Wells Fargo 2006 Annual Report Download - page 93

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Note 14: Common Stock and Stock Plans
Common Stock
Our reserved, issued and authorized shares of common stock
at December 31, 2006, were:
date of grant. Options granted in 2004 and 2005 generally
were fully vested upon grant. Options granted in 2006
generally become exercisable over three years from the date
of grant. Except as otherwise permitted under the plan,
if employment is ended for reasons other than retirement,
permanent disability or death, the option period is reduced
or the options are canceled.
Options granted prior to 2004 may include the right to
acquire a “reload” stock option. If an option contains the
reload feature and if a participant pays all or part of the
exercise price of the option with shares of stock purchased in
the market or held by the participant for at least six months,
upon exercise of the option, the participant is granted a new
option to purchase, at the fair market value of the stock as
of the date of the reload, the number of shares of stock equal
to the sum of the number of shares used in payment of the
exercise price and a number of shares with respect to related
statutory minimum withholding taxes. Reload grants are
fully vested upon grant and are expensed immediately under
FAS 123(R) beginning in 2006.
The total number of shares of common stock available for
grant under the plans at December 31, 2006, was 187,475,498.
Holders of RSRs are entitled to the related shares of
common stock at no cost generally over three to five years
after the RSRs were granted. Holders of RSRs generally are
entitled to receive cash payments equal to the cash dividends
that would have been paid had the RSRs been issued and
outstanding shares of common stock. Except in limited
circumstances, RSRs are canceled when employment ends.
The compensation expense for RSRs equals the quoted
market price of the related stock at the date of grant and is
accrued over the vesting period. Total compensation expense
for RSRs was not significant in 2006 or 2005.
For various acquisitions and mergers, we converted
employee and director stock options of acquired or merged
companies into stock options to purchase our common stock
based on the terms of the original stock option plan and the
agreed-upon exchange ratio.
BROAD-BASED PLAN In 1996, we adopted the PartnerShares®
Stock Option Plan, a broad-based employee stock option
plan. It covers full- and part-time employees who generally
were not included in the long-term incentive compensation
plans described above. The total number of shares of common
stock authorized for issuance under the plan since inception
through December 31, 2006, was 108,000,000, including
9,557,140 shares available for grant. The exercise date of
options granted under the PartnerShares Plan is the earlier
of (1) five years after the date of grant or (2) when the quoted
market price of the stock reaches a predetermined price.
These options generally expire 10 years after the date of
grant. No options have been granted under the PartnerShares
Plan since 2002. Because the exercise price of each
PartnerShares grant has been equal to or higher than the
Dividend Reinvestment and Common Stock Purchase Plans
Participants in our dividend reinvestment and common stock
direct purchase plans may purchase shares of our common
stock at fair market value by reinvesting dividends and/or
making optional cash payments, under the plan’s terms.
Employee Stock Plans
We offer several stock-based employee compensation
plans, which are described below. Effective January 1, 2006,
we adopted FAS 123(R), Share-Based Payment, using the
“modified prospective” transition method. FAS 123(R)
requires that we measure the cost of employee services
received in exchange for an award of equity instruments,
such as stock options or restricted share rights (RSRs),
based on the fair value of the award on the grant date.
The cost is normally recognized in our income statement
over the vesting period of the award; awards with graded
vesting are expensed on a straight-line method. Awards to
retirement-eligible employees are subject to immediate
expensing upon grant. Total stock option compensation
expense was $134 million in 2006, with a related recognized
tax benefit of $50 million. Stock option expense is based on
the fair value of the awards at the date of grant and includes
expense for awards granted in 2006 and expense for awards
granted prior to January 1, 2006, all or a portion of which
vested in 2006. Prior to January 1, 2006, we did not record
any compensation expense for stock options.
LONG-TERM INCENTIVE COMPENSATION PLANS Our stock incentive
plans provide for awards of incentive and nonqualified stock
options, stock appreciation rights, restricted shares, RSRs,
performance awards and stock awards without restrictions.
Options must have an exercise price at or above fair market
value (as defined in the plan) of the stock at the date of grant
(except for substitute or replacement options granted in
connection with mergers or other acquisitions) and a term
of no more than 10 years. Options granted in 2003 and
prior generally become exercisable over three years from the
Number of shares
Dividend reinvestment and
common stock purchase plans 11,770,843
Director plans 1,165,176
Stock plans (1) 525,694,478
Total shares reserved 538,630,497
Shares issued 3,472,762,050
Shares not reserved 1,988,607,453
Total shares authorized 6,000,000,000
(1) Includes employee option, restricted shares and restricted share rights, 401(k)
and compensation deferral plans.