exv4w2






Exhibit 4.2




SEVENTH SUPPLEMENTAL INDENTURE




     SEVENTH SUPPLEMENTAL INDENTURE, dated as of May 7, 2008 (this “Supplemental
Indenture”), by and between PROLOGIS (formerly ProLogis Trust and prior thereto Security
Capital Industrial Trust), a real estate investment trust organized under the laws of the State of
Maryland having its principal office at 4545 Airport Way, Denver, Colorado 80239 (the
“Company”), and U.S. BANK NATIONAL ASSOCIATION (as successor in interest to State Street
Bank and Trust Company), having a corporate trust office at Corporate Trust Services, 100 Wall
Street, Suite 1600, New York, New York 10005, as successor Trustee (in such capacity, the
“Trustee”) under the Base Indenture (defined below).



RECITALS OF THE COMPANY




     The Company and the Trustee have heretofore entered into an Indenture, dated as of March 1,
1995, as amended by a First Supplemental Indenture dated as of February 9, 2005, a Second
Supplemental Indenture dated as of November 2, 2005 (the “Second Supplemental Indenture”),
a Third Supplemental Indenture, dated as of November 2, 2005, a Fourth Supplemental Indenture dated
as of March 26, 2007, a Fifth Supplemental Indenture, dated as of November 8, 2007, and a Sixth
Supplemental Indenture, dated as of May 7, 2008 (as so supplemented, the “Base Indenture”),
providing for the issuance by the Company from time to time of its senior debt securities
evidencing its unsubordinated indebtedness (the “Securities”).



     Section 901(2) of the Base Indenture provides for the Company and the Trustee to enter into an
indenture supplemental to the Base Indenture to add covenants of the Company for the benefit of the
Holders of all or any series of Securities.



     Section 901(5) of the Base Indenture provides for the Company and the Trustee to enter into an
indenture supplemental to the Base Indenture to change or eliminate any of the provisions of the
Base Indenture, provided that any such change or elimination becomes effective only when there is
no Security Outstanding of any series created prior to the execution of such indenture supplemental
which is entitled to the benefit of such provision.



     Section 901(6) of the Base Indenture provides for the Company and the Trustee to enter into an
indenture supplemental to the Base Indenture to secure the Securities.



     The Board of Trustees of the Company has duly adopted resolutions authorizing the Company to
execute and deliver this Supplemental Indenture.



     All things necessary to make the Base Indenture, as hereby modified, a valid agreement of the
Company, in accordance with its terms, have been done.



     NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:



     For and in consideration of the premises and of the covenants contained herein and in the Base
Indenture, the Company and the Trustee covenant and agree, for the equal and proportionate benefit
of all Holders of Securities issued on or after the date of this Supplemental Indenture, as
follows:



 









 





ARTICLE ONE

RELATION TO BASE INDENTURE; DEFINITIONS




     Section 1.1. Relation to Base Indenture. This Supplemental Indenture constitutes an
integral part of the Base Indenture.



     Section 1.2. Definitions. For all purposes of this Supplemental Indenture, except as
otherwise expressly provided for or unless the context otherwise requires:




	 	(a)	 	Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Base Indenture.
	 
	 	(b)	 	All references herein to Articles and Sections, unless otherwise specified,
refer to the corresponding Articles and Sections of this Supplemental Indenture.
	 
	 	(c)	 	Pursuant to Section 901(2) of the Base Indenture, the following terms and
definitions are hereby added to the Base Indenture for the benefit of the Holders of
Securities issued on or after the date of this Supplemental Indenture, unless otherwise
provided in the Officers’ Certificate or supplemental indenture authorizing any series
of such Securities:






     “Capitalization Rate” means 7%.




     “Capitalized Value” means, as of any date, the annualized amount of Net
Operating Income for the most recently completed fiscal quarter divided by the
Capitalization Rate.




     “Net Operating Income” means, as of any date for any of the Company’s
Stabilized Assets and the Subsidiaries’ Stabilized Assets, the difference, if
positive between (a) any rentals, proceeds, expense reimbursements, and revenue
received from such Stabilized Assets, and (b) all costs and expenses incurred as a
result of, or in connection with, the operation and leasing of the applicable
Stabilized Assets, in each case determined in accordance with GAAP, but excluding
depreciation, amortization, interest expense, impairment and any capital
expenditures related to such Stabilized Assets.




