Document:

Second Amendment to Development and License Agreement between Axion Power Corporation and C and T Co. Incorporated dated as of March 18, 2005.

SECOND
AMENDMENT TO 

DEVELOPMENT
AND LICENSE AGREEMENT

THIS
AGREEMENT is made,
entered into and effective as of the 18th day of March 2005 between and among
Axion Power International, Inc. (“Axion”), a
corporation organized under the laws of the State of Delaware, C and T Co. Inc.,
(“C&T”) a
corporation organized under the laws of the Province of Ontario, Canada, and the
persons who collectively own 100% of the issued and outstanding common stock of
C&T (“C&T
Shareholders”).

WHEREAS, between
November 15, 2003 and January 9, 2004 Axion and its wholly owned subsidiary
negotiated a series of agreements to purchase all of the issued and outstanding
common stock of C&T, free and clear of all encumbrances and corporate
obligations of C&T, in exchange for a consideration that included $1,794,000
in cash that would be payable in installments and 1,562,900 capital warrants
that would each represent the two-year right to purchase one Axion share at a
price of $2.00 per share; and

WHEREAS,
after
giving effect to the required warrant issuances and cash payments, Axion owes
$1,100,500 for balance of the purchase obligations and the parties have agreed
to settle and fully satisfy the remaining obligations for a consideration
consisting of $100,500 in cash and 100,000 shares of Axion’s 8% Convertible
Senior Preferred Stock; and

WHEREAS,
C&T,
the C&T Shareholders and C&T’s directors, officers and affiliates have
agreed to acknowledge and memorialize their continuing obligations to deliver
certain intellectual property to Axion and assist in efforts to develop and
commercialize the E3Cell
Technology;

NOW
THEREFORE, in
consideration of the mutual covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which the
parties hereby acknowledge, the Parties agree as follows:

ARTICLE
I

INTEGRATION
OF AGREEMENTS BETWEEN THE PARTIES

1.1 Integration
of Agreements. This
Agreement is an amendment, continuation and extension of a business relationship
established between November 15, 2003 and January 9, 2004. The documents
identified below (collectively the “Prior Agreements”) establish and define the
terms of the parties’ relationship with each other:

	·  	
      A
      Development and License Agreement between C&T and Axion dated November
      15, 2003;

	·  	
      A
      letter of clarification from Axion to C&T dated November 15,
      2003;

	·  	
      A
      letter of amendment from Axion to C&T dated November 17,
      2003;

	·  	
      A
      First Amendment to Development and License Agreement dated January 9,
      2004; and

	·  	
      A
      Dispute Resolution Memorandum dated January 25,
2005.

Except to
the extent that the terms of any Prior Agreements are amended by the express
terms of a later agreement, such Prior Agreements are intended to continue in
full force and effect. In the event of an inconsistency between the Prior
Agreements and this Agreement, the contracts shall be interpreted in a manner
that will give fair application to all agreements between the parties. If
provisions of any agreements between the parties are inconsistent with the terms
of an earlier agreement, the terms of the later agreement shall be given
priority. To the extent possible, the agreements between the parties are to be
interpreted as an integrated whole and if any terms are held to be invalid; the
remainder shall not be affected thereby. By execution of this Agreement, C&T
and Axion expressly affirm their mutual intention to fully comply with all
applicable requirements of the Prior Agreements.

ARTICLE
II

SATISFACTION
OF CERTAIN OBLIGATIONS

2.1 Delivery
of Cash Payment. Upon
execution of this Agreement, Axion shall pay $100,500 to such account or
accounts as may be designated by C&T in final satisfaction of all debts owed
to C&T under the Development and License Agreement and the prior amendments
thereto.

2.2 Issuance
of Preferred Stock. Upon
execution of this Agreement, Axion shall issue 100,000 shares of its 8%
Convertible Senior Preferred Stock (the “Preferred Stock”) to C&T’s
creditors and shareholders in such numbers as C&T may direct. The Preferred
Stock is more fully described in Axion’s Private Placement Memorandum dated
February 16, 2005, copies of which have been provided to C&T and each person
who is entitled to receive shares of Preferred Stock pursuant to the provisions
of this paragraph. As a condition to the distribution of the shares of Preferred
Stock pursuant to the requirements of this paragraph, each creditor and each
C&T Shareholder shall be required to complete and execute a Stock Purchase
Agreement and Investment Representation Letter in the form attached as Exhibit C
to the memorandum.

2.3 Release
of Security Interest. Subject
only to the payment of the cash balance specified in paragraph 2.1, the issuance
and delivery of certificates for the Preferred Stock specified in paragraph 2.2,
C&T declares that the purchase money security interest specified in
paragraph 3.1 of the First Amendment to Development License Agreement dated
January 9, 2004 has been satisfied by Axion and is hereby released by C&T.
From and after the payment of the referenced consideration Axion shall be the
sole and exclusive owner of all right title and interest in the patents,
know-how and other intellectual property embodied in the E3Cell
Technology, including:

	·  	
      All
      rights to exploit the Intellectual property for any purpose and in any
      market worldwide;

	·  	
      All
      rights, powers and privileges that C&T has or may have under any
      pre-existing license or other agreements that grant any person other than
      Axion any right to exploit all or any part of the Intellectual Property
      for any purpose; and

	·  	
      All
      rights to fixed or contingent license fees, royalties or other payments of
      any nature that C&T has or may have under any pre-existing license or
      other agreements that grant any person other than Axion any right to
      exploit all or any part of the Intellectual Property for any
      purpose.

