Exhibit
10.34


 


 


 


 


 


 


 


 


 


 


 


THE AES CORPORATION

SEVERANCE PLAN

(Effective June 1, 2006)
















ARTICLE I

general provisions


1.1                           Establishment
and Purpose.


There
is hereby established, effective June 1, 2006, The AES Corporation Severance
Plan (the “Plan”).  The purpose of the
Plan is to provide eligible employees who are involuntarily terminated from
employment with severance and welfare benefits as set forth in this Plan.  This Plan constitutes a welfare plan under
ERISA and will be interpreted in accordance with the terms of ERISA. This Plan
supersedes any prior severance plans, policies, guidelines, arrangements,
agreements, letters and/or other communication, whether formal or informal,
written or oral sponsored by the Employer and/or entered into by any
representative of the Employer.


1.2                           Definitions.


Except
as may otherwise be specified or as the context may otherwise require, for
purposes of the Plan, the following terms shall have the respective meaning
ascribed thereto.


“Administrator”
means the Health and Welfare Benefits Plan LLC or such other committee or
persons designated by it to assume the duties of the Administrator.


“Affiliated
Employer” mean any corporation which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) which includes the
Company; any trade or business (whether or not incorporated) which is under
common control (as defined in Section 414(c) of the Code) with the
Company; any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the Code) which
includes the Company; and any other entity required to be aggregated with the
Company pursuant to regulations under Section 414(o) of the Code.


“Annual
Compensation” means (i) an Eligible Employee’s annualized base salary as in
effect as of the Eligible Employee’s Termination Date or (ii) in the event that
an Eligible Employee is an hourly employee, the person’s cumulative base
earnings (excluding bonuses) for the previous completed calendar year prior to
the Eligible Employee’s Terminate Date.  Unless otherwise provided on a Benefits
Schedule, Annual Compensation shall: (i) include pre-tax employee contributions
under any qualified defined contribution retirement plan, salary deferrals
under any unfunded nonqualified deferred compensation plan, and amounts
deferred (to include employee premiums) under a flexible spending account
established pursuant to section 125 of the Code; and (ii) exclude any
amounts contributed by the Employer to any plan established pursuant to
section 125 of the Code, overtime pay, bonuses, shift differential, annual
incentive payments, long-term incentive awards (including but not limited to
stock options, restricted stock and performance unit awards), and any other
form of supplemental compensation.


“Benefit
Schedule” means any schedule attached to the Plan which sets forth the
benefits of specified groups of Eligible Employees, as approved by the Company
and updated by the Administrator from time to time.



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


“Bonus”
means an Eligible Employee’s annual target bonus compensation as established by
the Employer and in effect on the Eligible Employee’s Termination Date.


“Cause”
means termination of employment by action of the Employer, or resignation in
lieu of such termination, on account of the Eligible Employee’s continued and
repeated failure to perform the Eligible Employee’s assigned duties or willful
misconduct in the performance of such duties; dishonesty; insubordination;
violation of the Employer’s policies, procedures, work rules or recognized
standards of behavior; misconduct related to the Eligible Employee’s
employment; or a charge, indictment or conviction of, or a plea of guilty or nolo contendere to, a felony, whether or not in connection
with the performance by the Eligible Employee of his or her duties or
obligations to the Employer.


“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 Securities Exchange Act of 1934) 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 of
Directors (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 of Directors.   For purposes of this definition, “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.


“COBRA
Coverage” means medical, dental and vision coverage which is required to be
offered to terminated employees under section 4980B of the Code and
section 606 of ERISA; provided, however, that no provision of this Plan
shall be construed to require the Employer to contribute on behalf of an
Eligible Employee towards continuation coverage for a health spending account.


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


“Company”
(or “AES”) means The AES Corporation, a Delaware corporation.



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“Disability
Termination” means: (a) the Eligible Employee fails to return to full-time
employment following exhaustion of short-term disability benefits provided by
the Employer; (b) the termination of the Eligible Employee’s employment
following the date the Eligible Employee is determined to be eligible for:
(i) long-term disability benefits under any long-term disability insurance
policy or plan maintained by the Employer; or (ii) disability pension or
retirement benefits under any qualified retirement plan maintained by the
Employer; or (c) the termination of the Eligible Employee’s employment due to a
physical or mental condition that substantially restricts the Eligible Employee’s
ability to perform his or her usual duties, as determined by the Employer.


