EX-10.3






Exhibit 10.3




Forest City Enterprises, Inc.

Executive Long-Term Incentive Plan

(As Amended and Restated as of June 19, 2008)




PREAMBLE


 


The Forest City Enterprises, Inc. Executive Long-Term Incentive Plan, as amended (“Plan”), is
hereby amended and restated in its entirety as set forth herein. The Plan is comprised of the
Forest City Enterprises, Inc. 1994 Stock Plan (“Stock Plan”) as amended and restated as of
June 19, 2008 and filed in the Company’s proxy statement for the annual meeting held on June 19,
2008, and the Cash Long-Term Incentive Plan (“Cash Plan”) which is outlined below. The purpose of
the Plan is to advance the interests of the Company and its shareholders and assist the Company in
attracting and retaining key employees by providing long-term incentives and financial rewards to
such key employees that are intended to be deductible to the maximum extent possible as
“performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code.
This Cash Plan is subject to shareholder approval with respect to amounts that may become payable
under the Cash Plan for fiscal year 2008 and thereafter and shall be null and void and of no
further effect if such shareholder approval is not obtained.

 


ARTICLE I

 DEFINITIONS


 


1.1  Award means an award of long-term cash incentive compensation pursuant to the Cash
Plan.



1.2  Cash Plan means the Forest City Enterprises, Inc. Cash Long-Term Incentive Plan.

 


1.3  Code means the Internal Revenue Code of 1986, as amended.

 


1.4   Committee means the Compensation Committee of the Board of Directors of the Company,
or their designee consisting of members appointed from time to time by the Board of Directors of
the Company, and shall comprise not less than such number of directors as shall be required to
permit the Cash Plan to satisfy the requirements of Code Section 162(m). The Committee
administering the Cash Plan shall be composed solely of “outside directors” within the meaning of
Code Section 162(m).

 


1.5   Company means Forest City Enterprises, Inc., an Ohio corporation, or its successors.

 


1.6   Disability means a total and permanent disability that causes a Participant to be
eligible to receive long term disability benefits from the Company’s Long Term Disability Plan, or
any similar plan or program sponsored by a subsidiary or branch of the Company.



1.7   Key Employees means Board-appointed officers of the Company who are designated by the
Board as “Section 16 officers” and other key employees of the Company and its subsidiaries.

 


1.8   Participant means a Key Employee who is selected by the Committee to participate in
the Cash Plan.



1.9 Payout Formula means the objective formula established by the Committee for
determining Awards for a Performance Period based on the level of achievement of the Performance
Objectives for the Performance Period.



1.10 Performance Objectives means the measurable performance objective or objectives
established pursuant to the Cash Plan for Participants, which may be described in terms of
Company-wide objectives or objectives that are related to the performance of the individual
Participant or of the subsidiary, division, department, region or function within the Company or
subsidiary in which the Participant is employed, and may be made relative to the performance of
other companies. The Performance Objectives shall be based on specified levels of or growth in or
relative to peer company performance in one or more of the following criteria: assets (e.g., net
asset value); capital (e.g., working capital); cash flow (e.g., earnings before depreciation,
amortization and deferred taxes (“EBDT”), operating cash flow, total cash flow, cash flow in
excess of cost of capital, residual cash flow or cash flow return on investment); liquidity
measures (e.g., total debt ratio or debt-to-EBDT); margins (e.g., profits divided by revenues,
operating margins, gross margins or material margins divided by revenues); productivity (e.g.,
productivity improvement); profits (e.g., net income, operating income, earnings before taxes
(“EBT”), earnings before interest and taxes (“EBIT”), EBDT, residual or economic earnings,
earnings or EBDT per share – these profitability criteria could be measured subject to GAAP
definitions); sales or expenses (e.g., revenue growth, reduction in expenses, sales and
administrative costs divided by sales or sales and administrative costs divided by profits); and
stock price (e.g., stock price appreciation or total shareholder return). In addition to the
returns and ratios mentioned above, the performance objectives may be based on any other ratios or
returns using the criteria mentioned above, including: economic value added; net asset ratio;
debt-to-capital ratio; working capital divided by sales; and profits or cash flow returns on
assets, designated assets, invested capital, net capital employed or equity (including return on
net assets, return on capital or invested capital, or total return, meaning change in net asset
value plus or minus net cash flow). If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the Performance Objectives
unsuitable, the Committee may in its discretion modify such Performance Objectives or the related
minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate
and equitable, except if such action would result in the loss of the otherwise available exemption
under Section 162(m) of the Code. In such case, the Committee shall not make any modification of
the Performance Objectives or minimum acceptable level of achievement.

