Form of Stock Option Agreement



 Exhibit 10.12 
  
 

 

					
			
	 	  	 	  	800 Cabin Hill Drive
	 	  	 	  	Greensburg, PA 15601
	 	  	 	  	724-837-3000
			
	 	  	 	  	Date

 Name 
 Street

 City 
  
 Dear First Name: 
  
 I am pleased to inform you
that the Board of Directors of Allegheny Energy, Inc. (“AE”) approved a grant to you of options to purchase shares of Allegheny Energy, Inc. common stock under the Allegheny Energy, Inc. Long Term Incentive Plan (the “Plan”).
This grant is subject to the terms and conditions of the Plan, which are incorporated by reference into this Notice Letter. In the event of any conflict between the terms of this Notice Letter and the Plan, the Plan’s terms will control.

  
 Option Summary 
  

							
	 Date of Grant:
	    	 Date
	  	 	  	 Type of Option: Non-Qualified Stock Option

				
	 Exercise Price per Share:
	    	 $
	  	 	  	 
				
	 Expiration Date:
	    	 Date
	  	 	  	 Number of Shares Granted: Date


  

	Vesting	Schedule: 

  

									
	 	 	         Date
	  	20%	 	 vested
	  	 
	 	 	         Date
	  	40%	 	 vested
	  	 
	 	 	         Date
	  	60%	 	 vested
	  	 
	 	 	         Date
	  	80%	 	 vested
	  	 
	 	 	         Date
	  	100%	 	 vested
	  	 

  
 Upon a Change in Control (as defined
in the Plan), the Option will be fully vested and exercisable. 
  
 Exercise After Termination Of Employment With AE Or Any Subsidiary: 
  
 Termination of employment due to retirement or disability (as defined in the Plan): vested portion of the Option is exercisable by you for three years after your termination of employment. 
  
 Death of participant: vested portion of the Option is exercisable by your beneficiary
until the later to occur of one year from the time of death or, if applicable, three years from the date of termination due to retirement. 
  
 Termination of employment for any reason other than as described above: vested portion of the Option is exercisable by you for 90 days after your termination of
employment. 
  
 Termination of employment for any reason: unvested portion
of the Option terminates immediately and is no longer exercisable. 
  
 In no
event may this Option be exercised after the Expiration Date as provided above. 







 Date 
 Page 2 
  
 You may exercise your Option only to the extent that it is vested according to the Vesting
Schedule above. Once your Option is vested, you can exercise it by following the procedure set forth in the Attachment to this Notice Letter. To exercise your Option, you must pay the total Exercise Price for the number of shares that you are
exercising, as well as any required federal or state tax withholding. You also may be required to sign other documents at AE’s request. 
  
 Please note that the date shown above as the expiration date is the latest date on which the Option can be exercised assuming that you remain employed by AE. If your
employment with AE terminates before that date, your option may expire before the stated expiration date, as explained above in the box labeled “Exercise After Termination Of Employment With AE Or Any Subsidiary.” However, the Board of
Directors (or any applicable Board Committee) may, in its discretion, extend the time in which you will be able to exercise your option. 
  
 Generally, during your lifetime, only you may exercise the Option granted in this Notice Letter. That means you may not transfer your Option to anyone else. 

 
 The Option granted to you does not confer any right to continue your employment with AE
and has no effect on the right of AE or any of its subsidiaries to terminate your employment, with or without cause. 
  
 Along with this Notice Letter, we are also providing you with a copy of the Plan document, Information Statement for the Plan, and the 2003 Annual Report. Please review
all of the enclosed materials carefully and keep them and this Notice Letter with your important papers. 
  
 This Notice Letter is delivered to you in two counterparts. Please complete the acceptance in the space below provided in both of such counterparts, retain one for your file, and return the other to Scott Summits,
Manager, Compensation and Payroll, Human Resources, Greensburg Corporate Center; whereupon this Notice Letter shall constitute a legal agreement between you and the Company on all the terms provided above, and shall be binding upon and inure to the
benefit of any successor(s) of the Company and your heirs and personal representatives. 
  
 Sincerely, 
  
 Paul J. Evanson 
  
 Enclosures 
  
 AE Long Term Incentive Plan 
 Stock Option Information Statement 
 2003 Annual Report 
  

	
	 ACCEPTED and AGREED on this      day of
                    

	
	  


	 Signature