Exhibit 10.3
THE MILLS
CORPORATION
OPERATING GUIDELINES FOR THE
ADMINISTRATION OF
EXECUTIVE LONG-TERM INCENTIVE
AWARDS
Effective January 1,
2002
I.
PURPOSE
The purpose of the Executive
Long-Term Incentive Program adopted by the Company and approved by
stockholders in 2002 (the “Program”) is to further the
growth and profitability of The Mills Corporation (the “
Company ”). The Program provides for cash and/or
equity awards contingent on the achievement of long-term corporate
performance goals, long-term individual performance goals, or a
combination of both. The Program is designed to enable the
Company to attract new executives, to encourage current key
executives to remain with the Company and to provide a financial
incentive for them to further the achievement of the
Company’s strategic and financial business objectives.
These Operating Guidelines set forth the rules and regulations
under which awards made from time to time to Grantees under the
Program will be administered.
II.
DEFINITIONS
The terms defined in this
Section II shall, for purposes of these Operating
Guidelines, have the meanings herein specified, unless the context
expressly or by necessary implication otherwise
requires:
A.
“
Affiliate ” means, with respect
to the Company, any company or other trade or business that
controls, is controlled by or is under common control with the
Company within the meaning of Rule 405 of Regulation C under
the Securities Act of 1933, including, without limitation, any
subsidiary of the Company.
B.
“Award”
means the award
granted to a Grantee hereunder that provides the opportunity to
earn cash and/or an Equity Award following the end of a Performance
Period, based on the level of attainment of one or more Performance
Targets during the Performance Period.
C.
“
Award Valuation Schedule
” means
the schedule established by the Committee on the Determination
Date setting forth the Performance Goals, Performance Targets and
Target Incentive Percentages for each Grantee and or class of
Grantees and the method for calculating the ultimate Equity Award
and/or cash payments to be made to Grantees upon achievement of the
various benchmarks established as Performance Targets.
D.
“Base Salary
” for any
Performance Period means a Grantee’s annual base salary
determined as of April 1 of each Fiscal Year of the applicable
Performance Period.
E.
“
Board ” means the Board of
Directors of The Mills Corporation.
F.
“
Cause ” shall have the
meaning such forth in Grantee’s employment agreement if such
agreement specifically provides that the definition of
“Cause” contained therein supersedes the definition of
Cause set forth in the Company’s Operating Guidelines for the
Administration of Executive Long-Term Incentive Awards, otherwise
“Cause” means:
(1)
the Grantee
commits an act of fraud or embezzlement with respect to the Company
or any of its Affiliates;
(2)
the Grantee is
convicted of, or enters a plea of guilty or nolo
contendere to, any felony;
(3)
the Grantee
commits any act of dishonesty, breach of fiduciary duty or
misconduct (whether in connection with the Grantee’s
responsibilities as an employee or otherwise) that, in the
Company’s reasonable judgment, either materially impairs the
Company’s business, goodwill or reputation or materially
compromises the Grantee’s ability to perform the
Grantee’s job duties or represent the Company with the
public;
(4)
the Grantee fails
to substantially perform his or her duties (other than any such
failure resulting from the Disability of the Grantee), which
failure continues for more than thirty (30) days after written
notice by the Company or any Affiliate, as applicable;
(5)
the Grantee
demonstrates such carelessness, lack of judgment, ineffectiveness
or inefficiency in the performance of his or her duties that he or
she is determined by the Company to be unfit to continue in
service; or
(6)
the Grantee
materially violates any confidentiality, non-solicitation or
non-competition obligation owing to the Company or its Affiliates
or materially violates any policies of the Company or its
Affiliates, including, but not limited to, the Company’s Code
of Business Conduct and Ethics.
G.
“
Change in Control.