“Eligible
Employee” means any Employee of the Employer who: (i) is not an Ineligible
Employee (within the meaning of Section 2.2); and (ii) who has completed one
Year-of-Service as a full-time Employee.


“Employee”
means any person who is listed as an employee on the payroll records of the
Employer as a full-time employee.  Any person
hired by the Employer as a consultant or independent contractor and any other
individual whom the Employer does not treat as its employee for federal income
tax purposes shall not be an Employee for purposes of this Plan, even if it is
subsequently determined by a Court or administrative agency that such
individual should be, or should have been, properly classified as a common law
employee of the Employer.


“Employer”
means the Company and any Affiliated Employer that participates in the Plan
with the consent of the Company.  The
Administrator shall maintain a list of participating Employers.


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.


“Ineligible
Termination” means the termination of an Eligible Employee’s employment
with the Employer on account of:


·                                          The
Eligible Employee’s voluntary resignation, including but not limited to the
Eligible Employee’s unilateral termination at any time prior to the Termination
Date established by the Employer;


·                                          A
termination for, or on account of, Cause;


·                                          A
Disability Termination;


·                                          The
Eligible Employee’s death;


·                                          The
Eligible Employee declines to accept a New Job Position offered by the Employer
that is located within 50 miles of the Eligible Employee’s then assigned work
site of the Employer;


·                                          The
Sale of Business Rule set forth in Section 2.4 herein; or


·                                          The
voluntary transfer of employment from Eligible Employee’s Employer to another
AES related entity, irrespective whether the Eligible Employee is required to
relocate or whether the AES related entity qualifies as an Affiliated Employer.



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“Involuntary Termination” means an Eligible
Employee’s involuntary termination of employment with the Employer that is not
an Ineligible Termination and that is by action of the Employer on account of:


·                                          Permanent
Layoff;


·                                          Reduction-in-force;


·                                          Permanent
job elimination;


·                                          The
restructuring or reorganization of a business unit, division, department or
other segment;


·                                          Termination
by Mutual Consent; or


·                                          Eligible
Employee declines to accept a New Job Position offered by the Employer that
requires the Eligible Employee to relocate to a work site location that is
located greater than 50 miles from the Employee’s
then assigned work site of the Employer.


“Layoff”
means a special program of workforce reduction approved in advance in writing
by the Employer and that is designated as a “Layoff” for purposes of this
Plan.  Notwithstanding the foregoing, a
Layoff must result in a permanent elimination of a job resulting from an
internal reorganization of the Employer.


“New
Job Position” means: (i) with respect to an Eligible Employee who has
demonstrated inadequate or unsatisfactory performance, as determined by the
Employer, any job position offered by the Employer; or (ii) with respect to all
other Eligible Employees, a full-time job position offered by the Employer that
does not result in a reduction of the Employee’s Annual Compensation.


“Participant”
has the meaning set forth in Section 2.1.


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


“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 of directors, or other governing group having functions
similar to a board of directors, as determined by the Company.


“Termination
by Mutual Consent” means a termination of employment pursuant to which the
Employer and Eligible Employee have agreed in writing that benefits are payable
under this Plan.


“Termination
Date” means the date that the Eligible Employee’s employment is terminated
(or scheduled to be terminated) by the Employer.



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“Week’s
Compensation” means one fifty-second (1/52) of an Eligible Employee’s
Annual Compensation.


“Year-of-Service”
means each twelve-month period measured from the Eligible Employee’s first day
of employment with an Employer, as reduced to reflect breaks in service and/or
services performed during such period the Eligible Employee was otherwise
ineligible to participate in the Plan, as determined under the rules
promulgated by the Administrator. 
Service with a predecessor employer (that was not an Affiliated
Employer) shall be recognized to the extent such service is recognized under
The AES Corporation Retirement Savings Plan. Service shall also include
services performed prior to the effective date of the Plan.  In the event an Eligible Employee is terminated
and subsequently reemployed by the Employer, the Eligible Employee’s service
for calculation of any severance benefits under Article IV of the Plan shall be
based on only upon the Eligible Employee’s service credited since the most
recent date of employment with the Employer.



