Contribution Agreement - Exchange Parties

Exhibit 10.12


CONTRIBUTION AGREEMENT


by and among


San Francisco Wave eXchange, LLC a Delaware limited liability company,

Santa Clara Wave eXchange, LLC

a Delaware limited liability company, and


eXchange colocation, LLC,

a California limited liability company


and

Digital Realty Trust, L.P.,

a Maryland limited partnership


Dated as of July 31, 2004


TABLE OF CONTENTS

PAGE


RECITALS 1

ARTICLE 1. CONTRIBUTION; TOTAL CONSIDERATION; INSPECTION AND TITLE 2

Section 1.1

Contribution of Property Interests 2

Section 1.2

Contribution of Assets 2

Section 1.3

Excluded Assets 3

Section 1.4

Assumed Liabilities 3

Section 1.5

Existing Loans 3

Section 1.6

Consideration and Exchange of Partnership Units 4

Section 1.7

Adjusted Consideration 4

Section 1.8

Treatment as Contribution 4

Section 1.9

Allocation of Total Consideration 4

Section 1.10

Term of Agreement 5

Section 1.11

Risk of Loss 5

Section 1.12

Property Tax Reassessment 6

Section 1.13

Inspection and Review Period 6

Section 1.14

Title and Survey 8

ARTICLE 2. CLOSING 10

Section 2.1

Conditions Precedent 10

Section 2.2

Time and Place 10

Section 2.3

Closing Deliveries 10

Section 2.4

Closing Costs 12

ARTICLE 3. REPRESENTATIONS AND WARRANTIES AND INDEMNITIES 12

Section 3.1

Representations and Warranties of the Operating Partnership 12

Section 3.2

Representations and Warranties of the Company 13

Section 3.3

Representations and Warranties of the Contributors 14

Section 3.4

Indemnification 15

Section 3.5

Matters Excluded from Indemnification 15

ARTICLE 4. COVENANTS 15

Section 4.1

Covenants of the Contributor 15

Section 4.2

Covenant of the Operating Partnership 17

Section 4.3

Prorations 17

Section 4.4

Tax Covenants 19

Section 4.5

Tax Protection Covenants 20

ARTICLE 5. POWER OF ATTORNEY 24

Section 5.1

Grant of Power of Attorney 24

Section 5.2

Limitation on Liability 24

Section 5.3

Ratification; Third Party Reliance 25

ARTICLE 6. MISCELLANEOUS 25

Section 6.1

Further Assurances 25

Section 6.2

Counterparts 25

Section 6.3

Governing Law 25

Section 6.4

Amendment; Waiver 25

Section 6.5

Entire Agreement 25


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Section 6.6

Assignability 25

Section 6.7

Titles 26

Section 6.8

Third Party Beneficiary 26

Section 6.9

Severability 26

Section 6.10

Reliance 26

Section 6.11

Survival 26

Section 6.12

Notice 26

Section 6.13

Equitable Remedies 27

Section 6.14

Dispute Resolution 27


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EXHIBIT LIST

EXHIBITS
SECTION FIRST
REFERENCED
A Legal Description of the Properties Recital A B Contribution and Assumption Agreement 1.2 C Representations, Warranties and Indemnities of Contributors 3.3 D Total Consideration 1.5 E Form of Tenant Notice 2.3(n) F Form of Management Agreement 4.2(b) G Form of Power of Attorney 5.1 H Form of Pledge Agreement Exhibit C, 3.3 SCHEDULES
1.2 List of Contributed Assets and Assumed Agreements 1.2 1.4 List of Assumed Liabilities 1.4 1.9 Allocation of Total Consideration 1.9 2.3(m) List of Tenant Estoppels 2.3(m) APPENDICES
A Disclosure Schedule 3.3


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CONTRIBUTION AGREEMENT


THIS CONTRIBUTION AGREEMENT (including all exhibits, hereinafter referred to as this " Agreement" ) is made and entered into as of July 31, 2004 by and among Digital Realty Trust, L.P., a Maryland limited partnership (the " Operating Partnership" ), San Francisco Wave eXchange, LLC, a Delaware limited liability company (" SF Wave" ), Santa Clara Wave eXchange, LLC, a Delaware limited liability company (" SC Wave" ), and eXchange colocation, LLC, a Delaware limited liability company (" eXchange" ). SF Wave, SC Wave and eXchange are sometimes collectively referred to herein as the " Contributors" and each individually as a " Contributor" ).

