Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of April 18,
2012, but shall be effective, nunc pro tunc, as of January 1, 2012, by and
between INLAND REAL ESTATE CORPORATION, a Maryland corporation (the “Company”),
and Mark Zalatoris (the “Executive”).

 

RECITALS:

 

A.                                    The Company is a real estate investment
trust which owns, operates and acquires neighborhood retail centers and
community centers within an approximate 400 mile radius of its headquarters in
Oak Brook, Illinois (the “Business”).

 

B.                                    Executive has served as the Company’s
President and Chief Executive Officer pursuant to an employment agreement,
effective as of April 21, 2008, by and between the Company and Executive and
during his employment hereunder, Executive 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,
2012.

 

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, 2012 (the
“Effective Date”), Executive shall serve as President and Chief Executive
Officer with duties commensurate with such position 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.

 

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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:

 

(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, 2012 (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:

 

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

 

(b)                              By the Company immediately Without Cause.(as
hereinafter defined).

 

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

 

(d)                              By Company, immediately for Good Reason (as
hereinafter defined).

 

(e)                               Upon a Change of Control (as hereinafter
defined)

 

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

 

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

 

(h)                              Voluntarily by Executive.

 

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

 

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2.3                            Definitions of Termination Terms

 

(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 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)                              “Without Cause” shall mean any reason other
than as defined as Cause or as otherwise defined herein.

 

(c)                               By Executive for “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; or

 

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

 

(d)                              By Company for “Good Reason” shall mean the
failure of Executive to achieve personal goals and objectives as mutually agreed
upon between the named Executive and the Board of Directors .

 

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

 

(i)                                             the members of IRC’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 IRC’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;

 

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

 

(iii)                                       the termination and liquidation of
IRC; and

 

(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; or

 

(v)                                         following a Change of Control, the
termination of Executive within a one year period.

 

(f)                                        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.

 

(g)                               “Voluntarily by Executive” shall mean the
Executive resigns of his or his own volition.

 

(h)                              “Expiration” of the Employment Term means this
Agreement does not automatically extend beyond the term set forth herein and may
only be extended by a mutually agreed upon written instrument between the
parties.

 

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 $510,000 per
annum in cash and a deferred compensation component in the amount of $45,000 of
restricted shares of IRC common stock which shall vest at a rate of twenty
percent (20%) per year over a five (5) year period.

 

(b)                              Annual Incentive Bonus.  The Company shall, in
addition to Executive’s Base Salary, pay Executive an Annual Incentive Bonus,
which shall be payable within 120 days of the end of each fiscal year in
accordance with the formula set forth on Exhibit A, attached hereto and made a
part hereof.

 

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(c)                               Annual Long Term Share Award.  No later than
June 30 of each fiscal year during the Employment Term, the Company shall grant
Executive an Annual Long Term Share Award consisting of shares of the common
stock of IRC (“Long Term Shares”), subject to the conditions set forth below and
in accordance with Exhibit B, attached hereto and made a part hereof.  Twenty
percent (20%) of any Long Term Shares granted hereunder shall vest on each
successive yearly anniversary of the grant of the Long Term Shares.

 

3.2                            General Compensation and Benefits Rules and
Guidelines.

 

(a)                                 All Long Term Shares shall be issued under,
and in accordance with, IRC’s 2005 Equity Award Plan (the “2005 Equity Award
Plan”); to the extent the terms of any Long Term Shares granted pursuant to this
Agreement conflict with the terms of the 2005 Equity Award Plan, the terms of
the 2005 Equity Award Plan shall apply to the minimum extent necessary to
eliminate the conflict.  Executive shall be the record owner of any Long Term
Shares granted hereunder; provided that any Long Term Shares 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 expressly provided for in Section 3.3 hereof, Executive may not
sell, transfer, hypothecate, pledge or assign any Long Term Shares which have
not vested.

 

(i)                                             Upon the occurrence of any
forfeiture of Long Term Shares, Executive shall immediately take all actions
necessary to permit the Company to redeem any forfeited Long Term Shares.

