SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
THE AES CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
Common Stock, par value $0.01 per share
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
Not Applicable
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(4) Proposed maximum aggregate value of transaction:
Not Applicable
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None
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
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the offsetting fee was paid previously. Identify the previous
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(4) Date Filed:
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[LOGO]
The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, APRIL 19, 2001
March 22, 2001
The Annual Meeting of Stockholders of The AES Corporation (the "Company")
will be held on Thursday, April 19, 2001, at 9:30 a.m. in the Company's
corporate offices at 1001 North 19th Street, Arlington, Virginia. Doors to the
meeting will open at 8:30 a.m.
The meeting will be conducted:
- To elect a board of ten directors;
- To consider and vote on a proposal to approve The AES Corporation 2001
Stock Option Plan (approved by the Board of Directors, described in the
following Proxy Statement);
- To consider and vote on a proposal to approve The AES Corporation 2001
Stock Option Plan for Outside Directors (approved by the Board of
Directors, described in the following Proxy Statement);
- To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 2, 2001 will be
entitled to notice of and to vote at this meeting.
[LOGO]
William R. Luraschi
Vice President and Secretary
EACH STOCKHOLDER IS REQUESTED TO EXECUTE AND PROMPTLY RETURN THE ENCLOSED
PROXY. A PREPAID ENVELOPE IS ENCLOSED FOR RETURNING PROXIES. YOU MAY ALSO VOTE
BY USING THE TELEPHONE OR INTERNET. (SEE DIRECTIONS ON PROXY CARD.)
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PROXY STATEMENT
March 22, 2001
The accompanying proxy is solicited by the Board of Directors of The AES
Corporation (the "Company" or "AES") for use at the Annual Meeting of
Stockholders of the Company to be held on Thursday, April 19, 2001 at 9:30 a.m.
at the Company's corporate offices at 1001 North 19th Street, Arlington,
Virginia 22209, or at any adjournment of such meeting. This Proxy Statement and
accompanying proxy are first being sent or given to stockholders on or about
March 22, 2001.
If the proxy is properly executed, the shares it represents will be voted at the
meeting in accordance with the instructions noted thereon. If no instructions
are specified, the shares will be voted for the election of directors and in
accordance with the Board of Directors' recommendations as set forth herein. Any
stockholder executing a proxy has the power to revoke it at any time before it
is voted by filing with the Company a written notice of revocation, by
delivering a duly executed proxy bearing a later date, or by attending the
Annual Meeting of Stockholders and voting in person. Proxies marked as
abstentions, or to withhold a vote from a nominee as a director in the case of
the election of directors, will have the effect of a negative vote. Broker
non-votes (where a nominee holding shares for a beneficial owner has not
received voting instructions from the beneficial owner with respect to a
particular matter and such nominee does not possess or choose to exercise his
discretionary authority with respect thereto) will be considered as present at
the meeting but not entitled to vote with respect to the particular matter and
will therefore have no effect.
The only securities of the Company entitled to be voted are shares of Common
Stock, and only holders of record of Common Stock at the close of business on
March 2, 2001 are entitled to notice of and to vote at the meeting. Holders of
Common Stock are entitled to one vote per share. There were 490,226,393 shares
of Common Stock outstanding at the close of business on March 2, 2001. The
Company's Annual Report for the fiscal year ended December 31, 2000 is being
delivered concurrently with this Proxy Statement.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is comprised of ten members. Only two Directors are also
employees of the Company. In 2000, the Board of Directors met 11 times,
including 7 telephonic meetings; Mr. Hemphill attended 71% of these meetings.
Directors are elected to hold office until the next Annual Meeting of
Stockholders and until their respective successors have been elected and
qualified. Directors shall be elected by a majority of the votes of the shares
of Common Stock present in person or represented by proxy at the Annual Meeting
of Stockholders, at which a quorum is present.
ROGER W. SANT co-founded AES with Dennis Bakke in 1981. He has been Chairman of
the Board and a director of AES since its inception and he held the office of
President through 1986 and Chief Executive Officer through December 31, 1993. He
currently is Chairman of the Board of The Summit Foundation, a Trustee of the
World Wide Fund for Nature, and serves on the Board of Directors of Marriott
International, Inc., Resources for the Future, and
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the National Symphony Orchestra. He was Assistant Administrator for Energy
Conservation and the Environment of the Federal Energy Administration ("FEA")
from 1974 to 1976 and the Director of the Energy Productivity Center, an energy
research organization affiliated with The Mellon Institute at Carnegie-Mellon
University, from 1977 to 1981.
DENNIS W. BAKKE co-founded AES with Roger Sant in 1981 and has been a director
of AES since 1986. He has been President of AES since 1987 and Chief Executive
Officer since January 1, 1994. From 1987 to 1993, he served as Chief Operating
Officer of AES; from 1982 to 1986, he served as Executive Vice President of AES;
and from 1985 to 1986, he also served as Treasurer of AES. He served with Mr.
Sant as Deputy Assistant Administrator of the FEA from 1974 to 1976 and as
Deputy Director of the Energy Productivity Center from 1978 to 1981. He is a
trustee of the Rivendell School and a member of the Board of Directors of
MacroSonix Corporation.
ALICE F. EMERSON has been a director of AES since 1993. She is a Senior Advisor
at The Andrew W. Mellon Foundation, was President of Wheaton College in
Massachusetts from 1975 to 1991, and prior to that served as Dean of Students at
the University of Pennsylvania. She is a member of the Boards of Directors of
the World Resources Institute, the FleetBoston Financial Corporation, Eastman
Kodak Company, Salzburg Seminar, and the MGH Institute of Health Professions.
ROBERT F. HEMPHILL, JR. has been a director of AES since June 1996. He served as
Executive Vice President of AES from 1982 to June 1996. He currently is the
Managing Director of Toucan Capital Corporation (an international venture
capital firm). He also serves on the Boards of the National Museum of American
History, the Selecterra Corporation, and is a member of the Advisory Board of
Venture House, an internet investment company, and Optiglobe, a data center
company.
FRANK JUNGERS was an advisor to the Board of AES from 1982 to 1983 and has been
a director of AES since 1983. He has been consultant to various companies since
prior to 1994. Mr. Jungers is the retired Chairman of the Board and Chief
Executive Officer of the Arabian American Oil Company. He currently serves on
the Boards of Directors of Thermo Electron Corporation, Esco Corporation, and
Statia Terminals. He is also Chairman of the Advisory Board of Common Sense
Partners, L.P. He is also Trustee of the Board of Trustees, The American
University in Cairo and serves as a Trustee to the High Desert Museum, and
Oregon Health Sciences University Foundation.
PHILIP LADER is being nominated for election to the Board of Directors. Mr.
Lader is the former U.S. Ambassador to the United Kingdom of Great Britain and
Northern Ireland (1997 to January 2001), and served in several senior White
House and Cabinet-level posts. Prior to entering government service, Ambassador
Lader was President of Sea Pines Company, Executive Vice President of the late
Sir James Goldsmith's U.S. holding company and president of universities in
South Carolina and Australia. Founder of Renaissance Weekends, Ambassador Lader
currently serves as Chairman of WPP plc, the world's largest advertising and
communications services company and a senior advisor to Morgan Stanley
International.
During 2000, Morgan Stanley Dean Witter, parent of Morgan Stanley International,
the investment banking firm in which Mr. Lader is a Senior Advisor, acted as
underwriter and co-managing underwriter for the following financial offerings of
the Company during 2000: a
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May 11, 2000 offering of 24,725,000 shares of Common Stock, par value $0.01 per
share, a May 11, 2000 offering of AES Trust VII Convertible Preferred
Securities, a September 7, 2000 offering of 9.375% Senior Notes due 2010, and a
November 27, 2000 offering of 10,000,000 shares of Common Stock, par value $0.01
per share.
JOHN H. MCARTHUR has been a director of AES since January 1997. He is the
retired Dean of the Harvard Business School, and has been a private business
consultant and active investor in various companies since prior to 1994. He
serves as Senior Advisor to the President of the World Bank Group. He is also a
member of the Boards of Directors of Ardais Corporation, BCE Inc., BCE
Emergis Inc., Cabot Corporation, HCA Healthcare Corporation, Glaxo Smith Kline,
Rohm & Haas Corporation, Springs Industries, Inc., and KOC Holdings, A.S. He
also serves in various capacities with non-profit health, government, and
education organizations in America, Canada, Europe, and Asia.
HAZEL R. O'LEARY has been a director of AES since April 1997. Mrs. O'Leary
previously served on AES's Board of Directors from September 1988 to June 1989.
