Document:

Exhibit 10.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE AES CORPORATION
  SEVERANCE PLAN 

(As Amended and Restated March 13, 2008)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARTICLE I

GENERAL PROVISIONS

 

1.1                           Establishment and Purpose.

 

The purpose of the
AES Corporation Severance Plan, as amended (the “Plan”) is to provide eligible
employees who are involuntarily terminated from employment in certain limited
circumstances with severance and welfare benefits as set forth in this
Plan.  Benefits payable under this Plan
are not, and should not be construed as vested benefits, and are generally
intended for employees who are involuntarily terminated without cause.  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.  The Plan
was originally established June 1, 2006,

 

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.

 

 

 

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“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.

 

“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 Separation from Service by action of the Employer, or resignation in lieu
of such Separation from Service, on account of the Eligible Employee’s
dishonesty; insubordination; continued and repeated failure to perform the
Eligible Employee’s assigned duties or willful misconduct in the performance of
such duties; intentionally engaging in unsatisfactory job performance; failing
to make a good faith effort to bring unsatisfactory job performance to an
acceptable level; 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 Company.

 

“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.

 

 

 

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

 

“Disability
Termination” means a Separation from Service: (a) on account of the
Eligible Employee’s failure to return to full-time employment following
exhaustion of short-term disability benefits provided by the Employer; (b) 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) 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 an Eligible Employee’s Separation from Service on
account of:

 

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

 

·                  Any Separation from Service that the
Employer determines (either before or after the Separation from Service and
whether or not any notice is given to the employee) the payment of benefits
under the Plan in connection with such Separation from Service would be
inconsistent with the intent and purpose of the Plan;

 

·                  A Separation from Service in connection
with an Eligible Employee’s failure to return to work immediately following the
conclusion of an approved leave-of-absence.

 

·                  A Separation from Service for, or on
account of, Cause;

 

 

 

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·                  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.

 

“Involuntary Termination” means an Eligible
Employee’s involuntary Separation from Service that is (i) not an
Ineligible Termination and (ii) 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; provided, however,
that except as provided in Section 2.4 or in connection with a Separation
from Service following a Change in Control, an Eligible Employee who functions
at or above a Group Manager position (or its equivalent) shall not incur an
Involuntary Termination if such Eligible Employee declines a New Job Position
(regardless of its location) at a time when the Eligible Employee’s existing
job position is being eliminated.

 

“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.

 

 

 

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“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.

 

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

 

“Separation
From Service” shall mean an Eligible Employee’s termination of employment
with the Company and all of its controlled group members within the meaning of Section 409A
of the Code.  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. 
Whether an Employee has a Separation from Service will be determined
based on all of the facts and circumstances and in accordance with the guidance
issued under Section 409A.

 

“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 the regulations issued under Code Section 409A
and the procedures established by the Company.

 

“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 an involuntary Separation from Service pursuant to
which the Company agrees, in its sole discretion, that benefits are payable
under this Plan.

 

“Termination
Date” means the date of the Eligible Employee’s Separation of Service (or
scheduled date of Separation from Service, as applicable).

 

“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 

 

 

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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’s Separation from Service and the Eligible Employee is
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.

 

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 Separation from Service is 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;

 

 

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·                  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.

 

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 Separation from Service is 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, generally comparable 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.

 

Notwithstanding
the foregoing, this section 2.4 shall not apply if an Eligible Employee’s
Separation from Service occurs in connection with a Change of Control and, as
such, any such Separation from Service will not be an Ineligible Termination
solely on the basis of the Sale of Business Rule.

 

 

 

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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 Separation from Service 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.

 

3.2                           Revocation.

 

The release
described in Section 3.1 must be executed and binding on the Eligible
Employee within the timeframe specified by the Company 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.

 

4.1.1        A Participant shall
be entitled to receive a separation payment as set forth on the applicable
Benefit Schedule.  The separation payment
will be paid at least monthly in substantially equal installments 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.

 

4.1.2        The separation
payments will commence on the Employer’s next normal pay date occurring after
the seventh business day following the Termination Date.