 

(ii)                                          Unless forfeited, Executive may
exercise all rights of a stockholder, including the right to vote and receive
dividends with respect to any Long Term Shares granted Executive.

 

(iii)                                       All Long Term Shares 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.

 

(b)                                                         Executive
acknowledges that the common stock underlying any Long Term Shares has been
registered under the Securities Act of 1933, as amended (the “Securities Act”),
pursuant to an effective registration statement on Form S-8 (file no.
333-128624);

 

(c)                                                                     
Executive acknowledges that once the common stock underlying any Long Term
Shares 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;

 

(d)                                                             Executive
acknowledges that an investment in the IRC’s common stock is subject to
significant risk, including the risks described, from time to time, in IRC’s
annual reports on Form 10-K.  Executive represents and warrants that he has such
knowledge

 

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and expertise in financial and business matters as to be capable of evaluating
the merits and risks of an investment in IRC’s common stock and the ability to
bear the economic risk of the investment; and

 

(e)                                                       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.

 

(f)                                   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
thirty (30) days of termination.

 

(g)                                  Business Expenses.

 

(i)                                     Reimbursement.  The Company shall
reimburse Executive for all ordinary and necessary business expenses incurred by
hm 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.

 

(ii)                          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.

 

(h)                                 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.

 

(i)                                     Compensation Upon Termination.  If
Executive’s employment hereunder and this Agreement 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 set forth in Section 3.3.

 

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3.3                                       Benefits Following Termination of
Executive

 

(a)                                         Upon Termination by Company for
Cause.  If Executive’s employment hereunder and this Agreement is terminated
under Section 2.2(a) , within thirty (30) days of the date of such termination,
the Company will pay Executive:

 

(iv)                                      any accrued base salary;

 

(v)                                         any accrued vacation payment;

 

(vi)                                      any accrued reimbursable expenses; and

 

(vii)                                   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) , any Long Term Shares issued to Executive which have not yet
vested shall immediately be forfeited by Executive.

 

(b)                         Upon Termination by Company Without Cause. If
Executive’s employment hereunder and this Agreement is terminated under Section
2.2(b), within thirty (30) 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;

 

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

 

(v)                                         any accrued bonus (which has been
determined for the prior year, but not yet paid);

 

(vi)                                      any accrued bonus for the current year
prorated to the date of termination; and

 

(vii)                                   an amount equal to the sum of: (A)
Executive’s then current per annum base salary; plus (B) an amount equal to the
Annual Incentive Bonus which was earned by Executive for the fiscal year
immediately preceding the year of termination; provided, however, that the
payment to Executive pursuant to this Section 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”).

 

In addition, if Executive’s employment and this Agreement is terminated under
Section 2.2 (b) any Long Term Shares issued to Executive which have not yet
vested shall immediately vest and shall no longer be subject to forfeiture by
Executive.

 

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(c)                          Upon Termination by the Executive for Good Reason. 
If Executive’s employment hereunder and this Agreement is terminated under
Section 2.2 (c), within thirty (30) 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;

 

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

 

(v)                                         any accrued bonus (which has been
determined for the prior year, but not yet paid);

 

(vi)                                      any accrued bonus for the current year
prorated to the date of termination; and

 

(vii)                                   an amount equal to the sum of: (A)
Executive’s then current per annum base salary; plus (B) an amount equal to the
Annual Incentive Bonus which was earned by Executive for the fiscal year
immediately preceding the year of termination; provided, however, that the
payment to Executive pursuant to this Section 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”).

 

In addition, if Executive’s employment and this Agreement is terminated under
Section 2.2 (c) any Long Term Shares issued to Executive which have not yet
vested shall immediately vest and shall no longer be subject to forfeiture by
Executive.

 

(d)                         Upon Termination by Company for Good Reason.  If
Executive’s employment hereunder and this Agreement is terminated under Section
2.2 (d),for Executive’s failure to achieve personal goals and objectives that
have been mutually agreed upon between Company and Executive, within thirty (30)
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;

 

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

 

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(v)                                         any accrued bonus (which has been
determined for the prior year, but not yet paid);

 

(vi)                                      any accrued bonus for the current year
prorated to the date of termination; and

 

an amount equal to .50 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
earned by Executive for the fiscal year immediately preceding the year of
termination; provided, however, that the payment to Executive pursuant to this
Section 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”).