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ARTICLE II

PARTICIPATION


2.1                           Eligibility.


Except
as otherwise provided in this Article II or a Benefit Schedule, an
Eligible Employee shall, upon execution of the Release in the form specified in
Article III of this Plan in the time and manner prescribed by the
Administrator, be eligible for the severance benefits provided under Article IV
of this Plan if the Eligible Employee’s employment with the Employer ceases by
reason of an Involuntary Termination.  An
Eligible Employee who fails to execute the Release in the time and manner
prescribed by the Administrator or who subsequently revokes execution of the
Release in accordance with its terms shall not be entitled to receive benefits
under this Plan.  An Eligible Employee
who satisfies all of the terms and conditions specified in this Plan and who
becomes entitled to receive benefits hereunder shall be referred to herein as a
“Participant.”


2.2                           Ineligible
Employees.


Notwithstanding
any provision of this Plan to the contrary, the following Employees (“Ineligible
Employees”) are not eligible to participate in the Plan:


·                                          Any
Employee who has been hired to work on a part-time, seasonal or temporary basis
or who is classified as a part-time, seasonal or temporary Employee, or a
student intern on the Employer’s records;


·                                          Any
Employee who has been hired by the Employer to work in a job share position
(provided that such Employee is not otherwise employed on a full-time basis);


·                                          An
Employee who is member of a collective bargaining unit to which this Plan has
not been specifically extended by a collective bargaining agreement;


·                                          An
Employee entitled to a severance type payment pursuant to any other plan,
policy, arrangement, agreement, letter or other communication sponsored by, or
entered into with, or maintained by the Employer, including but not limited to
an employment agreement;


·                                          Leased
employees, including those within the meaning of section 414(n) of the
Code;


·                                          Nonresident
aliens (other than those nonresident aliens to whom the Employer has extended
participation in the Plan with the written consent of the Company);


·                                          Any
individual who has agreed in writing that he or she waives his or her
eligibility to receive benefits under the Plan; and


·                                          Any
Employee who has an enforceable right to resume employment or to be recalled to
employment with the Employer.



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2.3                           Transfer of
Employment.


If
an Eligible Employee transfers to a location of AES to which this Plan has not
been extended, such Employee shall cease to be eligible to participate in this
Plan unless the Eligible Employee’s prior Employer has agreed in writing to
continue to extend participation in the Plan to the Employee with the consent
of the Company.


2.4                           Sale of
Business Rule.


An
Eligible Employee shall not be eligible to benefits under the Plan if the
Eligible Employee’s employment with an Employer (other than the Company) is
terminated in connection with the sale of the stock or other ownership
interests of the Employer or other related entity, or the sale, lease, or other
transfer of the assets, products, services or operations of the Employer or
other related entity to another organization if either of the following occurs:


·                                          The
Eligible Employee is employed by the new organization immediately following the
sale, transfer or lease or is so employed within a time period specified in an
agreement between the Employer and the new organizations; or


·                                          The
Employer terminates the employment of an Eligible Employee who did not accept
an offer of employment from the new organization when the new organization
offered a compensation and benefits package that was, in the aggregate,
substantially equivalent to the compensation and benefits provided by the
Employer; provided that such Eligible Employee was not required to relocate to
a work site location that is located greater than 50 miles from the Employee’s
then assigned work site of the Employer.


ARTICLE III

RELEASES


3.1                           Release.


Notwithstanding
anything in this Plan to the contrary, no benefits of any sort or nature (other
than as provided in section 3.3) shall be due or paid under this Plan to any
Eligible Employee unless the Eligible Employee executes a written release and
covenant not to sue, in form and substance satisfactory to the Employer, in its
sole discretion.  The written release
shall waive any and all claims against the Employer and all related parties
including, but not limited to, claims arising out of the Eligible Employee’s
employment by the Employer, the Eligible Employee’s termination of employment
and claims relating to the benefits paid under this Plan.  At the sole discretion of the Employer, the
release shall also include such noncompetition, nonsolicitation and
nondisclosure provisions as the Employer considers necessary or appropriate.



