Exhibit 10.578

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of August 15,
2008, but shall be effective, nunc pro tunc, as of January 1, 2008, by and
between INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation
(the “Company”), and Steven P. Grimes (the “Executive”).

 

RECITALS:

 

A.                                   The Company is a real estate investment
trust which owns, operates and acquires primarily retail real estate throughout
the United States (the “Business”).

 

B.                                     Executive has served as the Company’s
Chief Operating Officer and Chief Financial Officer and has demonstrated certain
unique and particular talents and abilities with regard to the Business.

 

C.                                     The Company desires to continue to assure
itself of the availability of the talents and abilities of Executive, by
entering into a new employment agreement to become effective as of January 1,
2008.

 

D.                                    Executive desires to continue to be
employed by the Company, subject to the terms, conditions and covenants
hereinafter set forth.

 

E.                                      As a condition for the Company to enter
into this Agreement, Executive has agreed to restrict his ability to enter into
competition with the Company.

 

NOW, THEREFORE, in consideration of the foregoing and the agreements, covenants
and conditions set forth herein, Executive and the Company hereby agree as
follows:

 

ARTICLE I

EMPLOYMENT

 

1.1                                 Employment.

 

(a)                                  The Company hereby employs and engages
Executive, and Executive hereby accepts employment, upon the terms and
conditions set forth in this Agreement. Effective as of January 1, 2008 (the
“Effective Date”), Executive shall serve as Chief Operating Officer and Chief
Financial Officer, with duties commensurate with such positions and such other
duties and responsibilities as assigned from time to time by the Company

 

(b)                                 In addition, Executive shall provide advice,
consultation and services to any other entities which control, are controlled by
or are under common control with the Company now or in the future (collectively,
“Affiliates”), as may be requested by the Company.

 

1.2                                 Activities and Duties During Employment.
Executive represents and warrants to the Company that he is free to engage in
full-time employment with the Company, and that he has no prior or other
commitments or obligations of any kind to anyone else which would hinder or
interfere with his acceptance of his obligations under this Agreement, or the
exercise of his reasonable commercial efforts as an employee of the Company.
During the Employment Term (as defined below), Executive agrees:

 

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(a)                                  to faithfully serve and further the
interests of the Company in every lawful way, giving honest, diligent, loyal and
cooperative service to the Company and its Affiliates;

 

(b)                                 to comply with all reasonable rules and
policies which are consistent with the terms of this Agreement and which, from
time to time, may be adopted by the Company or its Affiliates; and

 

(c)                                  to devote all of his business time,
attention and efforts to the faithful and diligent performance of his services
to the Company and its Affiliates.

 

ARTICLE II

TERM

 

2.1                                 Term.  The term of employment under this
Agreement shall commence on the Effective Date and shall last through and
including December 31, 2008 (the “Employment Term”) except as this Agreement may
be terminated as provided in Section 2.2.

 

2.2                                 Termination.  The Employment Term and
employment of Executive may be terminated as follows:

 

(d)                                 By the Company immediately for Cause (as
hereinafter defined).

 

(e)                                  By the Company immediately without Cause.

 

(f)                                    Automatically, without the action of
either party, upon the death of the Executive.

 

(d)                                 By either party upon a determination of
Total Disability (as hereinafter defined) of Executive.

 

(e)                                  Voluntarily by Executive, upon two
(2) weeks prior written notice.

 

(f)                                    By Executive, immediately for Good Reason
(as hereinafter defined).

 

(g)                                 On expiration of the Employment Term if not
extended by the mutual consent of the Company and Executive.

 

2.3                                 Definitions of “Cause,” “Total Disability,”
“Good Reason” and “Change of Control.”

 

(a)                                  For the purpose of this Agreement, “Cause”
shall mean: (i) conduct amounting to fraud, embezzlement, disloyalty or illegal
misconduct in connection with Executive’s duties under this Agreement and as an
employee of the Company; (ii) conduct that the Company reasonably believes has
brought the Company into substantial public disgrace or disrepute; (iii) failure
to perform his duties hereunder as reasonably directed by the Company after
providing written notice of the failure to Executive and Executive has failed to
cure within ten (10) days of receiving notice; (iv) gross negligence or willful
misconduct by the Executive with respect to the Company, its clients, its
employees and its activities; or (v) material breach by the Executive of this
Agreement or any other agreement to which Executive and the Company are a party
or any material breach by the Executive of any written policy adopted by the
Company concerning conflicts of interest, standards of business

 

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conduct or fair employment practices and any other similar matter, provided that
the Company has provided written notice of the breach to Executive and Executive
has failed to cure the breach within ten (10) days of receiving notice.