ARTICLE
III

IMPLEMENTATION
OF ASSET TRANSFER

3.1 Assignment
of Patents and Patent Applications. Upon
C&T’s receipt of the cash payment specified in paragraph 2.1 together with
proof of Axion’s delivery of certificates for the shares of Preferred Stock
specified in paragraph 2.2, C&T shall promptly transfer to Axion by
appropriate assignments all patents and all patent applications owned by C&T
that relate in any way to the E3Cell
Technology.

3.2 Warranty
of Title. C&T
hereby warrants that with the exception of:

	(a)  	
      any
      rights previously conveyed to Chip Taylor in Trust under the terms of a
      Joint Venture Agreement dated December 23, 1999, which was amended on
      November 26, 2000 and subsequently terminated by C&T on June 24, 2003;
      and

	(b)  	
      any
      rights previously conveyed to Mega-C Technologies, Inc. and Mega-C Power
      Corporation under the terms of an Agreement of Association dated April 2,
      2002 which was subsequently terminated by C&T on June 24,
      2003;

it has
clear and unencumbered title to the patents, know-how and other intellectual
property embodied in the E3Cell
Technology; it has not granted any license or other rights to the patents,
know-how and other intellectual property embodied in the E3Cell
Technology to any other person or entity; and it has not conveyed or transferred
any ownership interest in the patents, know-how and other intellectual property
embodied in the E3Cell
Technology to any person or entity. C&T further warrants that the agreements
referred to in subparagraphs (a) and (b) above, complete copies of which have
previously been provided to Axion, fairly represent all material terms of the
agreements between the parties thereto and have not been amended in any
respect.

3.3 Assignment
of Other Assets. Upon
C&T’s receipt of the cash payment specified in paragraph 2.1 together with
proof of Axion’s delivery of certificates for the shares of Preferred Stock
specified in paragraph 2.2, C&T shall promptly assign, transfer, convey and
deliver to Axion, all right, title, interest and benefit, including all of
C&T’s right, title, interest and benefit, of whatever kind and nature, real,
personal and mixed, tangible and intangible, whether or not reflected on
C&T’s books and records, known or unknown, accrued, absolute, contingent or
otherwise, in and to the assets, properties and rights owned by C&T, free
and clear of and expressly excluding all debts, liabilities, obligations, taxes,
liens and encumbrances of any kind, character or description, whether accrued,
absolute, contingent or otherwise (and whether or not reflected or reserved
against in the balance sheets, books of account and records of C&T) (the
foregoing collectively referred to as "Encumbrances") including, without
limitation:

	(a)  	
      all
      interests of C&T as tenant under any leases or subleases of real
      estate, including any leasehold improvements owned by C&T, and any and
      all amendments, modifications, supplements, renewals and extensions
      thereof;

	(b)  	
      all
      of the equipment owned by C&T and used in the operation of its
      business including, but not limited to laboratory equipment, office
      equipment, office furnishings and other tangible personal property owned
      by C&T, provided that the foregoing conveyance shall not extend to
      certain tangible personal property owned by C&T Labs, Inc., an
      affiliate of C&T, which will be the subject of a separate
      contract;

	(c)  	
      all
      rights of C&T under any contracts and agreements with technical
      development partners, employees and consultants, but only to the extent
      that such rights would or might otherwise preclude the establishment of
      new relationships between Axion and the counterparties to such contracts
      and agreements, it being expressly understood that Axion is assuming no
      duty or responsibility to any such counterparty by virtue of this
      agreement and shall have no duty of performance with respect
      thereto.

	(d)  	
      all
      patents, copyrights, trademarks, trade names and service marks used by
      C&T, whether registered or unregistered, including but not limited to
      any and all rights C&T may have or be able to assert with respect to
      Axion’s pending trademark registrations for the word “E3Cell”
      and all of the rights associated therewith, including any and all
      applications, registrations, extensions and renewals
    thereof;

	(e)  	
      all
      engineering specifications, laboratory notebooks, laboratory and technical
      reports, plans, drawings, diagrams, computer media and other books and
      records of any form or nature owned by C&T and relating to the
      E3Cell
      Technology or the prior operations of C&T, provided, however, that
      Axion agrees to give C&T’s authorized representatives reasonable
      access, at C&T's expense, to all of C&T’s tax returns and
      financial records for a period of three years from the date
      hereof;

All of
the foregoing assets, properties and contract rights to be transferred to Axion
hereunder are collectively referred to as the “Other Assets.” Anything in the
foregoing to the contrary notwithstanding, there shall be excluded from the
Other Assets (i) cash and cash equivalents held by C&T on the date of this
Agreement or received by C&T pursuant to the provisions of paragraph 2.1;
(ii) accounts receivable for services provided by C&T to Axion prior to the
date of this Agreement; and (iii) the specific items of tangible personal
property identified in Schedule A attached hereto.