 


1.11 Performance Period means a period of time established by the Committee, in its sole
discretion, within which the Performance Objectives relating to an Award are to be achieved. The
Committee may establish different Performance Periods for different Participants, and the Committee
may establish concurrent or overlapping Performance Periods.

 


1.12 Plan means this Forest City Enterprises, Inc. Executive Long-Term Incentive Plan.

 


1.13 Retirement means termination of employment with the Company or an affiliated company
when a Participant is age 65 or older with five or more years of continuous service.



ARTICLE II

 ELIGIBILITY AND PARTICIPATION




2.1   Eligibility and Participation.     The Committee shall select Key Employees of the
Company who are eligible to receive Awards under the Cash Plan, and who shall be Participants in
the Cash Plan during any Performance Period in which they may earn an Award. A Key Employee who is
a Participant for a given Performance Period is neither guaranteed nor assured of being selected
for participation in any subsequent Performance Period.



ARTICLE III 

TERMS OF AWARDS


 


3.1   Awards.     Within 90 days after the commencement of each Performance Period or, if
earlier, by the expiration of 25% of a Performance Period, the Committee will (a) designate one or
more Performance Periods, (b) select the Participants for the Performance Periods, (c) establish
the Performance Objectives for each Participant, and the relative weighting of each Performance
Objective, and (d) determine the Payout Formula for each Participant. The Performance Objectives,
the weighting of the Performance Objectives and the Payout Formulas need not be uniform with
respect to any or all Participants. Participants must achieve the Performance Objectives
established by the Committee in order to receive an Award under the Cash Plan. However, when
establishing the Payout Formula, the Committee may determine, within the time period set forth
above, that only the threshold level relating to a Performance Objective must be achieved for
Awards to be paid under the Cash Plan. Similarly, the Committee may establish a minimum threshold
performance level, a maximum performance level, and one or more intermediate performance levels or
ranges, with target award levels or ranges that will correspond to the respective performance
levels or ranges included in the Payout Formula. Notwithstanding the foregoing, the maximum
aggregate amount payable pursuant to any Awards established for a Participant in any one calendar
year will be $3,000,000.



3.2   Discretionary Adjustment.     The Committee may not increase the amount payable under
the Cash Plan or with respect to an Award pursuant to Section 3.1, but retains the authority to
reduce the amount in its sole discretion based on individual performance or any other reason.



3.3 Certification.     Following the close of each Performance Period and prior to payment
of any amount to any Participant under the Cash Plan, the Committee will certify in writing as to
the attainment of the Performance Objectives and the amount of the Award.



3.4   Form of Payment.   Each Award under the Cash Plan shall be paid in cash or its
equivalent.

 


3.5   Timing of Payment.   Payment of Awards will be made following the end of the
Performance Period and after determination of and certification of the Award, but in no event more
than two and one half months after the later of the end of the Performance Period or the calendar
year with respect to which such Award was earned.

 


ARTICLE IV 

NEW HIRES, PROMOTIONS AND TERMINATIONS


 


4.1   New Participants During the Performance Period.    Unless otherwise determined by the
Committee, if an individual is newly hired or promoted during a calendar year into a position
eligible for participation in the Cash Plan, he or she shall be eligible for an Award under the
Cash Plan for the Performance Period, subject to adjustments under Section 3.2 hereof, and prorated
for the portion of the Performance Period following the date of eligibility for the Cash Plan.

