Construction Management Agreement

EXHIBIT 10.64


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CONSTRUCTION MANAGEMENT AGREEMENT
(PHASE V - IMPROVEMENTS)


BETWEEN


BNP LEASING CORPORATION


("BNPLC")


AND


NETWORK APPLIANCE, INC.


("NAI")


MARCH 1, 2000


(SUNNYVALE, CALIFORNIA)


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TABLE OF CONTENTS


Page
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RECITALS.....................................................................................1


CONSENT AND AUTHORIZATION....................................................................1


GENERAL TERMS AND CONDITIONS.................................................................1


1. Construction by NAI..................................................................1
(A) The Construction Project......................................................1
(1) Construction Approvals by BNPLC........................................1
(a) Preconstruction Approvals by BNPLC..............................1
(b) Definition of Scope Change......................................2
(c) Approval of Scope Changes.......................................2
(2) NAI's Right to Control and Responsibility for Construction.............2
(a) Performance of the Work.........................................3
(b) Third Party Contracts...........................................3
(c) Third Party Estoppels...........................................4
(d) Adequacy of Drawings, Specifications and Budgets................4
(e) Existing Condition of the Land and Improvements.................4
(f) Correction of Defective Work....................................5
(g) Clean Up........................................................5
(h) No Damage for Delays............................................5
(i) No Fee For Construction Management..............................5
(3) Quality of Work........................................................5
(B) Completion Notices............................................................5


2. Construction Advances................................................................5
(A) Costs Subject to Reimbursement Through Construction Advances..................5
(B) Exclusions From Reimbursable Construction-Period Costs........................7
(C) Conditions to NAI's Right to Receive Construction Advances....................8
(1) Construction Advance Requests..........................................8
(2) Amount of the Advances.................................................8
(a) Limit Dependent Upon the Maximum Construction Allowance.........8
(b) Limit Dependent Upon Costs Previously Incurred by NAI...........8
(c) Limit During CMA Suspension Period..............................9
(d) Restrictions Imposed for Administrative Convenience.............9
(3) No Advances After Certain Dates.......................................10
(D) Breakage Costs for Construction Advances Requested But Not Taken.............10
(E) No Third Party Beneficiaries.................................................10
(F) No Waiver....................................................................10
(G) Funding by Participants......................................................10


(i) 3


3. Normal Tenant Improvements..........................................................12
(A) Definition of Normal Tenant Improvements.....................................12
(B) Advances for Normal Tenant Improvements......................................12
(C) Tenant's Obligation to Construct Normal Tenant Improvements..................12


4. Cost overruns.......................................................................12
(A) Definition of Projected Cost Overruns........................................12
(B) Notice of Projected Cost Overruns............................................12
(C) Election to Make a Voluntary NAI Construction Contribution...................13


5. Suspension and Termination..........................................................13
(A) CMA Suspension Events........................................................13
(1) Projection of Cost Overruns...........................................13
(2) Interruption of Construction..........................................13
(3) Failure of NAI to Correct Defective Work..............................14
(4) Failure of NAI to Provide Evidence of Costs and Expenses..............14
(B) FOCB Notices, Preemptive Notices and CMA Termination Events..................14
(C) Rights and Obligations of NAI During a CMA Suspension Period.................15
(D) Election by NAI to Terminate.................................................15
(E) BNPLC's Right to Terminate...................................................15
(F) Rights and Obligations Surviving Termination.................................16
(G) Cooperation by NAI Following any Termination.................................16


EXHIBITS


Exhibit A......................................................Legal Description


Exhibit B......Description of the Construction Project (With Site Plan Attached)


Exhibit C............................................Form of Contractor Estoppel


Exhibit D...................................Form of Design Professional Estoppel


Exhibit E................Notice Requesting Advance to Cover Insurance Deductible


Exhibit F......................................Construction Advance Request Form


Exhibit G.............................Notice of Voluntary NAI Funding Commitment


Exhibit H...............................................Preemptive Notice by NAI


Exhibit I...........................................Notice of Termination by NAI


(ii) 4


CONSTRUCTION MANAGEMENT AGREEMENT
(PHASE V - IMPROVEMENTS)


This CONSTRUCTION MANAGEMENT AGREEMENT (PHASE V - IMPROVEMENTS) (this "AGREEMENT"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and NETWORK APPLIANCE, INC., a California corporation ("NAI"), is made and dated as of March 1, 2000, the Effective Date. ("EFFECTIVE DATE" and other capitalized terms used and not otherwise defined in this Agreement are intended to have the meanings assigned to them in the Common Definitions and Provisions Agreement (Phase V - Improvements) executed by BNPLC and NAI contemporaneously with this Agreement. By this reference, the Common Definitions and Provisions Agreement (Phase V - Improvements) is incorporated into and made a part of this Agreement for all purposes.)


