Construction Management Agreement

Exhibit 10.4 CONSTRUCTION MANAGEMENT AGREEMENT BETWEEN NETWORK APPLIANCE, INC.
(" NAI" ) AND BNP PARIBAS LEASING CORPORATION
(" BNPPLC" ) December 15, 2005


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 " Integral Equipment" 7


TABLE OF CONTENTS
(Continued) Page " Maximum Construction Allowance" 8 " Notice of NAI' s Intent to Terminate" 8 " 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 " Participant Default" 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 " Projected Economic Depreciation of Equipment" 10 " Reimbursable Construction Period Costs" 10 " Remaining Proceeds" 10 " Scope Change" 10 " Target Completion Date" 11 " Termination of NAI' s Work" 11 " Third Party Contract" 11 " Third Party Contract/Termination Fees" 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 13 (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 15 (f) Clean Up 15 (g) No Damage for Delays 15

(ii)


TABLE OF CONTENTS
(Continued) Page (h) No Fee For Construction Management 15 (3) Quality of Work 16 (B) Completion Notice 16 (C) Status of Property Acquired With BNPPLC' s Funds 16 (D) Insurance 17 (1) Liability Insurance 17 (2) Property Insurance 17 (3) Failure of NAI to Obtain Insurance 17 (4) Waiver of Subrogation 18 (E) Condemnation 18 (F) Additional Representations, Warranties and Covenants of NAI Concerning the Property 19 (1) Payment of Local Impositions 19 (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 21 (G) BNPPLC' s Right of Access 21 (1) Access Generally 21 (4) 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 28 (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) Conditions to Funding for the Cost of Integral Equipment 29

(iii)


TABLE OF CONTENTS
(Continued) Page (e)Restrictions Imposed for Administrative Convenience 30 (3) No Advances After Certain Dates 30 (D) Breakage Costs for Construction Advances Requested But Not Taken 30 (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 32 (E) NAI' s Obligation to Restore 32 (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 33 7 Suspension and Termination of NAI' s Work 33 (A) Rights and Obligations During a Work/Suspension Period 33 (B) NAI' s Election to Terminate NAI' s Work 33 (C) BNPPLC' s Election to Terminate NAI' s Work 37 (D) Surviving Rights and Obligations 37 (E) Cooperation After a Termination of NAI' s Work 37 8 Continuation of Construction by BNPPLC 39 (A) Owner' s Election to Continue Construction 39 (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 41 9 NAI' s Obligation for 97-10/Prepayments 41 10 Indemnity for Covered Construction Period Losses 41 (A) Covenant to Indemnify Against Covered Construction Period Losses 41 (B) Certain Losses Included or Excluded 43 (1) Environmental 43

(iv)


TABLE OF CONTENTS
(Continued) Page (2) Failure to Maintain a Safe Work Site 43 (3) Failure to Complete Construction 44 (4) Fraud 44 (5) Excluded Taxes and Established Misconduct 44 (C) Express Negligence Protection 44 (D) Survival of Indemnity 44 (E) Due Date for Indemnity Payments 45 (F) Order of Application of Payments 45 (G) Defense of BNPPLC 45 (1) Assumption of Defense 45 (2) Indemnity Not Contingent 45 (H) When Payments Are Due 45 (I) Survival 46 (J) Notice of Claims 46 (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 47 (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 48 (2) Meaning of Refund 48 (3) Conditions to Payment 49

(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 15, 2005 (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:" 97-10/Event" means any of the following: (a) NAI gives a Notice of NAI' s Intent to Terminate and thereafter (i) fails to rescind the same as described in subparagraph 7(B)(7) within ten days after BNPPLC responds with any Increased Commitment, or (ii) gives a Notice of Termination as provided in subparagraph 7(B)(1); or (b) NAI gives a notice to terminate the Supplemental Payment Obligation as described in subparagraph 6(B) of the Purchase Agreement; or (c) BNPPLC gives notice to NAI as described in subparagraph 7(C) to cause a Termination of NAI' s Work; or (d) NAI fails for any reason whatsoever to substantially complete the Construction Project and give a Completion Notice to BNPPLC prior to the Target Completion Date; or (e) for any reason whatsoever (including the accrual of Carrying Costs), the Funded Construction Allowance exceeds the Maximum Construction Allowance." 97-10/Maximum Permitted Prepayment" as of any date means the amount equal to eighty-nine and nine-tenths of one percent (89.9%) of the aggregate of all 97-10/Project Costs paid or incurred on or prior to such date. Construction Management Agreement - Page 2