 

(b)                                 For purposes of this Agreement, Executive
shall be determined to have a “Total Disability” upon the determination of a
physician, acceptable to the Company and Executive that Executive is unable, by
reason of accident or illness, to substantially perform his duties or is
expected to be in the condition for periods totaling six (6) months (whether or
not consecutive) during any period of twelve (12) months. Nothing herein shall
limit Executive’s right to receive any payments to which Executive may be
entitled under any disability or employee benefit plan of the Company or under
any disability or insurance policy or plan. During a period of Total Disability
prior to termination hereunder, Executive shall continue to receive his full
compensation (including base salary) and benefits.

 

(c)                                  “Good Reason” will mean any of the
following events which have not been cured within ten (10) days following the
Company’s receipt of Executive’s written notice specifying the events or factors
constituting Good Reason:

 

(i)                                     the Company requires Executive to
relocate his principal residence to a location outside the Greater Chicago
Metropolitan Area in order to perform his duties and responsibilities hereunder;

 

(ii)                                  the Executive’s base salary or other
compensation and benefits is reduced to less than the amount of the Base Salary
and other compensation and benefits as set forth in Section 3.1 below;

 

(iii)                               a material breach by the Company of the
provisions of this Agreement; or

 

(iv)                              following a Change of Control, the assignment
to Executive of duties which constitute a material reduction in Executive’s
title or authority and which are materially inconsistent with Executive’s
position as contemplated by this Agreement.

 

(d)                                 “Change of Control” shall mean any of the
following events:

 

(i)                                     the members of the Company’s board of
directors as of the date of this Agreement fail to constitute a majority of the
members of the board; provided, however, that any individual becoming a member
of the board who is nominated or appointed to the board seat on the
recommendation and approval of the Company’s Nominating and Corporate Governance
Committee shall be treated as if he or she were a member of the board as of the
date of this Agreement;

 

(ii)                                  the disposition by the Company of all, or
substantially all, of the assets of the Company; or

 

(iii)                               the termination and liquidation of the
Company.

 

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ARTICLE III

COMPENSATION AND BENEFITS

 

3.1                                 Compensation.

 

(a)                                  Base Salary.  During the Employment Term,
the Company shall pay Executive a base salary (the “Base Salary”) of $375,000.00
per annum.

 

(b)                                 Annual Incentive Bonus.  The Company shall,
in addition to Executive’s Base Salary, pay Executive an Annual Incentive Bonus
of up to fifty (50%) percent of Base Salary, which shall be payable within 120
days of the end of each fiscal year.  One half of the Annual Incentive Bonus may
be payable at the discretion of the President and Chief Executive Officer, with
the approval of the Executive Compensation Committee and the Board of Directors;
and one half of the Annual Incentive Bonus shall be payable in accordance with
the formula set forth on Exhibit A, attached hereto and made a part hereof.

 

(c)                                  Annual Stock Option Award.  Subject to
approval of the 2008 Long-Term Equity Compensation Plan (the “2008 Equity Award
Plan”) by the Company’s stockholders, no later than June 30 of each fiscal year
during the Employment Term, the Company shall grant Executive an Annual Stock
Option Award to purchase shares of the common stock of the Company (“Annual
Stock Options”), subject to the conditions set forth below and in accordance
with the schedule set forth on Exhibit B, attached hereto and made a part
hereof. Twenty percent (20%) of any Annual Stock Options granted hereunder shall
vest on each successive yearly anniversary of the grant of the Annual Stock
Options.  In the event that the 2008 Equity Award Plan is approved after June 30
of the fiscal year in question, the Annual Stock Option Award for such year
shall be granted as soon as practicable after such approval.