3.4 Instruments
of Transfer. Upon
C&T’s receipt of the cash payment specified in paragraph 2.1 together with
proof of Axion’s delivery of certificates for the shares of Preferred Stock
specified in paragraph 2.2, C&T will deliver Axion (i) such deeds, bills of
sale, assignments, endorsements, checks and other good and sufficient
instruments of sale, transfer and conveyance, in such form and substance as
Axion shall reasonably request and consistent with all applicable law, as shall
be effective to vest in Axion all right and title to, and interest in, the
E3Cell
Technology and the Other Assets free and clear of all encumbrances; and (ii) all
contracts and commitments, instruments, books and records and other data being
conveyed hereunder and relating to the E3Cell
Technology and the Other Assets, and, simultaneous with such delivery, C&T
will take such steps as may be reasonably required to put Axion in actual
possession and operating control of the E3Cell
Technology and the Other Assets. At any time and from time to time thereafter,
on Axion’s reasonable request, C&T will execute, acknowledge and deliver
such further deeds, assignments and transfers and take such actions as may be
required in conformity with this Agreement for the adequate assignment,
transfer, and grant to Buyer of the E3Cell
Technology and the Other Assets.

ARTICLE
IV

CONTINUING
OBLIGATIONS OF THE PARTIES

4.1 Obligations
Respecting Certain Contracts. Upon
execution of this Agreement C&T shall terminate all employment and
consulting agreements with its scientific, research, administrative and
management personnel. In connection therewith, C&T will use its best efforts
to encourage all former C&T employees and consultants who either work at 100
Caster Avenue or are necessary for the proper development of the E3Cell
Technology to become direct employees of or consultants to Axion. Without
limiting the generality of the foregoing, C&T will cooperate fully in
transitioning all necessary scientists, technicians and management over to a
formal status as Axion employees; and the benefit of all secrecy agreements
previously signed by C&T employees and consultants that relate in any way to
the E3Cell
technology or the intellectual property embodied therein will be assigned to
Axion.

4.2 Obligations
Respecting Technology Transfer. The
execution of this Agreement and the performance of the obligations set forth
herein shall not in any manner reduce C&T’s continuing obligation to
completely transfer the intellectual property embodied in or necessary for the
effective use of the E3Cell
Technology to Axion. Without limiting the generality of the foregoing, the
technology transfer and information delivery obligations of C&T specified in
the Development and License Agreement shall continue in full force and effect
until all engineering specifications, laboratory notebooks, laboratory and
technical reports, plans, drawings, diagrams, computer media and other books and
records of any form or nature owned by C&T and relating to the E3Cell
Technology have been delivered to Axion, the required technology transfer has
been successfully completed and Axion has actual and effective possession of all
experience, know-how and other intellectual property owned by C&T. Each
director, officer or employee of C&T who is entitled to receive shares of
Preferred Stock pursuant to the provisions of paragraph 2.2 shall agree that he
will, to the extent deemed reasonably necessary by Axion, actively participate
and fully cooperate and use his best efforts to cause all other necessary
parties to actively participate and fully cooperate in the transfer of all such
property to Axion.

4.3 Obligations
Respecting Technology Development. Each
director, officer or employee of C&T who is entitled to receive shares of
Preferred Stock pursuant to the provisions of 2.2 shall agree that he will, to
the extent deemed reasonably necessary by Axion, actively participate and fully
cooperate and use his best efforts to cause all other necessary parties to
actively participate and fully cooperate in the future development of the
E3Cell
technology until the E3Cell is
“commercializable,” as that term is defined in the Development and License
Agreement.

4.4 Obligations
Respecting Non-employee Consultants. If and
to the extent that the technology transfer obligations of paragraph 4.2 or the
technology development obligations of 4.3 require the services of one or more
former C&T employees who have not been retained as continuing Axion
employees, then Axion shall be obligated to hire such individuals as independent
consultants and to pay them for services actually and necessarily rendered at an
hourly rate that is determined by current market conditions and scales for
similar work as determined by Human Resources and Skills Development Canada. In
connection therewith, C&T will use its best efforts to encourage all former
C&T employees to enter into appropriate consulting agreements with Axion and
cooperate fully in Axion’s efforts to ensure that such consultants provide the
required services in a timely and cost effective manner.

4.5 Obligations
Respecting Patent Matters. All
obligations of C&T relating to the diligent pursuit of patent protection for
the inventions and other intellectual property embodied in the E3Cell
Technology; cooperation in connection with the filing of additional patent
applications; cooperation in connection with future patent litigation and
cooperation in connection with Axion’s efforts to acquire other complementary or
competitive technology in order to solidify Axion’s intellectual property
platform shall survive the execution of this Agreement and the performance of
the conditions herein set forth for a period of five years. Without limiting the
generality of the foregoing, each director, officer or employee of C&T who
is entitled to receive shares of Preferred Stock pursuant to the provisions of
2.2 shall agree that he will, to the extent deemed reasonably necessary by
Axion, actively participate and fully cooperate and use his best efforts to
cause all other necessary parties to actively participate and fully cooperate in
Axion’s efforts to acquire any competitive or complimentary technologies or
patents that are or may be more readily available to such persons.

