EXHIBIT 10.1

 

THE AES CORPORATION

 

2003 LONG TERM COMPENSATION PLAN

As Amended and Restated on April 24, 2008

 

1.               PURPOSE. The 2003 Long Term Compensation Plan (the “Plan”) has
been established by The AES Corporation (the “Company”) (a) to reward Employees
by means of appropriate incentives for achieving long-range Company goals;
(b) to provide incentive compensation opportunities that are competitive with
those of other similar companies, (c) to further match Employees’ financial
interests with those of the Company’s other Stockholders through compensation
that is based on the Company’s common stock and thereby enhance the long-term
financial interest of the Company and its Affiliates, including through the
growth in the value of the Company’s equity and enhancement of long-term
shareholder return and (d) to facilitate recruitment and retention of
outstanding personnel eligible to participate in the plan. The Plan is amended
and restated as set forth herein to comply with Section 409A.

 

2.               DEFINITIONS. The capitalized terms used in this Plan have the
meanings set forth below. Except when otherwise indicated by the context,
reference to the masculine gender shall include, when used, the feminine gender
and any term used in the singular shall also include the plural.

 

(a)          “Affiliate” means (i) any Subsidiary of the Company, (ii) any
entity or Person or group of Persons that, directly or through one or more
intermediaries, is controlled by the Company and (iii) any entity or Person or
group of Persons in which the Company has a significant equity interest, as
determined by the Committee.

 

(b)         “Agreement” means any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan, which may,
but need not, be executed or acknowledged by a Participant.

 

(c)          “Award” means any Option, award of Restricted Stock or Restricted
Stock Units, Other Stock-Based Award or Performance Award granted under the
Plan.

 

(d)         “Board” or “Board of Directors” means the Board of Directors of the
Company.

 

(e)          “Change in Control” means the occurrence of one or more of the
following events: (i) 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 to any Person or group (as that term is used in
Section 13(d) (3) of the Exchange Act) of Persons, (ii) a Person or group (as so
defined) of Persons (other than management of the Company on the date of the
adoption of this Plan or their Affiliates) shall have become the beneficial
owner of more than 35% of the outstanding voting stock of the Company, or
(iii) during any one-year period, individuals who at the beginning of such
period constitute the Board (together with any new Director whose election or
nomination was approved by a majority of the Directors then in office who were
either Directors at the beginning of such period or who were previously so
approved, but excluding under all circumstances any such new Director whose
initial assumption of office occurs as a result of an actual or threatened
election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of any individual, corporation, partnership or other
entity or group) cease to constitute a majority of the Board. Notwithstanding
the foregoing or any provision of this Plan to the contrary, if an Award is
subject to Section 409A (and not excepted therefrom) and a Change of Control is
a distribution event for purposes of an Award, the foregoing definition of
Change in Control shall be interpreted, administered and construed in manner
necessary to ensure that the occurrence of any such event shall result in a
Change of Control only if such event qualifies as a change in the ownership or
effective control of a corporation, or a change in the ownership of a
substantial portion of the assets of a corporation, as applicable, within the
meaning of Treas. Reg. § 1.409A-3(i)(5).

 

(f)             ”Code” means the Internal Revenue Code of 1986, as amended and
in effect from time to time, or any successor statute.

 

(g)         “Committee” means the Compensation Committee of the Board, or any
successor committee thereto, or such other committee of the Board as is
appointed or designated by the Board to administer the Plan.

 

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(h)         “Covered Person” means an individual who is expected by the
Committee to be both (i) a “covered employee” as defined in Section 162(m) of
the Code for the tax year of the Company with regard to which a deduction in
respect of such person’s Award would be allowed and (ii) the recipient of
compensation (other than “qualified performance based compensation” as defined
in Section 162(m)) in excess of $1,000,000 for such tax year.

 

(i)             “Disability” means the disability of a Participant (i) such that
the Participant is considered disabled under any long term disability plan of
the Company, or otherwise (ii) as determined by the Committee.

 

(j)             “Employee” means any full-time or part-time employee (including
an Officer or Director who is also an employee) of the Company or an Affiliate.
“Employee” shall also include any individual or individuals to whom an offer of
employment has been extended. References in this Plan to “employment” and
related terms shall include the provision of services in any such capacity.

 

(k)          “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

(l)             “Fair Market Value” means the closing sale price of the Shares,
as reported on the composite tape of New York Stock Exchange issues, or any
other reporting system selected by the Committee on the relevant dates, or, if
no sale of Shares is reported for that date, on the date or dates that the
Committee determines, in its sole discretion, to be appropriate for purposes of
the valuation.

 

(m)       “Incentive Stock Option” means an Option granted under Section 6 that
meets the requirements of Section 422 of the Code, or any successor provision
thereto.

