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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