 

In addition, if Executive’s employment and this Agreement is terminated under
Section 2.2 (d) any Long Term Shares issued to Executive which have not yet
vested shall immediately be forfeited by Executive..

 

(e)                          Upon Termination within one year of a Change of
Control.  If Executive’s employment hereunder and this Agreement is terminated
under Section 2.2(e), within thirty (30) 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;

 

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

 

(v)                                         any accrued bonus (which has been
determined for the prior year, but not yet paid);

 

(vi)                                      any accrued bonus for the current year
prorated to the date of termination; and

 

(vii)                                   an amount equal to 2 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 earned by Executive for the fiscal year
immediately preceding the year of termination; plus (C) the aggregate dollar
value of each of the Annual Long Term Share 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 shall in no
event exceed an amount which would cause Executive to receive an “excess
parachute payment” as defined in the Code.

 

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In addition, if Executive’s employment and this Agreement is terminated under
Section 2.2 (e) any Long Term Shares issued to Executive which have not yet
vested shall immediately vest and shall no longer be subject to forfeiture by
Executive

 

(f)                           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(f) or (g), then within
thirty (30) days of the date of termination the Company will pay Executive (or
his estate or beneficiaries):

 

(i)                                             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 Long Term Shares or
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 are terminated under
Sections 2.2(f) or (g), any Long Term Shares or 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.

 

(h)                                 Upon Termination Voluntarily by Executive. 
If Executive’s employment hereunder and this Agreement is terminated under
Section 2.2(h) , within thirty (30) days of the date of such termination, the
Company will pay Executive:

 

(vi)                                      any accrued base salary;

 

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(vii)            any accrued vacation payment;

 

(viii)           any accrued reimbursable expenses; and

 

(ix)             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 are terminated under
Section 2.2(h), any Long Term Shares issued to Executive which have not yet
vested shall immediately be forfeited by Executive.

 

3.4          Cessation of Rights and Obligations: Survival of Certain
Provisions.  On the date of expiration 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.  Executive’s right to receive moneys earned but not yet paid shall
survive the termination of this Agreement.

 

ARTICLE IV
COVENANTS MADE BY EXECUTIVE

 

4.1          General.  Executive acknowledges that the covenants set forth in
this Article IV 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 Article IV will not preclude
Executive from being gainfully employed in a reasonably comparable position.

 

4.2          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, shareholder 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 shareholders, 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:

 

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(a)        Executive will not, during the Employment Term or for a period of two
(2) years following the expiration, 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.

 

4.3          Non-Solicitation. 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, (i) 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; (ii) 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; (iii) 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; (iv) 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; (v) 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 (vi) make
any agreement to do any of the foregoing to the extent restricted thereby.  As
used in this Article IV the term “Company” shall mean the Company or any
Affiliate thereof.

 

4.4          Non-hiring Agreement.  Executive hereby covenants and agrees that
for a period of one (1) year following the expiration, termination or extension
of this Agreement, Executive shall not directly or indirectly divert, take away,
solicit or interfere with or attempt to hire, employ, solicit or interfere with
any present or prospective employee of the Company.

 

4.5          Covenant Not to Compete.  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 alone, together or in association with others, either as a principal,
agent, owner, shareholder, officer, director, partner, employee, lender,
investor or in

 

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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, a real estate
investment trust focusing on retail real estate within a 400 mile radius of Oak
Brook, Illinois, other than as an employee of The Inland Group, Inc. (“TIGI”) or
an affiliate of TIGI or otherwise on behalf of the Company as an employee
thereof or such other business as may be permitted by the Company in writing. 
This limitation on competition shall only apply to real estate investment
trusts.

 

4.6.         Non-disparagement.  Executive hereby covenants and agrees that for
a period of two (2) years following the expiration, termination or extension of
this Agreement, Executive shall not, directly or indirectly in any manner
disparage, demean or defame 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.