 

(n)         “Non-Qualified Stock Option” means an Option granted under Section 6
that is not an Incentive Stock Option.

 

(o)         “Option” means an Incentive Stock Option or a Non-Qualified Stock
Option.

 

(p)         “Other Stock-Based Award” means any right granted under Section 8.

 

(q)         “Participant” means an Employee to whom an Award has been made.

 

(r)            “Performance Award” means an Award to a Covered Person under
Section 9.

 

(s)          “Person” means any individual, corporation, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

 

(t)             ”Plan” means this 2003 Long Term Compensation Plan, as amended
and in effect from time to time.

 

(u)         “Restricted Stock” means any Share underlying an Award granted under
Section 7.

 

(v)         “Restricted Stock Unit” means a contractual right underlying an
Award granted under Section 7 that is denominated in Shares, which Unit
represents a right to receive the value of a Share (or a percentage of such
value, which percentage may be higher than 100%) upon the terms and conditions
set forth in the Plan and the applicable Agreement.

 

(w)       “Retirement” means retirement of an Employee (i) as defined under any
retirement plan of the Company or any Affiliate which is qualified under
Section 401 of the Code or otherwise (ii) as determined by the Committee.

 

(x)           “Section 409A” shall mean Section 409A of the Code, the
regulations and other binding guidance promulgated thereunder.

 

(y)         “Separation from Service” and “Separate from Service” shall mean the
Participant’s death, retirement or other termination of employment with the
Company (including all persons treated as a single employer under
Section 414(b) and 414(c) of the Code) that constitutes a “separation from
service” (within the meaning of

 

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Section 409A). For purposes hereof, the determination of controlled group
members shall be made pursuant to the provisions of Section 414(b) and 414(c) of
the Code; provided that the language “at least 50 percent” shall be used instead
of “at least 80 percent” in each place it appears in Section 1563(a)(1),(2) and
(3) of the Code and Treas. Reg. § 1.414(c)-2; provided, further, where
legitimate business reasons exist (within the meaning of Treas. Reg.
§ 1.409A-1(h)(3)), the language “at least 20 percent” shall be used instead of
“at least 80 percent” in each place it appears.

 

(z)           “Specified Employee” means a key employee (as defined in
Section 416(i) of the Code without regard to paragraph (5) thereof) of the
Company as determined in accordance with Section 409A and the procedures
established by the Company.

 

(aa)    “Share” means a share of Stock.

 

(bb)  “Stock” means the common stock, $.01 par value per share (as such par
value may be adjusted from time to time), of the Company.

 

(cc)    “Subsidiary” means any entity in which the Company owns or otherwise
controls, directly or indirectly, stock or other ownership interests having the
voting power to elect a majority of the Board, or other governing group having
functions similar to a board of Directors, as determined by the Committee.

 

(dd)  “Substitute Award” means an Award granted in assumption of, or in
substitution for, an outstanding award previously granted by a company acquired
by the Company or with which the Company combines.

 

(ee)    “Successor” with respect to a Participant means the legal representative
of an incompetent Participant and, if the Participant is deceased, the legal
representative of the estate of the Participant or the person or persons who
may, by bequest or inheritance, or under the terms of an Award or of forms
submitted by the Participant to the Committee, acquire the right to receive cash
and/or Shares issuable in satisfaction of an Award.

 

3.               ADMINISTRATION. The authority to control and manage the
operation and administration of the Plan shall be vested in the Committee.

 

(a)          The Committee shall have exclusive power to make Awards, to
determine when and to whom Awards will be granted, the types of Awards and the
number of Shares covered by the Awards, to establish the terms, conditions,
performance criteria, restrictions, and other provisions of such Awards and,
subject to the terms of the Plan, to cancel or suspend Awards. In making such
Award determinations, the Committee may take into account the nature of services
rendered by the Employee, the Employee’s present and potential contribution to
the Company’s success and such other factors as the Committee deems relevant.

 

(b)         Subject to the provisions of the Plan, the Committee will have the
authority and discretion to determine the extent to which Awards under the Plan
will be structured to conform to the requirements applicable to
performance-based compensation as described in Section 162(m) of the Code, and
to take such action, establish such procedures, and impose such restrictions at
the time such Awards are granted as the Committee determines to be necessary or
appropriate to conform to such requirements.

 

(c)          The Committee shall have the authority and discretion to establish
terms and conditions of Awards as the Committee determines to be necessary or
appropriate to conform to applicable requirements or practices of jurisdictions
outside of the United States.

 

(d)         The Committee may determine whether, to what extent and under what
circumstances Awards may be settled, paid or exercised in cash, Shares or other
Awards or other property, or canceled, forfeited or suspended.

