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Construction Management Agreement

Date:
2007
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170K
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#2725065

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CONSTRUCTION MANAGEMENT AGREEMENT
BETWEEN
NETWORK APPLIANCE, INC.
(“NAI”)
AND
BNP PARIBAS LEASING CORPORATION
(“BNPPLC”)
December 14, 2006

 


 

TABLE OF CONTENTS
                         
                    Page  
ENGAGEMENT AND AUTHORIZATION     1  
 
                       
GENERAL TERMS AND CONDITIONS     2  
 
                       
1   Additional definitions     2  
    “97-10/Event”     2  
    “97-10/Maximum Permitted Prepayment”     2  
    “97-10/Prepayment”     3  
    “97-10/Project Costs”     3  
    “97-10/Pronouncement”     4  
    “NAI’s Estimate of Force Majeure Delays”     4  
    “NAI’s Estimate of Force Majeure Excess Costs”     4  
    “Accrued Construction Period Interest Expense”     4  
    “Affiliate’s Contract”     5  
    “Arrangement Fee”     5  
    “Administrative Fee”     5  
    “Capital Adequacy Charges”     5  
    “Carrying Costs”     5  
    “Commitment Fees”     5  
    “Complete Taking”     5  
    “Completion Date”     5  
    “Completion Notice”     5  
    “Construction Advances”     5  
    “Construction Advance Request”     6  
    “Construction Allowance”     6  
    “Construction Budget”     6  
    “Construction Project”     6  
    “Covered Construction Period Losses”     6  
    “Defective Work”     6  
    “FOCB Notice”     6  
    “Force Majeure Event”     7  
    “Funded Construction Allowance”     7  
    “Future Work”     7  
    “Ground Lease Rents”     7  
    “Increased Cost Charges”     7  
    “Increased Commitment”     7  
    “Increased Funding Commitment”     7  
    “Increased Time Commitment”     7  
    “Initial Advance”     7  
    “Maximum Construction Allowance”     7  

 


 

TABLE OF CONTENTS
(Continued)
                         
                    Page  
    “Notice of NAI’s Intent to Terminate”     7  
    “Notice of NAI’s Intent to Terminate Because of a Force Majeure Event”     8  
    “Notice of Termination By NAI”     8  
    “Outstanding Construction Allowance”     8  
    “Owner’s Election to Continue Construction”     8  
    “Pre-lease Casualty”     8  
    “Pre-lease Force Majeure Delays”     8  
    “Pre-lease Force Majeure Event”     8  
    “Pre-lease Force Majeure Event Notice”     8  
    “Pre-lease Force Majeure Excess Costs”     8  
    “Pre-lease Force Majeure Losses”     9  
    “Prior Work”     10  
    “Projected Cost Overruns”     10  
    “Reimbursable Construction Period Costs”     10  
    “Remaining Proceeds”     10  
    “Scope Change”     10  
    “Target Completion Date”     10  
    “Termination of NAI’s Work”     10  
    “Third Party Contract”     11  
    “Third Party Contract/Termination Fees”     11  
    “Timing or Budget Shortfall”     11  
    “Work”     11  
    “Work/Suspension Event”     11  
    “Work/Suspension Notice”     12  
    “Work/Suspension Period”     12  
 
                       
2   Construction and Management of the Property by NAI     12  
    (A)   The Construction Project     12  
        (1)   Construction Approvals by BNPPLC     12  
 
          (a)   Preconstruction Approvals by BNPPLC     12  
 
          (b)   Approval of Scope Changes     12  
        (2)   NAI’s Right to Possession and to Control Construction     13  
 
          (c)   Adequacy of Drawings, Specifications and Budgets     14  
 
          (d)   Existing Condition of the Land and Improvements     14  
 
          (e)   Correction of Defective Work     14  
 
          (f)   Clean Up     15  
 
          (g)   No Damage for Delays     15  
 
          (h)   No Fee For Construction Management     15  
        (3)   Quality of Work     15  

(ii)


 

TABLE OF CONTENTS
(Continued)
                         