 

(i)                                     All Annual Stock Options shall be issued
under, and in accordance with, the 2008 Equity Award Plan; to the extent the
terms of any Annual Stock Options awarded pursuant to this Agreement conflict
with the terms of the 2008 Equity Award Plan, the terms of the 2008 Equity Award
Plan shall apply to the minimum extent necessary to eliminate the conflict. Any
Annual Stock Options that have not yet vested shall be forfeited and redeemed by
the Company, without any further action on the part of the Company or the
Executive, if Executive is no longer employed by the Company for any reason,
other than in connection with a termination as described in Sections 2.2(b),
(c) or (d). Executive may not sell, transfer, hypothecate, pledge or assign any
Annual Stock Options which have not vested.

 

(ii)                                  Upon the occurrence of any forfeiture of
Annual Stock Options, Executive shall immediately take all actions necessary to
permit the Company to redeem any forfeited Annual Stock Options.

 

(iii)                               All Annual Stock Options which may be
issuable hereunder shall be issued in reliance upon the following
representations, warranties and agreements of Executive, each of which shall be
true and correct as of the date of issuance and each of which shall survive the
termination of this Agreement.

 

(A)                              Executive acknowledges that the common stock
underlying any Annual

 

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Stock Options will be required to be registered under the Securities Act
pursuant to an effective registration statement subsequent to stockholder
approval of the 2008 Equity Plan;

 

(B)                                Executive acknowledges that once the common
stock underlying any Annual Stock Options has been issued to Executive, the
common stock may not be subsequently transferred or sold by Executive except in
compliance with the registration requirements of federal and state securities
law or exemptions therefrom;

 

(C)                                Executive acknowledges that an investment in
the Company’s common stock is subject to significant risk, including the risks
described, from time to time, in the Company’s annual reports on Form 10-K.
Executive represents and warrants that he has such knowledge and expertise in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Company’s common stock and the ability to bear the
economic risk of the investment; and

 

(D)                               Executive represents and warrants that he has
had the opportunity to ask questions of the Company concerning its business and
to obtain any information which he considers necessary to verify the accuracy of
or to amplify upon the Company’s disclosures and that all questions which have
been asked have been answered by the Company to Executive’s satisfaction

 

3.2                                 Payment.  All Base Salary due Executive
hereunder shall be paid in accordance with the general payroll payment practice
of the Company for executive level employees; except that any payment relating
to the termination of Executive shall be paid as a lump sum payment within
fifteen (15) days of termination.

 

3.3                                 Business Expenses.

 

(a)                                  Reimbursement.   The Company shall
reimburse Executive for all ordinary and necessary business expenses incurred by
him in connection with the performance of his duties hereunder. The
reimbursement of business expenses will be governed by the policies for the
Company as they are in effect from time to time during the term of this
Agreement.

 

(b)                                 Accounting.  Executive shall provide the
Company with an accounting of any expenses, for which reimbursement is sought
including a description of the purpose for which each expense was incurred.
Executive shall provide the Company with such other supporting documentation and
other substantiation of reimbursable expenses as may be required by Company to
conform to Internal Revenue Service or other requirements. All such
reimbursements shall be payable by the Company to Executive within a reasonable
time after receipt by the Company of appropriate documentation required by the
Company.

 

3.4                                 Other Benefits.  The Company shall provide
Executive with such retirement benefits and group health and other insurance
coverage at such levels and on such terms as the  Company generally provides to
its executive level employees in accordance with its Company sponsored benefit
plans as they are in effect from time to time during the term of the Agreement.

 

3.5                                 Compensation Upon Termination.  If
Executive’s employment hereunder and this Agreement

 

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is terminated in accordance with the provisions of Article II, the Company will
be obligated to provide to Executive compensation and benefits, in lieu of any
severance under any severance plan that the Company may then have in effect, and
subject to setoff for any amounts owed by Executive to the Company or any
affiliate of the Company by reason of any contract, agreement, promissory note,
advance, failure to return Company property or loan document, as follows:

 

(a)                                  Upon Termination for Death or Total
Disability.  If Executive’s employment hereunder and this Agreement is
terminated by reason of his death or Total Disability, under Sections 2.2(c) or
(d), then within thirty (30) days of the date of termination the Company will
pay Executive (or his estate or beneficiaries):

 

(ii)                                  any Base Salary that has been accrued but
not paid as of the date of termination (the “Accrued Base Salary”);

 