Mrs. O'Leary was the seventh Secretary of the United States Department of Energy
from 1993 to 1997. She is consultant and attorney to a diverse group of domestic
and international energy and sustainable development firms. Prior to serving as
U.S. Secretary of Energy, she served as president of the natural gas subsidiary
of Northern States Power Company, and before that as Executive Vice President of
Northern States Power Company. She also serves on the Board of the Kaiser Group
International and UAL Corporation, the parent company of United Airlines. In
addition, Mrs. O'Leary serves on the non-profit Boards of Morehouse College, the
Andrew Young Center of International Development, the World Wildlife Fund, and
the Keystone Center.
THOMAS I. UNTERBERG has been a director of AES since 1984 and from 1982 to 1983.
He has been a Managing Director of C.E. Unterberg, Towbin (an investment banking
firm) since 1989, having been a Managing Director of Shearson Lehman
Brothers Inc., from 1987 through 1988. He currently serves on the Boards of
Directors of Electronics for Imaging, Inc., Systems and Computer Technology
Corporation, ECCS, Inc., Centrax Corporation, Inc., and Club One, LLC.
During 2000, Unterberg Harris, an affiliate of C.E. Unterberg, Towbin, the
investment banking firm in which Mr. Unterberg is a Managing Director, acted as
a co-managing underwriter for a financial offering of the Company which included
the May 11, 2000 offering of 24,725,000 million shares of Common Stock, par
value $0.01 per share.
ROBERT H. WATERMAN, JR. was an advisor to the Board of AES from 1983 to 1985 and
has been a director of AES since 1985. He is the founder and Chief Executive of
The Waterman Group, Inc. a firm that supports his research, writing, venture
management, and non-profit consulting activities. He is a co-author of IN SEARCH
OF EXCELLENCE, and the author of several other books on management including:
THE RENEWAL FACTOR, ADHOCRACY--THE POWER TO CHANGE and WHAT AMERICA DOES RIGHT
(FRONTIERS OF EXCELLENCE in Europe). Currently he is Chairman of the Board of
eProNet, Inc. and serves on the board of the Restless Leg Syndrome Foundation.
He also serves on the Boards of the World Wildlife Fund and the Center for
Excellence in Non-Profits.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS, AND EXECUTIVE OFFICERS
The following table sets forth, as of February 2, 2001, the beneficial ownership
of the Company's Common Stock by (a) each director and named executive officer,
(b) all directors and executive officers as a group and (c) all persons who own
more than five percent (5%) of the Company's Common Stock. Unless otherwise
indicated, each of the persons and group listed below has sole voting and
dispositive power with respect to the shares shown.
SHARES OF
COMMON STOCK
POSITION HELD BENEFICIALLY % OF CLASS
NAME AGE WITH THE COMPANY OWNED (1)(2) (1)(2)
---- --- ---------------- ------------ ----------
SHARES BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
Roger W. Sant.................... 69 Chairman of the Board and Director 37,791,367(3) 7.71
Dennis W. Bakke #................ 55 President, Chief Executive Officer 34,686,478(4) 7.08
and
Director
Alice F. Emerson +@.............. 69 Director 97,693 *
Robert F. Hemphill, Jr. %+....... 57 Director 3,022,250(5) *
Frank Jungers +@................. 74 Director 1,029,880(6) *
John H. McArthur %+.............. 67 Director 21,595 *
Hazel R. O'Leary +%.............. 63 Director 34,896 *
Thomas I. Unterberg %+........... 70 Director 2,134,973(7) *
Robert H. Waterman, Jr. +@#...... 64 Director 1,140,082(8) *
Barry J. Sharp................... 41 Executive Vice President and CFO 776,490(9) *
Paul T. Hanrahan................. 43 Executive Vice President 568,887(10) *
Thomas A. Tribone................ 48 Executive Vice President 981,672 *
Sarah A. Slusser................. 38 Vice President 240,784 *
All directors and executive
officers as a group (31
persons)....................... 96,451,339(11) 19.69
SHARES BENEFICIALLY OWNED BY
OTHERS:
FMR Corporation.................. Address: 82 Devonshire Street 28,009,365(12) 5.74
Boston, MA 02109
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% Member of the Financial Audit Committee.
+ Member of the Environmental, Safety and Social Responsibility Committee.
@ Member of the Compensation Committee.
# Member of the Nominating Committee.
* Shares held represent less than 1% of the total number of outstanding shares
of Common Stock of the Company.
(1) Shares beneficially owned and deemed to be outstanding include Common Stock
of the Company issued or issuable, on or before April 2, 2001, (a) upon
exercise of outstanding options, (b) upon exercise of warrants, (c) under
the Deferred Compensation Plan for Executive Officers, (d) under the
Deferred Compensation Plan for Directors, (e) under The AES Corporation
Profit Sharing and Stock Ownership Plan and the Employee Stock Ownership
Plan, and (f) under the Supplemental Retirement Plan.
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(2) Includes (a) the following shares issuable upon exercise of options: Mr.
Sant - 1,101,614 shares; Mr. Bakke - 1,555,838 shares; Mr. Sharp - 402,774
shares; Mr. Hanrahan - 516,891 shares; Mr. Tribone - 412,521 shares; Ms.
Slusser - 187,788 shares; Dr. Emerson - 65,351 shares; Mr.
Hemphill - 1,954 shares; Mr. Jungers - 53,619 shares; Dr.
McArthur - 15,899 shares; Ms. O'Leary - 28,899 shares; Mr.
Unterberg - 53,619 shares; Mr. Waterman - 53,619 shares; all directors and
executive officers as a group - 7,462,070 shares; (b) the following units
issuable under the Deferred Compensation Plan for Executive Officers: Mr.
Sant - 59,286 shares; all executive officers as a group - 59,286 shares; (c)
the following units issuable under the Deferred Compensation Plan for
Directors: Dr. Emerson - 14,373; Mr. Jungers - 163,689; Dr.
McArthur - 5,696; Ms. O'Leary - 5,297; Mr. Unterberg - 237,226; Mr.
Waterman - 236,618; all directors as a group 662,449; (d) the following
shares held in The AES Corporation Profit Sharing and Stock Ownership Plan
and the Employee Stock Ownership Plan: Mr. Sant - 585,649 shares; Mr.
Bakke - 561,294 shares; Mr. Hemphill - 396,988 shares; Mr. Sharp - 92,642
shares; Mr. Hanrahan - 24,590 shares; Mr. Tribone - 114,876 shares; Ms.
Slusser - 40,148 shares; all directors and executive officers as a
group - 2,978,592 shares; and (e) the following units issuable under the
Supplemental Retirement Plan: Mr. Sant - 8,684; Mr. Bakke - 12,912; Mr.
Hemphill - 2,596; Mr. Sharp - 2,994; Mr. Hanrahan - 9,530; Mr.
Tribone - 3,577; Ms. Slusser - 838; all directors and executive officers as
a group - 61,805 units.
(3) Includes 27,837,324 shares held jointly by Mr. Sant and his wife. Also
includes 244,764 shares held by his wife, 259,484 shares held in an IRA for
the benefit of Mrs. Sant, 399,740 shares in an IRA for the benefit of Mr.
Sant, and 1,621,356 shares in trust for Mr. Sant. In addition, includes
4,398,192 shares held by The Summit Foundation, of which Mr. Sant disclaims
beneficial ownership. Mr. and Mrs. Sant can be reached c/o The AES
Corporation, 1001 N. 19th Street, Arlington, Virginia 22209.
(4) Includes 17,001,862 shares held jointly by Mr. Bakke and his wife, 126,912
shares held by his children, and 1,754,282 shares held by his wife, and
112,932 shares held by the Mustard Seed Foundation, of which Mr. Bakke
disclaims beneficial ownership. Mr. and Mrs. Bakke can be reached c/o The
AES Corporation, 1001 N. 19th Street, Arlington, Virginia 22209.
(5) Includes 21,304 shares held in an IRA for the benefit of Mr. Hemphill.
(6) Includes 106,206 shares held by Mr. Jungers's wife.
(7) Includes 15,304 shares held by Mr. Unterberg's wife, of which Mr. Unterberg
disclaims beneficial ownership.
(8) Includes 9,480 and 184 shares, held in IRAs for Mr. Waterman and his wife,
respectively, and 840,617 shares held in a family trust.
(9) Includes 278,080 shares held jointly with his wife.
(10) Includes 110 shares held by his wife.
(11) Includes 5,705,057 shares held jointly by another executive officer and his
wife, and 476,804 shares held in trust for his children, and 1,154,400
shares held in a family trust. Includes 1,828,990 shares held jointly by
another senior officer and his wife. Includes 20,800 shares held jointly by
another officer and his wife. Includes 8,000 shares held jointly by another
officer and his wife, and 7,952 and 5,024 shares held in IRAs for their
benefit. Includes 6,760 shares held jointly by another executive officer and
her husband, and 488 shares held in trust for their children. Includes
12,670 shares held in trusts for his children by another executive officer.