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3.2                           Revocation.


The
release described in Section 3.1 must be executed and binding on the Eligible
Employee before benefits are due or paid. 
An Eligible Employee who revokes execution of the release in accordance
with the terms of the release shall not be entitled to receive benefits under
the Plan.


3.3                           Outplacement
Services.


Notwithstanding
the foregoing provisions of this Article III, the Outplacement Services
set forth under Section 4.3 herein may or may not be provided, at the
discretion of the Employer, to an Eligible Employee prior to the execution of a
release under this Plan.


ARTICLE IV

SEVERANCE BENEFITS


4.1                           Separation
Payment.


A
Participant shall be entitled to receive a separation payment as set forth on
the applicable Benefit Schedule.  The
separation payment will be paid as salary continuation in accordance with the
Employer’s established payroll policies and practices over the same time period
upon which the separation payment is based.


4.1.1        The separation payments will generally
commence on the Employer’s next normal pay date occurring after the seventh
business day following the later of  the
Termination Date or the effective date of the applicable Release.


4.2                           Continuation
of Certain Welfare Benefits.


4.2.1        Medical/Dental/Vision.  For the period set forth below in Section
4.2.3 and beginning in the calendar month following the calendar month in which
the Termination Date occurs, the Participant shall be eligible to participate
in the Employer’s medical, dental and vision employee welfare benefit plans
applicable to the Participant on his Termination Date.  To receive such benefits, the Participant
must properly enroll in COBRA coverage, and must also pay such premiums and
other costs for such coverage as generally applicable to the Employer’s active
employees.  The Employer will continue to
pay its share of the applicable premiums under the medical, dental and vision
plans for the same level and type of coverage in which the Participant is
enrolled as of the Termination Date.


If
a Participant has elected the “no benefit coverage” option under the medical,
dental or vision plans as of his actual Termination Date, the Participant shall
not be entitled to continuation coverage or cash in lieu thereof.  Following expiration of coverage under this
Section 4.2.1, a Participant may, to the extent eligible, continue to
participate in such plans for the remainder of the COBRA continuation period,
if any.



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4.2.2        Concurrent COBRA Period.  The continuation period for medical, dental
and vision coverage under this Plan shall be deemed to run concurrent with the
continuation period federally mandated by COBRA (generally 18 months), or any
other legally mandated and applicable federal, state, or local coverage period
for benefits provided to terminated employees under the health care plan.  The continuation period will be deemed to
commence on the first day of the calendar month following the month in which
the Termination Date falls. 
Notwithstanding the foregoing, COBRA Coverage will only be available if
the Participant is eligible for and timely elects COBRA Coverage, and timely
remits payment of the premiums for COBRA Coverage.


4.2.3        Length of Benefits.  Benefits under this Section 4.2 shall be for
the same time period upon which the separation payment was based; provided,
however that in no event will the time period exceed 18 months.


4.3                           Outplacement
Services.


As
set forth on the applicable benefit schedule, a Participant shall be eligible
for such outplacement services typically provided to employees of the same job
classification or level.  Outplacement
services may be provided by an independent agency or by the Employer.  Notwithstanding the foregoing, the
availability, duration, and appropriateness of outplacement services shall be
determined by the Administrator in its sole discretion; provided, however, that
outplacement expenses must be reasonable, must be actually incurred by the
Participant, and may not extend beyond the December 31 of the second calendar
year following the calendar year in which the Termination Date occurred.


4.4                           Bonus
Compensation.


As
set forth on the applicable Benefits Schedule, a Participant will be eligible
for a prorated Bonus.  Such Bonus will be
prorated based on the amount of time the Participant was actively at work on a
full-time basis in the calendar year in which the Participant’s Termination
Date falls, and will be paid, subject to Section 4.6, not later than 2-1/2
months following the end of such calendar year.