     “Refinancing Debt” means Debt issued in exchange for, or the net
proceeds of which are used to refinance or refund, then outstanding Debt (including
the principal amount, accrued interest and premium, if any, of such Debt plus any
fees and expenses incurred in connection with such refinancing); provided that (a)
if such new Debt, or the proceeds of such new Debt, are used to refinance or refund
Debt that is subordinated in right of payment to the Securities, such new Debt shall
only be permitted if it is expressly made subordinate in right of payment to the
Securities at least to the extent that the Debt to be refinanced is subordinated to
the Securities and (b) such new Debt does not mature prior to the stated maturity of
the Debt to be refinanced or refunded, and the weighted average life of such new
Debt is at least equal to the remaining weighted average life of the Debt to be
refinanced or refunded.



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     “Stabilized Asset” means, as of any date, any of the Company’s real
estate assets and any real estate assets of the Company’s Subsidiaries, at least 90%
of the rentable area of which was leased pursuant to bona fide tenant leases,
licenses, or other agreements requiring current rent or other similar payments for
the entire three months of the most recently completed fiscal quarter.




	 	(d)	 	Pursuant to Section 901(2) of the Base Indenture, the following terms and
definitions set forth in the Base Indenture are hereby amended and restated in their
entirety for the benefit of the Holders of Securities issued on or after the date of
this Supplemental Indenture, unless otherwise provided in the Officers’ Certificate or
supplemental indenture authorizing any series of such Securities:






     “Annual Service Charge” for any period means interest expense and the
amount of dividends which are payable in respect of any Disqualified Stock (as
recognized in the Company’s consolidated statement of earnings) adjusted to include
interest amounts that were capitalized and not included in such interest expense,
and to exclude amounts that represent amortization of non-cash items, such as the
amortization of premiums or discounts, loan issuance costs, hedging gains or losses
or fair value adjustments, and to exclude items classified as extraordinary items.




     “CDFS” means the Company’s business segment described in the Company’s
Annual Report on Form 10-K and referred to as the “corporate distribution facilities
services” or “CDFS” segment (or successor descriptions).




     “Consolidated Income Available for Debt Service” for any period means
net earnings of the Company and its Subsidiaries before preferred share dividends
determined in accordance with GAAP and as reported in the Company’s consolidated
statement of earnings plus (minus):




	 	(a)	 	Losses (gains) from the disposition or impairment of properties
that are classified in the Company’s consolidated financial statements as
“non-CDFS assets” (or successor descriptions);
	 
	 	(b)	 	Losses (gains) resulting from (i) foreign currency exchange
effects of settlement of intercompany Debt and mark-to-market adjustments
associated with intercompany Debt between the Company and its foreign
Subsidiaries and its foreign Unconsolidated Affiliates, (ii) foreign currency
effects from the remeasurement of third party Debt of the Company’s foreign
Subsidiaries and (iii) mark-to-market adjustments to foreign exchange and
interest rate contracts (or other derivatives), in each case to the extent
included in the net earnings of the Company and its Subsidiaries;
	 
	 	(c)	 	Losses (gains) from early extinguishment of Debt;
	 
	 	(d)	 	Excess (deficit) of redemption value over carrying value of
preferred shares redeemed;










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	 	(e)	 	Extraordinary losses (extraordinary gains) determined in
accordance with GAAP;
	 
	 	(f)	 	Cumulative charges (benefits) from a change in accounting
principle;
	 
	 	(g)	 	minority interest;
	 
	 	(h)	 	interest expense and the amount of dividends, which are payable
in respect of Disqualified Stock, as recognized in the Company’s consolidated
statement of earnings, adjusted to include interest amounts that were
capitalized and not included in such interest expense, and to exclude amounts
that represent amortization of non-cash items, such as the amortization of
premiums or discounts, loan issuance costs, hedging gains or losses or fair
value adjustments, and to exclude items classified as extraordinary items;
	 
	 	(i)	 	income taxes; and
	 
	 	(j)	 	depreciation and amortization.






     “Debt” of the Company or any Subsidiary means any indebtedness of the
Company or any Subsidiary (without duplication) in respect of (i) borrowed money or
evidenced by bonds, notes, mortgages, debentures or similar instruments (excluding
any mark-to-market increase or decrease in indebtedness due to the purchase
accounting impact of corporate or portfolio acquisitions and from the remeasurement
of intercompany indebtedness of Subsidiaries or Unconsolidated Affiliates), (ii)
indebtedness secured by an Encumbrance existing on any property of the Company or
any Subsidiary, whether or not such obligation shall have been assumed by the
Company or any Subsidiary; provided that the amount of any Debt under this clause
(ii) that has not been assumed by the Company or any Subsidiary shall be equal to
the lesser of the stated amount of such Debt or the fair market value of the
property securing such Debt, (iii) the principal amount of all obligations of the
Company or any Subsidiary with respect to redemption, repayment or other repurchase
of any Disqualified Stock or (iv) any lease of property by the Company or any
Subsidiary as lessee which is reflected on the Company’s consolidated balance sheet
as a capitalized lease in accordance with GAAP, to the extent that, in the case of
items (i), (ii) and (iv), any such item would appear as a liability on the Company’s
consolidated balance sheet in accordance with GAAP, and also includes, to the extent
not otherwise included, any obligation by the Company or any Subsidiary to be liable
for, or to pay, as obligor or guarantor (other than for purposes of collection in
the ordinary course of business), Debt of another Person (other than the Company or
any Subsidiary), excluding, in each case, indemnification obligations, capital
contribution obligations and similar obligations that are not required to be
reflected on the Company’s consolidated balance sheet.