RECITALS

A. SF Wave currently owns a fee simple interest in the parcel of land and the buildings and other improvements affixed to or located on such land (the " Improvements" ) and all rights and appurtenances related to such property located at 200 Paul Avenue, San Francisco, California (the " Paul Avenue Property" ). SC Wave currently owns a fee simple interest in the parcel of land and the buildings and Improvements affixed to or located on such land and all rights and appurtenances related to such property located at 1100 Space Park Drive, Santa Clara, California (the " Space Park Property" and together with the Paul Avenue Property, the " Properties" and each a " Property" ), as each Property is more fully described in Exhibit A .


B. The Operating Partnership desires to consolidate the ownership of the Properties and certain other properties owned by Global Innovation Partners, LLC (" GI Partners" ) and others through a series of transactions (the " Formation Transactions" ) whereby the Operating Partnership will acquire a direct fee simple interest and ownership (a " Direct Contribution" ) in the Properties (the " Property Interests" ) and a direct or indirect interest in such other properties.


C. The Formation Transactions relate to the proposed initial public offering (the " Public Offering" ) of the common stock of Digital Realty Trust, Inc., a Maryland corporation (the " Company" ), which will operate as a self-administered and self-managed real estate investment trust (" REIT" ) within the meaning of Section 856 of the Internal Revenue Code of 1986, as amended (the " Code" ) and which is the sole general partner of the Operating Partnership.

D. As part of the Formation Transactions, the SF Wave and SC Wave will transfer their respective Property Interests to the Operating Partnership in exchange for cash and units of limited partnership interest (" Partnership Units" ) in the Operating Partnership.

E. In addition, as part of the Formation Transactions, eXchange (which is an affiliate of SF Wave), desires to contribute all of its assets with respect to its colocation space licensing business at the Paul Avenue Property (the " Colocation Business" ) to the Operating Partnership, and the Operating Partnership desires to acquire the assets comprising the Colocation Business, in exchange for cash and Partnership Units.


F. The parties acknowledge that the Operating Partnership' s acquisition of the Property Interests, the Contributed Assets (as defined in Section 1.2 ) and the Assumed Agreements (as defined in Section 1.2 ), and the assumption of the Assumed Liabilities (as defined in Section 1.4 ) is in connection with and subject to the consummation of the Formation Transactions and the Public Offering. It is understood that the Operating Partnership may acquire interests in additional properties with the proceeds of the Public Offering.


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NOW, THEREFORE, for and in consideration of the foregoing premises, and the mutual undertakings set forth below, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


TERMS OF AGREEMENT


ARTICLE 1.

CONTRIBUTION; TOTAL CONSIDERATION; INSPECTION AND TITLE


Section 1.1 Contribution of Property Interests . At the Closing (as defined in Section 2.2 ) and subject to the terms and conditions contained in this Agreement, each Contributor shall contribute, transfer, assign, convey and deliver to the Operating Partnership, absolutely and unconditionally, and free and clear of all Liens (other than Permitted Exceptions (as defined herein)), all of its right, title and interest to the Property Interests, including all rights to indemnification in favor of such Contributor under the agreements pursuant to which such Contributor or its affiliates acquired the Property Interests transferred pursuant to this Agreement. The contribution of the Property Interests shall be evidenced by a Deed (as defined in Section 2.3(b) ). The parties shall take such additional actions and execute such additional documentation as may be required by each Contributor' s operating agreement and the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the " OP Agreement" ) or as reasonably requested by the Operating Partnership in order to effect the transactions contemplated hereby.


