Exhibit 10.18


 


THE AES
CORPORATION


PERFORMANCE
INCENTIVE PLAN

(As Amended and Restated  December 29, 2008)


 


1.                                      Purpose
of the Plan


 


The purpose of the The AES Corporation
Performance Incentive Plan (the “Plan”) is to advance the interests of the
Company and its shareholders by providing incentives to key employees with
significant responsibility for achieving performance goals critical to the
success and growth of the Company. The Plan is designed to: (i) promote
the attainment of the Company’s significant business objectives; (ii) encourage
and reward management teamwork across the entire Company; and (iii) assist
in the attraction and retention of employees vital to the Company’s long-term
success.  The Plan has been amended and
restated solely to comply with Section 409A.


 


2.                                      Definitions


 


For the
purpose of the Plan, the following definitions shall apply:


 


(a)                                  “Board” means the Board of Directors of the Company.


 


(b)                                 “Code” means the Internal Revenue Code of 1986, as amended,
including any successor law thereto.


 


(c)                                  “Committee” means the Compensation Committee of the Board, or
such other committee as is appointed or designated by the Board to administer
the Plan, in each case which shall be comprised solely of two or more “outside
directors” (as defined under Section 162(m) of the Code and the
regulations promulgated thereunder).


 


(d)                                 “Company” means The AES Corporation and any subsidiary entity
or affiliate thereof, including subsidiaries or affiliates which become such
after adoption of the Plan.


 


(e)                                  “Forfeit,” “Forfeiture,” “Forfeited” means
the loss by a Participant of any and all rights to an award granted under the
Plan, including the loss to any payment of compensation by the Company under
the Plan or any award granted thereunder.


 


(f)                                    “Participant” means any person: (1) who
satisfies the eligibility requirements set forth in Paragraph 4; (2) to
whom an award has been made by the Committee; and (3) whose award remains
outstanding under the Plan.


 


(g)                                 “Performance Goal” means, in relation to any Performance
Period, the level of performance that must be achieved with respect to a
Performance Measure.


 


(h)                                 “Performance Measures” means any one or more of the following
performance criteria, either individually, alternatively or in any combination,
and subject to such modifications or


 

















 


variations as specified by the Committee, applied to either the Company
as a whole or to a business unit or subsidiary entity thereof, either
individually, alternatively or in any combination, and measured over a period
of time including any portion of a year, annually or cumulatively over a period
of years, on an absolute basis or relative to a pre-established target, to
previous years’ results or to a designated comparison group, in each case as
specified by the Committee: cash flow; cash flow from operations; earnings
(including, but not limited to, earnings before interest, taxes, depreciation,
and amortization or some variation thereof); earnings per share, diluted or
basic; earnings per share from continuing operations; net asset turnover;
inventory turnover; capital expenditures; debt; debt reduction; working
capital; return on investment; return on sales; net or gross sales; market
share; economic value added; cost of capital; change in assets; expense
reduction levels; productivity; delivery performance; safety record and/or
performance; stock price; return on equity; total stockholder return; return on
capital; return on assets or net assets; revenue; income or net income;
operating income or net operating income; operating income adjusted for
management fees and depreciation, and amortization; operating profit or net
operating profit; gross margin, operating margin or profit margin; and
completion of acquisitions, business expansion, product diversification, new or
expanded market penetration and other non-financial operating and management
performance objectives.


 


To the extent consistent with Section 162(m) of
the Code and the regulations promulgated thereunder, the Committee may
determine that certain adjustments shall apply, in whole or in part, in such
manner as specified by the Committee, to exclude the effect of any of the
following events that occur during a Performance Period: the impairment of
tangible or intangible assets; litigation or claim judgments or settlements;
changes in tax law, accounting principles or other such laws or provisions
affecting reported results; business combinations, reorganizations and/or
restructuring programs, including but not limited to reductions in force and
early retirement incentives; currency fluctuations; and any extraordinary,
unusual, infrequent or non-recurring items, including, but not limited to, such
items separately identified in the financial statements and/or notes thereto in
accordance with generally accepted accounting principles.


