EX-10.4






Exhibit 10.4




FOREST CITY ENTERPRISES, INC.

SENIOR MANAGEMENT SHORT-TERM INCENTIVE PLAN

(Effective February 1, 2008)




1. Purpose. The purpose of this Senior Management Short-Term Incentive Plan (this “Plan”) is
to align employee and shareholder interests by providing cash incentives to eligible senior or
other select management employees of Forest City Enterprises, Inc. (the “Company”) for meeting and
exceeding corporate, business unit and individual objectives defined each fiscal year.



2. Definitions. The following capitalized words as used in this Plan shall have the following
meanings:



a. “Affiliate” means any corporation or other entity (including, but not limited to,
partnerships, limited liability companies and joint ventures) controlled by the Company.



b. “Award Opportunity” means a cash award opportunity established under the Plan for a
Participant by the Committee pursuant to such terms, conditions, restrictions and/or limitations,
if any, as the Committee may establish.



c. “Board” means the Board of Directors of the Company.



d. “CEO” means the Chief Executive Officer of the Company.



e. “Code” means the Internal Revenue Code of 1986, as amended.



f. “Committee” means the Compensation Committee of the Board.



g. “Company” has the meaning given such term in Section 1 of this Plan.



h. “Employee” means any person employed by the Company or Affiliate in a senior or other
select management capacity, whether such Employee is so employed at the time the Plan is adopted or
becomes so employed subsequent to the adoption of the Plan.



i. “EVP-HR” means the Executive Vice President, Human Resources of the Company.



j. “Participant” means, as to any Performance Period, any Employee who is selected by the
Committee to be eligible to participate in the Plan for that Performance Period, as provided
herein.



k. “Payout Formula” means the formula established by the Committee for determining Award
Opportunities for a Performance Period based on the level of achievement of the Performance
Objectives for the Performance Period.



l. “Performance Objectives” means the measurable or subjective performance objective or
objectives established pursuant to this Plan for Participants who have received Award
Opportunities. Performance Objectives may be described in terms of Company-wide objectives or
objectives that are related to the performance of the individual Participant or of an Affiliate,
division, business unit, department, region or function within the Company or Affiliate in which
the Participant is employed and may be based on 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) and/or strategic business criteria related to a Participant’s area or
areas of responsibility. 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). The Performance Objectives
may be made relative to the performance of other corporations or other entities.



m. “Performance Period” means the Company’s fiscal year or such other period as determined by
the Committee in its discretion, within which the Performance Objectives relating to an Award
Opportunity are to be achieved. The Committee may establish different Performance Periods for
different Participants, and the Committee may establish concurrent or overlapping Performance
Periods.



n. “Plan” means this Forest City Enterprises, Inc. Senior Management Short-Term Incentive
Plan, as amended from time to time.



3. Administration. The Committee shall be responsible for administration of the Plan. The
Committee, by majority action, is authorized to interpret the Plan, to prescribe, amend, and
rescind regulations relating to the Plan, to provide for conditions and assurances deemed necessary
or advisable to protect the interests of the Company and its Affiliates, and to make all other
determinations necessary or advisable for the administration of the Plan, but only to the extent
not contrary to the express provisions of the Plan. Determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the Plan shall be final,
binding and conclusive for all purposes and upon all Participants. No member of the Committee
shall be liable for any such action or determination made in good faith. The Committee may
delegate to the CEO, the EVP-HR or other senior officers or senior managers of the Company, subject
to such terms as the Committee shall determine, authority to administer all or any portion of the
Plan, or the authority to perform certain functions, including administrative functions. In the
event of such delegation, all references to the Committee in this Plan shall be deemed references
to such senior officers or senior managers as it relates to those aspects of the Plan that have
been delegated. In this regard, the Committee specifically authorizes each senior officer and
senior manager to establish the individual Performance Objectives for his or her direct reports who
participate in the Plan and determine whether and to what extent the individual Performance
Objectives for those direct reports have been achieved. Notwithstanding the foregoing, and to the
extent required by the Committee charter or the applicable exchange listing standards, the
Committee shall retain exclusive authority to establish Award Opportunities and determine payouts
for any Board-appointed officers of the Company who are designated by the Board as “Section 16
officers”.



4. Eligibility. The Committee, in its sole discretion, shall determine which Employees will be
eligible to participate in the Plan for any given Performance Period. In lieu of expressly
selecting eligible Employees for Plan participation, the Committee may establish eligibility
criteria providing for participation of all Employees who satisfy such criteria. When making
eligibility determinations, the Committee shall consider the recommendations of the CEO and the
EVP-HR; provided that the CEO shall make all recommendations with respect to the participation of
the EVP-HR. An 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.