(12) Of this aggregate number, FMR Corporation reported on SEC Schedule-13G
filed with the Securities Exchange Commission dated February 13, 2001, that
it had (a) sole voting power in 3,606,128 shares, (b) shared voting power on
no shares, (c) sole dispositive power on 28,099,365 shares and (d) shared
dispositive power on no shares.
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COMPENSATION OF DIRECTORS
Directors who are also officers of AES are not paid any fees or additional
compensation for service as members of AES's Board of Directors or any committee
thereof. Each director who is not employed by AES received $30,000 as annual
cash compensation for service on the Board of Directors for 2000, and $1,000 for
each board meeting attended in person and $500 for each meeting in which he or
she participated by telephone conference. The directors may elect to defer this
compensation pursuant to the Deferred Compensation Plan for Directors in the
form of stock units. All directors are reimbursed for travel and other related
expenses incurred in attending Board and committee meetings. Beginning in 2001,
fees for each Board meeting attended in person has been increased to $2,000 per
meeting, and the fee for each telephone conference has been increased to $750.
In addition, each Director shall be paid $2,000 per day for each day of the
Company's quarterly business meetings he/she attends. Directors who are not
employed by AES are not eligible to participate in AES's employee benefit plans
but participate in The AES Corporation Stock Option Plan for Outside Directors
that was adopted in 1992. Under the terms of the plan, the Company issues
options to purchase shares of the Company's Common Stock at a price equal to the
quoted market price on the date the option is granted. Directors eligible to
participate in the plan receive options annually to purchase Common Stock valued
on the grant date at $40,000. These options become eligible for exercise in
installments of 50% at the end of each of the first two years. For 2001, upon
approval of The AES Corporation 2001 Stock Option Plan for Outside Directors by
stockholders, the Board will have an additional payment alternative. Directors
may elect to take their annual cash compensation consisting of the $30,000
annual fee, the $40,000 annual stock option grant, plus four regular meeting
fees aggregating $8,000 in the form of a stock option award. For each Director
so electing, they will receive stock options equal to 1.15 times the cash value,
and such stock option grants shall vest within one year of grant.
COMMITTEES OF THE BOARD
The Board has four standing committees: the Financial Audit Committee, the
Environmental, Safety and Social Responsibility Committee, the Nominating
Committee, and the Compensation Committee.
The Financial Audit Committee (the "Audit Committee") recommends which firm will
be appointed by the Board of Directors as independent auditor to examine AES's
financial statements and to perform services related to the audit.
Audit Committee Report
The Audit Committee of the Board of Directors is responsible for the review and
oversight of the Company's performance with respect to its financial
responsibilities and the integrity of the Company's accounting and reporting
practices. The Audit Committee also recommends to the Board of Directors the
selection of the Company's independent auditors. The Audit Committee is composed
of four non-employee directors and operates under a written charter adopted and
approved by the Board of Directors. Each Audit Committee member is independent
as defined by NYSE listing standards. A copy of the Audit Committee Charter is
attached to this Proxy Statement.
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The Company, not the Audit Committee nor the independent auditor, is responsible
for the preparation of its financial statements and its operating results and
for the appropriate safekeeping of the Company's assets. The independent
auditor's responsibility is to attest to the fair presentation of the financial
statements. The independent auditor is accountable to the Board and the Audit
Committee, and the Board and Audit Committee have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent auditor. The role of the Audit Committee is to be satisfied that
both the Company and the independent auditor discharge their respective
responsibilities effectively. However, no member of the Audit Committee is
professionally engaged in the practice of accounting or auditing and is not
expert in the fields of accounting or auditing, including with respect to
auditor independence. The Audit Committee relies, without independent
verification, on the information provided to it and on the representations made
by management and the independent auditors.
The Audit Committee held six meetings during fiscal 2000. The meetings were
designed, among other things, to facilitate and encourage communication among
the Audit Committee, the Company, and the Company's independent auditors,
Deloitte & Touche LLP. The Audit Committee discussed with the Company's
independent auditors the overall scope and plans for their respective audits,
and met with the independent auditors, with and without management present, to
discuss the results of their examinations and their evaluations of the Company's
internal controls.
The Audit Committee has reviewed and discussed the audited consolidated
financial statements for the fiscal year ended December 31, 2000 with management
and Deloitte & Touche.
The Audit Committee also discussed with the independent auditors matters
required to be discussed with audit committees under generally accepted auditing
standards, including, among other things, matters related to the conduct of the
audit of the Company's consolidated financial statements and the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended
(Communication with Audit Committees).
The Company's independent auditors also provided to the Audit Committee the
written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and discussed
with the Audit Committee their independence from the Company. When considering
Deloitte & Touche's independence, the Audit Committee considered whether their
provision of services to the Company beyond those rendered in connection with
their audit and review of the Company's consolidated financial statements was
compatible with maintaining their independence. The Audit Committee also
reviewed, among other things, the amount of fees paid to Deloitte & Touche for
audit and non-audit services. (Please see Principal Accounting Firm Fees chart
located in the section of the Proxy marked, "General".)
Based on its review and these meetings, discussions and reports, and subject to
the limitations on its role and responsibilities referred to above and in the
Audit Committee Charter, the Audit Committee recommended to the Board of
Directors that the Company's audited consolidated financial statements for the
fiscal year ended December 31, 2000 be included
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in the Company's Annual Report on Form 10-K. The Audit Committee also
recommended the selection of the Company's independent auditors, and, based on
such recommendation, the Board has selected Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ended December 31, 2001.
John H. McArthur, Chairman
Robert F. Hemphill, Jr.
Thomas I. Unterberg
Hazel R. O'Leary
The Environmental, Safety and Social Responsibility Committee monitors the
environmental and safety compliance, respectively, of the Company and its
subsidiaries and reviews and approves the scope of the Company's internal
environmental and safety compliance audit programs to consider the adequacy and
appropriateness of the programs being planned and performed, as well as
periodically reviews the Company's commitment to, and implementation of, its
principle to act in a socially responsible way. The Environmental, Safety and
Social Responsibility Committee met once in 2000.
The Nominating Committee provides recommendations for potential nomination for
election of new members of the Board of Directors. The Nominating Committee
considers potential nominations provided by stockholders and submits suggested
nominations, when appropriate, to the Board of Directors for approval. The
Nominating Committee met once in 2000. Stockholders wishing to recommend persons
for consideration by the Nominating Committee as nominees for election to the
Company's Board of Directors can do so by writing to the Secretary of the
Company at 1001 North 19th Street, Arlington, Virginia 22209, giving each such
person's name, biographical data and qualifications. Any such recommendation
should be accompanied by a written statement from the person recommended of his
or her consent to be named as a nominee and, if nominated and elected, to serve
as a director. The Company's By-Laws also contain a procedure for stockholder
nomination of directors. (See "Submission of Stockholder Proposals and
Nominations" below.)
The Compensation Committee establishes rates of salary, bonuses, profit sharing
contributions, grants of stock options, retirement and other compensation for
all directors and officers of AES and for such other people as the Board may
designate. All of the members of this committee are "disinterested persons"
under the provisions of Rule 16b-3 adopted under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Compensation Committee's primary
responsibility is to formulate and maintain the compensation program of the
Company in order to develop, retain (and attract, when necessary) people
important to the Company's performance. This committee specifically acts to
evaluate the performance and set the total compensation for the executive
officers of the Company, including the CEO, in accordance with the guidelines
discussed below. This committee has delegated to the CEO the power to set
compensation for the non-executive officers. The Compensation Committee met one
time in 2000.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee's (the "Committee") guidelines for compensation of
executive officers are designed to provide fair and competitive levels of total
compensation while integrating pay with performance. Executive officers,
including the CEO, are
8
evaluated annually on the basis of both individual responsibilities and
contributions, as well as Company-wide results in two related areas: (i)
corporate culture (or principles) and (ii) business or functional area
performance.
There are three elements in the Company's executive officer compensation, which
is consistent with how most people who work for the Company are compensated.
These elements are base salary, annual incentive compensation, and stock option
program. Beginning in 1999, Mr. Bakke's compensation was granted exclusively in
stock options. See below for a more complete description. Certain executive
officers may be compensated similarly in the future.
Base salary is adjusted annually by the Committee to account for general
economic and cost of living changes. Adjustments are also made periodically to
recognize significant new or additional responsibilities of individual executive
officers. The Committee's guidelines are to provide base salary compensation
generally consistent with its interpretation of industry averages for
individuals with similar responsibility levels.
Annual incentive compensation is based upon both objective and subjective
measures in the areas of corporate culture and business or functional area
performance, and generally takes the form of bonuses payable after year-end.
With respect to corporate culture, the Company's shared principles of fairness,
integrity, fun and social responsibility are integral to its operations and
serve as its founding principles. These principles apply equally to the internal
activities of the Company as well as its external relationships. Each executive
officer's individual contribution to demonstrating and nurturing these shared
values is reviewed and considered as a factor in determining annual incentive
compensation. Evaluations by the Committee in this area are inherently
subjective.
