19. Stock-Based Compensation

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The following information regarding outstanding common stock shares and options reflects the two-for-one common stock split discussed in Note 18.

Duke Energy’s 1998 Long-term Incentive Plan, as amended (the 1998 Plan), reserved 60 million shares of common stock for awards to employees and outside directors. Under the 1998 Plan, the exercise price of each option granted cannot be less than the market price of Duke Energy’s common stock on the date of grant and the maximum option term is 10 years. The vesting periods range from immediate to five years.

Upon the acquisition of Westcoast, Duke Energy converted all stock options outstanding under the 1989 Westcoast Long-term Incentive Share Option Plan to Duke Energy Corporation stock options. Certain of these options also provide for share appreciation rights under which the holder of a stock option may, in lieu of exercising the option, exercise the share appreciation right. The exercise price of these options equals the market price on the date of grant and the maximum option term is 10 years. The vesting periods range from immediate to four years.

		Stock Option Activity		Options				Weighted- Average Exercise Price
			(in thousands)
		Outstanding at December 31, 1999		17,625				$	25
		Granted		7,594					41
		Exercised		(2,047	)				21
		Forfeited		(666	)				27
		Outstanding at December 31, 2000		22,506					31
		Granted		7,090					37
		Exercised		(2,285	)				25
		Forfeited		(905	)				33
		Outstanding at December 31, 2001		26,406					33
		Granted (a)		9,406					34
		Exercised		(1,452	)				23
		Forfeited		(3,151	)				37
		Outstanding at December 31, 2002		31,209					34

		Stock Options at December 31, 2002
				Outstanding										Exercisable
		Range of Exercise Prices		Number			Weighted- Average Remaining Life			Weighted- Average Exercise Price				Number			Weighted- Average Exercise Price
				(in thousands)			(in years)							(in thousands)
		$5 to $10		409			1.5			$	10			409			$	10
		$11 to $14		272			2.3				13			272				13
		$15 to $20		419			6.7				20			398				20
		$21 to $24		621			6.4				22			390				22
		$25 to $28		7,268			6.6				26			5,379				26
		$29 to $33		4,466			5.9				30			3,030				30
		$34 to $37		1,272			8.9				35			192				34
		$38 to $39		10,966			9.0				38			6,390				38
		> $39		5,516			8.0				43			2,685				43
		Total		31,209			7.6							19,145				32

On December 31, 2001, Duke Energy had 7.9 million exercisable options with a $28 weighted-average exercise price. On December 31, 2000, Duke Energy had 5.2 million exercisable options with a $23 weighted-average exercise price.

The weighted-average fair value per option granted was $10 during 2002, 2001 and 2000. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model.

		Weighted-Average Assumptions for Option-Pricing		2002				2001				2000
		Stock dividend yield		3.4	%			3.4	%			3.7	%
		Expected stock price volatility		29.9	%			29.5	%			25.1	%
		Risk-free interest rates		5.0	%			5.0	%			5.3	%
		Expected option lives		7 years				7 years				7 years

The 1998 Plan allows for a maximum of six million shares of common stock to be issued under restricted stock awards, performance awards and phantom stock awards. Performance awards granted under the 1998 Plan vest over periods from three to seven years. Vesting can occur in year three, at the earliest if performance is met. Duke Energy awarded 16,000 shares (fair value of less than $1 million at grant dates) in 2002, 24,000 shares (fair value of approximately $1 million at grant dates) in 2001 and 225,000 shares (fair value of approximately $7 million at grant dates) in 2000. Compensation expense for the performance awards is charged to earnings over the vesting period, and totaled $4 million in 2002, $6 million in 2001 and $7 million in 2000.

Phantom stock awards granted under the 1998 Plan vest over periods from one to four years. Duke Energy awarded 54,430 shares (fair value of approximately $2 million at grant dates) in 2002, 457,700 shares (fair value of approximately $17 million at grant dates) in 2001 and 168,500 shares (fair value of approximately $7 million at grant dates) in 2000. Compensation expense for the phantom awards is charged to earnings over the vesting period, and totaled $10 million in 2002, $4 million in 2001 and was less than $1 million in 2000.

Restricted stock awards granted under the 1998 Plan vest over periods from one to five years. Duke Energy awarded 14,260 shares (fair value of less than $1 million at grant dates) in 2002, 74,005 shares (fair value of approximately $3 million at grant dates) in 2001 and 195,500 shares (fair value of approximately $5 million at grant dates) in 2000. Compensation expense for restricted awards is charged to earnings over the vesting period, and totaled $2 million in 2002, $3 million in 2001 and $1 million in 2000.

Duke Energy’s 1996 Stock Incentive Plan (the 1996 Plan) allows four million shares of common stock for awards to employees. Restricted stock grants under the 1996 Plan vest over periods ranging from one to five years. Duke Energy awarded no restricted shares in 2002. Duke Energy awarded 50,000 restricted shares (fair value of approximately $2 million at grant date) in 2001 and 99,026 restricted shares (fair value of approximately $3 million at grant dates) in 2000. Compensation expense for restricted awards is charged to earnings over the vesting period and totaled $1 million in 2002, $1 million in 2001 and $3 million in 2000.

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