     “GAAP” means generally accepted accounting principles as in effect from
time to time in the United States or other accounting method that the Company is



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using subsequent to the date of this Supplemental Indenture and that has been
accepted by the Commission.




     “Pari Passu Debt” means any unsubordinated Debt of the Company or a
Subsidiary that is (i) unsecured, (ii) secured only by Encumbrances on property that
secure the Securities on an equal and ratable basis with such Debt or (iii) the
Securities provided such Securities are equally and ratably secured.




     “Permitted Encumbrances” means (a) pledges or deposits made to secure
payment of worker’s compensation (or to participate in any fund in connection with
worker’s compensation insurance), unemployment insurance, pensions, or social
security programs, (b) Encumbrances consisting of zoning restrictions, easements, or
other restrictions on the use of real property, provided that such items do
not materially impair the use of such property for the purposes intended and none of
which is violated in any material respect by existing or proposed structures or land
use, (c) Encumbrances imposed by mandatory provisions of law such as for
materialmen’s, mechanic’s, warehousemen’s, and other like Encumbrances arising in
the ordinary course of business, securing payment of any liability whose payment is
not yet due, (d) Encumbrances for taxes not yet due and payable or for taxes,
assessments, and governmental charges or assessments that are being contested in
good faith by appropriate proceedings diligently conducted, (e) Encumbrances on
properties where the Company or the applicable Subsidiary is insured against such
Encumbrances by title insurance or other similar arrangements, (f) Encumbrances
securing assessments or charges payable to a property owner association or similar
entity, which assessments are not yet due and payable or are being contested in good
faith by appropriate proceedings diligently conducted, (g) Encumbrances securing
assessment bonds and similar facilities district bonds so long as the Company or the
applicable Subsidiary is not in material default under the terms thereof, (h)
Encumbrances granted to the Company by any Subsidiary or by any Subsidiary to any
other Subsidiary, (i) leases to tenants of space in properties that are entered into
in the ordinary course of business, (j) any netting or set-off arrangement entered
into by the Company or any Subsidiary in the normal course of its banking
arrangements for the purpose of netting debit and credit balances, or any set-off
arrangement which arises by operation of law as a result of the Company or any
Subsidiary opening a bank account, (k) any title transfer or retention of title
arrangement entered into by the Company or any Subsidiary in the normal course of
its trading activities on the counterparty’s standard or usual terms, (l)
Encumbrances over goods and documents of title to goods arising out of letter of
credit transactions entered into in the ordinary course of business, and (m) any
Encumbrance which secures the Pari Pasu Debt.




     “Subsidiary” means any entity in which the Company, directly or
indirectly, holds an ownership interest, the operations and results of which are
consolidated in the Company’s financial statements included in the Company’s Annual
Report on Form 10-K or Quarterly Report on Form 10-Q. An entity in which the
Company, directly or indirectly, holds a 50% or less equity ownership



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interest and does not consolidate in its financial statements as of March 31,
2008 that later becomes a consolidated entity in its financial statements solely due
to a change in GAAP after March 31, 2008 will not be deemed a “Subsidiary” and will
remain an Unconsolidated Affiliate. In no event shall an entity be included as both
a “Subsidiary” and an “Unconsolidated Affiliate” for purposes of this Indenture.




     “Total Assets” means, as of any date, the sum of (i) the Capitalized
Value of the Company’s Stabilized Assets plus (ii) the aggregate book value of all
other assets of the Company and its Subsidiaries before accumulated depreciation and
amortization, as reflected on the Company’s consolidated balance sheet for the
applicable date.




     “Total Unencumbered Assets” means Total Assets, determined on a basis
excluding any assets that are subject to an Encumbrance.