4.5                           Enhanced
Benefits.


To
the extent provided under the Benefits Schedule, in the event the Participant
was Involuntarily Terminated within two years following a Change in Control, or
in the event the Participant was Involuntarily Terminated under circumstances
that constitute a Layoff, the separation payment under Section 4.1 will be
multiplied by 2.0.  In addition, the
length of time for which benefits under Section 4.2 will be provided will also
be multiplied by 2.0; provided, however, that this time period will never
exceed 18 months as set forth in section 4.2.3.


4.6                           Delay in
Payment.  


Notwithstanding
any provision of this Plan to the contrary, amounts payable hereunder may be
delayed for a period of six months after the Termination Date (or, if earlier,
the death of the Participant)  for any
Participant that is a “specified employee” (as defined in Section 409A of the
Code).  Any 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. 




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ARTICLE V

PLAN ADMINISTRATION


5.1                           Operation
of the Plan.


The
Administrator shall be the named fiduciary responsible for carrying out the
provisions of the Plan.  The
Administrator may delegate any and all of its powers and responsibilities
hereunder or appoint agents to carry out such responsibilities, and any such delegation
or appointment may be rescinded at any time. 
The Administrator shall establish the terms and conditions under which
any such agents serve.  The Administrator
shall have the full and absolute authority to employ and rely on such legal
counsel, actuaries and accountants (which may also be those of the Employer) as
it may deem advisable to assist in the administration of the Plan.


5.2                           Administration
of the Plan.


To
the extent that the Administrator in its sole discretion deems necessary or
desirable, the Administrator may establish rules for the administration of the
Plan, prescribe appropriate forms, and adopt procedures for handling claims and
the denial of claims.  The Administrator
shall have the exclusive authority and discretion to interpret, construe, and
administer the provisions of the Plan and to decide all questions concerning
the Plan and its administration.  Without
limiting the foregoing, the Administrator shall have the authority to determine
the level of an Employee, to determine eligibility for and the amount of any
benefits due in accordance with the attached Benefit Schedule, to make factual
determinations, to correct deficiencies, and to supply omissions, including
resolving any ambiguity or uncertainty arising under or existing in the terms
and provisions of the Plan or any Benefits Schedule.  Any and all such determinations of the
Administrator shall be final, conclusive, and binding on the Employer, the
Employee and any and all interested parties.


5.3                           Funding.


The
Plan shall be unfunded and all payments hereunder and expenses incurred in
connection with this Plan shall be from the general assets of the Employer.
Benefits will be paid directly by the Employer employing the Participant, and
no other Employer or Affiliated Employer will be responsible for any benefits
hereunder.


5.4                           Code
section 409A.


Notwithstanding
any provision of the Plan to the contrary, if any benefit provided under this
Plan is subject to the provisions of Section 409A of the Code and the
regulations issued thereunder, the provisions of the Plan will be administered,
interpreted and construed in a manner necessary to comply with Section 409A,
the regulations issued thereunder or and exception thereto (or disregarded to
the extent such provision cannot be so administered, interpreted, or
construed).  Additionally, the Company
and each Affiliated Employer may, to the extent necessary, modify the timing of
delivery of compensation and/or benefits to Participant if it is determined
that the timing would result in the additional tax and/or interest and/or
penalties assessed to Participant under Section 409A of the Code.



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ARTICLE VI

CLAIMS


6.1                           General.


If
an Employee believes that he or she is eligible for benefits under the Plan and
has not been so notified, an Employee should submit a written request for
benefits to the Administrator.  Any claim
for benefits must be made within six months of an Employee’s Termination
Date, or the Employee will be forever barred from pursuing a claim.  For purposes of this Article VI, an Employee
making a claim for benefits under the Plan shall be referred to as a “claimant”.  The claimant shall file the claim with and in
the manner prescribed by the Administrator. 
The Administrator shall make the initial determination concerning rights
to and amount of benefits payable under this Plan.


