MODIFICATION AGREEMENT
(THIRD AMENDMENT TO OPERATIVE DOCUMENTS)
This MODIFICATION AGREEMENT (this "AGREEMENT") is made effective as of
January 25, 2002, by BNP PARIBAS LEASING CORPORATION, a Delaware corporation
("BNP"), and NETWORK APPLIANCE, INC., a California corporation ("NAI").
R E C I T A L S
A. BNP and NAI executed a Lease Agreement (Phase III-Improvements) dated
as of June 16, 1999 (as amended, the "IMPROVEMENTS LEASE") and a Lease Agreement
(Phase III-Land) dated as of May 1, 2000 (as amended, the "LAND LEASE"),
together with certain other Operative Documents relating thereto (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 III - Improvements) executed by BNPLC and NAI contemporaneously with the
Improvements Lease and in the Common Definitions and Provisions Agreement (Phase
III - Land) executed by BNPLC and NAI contemporaneously with the Land Lease,
each as amended).
B. BNP, NAI, and the undersigned Participants desire to amend the
Improvements Lease, the Land Lease, and the Pledge Agreements as provided below
on and subject to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Financial Covenants. Subject to the approval of a Majority (under and as
defined in the Participation Agreement) as provided in the next
paragraph, Schedule 1 attached to each of the Land Lease, the
Improvements Lease, and the Pledge Agreements is hereby amended and
restated in its entirety with Schedule 1 attached hereto.
2. Collateral Percentage. At all times hereafter, the Collateral Percentage
for purposes of the Pledge Agreements shall be one hundred percent
(100%), and a Mandatory Collateral Period shall be in effect at all
times hereafter.
3. Approval by a Majority. The foregoing modifications are made contingent
upon approval by a "Majority" under and as defined in the Participation
Agreement, which approval is to be evidenced by the execution of this
Modification in the spaces provided below by parties to the
Participation Agreement.
4. Representations and Warranties. NAI hereby represents and warrants to
BNP and the Participants as follows:
(a) No Default has occurred or is continuing.
(b) The execution, delivery and performance by NAI of this
Modification has been duly authorized by all necessary corporate
and other action and do not and will not require any registration
with, consent or approval of,
notice to or action by, any Person in order to be effective and
enforceable.
(c) All representations and warranties of NAI contained in the
Operative Documents are true and correct on and as of the date
hereof.
5. Ratification. Each of the Operative Documents are hereby ratified and
confirmed in all respects.
6. Entire Agreement. This Agreement and the documents and agreements
referred to herein set forth the entire agreement between the parties
concerning the subject matter hereof and no amendment or modification of
this Agreement shall be binding or valid unless expressed in a writing
executed by both parties hereto.
7. Successors and Assigns. All of the covenants, agreements, terms and
conditions to be observed and performed by the parties hereto shall be
applicable to and binding upon their respective heirs, personal
representatives, successors and, to the extent assignment is permitted
under the Leases, their respective assigns.
8. Fees and Expenses. NAI covenants and agrees to pay to or reimburse BNP,
upon demand, for all reasonable out-of-pocket costs and expenses
(including the reasonable fees, charges and disbursements of counsel)
incurred by BNP in connection with the development, preparation,
negotiation, execution and delivery of this Modification. NAI covenants
and agrees to pay to BNP, for payment in turn by BNP to each Participant
which executes and returns this Modification to BNP on or prior to
February 11, 2002, an amendment fee equal to 10 basis points of all such
Participants' Percentages under the Participation Agreement multiplied
by the Stipulated Loss Value, such fee to be payable on the date hereof.
9. Execution in Counterparts. To facilitate execution, this Agreement may
be executed in as many identical counterparts as may be required. It
shall not be necessary that the signature of, or on behalf of, each
party, or that the signature of all persons required to bind any party,
appear on each counterpart. All counterparts, taken together, shall
collectively constitute a single instrument. It shall not be necessary
in making proof of this Agreement to produce or account for more than a
single counterpart containing the respective signatures of, or on behalf
of, each of the parties hereto. Any signature page to any counterpart
may be detached from such counterpart without impairing the legal effect
of the signatures thereon and thereafter attached to another counterpart
identical thereto except having attached to it additional signature
pages.