Section 1.2 Contribution of Assets . At the Closing and subject to the terms and conditions contained in this Agreement, each Contributor shall contribute, transfer, assign convey and deliver to the Operating Partnership, and the Operating Partnership shall acquire and accept, all of such Contributor' s right, title and interest in and to (i) those assets listed on Schedule 1.2 , if any, and all right, title and interest held directly or indirectly by the Contributors in (x) all Fixtures and Personal Property (as defined in Section 2.21 of Exhibit C ) related to each Property, and (y) all Intangible Personal Property (to the extent transferable) now or hereafter used in connection with the operation, ownership, maintenance, management or occupancy of each Property and the Colocation Business (collectively, the " Contributed Assets" ), and (ii) those certain agreements listed on Schedule 1.2 , and all agreements and arrangements related to each Property and to the Colocation Business to which any Contributor (or its affiliates or predecessors) is a party, directly or indirectly, including without limitation, all tenant leases, licenses or occupancy agreements related to each Property and to the Colocation Business and Service Contracts (as defined in Section 2.23 of Exhibit C ) (collectively, the " Assumed Agreements" ), and in each case, free and clear of any and all Liens, subject only to the Permitted Liens (as defined in Exhibit C ). The contribution of the Contributed Assets and the Assumed Agreements and the assumption of all obligations thereunder shall be evidenced by a Contribution and Assumption Agreement in substantially the form of Exhibit B attached hereto. " Intangible Personal Property" shall mean all, right, title and interest relating to a Property in and to all intangible personal property now or hereafter used in connection with the operation, ownership, maintenance, management, or occupancy of such Property, including without limitation: all trade names and trade marks associated with the ownership of such Property; the plans and specifications for the Improvements; warranties; guaranties; indemnities; claims against third parties; claims against tenants for tenant improvement reimbursements; all contract rights related to the construction, operation, ownership or management of such Property; certificates of occupancy; applications, permits, approvals and licenses; insurance proceeds and condemnation awards or claims thereto to be assigned to the Operating Partnership hereunder; and all books and records relating to such Property.


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Section 1.3 Excluded Assets . Notwithstanding the foregoing, the parties expressly acknowledge and agree that all assets and properties of the Contributors set forth on Schedule 1.3 , if any, shall be deemed " Excluded Assets" and not contributed, transferred, assigned, conveyed or delivered to the Operating Partnership pursuant to this Agreement, and the Operating Partnership shall not have any rights or obligations with respect thereto.

Section 1.4 Assumed Liabilities . On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Operating Partnership shall assume from the Contributors and thereafter pay, perform or discharge in accordance with their terms all of the liabilities of the Contributors listed on Schedule 1.4, if any (the " Assumed Liabilities" ).


Section 1.5 Existing Loans .

(a) The Contributors have obtained certain financing encumbering each Property from (i) Greenwich Capital Financial Products, Inc., as evidenced by those certain secured promissory notes in the aggregate original principal amount of $52,000,000 (the " Greenwich Loan" ), and (ii) Bank of the West, as evidenced by that certain secured promissory note in the aggregate original principal amount of $25,000,000 (the " BoW Loan" and together with the Greenwich Loan, the " Existing Loans" and each an " Existing Loan" ). Such notes, deed of trusts and all other documents or instruments evidencing or securing such Existing Loans, including any financing statements, and any amendments, modifications and assignments of the foregoing, shall be referred to, collectively, as the " Existing Loan Documents ." Each Existing Loan shall be considered a " Permitted Lien" for purposes of this Agreement. The Operating Partnership at its election shall either (i) assume the applicable Existing Loan at the Closing (subject to obtaining any necessary consents from the holder of each mortgage or deed of trust related to the Existing Loans (each a " Lender" and collectively the " Lenders" ) prior to Closing), (ii) take title to the Property Interest subject to the lien of the Existing Loan Documents or (iii) cause the Existing Loans to be refinanced or repaid in connection with the Closing; provided , however , that if the Operating Partnership elects to proceed under clauses (i) or (ii) of this sentence, the Operating Partnership may nonetheless, at its sole discretion, cause the Existing Loans to be refinanced or repaid after the Closing. From the date of the initial filing of the registration statement (the " Initial Filing Date" ) in connection with the Public Offering, the Contributors shall use their commercially reasonable efforts to obtain within thirty (30) days from the Initial Filing Date the consent of the Lenders to the assumption of the Existing Loans by the Operating Partnership at the Closing. In addition, at or before the Closing, each Lender related to the Existing Loans shall have released the Contributors and all their respective affiliates from any liability pursuant to any recourse obligations, guarantees, indemnification agreements, letters of credit posted as security or other similar obligations or, in the absence of such release, the Operating Partnership shall have entered into an indemnification agreement with respect to the Contributors' and their respective affiliates' obligations under the respective Existing Loan Documents.