5. Award Opportunities



a. After the beginning of each Performance Period, the Committee shall establish the Award
Opportunity for each Participant, including the applicable Performance Objectives and Payout
Formula. Each Performance Objective will be weighted by the Committee to reflect its relative
importance to the Company in the applicable Performance Period. The Payout Formulas, Performance
Objectives and weighting of the Performance Objectives need not be uniform with respect to any or
all Participants. The Committee shall consider the recommendations of the CEO and the EVP-HR in
determining the applicable Payout Formulas, Performance Objectives and weighting of the Performance
Objectives; provided that the CEO shall make all recommendations with respect to the EVP-HR. The
Committee may also establish Award Opportunities for newly hired or newly promoted Employees
without compliance with the limitations provided herein, which Award Opportunities may be based on
performance during less than the full Performance Period and may be pro-rated at the discretion of
the Committee.



b. Participants must achieve the Performance Objectives established by the Committee in order
to receive payment of an Award Opportunity under the Plan. However, the Committee may determine
that only a threshold level relating to a Performance Objective must be achieved for Award
Opportunities to be paid under the 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.



c. The Committee may in its sole discretion modify the Payout Formulas, Performance Objectives
or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems
appropriate and equitable (i) to reflect a change in the business, operations, corporate structure
or capital structure of the Company or its Affiliates, the manner in which it conducts its
business, or other events or circumstances or (ii) in the event that a Participant’s
responsibilities materially change during a Performance Period or the Participant is transferred to
a position that is not designated as eligible to participate in the Plan.



6. Determination of Award Opportunities. Following the end of each Performance Period, the
Committee shall determine in writing whether and to what extent the Performance Objectives with
respect to each Participant for the applicable Performance Period have been achieved and, if such
Performance Objectives have been achieved, to approve actual payment of each Award Opportunity
under the Plan pursuant to the applicable Payout Formulas. The Committee shall consider the
recommendations of the CEO and the EVP-HR when determining whether the Performance Objectives have
been achieved with respect to Participants; provided that the CEO shall make all recommendations
with respect to the EVP-HR. The Committee may, in its sole discretion, increase, decrease or
eliminate the amount of any Award Opportunity otherwise payable to any Participant to reflect such
Participant’s individual performance or such other factors as the Committee deems relevant, in
recognition of changed or special circumstances, or for any other reason. In the event a
Participant terminates employment with the Company and its Affiliates for any reason prior to the
last day of the Performance Period, the Participant shall not be entitled to payment of an Award
Opportunity with respect to that Performance Period; provided that in the case of termination of
employment by reason of death, disability or normal or early retirement, or any other termination,
the Committee may, in its sole discretion, pay all or any portion of the Award Opportunity to the
Participant (or to the Participant’s estate in the event of his or her death) as the Committee
deems appropriate and equitable.



7. Payment of Award Opportunities. If earned as set forth in Section 6, an Award Opportunity
of a Participant for a particular Performance Period shall be paid in cash after the end of the
Performance Period, 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.
Notwithstanding the foregoing, a Participant may elect to defer receipt of payment of an Award
Opportunity in accordance with the terms and subject to the conditions of the Company’s deferred
compensation plan.



8. Tax Withholding. The Company and its Affiliates shall have the right to deduct from all
payments made to any person under the Plan any federal, state, local, foreign or other taxes which,
in the opinion of the Company and its Affiliates are required to be withheld with respect to such
payments.



9. No Employment Contract. Nothing contained in this Plan shall confer upon a Participant any
right with respect to continuance of employment by the Company and its Affiliates, nor limit or
affect in any manner the right of the Company and its Affiliates to terminate the employment or
adjust the compensation of a Participant. For purposes of the Plan, the transfer of employment of
a Participant between the Company and any one of its Affiliates (or between Affiliates) shall not
be deemed a termination of the Participant’s employment.



10. Transferability. No right or benefit under this Plan will be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge such right or benefit will be void. No such
right or benefit will in any manner be liable for or subject to the debts, liabilities, or torts of
a Participant.



11. Successors. All obligations of the Company under the 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.



12. Governing Law. The Plan and all Award Opportunities shall be construed in accordance with
and governed by the laws of the State of Ohio, but without regard to its conflict of law
provisions.



13. Amendment or Termination. The Board, upon recommendation of the Committee, reserves the
right, at any time, to amend, suspend or terminate the Plan, in whole or in part, in any manner,
and for any reason, and without the consent of any Participant, Employee or other person. A proper
amendment of this Plan automatically shall effect a corresponding amendment to all Participants’
rights hereunder without further action or notice. A proper termination of this Plan automatically
shall effect a termination of all Participants’ rights hereunder without further action or notice.



14. Participation by Employees of Affiliates. Any Affiliate may, by action of its board of
directors or equivalent governing body and with the consent of the Board, adopt the Plan; provided
that the Board may waive the requirement that such board of directors or equivalent governing body
effect such adoption. By its adoption of or participation in the Plan, the adopting Affiliate
shall be deemed to appoint the Company its exclusive agent to exercise on its behalf all of the
power and authority conferred by the Plan upon the Company and accept the delegation to the
Committee of all the power and authority conferred upon it by the Plan. The authority of the
Company to act as such agent shall continue until the Plan is terminated as to the participating
Affiliate. An Award Opportunity of a Participant employed by a participating Affiliate shall be
paid in accordance with the Plan solely by that Affiliate, unless the Board otherwise determines
that the Company shall be responsible for payment. Each Award Opportunity that may become payable
under the Plan shall be paid solely from the general assets of the Company or the Affiliate
responsible for payment thereof. Nothing in this Plan shall be construed to create a trust or to
establish or evidence any Participant’s claim of any right to payment of an Award Opportunity other
than as an unsecured general creditor with respect to any payment to which he or she may be
entitled.