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10. Recitals. The recitals contained herein are incorporated by this
reference.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BNP PARIBAS LEASING CORPORATION,
a Delaware corporation
By:____________________________________
Xxxxx X. Xxx, Managing Director
NETWORK APPLIANCE, INC., a California
corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
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[Continuation of signature pages to Amendment dated to be effective January 25,
2002]
The undersigned Participant hereby consents to the foregoing Amendment:
BNP PARIBAS
By:____________________________________
Name:_______________________________
Title:______________________________
By:____________________________________
Name:_______________________________
Title:______________________________
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[Continuation of signature pages to Amendment dated to be effective January 25,
2002]
The undersigned Participant hereby consents to the foregoing Amendment:
BANK OF MONTREAL
By:____________________________________
Name:_______________________________
Title:______________________________
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[Continuation of signature pages to Amendment dated to be effective January 25,
2002]
The undersigned Participant hereby consents to the foregoing Amendment:
KEYBANK NATIONAL ASSOCIATION
By:____________________________________
Name:_______________________________
Title:______________________________
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[Continuation of signature pages to Amendment dated to be effective January 25,
2002]
The undersigned Participant hereby consents to the foregoing Amendment:
XXXXX FARGO BANK, N.A.
By:____________________________________
Name:_______________________________
Title:______________________________
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[Continuation of signature pages to Amendment dated to be effective January 25,
2002]
The undersigned Participant hereby consents to the foregoing Amendment:
THE INDUSTRIAL BANK OF JAPAN LIMITED
By:____________________________________
Name:_______________________________
Title:______________________________
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[Continuation of signature pages to Amendment dated to be effective January 25,
2002]
The undersigned Participant hereby consents to the foregoing Amendment:
THE BANK OF NOVA SCOTIA
By:____________________________________
Name:_______________________________
Title:______________________________
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Schedule 1
FINANCIAL COVENANTS
This Schedule 1 is attached to and made a part of (a) the Lease
Agreement (Phase III - Improvements) (as amended, the "IMPROVEMENTS LEASE")
dated to be effective as of June 6, 1999 (the "EFFECTIVE DATE"), between BNP
Paribas Leasing Corporation, a Delaware corporation, formerly known as BNP
Leasing Corporation ("BNPLC"), and Network Appliance, Inc., a California
corporation ("NAI"), (b) the Lease Agreement (Phase III - Land) (as amended, the
"LAND LEASE" and, together with the Improvements Lease, the "LEASES") dated May
1, 2000, between BNPLC and NAI, (c) the Pledge Agreement (Phase III -
Improvements) (as amended, the "PLEDGE AGREEMENT (IMPROVEMENTS)") dated to be
effective as of the Effective Date, among BNPLC, NAI, and BNP Paribas, as a
Participant and as agent for any financial institutions that become Participants
thereunder from time to time, and (d) the Pledge Agreement (Phase III - Land)
(as amended, and collectively with the Pledge Agreement (Improvements), the
"PLEDGE AGREEMENTS") dated to be effective as May 1, 2000, among BNPLC, NAI, and
BNP Paribas, as a Participant and as agent for any financial institutions that
become Participants thereunder from time to time.
PART I - DEFINED TERMS
In this Schedule 1, capitalized terms used but not defined herein shall
have the meaning assigned to them in the Leases or the Common Definitions and
Provisions Agreements referenced in the Leases; and the following capitalized
terms shall have the following meanings:
"ADJUSTED NET INCOME" means, for any fiscal period of NAI, the aggregate
net income earned (or net losses incurred) during such period by NAI and
its Subsidiaries (determined on a consolidated basis), plus any
Permitted Non-Cash Charges deducted in determining such net income (or
net loss).
"ADJUSTED EBIT" means, for any accounting period, net income (or net
loss) of NAI and its Subsidiaries (determined on a consolidated basis),
plus the amounts (if any) which, in the determination of net income (or
net loss) for such period, have been deducted for (a) interest expense,
(b) income tax expense (c) rent expense under leases of property, and
(d) Permitted Non-Cash Charges, but in no event shall Adjusted EBIT be
less than $1.00.
"CONSOLIDATED TANGIBLE NET WORTH" means the excess of (1) the total
assets, other than Intangible Assets, of NAI and its Subsidiaries
(determined on a consolidated basis) over (2) the total liabilities of
NAI and its Subsidiaries (determined on a consolidated basis).
