<PAGE>   1
                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 15(th) day
of June, 2001, 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 a 400 mile
radius of its headquarters in Oak Brook, Illinois (the "Business").

     B. Executive has served as the Company's Chief Financial Officer and
Treasurer pursuant to an employment agreement, dated as of July 1, 2000, by and
between the Company and Executive (the "Prior Agreement") and during his
employment thereunder, 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 July 1, 2001.

     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, engages and hires Executive, and Executive
hereby accepts employment, upon the terms and conditions set forth in this
Agreement. Effective as of July 1, 2001 (the "Effective Date"), Executive shall
serve as Senior Vice President, Chief Financial Officer and Treasurer, 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 (together "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:

<PAGE>   2

     (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 and/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 for a period of three and one half (3 1/2) years
(the "Initial Term"). The term of Executive's employment hereunder may also be
terminated as provided in Section 2.2. (The Initial Term, as it may be extended
or terminated, is herein referred to as the "Employment Term").

     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.

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

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

     (e) Voluntarily by Executive.

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

     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 such failure to Executive and Executive has failed to cure such
non-performance within ten days of receiving such notice; (iv) gross negligence
or willful misconduct with respect to the Company, its clients, its employees
and its activities; or (v) any other material breach of this Agreement or any
other agreement to which Executive and the Company are a party or any material
breach 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



                                       2
<PAGE>   3

breach to Executive and Executive has failed to cure the breach within ten (10)
days of receiving such notice.

     (b) Executive shall be determined to have a "Total Disability" for purposes
of this Agreement if he is unable by reason of accident or illness to
substantially perform his employment duties or is expected to be in such
condition for periods totaling six (6) months (whether or not consecutive)
during any period of twelve (12) months. The determination of whether a Total
Disability has occurred shall be based on the determination of a physician
mutually acceptable to the Company and Executive. 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 such Good Reason:

     (i) the Company requiring 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 reduction of Executive's base salary or other compensation and
benefits during the Employment Term to less than the amount of the Base Salary
and other compensation and benefits as set forth in Section 3.1 below; and

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

     (iv) 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, providing that such an assignment of duties occurs after a
          change in control.

     (d) "Change of Control" shall mean:

     (i) that 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 a board seat by the board shall be treated as if he or
she were a member of the board as of the date of this Agreement;

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

     (iii) the merger or consolidation of the Company with an unaffiliated third
party and the Company is not the surviving entity of such transaction or the
Company's stockholders do not own more than 50.1% of stock of resulting entity;


                                       3
<PAGE>   4


     (iv) any "person," as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, not affiliated with The Inland Group, Inc.,
becomes a "beneficial owner," as such term is used in Rule 13d-3 promulgated
under that Act, of 51% or more of the voting shares of the Company; and

     (v) the termination and liquidation of the Company.

                                   ARTICLE III

                            COMPENSATION AND BENEFITS

          3.1 Compensation.

     (a) Base Salary. During the first six (6) months of the Initial Term (July
1, 2001 through December 31, 2001) the Company shall pay Executive a base salary
of Ninety Thousand Dollars ($90,000). During the next three years of the Initial
Term the Company shall pay Executive a base salary as follows: (i) January 1,
2002 through December 31, 2002 the sum of One Hundred Ninety Thousand Dollars
($190,000); (ii) January 1, 2003 through December 31, 2003 the sum of Two
Hundred Ten Thousand Dollars ($210,000); (iii) January 1, 2004 through December
31, 2004 the sum of Two Hundred Twenty Five Thousand Dollars ($225,000).
(Collectively referred to hereafter as "Base Salary").

     (b) Annual Incentive Bonus. Within thirty days after December 31, 2001 the
Company shall pay Executive a bonus for the six months ending December 31, 2001
in the amount of Ten Thousand Dollars ($10,000). Commencing with the year ending
December 31, 2002, 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, commencing with the year ending December 31,
2002, in accordance with the formula set forth on Exhibit A, attached hereto and
made a part hereof.