 


(i)                                     “Performance Period” means, in relation to any award, the
calendar year or other period of 12 months or less for which a Participant’s
performance is being calculated, with each such period constituting a separate
Performance Period.


 


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


 


(k)                                  “Retirement” means retirement of an employee as determined
and authorized by the Committee.


 


(l)                                     Total and Permanent Disability” means: (1) if the
Participant is insured under a long-term disability insurance policy or plan
which is paid for by the Company, the Participant is totally disabled under the
terms of that policy or plan; or (2) if no such policy or plan exists, the
Participant shall be considered to be totally disabled as determined by the
Committee.


 


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3.                                      Administration
of the Plan


 


(a)                                  The management of the
Plan shall be vested in the Committee; provided, however, that all acts and
authority of the Committee pursuant to this Plan shall be subject to the
provisions of the Committee’s Charter, as amended from time to time, and such
other authority as may be delegated to the Committee by the Board. The
Committee may, with respect to Participants whom the Committee determines are
not likely to be subject to Section 162(m) of the Code, delegate such
of its powers and authority under the Plan to the Company’s officers as it
deems necessary or appropriate. In the event of such delegation, all references
to the Committee in this Plan shall be deemed references to such officers as it
relates to those aspects of the Plan that have been delegated.


 


(b)                                 Subject
to the terms of the Plan, the Committee shall, among other things, have full
authority and discretion to determine eligibility for participation in the
Plan, make awards under the Plan, establish the terms and conditions of such
awards (including the Performance Goal(s) and Performance Measure(s) to
be utilized) and determine whether the Performance Goals applicable to any
Performance Measures for any awards have been achieved. The Committee’s
determinations under the Plan need not be uniform among all Participants, or
classes or categories of Participants, and may be applied to such Participants,
or classes or categories of Participants, as the Committee, in its sole and
absolute discretion, considers necessary, appropriate or desirable. The
Committee is authorized to interpret the Plan, to adopt administrative rules,
regulations, and guidelines for the Plan, and may correct any defect, supply
any omission or reconcile any inconsistency or conflict in the Plan or in any
award. All determinations by the Committee shall be final, conclusive and
binding on the Company, the Participant and any and all interested parties.


 


(c)                                  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. Notwithstanding any provision of
the Plan to the contrary, if an award under this Plan is intended to qualify as
performance-based compensation under Section 162(m) of the Code and
the regulations issued thereunder and a provision of this Plan would prevent
such award from so qualifying, such provision shall be administered,
interpreted and construed to carry out such intention (or disregarded to the
extent such provision cannot be so administered, interpreted or construed).


 


(d)                                 The
benefits provided under the Plan are intended to be excepted from coverage
under Section 409A and the regulations promulgated thereunder and shall be
construed accordingly.  Notwithstanding
any provision of the Plan to the contrary, if any benefit provided under this
Plan is subject to the provisions of Section 409A and the regulations
issued thereunder (and not excepted therefrom), the provisions of the Plan
shall be administered, interpreted and construed in a manner necessary to
comply with Section 409A and the regulations issued thereunder (or
disregarded to the extent such provision cannot be so administered,
interpreted, or construed.)


 


4.                                      Participation
in the Plan


 


Officers and key employees of the Company shall be eligible to
participate in the Plan. No employee shall have the right to participate in the
Plan, and participation in the Plan in any one Performance Period does not
entitle an individual to participate in future Performance Periods.


 


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5.                                      Incentive
Compensation Awards


 


(a)                                  The
Committee may, in its discretion, from time to time make awards to persons
eligible for participation in the Plan pursuant to which the Participant will
earn cash compensation. The amount of a Participant’s award may be based on a
percentage of such Participant’s salary or such other methods as may be
established by the Committee. Each award shall be communicated to the
Participant, and shall specify, among other things, the terms and conditions of
the award and the Performance Goals to be achieved. The maximum amount of an
award that may be earned under the Plan by any Participant for any Performance
Period shall not exceed USD $5,000,000.