 

(e)          The Committee shall have the authority to interpret the Plan and
any Award or Agreement made under the Plan, to establish, amend, waive and
rescind any rules and regulations relating to the administration of the Plan, to
determine the terms and provisions of any Agreements entered into hereunder (not
inconsistent with the Plan), and to make all other determinations necessary or
advisable for the administration of the Plan.

 

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(f)            The Committee shall determine whether, to what extent, and under
what circumstances cash, Shares, other securities, other Awards, other property,
and other amounts payable with respect to an Award under the Plan shall be
deferred either automatically, or at the election of the holder thereof, or of
the Committee.

 

(g)         The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or in any Award in the manner and to the
extent it shall deem desirable. The determinations of the Committee in the
administration of the Plan, as described herein, shall be final, binding and
conclusive.

 

(h)         In controlling and managing the operation and administration of the
Plan, the Committee shall act by a majority of its then members, by meeting or
by writing filed without a meeting. The Committee shall maintain and keep
adequate records concerning the Plan and concerning its proceedings and acts in
such form and detail as the Committee may decide.

 

(i)              Except to the extent prohibited by applicable law or
regulation, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it. The Committee may revoke any such allocation or delegation at
any time.

 

(j)              The Company and any Affiliate shall furnish the Committee with
such data and information as may be required for it to discharge its duties. The
records of the Company and any Affiliate as to an Employee’s or Participant’s
employment, or other provision of services, termination of employment, or
cessation of the provision of services, leave of absence, reemployment and
compensation shall be conclusive on all persons unless determined to be
incorrect. Participants and other persons entitled to benefit under the Plan
must furnish the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.

 

(k)          To the fullest extent permitted by law, each member and former
member of the Committee and each person to whom the Committee delegates or has
delegated authority under this Plan shall be entitled to indemnification by the
Company against and from any loss, liability, judgment, damage, cost and
reasonable expense incurred by such member, former member or other person by
reason of any action taken, failure to act or determination made in good faith
under or with respect to this Plan.

 

4.               SHARES AVAILABLE FOR AWARDS.

 

(a)          Subject to adjustment as provided in Section 4(e), the maximum
number of Shares that may be delivered pursuant to Awards granted under the Plan
is 29,000,000. Notwithstanding the foregoing and subject to adjustment as
provided in Section 4(e), no Participant may receive Options and stock
appreciation rights under this Plan in any calendar year that relate to more
than 1,000,000 Shares.

 

(b)         Shares to be issued under the Plan may be made available from
authorized but unissued Stock, Stock held by the Company in its treasury, or
Stock purchased by the Company on the open market or otherwise. During the term
of the Plan, the Company will at all times reserve and keep available the number
of shares of Stock that shall be sufficient to satisfy the requirements of the
Plan.

 

(c)          If any Shares covered by an Award other than a Substitute Award, or
to which such an Award relates, terminate, lapse or are forfeited or cancelled,
or such an Award is otherwise settled without the delivery of the full number of
Shares underlying the Award, then the Shares covered by such Award, or to which
such Award relates, to the extent of any such forfeiture, termination, lapse,
cancellation, etc ., shall again be, or shall become available for issuance
under the Plan; provided, however, that Shares (i) delivered in payment of the
exercise price of an Option, (ii) not issued upon the net settlement or net
exercise of stock appreciation rights, or (iii) delivered to or withheld by the
Company to pay withholding taxes related to an Option or stock appreciation
right, shall not become available again for issuance under this Plan.

 

(d)         Shares underlying Substitute Awards shall not reduce the number of
Shares available for delivery under this Plan.

 

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(e)          In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, share split, reverse share split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company,
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of Shares (or
other securities or property) which thereafter may be made the subject of
Awards, including without limitation the individual limit set forth in
Section 4(a), (ii) the number and type of Shares (or other securities or
property) subject to outstanding Awards, and (iii) the grant, purchase, or
exercise price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award; provided,
however , that the number of Shares subject to any Award shall always be a whole
number; provided, further , with respect to any Award subject to Section 409A,
any such adjustment shall be authorized only to the extent that such adjustment
would not cause the Award to fail to comply with Section 409A.

 

5.               ELIGIBILITY. All Employees are eligible to participate in this
Plan and receive Awards hereunder. Holders of equity-based awards issued by a
company acquired by the Company or with which the Company combines are eligible
to receive Substitute Awards hereunder.

 

6.               OPTIONS. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions, in either case not inconsistent with the provisions of the
Plan, as the Committee shall determine:

 

(a)          The purchase price per Share under an Option shall be determined by
the Committee;provided,however, that, except in the case of Substitute Awards,
such purchase price shall not be less than the Fair Market Value of a Share on
the date of grant of such Option.