(ii)                                  any compensation for unused vacation days
accrued as of the termination date in an amount equal to Executive’s Base Salary
multiplied by a fraction, the numerator of which is the number of accrued unused
vacation days and the denominator of which is 360 (the “Accrued Vacation
Payment”);

 

(iii)                               any expenses incurred by Executive prior to
the date of termination that may be reimbursed pursuant to this Agreement (the
“Accrued Reimbursable Expenses”);

 

(iv)                              any accrued and vested benefits required to be
provided upon death or Total Disability by the terms of any Company-sponsored
benefit plans or programs exclusive of any Annual Stock Options (the “Accrued
Benefits”), together with any benefits required to be paid or provided in the
event of Executive’s death or Total Disability under applicable law; and

 

(v)                                 an amount equal to either the prorated
portion of the Annual Incentive Bonus that Executive received for the last
fiscal year completed prior to termination equal to the relevant Annual
Incentive Bonus multiplied by a fraction, the numerator of which is the number
of days in the year prior to the date of death or Total Disability and the
denominator of which is 360, or if the termination occurs in the first year of
the Employment Term, then the prorated portion of the Annual Incentive Bonus as
if the Target bonus was received for that year (the “Accrued Bonus”) calculated
in the same fashion.

 

In addition, if Executive’s employment and this Agreement is terminated under
Sections 2.2(c) or (d), any Annual Stock Options issued to Executive under this
Agreement which have not yet vested shall immediately vest and shall no longer
be subject to forfeiture.

 

(b)                                 Upon Termination by Company for Cause or
Voluntarily by Executive.  If Executive’s employment hereunder and this
Agreement is terminated under Sections 2.2(a) or (e), within fifteen (15) days
of the date of such termination, the Company will pay Executive:

 

(i)                                     any Accrued Base Salary;

 

(ii)                                  any Accrued Vacation Payment;

 

(iii)                               any Accrued Reimbursable Expenses; and

 

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(iv)                              any Accrued Benefits, together with any
benefits required to be paid or provided under applicable law.

 

In addition, if Executive’s employment and this Agreement is terminated under
Sections 2.2(a) or (e), any Stock Option Awards issued to Executive which have
not yet vested shall immediately be forfeited by Executive.

 

(c)                                  Upon Termination by the Company Without
Cause or by Executive for Good Reason.  If Executive’s employment hereunder and
this Agreement is terminated under Sections 2.2(b) or (f), the Company will pay
Executive:

 

(i)                                     any Accrued Base Salary;

 

(ii)                                  any Accrued Vacation Payment;

 

(iii)                               any Accrued Reimbursable Expenses;

 

(iv)                              any Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;

 

(v)                                 any Accrued Bonus; and

 

(vi)                              an amount equal to 1.00 times the sum of:
(A) Executive’s then current per annum base salary; plus (B) an amount equal to
the Annual Incentive Bonus which was paid to Executive for the fiscal year
immediately preceding the year of termination; provided, however, that the
payment to Executive pursuant to this Section 3.5(c)(vi) shall in no event
exceed an amount which would cause Executive to receive an “excess parachute
payment” as defined in the Internal Revenue Code of 1986, as amended (the
“Code”); provided, however that if the termination occurs within one year of a
Change of Control, then in addition to the amounts described in clauses
(i) through (v) above, the Company will pay Executive an amount equal to 1.5
times the sum of: (A) Executive’s then current per annum base salary; plus
(B) an amount equal to the Annual Incentive Bonus which was paid to Executive
for the fiscal year immediately preceding the year of termination; plus (C) the
aggregate dollar value of each of the Annual Stock Option Award that was granted
to Executive for the fiscal year immediately preceding the year of termination;
provided, however, that the payment to Executive pursuant to this
Section 3.5(c)(vi) shall in no event exceed an amount which would cause
Executive to receive an “excess parachute payment” as defined in the Code.

 

In addition, if Executive’s employment hereunder and this Agreement is
terminated under Section 2.2(b), any Annual Stock Options issued to Executive
which have not yet vested shall immediately vest and shall no longer be subject
to forfeiture by Executive. If Executive’s employment hereunder is terminated
under Section 2.2(f), any Annual Stock Options issued to Executive which have
not vested shall immediately be forfeited by Executive; provided that if this
Agreement is terminated under Section 2.2(f) within one year of a Change of
Control, then any Annual Stock Options issued to Executive under this Agreement
shall immediately vest and shall no longer be subject to forfeiture by
Executive.