 


(b)                                 With
respect to awards that are intended to be performance-based compensation under Section 162(m) of
the Code, each award shall be conditioned upon the Company’s achievement of one
or more Performance Goal(s) with respect to the Performance Measure(s) established
by the Committee. No later than ninety (90) days after the beginning of the
applicable Performance Period, the Committee shall establish in writing the
Performance Goals, Performance Measures and the method(s) for computing
the amount of compensation which will be payable under the Plan to each
Participant if the Performance Goals established by the Committee are attained;
provided however, that for a Performance Period of less than one year, the
Committee shall take any such actions prior to the lapse of 25% of the
Performance Period. In addition to establishing minimum Performance Goals below
which no compensation shall be payable pursuant to an award, the Committee, in
its discretion, may create a performance schedule under which an amount less
than or more than the target award may be paid so long as the Performance Goals
have been achieved.


 


(c)                                  The
Committee, in its sole discretion, may also establish such additional
restrictions or conditions that must be satisfied as a condition precedent to
the payment of all or a portion of any awards. Such additional restrictions or
conditions need not be performance-based and may include, among other things,
the receipt by a Participant of a specified annual performance rating, the
continued employment by the Participant and/or the achievement of specified
performance goals by the Company, business unit or Participant. Furthermore and
notwithstanding any provision of this Plan to the contrary, the Committee, in
its sole discretion, may reduce the amount of any award to a Participant if it
concludes that such reduction is necessary or appropriate based upon: (i) an
evaluation of such Participant’s performance; (ii) comparisons with
compensation received by other similarly situated individuals working within
the Company’s industry; (iii) the Company’s financial results and
conditions; or (iv) such other factors or conditions that the Committee
deems relevant. Notwithstanding any provision of this Plan to the contrary, the
Committee shall not use its discretionary authority to increase any award that
is intended to be performance-based compensation under Section 162(m) of
the Code.


 


6.                                      Payment
of Individual Incentive Awards


 


(a)                                  After
the end of the Performance Period, the Committee shall certify in writing the
extent to which the applicable Performance Goals and any other material terms
have been achieved.  Subject to the
provisions of the Plan, earned Awards shall be paid in the first calendar year
immediately following the end of the Performance Period and within the
applicable 21⁄2 month period specified in Treas. Reg. § 1.409A-1(b)(4) (“Payment
Date”).  For purposes of this provision,
and for so long as the Code permits, the approved minutes of the Committee
meeting in which the certification is made may be treated as written
certification.


 


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(b)                                 Unless
otherwise determined by the Committee, Participants who have terminated
employment with the Company prior to the actual payment date of any award for
any reason other than death, Retirement or Total and Permanent Disability,
shall Forfeit any and all rights to payment under any awards then outstanding
under the terms of the Plan and shall not be entitled to any cash payment for
such period. If a Participant’s employment with the Company should terminate
during a Performance Period by reason of death, Retirement or Total and
Permanent Disability or the Committee determines that an award is not
Forfeited, the Participant’s award shall be prorated to reflect the period of
service prior to his/her termination, death, Retirement or Total and Permanent
Disability, and shall be paid either to the Participant or, as appropriate, the
Participant’s estate, subject to the Committee’s certification that the
applicable Performance Goals and other material terms have been met.


 


(c)                                  The
Committee shall determine whether, to what extent, and under what additional
circumstances amounts payable with respect to an award under the Plan shall be
deferred either automatically, at the election of the Participant, or by the
Committee.  All deferrals under The AES Corporation
Restoration Supplemental Retirement Plan shall be made in accordance with terms
and procedures of such plan.