     “Unconsolidated Affiliate” means any entity in which the Company,
directly or indirectly, holds an ownership interest, the operations and results of
which are not consolidated in the Company’s financial statements included in the
Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q. An entity in
which the Company, directly or indirectly, holds a 50% or less equity ownership
interest and does not consolidate in its financial statements as of March 31, 2008
that later becomes a consolidated entity in its financial statements solely due to a
change in GAAP after March 31, 2008 will not be deemed a “Subsidiary” and will
remain an Unconsolidated Affiliate. In no event shall an entity be included as both
a “Subsidiary” and an “Unconsolidated Affiliate” for purposes of this Indenture.




     “Unsecured Debt” means Debt (including Pari Passu Debt) which is not
otherwise secured by an Encumbrance upon any of the properties of the Company or any
Subsidiary.



ARTICLE TWO

COVENANTS AND DEFAULTS




     Section 2.1. Limitations on Incurrence of Debt. In addition to the covenants set
forth in Article TEN of the Base Indenture, there are established pursuant to Section 901(2) of the
Base Indenture the following covenants for the benefit of the Holders of Securities issued on or
after the date of this Supplemental Indenture (which additional covenants shall replace and apply
in lieu of the covenants set forth in Section 2.1 of the Second Supplemental Indenture), unless
otherwise provided in the Officers’ Certificate or supplemental indenture authorizing any series of
such Securities; provided, however, that the covenants set forth in Section 1004 of
the Base Indenture, (as not amended by the Second Supplemental Indenture or this Supplemental
Indenture) (including the definitions set forth in Section 101 of the Base Indenture of any
capitalized terms used in Section 1004 of the Base Indenture), shall apply to Securities issued on
or after the date hereof only for so long as any Securities issued pursuant to the Base Indenture
prior to November 2, 2005 remain outstanding:



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     (a) The Company will not, and will not permit any Subsidiary to, incur any Debt if,
immediately after giving effect to the incurrence of such additional Debt and the
application of the net proceeds thereof, the aggregate principal amount of all outstanding
Debt of the Company and its Subsidiaries determined in accordance with GAAP is greater than
65% of the sum of (without duplication) (i) the Company’s Total Assets as of the end of the
calendar quarter covered in the Company’s Annual Report on Form 10-K or Quarterly Report on
Form 10-Q, as the case may be, most recently filed with the Commission (or, if such filing
is not permitted under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Debt and (ii) the purchase price of any real estate assets or mortgages
receivable acquired, and the amount of any securities offering proceeds received (to the
extent such proceeds were not used to acquire assets or mortgages receivable or used to
reduce Debt), by the Company or any Subsidiary since the end of such calendar quarter,
including those proceeds obtained in connection with the incurrence of such additional Debt.



     (b) In addition to the limitations set forth in subsection (a) of this Section 1004,
the Company will not, and will not permit any Subsidiary to, incur, or suffer to exist, any
additional Debt if the ratio of Consolidated Income Available for Debt Service to the Annual
Service Charge for the four consecutive fiscal quarters most recently ended prior to the
date on which such additional Debt is to be incurred shall have been less than 1.5 to 1.0 on
a pro forma basis after giving effect thereto and to the application of the net proceeds
therefrom, and calculated on the assumption that such additional Debt had been incurred at
the beginning of such period and the application of the proceeds (including projected income
therefrom) had been acquired at the beginning of such period.



     (c) In addition to the limitations set forth in subsections (a) and (b) of this Section
1004, the Company and its Subsidiaries may not at any time own Total Unencumbered Assets
equal to less than 125% of the aggregate outstanding principal amount of the Unsecured Debt
of the Company and its Subsidiaries determined on a consolidated basis.



     (d) In addition to the limitations set forth in subsections (a), (b) and (c) of this
Section 1004, the Company will not, and will not permit any Subsidiary to, incur or suffer
to exist any Debt secured by any Encumbrance upon any of the property of the Company or any
Subsidiary (excluding Pari Passu Debt), whether owned at the date hereof or hereafter
acquired, if, immediately after giving effect to the incurrence of such additional Debt and
the application of the net proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis which is
secured by any Encumbrance on property of the Company or any Subsidiary (excluding Pari
Passu Debt) is greater than 40% of the sum (without duplication) of (i) the Company’s Total
Assets as of the end of the calendar quarter covered in the Company’s Annual Report on Form
10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
Commission (or, if such filing is not permitted under the Exchange Act, with the Trustee)
prior to the incurrence of such additional Debt and (ii) the purchase price of any real
estate assets or mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire real estate
assets or mortgages



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receivable or used to reduce Debt), by the Company or any Subsidiary since the end of
such calendar quarter, including those proceeds obtained in connection with the incurrence
of such additional Debt.




     (e) For purposes of this Section 1004, Debt shall be deemed to be “incurred” by the
Company or a Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof.