 

(b)         The term of each Option shall be fixed by the Committee and the
effect thereon, if any, of the termination of employment of the Participant
shall be determined by the Committee and set forth in the applicable Agreement.
Notwithstanding, the term of an Option shall not exceed ten (10) years.

 

(c)          Any Option may be exercised at any time during the period
commencing with either the date that Option is granted or the first date
permitted under a vesting schedule established by the Committee and ending with
the expiration date of the Option. A Participant may exercise his Option for all
or part of the number of Shares which he is eligible to exercise under terms of
the Option. The Committee shall determine the method or methods by which, and
the form or forms in which, including, without limitation, cash, Shares, other
Awards, or other property, or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant exercise price, payment of the
exercise price with respect thereto may be made or deemed to have been made.

 

(d)         The terms of any Incentive Stock Option granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code, or any
successor provision thereto, and any regulations promulgated thereunder.

 

7.               RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS. The
Committee is hereby authorized to grant Awards of Restricted Stock and/or
Restricted Stock Units to Participants.

 

(a)          The Awards granted under this Section 7 shall be subject to such
restrictions as the Committee may impose (including, without limitation, any
limitation on the right to vote Shares underlying Restricted Stock Awards or the
right to receive any dividend, other right or property), which restrictions
may lapse separately or in combination at such time or times, in such
installments or otherwise, as the Committee may deem appropriate. If the vesting
conditions applicable to an Award of Restricted Stock or Restricted Stock Units
relate exclusively to the passage of time and continued employment or provision
of services, or refraining therefrom, the last vesting date of all or a portion
of such Award shall occur no less than 36 months following the date of such
Award, except that the foregoing restriction shall not apply to such Awards if
they (i) are made in satisfaction of Company obligations to employees that would
otherwise be paid in cash, (ii) are issued in connection with the exercise of an
Option or other Award hereunder, or (iii) are Substitute Awards.

 

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(b)         Any Award of Restricted Stock or Restricted Stock Units may be
evidenced in such manner as the Committee may deem appropriate, including,
without limitation, book-entry registration or issuance of a stock certificate
or certificates. In the event any stock certificate is issued in respect of
Shares underlying a Restricted Stock Award, such certificate shall be registered
in the name of the Participant and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Shares.

 

8.               OTHER STOCK-BASED AWARDS. The Committee is hereby authorized to
grant to Participants such other Awards (including, without limitation, stock
appreciation rights and rights to dividends and dividend equivalents) that are
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares) as are deemed by the Committee to be
consistent with the purposes of the Plan. Subject to the terms of the Plan, the
Committee shall determine the terms and conditions of such Awards.
Notwithstanding, the term of a stock appreciation right shall not exceed ten
(10) years. Shares or other securities delivered pursuant to a purchase right
granted under this Section 8 shall be purchased for such consideration, which
may be paid by such method or methods and in such form or forms, including,
without limitation, cash, Shares, other securities, other Awards, or other
property, or any combination thereof, as the Committee shall determine, the
value of which consideration, as established by the Committee, shall, except in
the case of Substitute Awards, not be less than the Fair Market Value of such
Shares or other securities as of the date such purchase right is granted.

 

9.               PERFORMANCE AWARDS.

 

(a)          The Committee is hereby authorized to grant Performance Awards to
Covered Persons, if the Committee intends that such Awards shall qualify as
“qualified performance based compensation” under Section 162(m) of the Code.

 

(b)         Performance Awards shall become earned and payable if targets
relating to one or more of the following performance measures are achieved
during a performance period or periods, as determined by the Committee: (i) Cash
Value Added, (ii) Total Shareholder Return, (iii) Return on Equity, (iv) Revenue
Growth, (v) Return on Net Assets, (vi) Earnings Per Share, (vii) EBITDA,
(viii) Return on Invested Capital, (ix) Parent Operating Cash Flow,
(x) Consolidated Free Cash Flow or (xi) Cash Return on Investment (CRI), each as
hereinafter defined.

 

(c)          Performance targets relating to the performance measures set forth
above shall be preestablished by the Committee, and achievement thereof
certified prior to payment of the Award, as required by Section 162(m) and
regulations promulgated thereunder, may relate to the Company as a whole, or to
one or more units thereof, and may be measured over such periods, as the
Committee shall determine.

 

(d)         The maximum value of any Performance Award which may be earned under
the Plan is $10,000,000.

 

(e)          For purposes of this Plan, the following terms shall have the
meanings set forth below. Each of the financial variables of which the
respective measures are a function shall be determined in accordance with GAAP,
as applicable, in a manner consistent with the Company’s audited financial
statements for the relevant period.

 

(i)             “Cash Return on Investment (CRI)” means (A) consolidated cash
flow from operations less mandatory capital expenditures, divided by (B) gross
investment (where gross investment equals gross property), plant and equipment,
plus working capital.