RECITALS


Pursuant to the Lease Agreement (Phase V - Improvements) executed by BNPLC and NAI contemporaneously the this Agreement (the "IMPROVEMENTS LEASE"), which covers the Improvements on the Land described in Exhibit A, BNPLC is leasing the Improvements and any appurtenances thereto to NAI.


In anticipation of the construction of new or additional Improvements for NAI's use pursuant to the Improvements Lease, BNPLC and NAI have agreed upon the terms and conditions upon which BNPLC is willing to authorize NAI to arrange and manage such construction and upon which BNPLC is willing to provide funds for such construction, and by this Agreement BNPLC and NAI desire to evidence such agreement.


CONSENT AND AUTHORIZATION


Subject to the terms and conditions set forth in this Agreement and in the Improvements Lease, BNPLC does hereby grant its consent and authorization to NAI for the construction by NAI of the Construction Project on the Land and for the management by NAI of such construction; provided, however, all rights of NAI against BNPLC hereunder are expressly made subject and subordinate to the Permitted Encumbrances and to any other claims or encumbrances affecting the Land or the Property that may be asserted by third parties and that do not constitute Liens Removable by BNPLC.


GENERAL TERMS AND CONDITIONS


1. Construction by NAI.


(A) The Construction Project.


(1) Construction Approvals by BNPLC.


(a) Preconstruction Approvals by BNPLC. NAI submitted and
obtained BNPLC's approval of the site plan and descriptions of
the Construction Project referenced in Exhibit B. Also set forth
in Exhibit B is a general


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description of the Construction Project. The Construction
Project, as constructed by NAI pursuant to this Agreement, and
all construction contracts and other agreements executed or
adopted by NAI in connection therewith, shall be not materially
inconsistent with the plans or other items referenced in Exhibit
B, except to the extent otherwise provided by any Scope Change
(as defined below) approved by BNPLC and except as otherwise
provided in subparagraph 6(d) of the Improvements Lease if BNPLC
should make a Landlord's Election to Continue Construction after
any termination of this Agreement.


(b) Definition of Scope Change. As used herein, "SCOPE
CHANGE" means a change to the Construction Project that, if
implemented, will make the quality, function or capacity of the
Improvements "materially different" (as defined below in this
subparagraph) than as described or inferred by site plan, plans
and renderings referenced in Exhibit B. The term "SCOPE CHANGE"
is not intended to include the mere refinement, correction or
detailing of the site plan, plans or renderings submitted to
BNPLC by NAI. As used in this subparagraph, a "material
difference" means a difference that could reasonably be expected
to (a) after completion of the Construction Project and the
funding of all Construction Advances required in connection
therewith, significantly reduce any excess of the market value of
the Property over Stipulated Loss Value or significantly increase
any excess of Stipulated Loss Value over the market value of the
Property, (b) change the general character of the Improvements
from that needed to accommodate the uses permitted by
subparagraph 2(a) of the Improvements Lease, or (c) result in
Projected Cost Overruns (as defined below).


(c) Approval of Scope Changes. Before making a Scope
Change, NAI shall provide to BNPLC a reasonably detailed written
description of the Scope Change, a revised construction budget
for the Construction Project and a copy of any changes to the
drawings, plans and specifications for the Improvements required
in connection therewith, all of which must be approved in writing
by BNPLC (or by any inspecting architect appointed by BNPLC from
time to time) before the Scope Change is implemented. BNPLC's
approval shall not in any event constitute a waiver of
subparagraph 1(A)(3) or of any other provision of this Agreement
or the Improvements Lease.