" 97-10/Prepayment" means any payment to BNPPLC required by Paragraph 9, which in each case will equal (A) the 97-10/Maximum Permitted Prepayment, computed as of the date on which the payment becomes due, less (B) the sum of (1) the accreted value of any prior payments actually received by BNPPLC from NAI constituting 97-10/Prepayments, and (2) amounts (if any) then owed by BNPPLC to NAI pursuant to this Agreement as reimbursements for 97-10 Project Costs paid by NAI and not theretofore reimbursed. For purposes of the preceding sentence, " accreted value" of a payment means the amount of the payment plus an amount equal to the interest that would have accrued on the payment if it bore interest at the Effective Rate plus the Spread." 97-10/Project Costs" means the following: (a) costs incurred for 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: ullet 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 any Permitted Encumbrance, ullet site preparation costs, and ullet costs of offsite and other public improvements required as conditions of governmental approvals for the Construction Project or required by any Permitted Encumbrances; (b) costs incurred to maintain insurance required by (and consistent with the requirements of) this Agreement prior to the Completion Date; (c) Local Impositions that have accrued or become due prior to the Completion Date; (d) Accrued Construction Period Interest Expense; and (e) any costs in addition to those described in clauses (a) through (d) preceding that GAAP (as it exists on the Effective Date) would allow BNPPLC to capitalize as part of the cost of the Property or that the 97-10/Pronouncement would allow BNPPLC to characterize as project costs, including: (1) cancellation or termination fees or other compensation payable by NAI or BNPPLC pursuant to any contract concerning the Construction Project made by NAI or BNPPLC with any general contractor, architect, engineer or other third party because of any election by NAI or BNPPLC to cancel or Construction Management Agreement - Page 3


terminate such contract, and (2) any costs that BNPPLC incurs and is allowed to capitalize to continue or complete the Construction Project after any Owner' s Election to Continue Construction as provided in subparagraph 8(A).However, notwithstanding the foregoing, 97-10/Project Costs will not include Pre-lease Force Majeure Losses, Administrative Fees, the Arrangement Fee, or any legal fees which are included in Transaction Expenses." 97-10/Pronouncement" means the pronouncement issued by the Emerging Issues Task Force of the Financial Accounting Standards Board in 1998 titled " EITF 97-10: The Effect of Lessee Involvement in Construction" , which provides that certain kinds of involvement by a lessee in pre-lease commencement construction will cause the lessee to be considered as the owner of the leased property during the construction period and then will require application of the appropriate sale and leaseback accounting rules." NAI' s Estimate of Force Majeure Delays" has the meaning indicated in subparagraph 7(B)(4)." NAI' s Estimate of Force Majeure Excess Costs" has the meaning indicated in subparagraph 7(B)(3)." Accrued Construction Period Interest Expense" means interest that has accrued and that BNPPLC has paid or is obligated to pay on Funding Advances for any period prior to the Completion Date. Such interest will include a percentage, equal to the aggregate Percentages of all Participants (under and as defined in the Participation Agreement), of Carrying Costs and Commitment Fees that accrue after the execution of any Participation Agreement and that are added to the Outstanding Construction Allowance as provided in this Agreement, it being understood that the additional amounts BNPPLC must pay to the Participants under the Participation Agreement because of the accrual of Carrying Costs and Commitment Fees effectively constitute construction period interest on advances the Participants make to BNPPLC under the Participation Agreement. Accrued Construction Period Interest Expense will also include any interest and other finance charges that accrue prior to the Completion Date because of Funding Advances provided to BNPPLC by BNPPLC' s Parent in the form of loans, regardless of whether BNPPLC' s obligation in respect of such loans is limited to BNPPLC' s interest in the Property. However, any such interest and other finance charges accruing on Funding Advances provided by BNPPLC' s Parent and included in Accrued Construction Period Interest Expense will not exceed the Carrying Costs attributable to the portion of the Lease Balance funded or maintained by such Funding Advances. Further, Accrued Construction Period Interest will not include any portion of Carrying Costs included in Pre-lease Force Majeure Losses (as set forth in the definition thereof below) or interest or finance charges that BNPPLC must pay to the Construction Management Agreement - Page 4