 

(ii)          “Cash Value Added” means (A) operating profit after taxes,
adjusted for minority interests, plus depreciation and amortization expenses and
other material non-cash charges (if any) minus (B) a charge reflecting the cost
(including replacement) of new capital.

 

(iii)       “Consolidated Free Cash Flow” means consolidated cash flow from
operations less mandatory capital expenditures (adjusted for minority
interests).

 

(iv)      “Earnings Before Income Taxes, Depreciation and Amortization (EBITDA)”
means net income from continuing operations plus (1) provision for income taxes
and (2) depreciation and amortization expenses.

 

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(v)         “Earnings Per Share” for a period means diluted earnings per common
share from continuing operations before extraordinary items.

 

(vi)      “Return on Equity” for a period means net income divided by average
Stockholders’ equity (adjusted for accumulated other comprehensive losses).

 

(vii) ”Return on Invested Capital” for a period means (A) net operating profits
after taxes divided by (B) total liabilities plus amounts, if any, attributable
to minority interests, preferred stock and average Stockholders’ equity
(adjusted for accumulated other comprehensive losses).

 

(viii) “Return on Net Assets” for a period means net income less preferred stock
dividends divided by the difference of average total assets less average
non-debt liabilities, with average defined as the sum of assets or liabilities
at the beginning and ending of the period divided by two.

 

(ix)        “Revenue Growth” means the percentage change in revenue (as defined
in Statement of Financial Accounting Concepts No. 6, published by the Financial
Accounting Standards Board) from one period to another.

 

(x)           “Total Shareholder Return” means the sum of the appreciation in
the Company’s stock price and dividends paid on the common stock of the Company
over a given period of time.

 

(xi)        “Parent Operating Cash Flow” means “Parent Operating Cash Flow” as
defined in the Company’s annual report filed on Form 10-K.

 

10.         TERMINATION OF EMPLOYMENT. Except as otherwise determined by the
Committee or provided by the Committee in an applicable Agreement and to the
extent not inconsistent with Section 14(k) hereof, in case of termination of
employment, the following provisions shall apply:

 

(a)          Upon termination of employment or cessation of provision of
services by the Employee for reason of death or Disability, or under other
circumstances provided by the Committee in its discretion in the applicable
Agreement:

 

(i)             any Award (other than Options) then held by such Employee shall
be immediately accelerated and become fully vested, exercisable and payable, and

 

(ii)          any Option then held by such Employee shall be immediately
accelerated and become fully vested, exercisable and payable and shall expire on
the earlier of (1) the date the Option would have expired had the Employee
continued in such employment and (2) one year after the date such Employee’s
service ceases.

 

(b)         Upon termination of employment or cessation of provision of services
by the Employee for reason of Retirement, or under other circumstances provided
by the Committee in its discretion in the applicable Agreement:

 

(i)             any Award (other than Options) then held by such Employee shall
be immediately accelerated and become fully vested, exercisable and payable, and

 

(ii)          any Option then held by such Employee shall automatically expire
on the earlier of (1) the date the Option would have expired had the Employee
continued in such employment and (2) one hundred and eighty days after the date
the such Employee’s service ceases, except that any Incentive Stock Option shall
automatically expire on the earlier of the date set forth in clause (1) above
and three months after the date that such Employee’s service ceases.

 

(c)          Upon termination of employment by the Company for cause (as
determined by the Committee in its sole discretion), or under other
circumstances provided by the Committee in its discretion in the applicable
Agreement:

 

(i)             any Award then held by such Employee whose restrictions have not
lapsed, which is not exercisable or which is not payable will automatically be
forfeited in full and canceled by the Company upon such termination of
employment, and

 

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(ii)          any Option then held by such Employee, to the extent exercisable,
shall automatically expire on the earlier of (1) the date the Option would have
expired had the Employee continued in such employment and (2) and three months
after the date that such Employee’s service ceases.

 

(d)         Upon termination of employment or cessation of provision of services
by the Employee for any reason other than death, Disability, Retirement or
termination of employment by the Company for cause (as determined by the
Committee in its sole discretion), or under other circumstances provided by the
Committee in its discretion in the applicable Agreement:

 

(i)              any Award (other than Performance Awards) then held by such
Employee whose restrictions have not lapsed, which is not exercisable or which
is not payable will automatically be forfeited in full and canceled by the
Company upon such termination of employment,

 

(ii)          any Option then held by such Employee, to the extent exercisable,
shall automatically expire on the earlier of (1) the date the Option would have
expired had the Employee continued in such employment and (2) one hundred and
eighty days after the date the such Employee’s service ceases, except that any
Incentive Stock Option shall automatically expire on the earlier of
clause (i) above and three months after the date that such Employee’s service
ceases, and

 

(iii)  any Performance Award then held by such Employee which is not then
payable will be paid in accordance with its terms at the time the Performance
Award would have been payable if the termination of employment had not occurred,
and the payment shall be prorated based on the number of days in the performance
period that occurred prior to the termination of employment.