 

3.6                                 Cessation of Rights and Obligations:
Survival of Certain Provisions. On the date of expiration

 

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or earlier termination of the Employment Term for any reason, all of the
respective rights, duties, obligations and covenants of the parties, as set
forth herein, shall, except as specifically provided herein to the contrary,
cease and become of no further force or effect as of the date of termination,
and shall only survive as expressly provided for herein.

 

ARTICLE IV

CONFIDENTIALITY AND NON-COMPETE AGREEMENT

 

4.1                                 Non-Disclosure of Confidential Information.
Executive hereby acknowledges and agrees that the duties and services to be
performed by Executive under this Agreement are special and unique and that as a
result of his employment by the Company hereunder Executive has developed over
time and will acquire, develop and use information of a special and unique
nature and value that is not generally known to the public or to the Company’s
industry, including but not limited to, certain records, secrets, documentation,
software programs, price lists, ledgers and general information, employee
records, mailing lists, stockholder lists, tenant lists and profiles,
prospective customer, acquisition candidate or tenant lists, accounts receivable
and payable ledgers, financial and other records of the Company or its
Affiliates, information regarding its stockholders, tenants or joint venture
partners, and other similar matters (all such information being hereinafter
referred to as “Confidential Information”). Executive further acknowledges and
agrees that the Confidential Information is of great value to the Company and
that the restrictions and agreements contained in this Agreement are reasonably
necessary to protect the Confidential Information and the goodwill of the
Company and the Affiliates.  Accordingly, Executive hereby agrees that:

 

(a)                                  Executive will not, during the Employment
Term or at any time thereafter, directly or indirectly, except in connection
with Executive’s performance of his duties under this Agreement, or as otherwise
authorized in writing by the Company for the benefit of the Company or any
Affiliate, divulge to any person, firm, corporation, limited liability company,
partnership or organization, or any affiliated entity (hereinafter referred to
as “Third Parties”), or use or cause or authorize any Third Parties to divulge
or use, the Confidential Information, except as required by law; and

 

(b)                                 Upon the termination of the Employment Term
and this Agreement for any reason whatsoever, Executive shall deliver or cause
to be delivered to the Company any and all Confidential Information, including
drawings, notebooks, keys, data and other documents and materials belonging to
the Company or its Affiliates which is in his possession or under his control
relating to the Company or its Affiliates, regardless of the medium upon which
it is stored, and will deliver to the Company upon termination, any other
property of the Company or its Affiliates which is in his possession or under
his control.

 

4.2                                 Non-Solicitation and Covenant Not to
Compete.

 

(a)                                  General. Executive acknowledges that the
covenants set forth in this Section 4.2 are reasonable in scope and essential to
the preservation of the business and the goodwill of the Company, and are
consideration for the amounts to be paid to Executive hereunder. Executive also
acknowledges that the enforcement of the covenants set forth in this Section 4.2
will not preclude Executive from being gainfully employed in such manner and to
the extent as to provide a standard of living for himself, the members of his
family and the others dependent upon him of at least the level provided by this
Agreement. In addition, Executive acknowledges that the Company and its
Affiliates have obtained an advantage over their competitors that is
characterized by relationships with clients, principals, tenants and other
contacts.

 

