2001, resulting in higher dayrates for the Company.
Depreciation expense was $82,513,000 in 2003, $61,447,000 in 2002, and
$49,532,000 in 2001. Depreciation rose significantly over the two-year period
as the Company placed into service 13 new rigs in 2002, and 19 new rigs in
2003. The Company anticipates depreciation expense to increase again during
2004, as a full year of depreciation expense is incurred
on rigs placed into service in 2003, and as new rigs are constructed and
employed in the field.
13
The Company’s methodology of reporting business segments and general and
administrative expenses has been changed in 2003. This change was driven by
last year’s spin-off of our Exploration and Production Company and to better
reflect the way the Company manages its contract drilling businesses.
The number of contract drilling business segments reported have increased to
three to reflect the Company’s U.S. offshore platform operations separately
from the U.S. land rig operations. Formerly, the combined U.S. segments were
reported as one segment. It is important to note that total operating profit
for U.S. operations and the international contract drilling segment has not
changed. U.S. Land and Offshore Platform segments have simply been separated.
Expenses within the Company’s contract drilling business segments have been
broken out to delineate direct operating costs from associated general and
administrative costs. Formerly, both costs were included in operating costs on
the consolidated statements of income. The associated general and
administrative costs of the contract drilling segments have been reclassified
to general and administrative expense on the consolidated statements of income.
These general and administrative costs are still included in the applicable
contract drilling segment. No other numbers on the consolidated statements of
income were changed or affected by this reclassification.
With the reclassifications, general and administrative expenses totaled
$41,003,000 for 2003, $36,563,000 for 2002, and $28,180,000 for 2001. The 30
percent increase from 2001 to 2002 was primarily the
14
result of increases in employee benefits relating to pension, medical
insurance, and 401(k) matching. Employee salaries and bonuses also contributed
to the increase, as well as increases in property and casualty insurance costs.
With the construction of the FlexRigs, training expenses were also a
contributor to the increase from 2001 to 2002. General and administrative
expenses rose again from 2002 to 2003 due to additional increases in pension
and medical insurance expense, along with increases in property and casualty
insurance costs.
Interest expense rose to $12,289,000 in 2003, compared with $980,000 in 2002,
and $1,701,000 in 2001. The Company issued a total of $200,000,000 of
intermediate-term debt, half of which was placed just prior to the end of
fiscal year 2002, and the other half placed at the very beginning of fiscal
year 2003. Additionally, the Company also drew on its bank line of credit
during 2003, with $30,000,000 drawn at the end of the year.
The provision for income taxes totaled $14,649,000 in 2003, $40,573,000 in
2002, and $54,689,000 in 2001. Effective income tax rates on income from
continuing operations were 43 percent in 2003, 44 percent in 2002, and 41
percent in 2001. The increase in effective tax rates from 2001 to 2002 was a
result of currency fluctuations, primarily in Venezuela, resulting in
additional taxes for inflationary gains and monetary corrections in 2002.
There was less of such an effect in 2003, but international income at higher
effective tax rates combined with the impact of state income taxes, kept the
overall Company tax rate at a relatively high level.
15
COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
2002
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except operating statistics)
|
|
U.S. LAND OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
273,993
|
|
|
$
|
232,446
|
|
|
|
17.9
|
%
|
|
Intersegment elimination
|
|
|
—
|
|
|
|
(809
|
)
|
|
|
—
|
|
|
Direct operating expenses
|
|
|
201,398
|
|
|
|
165,394
|
|
|
|
21.8
|
|
|
Intersegment elimination
|
|
|
—
|
|
|
|
(648
|
)
|
|
|
—
|
|
|
General and administrative expense
|
|
|
9,304
|
|
|
|
10,087
|
|
|
|
(7.8
|
)
|
|
Depreciation
|
|
|
44,726
|
|
|
|
26,311
|
|
|
|
70.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
18,565
|
|
|
$
|
30,493
|
|
|
|
(39.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
22,588
|
|
|
|
17,478
|
|
|
|
29.2
|
%
|
|
Average rig revenue per day
|
|
$
|
11,436
|
|
|
$
|
12,397
|
|
|
|
(7.8
|
)
|
|
Average rig expense per day
|
|
$
|
8,221
|
|
|
$
|
8,561
|
|
|
|
(4.0
|
)
|
|
Average rig margin per day
|
|
$
|
3,215
|
|
|
$
|
3,836
|
|
|
|
(16.2
|
)
|
|
Number of owned rigs at end of period
|
|
|
83
|
|
|
|
66
|
|
|
|
25.8
|
|
|
Rig utilization
|
|
|
81
|
%
|
|
|
84
|
%
|
|
|
(3.6
|
)
|
Operating statistics for per day revenue, expense and margin do not include reimbursements of “out-of-pocket” expenses.
The Company’s operating profit in its U.S. land rig operations fell by 39
percent from 2002 to 2003, despite the fact that commodity prices were very
strong during the year. Historically high crude oil and natural gas prices,
and an increasing industry rig count in the United States were all strong
signals for an up cycle that could benefit oil service and contract drilling
companies. However, in spite of increasing rig activity, average dayrates and
margins per rig day fell during the year. Even with higher industry rig
counts, the additional capacity added by companies like Helmerich & Payne,
along with intense rig-on-rig price competition, delayed improvements in
dayrates and margins. More specifically with Helmerich & Payne, 2002 dayrates
were aided by the remaining term left on some of the contracts for work
relating to FlexRig2s that were completed and commenced work during 2001.
