Wells Fargo 2009 Annual Report Download - page 168

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Employee Stock Ownership Plan
Under the Wells Fargo & Company 401(k) Plan (the 401(k)
Plan) and the Wachovia Savings Plan (the Savings Plan),
defined contribution plans with an ESOP feature, these plans
may borrow money to purchase our preferred or common
stock. From 1994 through 2008, we have loaned money to the
401(k) Plan to purchase shares of our ESOP Preferred Stock.
As we release and convert ESOP Preferred Stock into common
shares, we record compensation expense equal to the current
market price of the common shares. Dividends on the common
shares allocated as a result of the release and conversion of
the ESOP Preferred Stock reduce retained earnings and the
shares are considered outstanding for computing earnings
per share. Dividends on the unallocated ESOP Preferred Stock
do not reduce retained earnings, and the shares are not
considered to be common stock equivalents for computing
earnings per share. Loan principal and interest payments are
made from our contributions to the Wells Fargo 401(k) Plan,
along with dividends paid on the ESOP Preferred Stock. With
each principal and interest payment, a portion of the ESOP
Preferred Stock is released and, after conversion of the
ESOP Preferred Stock into common shares, allocated to
the Wells Fargo 401(k) Plan participants.
The Savings Plan contains a similar loan option except in
the form of ESOP Common Stock. Dividends on the common
shares allocated as a result of the release of ESOP Common
Stock reduce retained earnings and the shares are considered
outstanding for computing earnings per share. Dividends on
the unallocated ESOP Common Stock do not reduce retained
earnings, and the shares are not considered to be common
stock equivalents for computing earnings per share. Loan prin-
cipal and interest payments are made from our contributions
to the Wachovia Savings Plan. With each principal and inter-
est payment, a portion of the ESOP Common Stock is released
and allocated to the Wachovia Savings Plan participants.
In October 2009, the Wells Fargo Stock Fund and the
Wells Fargo ESOP Fund held in the 401(k) Plan were
combined to create a surviving Wells Fargo ESOP Fund.
The Savings Plan was merged into the 401(k) Plan on
December 31, 2009. Any outstanding ESOP loan previously
held by the Savings Plan is now held by the 401(k) Plan.
The balance of ESOP shares, the dividends on allocated
shares of common stock and unreleased preferred shares
paid to the 401(k) Plan and the fair value of unearned ESOP
shares were:
Shares outstanding
December 31,
(in millions, except shares) 2009 2008 2007
Allocated shares (common) 110,157,999 74,916,583 76,265,880
Unreleased shares (preferred) 414,019 519,900 449,804
Unreleased shares (common) 203,755 244,506 —
Fair value of unearned ESOP Preferred shares $ 414 520 450
Fair value of unearned ESOP Common shares 57—
Dividends paid
Year ended December 31,
2009 2008 2007
Allocated shares (common) $45 100 88
Unreleased shares (preferred) 51 66 57
Note 18: Common Stock and Stock Plans (continued)
Deferred Compensation Plan for Independent
Sales Agents
WF Deferred Compensation Holdings, Inc. is a wholly-
owned subsidiary of the Parent formed solely to sponsor
a deferred compensation plan for independent sales agents
who provide investment, financial and other qualifying
services for or with respect to participating affiliates. The
Nonqualified Deferred Compensation Plan for Independent
Contractors, which became effective January 1, 2002,
allows participants to defer all or part of their eligible
compensation payable to them by a participating affiliate.
The Parent has fully and unconditionally guaranteed the
deferred compensation obligations of WF Deferred
Compensation Holdings, Inc. under the plan.