4.6 Obligations
Respecting Representations and Warranties. All
representations and warranties of Axion (Ontario) and C&T as specified in
the Development and License Agreement shall survive the execution of this
Agreement and the performance of the conditions herein set forth for a period of
two years.

4.7 Obligations
Respecting Competitive Activities. Each
director, officer or employee of C&T who is entitled to receive shares of
Preferred Stock pursuant to the provisions of paragraph 2.2 shall agree, in
connection with the distribution of such shares to him, that for a period of
five years from the date of this Agreement he will not, without disclosure to
and approval of Axion, which may not be unreasonably withheld, directly or
indirectly, assist or have an active interest in (whether as a principal,
stockholder, lender, employee, officer, director, partner, joint venture
partner, consultant or otherwise) any firm, partnership, association,
corporation, business organization, entity or enterprise that is engaged in a
business that is directly competitive with Axion.

4.8 Obligations
Respecting Indebtedness. Axion
shall not assume any responsibility for any existing debts or obligations of
C&T that are not specifically enumerated herein. All such debts and
obligations shall be the sole responsibility of and paid by C&T. Each of the
directors, officers and employees of C&T who are entitled to receive shares
of Preferred Stock pursuant to the provisions of paragraph 2.2 shall indemnify
and hold Axion harmless from and against
any and all losses, claims, damages and liabilities of any
nature, including attorney’s fees, associated with or arising from the separate
indebtedness of C&T.

4.9 Obligations
Respecting Litigation. Axion,
C&T and certain of their respective directors, officers and affiliates have
been named as co-defendants in certain pending lawsuits and Axion is presently
paying all of the costs associated with or arising from such litigation. Axion
will continue paying the reasonable costs of a common defense for so long as the
activities necessary for the proper preparation and presentation of C&T’s
case are not materially different from the activities necessary for the proper
preparation and presentation of Axion’s case. Axion and C&T expressly
acknowledge that no information delivered to their joint legal counsel in
connection with the pending litigation can be treated as confidential so far as
any of the other parties are concerned and that, if a conflict develops which
cannot be resolved, their joint legal counsel may not be able to continue to act
for all of them and may have to withdraw completely. In the event of such a
conflict, no matter what that conflict may consist of, Axion may, in its
absolute discretion instruct the parties joint counsel to cease acting for
C&T or any of its directors, officers and employees and continue to act as
counsel for Axion and the remaining parties. If any party is disqualified from
participating in a joint defense, then all of the costs arising from the
retention of separate counsel shall be the sole responsibility of the
disqualified party. To the extent that new claims are asserted against C&T,
any its directors, officers and employees or the E3Cell
technology, but not against Axion, then Axion shall have the right but not the
duty to assume principal responsibility for the defense of such new claims.
Notwithstanding its payment of the costs of a common legal defense, Axion shall
not be required to indemnify C&T or any of its directors, officers and
employees unless Axion’s board of directors subsequently determines such
indemnification is both permissible and proper under the totality of the
circumstances.

IN
WITNESS WHEREOF the
Parties have executed this Agreement as of the date set forth
above.

	 	
      AXION
      POWER INTERNATIONAL, INC.
	 	
      INDIVIDUAL
      C&T SHAREHOLDERS:

	 	 	 	 
	 	 	 	 
	
      By:
	 /s/
      Charles Mazzacato 	
      By:
	
       /s/
      Igor Filipenko

	 	
      Authorized
      Officer: Charles
      Mazzacato
	 	
      IGOR
      FILIPENKO, Attorney-in-fact for all

	 	
      I
      have power to bind the corporation
	 	
      C&T
      Shareholders under duly executed and

	 	 	 	
      acknowledged
      powers of attorney

	 	
      C
      AND T CO. INC.
	 	 
	 	 	 	 
	 	 	 	 
	
      By:
	 /s/
      Andriy Malitskiy 	 	 
	 	
      Authorized
      Officer: Andriy
      Malitskiy
	 	 
	 	
      I
      have power to bind the corporationexv10w1

 

EXHIBIT 10.1

EXECUTIVE PROTECTION AGREEMENT

     This Agreement entered into as of the 15th day of March, 2005 (the “Effective Date”) by and
between ProLogis, a Maryland real estate investment trust (the “Trust”), and 
 (the “Executive”),

WITNESSETH THAT:

     WHEREAS, the Trust wishes to assure itself of the continuity of the Executive’s services in
the event of a change in control of the Trust; and

     WHEREAS, the Trust and the Executive accordingly desire to enter into this Agreement on the
terms and conditions set forth below;

     NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, it is
hereby agreed by and between the parties as follows:

     1. Term of Agreement. The “Term” of this Agreement shall commence on the Effective
Date and shall continue through December 31, 2006; provided, however, that on such date and on each
December 31 thereafter, the Term of this Agreement shall automatically be extended for one
additional year unless, not later than the preceding October 1, either party shall have given
notice that such party does not wish to extend the Term; and provided further that if a Change in
Control (as defined in paragraph 3 below) shall have occurred during the original or any extended
Term of this Agreement, the Term of this Agreement shall continue until the end of the
twenty-fourth calendar month after the calendar month in which such Change in Control occurs, at
which time it will expire.