The second area considered in the determination of annual compensation is the
individual executive officer's performance with respect to his or her related
business responsibilities and/or functional area. Although all aspects of an
individual's responsibilities are considered in determining annual compensation,
several quantitative measures of annual performance are considered significant,
including operating margin improvements, operating reliability, earnings per
share contributions, environmental performance, and plant and Company-wide
safety. The qualitative factors considered significant include business and
project development progress, effective strategic planning and implementation,
Company-wide support, understanding of and adherence to the Company's values,
and community relations and people development.
Important strategic successes or failures can take several years to translate
into objectively measurable results. The Committee does not compute annual
incentive compensation using a mathematical formula of pre-determined
performance goals and objective criteria. As a result, the Committee's ultimate
determination of the amount, if any, of annual incentive compensation is made at
the end of each year based on a subjective evaluation of several quantitative
and qualitative factors, with primary emphasis given this year to those factors
listed in the preceding paragraph. There are no targeted, minimum or maximum
levels of annual incentive compensation, and such compensation does not
necessarily bear any consistent relationship to salary amounts or total
compensation.
9
The Company's stock option program is used to reward people for the corporate
responsibilities they undertake, their performance of those duties and to help
them to think and act like owners. All executive officers and approximately 75%
of the total people in the Company located in the United States (approximately
4% of AES people worldwide) participate in this program. Historically, because
of differing legal environments in many countries, options had been primarily
granted to U.S. people. However, the Company has taken steps to incorporate
those people who reside outside of the United States into this program by
qualifying its stock option plan in each country where AES people currently
reside or work, and the Company expects the total participation to increase in
the future. Stock options are usually granted annually at the market price of
the Common Stock on the date of grant and provide vesting periods to reward
people for continued service to the Company. The Committee's determination of
the number of options to be granted to executive officers is based upon the same
factors as such officer's annual incentive compensation discussed above with
additional consideration given to the number of options previously granted.
Since 1994, the Company has participated in an annual survey conducted by an
outside consulting firm that encompasses over 400 public companies. Based in
part on the survey results, the Committee established guidelines for suggested
ranges of option grants to executive officers as well as the rest of the people
in the Company. Based on the survey, the Committee established guideline ranges
for eligible participants between the 50th and 90th percentile of similar
companies. As with annual incentive compensation, the determination of an
individual's grant is subjective and although the Committee has established
suggested guidelines, the grants are not formula based.
Total compensation is reviewed to determine whether amounts are competitive with
other companies whose operations are similar in type, size and complexity with
those of the Company, as well as a broad range of similarly sized companies.
Comparisons are made with published amounts, where available, and, from time to
time, the Company also participates in various industry-sponsored compensation
surveys in addition to the public-company survey described above. The Committee
also has, in the past, engaged an independent compensation consultant to
specifically review the level and appropriateness of executive officer
compensation. Other than as described above, the Company uses the results of
surveys, when available, for informational purposes only and does not target
individual elements of or total compensation to any specific range of survey
results (i.e., high, low or median) other than the Committee's suggested
guidelines for stock option grants as discussed in the previous paragraph.
Because each individual's compensation is determined, in part, by experience and
performance, actual compensation generally varies from industry averages.
Executive officers also participate in the Company's profit sharing plan (or
deferred compensation plan for executive officers) on the same terms as all
other people in the Company, subject to any legal limitations on amounts that
may be contributed or benefits that may be payable under the plan. Matching
contributions and annual profit sharing contributions are made with the Common
Stock of the Company to further encourage long-term performance. In addition,
certain individuals of the Company participate in the Company's supplemental
10
retirement plan, which provides supplemental retirement benefits to "highly
compensated employees" (as defined in the Internal Revenue Code) of any amount
which would be contributed on such individual's behalf under the profit sharing
plan (or the deferred compensation plan for executive officers) but is not so
contributed because of the limitations contained in the Internal Revenue Code.
In most cases, the Committee has taken steps to qualify income paid to any
officer as a deductible business expense pursuant to regulations issued by the
Internal Revenue Service pursuant to Section 162(m) of the Internal Revenue Code
with respect to qualifying compensation paid to executive officers in excess of
$1 million. Compensation earned pursuant to the exercise of options granted
under the Company's former stock option plan (which was discontinued in 1991) is
not considered for purposes of the $1 million aggregate limit, and exercises
under the 1991 Plan are similarly excluded. The Committee will continue to
consider the implications to the Company of qualifying all compensation as a
deductible expense under Section 162 (m), but retains the discretion to pay
bonuses commensurate with an executive officer's contributions to the success of
the Company, irrespective of whether such amounts are entirely deductible.
MR. BAKKE'S 2000 COMPENSATION
Mr. Bakke's compensation for 2000 was reviewed and approved by the Committee
utilizing the guidelines discussed above. Specifically, the following primarily
positive factors considered were:
- Strong adherence, understanding, and awareness by the people in the Company to
its shared principles of integrity, fairness, social responsibility and fun,
as indicated by the Company's internal values survey, with particular emphasis
made on excellent progress made at the Company's foreign subsidiaries.
- Significant development of new project and business opportunities, including
among others:
- The acquisition of a majority interest in C.A. La Eletricidad de Caracas
and Corporacion EDC, C.A.;
- The consolidation of AES's interest in Light-Servicos de Eletricidad S.A.
and Metropolitana Eletricidad de Sao Paulo S.A.;
- The agreement to acquire IPALCO Enterprises Inc.;
- The acquisition of a 49% interest held by TransCanada Pipelines Ltd in the
Songo Songo Gas-to-Electricity Project in Tanzania;
- The acquisition of Reliant Energy International's interest in El Salvador
Energy Holdings, S.A., which owns three distribution companies in El
Salvador;
- The acquisition of a 98% stake in the 1,000 MW hydroelectric facility of
Hidroelectrica Alicura S.A. in Argentina;
- The commencement of construction of a $340 million electric power plant
and liquefied natural gas importing facility located in the Dominican
Republic;
- The acquisition of Redibol, a competitive access provider based in La Paz,
Bolivia;
- The completion of a tender offer to acquire a majority interest in Gener
S.A.;
11
- The acquisition of KMR Power Corporation in Colombia including two natural
gas fired power plants having a total capacity of approximately 414MW;
- Award of electricity and desalination project in the Sultanate of Oman;
- Numerous project financing and refinancings totaling over $7 billion.
- Successful corporate issuance of approximately $1,440 million of common
equity, $460 million term convertible preferred securities, $1,150 million
aggregate principal amount of senior notes, and $1,450 million of bank
facilities.
- An increase in the price of the Company's common stock of 48% in 2000.
- An exceptional year in plant reliability and availability.
- Continued excellent environmental performance below permitted levels (on
average).
- An increase in total net megawatts in operation, construction, or under
advanced or pending acquisition development from approximately 44,000 to
64,000.
The following primarily negative factors considered were:
- While the Company's overall safety record continued to improve in 2000,
several very serious injuries occurred, including eight that resulted in loss
of life.
The Committee decided that, beginning in 1999, Mr. Bakke would no longer receive
cash as part of his overall compensation. Mr. Bakke is compensated solely by the
grant of stock options (in lieu of a cash salary and cash bonus). The Committee
believes that this method of compensation will align Mr. Bakke's compensation
more closely with the financial interests of the Company's other stockholders.
Mr. Bakke's total 2000 compensation (including the estimated fair value of
options granted using the Black-Scholes formula) increased 49% over his 1999
compensation.
Frank Jungers, Chairman
Alice F. Emerson
Robert H. Waterman, Jr.
12
--------------------------------------------------------------------------------
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received by the five most highly
compensated executive officers for the three years ended December 31, 2000,
adjusted through February 2, 2001.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------------------- --------------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS (#) (1) COMPENSATION ($) (2)
--------------------------- -------- ---------- --------- ---------------- --------------- --------------------
DENNIS W. BAKKE 2000 0 0 12,133 200,000 0
Chief Executive 1999 0 0 18,161 98,947 0
Officer and President 1998 500,000 0 11,924 160,000 56,000
BARRY J. SHARP 2000 250,000 300,000 240 50,000 34,750
Executive VP and 1999 240,000 350,000 324 18,948 30,800
Chief Financial Officer 1998 225,000 500,000 264 16,667 28,500
PAUL T. HANRAHAN 2000 225,000 300,000 438 48,571 32,125
Executive Vice President 1999 220,000 225,000 2,157 28,888 18,900
1998 210,000 300,000 1,620 19,790 23,000
THOMAS A. TRIBONE 2000 260,000 250,000 360 28,571 35,800
Executive Vice President 1999 250,000 250,000 528 9,895 31,750
1998 235,000 425,000 696 20,000 29,500
SARAH A. SLUSSER 2000 200,000 275,000 216 41,429 29,500
Vice President 1999 185,000 300,000 240 24,632 17,575
1998 165,000 300,000 264 24,444 15,735
------------------------------
(1) The number of options shown as compensation as of December 31, 2000 were for
services rendered for 2000. Those stock options were awarded by the
Compensation Committee of the Board in January 2001.