 

4.7          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 Article IV 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 right or ability to collect money damages, Executive agrees that any
actual or threatened violation of any of the provisions of Article IV may be
immediately restrained or enjoined by any court of competent jurisdiction, and
that a temporary restraining order or 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 Article IV shall 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 Article IV 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

 

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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:

 

5.2          To Executive at his home address.

 

To the Company at:

 

Inland Real Estate Corporation

2901 Butterfield Road

Oak Brook, Illinois 60523

Attn: Mark Zalatoris, President and Chief Executive Officer

 

 

 

With a copy to:

 

Inland Real Estate Corporation

2901 Butterfield Road

Oak Brook, Illinois 60523

Attn: Beth Sprecher Brooks, Senior

Vice President and General Counsel

 

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.

 

5.3          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 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.

 

5.4          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.

 

5.5          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.

 

5.6          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

 

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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.

 

5.7          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.

 

5.8          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.

 

5.9          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.

 

5.10        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.

 

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

 

5.12        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 REAL ESTATE CORPORATION,

 

 

 

a Maryland corporation

 

 

 

By:

/s/ Thomas D’Arcy

 

 

 

 

Name:

Thomas D’Arcy

 

 

 

 

Its:

Chairman

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

By :

/s/ Mark Zalatoris

 

 

 

 

Name:

Mark Zalatoris

 

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EXHIBIT A

 

(FORMULA FOR DETERMINING ANNUAL CASH INCENTIVE BONUS)

 

I.                                        The Executive’s Annual Cash Incentive
Bonus (“ACIB”) shall be determined in part by two different criteria (set forth
below) based on the performance of IRC when compared to the performance of a
peer group of companies measured to either a Target or High level of performance
and to a third criteria of individual performance (based on attainment of
personal goals) as evaluated by the Company’s Chief Executive Officer.

 

·                                          IRC will have achieved a Target level
of performance for FFO growth if IRC’s annual growth in FFO per fully-diluted
share for the completed fiscal year immediately preceding the year in which the
ACIB 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).  IRC will have achieved a Target level of
performance for Total Shareholder Return if IRC’s Total Shareholder Return (as
defined below) per share for the completed fiscal year immediately preceding the
year in which the ACIB is calculated, is not less than 100% of the median Total
Shareholder Return for the applicable year as published by NAREIT for the Retail
REIT Shopping Center Index.

 

·                                          IRC will have achieved a High level
of performance for FFO growth if IRC’s annual growth in FFO per fully-diluted
share for the completed fiscal year immediately preceding the year in which the
ACIB 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).  IRC will have achieved a High level of
performance for Total Shareholder Return if IRC’s Total Shareholder Return (as
defined below) per share for the completed fiscal year immediately preceding the
year in which the ACIB is calculated, is not less than 130% of the median Total
Shareholder Return for the applicable year as published by NAREIT for the Retail
REIT Shopping Center Index.

 

·                                          For purposes of calculating ACIB,
“FFO” shall have the same meaning ascribed to that term in IRC’s annual report
on Form 10-K as filed with the SEC for the year in which the bonus is to be
calculated.  “Total Shareholder Return” shall mean the sum of : 1) the change in
the IRC stock price from January 1, 2012 to December 31, 2012 (as expressed as a
percentage), plus 2) the dividend yield paid during 2012 (as expressed as a
percentage by dividing dividends paid in 2012 divided by the IRC stock price as
of January 1, 2012).

 

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Subject to Section II. below, if IRC achieves a Target level of performance in
each of the two named criteria, the Executive’s  Company performance related
ACIB will equal a total of 14% of Executive’s Base Salary for the applicable
year (or 7% for each of the criteria achieved).  If IRC achieves a High level of
performance in each of the two named criteria, the Executive’s company
performance related ACIB will equal a total of 22% of Executive’s Base Salary
for the applicable year (or 11% for each of the criteria achieved).

 

It is recognized that of the two criteria, both may not fall into the same level
of performance, but rather one may be at a Target level and the other at a High
level (or not achieve either level).  Executive is entitled to an award for each
of the three (3) performance level metric that may be achieved.