     2. Employment After a Change in Control. If the Executive is in the employ of the
Trust on the date of a Change in Control, the Trust hereby agrees to continue the Executive in its
employ for the period commencing on the date of the Change in Control and ending on the last day of
the Term of this Agreement. During the period of employment described in the foregoing provisions
of this paragraph 2 (the “Employment Period”), the Executive shall hold such position with the
Trust and exercise such authority and perform such executive duties as are commensurate with his
position, authority and duties immediately prior to the Employment Period. The Executive agrees
that during the Employment Period he shall devote his full business time exclusively to the
executive duties described herein and perform such duties faithfully and efficiently; provided,
however, that nothing in this Agreement shall prevent the Executive from voluntarily resigning from
employment upon no less than 15 days’ advance written notice to the Trust under circumstances that
do not constitute a Termination (as defined in paragraph 5).

     3. Change in Control. For purposes of this Agreement, a “Change in Control” means
the happening of any of the following:

 

     (a) The consummation of a transaction, approved by the shareholders of the Trust, to
merge the Trust into or consolidate the Trust with another entity, sell or otherwise dispose
of all or substantially all of its assets or adopt a plan of liquidation, provided, however,
that a Change in Control shall not be deemed to have occurred by reason of a transaction, or
a substantially concurrent or otherwise related series of transactions, upon the completion
of which 50% or more of the beneficial ownership of the voting power of the Trust, the
surviving corporation or corporation directly or indirectly controlling the Trust or the
surviving corporation, as the case may be, is held by the same persons (as defined below)
(although not necessarily in the same proportion) as held the beneficial ownership of the
voting power of the Trust immediately prior to the transaction or the substantially
concurrent or otherwise related series of transactions, except that upon the completion
thereof, employees or employee benefit plans of the Trust may be a new holder of such
beneficial ownership.

     (b) The “beneficial ownership” (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) of securities representing 50% or more of the
combined voting power of the Trust is acquired, other than from the Trust, by any “person”
as defined in Sections 13(d) and 14(d) of the Exchange Act (other than any trustee or other
fiduciary holding securities under an employee benefit or other similar stock plan of the
Trust).

     (c) At any time during any period of two consecutive years, individuals who at the
beginning of such period were members of the Board of Trustees of the Trust cease for any
reason to constitute at least a majority thereof (unless the election, or the nomination for
election by the Trust’s shareholders, of each new trustee was approved by a vote of at least
two-thirds of the trustees still in office at the time of such election or nomination who
were trustees at the beginning of such period).

     For purposes of this Agreement, the following terms shall be defined as indicated:

          (i) The term “Beneficial Owner” shall mean beneficial owner as defined in Rule 13d-3
under the Exchange Act.

          (ii) Entities shall be treated as being under “common control” during any period in
which they are “affiliates” of each other as that term is defined in the Exchange Act.

          (iii) The term “person” shall be as defined in Sections 13(d) and 14(d) of the Exchange
Act, but shall exclude any trustee or other fiduciary holding securities under an employee
benefit or other similar stock plan of the Trust.

2

 

          (iv) The term “ProLogis Affiliate” shall mean ProLogis and any of its “affiliates” as
that term is defined in the Exchange Act.”

     4. Compensation During the Employment Period. During the Employment Period, the
Executive shall be compensated as follows:

     (a) He shall receive an annual salary which is not less than his annual salary
immediately prior to the Employment Period.

     (b) He shall be entitled to participate in annual cash-based incentive compensation
plans which, in the aggregate, provide bonus opportunities which are not materially less
favorable to the Executive than the greater of (i) the opportunities provided by the Trust
for executives with comparable levels of responsibility as in effect from time to time; and
(ii) the opportunities provided to the Executive under all such plans in which he was
participating prior to the Employment Period.

     (c) He shall be eligible to participate in other incentive compensation plans and other
employee benefit plans on a basis not materially less favorable to the Executive than that
applicable to other executives of the Trust with comparable levels of responsibility as in
effect from time to time.

     5. Termination. For purposes of this Agreement, the term “Termination” shall mean
termination of the employment of the Executive by the Trust during the Employment Period (i) by the
Trust, for any reason other than death, Disability, or Cause, or (ii) by Constructive Discharge of
the Executive (as these terms are described below). For purposes of this Agreement:

     (a) The Executive shall be considered to have a “Disability” during the period in which
he is unable, by reason of a medically determinable physical or mental impairment, to engage
in the material and substantial duties of his regular occupation, and such condition is
expected to be permanent, as determined by the Board of Trustees.