(b) In connection with the assumption of each Existing Loan at the Closing or refinancing or payoff of an Existing Loan after the Closing, the Operating Partnership shall be responsible for an assumption fee and prepayment premium assessed by the lender and associated with such assumption, refinancing or payoff prior to maturity or any other reasonable fee, charge, legal fees, cost or expense (collectively, " Assumption Fees" ) up to a maximum of one percent (1%) of the outstanding principal balance of each Existing Loan on the date hereof (each an " Assumption Fee Cap" ) and, subject


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to Section 3.5 , shall indemnify and hold harmless the Contributors from and against any liability under the Existing Loans arising from and after the Closing. Any assumption fee, prepayment premium and Assumption Fees subject to the Assumption Fee Cap for each Existing Loan shall be calculated solely with respect to such Existing Loan and shall not be aggregated or combined with any assumption fee, prepayment premium and Assumption Fees associated with any other Existing Loan. For purposes of Section 1.6 and Exhibit D , the " Excess Assumption Fee" shall be equal to the sum of (x) the amount by which Assumption Fees for the Greenwich Loan exceed one percent (1%) of the outstanding principal balance of the Greenwich Loan on the date hereof (which is $47,506,522.78), and (y) the amount by which Assumption Fees for BoW Loan exceed one percent (1%) of the outstanding principal balance of the BoW Loan on the date hereof (which is $16,052,678.03). Nothing contained in this Agreement shall preclude the Operating Partnership from reducing or increasing the indebtedness secured by the Property Interests above the amount outstanding on the Existing Loans in connection with any refinancing which may occur concurrently with or after Closing. Each Contributor shall use commercially reasonable efforts along with the Operating Partnership in seeking to process approval of the assumption of each Existing Loan or in beginning the process for any refinancing or a payoff (such as, without limitation, requesting a payoff statement from the holder(s) of each Existing Loans).

Section 1.6 Consideration and Exchange of Partnership Units . Subject to Section 1.7 , the Operating Partnership shall, in exchange for the Property Interests, the Contributed Assets, the Assumed Liabilities and the Assumed Agreements, transfer to the Contributors consideration equal to the Contributors' " Total Consideration" as indicated on Exhibit D (taking account of any adjustments to the Total Consideration pursuant to this Agreement), which shall be payable as set forth on Exhibit D . For purposes of any adjustment to Total Consideration pursuant to Sections 1.11 and 4.1(d) , the Total Consideration shall be reduced by the number of Partnership Units equal to the dollar value of such adjustment divided by Twenty Dollars ($20.00). The transfer of the Partnership Units to the Contributors shall be evidenced by either an amendment (the " Amendment" ) to the OP Agreement or by certificates relating to such Partnership Units (the " Certificates" ) in either case, as determined by the Operating Partnership, in such form as shall be reasonably acceptable to the Contributors. The parties shall take such additional actions and execute such additional documentation as may be required by such party' s operating agreement and the OP Agreement in order to effect the transactions contemplated hereby.