Those relatively high dayrates and
16
margins did not continue at those levels during 2003 after contracts expired.
The Company’s increase in rig capacity was brought about by its FlexRig3
construction program that began during 2002 and extended through 2003. During
2003, 19 FlexRig3s were completed and put into service. Two first generation
FlexRig’s were sent overseas for work in Hungary and Chad. As a result of the
construction program, the Company’s investment in drilling equipment rose
significantly, thereby resulting in an increase in depreciation expense.
Although the Company will have more rigs available for service next year, and
although industry fundamentals are positive going in to 2004, a drop in
dayrates or rig utilization could cause U.S. land rig operating profit to
decrease next year.
COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
2002
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except operating statistics)
|
|
U.S. OFFSHORE PLATFORM OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
112,633
|
|
|
$
|
132,249
|
|
|
|
(14.8
|
)%
|
|
Direct operating expenses
|
|
|
60,589
|
|
|
|
79,301
|
|
|
|
(23.6
|
)
|
|
General and administrative expense
|
|
|
2,939
|
|
|
|
3,451
|
|
|
|
(14.8
|
)
|
|
Depreciation
|
|
|
12,799
|
|
|
|
10,809
|
|
|
|
18.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
36,306
|
|
|
$
|
38,688
|
|
|
|
(6.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
2,233
|
|
|
|
3,286
|
|
|
|
(32.0
|
)%
|
|
Average rig revenue per day
|
|
$
|
38,239
|
|
|
$
|
30,424
|
|
|
|
25.7
|
|
|
Average rig expense per day
|
|
$
|
17,822
|
|
|
$
|
16,263
|
|
|
|
9.6
|
|
|
Average rig margin per day
|
|
$
|
20,417
|
|
|
$
|
14,161
|
|
|
|
44.2
|
|
|
Number of owned rigs at end of period
|
|
|
12
|
|
|
|
12
|
|
|
|
0.0
|
|
|
Rig utilization
|
|
|
51
|
%
|
|
|
83
|
%
|
|
|
(38.6
|
)
|
Operating statistics for per day revenue, expense and margin do not include reimbursements of “out-of-pocket” expenses
and exclude the effects of offshore platform management contracts.
17
During the year, the Company continued to experience a reduction in activity
days and rig utilization in its U.S. offshore platform rig operations. Total
revenue and revenue per day during 2003 were aided by the recognition of
revenue due to early termination of contracts. During the fourth quarter of
2003, one platform rig was stacked and two rigs that were working at full
dayrate were changed to standby status, thereby likely causing a reduction of
the first quarter 2004 operating profit for the U.S. offshore rig segment of
approximately 50 percent from that of the fourth quarter of 2003. Capital
expenditures were reduced dramatically due to the fact that there were no new
platform rigs under construction during 2003, whereas two new platform rigs
were completed during 2002. It is anticipated that during 2004, the U.S.
offshore platform market will continue to be soft, unless and until commodity
pricing or other circumstances significantly increase demand for platform rigs.
COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
2002
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except operating statistics)
|
|
INTERNATIONAL OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
109,812
|
|
|
$
|
151,392
|
|
|
|
(27.5
|
)%
|
|
Direct operating expenses
|
|
|
81,461
|
|
|
|
115,294
|
|
|
|
(29.3
|
)
|
|
General and administrative expense
|
|
|
3,110
|
|
|
|
2,634
|
|
|
|
18.1
|
|
|
Depreciation
|
|
|
20,092
|
|
|
|
20,336
|
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
5,149
|
|
|
$
|
13,128
|
|
|
|
(60.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
4,515
|
|
|
|
5,956
|
|
|
|
(24.2
|
)%
|
|
Average rig revenue per day
|
|
$
|
19,603
|
|
|
$
|
21,161
|
|
|
|
(7.4
|
)
|
|
Average rig expense per day
|
|
$
|
14,140
|
|
|
$
|
14,599
|
|
|
|
(3.1
|
)
|
|
Average rig margin per day
|
|
$
|
5,463
|
|
|
$
|
6,562
|
|
|
|
(16.7
|
)
|
|
Number of owned rigs at end of period
|
|
|
32
|
|
|
|
33
|
|
|
|
(3.0
|
)
|
|
Rig utilization
|
|
|
39
|
%
|
|
|
51
|
%
|
|
|
(23.5
|
)
|
Operating statistics for per day revenue, expense and margin do not include reimbursements of “out-of-pocket” expenses
and exclude the effects of offshore platform management contracts.
18
Rig activity, revenues, and operating profit in the Company’s international
operations declined from 2002 to 2003. The general softness in the
international markets was broad based and resulted in lower utilizations in
each of the countries in which the Company operated during the 2002-2003
period. The Company’s Venezuelan operations, where the largest number of
Company international rigs are located, were also hampered by an attempted
coup, which resulted in a strike by workers at PDVSA, the government-owned oil
company.
During 2002, the Company recorded an estimated devaluation loss totaling
$1,200,000 in Argentina when that country experienced a dramatic economic
collapse. As a result of the collapse, the government stopped the outflow of
dollars from the country and required that former dollar obligations be paid in
Argentina pesos. During 2003, the Company was able to reduce its 2002
estimated loss by approximately $980,000 relating to the Argentina currency
devaluation.