"DEBT" as used in this Exhibit shall have the meaning assigned to it in
the Common Definitions and Provisions Agreements, where "Debt" of any
Person is defined to mean (without duplication of any item) the sum of:
(a) indebtedness of such Person for borrowed money; (b) indebtedness of
such Person for the deferred purchase price of property or services
(except trade payables and accrued expenses constituting current
liabilities in the ordinary course of business); (c) the face amount of
any outstanding letters of credit issued for the account of such Person;
(d) obligations of such Person arising under acceptance facilities; (e)
guaranties, endorsements (other than for
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collection in the ordinary course of business) and other contingent
obligations of such Person to purchase, to provide funds for payment, to
provide funds to invest in any Person, or otherwise to assure a creditor
against loss; (f) obligations of others secured by any Lien on property
of such Person; (g) obligations of such Person as lessee under Capital
Leases; and (h) the obligations of such Person, contingent or otherwise,
under any "synthetic" or other lease of property or related documents
(including a separate purchase agreement) which provides that such
Person or any of its Affiliates must purchase or cause another Person to
purchase any interest in the leased property and thereby guarantee a
minimum residual value of the leased property to the lessor (a
"SYNTHETIC LEASE"). For purposes of this definition, the amount of the
obligations described in clause (h) of the preceding sentence with
respect to any lease classified according to GAAP as an "operating
lease," shall equal the sum of (1) the present value of rentals and
other minimum lease payments required in connection with such lease
[calculated in accordance with SFAS 13 and other GAAP relevant to the
determination of the whether such lease must be accounted for as an
operating lease or capital lease], plus (2) the fair value of the
property covered by the lease; provided, however, that such amount shall
not exceed the price, as of the date a determination of Debt is required
hereunder, for which the lessee can purchase the leased property
pursuant to any valid ongoing purchase option if, upon such a purchase,
the lessee shall be excused from paying rentals or other minimum lease
payments that would otherwise accrue after the purchase. Notwithstanding
the foregoing, solely for the purpose of calculating the financial
covenants provided for in Part II of this Schedule 1, NAI may exclude
from the calculation of Debt any payments or obligations required
pursuant to or in connection with the Leases (or under other Synthetic
Leases with BNPLC from time to time, if any).
"FIXED CHARGES" means, for any accounting period, the sum (without
duplication of any item) of the following charges or costs incurred or
paid by NAI and its Subsidiaries (determined on a consolidated basis):
(a) gross interest expense accruing during such period, plus (b)
amortization of principal or debt discount in respect of all Debt during
such period, plus (c) rent payable under all leases of property during
such period, plus (d) taxes payable during such period (but in no event
less than $1.00, regardless of any tax refunds received).
"INTANGIBLE ASSETS" means assets of NAI and its Subsidiaries (determined
on a consolidated basis) that are properly classified as "INTANGIBLE
ASSETS" in accordance with GAAP and, in any event, shall include
goodwill, patents, trade names, trademarks, copyrights, franchises,
experimental expense, organization expense, unamortized debt discount
and expense, and deferred charges (other than prepaid insurance, prepaid
taxes and current deferred taxes to the extent any such prepaid or
deferred items are classified on the balance sheet of NAI and its
consolidated Subsidiaries as current assets in accordance with GAAP and
with the concurrence of NAI's independent public accountants).
"MANDATORY COLLATERAL PERIOD" means any period during which,
notwithstanding any contrary designation of a Collateral Percentage by
NAI under the Pledge Agreements, the Collateral Percentage for purposes
of the Pledge Agreements shall be one hundred percent (100%).
"PERMITTED NON-CASH CHARGES" means the amounts (if any) which, in the
determination of net income (or net loss) for any relevant fiscal
period, have been deducted by NAI or its Subsidiaries for non-cash
charges made to write down goodwill or research and development costs in
connection with acquisitions permitted by this Schedule 1.
