Exhibit 10.578


 


EMPLOYMENT AGREEMENT


 


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


 


RECITALS:


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE I


EMPLOYMENT


 


1.1                                 Employment.


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


ARTICLE II


TERM


 


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


 


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


 


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


 


(e)                                  By
the Company immediately without Cause.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(iii)                               the termination and liquidation of the Company.


 

















 


ARTICLE III


COMPENSATION AND BENEFITS


 


3.1                                 Compensation.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


3.3                                 Business
Expenses.


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(i)                                     any Accrued Base
Salary;


 


(ii)                                  any Accrued Vacation
Payment;


 


(iii)                               any Accrued Reimbursable
Expenses; and


 

















 


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


 


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


 


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


 


(i)                                     any Accrued Base
Salary;


 


(ii)                                  any Accrued Vacation Payment;


 


(iii)                               any Accrued Reimbursable
Expenses;


 


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


 


(v)                                 any Accrued Bonus; and


 


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


 


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


 


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


 

















 


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


 


ARTICLE IV


CONFIDENTIALITY AND NON-COMPETE AGREEMENT


 


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


 


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


 


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


 


4.2                                 Non-Solicitation and Covenant Not to Compete.


 


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


 
















 


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


 


4.3                                 Remedies.


 


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


 

















 


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


 


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


 


ARTICLE V


MISCELLANEOUS


 


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


 


	
  To Executive at his home
  address.

  
	
   

  	
   

  	
   

  
	
  To the Company at:

  	
   

  	
  Inland Western Retail Real
  Estate Trust, Inc.

  
	
   

  	
   

  	
  2901 Butterfield Road

  
	
   

  	
   

  	
  Oak Brook, Illinois 60523

  
	
   

  	
   

  	
  Attn: Michael J. O’Hanlon

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
  Telephone:
  (630) 368-2323

  
	
   

  	
   

  	
  Fax:
  (630) 645-7229

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Inland Western Retail Real
  Estate Trust, Inc.

  
	
   

  	
   

  	
  2901
  Butterfield Road

  
	
   

  	
   

  	
  Oak
  Brook, Illinois 60523

  
	
   

  	
   

  	
  Attn:
  Dennis K. Holland

  
	
   

  	
   

  	
  General
  Counsel and Secretary

  
	
   

  	
   

  	
  Telephone:
  (630) 368-2861

  
	
   

  	
   

  	
  Fax:
  (630) 586-6446

  
	
   

  	
   

  	
   

  



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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


[The remainder of this page intentionally blank]


 

















 


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


 


	
   

  	
  INLAND
  WESTERN RETAIL REAL ESTATE TRUST, INC.,

  
	
   

  	
  a
  Maryland corporation

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/ Michal J. O’Hanlon

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael
  J. O’Hanlon

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:
  

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  Steven P. Grimes

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Steven
  P. Grimes

  



 

















 


EXHIBIT A


(FORMULA FOR DETERMINING ANNUAL INCENTIVE BONUS)


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


EXHIBIT B


(FORMULA FOR DETERMINING ANNUAL STOCK OPTION AWARD)


 


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


 


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