In Venezuela, approximately 60 percent of the Company’s billings are in U.S.
dollars and 40 percent are in bolivars, the local currency. As a result, the
Company is exposed to risk of currency devaluation in Venezuela. Devaluation
losses for Venezuelan operations totaled $624,000 in 2003 and $4,393,000 in
2002. The Company anticipates devaluation losses in Venezuela during 2004, but
is unable to predict the extent of the devaluation. If 2004 rig activity
levels are similar to 2003, and if a 25 percent to 50 percent devaluation would
occur, the Company could experience potential devaluation losses ranging from
approximately $3,200,000 to $5,100,000. (See MD&A section entitled Foreign
Currency Exchange Rate
Risk for important details regarding potential devaluation losses.)
19
In addition to potential devaluation, next year’s average dayrate and profit
margin per rig, as well as rig utilizations are difficult to predict and, while
not expected to decline during 2004, are subject to unpredictable markets that
could produce significant volatility.
COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
2002
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
REAL ESTATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
10,893
|
|
|
$
|
8,525
|
|
|
|
27.8
|
%
|
|
Direct operating expenses
|
|
|
1,789
|
|
|
|
1,617
|
|
|
|
10.6
|
|
|
Depreciation
|
|
|
2,535
|
|
|
|
1,844
|
|
|
|
37.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
6,569
|
|
|
$
|
5,064
|
|
|
|
29.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit increased by approximately 30 percent from 2002 to 2003 in the
Company’s Real Estate division, primarily due to the sale of approximately 15
acres of raw land from the Company’s Southpark investment. Pre-tax profit from
the sale of land was approximately $2.2 million. Depreciation expense
increased in 2003 due to the acceleration of depreciation on the Company’s
headquarters building, which will be razed in 2004. Overall combined occupancy
and resulting revenues generated from all the other real estate properties did
not materially fluctuate from 2002 to 2003.
20
COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
2001
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except operating statistics)
|
|
U.S. LAND OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
232,446
|
|
|
$
|
226,344
|
|
|
|
2.7
|
%
|
|
Intersegment elimination
|
|
|
(809
|
)
|
|
|
(4,487
|
)
|
|
|
(82.0
|
)
|
|
Direct operating expenses
|
|
|
165,394
|
|
|
|
133,650
|
|
|
|
23.8
|
|
|
Intersegment elimination
|
|
|
(648
|
)
|
|
|
(2,553
|
)
|
|
|
(74.6
|
)
|
|
General and administrative expense
|
|
|
10,087
|
|
|
|
6,479
|
|
|
|
55.7
|
|
|
Depreciation
|
|
|
26,311
|
|
|
|
16,701
|
|
|
|
57.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
30,493
|
|
|
$
|
67,580
|
|
|
|
(54.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
17,478
|
|
|
|
15,098
|
|
|
|
15.8
|
%
|
|
Average rig revenue per day
|
|
$
|
12,397
|
|
|
$
|
14,315
|
|
|
|
(13.4
|
)
|
|
Average rig expense per day
|
|
$
|
8,561
|
|
|
$
|
8,175
|
|
|
|
4.7
|
|
|
Average rig margin per day
|
|
$
|
3,836
|
|
|
$
|
6,140
|
|
|
|
(37.5
|
)
|
|
Number of owned rigs at end of period
|
|
|
66
|
|
|
|
49
|
|
|
|
34.7
|
|
|
Rig utilization
|
|
|
84
|
%
|
|
|
97
|
%
|
|
|
(13.4
|
)
|
Operating statistics for per day revenue, expense and margin do not include reimbursements of “out-of-pocket” expenses.
U.S. land operating profit declined by 55 percent from 2001 to 2002 as overall
industry rig counts declined from a cyclical high brought on by a spike in
natural gas prices during 2001. The significant reduction in industry rig
counts that followed during 2002 brought about lower dayrates, rig margins, and
rig utilizations compared with 2001 levels. Although utilization rates declined
during 2002, activity days increased due to an additional 17 rigs put into
service in the U.S. land rig market. This increase was due to FlexRig
construction and movement of land rigs from South American operations to the
U.S. During 2002, the Company completed the final five rigs of its 12-rig
FlexRig2 program commenced in 2001. It also placed eight FlexRig3s into
service and added four more rigs to the U.S. fleet that were moved from South
American operations. Capital spending in U.S. land rig operations
21
increased as the Company embarked on its FlexRig3, 25-rig construction project.
As a result of capital expenditures for U.S. land operations of $236.3 million
in 2002, compared with $136.7 million in 2001, depreciation expense rose by
approximately 58 percent during 2002.
COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
2001
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except operating statistics)
|
|
U.S. OFFSHORE PLATFORM OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
132,249
|
|
|
$
|
128,459
|
|
|
|
3.0
|
%
|
|
Direct operating expenses
|
|
|
79,301
|
|
|
|
75,810
|
|
|
|
4.6
|
|
|
General and administrative expense
|
|
|
3,451
|
|
|
|
2,962
|
|
|
|
16.5
|
|
|
Depreciation
|
|
|
10,809
|
|
|
|
9,576
|
|
|
|
12.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
38,688
|
|
|
$
|
40,111
|
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
3,286
|
|
|
|
3,572
|
|
|
|
(8.0
|
)%
|
|
Average rig revenue per day
|
|
$
|
30,424
|
|
|
$
|
28,995
|
|
|
|
4.9
|
|
|
Average rig expense per day
|
|
$
|
16,263
|
|
|
$
|
15,734
|
|
|
|
3.4
|
|
|
Average rig margin per day
|
|
$
|
14,161
|
|
|
$
|
13,261
|
|
|
|
6.8
|
|
|
Number of owned rigs at end of period
|
|
|
12
|
|
|
|
10
|
|
|
|
20.0
|
|
|
Rig utilization
|
|
|
83
|
%
|
|
|
98
|
%
|
|
|
(15.3
|
)
|
Operating statistics for per day revenue, expense and margin do not include reimbursements of “out-of-pocket” expenses
and exclude the effects of offshore platform management contracts.