6.2                           Claim
Evaluation.


A
properly filed claim will be evaluated and the claimant will be notified of the
approval or the denial of the claim within ninety (90) days after the receipt
of the claim, unless special circumstances require an extension of time for
processing.  Written notice of the
extension will be furnished to the claimant prior to the expiration of the
initial ninety-day (90-day) period, and will specify the special circumstances
requiring an extension and the date by which a decision will be reached
(provided the claim evaluation will be completed within one hundred and twenty
(180) days after the date the claim was filed).


6.3                           Notice of
Disposition.


A
claimant will be given a
written notice in which the claimant will be advised as to whether the claim is
granted or denied, in whole or in part. 
If a claim is denied, in whole or in part the notice will contain:
(i) the specific reasons for the denial; (ii) references to
pertinent Plan provisions upon which the denial is based; (iii) a description of any additional material or
information necessary to perfect the claim and an explanation of why such
material or information is necessary; and (iv) the claimant’s rights to
seek review of the denial.


6.4                           Appeals.


If a claim is denied, in whole or in part, the
claimant, or his duly authorized representative, has the right to
(i) request that the Administrator review the denial, (ii) review
pertinent documents, and (iii) submit issues and comments in writing,
provided that the claimant files a written appeal with the Administrator within
sixty (60) days after the date the claimant received written notice of the
denial.  Within sixty (60) days after an
appeal is received, the review will be made and the claimant will be advised in
writing of the decision, unless special circumstances require an extension of
time for reviewing the appeal, in which case the claimant will be given written
notice within the initial sixty-day (60-day) period specifying the reasons for 



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the extension and when the review will be completed
(provided the review will be completed within one hundred and twenty (120) days
after the date the appeal was filed). 
The decision on appeal will be forwarded to the claimant in writing and
will include specific reasons for the decision and references to the Plan
provisions upon which the decision is based. 
A decision on appeal will be final and binding on all persons for all
purposes.  If a claimant’s claim for
benefits is denied in whole or in part, the claimant may file suit in a state
or federal court.
Notwithstanding the aforementioned, before the claimant may file suit in a
state or federal court, the claimant must exhaust the Plan’s
administrative claims procedure set forth in this Article VI.  If any such state or federal judicial or
administrative proceeding is undertaken, the evidence presented will be
strictly limited to the evidence timely presented to the Administrator.  In addition, any such state or federal
judicial or administrative proceeding must be filed within six (6) months after
the Administrator’s final decision. In addition, any such state or federal judicial or
administrative proceeding relating to this Plan shall only be brought in the
Circuit Court for Arlington County, Virginia or in the United States District
Court for the Eastern District of Virginia, Alexandria Division.  If any
such action or proceeding is brought in any other location, then the filing
party expressly consent to the transfer of such action to the Circuit Court for
Arlington County, Virginia or the United States District Court for the Eastern
District of Virginia, Alexandria Division.  Nothing in this clause shall
be deemed to prevent any party from removing an action or proceeding to enforce
or interpret this Plan from the Circuit Court for Arlington County, Virginia to
the United States District Court for the Eastern District of Virginia,
Alexandria Division.


ARTICLE VII

PLAN AMENDMENTS


7.1                           Amendment
Authority.


The
Board may, at any time and in its sole discretion, amend, modify or terminate
the Plan, including any Benefit Schedule, as the Board, in its judgment shall
deem necessary or advisable.  The Board
may delegate its amendment authority to the Administrator or such other persons
as the Board considers appropriate.


ARTICLE VIII

Miscellaneous


8.1                           Summary
Plan Description.


To
the extent the summary plan description or any other writing communication to
an Employee conflicts with this Plan, the Plan document shall control.



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8.2                           Impact on
Other Benefits.


Except
as otherwise provided herein, any amounts paid to a Participant under this Plan
shall have no effect on the Participant’s rights or benefits under any other
employee benefit plan sponsored by the Employer; provided, however, that in no
event shall any Participant be entitled to any payment or benefit under the
Plan which duplicates a payment or benefit received or receivable by the
Participant under any severance plan, policy, guideline, arrangement,
agreement, letter and/or other communication, whether formal or informal,
written or oral sponsored by the Employer or an affiliate thereof and/or
entered into by any representative of the Employer and/or any affiliate
thereof.  Further, any such amounts shall
not be used to determine eligibility for or the amount of any benefit under any
employee benefit plan, policy, or arrangement sponsored by the Employer or any
affiliate thereof.