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(b)                                 Covenants. Executive hereby covenants and
agrees that, except as permitted by the Company, during the Employment Term, and
any extensions thereof, and for a period of one (1) year following the
expiration, termination or extension of this Agreement, Executive shall not,
directly or indirectly: (i) alone, together or in association with others,
either as a principal, agent, owner, stockholder, officer, director, partner,
employee, lender, investor or in any other capacity, engage in, have any
financial interest in or be in any way connected or affiliated with, or render
advice or services to, Developers Diversified Realty Corp., Kimco Realty
Corporation or Regency Centers Corporation; (ii) directly or indirectly divert,
take away, solicit or interfere with or attempt to divert, take away, solicit or
interfere with any present or prospective customer, except on behalf of the
Company as an employee thereof; (iii) directly or indirectly solicit, induce,
influence or attempt to solicit, induce or influence any employee or agent of
the Company to leave his employment or engagement with the Company, or offer
employment or engagement to or employ or engage any such employee of the
Company, or assist or attempt to assist any such employee of the Company in
seeking other employment; (iv) in any manner slander, libel or by other means
take action which is or intended, or could reasonably be expected, to be
detrimental to the Company or an Affiliate or their respective employees or
operations; (v) knowingly make or participate in any “solicitation” of “proxies”
or “consents” (as such terms are used in the proxy rules of the United States
Securities and Exchange Commission) or make proposals for approval of the
Company’s stockholders; (vi) knowingly form, join or participate in a “group”
(within the meaning of Section 13(d)(3) of the Exchange Act) with respect to the
Company’s securities; (vii) otherwise knowingly act to control or seek to
control the management, board of directors or policies of the Company (except
with respect to actions taken solely in Executive’s capacity as an officer of
the Company in the exercise of his fiduciary duties; or (viii) make any
agreement to do any of the foregoing to the extent restricted thereby. As used
in this Section 4.2, the term “Company” shall mean the Company or any Affiliate
thereof. As used in this Section 4.2(b), “customer” and “prospective customer”
shall include: (i) any tenant of the Company’s properties or any other person or
entity with whom the Company is negotiating for the leasing of real property
from the Company or an Affiliate at the time of the termination of this
Agreement or during the six month period immediately prior to such termination;
(ii) any owner or prospective owner of real property the purchase or sale of
which is being negotiated by the Company at the time of the termination of this
Agreement or during the six month period immediately prior to such termination;
or (iii) any joint venture partner of the Company. The restrictions imposed by
this subparagraph 4.2(b) shall not apply to the ownership of one percent (1%) or
less of all of the outstanding securities of any entity whose securities are
listed on a national securities exchange, or included for quotation on any
interdealer quotation system.

 

4.3                                 Remedies.

 

(a)                                  Injunctive Relief. Executive expressly
acknowledges and agrees that the business of the Company is highly competitive
and that a violation of any of the provisions of Sections 4.1 or 4.2 would cause
immediate and irreparable harm, loss and damage to the Company or an Affiliate
not adequately compensable by a monetary award. Executive further acknowledges
and agrees that the time periods and territorial areas provided for herein are
the minimum necessary to adequately protect the business of the Company, the
enjoyment of the Confidential Information and the goodwill of the Company.
Without limiting any of the other remedies available to the Company at law or in
equity, or the Company’s light or ability to collect money damages, Executive
agrees that any actual or threatened violation of any of the provisions of
Sections 4.1 or  4.2 may be immediately restrained or enjoined by any court of
competent jurisdiction, and that a temporary restraining order or

 

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emergency, preliminary or final injunction may be issued in any court of
competent jurisdiction, upon twenty-four (24) hour notice and without bond.

 

(b)                                 Enforcement. Executive expressly
acknowledges and agrees that the provisions of Sections 4.1 or 4.2 shall be
enforced to the fullest extent permissible under the laws and public policies in
each jurisdiction in which enforcement might be sought. Accordingly, if any
particular portion of Sections 4.1 or 4.2 shall ever be adjudicated as invalid
or unenforceable, or if the application thereof to any party or circumstance
shall be adjudicated to be prohibited by or invalidated by such laws or public
policies, such section or sections shall be: (i) deemed amended to delete
therefrom such portions so adjudicated; or (ii) modified as determined
appropriate by such a court, such deletions or modifications to apply only with
respect to the operation of such section or sections in the particular
jurisdictions so adjudicating on the parties and under the circumstances as to
which so adjudicated.

 

ARTICLE V

MISCELLANEOUS

 

5.1                                 Notices.  All notices or other
communications required or permitted hereunder shall be in writing and shall be
deemed given or delivered: (i) when delivered personally or by commercial
messenger; (ii) one (1) business day following deposit with a recognized
overnight courier service; provided such deposit occurs prior to the deadline
imposed by such service for overnight delivery; (iii) when transmitted, if sent
by facsimile copy, provided confirmation of receipt is received by sender and
such notice is sent by an additional method provided hereunder, in each case
above provided such communication is addressed to the intended recipient thereof
as set forth below:

 

To Executive at his home address.