 


4.2   Retirement, Disability or Death.    Unless otherwise determined by the Committee, a
Participant who terminates employment with the Company during a Performance Period due to
Retirement, Disability or death shall be eligible to receive an Award, subject to adjustments under
Section 3.2 hereof, and prorated for the portion of the Performance Period prior to termination of
employment. Awards payable in the event of death shall be paid to the Participant’s estate.

 


4.3   Termination of Employment.     If a Participant terminates employment with the
Company for a reason other than Retirement, Disability or death, unless otherwise determined by the
Committee, no Award shall be payable with respect to the Performance Period in which such
termination occurs.



ARTICLE V 

MISCELLANEOUS


 


5.1   Withholding Taxes.     The Company shall have the right to make payment of Awards net
of any applicable federal, state and local taxes required to be withheld, or to require the
Participant to pay such withholding taxes. If the Participant fails to make such tax payments as
required, the Company shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to such Participant or to take such other action
as may be necessary to satisfy such withholding obligations.

 


5.2   Nontransferability.     No Award may be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, including assignment pursuant to a domestic relations order,
during the time in which the requirement of continued employment or attainment of performance
objectives has not been achieved. Each Award shall be paid during the Participant’s lifetime only
to the Participant, or, if permissible under applicable law, to the Participant’s legal
representatives. No Award shall, prior to receipt thereof by the Participant, be in any manner
liable for or subject to the debts, contracts, liabilities, or torts of the Participant.

 


5.3   Administration.     The Committee shall administer the Cash Plan, interpret the terms
of the Cash Plan, amend and rescind rules relating to the Cash Plan, and determine the rights and
obligations of Participants under the Cash Plan. The Committee may delegate any of its authority as
it solely determines. In administering the Cash Plan, the Committee may at its option employ
compensation consultants, accountants and counsel and other persons to assist or render advice to
the Committee, all at the expense of the Company. All decisions of the Committee shall be final and
binding upon all parties including the Company, its shareholders, and the Participants. The
provisions of this Cash Plan are intended to ensure that all Awards granted hereunder qualify for
the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is
set forth in Section 162(m)(4)(C) of the Code, and this Cash Plan shall be interpreted and operated
consistent with that intention.

 


5.4   Severability.     If any provisions of the Cash Plan or any Award is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Cash
Plan or any Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws, or if it cannot be so construed or
deemed amended without, in the determination of the Committee, materially altering the purpose or
intent of the Cash Plan or the Award, such provision will be stricken as to such jurisdiction, and
the remainder of the Cash Plan or Award shall remain in full force and effect.

 


5.5   No Fund Created.     Neither the Cash Plan nor any Award shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship between the Company and
a Participant or any other person. To the extent that any person acquires a right to receive
payments from the Company pursuant to an Award, such right shall be no greater than the right of
any unsecured general creditor of the Company.

 


5.6   Employment at Will.     Neither the adoption of the Cash Plan, eligibility of any
person to participate, nor payment of an Award to a Participant shall be construed to confer upon
any person a right to be continued in the employ of the Company. The Company expressly reserves the
right to discharge any Participant whenever in the sole discretion of the Company its interest may
so require.

 


5.7   Amendment or Termination of the Cash Plan.     The Board of Directors of the Company
reserves the right to amend or terminate the Cash Plan at any time with respect to future Awards to
Participants. Amendments to the Cash Plan will require shareholder approval to the extent required
to comply with applicable law, including the exemption under Code Section 162(m).

 


5.8   Non-Exclusivity of Cash Plan.     Neither the adoption of the Cash Plan by the Board
of Directors nor the submission of the Cash Plan to shareholders of the Company for approval shall
be construed as creating any limitations on the power of the Board of Directors or the Committee to
adopt such other incentive arrangements as either may deem desirable, including, without
limitation, cash or equity-based compensation arrangements, either tied to performance or
otherwise.



5.9 Successors. All obligations of the Company under the Cash Plan shall be binding on any
successor to the Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business
or assets of the Company.