 

II.          The Executive’s ACIB component related to personal performance will
be awarded up to a maximum of 12% of the Executive’s Base Salary for the
applicable year.  This third component shall be dependent upon the Executive
achieving personal goals and objectives with respect to his individual
performance, as agreed by the Executive and IRC’s chief executive officer at the
beginning of the applicable year.

 

The Executive’s Total Annual Cash Incentive Bonus for the applicable year shall
be determined by adding these three (3) components.

 

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EXHIBIT B

 

(FORMULA FOR DETERMINING ANNUAL AWARD OF LONG TERM SHARES)

 

I.                                        The Executive’s Annual Award of Long
Term Restricted Shares (“LTRS”) shall be determined in part by two different
criteria (set forth below) based on the performance of IRC when compared to the
performance of a peer group of companies measured to either a Target or High
level of performance and to a third criteria of individual performance (based on
the attainment of personal goals) as evaluated by the Company’s Chief Executive
Officer.

 

IRC will have achieved a Target level of performance for FFO growth if IRC’s
annual growth in FFO per fully-diluted share for the completed fiscal year
immediately preceding the year in which the grant of Long Term Shares 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).  IRC will have achieved a Target level of
performance for Total Shareholder Return if IRC’s Total Shareholder Return (as
defined below) per share for the completed fiscal year immediately preceding the
year in which the LTRS is calculated, is not less than 100% of the median Total
Shareholder Return for the applicable year as published by NAREIT for the Retail
REIT Shopping Center Index.

 

IRC will have achieved a High level of performance for FFO growth if IRC’s
annual growth in FFO per fully-diluted share for the completed fiscal year
immediately preceding the year in which the grant of Long Term Shares 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).  IRC will have achieved a High level of performance
for Total Shareholder Return if IRC’s Total Shareholder Return (as defined
below) per share for the completed fiscal year immediately preceding the year in
which the LTRS is calculated, is not less than 130% of the median Total
Shareholder Return for the applicable year as published by NAREIT for the Retail
REIT Shopping Center Index.

 

For purposes of calculating the LTRS grant, “FFO” shall have the same meaning
ascribed to that term in IRC’s annual report on Form 10-K as filed with the SEC
for the year in which the LTRS is to be calculated.  .  “Total Shareholder
Return” shall mean the sum of : 1) the change of the IRC stock price from
January 1, 2012 to December 31, 2012 (as expressed as a percentage), plus 2) the
dividend yield paid during 2012 (as expressed as a percentage of dividends paid
in 2012 divided by the IRC stock price as of January 1, 2012).

 

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Subject to Section II. below, if IRC achieves a Target level of performance in
each of the two named criteria, the Executive’s LTRS grant will equal the number
of shares equal to the quotient of (1) 26% (or 13% for each of the criteria
achieved) of the Executive’s Base Salary for the applicable year, divided by
(2) the average of the high and low trading price as reported by the New York
Stock Exchange on the date of grant.  If IRC achieves a High level of
performance in each of the two named criteria, the Executive’s LTRS grant will
equal the number of shares equal to the quotient of (1) 40% (or 20% for each of
the criteria achieved) of the Executive’s Base Salary for the applicable year,
divided by (2) the average of the high and low trading price as reported by the
New York Stock Exchange on the date of grant.

 

It is recognized that of the two criteria, both may not fall into the same level
of performance, but rather one may be at a Target level and the other at a High
level (or not achieve either level). Executive is entitled to an award for each
of the three (3) performance level metric that may be achieved.

 

II.                                   The Executive’s LTRS component related to
personal performance will be awarded up to a maximum of 21% of the Executive’s
Base Salary for the applicable year.  This third component shall be dependent
upon the Executive achieving personal goals and objectives with respect to his
individual performance, as agreed by the Executive and IRC’s chief executive
officer at the beginning of the applicable year.

 

The Executive’s Total Annual Award of Long Term Restricted Shares for the
applicable year shall be determined by adding these three components.

 

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