(2) This column constitutes Company contributions to The AES Corporation Profit
Sharing and Stock Ownership Plan and the Employee Stock Ownership Plan of
the Company, and allocations to the Company's Supplemental Retirement Plan.
Specifically for 2000, (a) amounts contributed to The AES Profit Sharing and
Stock Ownership Plan and Employee Stock Ownership Plan: Mr. Bakke - $0;
Mr. Sharp - $19,500; Mr. Hanrahan - $20,000; Mr. Tribone - $19,500;
Ms. Slusser - $19,500 and (b) amounts allocated to the Supplemental
Retirement Plan: Mr. Bakke - $0; Mr. Sharp - $15,250;
Mr. Hanrahan - $12,125; Mr. Tribone - $16,300; Ms. Slusser - $10,000.
13
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on options granted for 2000 to the
named executive officers.
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED
UNDERLYING TO ALL EXERCISE
OPTIONS AES PEOPLE OR BASE GRANT DATE
GRANTED FOR FISCAL PRICE EXPIRATION FAIR VALUE
NAME (#)(1) YEAR ($/SH) DATE ($)(2)
---- ---------- ---------- -------- ---------- ----------
DENNIS W. BAKKE 200,000 4.80% 55.61 01/31/11 7,000,000
Chief Executive
Officer and President
BARRY J. SHARP 50,000 1.20% 55.61 01/31/11 1,750,000
Executive Vice President,
Chief Financial Officer
PAUL T. HANRAHAN 48,571 1.17% 55.61 01/31/11 1,700,000
Executive Vice President
THOMAS A. TRIBONE 28,571 0.69% 55.61 01/31/11 1,000,000
Executive Vice President
SARAH A. SLUSSER 41,429 0.99% 55.61 01/31/11 1,450,000
Vice President
------------------
(1) All options are for shares of Common Stock of the Company. Options granted
for services performed in 2000 were granted at the quoted market price of
the Company's Common Stock on the date of grant, and vest at the rate of 50%
per year through January 2003.
(2) The Black-Scholes stock option pricing model was used to value the stock
options on the grant date (January 31, 2001). The Company's assumptions
under this model include an expected volatility of 47.05%, a 5.26% risk free
rate of return, no dividends, and a vesting adjustment of 4.5%. The options
have 10 year terms and vest at 50% per year. No adjustments were made for
non-transferability or risk of forfeiture.
The use of such amounts and assumptions are not intended to forecast any
possible future appreciation of the Company's stock price or dividend
policy.
14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR-END OPTION
VALUE
The following table provides information on option exercises in 2000 by the
named executive officers and the value of such officers' unexercised options at
December 31, 2000.
NUMBER OF DOLLAR
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OF DOLLAR OPTIONS AT OPTIONS AT
SHARES VALUE DEC. 31, 2000 DEC. 31, 2000
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (1) UNEXERCISABLE UNEXERCISABLE (2)
---- ----------- ---------- ------------- -----------------
DENNIS W. BAKKE 376,984 12,820,283 1,296,890/ 60,242,694/
Chief Executive Officer and President 357,896 9,891,898
BARRY J. SHARP 175,820 7,552,536 367,159/ 17,699,506/
Executive Vice President, 54,563 1,359,811
Chief Financial Officer
PAUL T. HANRAHAN 58,408 2,298,576 492,552/ 21,898,603/
Executive Vice President 34,234 929,680
THOMAS A. TRIBONE 154,500 9,725,698 382,626/ 18,323,999/
Executive Vice President 39,790 1,142,197
SARAH A. SLUSSER 9,272 499,613 163,250/ 7,357,324/
Vice President 36,854 936,977
------------------
(1) The amounts in this column have been calculated based upon the difference
between the quoted market price of the securities underlying each stock
option on the date of exercise and its exercise price.
(2) The amounts in this column have been calculated based on the difference
between the quoted market price of the Company's Common Stock on December
31, 2000 of $55.3750 per share for each security underlying such stock
option and the per share exercise price.
15
MEASUREMENT PERIOD THE AES
(FISCAL YEAR COVERED) CORPORATION S&P 500 PEER GROUP*
1995........................................................ 100.00 100.00 100.00
1996........................................................ 194.76 122.96 140.52
1997........................................................ 390.55 163.98 187.21
1998........................................................ 396.85 210.84 194.56
1999........................................................ 626.15 255.21 147.62
2000........................................................ 927.71 231.98 107.44
THE AES CORPORATION STOCK PRICE PERFORMANCE
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DOLLARS
1995 1996 1997 1998 1999 2000
The AES Corporation 100 194.76 390.55 396.85 626.15 927.71
S&P 500 100 122.96 163.98 210.84 255.21 231.98
Peer Group 100 140.52 187.21 194.56 147.62 107.44
PEER GROUP INDEX*
The 2000 Peer Group consists of the following publicly traded companies in the
global power generation industry: Edison International, CMS Energy Corporation,
and International Power, PLC. Last year, the Company's Peer Group included
Mid-American Energy Company, Inc. ("MAEC"). Since February 2000, MAEC ceased
trading as a public company, and could no longer be included in AES' Peer Group
index.
The 2000 Peer Group Index reflects the weighted average total return for the
entire Peer Group calculated for the period in which the Company's equity
securities were registered with the Securities and Exchange Commission pursuant
to the Exchange Act, from a base of 100. In compliance with Securities and
Exchange Commission regulations, the returns of each company in the 2000 Peer
Group Index have been weighted according to their market capitalization as of
the beginning of the period.
The Report of the Compensation Committee on Executive Compensation and The AES
Corporation Stock Price Performance Graph shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission or
subject to Regulation 14A or 14C under the Exchange Act.
------------------------
* Excludes The AES Corporation
16
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on the Company's review of reports filed under Section 16(a) of the
Securities Exchange Act of 1934 and certain representations, the Company
believes that in 2000 there were no reports that were not reported on a timely
basis and no known failure to file a required form except that Mr. Jungers did
not timely report on Form 4 the selling of certain voting rights of AES shares
held indirectly, Mr. Armstrong did not timely report the selling of 420 shares
on Form 4, Mr. Levesley did not timely report the exercise and sale of 4,000
shares on Form 4, Mr. Ryan did not timely report the sale of 51,668 shares on
Form 4, Mr. Sant did not timely report on Form 4 the sale of 35,000 shares in
his charitable foundation, and Mr. Unterberg did not timely report on Form 4 the
sale of 4,000 shares owned by his spouse.
PROPOSAL 2
APPROVAL AND ADOPTION OF 2001 EMPLOYEE STOCK OPTION PLAN
The Board of Directors has adopted The AES Corporation 2001 Stock Option Plan
(the "2001 Option Plan") and recommends it for stockholder approval at the
forthcoming Annual Meeting. The Board of Directors believes that the 2001 Option
Plan will encourage and promote the growth and prosperity of AES by allowing
employees of AES and its affiliates to continue to share in the stock ownership
of AES. The AES Corporation Incentive Stock Option Plan, AES's previous stock
option plan, expires pursuant to its terms on June 1, 2001 with respect to
future grant of options.
There follows a brief description of the principal features of the 2001 Option
Plan.
SHARES AVAILABLE FOR FUTURE GRANTS. The total number of shares of Common Stock
for which options can be granted pursuant to the 2001 Option Plan is 15,000,000
shares, subject to adjustment for any merger or other corporation transaction or
event as described below under "RECAPITALIZATION". Subject to such adjustment,
no participant may receive options in any calendar year that relate to more than
1 million shares of Common Stock. Shares underlying substitute options, as
described below under "ELIGIBILITY", will not be counted against shares
available for future grants of options under the 2001 Option Plan.
AES will reserve, either from authorized but unissued Common Stock or from
Common Stock reacquired by AES and held in its treasury, the full number of
shares of Common Stock necessary to satisfy all options that may be granted
under the 2001 Option Plan.
ADMINISTRATION. The Compensation Committee (the "Committee") of the Board of
Directors has been designated to administer the 2001 Option Plan.
Subject to the provisions of the 2001 Option Plan and any restrictions that the
Board of Directors may make, the Committee will have authority to prescribe,
amend and rescind rules and regulations relating to the 2001 Option Plan, to
construe all plan provisions and to determine any and all questions arising
under the 2001 Option Plan. The Committee will determine the manner, timing and
amount of any options granted pursuant to the 2001 Option Plan. The
determination of the Committee will be binding and conclusive on all persons.