     (b) For purposes of this Agreement, “Cause” shall mean, in the reasonable judgment of
the Board of Trustees (i) the willful and continued failure by the Executive to
substantially perform his duties with the Trust or any subsidiary after written notification
by the Trust or subsidiary, (ii) the willful engaging by the Executive in conduct which is
demonstrably injurious to the Trust or any subsidiary, monetarily or otherwise, or
(iii) the engaging by the Executive in egregious misconduct involving serious moral
turpitude. For purposes hereof, no act, or failure to act, on the Executive’s part shall be
deemed “willful” unless done, or omitted to be done, by the Executive not in

3

 

good faith and
without reasonable belief that such action was in the best interest of the Trust or
subsidiary.

     (c) If, after a Change in Control, the Executive:

          (i) provides written notice to the Trust of the occurrence of Good Reason (as
defined below) within a reasonable time after the Executive has knowledge of the
circumstances constituting Good Reason, which notice shall specifically identifies
the circumstances which the Executive believes constitute Good Reason;

          (ii) the Trust fails to notify the Executive of the Trust’s intended method of
correction within a reasonable period of time after the Trust receives the notice,
or the Trust fails to correct the circumstances within a reasonable time after such
notice; and

          (iii) the Executive resigns within a reasonable time after receiving the
Trust’s response, if such notice does not indicate an intention to correct such
circumstances, or within a reasonable time after the Trust fails to correct such
circumstances;

then the Executive shall be considered to have been subject to a “Constructive Discharge” by
the Trust. For purposes of this Agreement, “Good Reason” shall mean, without the
Executive’s express written consent (and except in consequence of a prior termination of the
Executive’s employment), the occurrence of any of the following circumstances:

               (I) a substantial adverse alteration in the nature of the Executive’s status
or responsibilities from those in effect immediately prior to the Employment Period;

               (II) failure to provide salary and other compensation and benefits in
accordance with paragraph 4; or

               (III) the failure of the Trust to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement as contemplated in paragraph
16.

If the Executive becomes employed by the entity into which the Trust merged, or the purchaser of
substantially all of the assets of the Trust, or a successor to such entity or purchaser, the

4

 

Executive shall not be treated as having terminated employment for purposes of this Agreement until
such time as the Executive terminates employment with the merged entity or purchaser (or
successor), as applicable. If the Executive is transferred to employment with a subsidiary of the
Trust (regardless of whether before, on, or after a Change in Control), such transfer shall not
constitute a termination of employment for purposes of this Agreement, provided that the subsidiary
agrees to assume this Agreement and be substituted for the Trust under this Agreement (provided
that the subsidiary shall not be substituted for the Trust for purposes of defining the term
“Change in Control”).

     6. Severance Benefits. Subject to the provisions of paragraphs 7 and 8 below, in the
event of a Termination described in paragraph 5, in lieu of the amount otherwise payable under
paragraph 4:

     (a) The Executive shall be entitled to the bonus(es) payable for the performance
period(s) in which the date of the Executive’s Termination occurs, with payment based on
achievement of a target level of performance for the entire period (regardless of actual
performance for the period); provided, however, that the amount of the bonus shall be
subject to a pro-rata reduction to reflect the portion of the applicable performance period
following the date of termination. Payment under this paragraph (a) shall be made at the
regularly scheduled time for payment of such amounts to active employees.

     (b) As of the date of Termination, the Executive shall be fully vested in all benefits
accrued through the date of Termination under the ProLogis Nonqualified Savings Plan, and
all such benefits shall be payable in a lump sum not later than 10 days after the date of
Termination.

     (c)
Any awards granted under the ProLogis 1997 Long Term Incentive Plan
or under any other incentive, compensation or other plan that are held by the Executive on the
date of Termination shall vest and become immediately exercisable on such date.

     (d) The Executive shall continue to receive medical insurance and life insurance
coverage in accordance with paragraph 4(c) above for a period of period of 36 months after
the date of Termination.

     (e) The Executive shall be entitled to a lump sum payment in cash no later than ten
business days after the date of Termination equal to the sum of:

          (i) an amount equal to three times the Executive’s annual salary rate in effect
immediately prior to the Employment Period; and

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          (ii) an amount equal to three times the Executive’s target level of the
annual bonus for the fiscal year in which the date of Termination occurs.

     (f) The Trust shall, for a period not to exceed twelve months, provide for standard
outplacement services by any one qualified outplacement agency selected by the Trust.

Except as may be otherwise specifically provided in an amendment of this paragraph 6 adopted in
accordance with paragraph 15, the Executive’s rights under this paragraph 6 shall be in lieu of any
benefits with respect to a termination following a Change in Control that may be otherwise payable
to or on behalf of the Executive pursuant to the terms of any severance pay arrangement of the
Trust or any subsidiary or any other, similar arrangement of the Trust or any subsidiary providing
benefits upon involuntary termination of employment.

     7. Make-Whole Payments. The following shall apply with respect to amounts to or on
behalf of the Executive:

     (a) Subject to the following provisions of this paragraph 7, if any payment or benefit
to which the Executive is entitled from the Trust, any affiliate, or trusts established by
the Trust or by any affiliate (a “Payment”) is subject to any tax under section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), or any similar federal or state law
(an “Excise Tax”), the Trust shall pay to the Executive an additional amount (the “Make
Whole-Amount”) which is equal to (i) the amount of the Excise Tax, plus (ii) the aggregate
amount of any interest, penalties, fines or additions to any tax which are imposed in
connection with the imposition of such Excise Tax, plus (iii) all income, excise and other
applicable taxes imposed on the Executive under the laws of any Federal, state or local
government or taxing authority by reason of the payments required under clause (i) and
clause (ii) and this clause (iii).