Two new offshore platform rigs were completed and placed in service
during 2002 at high dayrates, but with short-term contracts. As a result,
average rig revenue per day and average margins per day improved from
2001 to 2002. More than offsetting this improvement was a decline in
activity days of eight percent, the beginning signs of an overall reduction
in that market that continued into 2003.
22
COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
2001
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except operating statistics)
|
|
INTERNATIONAL OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
151,392
|
|
|
$
|
170,270
|
|
|
|
(11.1
|
)%
|
|
Direct operating expenses
|
|
|
115,294
|
|
|
|
120,845
|
|
|
|
(4.6
|
)
|
|
General and administrative expense
|
|
|
2,634
|
|
|
|
2,112
|
|
|
|
24.7
|
|
|
Depreciation
|
|
|
20,336
|
|
|
|
18,838
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
13,128
|
|
|
$
|
28,475
|
|
|
|
(53.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
5,956
|
|
|
|
7,283
|
|
|
|
(18.2
|
)%
|
|
Average rig revenue per day
|
|
$
|
21,161
|
|
|
$
|
19,683
|
|
|
|
7.5
|
|
|
Average rig expense per day
|
|
$
|
14,599
|
|
|
$
|
13,334
|
|
|
|
9.5
|
|
|
Average rig margin per day
|
|
$
|
6,562
|
|
|
$
|
6,349
|
|
|
|
3.4
|
|
|
Number of owned rigs at end of period
|
|
|
33
|
|
|
|
37
|
|
|
|
(10.8
|
)
|
|
Rig utilization
|
|
|
51
|
%
|
|
|
56
|
%
|
|
|
(8.9
|
)
|
Operating statistics for per day revenue, expense and margin do not include
reimbursements of “out-of-pocket” expenses and exclude the effects of offshore
platform management contracts.
Rig utilization, total activity days, and total revenues declined from 2001 to
2002, resulting in operating profit declining by approximately 54 percent. The
most significant declines in activity and profitability were in Company
operations located in Colombia and Argentina. Colombia’s rig utilizations fell
from 69 percent during 2001 to 31 percent during 2002. Additionally, the
number of rigs available in Colombia fell from seven during the first quarter
of 2001 to three by the end of 2001. Those four rigs were moved to the United
States. Accordingly, profitability in Colombia declined sharply during 2002.
Operating profit for Company operations in Venezuela and Argentina also
declined during 2002. Devaluation losses in Venezuela were $4,393,000 in 2002,
and $796,000 in 2001. (See MD&A section entitled Foreign Currency Exchange
Risk for more detail regarding potential devaluation losses.)
23
COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
2001
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
REAL ESTATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,525
|
|
|
$
|
11,018
|
|
|
|
(22.6
|
)%
|
|
Direct operating expenses
|
|
|
1,617
|
|
|
|
2,419
|
|
|
|
(33.2
|
)
|
|
Depreciation
|
|
|
1,844
|
|
|
|
2,284
|
|
|
|
(19.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
5,064
|
|
|
$
|
6,315
|
|
|
|
(19.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and operating profit declined from 2001 to 2002 in the Company’s Real
Estate division, due to a sale of raw land which resulted in approximately $2
million of operating profit during 2001. Depreciation was higher in 2001 due to
the acceleration of depreciation for a building that was razed during 2002.
Earnings from ongoing leasing operations were up only slightly from 2001 to
2002.
CRITICAL ACCOUNTING POLICIES
The Company’s consolidated financial statements are impacted by the accounting
policies used and the estimates and assumptions made by management during their
preparation. The following is a discussion of the critical accounting policies
related to property, plant and equipment, impairment of long-lived assets,
self-insurance accruals, and revenue recognition. Other significant accounting
policies are summarized in Note 1 in the notes to the consolidated financial
statements.
Property, plant and equipment, including renewals and betterments, are stated
at cost, while maintenance and repairs are expensed currently. Interest costs
applicable to the construction of qualifying assets are capitalized as a
component of the cost of such assets. The Company provides for the depreciation
of property, plant and equipment using the straight-line method over the
estimated useful lives of the assets.
24
Upon retirement or other disposal of fixed assets, the cost and related
accumulated depreciation are removed from the respective accounts and any gains
or losses are recorded in results of operations.
The Company reviews its long-lived assets, including property and equipment,
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss exists
when estimated undiscounted cash flows expected to result from the use of the
asset and its eventual disposition are less than its carrying amount. Any
impairment loss recognized represents the excess of the asset’s carrying value
as compared to its estimated fair value, which is determined based on the
present value of estimated cash flows from the asset and appraisals or sales
prices of comparable assets. There were no long-lived asset impairment losses
in the Company’s continuing operations during the years ended September 30,
2003, 2002, and 2001. However, should industry market conditions deteriorate
from those existing currently, impairment losses could be recorded in the
future. All of the Company’s drilling rigs are transportable and are therefore
not limited to one area or country. Drilling rigs can be moved from countries
where demand is low to countries experiencing high demand for drilling
services. When making determinations of location for drilling rigs, the
Company considers both long and short-term views of demand and other reasonable
business considerations.