17
The Committee may delegate its power under the 2001 Option Plan to each of the
Chairman of the Board of Directors and the President of the Company, with
respect to options that may be granted to employees who are not officers or
directors or beneficial owners of more than 10% of the Common Stock, subject to
the requirements of the General Corporation Law of the State of Delaware.
ELIGIBILITY. Any person who is a common law employee of AES or an affiliate will
be eligible to participate in the 2001 Option Plan. Holders of options granted
by a company acquired by AES or with which AES combines may be granted
substitute options to purchase Common Stock under the 2001 Option Plan.
Currently, approximately 44,000 employees are eligible for options under the
2001 Option Plan.
OPTIONS GENERALLY. Options granted under the 2001 Option Plan may either be
nonqualified stock options or incentive stock options qualifying under Section
422 of the Internal Revenue Code. The options that participants will be granted
under the 2001 Option Plan are not yet determinable, as these options will be
granted at the determination of the Committee.
Each option will be in writing, and such writing will specify the number of
shares of Common Stock which may be purchased pursuant to the option, the
purchase price, the period during which the option may be exercised and other
conditions, if any, under which the option has been granted. Unless the
Committee determines otherwise, such writing will also provide for any vesting
of the option. Unless specifically provided to the contrary in such a writing,
upon a "change of control" of AES, all options will become fully vested and
exercisable. The 2001 Option Plan defines "change of control" to include (i) any
person or group acquiring 30% or more of the Company's voting stock, (ii)
replacement of more than half of the current directors of the Company, except by
individuals whose appointment or nomination for election was approved by the
current board (including such additionally approved individuals) and (iii)
stockholder approval of a merger of the Company, except for any merger that
would result in the voting securities of the Company continuing to represent
more than 51% of the successor entity.
RECAPITALIZATION. In the event of any merger, consolidation, split-up, spin-off,
combination or exchange of shares, or other recapitalization or change in
capitalization or other similar corporate transaction or event that affects
AES's Common Stock or other securities of AES and the Committee determines that
an adjustment is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the 2001
Option Plan, the Committee will, as it deems equitable adjust any or all of:
- the number of shares of Common Stock (or number and kind of other securities
or property) which may be made the subject of options, including the aggregate
and individual limits described above under "SHARES AVAILABLE FOR FUTURE
GRANTS",
- the number of shares of Common Stock (or number and kind of other securities
or property) subject to outstanding options, and
- the grant, purchase or exercise price with respect to any option.
In the alternative, if deemed appropriate, the Committee will make provision for
a cash payment to an optionee.
In the event of any stock split, reverse stock split, stock dividend or other
subdivision or
18
combination of the Common Stock or other securities of the Company, the items
above will be adjusted automatically.
TRANSFERABILITY. No option granted under the 2001 Option Plan will be sold,
transferred or otherwise disposed of by any optionee or by any other person
having any rights to the option, other than by will or by the laws of descent
and distribution.
NONEXCLUSIVITY. Nothing contained in the 2001 Option Plan will preclude the
Company from adopting or continuing in effect other or additional compensation
arrangements, and any such arrangements may be generally applicable, or
applicable only in specific cases.
TERMINATION; AMENDMENT. The 2001 Option Plan will terminate no later than
January 1, 2011. Notwithstanding this, AES reserves the right to change, amend,
modify or terminate the 2001 Option Plan (or any portion of the 2001 Option
Plan) at any time; provided, however, that AES will not amend the 2001 Option
Plan to increase the aggregate shares available for future grants, other than as
provided for above in "RECAPITALIZATION", without also seeking stockholder
approval. However, stockholder approval must be obtained if such approval is
necessary to qualify for or comply with any tax or regulatory status or
requirement for which or with which the Board of Directors deems it necessary or
desirable to qualify or comply. The Committee may amend the 2001 Option Plan in
such manner as may be necessary so as to have the plan conform to local rules
and regulations in any jurisdiction outside the United States.
In addition, subject to the terms of the 2001 Option Plan and applicable law,
the Committee may waive any conditions or rights under or change, amend, modify
or terminate any option, prospectively or retroactively.
U.S. FEDERAL INCOME TAX CONSEQUENCES. The following summarizes the tax
consequences of option grants under the 2001 Option Plan under U.S. federal
income tax laws as currently in effect. The recipient of an option will
recognize no income, for U.S. federal income tax purposes, upon the grant of an
option under the 2001 Option Plan. If the option is a nonqualified option, then
the optionee will recognize, upon exercise of the option, ordinary income in an
amount equal to the excess of the fair market value, at exercise, of the Common
Stock acquired over the exercise price of such option. The Company will be
entitled to a tax deduction for the same amount.
If the option is an incentive stock option, then the recipient will recognize no
income upon exercise (except for purposes of alternative minimum tax). If the
Common Stock acquired upon exercise is held for at least one year from the date
of exercise and two years from the date of grant of the option, then any gain
realized by the optionee upon sale will be taxed at long-term capital gains
rates. The Company will not be entitled to any deduction in that event. If the
shares are not held for the requisite period, then the option will be treated as
if it had been a nonqualified option: the employee will recognize, in the year
of sale, ordinary income equal to the excess of fair market value of the shares
on the date of exercise over the exercise price, the Company will get a
corresponding deduction and any additional gain will be taxed as capital gain,
long-term or short-term depending on the holding period.
The Board of Directors recommends that the stockholders approve the 2001 Option
Plan and intends to introduce at the forthcoming Annual
19
Meeting the following resolution (designated herein as Proposal 2):
"RESOLVED, that The AES Corporation 2001 Stock Option Plan be hereby
approved and adopted, effective in accordance with the provisions
thereunder."
Stockholder approval of the 2001 Option Plan is not required under Delaware law
or under the charter and bylaws of the Company but is being sought in order to
qualify for certain regulatory and tax benefits under New York Stock Exchange
rules and Sections 162(m) and 422 of the Internal Revenue Code.
If stockholders do not approve the 2001 Option Plan, no grants under the 2001
Option Plan will be made to any executive officers.
The affirmative vote of holders representing a majority of the outstanding
shares of Common Stock present or represented at the forthcoming Annual Meeting
is necessary for the adoption of Proposal 2.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION OF THE AES CORPORATION
2001 STOCK OPTION PLAN.
PROPOSAL 3
APPROVAL AND ADOPTION OF 2001 PLAN FOR OUTSIDE DIRECTORS
The Board of Directors has adopted The AES Corporation 2001 Plan for Outside
Directors (the "2001 Director Plan"), subject to stockholder approval at the
forthcoming Annual Meeting. The Board of Directors believes that the 2001
Director Plan will encourage and promote the growth and prosperity of AES by
helping to attract, retain and reward outside directors of AES with equitable
and competitive compensation opportunities and by sharing in the stock ownership
of AES.
There follows a brief description of the principal features of the 2001 Director
Plan.
SHARES AVAILABLE FOR FUTURE GRANTS. The total number of shares of Common Stock
for which options can be granted pursuant to the 2001 Director Plan is 750,000
shares, subject to adjustment for any merger or other corporation transaction or
event as described below under "RECAPITALIZATION".
AES will reserve, either from authorized but unissued Common Stock or from
Common Stock reacquired by AES and held in its treasury, the full number of
shares of Common Stock necessary to satisfy all options that may be granted
under the 2001 Director Plan.
ADMINISTRATION. The Board of Directors will administer the 2001 Director Plan.
Subject to the provisions of the 2001 Director Plan and such restrictions, if
any, as the Board of Directors may make, the Board of Directors will have
authority to modify, prescribe, amend and rescind rules and regulations relating
to the 2001 Director Plan, to construe all plan provisions and to determine any
and all questions arising under the 2001 Director Plan. The determination of the
Board of Directors will be binding and conclusive on all persons.
ELIGIBILITY. Any director of AES who is not an employee of AES or any of its
affiliates will be eligible to participate in the 2001 Director Plan. Currently,
seven directors are eligible for awards under the 2001 Director Plan.
AWARDS. Options may be granted under the 2001 Director Plan in accordance with
the policies established by the Board of Directors from time to time. Currently,
AES's policies provide that each outside director of the Company receive:
20
- an initial option as of the date of his or her initial election or appointment
to the Board of Directors, the grant date value of which is discretionary and
determined by the Board of Directors at the time of such election or
appointment ("Initial Options"), and
- an annual option with a grant date value of $40,000 ("Annual Options").
Each option will be in writing, and such writing will specify the number of
shares of Common Stock that may be purchased pursuant to the option and any
conditions under which the option has been granted. In addition, each option
will be subject to the following terms and conditions:
- The exercise price per share of Common Stock that may be purchased pursuant to
an option will equal 100% of the quoted market price of the Common Stock on
the date of grant of the option.