     (f) Notwithstanding the foregoing, nothing in the above covenants shall prevent (i) the
Company from incurring Debt owed to any Subsidiary, provided that such Debt is unsecured and
expressly subordinated to the Securities, (ii) any Subsidiary from incurring Debt owed to
the Company or (iii) the Company or any Subsidiary from incurring Refinancing Debt.



     Section 2.2 Provision of Financial Information. In addition to the covenants set
forth in Article TEN of the Base Indenture, there are established pursuant to Section 901(2) of the
Base Indenture the following covenants for the benefit of the Holders of Securities issued on or
after the date of this Supplemental Indenture (which additional covenants shall replace and apply
in lieu of the covenants set forth in Section 2.2 of the Second Supplemental Indenture), unless
otherwise provided in the Officers’ Certificate or supplemental indenture authorizing any series of
such Securities; provided, however, that the covenants set forth in Section 1009 of
the Base Indenture (as not amended by the Second Supplemental Indenture or this Supplemental
Indenture) shall apply to Securities issued on or after the date hereof only for so long as any
Securities issued pursuant to the Base Indenture prior to November 2, 2005 remain outstanding:




     Whether or not the Company is subject to Section 13 or 15(d) of the Exchange Act, the
Company will, to the extent permitted under the Exchange Act, file with the Commission the
annual reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13 or 15(d) (the “Financial
Statements”) if the Company were so subject, such documents to be filed with the Commission
on or prior to the respective dates (the “Required Filing Dates”) by which the Company would
have been required so to file such documents if the Company were so subject.




     The Company will also in any event (x) within 15 days of each Required Filing Date (i)
transmit by mail or electronic transmittal to all Holders, as their names and addresses
appear in the Security Register, without cost to such Holders, copies of the annual reports
and quarterly reports which the Company is required to file or would have been required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections, and (ii) file with the Trustee copies of annual reports,
quarterly reports and other documents which the Company would have been required to file
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company were
subject to such Sections and (y) if filing such documents by the Company with the Commission
is not permitted under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents to any
prospective Holder.



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     Section 2.3 Events of Default. Pursuant to Section 901(5) of the Base Indenture,
clauses (5) and (6) of Section 501 of the Base Indenture are hereby amended for the benefit of the
Holders of Securities issued on or after the date of this Supplemental Indenture (which amendments
shall replace and apply in lieu of the provisions set forth in Section 2.3 of the Second
Supplemental Indenture), unless otherwise provided in the Officers’ Certificate or supplemental
indenture authorizing any series of such Securities, to provide that references to $10,000,000
contained in clauses (5) and (6) of Section 501 of the Indenture are amended to be $50,000,000;
provided, however, that the provisions of this Section 2.3 shall become effective
only when there are no Securities Outstanding of any series created prior to November 2, 2005.



ARTICLE THREE

MISCELLANEOUS PROVISIONS




     Section 3.1. This Supplemental Indenture shall be effective as of the opening of business on
the date first above written upon the execution and delivery hereof by each of the parties hereto.



     Section 3.2. Except as expressly modified or amended hereby, the Base Indenture continues in
full force and effect and is in all respects confirmed, ratified and preserved.



     Section 3.3. This Supplemental Indenture and all its provisions shall be deemed a part of the
Base Indenture in the manner and to the extent herein and therein provided.



     Section 3.4. This Supplemental Indenture shall be governed by, and construed in accordance
with, the laws of the State of New York.



     Section 3.5. This Supplemental Indenture may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.



     Section 3.6. The Trustee shall have not any responsibility for the Recitals of the Company
hereto, which Recitals are made by the Company alone, or for the validity or sufficiency of this
Supplemental Indenture.



[Remainder of page intentionally left blank]




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     IN WITNESS WHEREOF, the parties hereto have caused this Seventh Supplemental Indenture to be
duly executed and the Company has caused its seal to be hereunto affixed and attested, all as of
the day and year first above written.



	 	 	 	 	 
	 	PROLOGIS

 	 
	 	By:  	                                                        /s/ Phillip D. Joseph, Jr.
 	 
	 	 	Name:  	Phillip D. Joseph, Jr. 	 
	 	 	Title:  	Senior Vice President 	 
	 



[SEAL]






Attest:




	 	 	 	 	 
	By:  	/s/ David Grawemeyer
 	 
	 	Name: David Grawemeyer 	 
	 	Title:  Assistant Secretary 	 
	 



	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as

Trustee as aforesaid

 	 
	 	By:  	/s/ Thomas E. Tabor
 	 
	 	 	Name:  	Thomas E Tabor 	 
	 	 	Title:  	Vice President 	 
	 




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