Exhibit 10-26

ENERGY EAST CORPORATION

2000 Stock Option Plan

2007 STOCK OPTION AWARD AGREEMENT

     1.     Pursuant to the provisions of the 2000 Stock Option Plan, as it may
be amended from time to time (hereinafter called the "Plan"), of Energy East
Corporation (hereinafter called the "Company"), the Company hereby grants to
                                     (hereinafter called the "Optionee"),
subject in all respects to the terms and conditions of the Plan and subject
further to the terms and conditions herein set forth, the right and option to
purchase from the Company all or any part of an aggregate of            shares
of Common Stock ($.01 Par Value) of the Company at the purchase price of $24.76
per share (hereinafter called the "Option"). Capitalized terms not defined
herein shall have the same definitions as in the Plan.

     2.     The Option is a Non-Statutory Stock Option and is intended not to
qualify as an Incentive Stock Option under Section 422 of the Code.

     3.     Except as otherwise provided herein, the Option will become
exercisable in installments as follows: The Option may be exercised on and after
its grant date of February 7, 2007 ("Option Grant Date") in aggregate as to no
more than 33 1/3 % of the total number of shares originally optioned, rounded to
the next whole number; on and after January 1, 2008 in aggregate as to no more
than 66 2/3 % of the total number of shares originally optioned, rounded to the
next whole number; and on January 1, 2009 as to all optioned shares which have
not previously been exercised. Partial exercises of the Option shall be made
only with respect to whole shares of the Company's Common Stock. In no event may
the Option granted hereunder be exercised after February 7, 2017 ("Option
Expiration Date").

     4.     In addition to the grant of the Option hereunder, the Optionee is
hereby granted the same number of Stock Appreciation Rights in tandem with the
Option which entitle the Optionee to receive from the Company, upon the exercise
of such Stock Appreciation Rights, an amount equal to the excess of the Fair
Market Value of a share of the Company's Common Stock, determined on the date of
the exercise, over the exercise price of the Option. Stock Appreciation Rights
shall be exercisable under the same terms and conditions contained in Article 3
herein and shall expire on the Option Expiration Date. Upon their exercise,
Stock Appreciation Rights shall be settled in cash. The exercise of Stock
Appreciation Rights granted shall result in the corresponding cancellation of
the Option to the extent of the number of shares of the Company's Common Stock
as to which Stock Appreciation Rights are exercised. The exercise of the Option
shall result in the corresponding cancellation of the Stock Appreciation Rights
to the extent of the number of shares of the Company's Common Stock as to which
the Option is exercised. The Option and the Stock Appreciation Rights are
collectively referred to hereinafter as "Awards".

     5.     Neither the Option nor any right hereunder shall be assignable or
transferable by the Optionee or be subject to any lien, obligation or liability
of the Optionee, except that the Option may be transferred:

(a)  by the Optionee by will or the laws of descent and distribution;

(b)  by the Optionee, with the prior written consent of the committee
administering the Plan ("Committee"), by gift to (i) the Optionee's spouse or a
child or grandchild of the Optionee or of the Optionee's spouse, or (ii) a trust
or an estate in which the Optionee or the Optionee's spouse or a child or
grandchild of the Optionee or of the Optionee's spouse has a substantial
interest; and

(c)  by the Optionee, with the prior written consent of the Committee, pursuant
to a domestic relations order as defined in Section 414 of the Code, or any
successor provision.

In the event of a transfer, the Option shall continue to be subject to all the
terms and conditions contained herein and the Optionee shall remain obligated to
pay to the Company, upon the exercise of the Option by the Optionee's
transferee, amounts sufficient to satisfy any applicable federal, state and
local withholding tax requirements. The Option may not be further transferred by
the Optionee's transferee, except by will or the laws of descent and
distribution. Moreover, the Committee may require a transferee who acquires the
Option pursuant to Subsections (b) or (c) above to furnish to the Company, as a
condition to the issuance of shares upon the exercise of the Option, an
agreement (in such form as the Committee may specify) that is executed by the
transferee and that contains such provisions, including representations and
restrictions as to the transferability of the shares, as are required by the
Committee.