 


7.                                      Amendment
or Termination of the Plan


 


While the Company intends that the Plan shall continue in force from
year to year, the Company reserves the right to amend, modify or terminate the
Plan, at any time; provided, however, that no such modification, amendment or
termination shall, without the consent of the Participant, materially adversely
affect the rights of such Participant to any payment that has been determined
by the Committee to be due and owing to the Participant under the Plan but not
yet paid. Any and all actions permitted under this Section 7 may be
authorized and performed by the Committee in its sole and absolute discretion.


 


Notwithstanding the foregoing or any provision of the Plan to the
contrary, the Committee may at any time (without the consent of the
Participant) modify, amend or terminate any or all of the provisions of this
Plan to the extent necessary to conform the provisions of the Plan with Section 409A
or Section 162(m) of the Code, the regulations promulgated thereunder
or an exception thereto regardless of whether such modification, amendment, or
termination of the Plan shall adversely affect the rights of a Participant
under the Plan.  Notwithstanding, (i) Section 409A
may impose upon the Participant certain taxes or other charges for which the
Participant is and shall remain solely responsible, and nothing contained in
this Plan shall be construed to obligate the Company for any such taxes or
other charges, and (ii) in no event shall the Committee or Board (or any
member thereof), or the Company (or its employees, officers, directors or
affiliates) have any liability to any Participant (or any other person) due to
the failure of the Plan to satisfy the requirements of Section 409A or any
other applicable law.


 


8.                                      Rights
Not Transferable


 


A Participant’s
rights under the Plan may not be assigned, pledged, or otherwise transferred
except, in the event of a Participant’s death, to the Participant’s designated
beneficiary, or in the absence of such a designation, by will or by the laws of
descent and distribution.


 


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9.                                      Funding/Payment


 


The Plan is not funded and all awards payable
hereunder shall be paid from the general assets of the Company. No provision
contained in this Plan and no action taken pursuant to the provisions of this
Plan shall create a trust of any kind or require the Company to maintain or set
aside any specific funds to pay benefits hereunder. To the extent a Participant
acquires a right to receive payments from the Company under the Plan, such
right shall be no greater than the right of any unsecured general creditor of
the Company.  If any earned Award is not
paid by the Payment Date due to administrative impracticability, such earned
Award will be paid, without earnings, as soon as administratively practicable
thereafter.


 


10.                               Withholdings


 


The Company
shall have the right to withhold from any awards payable under the Plan or
other wages payable to a Participant such amounts sufficient to satisfy
federal, state and local tax withholding obligations arising from or in
connection with the Participant’s participation in the Plan and such other
deductions as may be authorized by the Participant or as required by applicable
law.


 


11.                               No Employment or Service Rights


 


Nothing contained in the Plan shall confer upon any Participant any
right with respect to continued employment with the Company (or any of its
affiliates) nor shall the Plan interfere in any way with the right of the
Company (or any of its affiliates) to at any time reassign the Participant to a
different job, change the compensation of the Participant or terminate the
Participant’s employment for any reason.


 


12.                               Other Compensation Plans


 


Nothing
contained in this Plan shall prevent the Corporation from adopting other or
additional compensation arrangements for employees of the Corporation,
including arrangements that are not intended to comply with Section 162(m)
of the Code.


 


13.                               Governing Law


 


The Plan shall be governed by and construed in accordance with the laws
of the State of Delaware, without giving effect to its conflict of law
provisions.


 


14.                               Effective Date


 


The Plan’s material terms have been approved by the Company’s
shareholders.  This amendment and
restatement of The AES Corporation Performance Incentive Plan has been duly
executed by the undersigned and is effective this 29 day of December 2008.


 


	
   

  	
  The AES
  Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jay L.
  Kloosterboer

  
	
   

  	
   

  	
  Jay L. Kloosterboer, Executive Vice

  
	
   

  	
   

  	
  President, Business Excellence

  



 


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