- Each option will expire 10 years after the date of grant of the option, or
such earlier date as it may no longer be exercised and cannot, by its terms,
become exercisable.
- Unless otherwise determined by the Board of Directors, the Initial Options
shall vest and become exercisable at the rate of 20% per year (upon the
anniversary date of the grant).
- Unless otherwise determined by the Board of Directors, Annual Options will
fully vest upon the completion of the outside director's one-year term.
- Notwithstanding the foregoing, upon a "change in control" ("change of control"
is defined in the same way as in the 2001 Option Plan), all options will
become fully vested and exercisable.
In addition, each outside director may elect to forgo his or her cash
compensation and be granted an alternative option ("Alternative Option"). The
estimated fair value (used for determining the grant) of an Alternative Option
may be greater than the sum of the fees and the estimated fair value of the
Annual Options. Each outside Director who has elected to receive such an
Alternative Option will be granted an Alternative Option to purchase the number
of whole shares of Common Stock which will have an estimated fair value equal to
the product of (i) the sum of his or her annual fees, the fees for the four
quarterly meetings and the Annual Option estimated fair value, multiplied by
(ii) 1.15. For example, it was decided for 2001 that each outside director will
receive $30,000 in annual fees, an Annual Option grant with an estimated fair
value of $40,000, and four regular meeting fees equal to $8,000 for a total of
$78,000. If a director elects the alternative option, such director would
receive an Alternative Option equal to $89,700 ($78,000 X 1.15 = $89,700).
Each Alternative Option will be in writing, and such writing will specify the
number of shares of Common Stock that may be purchased pursuant to the
Alternative Option and any conditions under which it has been granted. In
addition, each Alternative Option will be subject to the following terms and
conditions:
- Unless otherwise determined by the Board of Directors, the exercise price per
share of Common Stock that may be purchased pursuant to an Alternative Option
will equal 100% of the fair market value of the Common Stock on its date of
grant.
- Each Alternative Option will expire 10 years after its date of grant, or such
earlier date as
21
it may no longer be exercised and cannot, by its terms, become exercisable.
- Unless otherwise determined by the Board of Directors, Alternative Options
will fully vest upon the completion of the outside director's one-year term.
- Notwithstanding the foregoing, upon a "change in control", all Alternative
Options will become fully vested and exercisable.
The number of shares which may be purchased pursuant to an Initial Option, an
Annual Option or an Alternative Option will be determined by the Board of
Directors by applying the "option valuation methodology". The 2001 Director Plan
defines "option valuation methodology" as the method specified by the Board of
Directors from time to time for determining the number of shares of Common Stock
to be subject to an option and, if applicable, the exercise price thereof. The
"option valuation methodology" may be the Black-Scholes option valuation
methodology or such other methodology as may be deemed reasonable by the Board
of Directors.
RECAPITALIZATION. In the event of any merger, consolidation, split-up, spin-off,
combination or exchange of shares, or other recapitalization or change in
capitalization or other similar corporate transaction or event that affects
AES's Common Stock or other securities of AES and the Board of Directors
determines that an adjustment is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the 2001 Director Plan, the Board of Directors will, as it deems equitable
adjust any or all of:
- the number of shares of Common Stock (or number and kind of other securities
or property) which may be made the subject of options, including the aggregate
limits described above under "SHARES AVAILABLE FOR FUTURE GRANTS",
- the number of shares of Common Stock (or number and kind of other securities
or property) subject to outstanding options, and
- the grant, purchase or exercise price with respect to any option.
In the alternative, if deemed appropriate, the Board of Directors will make
provision for a cash payment to an optionee.
In the event of any stock split, reverse stock split, stock dividend or other
subdivision or combination of the Common Stock or other securities of the
Company, the items above will be adjusted automatically.
TRANSFERABILITY. No option granted under the 2001 Director Plan will be sold,
transferred or otherwise disposed of by any optionee or by any other person
having any rights to the option, other than by will or by the laws of descent
and distribution.
NONEXCLUSIVITY. Nothing contained in the 2001 Director Plan will preclude the
Company from adopting or continuing in effect other or additional compensation
arrangements, and any such arrangements may be generally applicable, or
applicable only in specific cases.
TERMINATION; AMENDMENT. The 2001 Director Plan will terminate no later than
January 1, 2011. Notwithstanding this, AES reserves the right to change, amend,
modify or terminate the 2001 Director Plan (or any portion of the 2001 Director
Plan), including without limitation the amount of Initial, Annual or Alternative
Options to be granted to an outside director under the 2001 Director Plan at any
time; PROVIDED
22
HOWEVER, that AES will not amend the 2001 Director Plan to increase the
aggregate shares available for future grants, other than as provided for above
in "RECAPITALIZATION", without also seeking stockholder approval.
In addition, subject to the terms of the 2001 Director Plan and applicable law,
the Board of Directors may waive any conditions or rights under or change,
amend, modify or terminate any option, prospectively or retroactively.
U.S. FEDERAL INCOME TAX CONSEQUENCES. All options granted under the 2001
Director Plan are nonqualified options. The tax consequences of such options are
described above under the description of Proposal 2, "U.S. FEDERAL INCOME TAX
CONSEQUENCES".
The Board of Directors recommends that the stockholders approve the 2001
Director Plan and intends to introduce at the forthcoming Annual Meeting the
following resolution (designated herein as Proposal 3):
"RESOLVED, that The AES Corporation 2001 Plan for Outside Directors be
hereby approved and adopted, effective in accordance with the provisions
thereunder."
Stockholder approval of the 2001 Director Plan is not required under Delaware
law or under the charter and bylaws of the Company, but is being sought in order
to qualify for certain regulatory benefits under New York Stock Exchange rules.
If stockholders do not approve the 2001 Director Plan, it will not be adopted.
The affirmative vote of holders representing a majority of the outstanding
shares of Common Stock present or represented at the forthcoming Annual Meeting
is necessary for the adoption of Proposal 3.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION OF THE AES CORPORATION
2001 PLAN FOR OUTSIDE DIRECTORS.
SUBMISSION OF STOCKHOLDER PROPOSALS AND NOMINATIONS
Any stockholder entitled to vote in the election of directors and who meets the
requirements of the proxy rules under the Exchange Act may submit to the Board
of Directors proposals to be considered for submission to the stockholders at
the Year 2002 Annual Meeting. Any such proposal should be submitted in writing
by notice delivered or mailed by first-class United States mail, postage prepaid
to the Secretary, The AES Corporation, 1001 North 19th Street, Arlington,
Virginia 22209 and must be received no later than November 22, 2001 in
compliance with new regulations promulgated by the Commission. Any such notice
shall set forth: (a) the name and address of the stockholder and the text of the
proposal to be introduced; (b) the number of shares of stock held of record,
owned beneficially and represented by proxy by such stockholder as of the date
of such notice; and (c) a representation that the stockholder intends to appear
in person or by proxy at the meeting to introduce the proposal specified in the
notice. The chairperson of the meeting may refuse to acknowledge the
introduction of any stockholder proposal not made in compliance with the
foregoing procedure.
AES's By-Laws contain a procedure for stockholder nomination of directors. The
By-Laws provide that any record owner of stock entitled to be voted generally in
the election of directors may nominate one or more persons for election as a
director at a stockholders meeting only if written notice is given to the
Secretary of AES of the intent to make such nomination. The
23
notice must be given, with respect to an annual meeting, not later than 90 days
in advance of such annual meeting and with respect to a special meeting, not
later than the close of business on the seventh day following the earlier of (a)
the date on which notice of such special meeting is first given to stockholders
and (b) the date on which a public announcement of such meeting is first made.
Each notice must include (i) the name and address of each stockholder who
intends to appear in person or by proxy to make the nomination and of the person
or persons to be nominated; (ii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming them) pursuant to which the nomination is to be made by the
stockholder; (iii) such other information regarding each nominee proposed by
such stockholder as would have been included in a proxy statement filed pursuant
to Rule 14a-8 under the Exchange Act; and (iv) the consent of each nominee to
serve if elected. The presiding officer of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with this procedure. The
procedure for stockholder nomination of directors described above may have the
effect of precluding a nomination for election of directors at a particular
meeting if the required procedure is not followed.
GENERAL
Deloitte & Touche LLP has been engaged as the Company's independent auditors for
2001. Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting and will be given an opportunity to make a statement. They also will be
available to respond to appropriate questions.