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"QUICK RATIO" means the ratio of:
(A) the sum (without duplication of any item) of the
following assets of NAI and its Subsidiaries (determined on a
consolidated basis): unencumbered cash; plus unencumbered short
term cash investments; plus other unencumbered marketable
securities which are classified as short term investments in
accordance with GAAP; plus unencumbered accounts receivable,
computed net of reserves for uncollectible amounts as determined
in accordance with GAAP, but excluding collateral delivered and
pledged under the Pledge Agreements (or under any other pledge
agreements with BNPLC securing Debt payable by NAI or any
Subsidiary to BNPLC) in accordance with the requirements thereof
(if any); plus, to
(B) the sum (without duplication of any item) of (1) all
liabilities of NAI and its Subsidiaries (determined on a
consolidated basis) treated as current liabilities in accordance
with GAAP, plus (2) other obligations included in total Debt of
NAI and its Subsidiaries (determined on a consolidated basis),
the payment of which is due on demand or will become due within
one year after the date on which the applicable determination of
Quick Ratio is required hereunder.
"ROLLING FOUR QUARTER PERIOD" means a period of four consecutive fiscal
quarters of NAI, the last of which quarters ends after December 31,
1999.
PART II - FINANCIAL COVENANTS FOR LEASE AGREEMENT
NAI covenants that it shall not at any time suffer or permit:
1. Minimum Unencumbered Cash and Cash Equivalents. The sum (without
duplication of any item) of the unrestricted cash, unencumbered short
term cash investments and unencumbered marketable securities classified
as short term investments according to GAAP of NAI and its Subsidiaries
(determined on a consolidated basis) (but excluding collateral delivered
and pledged under the Pledge Agreements [or under any other pledge
agreements with BNPLC securing Debt payable by NAI or any Subsidiary to
BNPLC] in accordance with the requirements thereof [if any]) to be less
than total Debt of NAI and its Subsidiaries (determined on a
consolidated basis).
2. Minimum Tangible Net Worth. Consolidated Tangible Net Worth to be less
than the sum of: (a) ninety percent of the Consolidated Tangible Net
Worth as of October 30, 1998; plus (b) seventy-five percent of NAI's net
income (computed without deduction for net losses in any fiscal quarter)
earned in each fiscal quarter since October 30, 1998; plus (c)
one-hundred percent of the net proceeds of sales of stock in NAI or its
Subsidiaries (other than sales to NAI or its Subsidiaries) after October
30, 1998; less (d) Permitted Non-Cash Charges for any period after
October 30, 1998.
3. Minimum Quick Ratio. The Quick Ratio to be less than 1.50 to 1.00.
4. Minimum Fixed Charge Coverage. The ratio of (a) Adjusted EBIT for any
Rolling Four Quarter Period to (b) Fixed Charges for the same Rolling
Four Quarter Period, to be less than 1.50 to 1.00.
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5. Minimum Profitability. Adjusted Net Income to be less than $1.00 in more
than one fiscal quarter of any Rolling Four Quarter Period.
6. Maximum Leverage Ratio. the ratio of (a) total Debt of NAI and its
Subsidiaries (determined on a consolidated basis) at the end of any
Rolling Four Quarter Period to (b) the Adjusted EBIT for the same Four
Quarter Rolling Period, to exceed 3.00 to 1.00.
PART III - [INTENTIONALLY OMITTED]
PART IV - OTHER COVENANTS
Without limiting NAI's obligations under the other provisions of the Operative
Documents, during the Term, NAI shall not, without the prior written consent of
BNPLC in each case:
A. Liens. Create, incur, assume or suffer to exist, or permit any of its
Consolidated Subsidiaries to create, incur, assume or suffer to exist, any Lien,
upon or with respect to any of its properties, now owned or hereafter acquired,
provided that the following shall be permitted except to the extent that they
would encumber any interest in the Property in violation of other provisions of
the Operative Documents:
1. Liens for taxes or assessments or other government charges or
levies if not yet due and payable or if they are being contested in good
faith by appropriate proceedings and for which appropriate reserves are
maintained;
2. Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which
are not past due for more than thirty (30) days, or which are being
contested in good faith by appropriate proceedings and for which
appropriate reserves have been established;
3. Liens under workmen's compensation, unemployment insurance,
social security or similar laws (other than ERISA);
4. Liens, deposits or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money),
leases, public or statutory obligations, surety, stay, appeal,
indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
5. judgment and other similar Liens against assets other than
the Property or any part thereof in an aggregate amount not in excess of
$3,000,000 arising in connection with court proceedings; provided that
the execution or other enforcement of such Liens is effectively stayed
and the claims secured thereby are being actively contested in good
faith by appropriate proceedings;