(2) NAI's Right to Control and Responsibility for Construction.
Subject to the terms and conditions set forth in this Agreement and in
the Improvements Lease, and prior to any termination of this Agreement
as provided in subparagraphs 5(D) and 5(E), NAI shall have the sole
right to control and the sole responsibility for the design and
construction of the Construction Project, including the means, methods,
sequences and procedures implemented to accomplish such design and
construction. Although title to all Improvements will pass directly to
BNPLC (as more particularly provided in Paragraph 7 of the Improvements
Lease), BNPLC's obligation with respect to the Construction Project
shall be limited to the making of advances under and subject to the
conditions set forth in this Agreement and in Paragraph 6 of the
Improvements Lease. Without limiting the foregoing, NAI acknowledges and
agrees that:


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(a) Performance of the Work. Except as provided in
subparagraphs 5(C) and 5(F), NAI must, using its best skill and
judgment and in an expeditious and economical manner not
inconsistent with the interests of BNPLC, perform or cause to be
performed all work required, and will provide or cause to be
provided all supplies and materials required, to design and
complete construction of the Construction Project (collectively
"WORK"). The Work will include obtaining all necessary building
permits and other governmental approvals required in connection
with the design and construction of the Construction Project,
including the design and construction of Normal Tenant
Improvements (as defined below), or required in connection with
the use and occupancy thereof (e.g., final certificates of
occupancy). The Work will also include any repairs or restoration
required because of damage to Improvements by fire or other
casualty prior to the Base Rent Commencement Date (a
"PRE-COMMENCEMENT CASUALTY"); however, the cost of any such
repairs or restoration will be subject to reimbursement not only
through Construction Advances made on and subject to the terms
and conditions of this Agreement, but also through the
application of Escrowed Proceeds as provided in the Improvements
Lease. NAI will carefully schedule and supervise all Work, will
check all materials and services used in connection with all Work
and will keep full and detailed accounts as may be necessary to
document expenditures made or expenses incurred for the Work.
Subject to delays beyond the reasonable control of NAI, NAI shall
cause all Work to be completed on or before the first Business
Day of September, 2001.


(b) Third Party Contracts.


1) NAI shall not enter into any construction
contract or other agreement with a third party concerning
the Work or the Construction Project (a "THIRD PARTY
CONTRACT") in the name of BNPLC or otherwise purport to
bind BNPLC to any obligation to any third party.


2) In any Third Party Contract between NAI and any
of its Affiliates (an "AFFILIATE'S CONTRACT") NAI shall
reserve the right to terminate the contract at any time,
without cause, and without subjecting NAI to liability for
any Termination Fee (as defined below). Further, NAI shall
not enter into any Affiliate's Contract that obligates NAI
to pay more than would be required under an arms-length
contract or that would require NAI to pay its Affiliate
any amount in excess of the sum of actual, out-of-pocket
direct costs and internal labor costs incurred by the
Affiliate to perform such contract.


3) As necessary to limit the total Reimbursable
Third Party Contract Termination Fees (as defined below)
for which BNPLC may be required to provide Construction
Advances to no more than $8,000,000 (the "MAXIMUM
PERMITTED TERMINATION FEES"), NAI shall reserve in every
significant Third Party Contract an absolute express right
to terminate such contract at any time, without cause.
Although any Third Party Contract (other than an
Affiliate's Contract) may require NAI to pay


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a specified Termination Fee in the event of such a
termination, the specified Termination Fee must not exceed
the difference computed by subtracting (I) the aggregate
of all Termination Fees that have been paid or would
become payable by NAI if NAI terminated all other Third
Party Contracts, from (II) the Maximum Permitted
Termination Fees. Without limiting the foregoing, NAI will
manage and administer all Third Party Contracts as
necessary to ensure that, at any point in time, NAI can
terminate all such contracts without becoming liable for
Termination Fees in excess of the Maximum Permitted
Termination Fees.


4) As used in this Agreement, "TERMINATION FEE"
means any amount, however denominated, for which NAI will
be obligated under a Third Party Contract as a result of
any election or decision by NAI to terminate such Third
Party Contract, including demobilization costs; provided,
however, amounts payable for Prior Work [as defined below]
as of the date any such termination are not intended to be
characterized as Termination Fees for purposes of this
Agreement. If, as described in the preceding paragraph,
NAI reserves an absolute express right in a Third Party
Contract to terminate such contract at any time, without
cause, for a specified dollar amount, such dollar amount
will constitute a Termination Fee. If no such right is
reserved in a Third Party Contract, the Termination Fee
applicable to such contract for purposes of this Agreement
will be the amount of damages that NAI could be required
to pay (in addition to payments required for Prior Work)
upon an anticipatory repudiation of the Third Party
Contract by NAI.


(c) Third Party Estoppels. If requested by BNPLC with
respect to any material general construction contract between NAI
and a third party contractor for any part of the Work, NAI shall
cause the contractor to execute and deliver to BNPLC an estoppel
letter substantially in the form of Exhibit C. Similarly, if
requested by BNPLC with respect to any material architectural or
engineering contract between NAI and a third party professional
or firm for any part of the Work, NAI shall cause the
professional or firm thereunder to execute and deliver to BNPLC
an estoppel letter substantially in the form of Exhibit D.