The Company is self-insured or maintains high deductibles for certain losses
relating to worker’s compensation, general, product, and auto liabilities.
Generally, deductibles are $2 million per occurrence on claims that fall under
these
coverages. Insurance is also purchased on rig properties and generally
deductibles are $1 million per occurrence.
25
Excess insurance is purchased over these coverages to limit the Company’s
exposure to catastrophic claims, but there can be no assurance that such
coverage will respond or be adequate in all circumstances. Retained losses are
estimated and accrued based upon our estimates of the aggregate liability for
claims incurred, and using the Company’s historical loss experience and
estimation methods that are believed to be reliable.
Revenues and costs on daywork contracts are recognized daily as the work
progresses. For certain contracts, we receive lump-sum payments for the
mobilization of rigs and other drilling equipment. Revenues earned, net of
direct costs incurred for the mobilization, are deferred and recognized over
the term of the related drilling contract. Other lump-sum payments received
from customers relating to specific contracts are deferred and amortized to
income as services are performed. Costs incurred to relocate rigs and other
drilling equipment to areas in which a contract has not been secured are
expensed as incurred.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s capital spending for continuing operations was $246,301,000 for
2003, $312,064,000 in 2002, and $184,668,000 in 2001. Net cash provided from
operating activities for those same time periods were $96,504,000 in 2003,
$151,774,000 in 2002, and $127,435,000 in 2001. In addition to the net cash
provided by operating activities, the
Company also generated net proceeds from the sale of portfolio securities of
$18,215,000 in 2003, $47,146,000 in 2002, and $24,438,000 in 2001.
During 2000, the Company announced a program (FlexRig2 program) under which it
would construct 12 new FlexRigs at an approximate cost
26
of between $7.5 and $8.25 million each. During 2001, the Company completed
construction on seven of those 12 rigs. Additionally, the Company announced in
2001 that it would embark on another construction project (FlexRig3 program) to
build an additional 25 FlexRigs at an approximate cost of $11 million each.
During 2002, the Company completed the remaining five rigs in the FlexRig2
program and the first eight rigs in the FlexRig3 program. During 2003, the
remaining 17 rigs originally planned in the FlexRig3 program were completed.
Another seven FlexRig3s were scheduled for construction, two of which were
completed by the end of fiscal 2003, and five are scheduled to be completed by
March, 2004.
The Company expects to fund its 2004 capital spending of approximately
$100,000,000 with internally generated cash flows, its bank line of credit
and/or from funds generated by the sale of stock from its investment portfolio.
In August 2002, the Company entered into a $200 million intermediate-term
unsecured debt obligation with staged maturities from five to 12 years and a
weighted average interest rate of 6.31 percent. Funding of the notes occurred
on August 15, 2002, and October 15, 2002, in equal amounts of $100 million.
The terms of the debt obligations require the Company to maintain a minimum
ratio of debt to total capitalization. Proceeds from
the intermediate-term debt were used to repay the balance of the Company’s
outstanding debt of $50 million in September 2002, help fund the Company’s rig
construction program and for other general corporate purposes.
On September 30, 2003, the Company had a committed unsecured line of credit
totaling $125 million, with short-term loans totaling $30 million and letters
of credit totaling $13.7 million outstanding against the line.
27
The line of credit matures in July 2004 and bears interest of LIBOR + .87
percent to 1.125 percent depending on certain financial ratios of the Company.
The Company must maintain certain financial ratios including debt to total
capitalization and debt to earnings before interest, taxes, depreciation, and
amortization, and maintain certain levels of liquidity and tangible net worth.
The strength of the Company’s balance sheet is substantial, with current ratios
for September 30, 2003, and 2002 at 2.2 and 2.5, respectively, and with debt to
total capitalization of 18 percent and 10 percent, respectively. Additionally,
the Company manages a large portfolio of marketable securities that, at the
close of 2003, had a market value of $169,546,000. The Company’s investments in
Atwood Oceanics, Inc., Schlumberger, Ltd., and ConocoPhillips made up almost 90
percent of the portfolio’s market value on September 30, 2003. The value of
the portfolio is subject to fluctuation in the market and may vary considerably
over time. Excluding the Company’s equity-method investments, the portfolio is
recorded at fair value on the Company’s balance sheet for each reporting
period. During 2003, the Company paid a dividend
of $0.32 per share, or a total of $16,015,268, representing the 31st
consecutive year of dividend increases.
STOCK PORTFOLIO HELD BY THE COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2003
|
|
Number of Shares
|
|
Cost Basis
|
|
Market Value
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except share amounts)
|
|
Atwood Oceanics, Inc.
|
|
|
3,000,000
|
|
|
$
|
56,655
|
|
|
$
|
71,970
|
|
|
Schlumberger, Ltd.