” means
the first day on which any one or more of the following conditions
shall have been satisfied:
(1)
The acquisition
of beneficial ownership, as such term is defined in the Securities
Exchange Act of 1934, as amended (the “Exchange Act”),
in a single transaction or series of related transactions (by
tender offer or otherwise), of more than fifty percent (50%) of the
voting securities of the Company, by a single person or entity
(other than the Company) or “group” within the meaning
of Section 13(d)(3) of the Exchange Act, whether through
the acquisition of previously issued and outstanding voting
securities, or of voting securities that have not been previously
issued, or any combination thereof;
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(2)
There shall be
consummated any consolidation, merger, business combination or
reorganization involving the Company or the securities of the
Company in which holders of voting securities of the Company
immediately prior to such consummation own, as a group, immediately
after such consummation, voting securities of the Company (or, if
the Company does not survive such transaction, voting securities of
the corporation surviving such transaction) having less than fifty
percent (50%) of the total voting power in an election of directors
of the Company (or such other surviving corporation);
(3)
The individuals
who constituted the Company’s Board of Directors as of the
effective date of the Program (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the
directors of the Company; provided, however, that any individual
whose election, or whose nomination for election by the
Company’s stockholders, was approved by a vote of at least
two-thirds (2/3) of the persons then comprising the Incumbent Board
shall be considered, for purposes of these Operating Guidelines,
members of the Incumbent Board; and provided, further, that no
individual shall be considered a member of the Incumbent Board if
such individual initially assumed office as a result of either an
actual or threatened “election contest” (as described
in Rule 14a-11 promulgated under the Exchange Act) (an
“Election Contest”) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person or
entity other than the Company’s Board of Directors (a
“Proxy Contest”), including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy
Contest;
(4)
There shall be
consummated any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company (on a consolidated
basis) to a party that is not a direct or indirect wholly-owned
subsidiary of the Company, including, without limitation, any sale,
lease, exchange or other transfer of all or substantially all of
the assets of the Company (on a consolidated basis) that includes
the assets of the Limited Partnership; or
(5)
The Company (or
its successor) no longer serves as the sole general partner of the
Limited Partnership other than as a result of (i) the merger
of the Limited Partnership with the Company or a subsidiary of the
Company, (ii) the redemption of all limited partnership
interests in the Limited Partnership by the Limited Partnership or
the purchase of all such limited partnership interests by the
Company, or (iii) the liquidation, dissolution or winding up
of the Limited Partnership.
Notwithstanding the forgoing, a
Change of Control shall be deemed not to have occurred
(i) with respect to a Grantee, if the Grantee is involved as
an officer, director, employee, agent, finder, consultant, partner,
investor, creditor or principal, or in any other individual or
representative capacity whatsoever, with an entity that acquires an
interest in the
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Company in a transaction that
otherwise would constitute a Change in Control and, pursuant to
written or unwritten agreement or understanding with such entity
entered into prior to or in connection with such transaction, the
Grantee receives or has the right to receive a material economic
benefit as a result of or in connection with such transaction
(other than compensation granted or awarded to Grantee by the
Company in the ordinary course of business consistent with past
practice or solely as a result of his or her then current ownership
interest in the Company ), or (ii) if any of the foregoing
transactions occurs with any employee benefit plan of the Company
or with any trustee or fiduciary or committee of any employee
benefit plan of the Company, any Affiliate of the Company, any
direct or indirect wholly owned subsidiary of the Company, or any
entity owned, directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company prior to the event that would otherwise
constitute a Change in Control. For purposes of this
definition, a “material economic benefit” shall mean
cash, equity or other payments or benefits having a value equal to
at least 40% of the Grantee’s base salary immediately prior
to the Change in Control, without taking into account cash or
equity-based compensation granted or awarded to Grantee by the
Company or its successor in interest in the ordinary course of
business consistent with the Company’s past practice, or as a
result of his or her then current ownership interest in the
Company.
H.
“
Committee ” means the Executive
Compensation Committee of the Board.
I.
“
Company ” has the meaning set
forth in Section I.
J.
“
Common Stock ” means the common
stock, par value $0.01 per share, of the Company.
K.
“
Covered Employee ” means:
(1)
any Grantee who
is, on the date of the grant of an Award, a “covered
employee” with respect to the Company within the meaning of
Section 162(m); and
(2)
any Grantee who
the Committee determines, on the date of the grant of an Award,
could become a “covered employee” by the date of
payment of such Award.
L.
“
Determination Date
” with
respect to any Performance Period means the date on which the
Committee establishes the Award Valuation Schedule for such
Performance Period. In the case of Awards intended to qualify
as Performance-Based Compensation, the Determination Date shall be
a date that is on or prior to the date that is 90 days following
the commencement of the respective Performance Period.
M.