     (c) Annual Long Term Share Award. Effective January 1, 2002 the Company
shall give Executive an Annual Long Term Share Award for the six months ending
December 31, 2001 of 909.09 shares of the Company's stock. Commencing with the
fiscal year ending December 31, 2002, so long as the Employment Term has not
been terminated for any reason, Executive shall, within 120 days of the end of
the immediately fiscal year, receive shares of the common stock of the Company
("Long Term Shares"), subject to the restrictions and forfeitures set forth
below, in accordance with the schedule set forth on Exhibit B, attached hereto
and made a part hereof. Twenty percent (20%) of the Long Term Shares shall vest
on each successive yearly anniversary of the date such Long Term Shares were
granted to Executive.

     (i) Executive shall be the record owner of the Long Term Shares, but all
such shares shall be held by the Company for the benefit of Executive and any
such Long Term Shares which have not yet vested shall be forfeited to the
Company, and without any further action on the part of the Company or the
Executive the Company shall be deemed to have acquired a one hundred percent
interest in the forfeited Long Term Shares, if Executive is no longer employed
by the Company for any reason, other than in connection with a termination as
described in Section 2.2 (b), (c) or (d). Executive may not sell, transfer,
hypothecate, pledge or assign any Long Term Shares which remain subject to
forfeiture.


                                       4
<PAGE>   5

     (ii) Upon the occurrence of any forfeiture of Long Term Shares, Executive
shall immediately take all actions necessary to cause the Company to be
immediately vested with full and complete ownership of such forfeited Long Term
Shares.

     (iii) Executive may exercise all rights of a stockholder, including the
right to vote and receive dividends on all Long Term Shares so long as such
shares have not been forfeited.

     (iv) If the Company shall file a registration statement (other than a
registration statement on Form S-4, S-8 or S-3 or any successor form) with the
Securities and Exchange Commission while any vested Long Term Shares are
outstanding, the Company shall give Executive at least 30 days prior written
notice of the filing of such registration statement. If requested by Executive
in writing within 20 days after receipt of any such notice, the Company shall,
at the Company's sole expense (other than the fees and disbursements of counsel
for Executive, and the underwriting discounts, if any, payable in respect of the
vested Long Term Shares sold by Executive), register all or, at Executive's
option, any portion of the vested Long Term Shares requested by Executive,
concurrently with the registration of such other securities, all to the extent
requisite to permit the public offering and sale of such other securities, and
will use its best efforts through its officers, directors, auditors and counsel
to cause such registration statement to become effective as promptly as
practicable. Notwithstanding the forgoing, if the managing underwriter of any
such offering shall advise a Company in writing that, in its opinion, the
distribution of all or a portion of the vested Long Term Shares requested to be
included in the registration concurrently with the securities being registered
by the Company and the securities of other holders of Company securities would
materially adversely affect the distribution of such securities by the Company
for its own account, the Company will include in such registration first, the
securities that the Company proposes to sell, second, the registerable
securities requested to be included in such registration and other securities
requested be included in such registration by holders who have registration
rights, pro rata among the holders of such registerable securities and such
other securities on the basis of the number of shares which are owned by such
holders, and third, other securities requested to be included in such
registration.

     (v) All Long Term Shares which may be issuable hereunder shall be issued in
reliance upon the following representations, warranties and agreements of
Zalatoris, 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) Zalatoris acknowledges that any Long Term Shares which may be issuable
     to him will not have been registered under the Securities Act or under
     applicable state securities laws;

     (b) All Long Term Shares issuable to Zalatoris will be acquired by
     Zalatoris solely for investment purposes and for the account of Zalatoris
     and not as nominee or agent for others or with a view to or for sale in
     connection with any distribution, and Zalatoris has not and will not, at
     the time of issuance, have entered into any arrangement or understanding
     with respect thereto, except in accordance with the terms of this Agreement
     or otherwise in compliance with applicable securities laws;