 

11.         DURATION. The Plan shall be effective as of February 1, 2003,
subject to its approval by the stockholders of the Company. No Award shall be
granted under the Plan after the tenth anniversary of the effective date.
However, unless otherwise expressly provided in the Plan or in an applicable
Agreement, any Award theretofore granted may extend beyond such date, and the
authority of the Committee to administer the Plan and to amend, alter, adjust,
suspend, discontinue, or terminate any such Award, or to waive any conditions or
rights under any such Award, and the authority of the Board to amend the Plan,
shall extend beyond such date.

 

12.         AMENDMENT, MODIFICATION AND TERMINATION.

 

(a)          Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Agreement or in the Plan, the Board
may amend, alter, suspend, discontinue, or terminate the Plan or any portion
thereof at any time; provided, however , that no such amendment, alteration,
suspension, discontinuation or termination shall be made without (i) shareholder
approval if such approval is necessary to comply with any tax or regulatory
requirement for which or with which the Board deems it necessary or desirable to
qualify or comply or (ii) the consent of the affected Participant, if such
action would adversely affect the rights of such Participant under any
outstanding Award. Notwithstanding anything to the contrary herein, the
Committee may amend the Plan in such manner as may be necessary to enable the
Plan to achieve its stated purposes in any jurisdiction outside the United
States in a tax-efficient manner and in compliance with local rules and
regulations. Notwithstanding the foregoing or any provision of the Plan or an
Award to the contrary, (i) the Committee may at any time (without the consent of
any Participant) modify or amend any or all of the provisions of the Plan or an
Award to the extent necessary to conform the provisions of the of the Plan or an
Award with Section 409A, the regulations issued thereunder or an exception
thereto, regardless of whether such modification or amendment of the Award shall
adversely affect the rights of a Participant, and (ii) the Committee may not,
without stockholder approval, reduce the exercise price of any Option or stock
appreciation right or take any other action with respect to outstanding Options
or stock appreciation rights that is treated as a repricing of such Options or
stock appreciation rights under generally accepted accounting principles (unless
otherwise permitted by applicable listing standards).

 

(b)         The Committee may waive any conditions or rights under, amend any
terms of, or amend, alter, suspend, discontinue or terminate, any Award
theretofore granted, prospectively or retroactively, without the consent of any
Participant or holder or beneficiary of an Award, provided, however , that no
such action shall impair the rights of a Participant or holder or beneficiary
under any Award theretofore granted under the Plan.

 

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(c)          With respect to Participants who reside or work outside the United
States of America, the Committee may, in its sole discretion, amend, or
otherwise modify, without Board or shareholder approval, the terms of the Plan
or Awards with respect to such Participant in order to conform such terms with
the provisions of local law; provided that such amendment or other modification
shall not increase the total number of Shares reserved for purposes of the Plan
without the approval of the Stockholders of the Company.

 

(d)         The Committee shall be authorized to make adjustments in the terms
and conditions of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events (including, without limitation, an event
affecting the Company, or the financial statements of the Company, or of changes
in applicable laws, regulations or accounting principles), whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.

 

(e)          To the extent not inconsistent with Section 14(k) hereof, in
connection with a Change in Control or an event described in Section 4(e), the
Committee may, in its discretion (i) cancel any or all outstanding Awards under
the Plan in consideration for payment to the holder of each such cancelled Award
of an amount equal to the portion of the consideration that would have been
payable to such holder pursuant to such transaction if such Award had been fully
vested and exercisable, and had been fully exercised, immediately prior to such
transaction, less the exercise price if any that would have been payable
therefore, or (ii) if the net amount referred to in clause (i) would be
negative, cancel such Award for no consideration or payment of any kind. Payment
of any amount payable pursuant to the preceding sentence may be made in cash
and/or securities or other property in the Committee’s discretion.

 

13.         CHANGE IN CONTROL. Except as otherwise expressly provided in the
applicable Agreement and to the extent not inconsistent with
Section 14(k) hereof, upon the occurrence of a Change in Control, all
outstanding Options under this Plan shall become fully exercisable and all
outstanding Awards (other than Options) under this Plan shall become fully
vested and payable.

 

14.         MISCELLANEOUS.

 

(a)          Nothing in the Plan or in any Agreement shall confer upon any
Participant who is an Employee the right to continue in the service or
employment of the Company or any Affiliate or affect any right which the Company
or any Affiliate may have to terminate or modify the employment or provision of
service of the Participant with or without cause.