In the event of the termination of the employment of the Optionee, the Option
shall be exercisable by the Optionee's transferee only to the extent specified,
and during the applicable periods set forth, in Section 11 hereof.

A transfer of all or any portion of the Option shall result in the concurrent
transfer of the related tandem Stock Appreciation Rights. Stock Appreciation
Rights may not be transferred by themselves.

      6.     Unless otherwise provided by the Committee, the Option, or any
portion thereof, shall be exercised by a written notice (in such form as the
Committee may specify) that is addressed to the Secretary of the Company and
that specifies the number of shares with respect to which it is being exercised
and the total exercise price. The written notice shall be accompanied by the
payment of the exercise price in cash or the equivalent payable to the Company,
or, unless otherwise provided by the Committee, by tendering (either actually or
by delivery of a Committee-approved form attesting to stock ownership)
previously acquired shares of the Company's Common Stock which are owned by the
Optionee (or the Optionee's transferee) and which are not subject to any pledge
or other security interest, or by any combination of the foregoing. With respect
to shares tendered in lieu of the payment of cash or cash equivalents, such
shares shall be valued on the basis of their Fair Market Value on the date of
exercise. Unless otherwise provided by the Committee, an Option shall not be
deemed exercised until the date ("Exercise Date") that both a written notice of
exercise and the payment of the exercise price in the form required herein is
provided to the Company in accordance with the provisions of Section 10 hereof.

The Committee, in its sole discretion, may, in lieu of delivering shares covered
by the exercised Option, settle the exercise of the Option by means of a cash
payment to the Optionee (or the Optionee's transferee) equal to the difference
between the Fair Market Value of the Company's Common Stock determined on the
Exercise Date and the Option Price. The Committee shall at the same time return
to the Optionee (or the Optionee's transferee) any payment for the shares
covered by the Option.

Unless otherwise provided by the Committee, (i) the Stock Appreciation Rights
shall be exercised by delivery of a written notice that is addressed to the
Secretary of the Company and that specifies the number of shares with respect to
which the Stock Appreciation Right is being exercised, and (ii) the Exercise
Date with respect to a Stock Appreciation Right shall be the date the written
notice of exercise of the Stock Appreciation Right is provided to the Company in
accordance with the provisions of Section 10 hereof.

     7.     As a condition to the issuance of shares of Common Stock of the
Company under the Option, the Optionee shall remit (or cause to be remitted) to
the Company an amount sufficient to satisfy any applicable federal, state and
local withholding tax requirements. An Optionee may, totally or in part, satisfy
this obligation by electing to have shares withheld (with the consent of the
Optionee's transferee, in the event the Option is exercised by a transferee) or
by delivering other shares having a Fair Market Value equal to the amount
required to be withheld, provided that this election is made in writing on or
prior to the date of the exercise of the Option. The Fair Market Value of any
shares so withheld or delivered shall be determined as of the date the taxes are
required to be withheld.

     8.     Except as otherwise provided herein, to the extent that all or any
portion of the exercise price, or taxes incurred in connection with the exercise
of the Option, are paid by the Optionee by surrendering shares of the Company's
Common Stock (or, in the case of the payment of taxes, by the withholding of
shares) then, concurrently with such surrender or withholding, the Optionee
shall be granted as an additional option a replacement option, subject in all
respects to the provisions of the Plan, including but not limited to Article V
thereof. The replacement option, to the extent permissible, shall cover the
number of shares of the Company's Common Stock surrendered to pay the exercise
price plus the number of shares surrendered or withheld to satisfy the
Optionee's tax liability and shall have an exercise price equal to 100% of the
Fair Market Value of the Company's Common Stock determined on the date such
replacement option is granted. The replacement option shall not be exercisable
for six months from the date of its grant and shall expire on the Option
Expiration Date. No replacement option shall be issued after August 7, 2017.
Replacement options shall be issued with respect to options which are themselves
replacement options. Notwithstanding the foregoing, neither the surrender of
shares in connection with the exercise of the Option (or a replacement option)
by the Optionee's transferee, nor the surrender or withholding of shares in
connection with the payment of any taxes incurred with respect to such an
exercise, shall result in the grant of a replacement option to any party.