     (c) Zalatoris acknowledges that any Long Term Shares issued to him must be
     held indefinitely unless subsequently registered under the Securities Act
     or an exemption from such registration is available. Zalatoris agrees that
     he shall not make a disposition of any Long


                                       5
<PAGE>   6

     Term Shares issued to him unless these shares have been registered under
     the Securities Act or are sold in accordance with an exemption from
     registration under Rule 144 or 144A under the Securities Act, or unless an
     exemption from the registration requirements of the Securities Act and
     applicable state securities laws (other than under Rule 144 or 144A) is
     available and the Company shall have received an opinion of counsel
     reasonably satisfactory to the Company to the effect that an exemption from
     the registration requirements of the Securities Act is valid and available;

     (d) Zalatoris acknowledges that holding of any Long Term Shares is subject
     to significant risk, including the risks described, from time to time, in
     the Company's Reports on Form 10-K. Zalatoris represents and warrants to
     Company that he is able to fend for himself and has such knowledge and
     expertise in financial and business matters as to be capable of evaluating
     the merits and risks of his investment and the ability to bear the economic
     risks of his investment;

     (e) Zalatoris is an "Accredited Investor" as defined in Rule 501 to
     Regulation D promulgated under the Securities Act inasmuch as he is an
     executive officer of the Company;

     (f) Zalatoris 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 Zalatoris' satisfaction.

     3.2 Payment. Base Salary shall be payable in intervals 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 15 days of such 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 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
his expenses, which accounting shall clearly reflect which expenses were
incurred for proper business purposes in accordance with the policies adopted by
the Company, and as such are reimbursable by the Company. Executive shall
provide the Company with such other supporting documentation and other
substantiation of reimbursable expenses as will 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 as required by 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.


                                       6
<PAGE>   7

       3.5 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 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 30 days of the date
of termination the Company will provide to 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 his 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) reimbursement for expenses incurred by him prior to the date of
termination that are subject to reimbursement 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 (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) either the prorated portion of the Annual Incentive Bonus that he
received for the fiscal year prior to termination calculated by the amount of
Annual Incentive Bonus received for the fiscal year prior to termination
multiplied by a fraction, the numerator of which is the number of days in that
year that Executive worked 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 Initial 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 Section 2.2(c)- (d) any Long Term Shares 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 Sections 2.2
(a) or (e), within 15 days of the date of such termination, the Company will:

     (i) pay Executive the Accrued Base Salary;

     (ii) pay Executive the Accrued Vacation Payment;


                                       7
<PAGE>   8

     (iii) pay Executive the Accrued Reimbursable Expenses; and

     (iv) pay Executive the 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 Section 2.2(a) or (e) Long Term Shares 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:

     (i) pay Executive the Accrued Base Salary;

     (ii) pay Executive the Accrued Vacation Payment;

     (iii) pay Executive the Accrued Reimbursable Expenses;

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

     (v) pay Executive the Accrued Bonus; and

     (vi) pay Executive an amount equal to 1.25 times the sum of: (A)
Executive's then current 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 (or if the termination occurs in the first
year of the Initial Term, then the Annual Incentive Bonus as if the target bonus
was received for that year); 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 two years of a change of control, then in
addition to the amounts described in (i) - (v) above, the Company will pay
Executive an amount equal to 2.99 times the sum of: (A) Executive's then current
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 (or if the termination occurs in the first eighteen months of the
Initial Term, then the Annual Incentive Bonus as if the target bonus was
received for that year); plus (C) the value of the Annual Long Term Share Award
which was granted to Executive for the fiscal year immediately preceding the
year of termination (or if the termination occurs in the first eighteen months
of the Initial Term, then the Annual Long Term Share Award as if the target
share award was received for that year); provided, however, that the payment to
Executive pursuant to this Section (d)(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) Long Term Shares 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) Long Term Shares issued to Executive which have not vested shall


                                       8
<PAGE>   9

immediately be forfeited by Executive; provided that if this Agreement is
terminated under Section 2.2(f) within two years of a change of control than any
Long Term Shares 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 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
said termination, and shall only survive as expressly provided for herein.