Participants under the Participation Agreement because of the accrual of such portion of Carrying Costs." Affiliate' s Contract" has the meaning indicated in subparagraph 2(A)(2)(b)." Arrangement Fee" has the meaning indicated in subparagraph 3(A)." Administrative Fee" has the meanings indicated in subparagraph 3(A) and subparagraph 3(D)." Capital Adequacy Charges" has the meaning indicated in subparagraph 3(E)(1)." Carrying Costs" has the meaning indicated in subparagraph 3(B)." Commitment Fees" has the meaning indicated in subparagraph 3(C)." Complete Taking" means a taking by eminent domain prior to the Completion Date over NAI' s objection of all of the Land or the Property, or so much thereof as to make it impossible to complete the Construction Project for its intended uses on the Land regardless of any Scope Changes BNPPLC may be willing to approve or any Increased Commitment that BNPPLC may be willing to provide." Completion Date" means the the date upon which NAI gives the notice to BNPPLC which is required by subparagraph 2(B), after having substantially completed the Construction Project and having obtained any certificate of substantial completion or other permit (temporary or permanent) required for the commencement of NAI' s use of the Improvements." Completion Notice" means the notice required by subparagraph 2(B) from NAI to BNPPLC, advising BNPPLC that NAI has substantially completed construction of the Construction Project and has obtained any certificate of substantial completion or other permit (temporary or permanent) required for the commencement of NAI' s use of the Improvements. (Any such Completion Notice will also confirm the amounts required to compute the Projected Economic Depreciation of Equipment, consistent with BNPPLC' s determination of the projected future value as provided in subparagraph 4(C)(2)(d), for use in calculating Amortizing Rent as provided in the Lease.)" Construction Advances" means (1) actual advances of funds made by or on behalf of BNPPLC to or on behalf of NAI as provided in Paragraph 4, which sets forth NAI' s rights to receive advances for Reimbursable Construction Period Costs, and (2) other amounts paid or incurred by BNPPLC that subparagraph 8(A) or other provisions of this Construction Management Agreement - Page 5


Agreement allow BNPPLC to characterize as Construction Advances. The term "Construction Advances" will not, however, include advances of insurance proceeds, condemnation proceeds or other Escrowed Proceeds to pay or reimburse costs of repairs or restoration." Construction Advance Request" has the meaning indicated in subparagraph 4(C)(1)." Construction Allowance" means the allowance to be provided by BNPPLC for the design and construction of the Construction Project, against which and from which Carrying Cost, Construction Advances and other amounts will be or may be charged and paid as provided in various provisions of this Agreement (including Paragraphs 3, 4 and 8)." Construction Budget" means the budget for the Construction Project set forth in Exhibit B ." Construction Project" means the new buildings or other substantial Improvements to be constructed, or the alteration of existing Improvements, as described generally in Exhibit B ." Covered Construction Period Losses" has the meaning indicated in subparagraph 10(A)." Defective Work" has the meaning indicated in subparagraph 2(A)(2)(e)." FOCB Notice" means a notice from BNPPLC to NAI advising NAI of any of the following events or circumstances, and also advising NAI that because of any of the following events or circumstances BNPPLC will be entitled to make the election described in subparagraph 7(C), which will constitute a Termination of NAI' s Work and a 97-10/Event: (1) NAI has taken action to cancel or terminate or reduce the coverage available to BNPPLC under the builder' s risk insurance obtained for the Construction Project as required by this Agreement, or NAI has otherwise failed to maintain any insurance or to provide insurance certificates to BNPPLC as required by this Agreement and not cured such failure within ten days after receiving notice thereof, or (2) NAI has given any Pre-lease Force Majeure Event Notice to BNPPLC, or (3) an Event of Default has occurred and is continuing; or Construction Management Agreement - Page 6


(4) a Work/Suspension Event has occurred and continued for more than thirty consecutive days after NAI' s receipt of a Work/Suspension Notice advising NAI of such Work/Suspension Event." Force Majeure Event" means (A) any taking of any part of the Property by eminent domain prior to the Completion Date, and (B) any damage to the Improvements or disruption of the Work that occurs prior to the Completion Date and that is caused by fire or acts of God (such as flood, lightning, earthquake or hurricane), war, strikes and other labor disputes, or riot or similar civil disturbance, but only to the extent such damage or disruption (i) is beyond the control of and not caused in whole or in part by negligence, illegal acts or willful misconduct on the part of NAI or of its employees or of any other party acting under NAI' s control or with the approval or authorization of NAI, and (ii) could not have been avoided or overcome by the exercise of due diligence or reasonable foresight on the part of NAI or of any other such party." Funded Construction Allowance" means on any day the Outstanding Construction Allowance on that day, including all Construction Advances and Carrying Costs added to the Outstanding Construction Allowance on or prior to that day, plus the amount of any Qualified Prepayments deducted on or prior to that day in the calculation of such Outstanding Construction Allowance." Future Work" has the meaning indicated in subparagraph 4(C)(2)(b)." Ground Lease Rents" has the meaning indicated in subparagraph 3(F)." Increased Cost Charges" has the meaning indicated in subparagraph 3(E)(1)." Increased Commitment" has the meaning indicated in subparagraph 7(B)(6)." Increased Funding Commitment" has the meaning indicated in subparagraph 7(B)(6)(a)." Increased Time Commitment" has the meaning indicated in subparagraph 7(B)(6)(b)." Initial Advance" has the meaning indicated in subparagraph 3(A)." Integral Equipment" means all furniture, trade fixtures and equipment (including conveyor systems) that will be integral to NAI' s use and occupancy of the Improvements for the permitted uses described in subparagraph 2(A) of the Lease and that will be placed or installed and maintained on the Land. Construction Management Agreement - Page 7