“
Disability ” means that
(1) the Grantee has been unable, notwithstanding such
reasonable accommodations as may be required by applicable law, to
engage in the essential function of his position with the Company
due to a disability, as
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determined by the
Company upon receipt of and in reliance on independent competent
medical advice, for more than one hundred eighty (180) total
calendar days during any period of twelve (12) consecutive months,
or (2) the Company has reasonably determined, upon receipt of
the and in reliance on independent competent medical advice, that
the Grantee is unlikely to be able, notwithstanding such reasonable
accommodations as may be required by applicable law, to engage in
the essential functions of his position with the Company due to a
disability for more than one hundred eighty (180) total calendar
days during any period of twelve (12) consecutive
months.
N.
“
Equity Award ” means any one or
more of the following equity-based awards: shares of Common Stock,
options on Common Stock, restricted shares of Common Stock,
restricted Common Stock units, or Common Stock appreciation
rights.
O.
“
Fiscal Year ” means the 12-month
period ending on December 31 of each year, or such other
12-month period that is used by the Company as its annual
accounting period.
P.
“
Funds From Operations Per
Share ” and “
FFO Per Share ” shall be calculated
in the same manner as that used by the Company in reporting fully
diluted funds from operations per common share in its Form 8-K
furnished to the Securities and Exchange Commission.
Q.
“
Good Reason ” means the occurrence
of any one or more of the following events without the express
written consent of the Grantee; provided, however, that any of the
events described in clauses 2, 3 or 4 below shall only constitute
Good Reason if the Company shall have failed to correct or remedy
such event within thirty (30) days following receipt of written
notice from the Grantee describing in reasonable detail such event
and demanding correction or remedy:
(1)
the relocation of
the Grantee’s principal office to a location that is more
than fifty (50) miles from the Company’s headquarters as of
the Grantee’s date of hire or future Washington, D.C. area
headquarters or a relocation of the Grantee’s principal
office location that results in an increase of fifty (50) miles or
more in the distance of the Grantee’s commute;
(2)
a failure by the
Company to pay or provide for any earned Base Salary, earned annual
bonus, earned LTIP award, or any other earned material compensation
or benefits required to be paid or provided for by the Company, in
each case when due;
(3)
a reduction by
the Company in the Grantee’s Base Salary, except as part of a
salary reduction program approved by the Board that is generally
applicable to executives of the Company in the same or similar
positions as that of the Grantee; or
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(4)
the failure of
the Company to obtain a satisfactory agreement from any successor
to the Company to assume and perform the obligations of the Company
hereunder (after taking into account any action of the Board
pursuant to Section V.F. hereof).
R.
“Grantee ” means a full-time
executive of the Company at or above the Vice President level, who
has been designated by the Committee to receive an Award under the
Program.
S.
“Limited
Partnership” means
The Mills Limited Partnership, a Delaware limited
partnership.
T.
“Performance-Based
Compensation” means
an Award that is intended to qualify as “other
performance-based compensation” for purposes of
Section 162(m).
U.
“Performance Goals
” shall
mean one or more of the following performance measures:
(1)
growth in funds
from operations;
(2)
return on
invested capital;
(3)
tenant
sales;
(4)
total shareholder
return;
(5)
total stockholder
return (on a comparable basis) of a publicly available index, such
as, but not limited to the Standard & Poor’s 500
Stock Index;
(6)
return on equity
based upon cash flow (calculated as cash flow divided by equity
adjusted for non-recurring tenant capital and projects abandoned in
excess of $5 million);
(7)
pretax
earnings;
(8)
earnings before
interest expense, taxes, depreciation and amortization;
(9)
pretax operating
earnings after interest expense and before bonuses, service fees
and extraordinary or special items;
(10)
operating
margin;
(11)
earnings per
share;
(12)
return on
investment;
(13)
ratio of debt to
shareholder’s equity;
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(14)
such other
performance measures as may be selected by the Committee
(including, but not limited to, Sales per Square Feet and FFO Per
Share); and/or
(15)
such individual
performance objectives, which may vary from Grantee to Grantee, as
may be set by the Company.
V.
“
Performance Period
” means
the period of three consecutive Fiscal Years, or such lesser period
as determined by the Committee, during which Awards may be earned
under a Program, commencing on the first day of the first Fiscal
Year, or such other day as determined by the Committee.
W.
“
Performance Targets
” means
the specific Performance Goals that are established by the
Committee for a Performance Period; provided, however, that
Performance Targets that ar
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