     3.7 Employment-Agreement; Release of Claims. On the Effective Date, this
Agreement shall supersede the Prior Agreement which shall be void and of no
further effect. In consideration of the promises contained herein, and as a
natural inducement to the Company to enter into this Agreement, Executive hereby
releases and forever discharges the Company and its officers, directors,
employees, investors, shareholders, affiliates and agents from, and agrees not
to sue any of these parties concerning any and all actions, liabilities, and
other claims for relief and remuneration whatsoever, including all matters in
equity, contract, tort or pursuant to statute, whether presently known or
unknown, suspected or unsuspected that Executive may possess, provided nothing
herein shall be deemed to waive or release any claim: (a) for indemnification
that Executive may have under the Company's Third Articles of Amendment and
Restatement Amended and Restated By-laws; or (b) to enforce this Agreement.

                                   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, 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:

     (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


                                       9
<PAGE>   10

     (b) Upon the termination of the Employment Term 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 such termination of the employment term 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 covenant 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.

     (b) Covenant. Executive hereby covenants and agrees that, during the term
of his employment hereunder and during, a period of one year following the end
of his employment hereunder, Executive shall not, directly or indirectly: (i)
alone, together or in association with others, either as a principal, agent,
owner, shareholder, 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, any business
engaged in the purchase, sale, financing, management, leasing, brokerage or
providing services for retail shopping centers or any new businesses or lines of
business which the Company may enter prior to the termination of Executive's
employment under this Agreement in the greater metropolitan area of Chicago,
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, or as set
forth on the affiliations on Exhibit C attached hereto and made a part hereof;
(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


                                       10
<PAGE>   11

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 an Affiliate. 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 Executive's employment 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 Executive's employment 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 right 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 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. It is the desire of the parties that the provisions of
Sections 4.1 or 4.2 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, delivered and received:
(a) when delivered, if delivered personally; (b) four days after mailing, when
sent by registered or certified mail, return receipt requested and postage,
prepaid; (c) one business day after delivery to a private courier service, when


                                       11
<PAGE>   12

delivered to a private courier service providing documented overnight service;
and (d) on the date of delivery if delivered by telecopy, receipt confirmed,
provided that a confirmation copy is sent on the next business day by first
class mail, postage prepaid, in each case addressed as follows:

         To Executive at his home address.

         To the Company at:   Inland Real Estate Corporation
                              2901 Butterfield Road
                              Oak Brook, Illinois 60523
                              Attn: Robert D. Parks

         With a copy to:      Foley & Lardner
                              Three First National Plaza
                              Suite 4100
                              Chicago, Illinois 60602
                              Attn: William J. McKenna, Jr.
                              Telephone:  (312) 558-6769
                              Facsimile:  (312) 558-6585

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 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


                                       12
<PAGE>   13

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 laws of the State of
Illinois, 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 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.




                                       13
<PAGE>   14


     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/ Robert D. Parks
                                  ----------------------------

                             Name: Robert D. Parks
                                   ---------------------------

                             Its: President and CEO
                                  ----------------------------

                             EXECUTIVE

                             /s/ Mark E. Zalatoris
                             ---------------------------------
                             Mark Zalatoris


                                       14
<PAGE>   15
                                    EXHIBIT A

                         (FORMULA FOR DETERMINING ANNUAL
                                INCENTIVE BONUS)

I.   The Executive's Annual Incentive Bonus Opportunity ("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 growth in FFO per fully-diluted share when compared to the
          prior year, for the fiscal year for which the AIBO is calculated is
          not less than 70% of the median FFO growth rate for the applicable
          year as published by NAREIT for the Retail Property Sector.

     -    The Company will have achieved a Target level of performance if the
          Company's growth in FFO per fully-diluted share when compared to the
          prior year, for the fiscal year for which the AIBO is calculated is
          not less than 100% of the median FFO growth rate for the applicable
          year as published by NAREIT for the Retail Property Sector.