On November 15, 2000, the Securities and Exchange Commission adopted new auditor
independence rules, including new requirements for disclosing audit and
non-audit fees in proxy statements. The following chart outlines fees billed
during the year ended December 31, 2000 by Deloitte and Touche LLP:
PRINCIPAL ACCOUNTING FIRM FEES
Aggregate fees billed to the Company during 2000 for the fiscal year ending
December 31, 2000 by the Company's principal accounting firm, Deloitte & Touche
LLP:
Audit Fees $4,861,897(a)
Financial Information Systems $ 155,020(c)
Design and Implementation Fees
All Other Fees $7,464,526(b)(c)
(a) Includes statutory audit fees related to the Company's wholly-owned foreign
subsidiaries; fees related to stand alone audits of U.S. subsidiaries for
debt covenant purposes;
(b) Includes fees for tax consulting, permitted internal audit outsourcing, and
other non-audit services.
(c) The Audit Committee of The AES Corporation has considered whether the
provision of these services is compatible with maintaining Deloitte and
Touche LLP's independence, and concluded that these services are compatible.
SOLICITATION OF PROXIES
Proxies will be solicited by mail, telephone, or other means of communication.
The Company has retained the services of First Chicago Trust Company of New York
and Corporate Investor Communications, Inc. to assist in the solicitation of
proxies from stockholders for a fee, including its expenses, estimated at
$6,000. In addition, solicitation can be made by directors, officers, and
regular employees of the Company. The
24
Company will reimburse brokerage firms, custodians, nominees, and fiduciaries in
accordance with the rules of the National Association of Securities
Dealers, Inc., for reasonable expenses incurred by them in forwarding materials
to the beneficial owners of shares. The entire cost of solicitation will be
borne by the Company.
FORM 10-K ANNUAL REPORT
ANY STOCKHOLDER WHO DESIRES A COPY OF THE COMPANY'S 2000 ANNUAL REPORT ON FORM
10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY OBTAIN A COPY
(EXCLUDING EXHIBITS) WITHOUT CHARGE BY ADDRESSING A REQUEST TO THE SECRETARY,
THE AES CORPORATION, 1001 NORTH 19TH STREET, ARLINGTON, VIRGINIA 22209. EXHIBITS
ALSO MAY BE REQUESTED, BUT A CHARGE EQUAL TO THE REPRODUCTION COST THEREOF WILL
BE MADE. STOCKHOLDERS MAY ALSO VISIT THE COMPANY'S WEB SITE AT
HTTP://WWW.AESC.COM
By Order of the Board Of Directors,
[LOGO]
William R. Luraschi
Vice President and Secretary
25
Attachment I
THE AES CORPORATION
CHARTER OF THE FINANCIAL AUDIT COMMITTEE
MEMBERSHIP
The Financial Audit Committee ("Committee") shall be appointed by the Board
of Directors (the "Board") and be comprised entirely of outside Directors of the
Board who are generally knowledgeable in financial and auditing matters,
including at least one member with accounting or related financial management
expertise. Each member shall be independent and, in the opinion of the Board,
free of any relationship that would interfere with their exercise of independent
judgment. The Committee shall review and assess the adequacy of this charter
annually, and shall make such changes necessary to comply with the rules and
regulations of the Securities and Exchange Commission, the New York Stock
Exchange and any other appropriate regulatory body.
STATEMENT OF PURPOSE
The Committee's purpose is the review and oversight of the Company's
performance with respect to its financial responsibilities and the integrity of
the Company's accounting and reporting practices, focusing particularly in areas
that require exercise of judgment. The Committee shall assure the Board that to
the best of its knowledge, financial matters of the Company are being dealt with
consistent with the mission of the Company and its shared principles of Fun,
Fairness, Social Responsibility and Integrity.
The Company--not the Committee or the independent auditor--is responsible
for the financial statements and its operating results and for the appropriate
safekeeping of the Company's assets. The independent auditor's responsibility is
to attest to the fair presentation of the financial statements. The independent
auditor shall be accountable to the Board and the Committee, and the Board and
the Committee shall have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent auditor.
The role of the Committee is to be satisfied that both the Company and the
independent auditor discharge their respective responsibilities effectively.
RESPONSIBILITIES
In carrying out its duties, the Committee shall review the Company's annual
audited financial statements prior to filing or distribution, and discuss with
the independent auditor, the Company's financial officers and other appropriate
members of the Company their qualitative judgments about the appropriateness,
not just the acceptability, of accounting principles and the clarity of
financial disclosure practices used or proposed to be adopted by the Company.
The Committee shall also solicit
A-1
the independent auditor's views as to the degree of aggressiveness or
conservatism of the Company's choices of accounting principles, including
whether these principles are common or minority practices. In addition, the
Committee shall discuss with the independent auditors any information required
to be communicated by the independent auditors in accordance with AICPA SAS 71.
The Committee shall advise the Company in general on its financial reporting
process, the external audit process, risk analysis and AES's internal review
process. The Committee shall report to the Board such matters that come to its
attention, including conflicts of interest, the use of Company funds for any
unauthorized or illegal payments, and any other questionable business practices.
The Committee shall cause the Board to be informed, on a timely basis, of
significant developments in accounting principles affecting the Company as well
as relevant rulings by the Securities and Exchange Commission and other
regulatory bodies. In performing such responsibility it shall rely on the
support of the Company, the independent auditors, legal counsel of the Company
and the people responsible for the financial reporting of the Company.
The Committee shall cause the independent auditors to provide a formal
written statement delineating all relationships between the Company and the
internal auditors, and shall discuss those relationships with the independent
auditors. The Committee will recommend to the Board any appropriate action
necessary to satisfy itself of the independence of the internal auditors.
TERMS OF APPOINTMENT
Committee membership shall begin on the first day of an eligible Board
member's day of appointment to the Committee by the Board. Membership shall end
on the last day of such Board member's term.
REPORTING AND MEETING
The Committee will report to the full Board at least once annually. The
Committee shall meet at least (2) times a year to fulfill its obligations, or
more frequently as circumstances dictate.
DECISION-MAKING
The Committee shall be responsible for reviewing and recommending matters
related to its duties to the Board, including the selection of the independent
auditor. Final decision-making on all matters shall be vested in the entire
Board.
A-2
[LOGO]
PROXY
The AES Corporation
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE AES CORPORATION FOR ANNUAL MEETING ON APRIL 19, 2001.
THE UNDERSIGNED hereby appoints Roger W. Sant or Dennis W. Bakke, or
either of them, and any substitute or substitutes, to be the attorneys and
proxies of the undersigned at the Annual Meeting of Stockholders of The AES
Corporation ("AES") to be held at 9:30 a.m. EST on Thursday, April 19, 2001 at
1001 N. 19th St., Arlington, VA 22209, or at any adjournment thereof, and to
vote at such meeting the shares of common stock of AES the undersigned held of
record on the books of AES on the record date for the meeting for the election
for the nominees listed below, on Proposals 1, 2, and 3 referred to on the
reverse side and described in the Proxy Statement, and on any other business
before the meeting, with all powers the undersigned would possess if personally
present.
(change of address/comments)
ELECTION OF DIRECTORS, NOMINEES:
Roger W. Sant Dennis W. Bakke __________________________
Alice F. Emerson John H. McArthur __________________________
Robert F. Hemphill, Jr. Hazel R. O'Leary __________________________
Francis Jungers Thomas I. Unterberg. __________________________
Philip Lader Robert H. Waterman, Jr. (If you have written in
the above space, please
mark the corresponding box
on the side of this card)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARE
UNLESS YOU SIGN AND RETURN THIS CARD, OR VOTE BY TELEPHONE OR THE INTERNET.
--------------------------------------------------------------------------------
[X] Please mark your votes as in this example. [6811]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, AND 3.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR COMPANY PROPOSALS 1, 2, AND 3.
--------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS (SEE REVERSE) FOR [ ] WITHHELD [ ]
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
______________________________________________________
2. ADOPTION OF THE AES CORPORATION FOR [ ] WITHHELD [ ]
2001 STOCK OPTION PLAN
3. ADOPTION OF THE AES CORPORATION
2001 DIRECTORS PLAN FOR [ ] WITHHELD [ ]
Change of Address/
Comments on Reverse Side [ ]
All as more particularly described in the Proxy Statement relating to such
meeting, receipt of which is hereby acknowledged.
Please sign exactly as name appears herein, Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
-------------------------------------------------------
-------------------------------------------------------
Signatures (s) Date
TELEPHONE AND INTERNET VOTING INSTRUCTIONS
You may use the telephone or the internet, 24 hours a day, 7 days a week, to
vote. However, to ensure that your vote will be counted, please cast your
internet or telephone vote before midnight on April 18. To access the telephone
or internet voting instruction system, you must use the control number printed
in the box above.
1. To vote over the telephone: Using a touch-tone telephone, call 1-877-PRX-VOTE
(1-877-779-8683).
2. To vote over the internet: Log on to the internet and go to the web site
http://www.eproxyvote.com/aes
Using the telephone or internet voting instruction system has the same effect as
giving voting instructions by marking, signing, dating and returning your paper
Proxy Card. If you use the telephone or Internet voting instruction system,
there is no need for you to mail back your Proxy.