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6. easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with
the occupation, use and enjoyment by NAI or any such Consolidated
Subsidiary of the property or assets encumbered thereby in the normal
course of its business or materially impair the value of the property
subject thereto;
7. Liens securing obligations of such a Consolidated Subsidiary
to NAI or to another such Consolidated Subsidiary;
8. Liens not otherwise permitted by this subparagraph A (and not
encumbering the Property or any Collateral) incurred in connection with
the incurrence of additional Debt or asserted to secure Unfunded Benefit
Liabilities, provided that (a) the sum of the aggregate principal amount
of all outstanding obligations secured by Liens incurred pursuant to
this clause shall not at any time exceed five percent (5%) of
Consolidated Tangible Net Worth at such time; and (b) such Liens do not
constitute Liens against NAI's interest in any material Subsidiary or
blanket Liens against all or substantially all of the inventory,
receivables, general intangibles or equipment of NAI or of any material
Subsidiary of NAI (for purposes of this clause, a "material Subsidiary"
means any subsidiary whose assets represent a substantial part of the
total assets of NAI and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP); and
9. Liens incurred in connection with any renewals, extensions or
refundings of any Debt secured by Liens described in the preceding
clauses of this subparagraph A, provided that there is no increase in
the aggregate principal amount of Debt secured thereby from that which
was outstanding as of the date of such renewal, extension or refunding
and no additional property is encumbered.
B. Transactions with Affiliates. Enter into or permit any Subsidiary of
NAI to enter into any material transactions (including, without limitation, the
purchase, sale or exchange of property or the rendering of any service) with any
Affiliates of NAI except on terms (1) that would not cause or result in a
Default by NAI under the financial covenants set forth in Part II of this
Schedule, and (2) that are no less favorable to NAI or the relevant Subsidiary
than those that would have been obtained in a comparable transaction on an arm's
length basis from an unrelated Person.
C. Compliance. Fail to preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; or fail to comply with the provisions of all documents
pursuant to which NAI is organized and/or which govern NAI's continued existence
and with the requirements of all laws, rules, regulations and orders of a
governmental agency applicable to NAI and/or its business.
D. Insurance. Fail to maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of NAI,
including but not limited to fire, extended coverage, public liability, flood,
property damage and workers' compensation, with all such insurance carried with
companies and in amounts satisfactory to BNPLC, or fail to deliver to BNPLC from
time to time at BNPLC's request schedules setting forth all insurance then in
effect.
E. Facilities. fail to keep all properties useful or necessary to NAI's
business in good repair and condition, or to from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.
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F. Taxes and Other Liabilities. Fail to pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as NAI may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which NAI has
made provisions, to BNPLC's satisfaction, for eventual payment thereof in the
event that NAI is obligated to make such payment.
G. Capital Expenditures. Make any additional investment in fixed assets
in any fiscal year in excess of an aggregate of twenty percent (20%) of NAI's
total assets as of the end of the prior fiscal year.
H. Merger, Consolidation, Transfer of Assets. Merge into or consolidate
with any other entity (unless NAI is the surviving entity and remains in
compliance of all provisions of the Operative Documents); or make any
substantial change in the nature of NAI's business as conducted as of the date
hereof; or sell, lease, transfer or otherwise dispose of all or a substantial or
material portion of NAI's assets except in the ordinary course of its business.
I. Loans, Advances, Investments. Make any loans or advances to or
investments in any person or entity, except (a) any of the foregoing existing as
of, and disclosed to BNPLC prior to, the date hereof, (b) loans to employees for
travel advances, relocation loans and other loans in the ordinary course of
business, (c) investments in accordance with NAI's investment policy, as in
effect from time to time, (d) existing investments in subsidiaries and joint
ventures which have been disclosed to BNPLC in writing prior to the date hereof,
and new investments in subsidiaries and joint ventures in amounts up to an
aggregated of $10,000,000.00, (e) loans to employees, officers, directors to
finance or refinance the purchase of equity securities of NAI.
J. Dividends, Distributions. Declare or pay any dividend or distribution
either in cash, stock or any other property on NAI's stock now or hereafter
outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of
any class of NAI's stock now or hereafter outstanding.
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