" Maximum Construction Allowance" means an amount equal to $38,500,000, less the Initial Advance." Notice of NAI' s Intent to Terminate" has the meaning indicated in subparagraph 7(B)(2)." Notice of NAI' s Intent to Terminate Because of a Force Majeure Event" has the meaning indicated in subparagraph 7(B)(5)." Notice of Termination By NAI" has the meaning indicated in subparagraph 7(B)(1)." Outstanding Construction Allowance" means, as of any date, the difference (but not less than zero) of (A) the total Construction Advances made by or on behalf of BNPPLC on or prior to such date in question, plus (B) all Carrying Costs, Commitment Fees, Administrative Fees, Increased Cost Charges and Capital Adequacy Charges added on or prior to the date as provided in Paragraph 3, less (C) any funds received and applied as Qualified Prepayments on or prior to such date." Owner' s Election to Continue Construction" has the meaning indicated in subparagraph 8(A)." Participant Default" has the meaning indicated in subparagraph." Pre-lease Casualty" has the meaning indicated in subparagraph 2(A)(2)(a)." Pre-lease Force Majeure Delays" means delays in the completion of the Work to the extent (but only to the extent) caused solely by a Pre-lease Force Majeure Event." Pre-lease Force Majeure Event" means a Force Majeure Event that occurs prior to the Completion Date; provided, however, that if NAI does not notify BNPPLC of any such Force Majeure Event by the delivery of a Pre-lease Force Majeure Event Notice within thirty days after the Force Majeure Event first occurs or commences, then such Force Majeure Event will not qualify as a " Pre-lease Force Majeure Event" for purposes of this Agreement or the other Operative Documents." Pre-lease Force Majeure Event Notice" has the meaning indicated in subparagraph 6(B)." Pre-lease Force Majeure Excess Costs" means the amount (if any) by which the increase in the costs of the Work resulting directly and solely from a Pre-lease Force Majeure Event (such as, for example, the costs of repairing damage to the Improvements Construction Management Agreement - Page 8


caused by a Pre-lease Force Majeure Event) exceed the amounts available to pay or reimburse NAI for such increased costs. Amounts available to pay or reimburse such increased costs will include (a) insurance proceeds or any recovery from a third party (including any Escrowed Proceeds held by BNPPLC), and (b) any part of the Construction Allowance (including any unused contingency amount in the Construction Budget) not used or needed to cover other Reimbursable Construction Period Costs." Pre-lease Force Majeure Losses" means any of the following Losses that BNPPLC suffers by reason of damage to the Improvements caused by a Pre-lease Force Majeure Event: (a) the costs of repairing such damage to the extent that such costs have, as of the date of any required determination of Pre-lease Force Majeure Losses, (i) been paid or reimbursed from a Construction Advance (and thus are included in the Lease Balance as of that date), to be distinguished from costs of repairs paid or reimbursed from insurance proceeds or from any recovery from a third party, and (ii) exceeded amounts (if any) available in the NAI' s original Construction Budget for contingencies and thus would not have been covered by the Construction Allowance but for an Increased Funding Commitment; (b) any diminution in the value of the Improvements resulting from any such damage that has not, as of the date of the required determination of Pre-lease Force Majeure Losses, been repaired; (c) any increase in the total amount of Carrying Costs, Commitment Fees, Administrative Fees, Increased Cost Charges, Capital Adequacy Charges and Ground Lease Rents (and any other amounts) added to the Lease Balance as provided in Paragraph 3 solely by reason of Pre-lease Force Majeure Delays; and (d) to the extent not already included in the increase described in the preceding clause, all increases in Carrying Costs that are attributable to the amounts included in Pre-lease Force Majeure Losses pursuant to the preceding clause (a);but in each case such amounts will constitute Pre-lease Force Majeure Losses only to the extent, if any, that they are not offset by insurance proceeds which are (1) paid by reason of such Pre-lease Force Majeure Event (including insurance proceeds paid to compensate BNPPLC or NAI for increased financing costs, the lost time value of BNPPLC' s investment in the Project or business interruption) and (2) applied as a Qualified Prepayment to reduce the Lease Balance.Also, for purposes of this definition, the diminution in the value of the Improvements, as Construction Management Agreement - Page 9


described in the preceding clause (b), will not exceed the amount thereof estimated in good faith by any independent appraiser or insurance adjuster engaged by BNPPLC to determine such amount after BNPPLC has received a Notice of Pre-lease Force Majeure Event as provided in subparagraph 6(B), nor will it exceed the cost of repairing the damage described in the preceding clause (b) as estimated in good faith by any such independent insurance adjuster or as indicated by any bona fide written bid to make the repairs that BNPPLC obtains from a reputable contractor capable of making the repairs." Prior Work" has the meaning indicated in subparagraph 4(C)(2)(b)." Projected Cost Overruns ...