 

(b)         The Company shall have a right to withhold from any payment of cash
or Stock to a Participant or other person under the Plan an amount sufficient to
cover any required withholding taxes, including the Participant’s social
security and Medicare taxes (FICA) and federal, state, local income tax or such
other applicable taxes (“Taxes”) with respect to income arising from payment of
the Award. The Company shall have the right to require the payment of any Taxes
before issuing any Stock pursuant to the Award. The Committee may, if it deems
appropriate in the case of a Participant, withhold such Taxes through a
reduction of the number of Shares delivered to such individual, or allow the
Participant to elect to cover all or any part of the required withholdings, and
to cover any additional withholdings up to the amount needed to cover the Taxes
with respect to income arising from payment of the Award, through a reduction of
the number of Shares delivered to such individual or a subsequent return to the
Company of Shares held by the Participant or other person, in each case valued
in the same manner as used in computing the withholding taxes under the
applicable laws. Notwithstanding the foregoing or any provisions of the Plan to
the contrary, any broker-assisted cashless exercise shall comply with the
requirements for equity classification of Paragraph 35 of FASB Statement
No. 123(R) and any withholding satisfied through a net-settlement shall be
limited to the minimum statutory withholding requirements.

 

(c)          Awards received by a Participant under this Plan shall not be
deemed a part of a Participant’s regular, recurring compensation for purposes of
any termination, indemnity or severance pay laws and shall not be included in,
nor have any effect on, the determination of benefits under any other employee
benefit plan, contract or similar arrangement provided by the Company or an
Affiliate, unless expressly so provided by such other plan, contract or
arrangement, or unless the Committee so determines. No provision of the Plan
shall prevent the Company from adopting or continuing in effect other or
additional compensation arrangements, including incentive arrangements

 

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providing for the issuance of options and stock, and awards that do not qualify
under Section 162(m) of the Code, and such arrangements may be generally
applicable or applicable only in specific cases.

 

(d)         Subject to the provisions of the Plan, (i) no Award and no right
under any Award shall be assignable, alienable, saleable or transferable by a
Participant otherwise than by will or by the laws of descent and distribution;
provided , however , that, if so determined by the Committee, a Participant may,
in the manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant, and to receive any
property distributable, with respect to any Award upon the death of the
Participant; (ii) each Award, and each right under any Award, shall be
exercisable during the Participant’s lifetime only by the Participant or, if
permissible under applicable law, by the Participant’s guardian or legal
representative; and (iii) no Award and no right under any such Award, may be
pledged, alienated, attached, or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company. The provisions of this paragraph shall not apply to any
Award which has been fully exercised, earned or paid, as the case may be, and
shall not preclude forfeiture of an Award in accordance with the terms thereof.

 

(e)          This Plan shall be unfunded and the Company shall not be required
to segregate any assets that may at any time be represented by Awards under this
Plan. Neither the Company, its Affiliates, the Committee, nor the Board shall be
deemed to be a trustee of any amounts to be paid under this Plan nor shall
anything contained in this Plan or any action taken pursuant to its provisions
create or be construed to create a fiduciary relationship between the Company
and/or its Affiliates, and a Participant or Successor. To the extent any person
acquires a right to receive an Award under this Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company.

 

(f)             Any liability of the Company to any Participant with respect to
an Award shall be based solely upon contractual obligations created by this Plan
and the applicable Agreement. Except as may be required by law, neither the
Company nor any member or former member of the Board or of the Committee, nor
any other person participating (including participation pursuant to a delegation
of authority under Sections 3(c) and 3(i) hereof) in any determination of any
question under this Plan, or in the interpretation, administration or
application of this Plan, shall have any liability to any party for any action
taken, or not taken, under this Plan.

 

(g)         No certificate for Shares distributable pursuant to this Plan shall
be issued and delivered unless the issuance of such certificate complies with
all applicable legal requirements including, without limitation, compliance with
the provisions of applicable state securities laws, the Securities Act of 1933,
as amended and in effect from time to time or any successor statute, the
Exchange Act and the requirements of the exchanges on which the Company’s Shares
may, at such time be listed.

 

(h)         To the extent that federal laws do not otherwise control, this Plan
and all determinations made and actions taken pursuant to this Plan shall be
governed by the laws of Delaware and construed accordingly.

 

(i)              In the event that any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions of this Plan, and this Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

 

(j)              No fractional shares shall be issued or delivered pursuant to
this Plan or any Agreement, and the Committee shall determine whether cash,
other securities, or other property shall be paid or transferred in lieu of any
fractional shares, or whether such fractional Shares or any rights thereto shall
be canceled, terminated, or otherwise eliminated.