Section 1.7 Adjusted Consideration . Notwithstanding any other provision of this Agreement to the contrary, except to the extent otherwise expressly provided in Sections 1.11 , 1.14 and 4.1(d) , if the Operating Partnership in good faith determines that the ownership of any particular interests that constitute part of the Property Interests would be inappropriate for the Operating Partnership for any reason; the Operating Partnership shall elect to either (a) proceed to the Closing with no reduction in the Contributors' Total Consideration as indicated on Exhibit D ; or (b) subject to Section 1.13(d) below, terminate this Agreement in its entirety.


Section 1.8 Treatment as Contribution . The transfer, assignment and exchange effectuated pursuant to this Agreement shall constitute a " Capital Contribution" to the Operating Partnership pursuant to Article 4 of the OP Agreement and is intended to be governed by Section 721(a) of the Code, and each Contributor hereby consents to such treatment.


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Section 1.9 Allocation of Total Consideration . The Total Consideration shall be allocated as set forth in Schedule 1.9 . The Operating Partnership and each Contributor agree to (i) be bound by the allocation, (ii) act in accordance with the allocation in the preparation of financial statements and filing of all tax returns and in the course of any tax audit, tax review or tax litigation relating thereto and (iii) take no position and cause their affiliates that they control to take no position inconsistent with the allocation for income tax purposes.

Section 1.10 Term of Agreement . If the Closing does not occur by March 31, 2005 (the " Termination Date" ), this Agreement shall be deemed terminated and shall be of no further force and effect and neither the Operating Partnership nor the Contributors shall have any further obligations hereunder except as specifically set forth herein. Notwithstanding the foregoing, the rights and obligations of the parties to that certain Mutual Nondisclosure Agreement (the " MNDA" ), dated as of June 17, 2004, by and among Global Innovation Partners, LLC, a Delaware limited liability company, and Digital Realty Trust, Inc., a Maryland corporation, on one hand, and Cambay Tele.com, LLC, a California limited liability company, and Wave Exchange, LLC, a Delaware limited liability company, on the other hand, shall survive a termination of this Agreement prior to the Closing in accordance with the terms and conditions set forth in the MNDA. In addition, the Operating Partnership hereby agrees to be bound by and subject to the MNDA to the same extent as the Company, as if the Operating Partnership were an original signatory to the MNDA. Notwithstanding anything to the contrary herein or in the MNDA, the MNDA shall be terminated for all purposes upon the Closing.


Section 1.11 Risk of Loss . The risk of loss relating to the Contributors' Property Interests and the underlying Properties prior to Closing shall be borne by the Contributors. If, prior to the Closing, any Property is partially or totally destroyed or damaged by fire or other casualty, or is taken by eminent domain or through condemnation proceedings, then the Operating Partnership may, at its option (so long as the cost of repairing such destruction or damage is in the reasonable judgment of the Operating Partnership in excess of the Maximum Per Property Total Consideration Adjustment (as defined below)), determine not to acquire the Property Interest that has been partially or totally destroyed, damaged or taken (with an adjustment to the Contributors' Total Consideration as indicated on Exhibit D ) and proceed with the acquisition of the other Property Interest. After the occurrence of any such casualty or condemnation affecting a Property, the Operating Partnership may also, at its option within thirty (30) days after the Operating Partnership is notified of any such casualty or condemnation, elect to (a) acquire such particular Property Interest and (b) direct the Contributors to pay or cause to be paid to the Operating Partnership upon or following the Closing any sums collected by the Contributors, if any, under any policies of insurance, if any, or award proceeds relating to such casualty or condemnation (to the extent that the Contributors have not applied such sums or proceeds to the restoration of the affected Property or otherwise to address the impacts of such casualty or condemnation) and otherwise assign to the Operating Partnership upon or following the Closing all rights of the Contributors to collect such sums as may then be uncollected, and/or to the extent available to the Contributors, adjust or settle any insurance claim or condemnation proceeding, which the Contributors have not adjusted or settled prior to the Closing. Under such circumstances, the Contributors' Total Consideration shall be reduced (but, with respect to each Property considered separately, not in excess of an amount which, when aggregated with any other adjustments with respect to such Property pursuant to this Section 1.11 and/or Section 4.1(d) , would exceed Five Million Dollars ($5,000,000) (the " Maximum Per Property Total Consideration Adjustment" )), by the amount of (i) any deductibles under the applicable insurance policies or award with respect to the Properties contributed at Closing and (ii) any uninsured casualty or loss with respect to the Properties contributed at Closing. Insurance on the transferred Property Interests shall be cancelled as of


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12:01 a.m. on the Closing Date, and thereafter the Operating Partnership shall be solely responsible for all risk of loss relating to the Property Interests.