|
|
|
1,480,000
|
|
|
|
23,511
|
|
|
|
71,632
|
|
|
ConocoPhillips
|
|
|
140,000
|
|
|
|
3,486
|
|
|
|
7,665
|
|
|
Other
|
|
|
|
|
|
|
6,303
|
|
|
|
18,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
89,955
|
|
|
$
|
169,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
MATERIAL COMMITMENTS
The Company has no off balance sheet arrangements, as defined by SEC rules. The
Company’s contractual obligations as of September 30, 2003, including payments
due by year are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
After 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term loans (a)
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Long-term debt (a)
|
|
|
200,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
175,000
|
|
|
Operating leases (b)
|
|
|
8,146
|
|
|
|
1,285
|
|
|
|
1,048
|
|
|
|
1,311
|
|
|
|
1,385
|
|
|
|
1,385
|
|
|
|
1,732
|
|
|
Purchase obligations
|
|
|
36,415
|
|
|
|
35,530
|
|
|
|
530
|
|
|
|
355
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Contractual Obligations
|
|
$
|
274,561
|
|
|
$
|
66,815
|
|
|
$
|
1,578
|
|
|
$
|
1,666
|
|
|
$
|
26,385
|
|
|
$
|
1,385
|
|
|
$
|
176,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
See Note 3 “Long-term Debt” to the Company’s Consolidated Financial
Statements.
|
|
|
|
(b)
|
|
See Note 14 “Commitments and Contingencies” to the Company’s Consolidated
Financial Statements.
|
An actuarial study of the Company’s pension plan projects that no funding will
be required in fiscal years 2004 or 2005. After 2005, funding requirements, if
any, will be subject to returns on plan assets and other external factors.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Rate Risk.
The Company has international operations
in Hungary, Chad, and in several South American countries, as well as a labor
contract for work off the coast of Equatorial Guinea. With the exception of
Venezuela, the Company’s exposure to currency valuation losses is usually
minimal due to the fact that virtually all billings and receipts in other
countries are in U.S. dollars. Even though the Company’s contract with its
customers in Argentina was in U.S. dollars, the Company recorded a devaluation
loss as Argentina experienced a dramatic economic collapse during 2002. As a
result of the economic collapse, the government stopped the outflow of dollars
from the country and required that former dollar obligations be paid in
Argentina pesos,
29
resulting in the Company recording an estimated loss of $1,200,000
in 2002. The Company was able to reduce this estimated loss by
approximately $980,000 during 2003. At the present time, the
Company has two rigs located in Argentina, one of which will begin
working during early 2004.
The Company is exposed to risks of currency devaluation in Venezuela
primarily as a result of bolivar receivable balances and bolivar cash
balances. In Venezuela, while approximately 60 percent of the Company’s
invoice billings to the Venezuelan state oil company, PDVSA, are in
U.S. dollars and 40 percent are in the local currency, the bolivar, PDVSA
typically pays all amounts owed in bolivars. The Company, historically,
has usually been able to convert the bolivars received in payment of
the dollar-based billings into dollars in a timely manner and thus avoid,
in large measure, devaluation losses pertaining to these dollar-based
invoices. In January 2003, the Venezuelan government put into effect
exchange controls that fixed the exchange rate at 1600 Bolivars to one
U.S. dollar and also prohibited the Company, as well as other companies,
from converting the bolivar into U.S. dollars through the central bank.
As a result of these exchange controls, the Company has been unable
since January 2003 to convert its bolivar cash balances into U.S. dollars.
As of September 30, 2003, the Company’s bolivar balance was approximately
14 billion bolivars or approximately $8.8 million. Historically, the
Company has kept bolivar cash balances at necessary minimum levels
to fund local operating costs.
As part of the exchange controls regulation, the Venezuelan government
provided a mechanism by which companies could request conversion
of bolivars into U.S. dollars. In compliance with such regulations, the
30
Company on October 1, 2003, submitted a request to the Venezuelan government
seeking permission to dividend earnings, which effectively will convert 14
billion bolivars into approximately $8.8 million. The Company is unable to
predict if or when this request will be approved.
From August of 2002 to August of 2003, there was a 13 percent devaluation of
the bolivar. As a result, the Company experienced a $624,000 devaluation loss
for 2003. This 13 percent devaluation loss may not be reflective of the actual
potential for future devaluation losses because of the exchange controls that
are currently in place. While the Company is unable to predict future
devaluation in Venezuela, if fiscal 2004 activity levels are similar to fiscal
2003 and if a 25 percent to 50 percent devaluation should occur, the Company
could experience potential currency devaluation losses ranging from
approximately $3,200,000 to $5,100,000.
In late August 2003, the Venezuelan state petroleum company agreed, on a
prospective basis, to pay a portion of the Company’s dollar-based invoices in
U.S. dollars. While this is a positive development in light of the existing
exchange controls, there is no guarantee as to how long this arrangement will
continue. Were this agreement to end, the Company would revert back to
receiving these payments in bolivars and thus increase bolivar cash balances
and exposure to devaluation.
Commodity Price Risk.
The demand for contract drilling services is a result of
exploration and production companies spending money to explore and develop
drilling prospects in
search for crude oil and natural gas. Their appetite for such spending is
driven by their cash flow and financial strength, which is very dependent,
among other things, on crude oil and natural gas commodity prices. Crude oil
31
prices are determined by a number of factors including supply and
demand, worldwide economic conditions, and geopolitical factors.
Crude oil and natural gas prices have been volatile and very difficult
to predict. This difficulty has led many exploration and production
companies to base their capital spending on much more conservative
estimates of commodity prices. As a result, demand for contract
drilling services is not always purely a function of the movement of
commodity prices.
Interest Rate Risk.