     -    The Company will have achieved a High level of performance if the
          Company's growth in FFO per fully-diluted share when compared to the
          prior year, for the fiscal year for which the AIBO is calculated is
          not less than 130% of the median FFO growth rate for the applicable
          year as published by NAREIT for the Retail Property Sector.

For purposes of calculating AIBO, "FFO" shall have the same meaning ascribed to
that term in the Company's report on Form 10-k as filed with the SEC for the
year in which the bonus is to be calculated.

If the Company achieves a Threshold level of performance, the Executive's AIBO
will be equal to 20% of Executive's Base Salary for the applicable year. If the
Company achieves a Target level of performance, the Executive's AIBO will be
equal to 30% of Executive's Base Salary for the applicable year. If the Company
achieves a High level of performance, the Executive's AIBO will be equal to 60%
of Executive's Base Salary for the applicable year.

II.  The Executive's Annual Incentive Bonus for the applicable year shall be
     determined by adding two components:

A.   The first component shall be equal to 66% of the Executive's AIBO.

B.   The second component shall be determined by the Company's CEO based on a
     subjective assessment of the Executive's performance, and may be up to but
     not in excess of 34% of the Executive's AIBO.


                                       15
<PAGE>   16

                                    EXHIBIT B

                    (FORMULA FOR DETERMINING ANNUAL AWARD OF
                       LONG TERM GRANT RESTRICTED SHARES)

I.   The Executive's Annual Award of Long Term Grant Restricted Share
     Opportunity ("LTGRSO") 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 growth in FFO, per fully-diluted share when compared to the
          prior year, for the fiscal year for which the grant of Long Term Grant
          Restricted Shares is calculated is not less than 70% of the median FFO
          growth rate for the applicable year as published by NAREIT for the
          Retail Property Sector.

     -    The Company will have achieved a Target level of performance if the
          Company's growth in FFO per fully-diluted share when compared to the
          prior year for the fiscal year for which the grant of Long Term Grant
          Restricted Shares is calculated is not less than 100% of the median
          FFO growth rate for the applicable year as published by NAREIT for the
          Retail Property Sector.

     -    The Company will have achieved a High level of performance if the
          Company's growth in FFO per fully-diluted share when compared to the
          prior year for which the grant of Long Term Grant Restricted Shares is
          calculated is not less than 130% of the median FFO growth rate for the
          applicable year as published by NAREIT for the Retail Property Sector.

For purposes of calculating LTGRSO, "FFO" shall have the same meaning ascribed
to that term in the Company's report on Form 10-k as filed with the SEC for the
year in which the bonus is to be calculated.

If the Company achieves a Threshold level of performance, the Executive's LTGRSO
will be 4545.45 shares. If the Company achieves a Target level of performance,
the Executive's LTGRSO will be 9090.91 shares. If the Company achieves a High
level of performance, the Executive's LTGRSO will be 18,181.82 shares.

II.  The Executive's Annual Award of Long Term Grant Restricted Shares for the
     applicable year shall be determined by adding two components:

     A.   The first component shall be equal to 66% of the Executive's LTGRSO.

     B.   The second component shall be determined by the Company's CEO based on
          a subjective assessment of the Executive's performance, and may be up
          to but not in excess of 34% of the Executive's LTGRSO.


                                       16
<PAGE>   17

                                    EXHIBIT C

                         TO EMPLOYMENT AGREEMENT BETWEEN
                INLAND REAL ESTATE CORPORATION AND MARK ZALATORIS

                                  AFFILIATIONS

IGL Real Estate, Inc.                       Director

                         INVESTMENTS/FINANCIAL INTERESTS

               2000 Shares                  Prime Retail Trust, Inc.

               30 Shares                    Mid America Management Corp.

               Shares                       Midwest Real Estate Equities, Inc.

               2000 Shares                  Boykin Lodging


                                       17