8.3                           Tax
Withholding.


The
Employer shall have the right to withhold from any benefits payable under the
Plan or any other wages payable to a Participant an amount sufficient to
satisfy federal, state and local tax withholding requirements, if any, arising
from or in connection with the Participant’s receipt of benefits under the
Plan.


8.4                           No
Employment or Service Rights.


Nothing
contained in the Plan shall confer upon any Employee any right with respect to
continued employment with the Employer, nor shall the Plan interfere in any way
with the right of the Employer to at any time reassign an Employee to a
different job, change the compensation of the Employee or terminate the
Employee’s employment for any reason.


8.5                           Nontransferability.


Notwithstanding
any other provision of this Plan to the contrary, the benefits payable under
the Plan may not be subject to voluntary or involuntary anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the Participant or such other person, other than
pursuant to the laws of descent and distribution, without the consent of the
Company.


8.6                           Successors.


The
Company and its affiliates shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company and its affiliates
(taken as a whole) expressly to assume and agree to perform under the terms of
the Plan in the same manner and to the same extent that the Company and its
affiliates would be required to perform it if no such succession had taken
place (provided that such a requirement to perform which arises by operation of
law shall be deemed to satisfy the requirements for such an express assumption
and agreement), and in such event the Company and its affiliates (as
constituted prior to such succession) shall have no further obligation under or
with respect to the Plan.


8.7                           Governing
Law.


Except
as otherwise preempted by the laws of the United States, this 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.  If any provision of this Plan shall be held
illegal or invalid for any reason, such determination shall not affect the
remaining provisions of this Plan.



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BENEFITS
SCHEDULE  


 


	
  Title/Classification

  	
   

  	
  Severance Benefits

  (Min. 1 Year-of-Service for Eligibility)

  
	
   

  	
   

  	
   

  
	
  Senior Leaders 

  (CEO, CFO and EVP - Strategic

  Initiative excluded because of

  contracts)

  	
   

  	
  One (1) times (Annual Compensation + Bonus) (Section
  4.1)

  Health Benefits (Section 4.2)

  Outplacement Benefits (Section 4.3)

  Prorated Bonus (Section 4.4)

  Special Enhanced Benefits (Section 4.5)

  
	
   

  	
   

  	
   

  
	
  Group Managers (and

  Equivalents)

  	
   

  	
  One (1) times (Annual Compensation) (Section 4.1)

  Health Benefits (Section 4.2)

  Outplacement Benefits (Section 4.3)

  Prorated Bonus (Section 4.4)

  Special Enhanced Benefits (Section 4.5)

  
	
   

  	
   

  	
   

  
	
  Plant Managers (and

  Equivalents)

  	
   

  	
  Three (3) months prorated Annual Compensation plus
  two (2)

  Weeks’ Compensation for each Year-of-Service up to a maximum of

  thirty-nine (39) Week’s Compensation (Section 4.1)

  Health Benefits (Section 4.2)

  
	
   

  	
   

  	
   

  
	
   Associates

  	
   

  	
  Two (2) months prorated Annual Compensation plus two
  (2) Weeks’ Compensation for each Year-of-Service up to a maximum of
  twenty-six (26) Week’s Compensation (Section 4.1) Health Benefits (Section
  4.2)

  



 
















THE AES
CORPORATION SEVERANCE PLAN

FOR FULL-TIME SALARIED EMPLOYEES


List of
Participating Employers


[The Administrator is required to maintain a list of
Participating Employers]*


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


*(i) Individuals employed by Indianapolis Power &
Light Company and its subsidiaries and (ii) unionized U.S. employees shall not
be eligible to participate in the Plan.


 



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APPENDIX A
  TO 

THE AES CORPORATION SEVERANCE PLAN


Excise Tax Reimbursement.