The Company’s interest rate risk exposure results primarily
from short-term rates, mainly LIBOR-based on borrowings from its commercial
banks. To reduce the impact of fluctuations in interest rates, the Company
maintains a portion of its total debt portfolio in fixed-rate debt. On
September 30, 2003, the amount of the Company’s fixed-rate debt was
approximately 87 percent of total debt. In the past, the Company has entered
into financial instruments such as interest rate swaps and may consider this
and other financial instruments in the future to manage the portfolio mix
between fixed and floating rate debt and to mitigate the impact of changes in
interest rates based on management’s assessment of future interest rates,
volatility of the yield curve, and the Company’s ability to access the capital
markets in a timely manner.
Based on the outstanding borrowings under variable-rate debt instruments on
September 30, 2003, a change in the average interest rate of 100 basis points
would result in a change in net income and cash flows before income taxes on an
annual basis of approximately $0.2 million and $0.3 million, respectively.
32
The following tables provide information as of September 30, 2003 and 2002
about the Company’s interest rate risk sensitive instruments:
INTEREST RATE RISK
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After
|
|
|
|
|
|
Fair Value
|
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2008
|
|
Total
|
|
@ 9/30/03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
25,000
|
|
|
|
—
|
|
|
$
|
175,000
|
|
|
$
|
200,000
|
|
|
$
|
226,500
|
|
|
|
Average Interest Rate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.5
|
%
|
|
|
—
|
|
|
|
6.4
|
%
|
|
|
6.4
|
%
|
|
|
—
|
|
|
Variable Rate Debt
|
|
$
|
30,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
|
Average Interest Rate (a)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(a
|
)
|
|
|
—
|
|
|
(a) LIBOR plus an increment of .875% to 1.25% depending on certain financial
ratios.
|
INTEREST RATE RISK
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After
|
|
|
|
|
|
Fair Value
|
|
|
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2007
|
|
Total
|
|
@ 9/30/02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
12,500
|
|
|
$
|
87,500
|
|
|
$
|
100,000
|
|
|
$
|
109,700
|
|
|
|
Average Interest Rate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.5
|
%
|
|
|
6.4
|
%
|
|
|
6.4
|
%
|
|
|
—
|
|
|
Interest Rate Swap (b)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(b
|
)
|
|
|
(1,700
|
)
|
|
(b) At September 30, 2002, the Company held an interest rate swap on $50
million face value debt to receive variable interest payments based on 30-day
LIBOR rates and pay fixed interest payments of 5.4% through October 27, 2003.
|
Equity Price Risk.
On September 30, 2003, the Company owned stocks in other
publicly held companies with a total market value of $169,546,000. These
securities are subject to a wide variety and number of market-related risks
that could substantially reduce or increase the market value of the Company’s
holdings. Except for the Company’s holdings in its equity affiliate, Atwood
Oceanics, Inc., the portfolio is recorded at fair value on its balance sheet
with changes in unrealized after-tax value reflected in the equity section of
its balance sheet. Any reduction in market value would have an impact on the
Company’s debt ratio and financial strength. The total market value of the
portfolio of securities was $175,668,000 at September 30, 2002.
33
Report of Independent Auditors
The Board of Directors and Shareholders
Helmerich & Payne, Inc.
We have audited the accompanying consolidated balance sheets of Helmerich &
Payne, Inc. as of September 30, 2003 and 2002, and the related consolidated
statements of income, shareholders’ equity, and cash flows for each of the
three years in the period ended September 30, 2003. These financial statements
are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Helmerich &
Payne, Inc. at September 30, 2003 and 2002, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 2003, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
Tulsa, Oklahoma
November 19, 2003
34
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
2003
|
|
2002
|
|
2001
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
507,331
|
|
|
$
|
523,803
|
|
|
$
|
531,604
|
|
|
|
Income from investments
|
|
|
7,953
|
|
|
|
28,076
|
|
|
|
10,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
515,284
|
|
|
|
551,879
|
|
|
|
542,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs
|
|
|
345,537
|
|
|
|
361,669
|
|
|
|
330,181
|
|
|
|
Depreciation
|
|
|
82,513
|
|
|
|
61,447
|
|
|
|
49,532
|
|
|
|
General and administrative
|
|
|
41,003
|
|
|
|
36,563
|
|
|
|
28,180
|
|
|
|
Interest
|
|
|
12,289
|
|
|
|
980
|
|
|
|
1,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
481,342
|
|
|
|
460,659
|
|
|
|
409,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income
taxes and equity in income (loss) of affiliates
|
|
|
33,942
|
|
|
|
91,220
|
|
|
|
132,977
|
|
|
Provision for income taxes
|
|
|
14,649
|
|
|
|
40,573
|
|
|
|
54,689
|
|
|
Equity in income (loss) of affiliates
net of income taxes
|
|
|
(1,420
|
)
|
|
|
3,059
|
|
|
|
2,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
17,873
|
|
|
|
53,706
|
|
|
|
80,467
|
|
|
Income from discontinued operations
|
|
|
—
|
|
|
|
9,811
|
|
|
|
63,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
17,873
|
|
|
$
|
63,517
|
|
|
$
|
144,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.36
|
|
|
$
|
1.08
|
|
|
$
|
1.61
|
|
|
|
Income from discontinued operations
|
|
|
—
|
|
|
|
0.19
|
|
|
|
1.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.36
|
|
|
$
|
1.27
|
|
|
$
|
2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.35
|
|
|
$
|
1.07
|
|
|
$
|
1.58
|
|
|
|
Income from discontinued operations
|
|
|
—
|
|
|
|
0.19
|
|
|
|
1.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.35
|
|
|
$
|
1.26
|
|
|
$
|
2.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
50,039
|
|
|
|
49,825
|
|
|
|
50,096
|
|
|
|
Diluted
|
|
|
50,596
|
|
|
|
50,345
|
|
|
|
50,772
|
|
The accompanying notes are an integral part of these statements.