Section 1.12 Property Tax Reassessment . Notwithstanding anything to the contrary contained herein with respect to the delivery of Partnership Units to the Contributors as part of the Total Consideration, the number of Partnership Units having an aggregate value of One Million Dollars ($1,000,000) (the " Holdback Units" ), based on one Partnership Unit being equal in value to the Public Offering price for one share of the Company' s common stock, shall be held by the Operating Partnership in trust for the benefit of the Contributors for a period up to the earlier of: (a) receipt of notice(s) of reassessment confirming the new assessed valuation of each Property as a result of the Closing, or (b) thirty-six (36) months following the Closing Date (the " Reassessment Period" ) pursuant to this Section 1.12 ; provided , however , that in the event the Operating Partnership appeals or contests any such reassessment at its sole election, a portion of the Holdback Units equal to the amount being appealed or contested shall continue to be held by the Operating Partnership in trust for the benefit of the Contributors until such appeal or contest is resolved even if such resolution extends beyond the Reassessment Period. In the event of a reassessment of the property value of any Property during the Reassessment Period due to the consummation of the transactions contemplated by this Agreement, that portion of the Holdback Units with a value (based on the Public Offering price of one share of the Company' s common stock) equal to the additional annual real property taxes payable by the Operating Partnership during the sixty (60)-month period following the Closing Date as a result of such reassessment and which, under the terms of the respective Leases in place as such Leases exist as of the Closing Date, or under any Leases for the Properties entered into after the Closing Date (other than those involving a tax reimbursement obligation based upon a base year on or after the Closing Date), the Operating Partnership does not have a right to pass-through to the tenants of the applicable Property, shall be surrendered and forfeited by the Contributors. In no event shall the Contributors be responsible for any reassessment of the Property Interests solely to the extent such reassessment results from significant new construction after the Closing. Other than with respect to the Holdback Units as provided in this Section 1.12 , the Contributors shall have no further obligations for any reassessment of the assessed value of the Properties or the Property Interests. After the Reassessment Period, the Operating Partnership shall deliver to the Contributors any Holdback Units not forfeited by the Contributors pursuant to this Section 1.12 .

Section 1.13 Inspection and Review Period .

(a) The Operating Partnership and its employees, representatives, counsel and consultants shall have the right to review and investigate any and all conditions and aspects of the Properties, including without limitation with respect to the existence of Hazardous Materials or other environmental conditions at the Properties and all agreements and arrangements related to the operation of the Properties and the Colocation Business, from the date hereof until 5:00 p.m. (California time) on the forty-fifth (45 th ) calendar day following the date hereof or such longer period required to obtain the tenant estoppels required pursuant to Section 2.3(m) (the " OP Inspection and Review Period" ). Each Contributor shall provide access to the Properties and all documents, materials, books, records and files relating to the Properties and the Colocation Business in the possession of each Contributor (or its affiliates), as the Operating Partnership may reasonably request (all such items the " OP Due Diligence Documents" ); provided , however , that the OP Due Diligence Documents shall not include any information of the Contributors entitled to the attorney-client privilege.


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(b) Any on-site inspections of the Properties shall (i) be coordinated with the Contributors, (ii) occur only at reasonable times during normal business hours agreed upon by the Contributors and the Operating Partnership after at least two (2) business day' s prior written notice to the Contributors, (iii) be conducted in a manner that will not damage the Properties (except for limited invasive testing within the scope of work and in accordance with the terms an ...