WELLS FARGO & COMPANY
PERFORMANCE-BASED COMPENSATION POLICY
1. PURPOSE. The purpose of the "Wells Fargo & Company
Performance-Based Compensation Policy " (the "Policy") is to establish one or
more performance goals for payment of incentive compensation other than stock
options and the maximum amount of such incentive compensation that may be paid
to certain executive officers. It is the intention of the Section 162(m)
Committee (the "Committee") of the Board of Directors of the Corporation that
incentive compensation awarded to each Covered Executive Officer (as defined
below) be deductible by the Corporation for federal income tax purposes in
accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), any regulations promulgated thereunder, and ruling or advisory
opinions published by the Internal Revenue Service related thereto (the
"Regulations").
2. COVERED EXECUTIVE OFFICERS. This Policy shall apply to any
individual (a "Covered Executive Officer") who, on the last day of a taxable
year is (a) the chief executive officer of the Corporation or is acting in such
capacity, or (b) is among the four highest compensated executive officers (other
than the chief executive officer) of the Corporation. Whether an individual is
the chief executive officer or among the four highest compensated executive
officers shall be determined pursuant to the executive compensation disclosure
rules under the Securities Exchange Act of 1934.
3. INCENTIVE COMPENSATION AWARD/ESTABLISHMENT OF PERFORMANCE GOALS.
An incentive compensation award to a Covered Executive Officer may be paid in
the form of cash, stock, or restricted stock, or any combination thereof.
Payment of an incentive compensation award to a Covered Executive Officer will
be contingent upon the attainment of the performance goal or goals for the
Performance Period established for such Covered Executive Officer by the
Committee as provided herein. The Committee shall retain the discretion to
reduce the incentive compensation award payable to a Covered Executive Officer,
notwithstanding attainment of any performance goal.
The Committee shall establish in writing one or more performance goals
to be attained (which performance goals may be stated as alternative performance
goals) for a Performance Period for each Covered Executive Officer on or before
the latest date permitted under Section
162(m) of the Code or the Regulations. Performance goals may be based on any
one or more of the following business criteria (as defined in paragraph 4
below) as the Committee may select:
- Earnings Per Share
- Business Unit Net Earnings
- Return on Realized Common Equity.
The maximum amount of an incentive compensation award for any
Performance Period to any Covered Executive Officer shall be a dollar amount not
to exceed eight-tenths of one percent (0.8%) of the Corporation's Net Income (as
defined below).
4. DEFINITIONS. For purposes of this Policy and for determining
whether a particular performance goal is attained, the following terms shall
have the meanings given them below:
(a) The term "Business Unit Net Earnings" shall mean the net
earnings of the business unit of the Corporation managed by a Covered
Executive Officer, as determined in accordance with generally accepted
accounting principles, adjusted in accordance with the Corporation's
management accounting practices and conventions in effect at the
beginning of the Performance Period, and as further adjusted in the same
manner as provided below for Net Income.
(b) The term "Earnings Per Share" shall mean the
Corporation's diluted earnings per share as reported in the
Corporation's consolidated financial statements for the Performance
Period, adjusted in the same manner as provided below for Net Income.
(c) The term "Net Income" shall mean the Corporation's net
income for the applicable Performance Period as reported in the
Corporation's consolidated financial statements, adjusted to eliminate
the effect of (1) restatements of prior periods' financial results
relating to an acquisition accounted for as a pooling of interests; (2)
losses resulting from discontinued operations; (3) extraordinary gains
or losses; (4) the cumulative effect of changes in generally accepted
accounting principles; and (5) any other unusual, non-recurring gain or
loss which is separately identified and quantified in the Corporation's
financial statements.
(d) The term "Performance Period" shall mean a calendar year,
commencing January 1 and ending December 31.
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(e) The term "Return on Realized Common Equity" shall mean
the Net Income of the Corporation on an annualized basis less dividends
accrued on outstanding preferred stock, divided by the Corporation's
average total common equity excluding average accumulated comprehensive
income as reported in the Corporation's consolidated financial
statements for the Performance Period.
5. APPLICABILITY OF CERTAIN PROVISIONS OF THE LONG-TERM INCENTIVE
COMPENSATION PLAN AND THE EMPLOYEES' DEFERRED COMPENSATION PLAN TO INCENTIVE
COMPENSATION AWARDS. An incentive compensation award paid in stock or restricted
stock pursuant to this Policy shall be governed by the provisions (other than
provisions with respect to the computation of such award) of the Corporation's
Long-Term Incentive Compensation Plan. Deferral of an incentive compensation
award paid in cash under this Policy shall be made pursuant to the provisions of
the Corporation's Employees' Deferred Compensation Plan.
6. EFFECTIVE DATE; AMENDMENT AND TERMINATION. This Policy shall be
effective as of January 1, 1998; provided, however, that no incentive
compensation award shall be paid pursuant to this Policy, unless this Policy has
been approved by the stockholders of the Corporation. The Committee may at any
time terminate, suspend, amend or modify this Policy except that stockholder
approval shall be required for any amendment or modification to this Policy
that, in the opinion of counsel, would be required by Section 162(m) of the Code
or the Regulations.
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