 

4.1.3        For purposes of Section 409A:
(i) the right to salary continuation installment payments shall be treated
as the right to a series of separate payments; and (ii) a payment shall be
treated as made on the scheduled payment date if such payment is made at such
date or a later date in the same calendar year or, if later, by the 15th day of
the third calendar month following the scheduled payment date.  A Participant shall have no right to
designate the 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

date of any
payment under the Plan.  For purposes of
the Plan, each salary continuation installment payment is intended to be
excepted from Section 409A to the maximum extent provided under Section 409A
as follows: (i) each salary continuation installment payment that is
scheduled to be made on or before March 15th of the calendar year
following the calendar year containing the Termination Date is intended to be
excepted under the short-term deferral exception as specified in Treas. Reg. §
1.409A-1(b)(4); and (ii) each
salary continuation installment payment that is not otherwise excepted under
the short-term deferral exception is intended to be excepted under the involuntary
pay exception as specified in Treas. Reg. §
1.409A-1(b)(9)(iii).

 

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.

 

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 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

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 (or such shorter period as specified by the
Employer).  Any such reimbursement shall
be as soon as administratively feasible, but in no event later than December 31st
of the third 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 not later than March 15th of the calendar year following the
calendar year in which the Termination Date occurs.

 

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, to the extent that a payment
hereunder is subject to Section 409A (and not excepted therefrom), such
payment shall 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. 
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 in the month following the month containing the 6-month anniversary of
the date of Termination Date.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

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
or an exception thereto (or disregarded to the extent such provision cannot be
so administered, interpreted, or construed). 
With respect to payments subject to Section 409A of the Code: (i) it is intended that distribution events
authorized under the Plan qualify as permissible distribution events for
purposes of Section 409A of the Code; and (ii) the Company and
each Employer reserve the right to accelerate and/or defer any payment to the
extent permitted and consistent with Section 409A.  Notwithstanding any provision of the Plan
to the contrary, in no event shall the Administrator, the Company, an
Affiliated Employer or Subsidiary (or their 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

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 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 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

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. 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
consents 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. 
Notwithstanding the foregoing or any provision of the Plan to the
contrary, the Board (or its designee) may at any time (in its sole discretion
and without the consent of any Participant) modify, amend or terminate any or
all of the provisions of this Plan  or
take any other action, to the extent necessary or advisable to conform the
provisions of the Plan with Section 409A of the Code, the regulations
issued thereunder or an exception thereto, regardless of whether such
modification, amendment or termination of this Plan or other action shall
adversely affect the rights of an Eligible Employee or Participant under the
Plan. Termination of this Plan  shall not
be a distribution event under the Plan unless otherwise permitted under Section 409A.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

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.

 

 

 

14

 

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.

 

                This amendment and restatement of The AES Corporation
Severance Plan has been duly executed by the undersigned and is effective this
13th day of March 2008.

 

	
   

  	
  The AES Corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/

  
	
   

  	
   

  	
   

  	
  Jay L. Kloosterboer, Executive Vice

  President, Business Excellence 

  

 

 

 

 

15

 

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)

  Excise Tax
  Reimbursement (Appendix A)

   

  
	
  

  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)

   

  

 

 

 

1

 

THE AES CORPORATION SEVERANCE
PLAN

 

 

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) Ineligible Employees shall not be
eligible to participate in the Plan.

 

 

 

1

 

 

APPENDIX A
  TO 

THE AES CORPORATION SEVERANCE PLAN

 

EXCISE TAX REIMBURSEMENT.

 

8.8           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.

 

8.9           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 Separation from Service 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.

 

8.10         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.    Subject to
Section 4.6 of the Plan, as applicable, 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,
but in no event later than the end of the Senior Leader’s taxable year
following the Senior Leader’s taxable year in which the Senior Leader remits
the related taxes.

 

8.11         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.

 

8.12         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.Exhibit 10.41

 

THE AES
CORPORATION

PERFORMANCE INCENTIVE PLAN

(As Amended and Restated  March 13, 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.

 

2

 

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.

 

3

 

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 on or before March 15th of
such calendar year (“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.

 

4

 

(b)           Unless otherwise determined by the
Committee, Participants who have terminated employment with the Company prior
to the end of a Performance Period 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.

 

5

 

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 13th day of March 2008.

 

	
   

  	
  The AES Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Jay L. Kloosterboer,
  Executive Vice

  
	
   

  	
   

  	
  President, Business
  Excellence

  
				

 

6

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