(d) Adequacy of Drawings, Specifications and Budgets.
BNPLC has made and will make no representations as to the
adequacy of any budgets, site plans, renderings, plans, drawings
or specifications for the Construction Project, and no
modification of any such budgets, site plans, renderings, plans,
drawings or specifications that may be required from time to time
will entitle NAI to any adjustment in the Construction Allowance.


(e) Existing Condition of the Land and Improvements. NAI
is familiar with the conditions of the Land and any existing
Improvements on the Land. NAI shall have no claim for damages
against BNPLC or for an increase in the Construction Allowance by
reason of any condition (concealed or otherwise) of or affecting
the Land or Improvements.


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(f) Correction of Defective Work. NAI will promptly
correct all Work performed prior to any termination of this
Agreement that does not comply with the requirements of this
Agreement or that is otherwise defective (in either case,
"DEFECTIVE WORK") at NAI's sole expense. If NAI fails to correct
any Defective Work or fails to carry out Work in accordance with
this Agreement, BNPLC may (but will not be required to) order NAI
to stop all Work until the cause for such failure has been
eliminated.


(g) Clean Up. Upon the completion of all Work, NAI will
remove all waste material and rubbish from and about the Land, as
well as all tools, construction equipment, machinery and surplus
materials. NAI will keep the Land and the Improvements thereon in
a reasonably safe and sightly condition as Work progresses.


(h) No Damage for Delays. NAI shall have no claim for
damages against BNPLC or for an increase in the Construction
Allowance by reason of any delay in the performance of any Work.


(i) No Fee For Construction Management. NAI shall have no
claim for any fee or other compensation or for any reimbursement
of internal administrative or overhead expenses of NAI under this
Agreement, it being understood that NAI is executing this
Agreement in consideration of the rights expressly granted to it
herein and in the Improvements Lease.


(3) Quality of Work. NAI shall cause the Work undertaken and
administered by it pursuant to this Agreement to be performed (a) in a
safe and good and workmanlike manner, (b) in accordance with Applicable
Laws, (c) in compliance with (i) the provisions of this Agreement and
the Improvements Lease, (ii) the material provisions of the Permitted
Encumbrances and (iii) the material provisions of the Development
Documents, and (d) in a manner that, taken as a whole, enhances the
value of the Property commensurate with any Construction Advances and
Carrying Costs added to the Outstanding Construction Allowance in
connection therewith.


(B) Completion Notices. NAI shall provide a notice (a "COMPLETION NOTICE (BUILDING 4)") to BNPLC promptly after renovation of the portion of the Improvements designated by NAI as "Building 4" are substantially complete and ready for occupancy by NAI. Such notice will include a determination by NAI of the amount of Stipulated Loss Value (Building 4), as defined in the Common Definitions and Provisions Agreement, and of Stipulated Loss Value (Building 4/Land), as defined in the other Common Definitions and Provisions Agreement. In addition, NAI shall provide a notice (a "COMPLETION NOTICE (BUILDING 4)") to BNPLC promptly after construction of the Construction Project is substantially complete, advising BNPLC of the substantial completion.


2. Construction Advances.


(A) Costs Subject to Reimbursement Through Construction Advances. Subject to the terms and conditions set forth herein, NAI shall be entitled to a Construction Allowance, from


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which BNPLC will make Construction Advances on Advance Dates from time to time to pay or reimburse NAI for the following costs ("REIMBURSABLE CONSTRUCTION-PERIOD COSTS") to the extent the following costs are not already included in Transaction Expenses paid by BNPLC from the Initial Funding Advance:


(1) the actual costs and expenses incurred or paid by NAI for the
preparation, negotiation and execution of this Agreement and the other
Operative Documents;


(2) the cost of title insurance or other out of pocket expenses
described in subparagraph 5(c)(iii) of the Improvements Lease or of the
Other Lease Agreement to the extent paid by NAI prior to the Base Rent
Commencement Date;


(3) Commitment Fees;


(4) costs of the Work, including not only hard costs incurred for
the new Improvements described in Exhibit B, but also the following
costs to the extent reasonably incurred in connection with the
Construction Project:


- soft costs, such as architectural fees,
engineering fees and fees and costs paid in
connection with obtaining project permits and
approvals required by governmental authorities
or the Development Documents,


- site preparation costs, and


- costs of offsite and other public improvements
required as conditions of governmental approvals
for the Construction Project;


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