(a)           Subject
to the provisions of The AES Corporation Severance Plan (the “Plan”) and
notwithstanding whether an Involuntary Termination has occurred as provided
under Article II of the Plan, a Senior Leader (excluding the CEO, CFO and
EVP-Strategic Initiative as set forth more fully on the Plan’s Benefits
Schedule) shall be entitled to excise tax reimbursements as set forth in this
Appendix A to the Plan (“Appendix A”). 
Capitalized terms not otherwise defined herein shall have the meaning
ascribed thereto in the Plan.


(b)           If
any of the payments or benefits received or to be received by a Senior Leader
in connection with a Change in Control or the Senior Leader’s termination of
employment with the Employer, whether pursuant to the terms of the Plan or any
other plan, arrangement or agreement provided by the Employer, any Person whose
actions result in a Change in Control or any Person affiliated with the
Employer or such Person (all such payments and benefits, excluding the Gross-Up
Payment, being hereinafter referred to as the “Total Payments”), will be
subject to the excise tax imposed under Section 4999 of the Code (the “Excise
Tax”), the Employer shall pay to the Senior Leader an additional amount
(the “Gross-Up Payment”) such that the net amount retained by the Senior
Leader, after deduction of any Excise Tax on the Total Payments and any
federal, state and local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Total Payments.


(c)           For
purposes of determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax, all determinations required
to be made under this Appendix A, including whether a Gross-Up Payment is
required and the amount of the Gross-Up Payment, shall be made by a nationally
recognized accounting firm designated by the Administrator (the “Accounting
Firm”).  Any determination by the
Accounting Firm shall be binding upon the Plan, the Employer and Senior
Leader.  For purposes of determining the
amount of the Gross-Up Payment, the Senior Leader shall be deemed to pay
federal income tax at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Senior Leader’s residence on the date of termination (or if
there is no date of termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Appendix A), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.  If any Gross-Up Payment is
required to be made, the Employer shall make the Gross-Up Payment within 30
days after the Administrator has received the Accounting Firm’s determination.



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(d)           In
the event that the Excise Tax is finally determined to be less than the amount
taken into account hereunder in calculating the Gross-Up Payment, the Senior
Leader shall repay to the Employer, within five (5) business days following the
time that the amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment
being repaid by the Senior Leader) to the extent that such repayment results in
a reduction in the Excise Tax, plus interest on the amount of such repayment at
120% of the rate provided in Section 1274(b)(2)(B) of the Code.  In the event that the Excise Tax is finally
determined to exceed the amount taken into account hereunder in calculating the
Gross-Up Payment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the Employer
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Senior Leader with respect to
such excess) within five (5) business days following the time that the amount
of such excess is finally determined. 
The Senior Leader and the Employer shall each reasonably cooperate with
the other and the Administrator in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.


(e)           The
Senior Leader shall notify the Administrator in writing of any claim by the
Internal Revenue Service that, if successful, would require payment by the
Employer of the Gross-Up Payment.  Such
notification shall be given as soon as practicable but no later than five (5)
business days after the Senior Leader is informed in writing of such claim and
shall apprise the Administrator of the nature of the claim and the date on
which such claim is requested to be paid. 
The Senior Leader shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such notice to the
Administrator (or such shorter period ending on the date any payment of taxes
with respect to such claims is due).  If
the Administrator notifies the Senior Leader in writing prior to the expiration
of such period that it desires to contest such claim, the Senior Leader shall:


(i) provide the Administrator any information reasonably requested by
the Employer and/or Administrator relating to such claim;


 (ii) take such action in
connection with contesting such claim as the Administrator shall reasonable
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Administrator;


(iii) cooperate with the Administrator in good faith in order
effectively to contest such claim; and


(iv) permit the Administrator to participate in any proceedings
relating to such claim;


provided,
however, that the Employer shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Senior Leader harmless, on an
after-tax basis, for any income taxes or Excise Tax (including interest and
penalties with respect thereto) imposed as a result of such presentation and
payment of costs and expenses.  Without
limitation on the foregoing provisions, 
Administrator shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Senior
Leader to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Senior Leader agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine.  The Administrator’s control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder.


 



 3