 

 

 

To the Company at:

 

Inland Western Retail Real Estate Trust, Inc.

 

 

2901 Butterfield Road

 

 

Oak Brook, Illinois 60523

 

 

Attn: Michael J. O’Hanlon

 

 

President and Chief Executive Officer

 

 

Telephone: (630) 368-2323

 

 

Fax: (630) 645-7229

 

 

 

With a copy to:

 

Inland Western Retail Real Estate Trust, Inc.

 

 

2901 Butterfield Road

 

 

Oak Brook, Illinois 60523

 

 

Attn: Dennis K. Holland

 

 

General Counsel and Secretary

 

 

Telephone: (630) 368-2861

 

 

Fax: (630) 586-6446

 

 

 

Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.

 

5.2                                 Entire Agreement; Amendments. Etc. This
Agreement contains the entire agreement and understanding of the parties hereto,
and supersedes all prior agreements and understandings relating to the

 

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subject matter thereof. No modification, amendment, waiver or alteration of this
Agreement or any provision or term hereof shall in any event be effective unless
the same shall be in writing, executed by both parties hereto, and any waiver so
given shall be effective only in the specific instance and for the specific
purpose for which given.

 

5.3                                 Benefit.  This Agreement shall be binding
upon, and inure to the benefit of, and shall be enforceable by, the heirs,
successors and legal representatives of Executive and the successors, assignees
and transferees of the Company and its current or future Affiliates. This
Agreement or any right or interest hereunder may not be assigned by Executive.

 

5.4                                 No Waiver. No failure or delay on the part
of any party hereto in exercising any right, power or remedy hereunder or
pursuant hereto shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder or pursuant thereto.

 

5.5                                 Severability. Wherever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law but, if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. If any part of any covenant or other provision in this Agreement is
determined by a court of law to be overly broad thereby making the covenant
unenforceable, the parties hereto agree, and it is their desire, that the court
shall substitute a judicially enforceable limitation in its place, and that as
so modified the covenant shall be binding upon the parties as if originally set
forth herein.

 

5.6                                 Compliance and Headings.  The headings in
this Agreement are intended to be for convenience and reference only, and shall
not define or limit the scope, extent or intent or otherwise affect the meaning
of any portion hereof.

 

5.7                                 Governing Law.  The parties agree that this
Agreement shall be governed by, interpreted and construed in accordance with the
internal laws of the State of Illinois without regard to its conflicts of law
provisions, and the parties agree that any suit, action or proceeding with
respect to this Agreement shall be brought in the state courts in Chicago,
Illinois or in the U.S. District Court for the Northern District of Illinois.
The parties hereto hereby accept the exclusive jurisdiction of those courts for
the purpose of any such suit, action or proceeding. Venue for any such action,
in addition to any other venue permitted by statute, will be in Chicago,
Illinois.

 

5.8                                 Counterparts. This Agreement may be executed
in one or more counterparts, each of which will be deemed an original and all of
which together will constitute one and the same instrument.

 

5.9                                 No Presumption Against Drafter. Each of the
parties hereto has jointly participated in the negotiation and drafting of this
Agreement. In the event an ambiguity or a question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by each of the
parties hereto and no presumptions or burdens of proof shall arise favoring any
party by virtue of the authorship of any provisions of this Agreement.

 

5.10                           Enforcement. In the event either of the parties
to this Agreement shall bring an action against the other party with respect to
the enforcement or breach of any provision of this Agreement, the prevailing
party in such action shall recover from the non-prevailing party the costs
incurred by the prevailing party

 

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with respect to such action including court costs and reasonable attorneys’
fees.

 

5.11                           Recitals. The Recitals set forth above are hereby
incorporated in and made a part of this Agreement by this reference.

 

[The remainder of this page intentionally blank]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed and delivered as of the day and year first above written.

 

 

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.,

 

a Maryland corporation

 

 

 

By:

/s/ Michal J. O’Hanlon

 

 

 

 

Name:

Michael J. O’Hanlon

 

 

 

 

Its:

President and Chief Executive Officer

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

By:

/s/ Steven P. Grimes

 

 

 

 

Name:

Steven P. Grimes

 

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EXHIBIT A

(FORMULA FOR DETERMINING ANNUAL INCENTIVE BONUS)

 

I.                                         One half of the Executive’s Annual
Incentive Bonus Opportunity (“FFO AIBO”) shall be determined based on
performance of the Company, measured to either a Threshold, Target, or High
level of performance.