 

(k)          Notwithstanding any provision of the Plan or an Agreement to the
contrary, if any Award or benefit provided under this Plan is subject to the
provisions of Section 409A, the provisions of the Plan and any applicable
Agreement shall be administered, interpreted and construed in a manner necessary
to comply with Section 409A or an exception thereto (or disregarded to the
extent such provision cannot be so administered, interpreted or construed). The
following provisions shall apply, as applicable:

 

(i)              If a Participant is a Specified Employee and a payment subject
to Section 409A (and not excepted therefrom) to the Participant is due upon
Separation from Service, such payment shall be delayed for a period of six
(6) months after the date the Participant Separates from Service (or, if
earlier, the death of the Participant). Any

 

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payment that would otherwise have been due or owing during such six-month period
will be paid immediately following the end of the six-month period in the month
following the month containing the 6-month anniversary of the date of
termination unless another compliant date is specified in the applicable
Agreement.

 

(ii)          For purposes of Section 409A, and to the extent applicable to any
Award or benefit under the Plan, it is intended that distribution events qualify
as permissible distribution events for purposes of Section 409A and shall be
interpreted and construed accordingly. W ith respect to payments subject to
Section 409A, the Company reserves the right to accelerate and/or defer any
payment to the extent permitted and consistent with Section 409A. Whether a
Participant has Separated from Service or employment will be determined based on
all of the facts and circumstances and, to the extent applicable to any Award or
benefit, in accordance with the guidance issued under Section 409A. For this
purpose, a Participant will be presumed to have experienced a Separation from
Service when the level of bona fide  services performed permanently decreases to
a level less than twenty percent (20%) of the average level of bona fide 
services performed during the immediately preceding thirty-six (36) month period
or such other applicable period as provided by Section 409A.

 

(iii)       The Committee, in its discretion, may specify the conditions under
which the payment of all or any portion of any Award may be deferred until a
later date. Deferrals shall be for such periods or until the occurrence of such
events, and upon such terms and conditions, as the Board shall determine in its
discretion, in accordance with the provisions of Section 409A, the regulations
and other binding guidance promulgated thereunder; provided, however, that no
deferral shall be permitted with respect to Options and other stock rights
subject to Section 409A. An election shall be made by filing an election with
the Company (on a form provided by the Company) on or prior to December 31st of
the calendar year immediately preceding the beginning of the calendar year (or
other applicable service period) to which such election relates (or at such
other date as may be specified by the Board to the extent consistent with
Section 409A) and shall be irrevocable for such applicable calendar year (or
other applicable service period).

 

(iv)      The grant of Non-Qualified Stock Options and other stock rights
subject to Section 409A shall be granted under terms and conditions consistent
with Treas. Reg. § 1.409A-1(b)(5) such that any such Award does not constitute a
deferral of compensation under Section 409A. Accordingly, any such Award may be
granted to Employees of the Company and its subsidiaries and affiliates in which
the Company has a controlling interest. In determining whether the Company has a
controlling interest, the rules of Treas. Reg. § 1.414(c)-2(b)(2)(i) shall
apply; provided that the language “at least 50 percent” shall be used instead of
“at least 80 percent” in each place it appears; provided, further, where
legitimate business reasons exist (within the meaning of Treas. Reg.
§ 1.409A-1(b)(5)(iii)(E)(i)), the language “at least 20 percent” shall be used
instead of “at least 80 percent” in each place it appears. The rules of Treas.
Reg. §§ 1.414(c)-3 and 1.414(c)-4 shall apply for purposes of determining
ownership interests.

 

(v)         Notwithstanding anything to the contrary contained herein and with
respect to Options that were earned and vested under the Plan prior to
January 1, 2005 (as determined under Section 409A, “Grandfather Options”), such
Grandfathered Options are intended to be exempt from Section 409A and shall be
administered and interpreted in a manner intended to ensure that any such
Grandfathered Option remains exempt from Section 409A. No amendments or other
modifications shall be made to such Grandfathered Options except as specifically
set forth in a separate writing thereto, and no amendment or modification to the
Plan shall be interpreted or construed in a manner that would cause a material
modification (within the meaning of Section 409A, including Treas. Reg.
§ 1.409A-6(a)(4)) to any such Grandfathered Options.

 

(vi)      In no event shall any member of the Board, the Committee or the
Company (or its employees, Officers or Directors) have any liability to any
Participant (or any other Person) due to the failure of an Award to satisfy the
requirements of Section 409A.

 

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This amendment and restatement of The AES Corporation 2003 Long Term
Compensation Plan has been duly executed by the undersigned and is effective
this 24th day of April 2008.

 

 

The AES Corporation

 

 

 

 

 

 

 

 

By:

/s/ Jay L. Kloosterboer

 

 

 

Jay L. Kloosterboer

 

 

 

Executive Vice President, Business Excellence

 

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