35
Consolidated Balance Sheets
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
2003
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
38,189
|
|
|
$
|
46,883
|
|
|
|
Accounts receivable, less reserve of $1,319 in 2003 and $1,337 in 2002
|
|
|
91,088
|
|
|
|
92,604
|
|
|
|
Inventories
|
|
|
22,533
|
|
|
|
22,511
|
|
|
|
Prepaid expenses and other
|
|
|
45,721
|
|
|
|
16,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
197,531
|
|
|
|
178,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENTS
|
|
|
158,770
|
|
|
|
150,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT, at cost:
|
|
|
|
|
|
|
|
|
|
|
Contract drilling equipment
|
|
|
1,490,389
|
|
|
|
1,235,784
|
|
|
|
Construction in progress
|
|
|
45,004
|
|
|
|
72,303
|
|
|
|
Real estate properties
|
|
|
56,247
|
|
|
|
48,925
|
|
|
|
Other
|
|
|
87,570
|
|
|
|
82,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,679,210
|
|
|
|
1,439,322
|
|
|
|
Less-accumulated depreciation and amortization
|
|
|
621,005
|
|
|
|
541,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
1,058,205
|
|
|
|
897,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
1,329
|
|
|
|
942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,415,835
|
|
|
$
|
1,227,313
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
36
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
2003
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except share data)
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
30,000
|
|
|
$
|
—
|
|
|
|
Accounts payable
|
|
|
29,630
|
|
|
|
41,045
|
|
|
|
Accrued liabilities
|
|
|
28,988
|
|
|
|
31,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
88,618
|
|
|
|
72,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
Long-term notes payable
|
|
|
200,000
|
|
|
|
100,000
|
|
|
|
Deferred income taxes
|
|
|
181,737
|
|
|
|
131,401
|
|
|
|
Other
|
|
|
28,229
|
|
|
|
27,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities
|
|
|
409,966
|
|
|
|
259,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.10 par value, 80,000,000 shares authorized,
53,528,952 shares issued
|
|
|
5,353
|
|
|
|
5,353
|
|
|
|
Preferred stock, no par value, 1,000,000 shares authorized, no shares issued
|
|
|
—
|
|
|
|
—
|
|
|
|
Additional paid-in capital
|
|
|
83,302
|
|
|
|
82,489
|
|
|
|
Retained earnings
|
|
|
840,776
|
|
|
|
838,929
|
|
|
|
Unearned compensation
|
|
|
(10
|
)
|
|
|
(190
|
)
|
|
|
Accumulated other comprehensive income
|
|
|
33,668
|
|
|
|
16,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
963,089
|
|
|
|
942,761
|
|
|
|
Less treasury stock, 3,388,588 shares in 2003 and
3,518,282 shares in 2002, at cost
|
|
|
45,838
|
|
|
|
47,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
917,251
|
|
|
|
895,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
1,415,835
|
|
|
$
|
1,227,313
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
37
Consolidated Statements of Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
Unearned
|
|
Retained
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Compensation
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Balance, September 30, 2000
|
|
|
53,529
|
|
|
$
|
5,353
|
|
|
$
|
66,090
|
|
|
$
|
(3,277
|
)
|
|
$
|
813,885
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,254
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on available-for sale securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives instruments losses, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends ($.30 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,047
|
)
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
7,965
|
|
|
|
|
|
|
|
|
|
|
Purchase of stock for treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit of stock-based awards
|
|
|
|
|
|
|
|
|
|
|
6,269
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,465
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2001
|
|
|
53,529
|
|
|
|
5,353
|
|
|
|
80,324
|
|
|
|
(1,812
|
)
|
|
|
943,105
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,517
|
|
|
|
Other comprehensive (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on available-for sale securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives instruments losses, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of Cimarex Energy Co. Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(152,201
|
)
|
|
Cash dividends ($.31 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,492
|
)
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
1,099
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of Restricted Stock Award
|
|
|
|
|
|
|
|
|
|
|
88
|
|
|
|
156
|
|
|
|
|
|
|
Tax benefit of stock-based awards
|
|
|
|
|
|
|
|
|
|
|
978
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2002
|
|
|
53,529
|
|
|
|
5,353
|
|
|
|
82,489
|
|
|
|
(190
|
)
|
|
|
838,929
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,873
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on available-for sale securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives instruments amort., net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends ($.32 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,026
|
)
|
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
441
|
|
|
|
|
|
|
|
|
|
|
Tax benefit of stock-based awards
|
|
|
|
|
|
|
|
|
|
|
372
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2003
|
|
|
53,529
|
|
|
$
|
5,353
|
|
|
$
|
83,302
|
|
|
$
|
(10
|
)
|
|
$
|
840,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[Additional columns below]
[Continued from above table, first column(s) repeated]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Income (Loss)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Balance, September 30, 2000
|
|
|
3,548
|
|
|
$
|
(32,412
|
)
|
|
$
|
106,064
|
|
|
$
|
955,703
|
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,254
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on available-for sale securities, net
|
|
|
|
|
|
|
|
|
|
|
(55,769
|
)
|
|
|
(55,769
|
)
|
|
|
|
Derivatives instruments losses, net
|
|
|
|
|
|
|
|
|
|
|
(986
|
)
|
|
|
(986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
&nbs |