 

·                  The Company will have achieved a Threshold level of
performance if the Company’s annual growth in FFO per fully-diluted share for
the completed fiscal year immediately preceding the year in which the FFO AIBO
is calculated, when compared to FFO per fully-diluted share for the next
preceding completed fiscal year, is not less than 80% of the median FFO growth
rate for the applicable year as published by NAREIT for the Retail REIT Shopping
Center subsector of the NAREIT Equity REIT Total Return Index (or, if not then
in existence, a comparable retail REIT shopping center index mutually agreeable
to the Company and Executive).

 

·                  The Company will have achieved a Target level of performance
if the Company’s annual growth in FFO per fully-diluted share for the completed
fiscal year immediately preceding the year in which the FFO AIBO is calculated,
when compared to FFO per fully-diluted share for the next preceding completed
fiscal year, is not less than 100% of the median FFO growth rate for the
applicable year as published by NAREIT for the Retail REIT Shopping Center
subsector of the NAREIT Equity REIT Total Return Index (or, if not then in
existence, a comparable retail REIT shopping center index mutually agreeable to
the Company and Executive).

 

·                  The Company will have achieved a High level of performance if
the Company’s annual growth in FFO per fully-diluted share for the completed
fiscal year immediately preceding the year in which the FFO AIBO is calculated,
when compared to FFO per fully-diluted share for the next preceding completed
fiscal year, is not less than 130% of the median FFO growth rate for the
applicable year as published by NAREIT for the Retail REIT Shopping Center
subsector of the NAREIT Equity REIT Total Return Index (or, if not then in
existence, a comparable retail REIT shopping center index mutually agreeable to
the Company and Executive).

 

For purposes of calculating FFO AIBO, “FFO” shall have the same meaning ascribed
to that term in the Company’s annual report on Form 10-K as filed with the SEC
for the year in which the bonus is to be calculated, but excluding therefrom the
performance of Inland Western I (Common and Preferred) Stock Portfolio, and
Western Dedicated (Preferred) Stock Portfolio.

 

Subject to Section II. below, if the Company achieves a Threshold level of
performance, the Executive’s FFO AIBO will be equal to one half of 20% of
Executive’s Base Salary for the applicable year. If the Company achieves a
Target level of performance, the Executive’s FFO AIBO will be equal to one half
of 30% of Executive’s Base Salary for the applicable year. If the Company
achieves a High level of performance, the Executive’s FFO AIBO will be equal to
one half of 50% of Executive’s Base Salary for the applicable year.

 

II.                                     The amount of any Annual Incentive Bonus
determined pursuant to this Exhibit A shall be non-discretionary on the part of
the Company, and shall be paid to the Executive in accordance with the
provisions of Section 3.I(b) of the Agreement.

 

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EXHIBIT B

(FORMULA FOR DETERMINING ANNUAL STOCK OPTION AWARD)

 

I.                                         The Executive will be awarded an
Annual Stock Option Award only if the Company shall have achieved a Threshold
level of performance in the completed fiscal year immediately preceding the
award. For these purposes, the Company will have achieved a Threshold level of
performance if the Company’s annual growth in FFO per fully-diluted share for
the completed fiscal year immediately preceding the year in which the award of
Annual Stock Options is calculated, when compared to FFO per fully-diluted share
for the next preceding completed fiscal year, is not less than 80% of the median
FFO growth rate for the applicable year as published by NAREIT for the Retail
REIT Shopping Center subsector of the NAREIT Equity REIT Total Return Index (or,
if not then in existence, a comparable retail REIT shopping center index
mutually agreeable to the Company and Executive).

 

II.                                     If the Company achieves a Threshold
level of performance, the Executive’s Annual Stock Option Award will authorize
the Executive to purchase the number of shares equal to 12,500 shares. The
strike price for each share underlying each Annual Stock Option Award will be
equal to (i) until such time, if ever, that the Company’s shares are listed on a
national exchange, the market value of shares established annually by the
Company for the purposes of the ERISA valuation; or (ii) after the Company’s
shares are listed on a national exchange, if ever, the market value of such
shares.

 

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