                    Page  
    (B)   Completion Notice     15  
    (C)   Status of Property Acquired With BNPPLC’s Funds     16  
    (D)   Insurance     16  
        (1)   Liability Insurance     16  
        (2)   Property Insurance     17  
        (3)   Failure of NAI to Obtain Insurance     17  
        (4)   Waiver of Subrogation     17  
    (E)   Condemnation     18  
    (F)   Additional Representations, Warranties and Covenants of NAI Concerning the Property     18  
        (1)   Payment of Local Impositions     18  
        (2)   Operation and Maintenance     19  
        (3)   Debts for Construction, Maintenance, Operation or Development     20  
        (4)   Permitted Encumbrances and the Ground Lease     20  
        (5)   Books and Records Concerning the Property     20  
    (G)   BNPPLC’s Right of Access     21  
        (1)   Access Generally     21  
        (2)   Failure of NAI to Perform     21  
 
                       
3   Amounts to be Added to the Lease Balance (in Addition to Construction Advances)     22  
    (A)   Initial Advance     22  
    (B)   Carrying Costs     23  
    (C)   Commitment Fees     23  
    (D)   Future Administrative Fees and Out-of-Pocket Costs     24  
    (E)   Increased Cost Charges and Capital Adequacy Charges     24  
    (F)   Ground Lease Payments     25  
 
                       
4   Construction Advances     25  
    (A)   Costs Subject to Reimbursement Through Construction Advances     25  
    (B)   Exclusions From Reimbursable Construction Period Costs     27  
    (C)   Conditions to NAI’s Right to Receive Construction Advances     27  
        (1)   Construction Advance Requests     27  
        (2)   Amount of the Advances     28  
 
          (a)   The Maximum Construction Allowance     28  
 
          (b)   Costs Previously Incurred by NAI     28  
 
          (c)   Limits During any Work/Suspension Period     29  
 
          (d)   Restrictions Imposed for Administrative Convenience     29  
        (3)   No Advances After Certain Dates     29  
    (D)   Breakage Costs for Construction Advances Requested But Not Taken     29  

(iii)


 

TABLE OF CONTENTS
(Continued)
                         
                    Page  
    (E)   No Third Party Beneficiaries     30  
    (F)   No Waiver     30  
 
                       
5   Application of Insurance and Condemnation Proceeds     30  
    (A)   Collection and Application Generally     30  
    (B)   Advances of Escrowed Proceeds to NAI     31  
    (C)   Status of Escrowed Proceeds After Commencement of the Term of the Lease     31  
    (D)   Special Provisions Applicable After a 97-10/Event or Event of Default     31  
    (E)   NAI’s Obligation to Restore     31  
    (F)   Special Provisions Concerning a Complete Taking     32  
 
                       
6   Notice of Cost Overruns and Pre-lease Force Majeure Events     32  
    (A)   Notice of Projected Cost Overruns     32  
    (B)   Pre-lease Force Majeure Event Events and Notices     32  
 
                       
7   Suspension and Termination of NAI’s Work     32  
    (A)   Rights and Obligations During a Work/Suspension Period     32  
    (B)   NAI’s Election to Terminate NAI’s Work     32  
    (C)   BNPPLC’s Election to Terminate NAI’s Work     36  
    (D)   Surviving Rights and Obligations     36  
    (E)   Cooperation After a Termination of NAI’s Work     37  
 
                       
8   Continuation of Construction by BNPPLC     38  
    (A)   Owner’s Election to Continue Construction     38  
        (1)   Take Control of the Property     39  
        (2)   Continuation of Construction     39  
        (3)   Arrange for Turnkey Construction     40  
        (4)   Suspension or Termination of Construction by BNPPLC     40  
    (B)   Powers Coupled With an Interest     40  
 
                       
9   NAI’s Obligation for 97-10/Prepayments     40  
 
                       
10   Indemnity for Covered Construction Period Losses     41  
    (A)   Covenant to Indemnify Against Covered Construction Period Losses     41  
    (B)   Certain Losses Included or Excluded     42  
        (1)   Environmental     42  
        (2)   Failure to Maintain a Safe Work Site     43  
        (3)   Failure to Complete Construction     43  
        (4)   Fraud     43  

(iv)


 

TABLE OF CONTENTS
(Continued)
                         