     9.     The Company shall, on or as soon as practicable after the date of
the exercise of all or a portion of the Option, deliver to the Optionee (or the
Optionee's transferee) a certificate or certificates for the appropriate number
of shares of the Company's Common Stock (or in the event that the Company is
using a book entry system, make the appropriate book entry). Notwithstanding
anything to the contrary contained in the Plan or this Agreement, the Company
shall not be required to issue shares of Common Stock until all applicable
legal; listing; registration and regulatory requirements or approvals relating
to the issuance have been satisfied or obtained. The shares of the Company's
Common Stock issued upon the exercise of an Option may not be transferred except
in accordance with all applicable federal and state securities laws, rules and
regulations. Certificates issued to transferees of the Optionee may contain
legends reflecting any restrictions on transferability imposed by the Company in
order to comply with such laws, rules and regulations. The Company shall not be
required to register any shares issued to any transferees of the Optionee.

     10.    All notices under this Agreement shall be in writing. Notices, other
communications and payments provided for in this Agreement shall be deemed to
have been duly given or made when delivered in person or when mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the Company at the address set forth below or to the Optionee at the address set
forth on the signature page of this Agreement or to such substitute address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon actual
receipt:

 

Corporate Secretary
Energy East Management Corporation
89 East Avenue
Rochester, New York 14649
Attention: Paul T. Karakantas

Notice to the Company may be given by telecopy and shall be deemed to have been
given when received by the Company at the telecopy number designated by the
Company.

     11.    Termination of Employment.

a)  In the event that the Optionee ceases to be an employee of any of the
Company and its affiliates by reason of death, retirement or permanent
disability, the Awards may be exercised by the Optionee or by the Optionee's
legal representative or representatives or by the persons entitled to do so
under the Optionee's will or the laws of descent and distribution, to the extent
the Awards are or become exercisable under the vesting provisions set forth in
Section 3 hereof, but in no event after the Option Expiration Date.

(b)  In the event that the Optionee ceases to be an employee of any of the
Company and its affiliates by reason of termination by any of the Company and
its affiliates of the Optionee's employment for cause (as determined in the sole
discretion of the Committee), the Awards shall expire to the extent that they
are unexercised at the time of such termination of employment.

(c)  In the event that the Optionee ceases to be an employee of any of the
Company and its affiliates for any reason other than death, retirement,
permanent disability or termination of employment by any of the Company and its
affiliates for cause, the Awards shall expire to the extent that they are
unexercised at the time such Optionee ceases to be an employee of any of the
Company and its affiliates.

(d)  Notwithstanding the foregoing, in the event that the Optionee ceases to be
an employee of any of the Company and its affiliates for any reason other than
"Death, "Retirement", Disability" or "Cause" (as defined below) during the
period of two years beginning upon the occurrence of a Change of Control (as
defined in Section 18), the Awards may be exercised by the Optionee or the
Optionee's legal representative or representatives or by the persons entitled to
do so under the Optionee's will or the laws of descent and distribution, to the
extent the Awards are exercisable as of the date of the Optionee's termination
of employment, during the one-year period following the date of such termination
of employment, but not after the expiration of such period, and in no event
after the Option Expiration Date. For purposes of this Section 11(d), the term
"Cause" shall mean (1) "Cause" as defined in any individual employment,
severance or similar agreement between the Optionee and the Company or one of
its Affiliates that is in effect at the time of termination of employment, or
(2) if there is no such agreement or if it does not define Cause, the Optionee's
(A) commission of a felony under federal law or the law of the state in which
such action occurred, (B) dishonesty in the course of fulfilling the Optionee's
employment duties, or (C) willful and deliberate failure to perform the
Optionee's employment duties in any material respect, which failure is not cured
by the Optionee promptly after receiving written notice thereof.