     (b) For purposes of determining the Make-Whole Amount, the Executive shall be deemed to
be taxed at the highest marginal rate under all applicable local, state, federal and foreign
income tax laws for the year in which the Make-Whole Amount is paid. The
Make-Whole Amount payable with respect to an Excise Tax shall be paid by the Trust
coincident with the Payment with respect to which such Excise Tax relates.

     (c) All calculations under this paragraph 7 shall be made initially by the Trust and
the Trust shall provide prompt written notice thereof to the Executive to enable the
Executive to timely file all applicable tax returns. Upon request of the Executive, the
Trust shall provide the Executive with sufficient tax and compensation data to enable the
Executive or his tax advisor to independently make the calculations described in

6

 

paragraph
(b) above and the Trust shall reimburse the Executive for reasonable fees and expenses
incurred for any such verification.

     (d) If the Executive gives written notice to the Trust of any objection to the results
of the Trust’s calculations within 60 days of the Executive’s receipt of written notice
thereof, the dispute shall be referred for determination to tax counsel selected by the
independent auditors of the Trust (“Tax Counsel”). The Trust shall pay all fees and
expenses of such Tax Counsel. Pending such determination by Tax Counsel, the Trust shall
pay the Executive the Make-Whole Amount as determined by it in good faith. The Trust shall
pay the Executive any additional amount determined by Tax Counsel to be due under this
paragraph 7 (together with interest thereon at a rate equal to 120% of the Federal
short-term rate determined under section 1274(d) of the Code) promptly after such
determination.

     (e) The determination by Tax Counsel shall be conclusive and binding upon all parties
unless the Internal Revenue Service, a court of competent jurisdiction, or such other duly
empowered governmental body or agency (a “Tax Authority”) determines that the Executive owes
a greater or lesser amount of Excise Tax with respect to any Payment than the amount
determined by Tax Counsel.

     (f) If a Taxing Authority makes a claim against the Executive which, if successful,
would require the Trust to make a payment under this paragraph 7, the Executive agrees to
contest the claim on request of the Trust subject to the following conditions:

               (i) The Executive shall notify the Trust of any such claim within 10 days of
becoming aware thereof. In the event that the Trust desires the claim to be
contested, it shall promptly (but in no event more than 30 days after the notice
from the Executive or such shorter time as the Taxing Authority may specify for
responding to such claim) request the Executive to contest the claim. The Executive
shall not make any payment of any tax which is the subject of the claim before the
Executive has given the notice or during the 30-day period thereafter
unless the Executive receives written instructions from the Trust to make such
payment together with an advance of funds sufficient to make the requested payment
plus any amounts payable under this paragraph 7 determined as if such advance were
an Excise Tax, in which case the Executive will act promptly in accordance with such
instructions.

               (ii) If the Trust so requests, the Executive will contest the claim by either
paying the tax claimed and suing for a refund in the appropriate court or

7

 

contesting
the claim in the United States Tax Court or
other appropriate court, as directed by
the Trust; provided, however, that any request by the Trust for the Executive to pay
the tax shall be accompanied by an advance from the Trust to the Executive of funds
sufficient to make the requested payment plus any amounts payable under this
paragraph 7 determined as if such advance were an Excise Tax. If directed by the
Trust in writing the Executive will take all action necessary to compromise or
settle the claim, but in no event will the Executive compromise or settle the claim
or cease to contest the claim without the written consent of the Trust; provided,
however, that the Executive may take any such action if the Executive waives in
writing his right to a payment under this paragraph 7 for any amounts payable in
connection with such claim. The Executive agrees to cooperate in good faith with
the Trust in contesting the claim and to comply with any reasonable request from the
Trust concerning the contest of the claim, including the pursuit of administrative
remedies, the appropriate forum for any judicial proceedings, and the legal basis
for contesting the claim. Upon request of the Trust, the Executive shall take
appropriate appeals of any judgment or decision that would require the Trust to make
a payment under this paragraph 7. Provided that the Executive is in compliance with
the provisions of this paragraph (ii), the Trust shall be liable for and indemnify
the Executive against any loss in connection with, and all costs and expenses,
including attorneys’ fees, which may be incurred as a result of, contesting the
claim, and shall provide to the Executive within 30 days after each written request
therefor by the Executive cash advances or reimbursement for all such costs and
expenses actually incurred or reasonably expected to be incurred by the Executive as
a result of contesting the claim.

               (iii) Should a Tax Authority finally determine that an additional Excise Tax
is owed, then the Trust shall pay an additional Make-Up Amount to the Executive in a
manner consistent with this paragraph 7 with respect to any additional Excise Tax
and any assessed interest, fines, or penalties. If any Excise Tax as calculated by
the Trust or Tax Counsel, as the case may be, is finally determined by a Tax
Authority to exceed the amount required to be paid under
applicable law, then the Executive shall repay such excess to the Trust within
30 days of such determination; provided that such repayment shall be reduced by the
amount of any taxes paid by the Executive on such excess which is not offset by the
tax benefit attributable to the repayment.