                    Page  
        (5)   Excluded Taxes and Established Misconduct     43  
    (C)   Express Negligence Protection     44  
    (D)   Survival of Indemnity     44  
    (E)   Due Date for Indemnity Payments     44  
    (F)   Order of Application of Payments     44  
    (G)   Defense of BNPPLC     44  
        (1)   Assumption of Defense     44  
        (2)   Indemnity Not Contingent     45  
    (H)   When Payments Are Due     45  
    (I)   Survival     45  
    (J)   Notice of Claims     45  
    (K)   Withholding of Consent to Settlements Proposed by NAI     46  
    (L)   Settlements Without the Prior Consent of NAI     46  
        (1)   Election to Pay Reasonable Settlement Costs in Lieu of Actual     46  
        (2)   Conditions to Election     46  
        (3)   Indemnity Survives Settlement     47  
    (M)   No Authority to Admit Wrongdoing on the Part of NAI     47  
    (N)   Refunds of Covered Construction Period Losses Paid by NAI     47  
        (2)   Meaning of Refund     48  
        (3)   Conditions to Payment     48  

(v)


 

TABLE OF CONTENTS
(Continued)
Exhibits and Schedules
     
Exhibit A   Legal Description
     
Exhibit B   Description of the Construction Project and Budget
     
Exhibit C   Construction Advance Request Form
     
Exhibit D   Pre-lease Force Majeure Event Notice
     
Exhibit E   Notice of Termination by NAI’s Work
     
Exhibit F   Notice of NAI’s Intent to Terminate
     
Exhibit G   Notice of Increased Funding Commitment by BNPPLC
     
Exhibit H   Notice of Increased Time Commitment by BNPPLC
     
Exhibit I   Notice of Rescission of NAI’s Intent to Terminate

(vi)


 

CONSTRUCTION MANAGEMENT AGREEMENT
     This CONSTRUCTION MANAGEMENT AGREEMENT (this “Agreement”), dated as of December 14, 2006 (the “Effective Date”), is made by and between BNP PARIBAS LEASING CORPORATION (“BNPPLC”), a Delaware corporation, and NETWORK APPLIANCE, INC. (“NAI”), a Delaware corporation.
RECITALS
     Contemporaneously with the execution of this Agreement, BNPPLC and NAI are executing a Common Definitions and Provisions Agreement dated as of the Effective Date (the “Common Definitions and Provisions Agreement”), which by this reference is incorporated into and made a part of this Agreement for all purposes. As used in this Agreement, capitalized terms defined in the Common Definitions and Provisions Agreement and not otherwise defined in this Agreement are intended to have the respective meanings assigned to them in the Common Definitions and Provisions Agreement.
     At the request of NAI and to facilitate the transaction contemplated in the other Operative Documents, contemporaneously with this Agreement BNPPLC is executing and accepting a Ground Lease from NAI (the “Ground Lease”), pursuant to which BNPPLC is acquiring a leasehold estate in the Land described in Exhibit A and any existing Improvements on such Land.
     Also contemporaneously with this Agreement, BNPPLC and NAI are executing a Lease Agreement (the “Lease”), pursuant to which the parties expect that NAI will lease the Improvements on the Land described in Exhibit A from BNPPLC for a lease term that will commence on the Completion Date (as defined below).
     In anticipation of the construction of new or additional Improvements for NAI’s use pursuant to the Lease, BNPPLC and NAI have agreed upon the terms and conditions upon which BNPPLC is willing to authorize NAI to arrange and manage such construction and upon which BNPPLC is willing to provide funds for such construction, and by this Agreement BNPPLC and NAI desire to evidence such agreement.
ENGAGEMENT AND AUTHORIZATION
     Subject to the terms and conditions set forth in this Agreement, BNPPLC does hereby engage and authorize NAI — and NAI does hereby accept such engagement and authorization, as an independent contractor for BNPPLC — to construct the Construction Project on the Land and to manage such construction for BNPPLC. As more particularly provided in subparagraph 2(A)(2) below, NAI will take possession and control of the Land and all Improvements on the Land to accomplish such construction. However, the rights and authority granted to NAI by this Agreement are expressly made subject and subordinate to the terms and condition hereinafter set

 


 

forth and to the Ground Lease, to the Permitted Encumbrances and to any other claims or encumbrances affecting the Land or the Property that may be asserted by third parties other than Liens Removable by BNPPLC.
GENERAL TERMS AND CONDITIONS
     1      Additional definitions. As used in this Agreement, capitalized terms defined above will have the respective meanings assigned to them above; as indicated above, capitalized terms that are defined in the Common Definitions and Provisions Agreement and that are used but not defined herein will have the respective meanings assigned to them in the Common Definitions and Provisions Agreement; and, the following terms will have the following respective meanings:


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