     12.    In the event of any change in corporate capitalization (including,
but not limited to, a change in the number of shares of Common Stock
outstanding), such as a stock split or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or other distribution
of stock or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code) or any partial or complete liquidation of the Company, then in any such
event the number and kind of shares subject to the Awards and the exercise price
per share may be appropriately adjusted consistent with such change in such
manner as the Committee in its sole discretion may deem equitable. If deemed
necessary or appropriate by the Committee, provision may be made for the payment
to the Optionee of a cash amount in cancellation of the Award equal to its
then-value, as determined by the Committee; provided, that if such event takes
place in connection with a Change of Control such value shall be based on the
value received by the holders of the outstanding Common Stock in connection with
the Change of Control. Notwithstanding the foregoing, the number of shares
subject to this Award shall always be a whole number. Any adjustments made by
the Committee shall be conclusive and binding for all purposes of the Plan.

     13.    The Awards shall not confer upon the Optionee any right with respect
to the continuance of employment with any of the Company and its affiliates, nor
shall it affect any right which any of the Company and its affiliates may have
to terminate the employment of the Optionee.

     14.    The Optionee (or Optionee's transferee) shall not be entitled to the
rights of a stockholder with respect to any shares of the Company's Common Stock
subject to the Option prior to the date of issuance of a certificate or
certificates for such shares (or in the event that the Company is using a book
entry system, the date the Company makes the appropriate book entry). No
adjustment shall be made for dividends or distributions or other rights with
respect to such shares for which the record date is prior to the date the stock
certificate or certificates are issued (or appropriate book entry is made).

     15.    A copy of the Plan has been delivered to the Optionee prior to the
execution hereof and is on file at the Company's corporate offices in Portland,
Maine and Binghamton, New York.

     16.     This Agreement shall be governed by the laws of the State of New
York, other than its conflicts of laws provisions. In the event of an
inconsistency between any term of the Plan and any term of this Agreement, the
terms of the Plan shall govern.

     17.    Notwithstanding anything to the contrary contained in any other
Section of this Agreement, the Options and Stock Appreciation Rights granted
hereunder shall become immediately exercisable upon the occurrence of a Change
in Control.

     18.     For purposes of this Section 18, a "Change of Control" shall mean
the happening of any of the following events:

(i)  an acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 25% or more of either (l) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (2) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (1) any acquisition directly
from the Company, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself acquired
directly from the Company, (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company, or (4) any
acquisition pursuant to a transaction which complies with clauses (1), (2) and
(3) of subsection (iii) of this definition; or

(ii)  a change in the composition of the Board such that the individuals who, as
of the effective date of the Plan, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, for purposes of
this Section 18(ii), that any individual who becomes a member of the Board
subsequent to the effective date of the Plan, whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
two-thirds of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board, but, provided, further, that any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered as a
member of the Incumbent Board; or

(iii) consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company ("Corporate
Transaction"); excluding, however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (2) no Person (other than the
Company, any employee benefit plan (or related trust) of the Company or any
entity controlled by the Company or such corporation resulting from such
Corporate Transaction) will beneficially own, direct or indirectly, 25% or more
of, respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the
outstanding voting securities of such corporation entitled to vote generally in
the election of directors except to the extent that such ownership existed prior
to the Corporate Transaction, and (3) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the board
of directors of the corporation resulting from such Corporate Transaction; or

 

(iv)  the approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.

 

ENERGY EAST CORPORATION

     

By:                                                     

 

                   Secretary

   

Dated:                             

 

 

ACCEPTED AND AGREED TO:

Optionee acknowledges receipt of a copy of the Plan and represents that Optionee
is familiar with the terms and provisions contained therein. Optionee hereby
accepts the Awards subject to all of the terms and provisions of the Plan.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
and interpretations of the Committee as to any questions arising under the Plan,
the Option and the Stock Appreciation Rights.

 

 

                                         

 

              Optionee