     8. Withholding. All payments to the Executive under this Agreement will be subject
to all applicable withholding of state and federal taxes.

8

 

     9. Arbitration of All Disputes. Any controversy or claim arising out of or relating
to this Agreement or the breach thereof shall be settled by arbitration in Denver, Colorado, in
accordance with the laws of the State of Colorado, by three arbitrators appointed by the parties.
If the parties cannot agree on the appointment of the arbitrators, one shall be appointed by the
Trust and one by the Executive and the third shall be appointed by the first two arbitrators. If
the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third
arbitrator shall be appointed by the Chief Judge of the United States Court of Appeals for the
Tenth Circuit. The arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators which shall be as
provided in this paragraph 9. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.

     10. Legal and Enforcement Costs. This paragraph 10 shall apply if it becomes
necessary or desirable for the Executive to retain legal counsel or incur other costs and expenses
in connection with either enforcing any and all of his rights under this Agreement or defending
against any allegations of breach of this Agreement by the Trust:

     (a) The Executive shall be entitled to recover from the Trust reasonable attorneys’
fees, costs and expenses incurred by him in connection with such enforcement or defense.

     (b) Payments required under this paragraph 10 shall be made by the Trust to the
Executive (or directly to the Executive’s attorney) promptly following submission to the
Trust of appropriate documentation evidencing the incurrence of such attorneys’ fees, costs,
and expenses.

     (c) The Executive shall be entitled to select his legal counsel; provided, however,
that such right of selection shall not affect the requirement that any costs and expenses
reimbursable under this paragraph 10 be reasonable.

     (d) The Executive’s rights to payments under this paragraph 10 shall not be affected by
the final outcome of any dispute with the Trust; provided, however, that to the
extent that the arbitrators shall determine that under the circumstances recovery by
the Executive of all or a part of any such fees and costs and expenses would be unjust or
inappropriate, the Executive shall not be entitled to such recovery; and to the extent that
such amount have been recovered by the Executive previously, the Executive shall repay such
amounts to the Trust.

     11. Mitigation and Set-Off. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment or otherwise. The

9

 

Trust shall not be entitled to set off against the amounts payable to the Executive under this
Agreement any amounts owed to the Trust by the Executive, any amounts earned by the Executive in
other employment after termination of his employment with the Trust, or any amounts which might
have been earned by the Executive in other employment had he sought such other employment.

     12. Notices. Notices and all other communications provided for in this Agreement
shall be in writing and shall be delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid (provided that international mail shall be sent via
overnight or two-day delivery), or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below (or such other addresses as shall be specified by the parties by like
notice). Such notices, demands, claims and other communications shall be deemed given:

     (a) in the case of delivery by overnight service with guaranteed next day delivery, the
next day or the day designated for delivery;

     (b) in the case of certified or registered U.S. mail, five days after deposit in the
U.S. mail; or

     (c) in the case of facsimile, the date upon which the transmitting party received
confirmation of receipt by facsimile, telephone or otherwise;

provided, however, that in no event shall any such communications be deemed to be given later than
the date they are actually received. Communications that are to be delivered by the U.S. mail or
by overnight service or two-day delivery service to the Executive shall be to the last address he
has filed in writing with the Trust, and such deliveries to the Trust shall be to the following
address:

	   	ProLogis

14100 East 35th Place

Aurora, Colorado 80011

All notices to the Trust shall be directed to the attention of the Chief Financial Officer of the
Trust, with a copy to the Secretary of the Trust.

     13. Non-Alienation. The Executive shall not have any right to pledge, hypothecate,
anticipate or in any way create a lien upon any amounts provided under this Agreement; and no
benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or
involuntary acts, or by operation of law. Nothing in this paragraph 13 shall limit the Executive’s

10

 

rights or powers to dispose of his property by will or limit any rights or powers which his
executor or administrator would otherwise have.

     14. Governing Law. The provisions of this Agreement shall be construed in accordance
with the laws of the State of Colorado, without application of conflict of laws provisions
thereunder.

     15. Amendment. This Agreement may be amended or canceled by mutual agreement of the
parties in writing without the consent of any other person and, so long as the Executive lives, no
person, other than the parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof.

     16. Successors to the Trust. This Agreement shall be binding upon and inure to the
benefit of the Trust and any successor of the Trust. The Trust will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Trust to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Trust would be required to perform it if no
succession had taken place.

     17. Severability. In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and effect.

     18. Counterparts. This Agreement may be executed in two or more counterparts, any
one of which shall be deemed the original without reference to the others.

11

 

     IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization
from its Board of Trustees, the Trust has caused these presents to be executed in its name and on
its behalf, all as of the Effective Date.

	 	 	 
	

	 	EXECUTIVE
	 
	 	 
	 
	 	 
	

	 	 
	 
	 	 
	 
	 	 
	

	 	PROLOGIS
	 
	 	 
	 
	 	 
	

	 	 

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