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SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.      )

Filed by the Registrant                                   x

Filed by a Party other than the Registrant      ¨ 

Check the appropriate box:

Wells Fargo & Company

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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March 18, 2003

Dear Stockholder:

The annual meeting of stockholders will be held on Tuesday, April 22, 2003 at 1:00 p.m., Pacific daylight time, in the Penthouse Boardroom, 420 Montgomery Street, San Francisco, California.

At the annual meeting you will be asked to elect directors, to approve the Performance-Based Compensation Policy and the Directors Stock Compensation and Deferral Plan, to ratify the appointment of independent auditors for the year 2003, and to vote on two stockholder proposals relating to stock options.

For reasons explained in the accompanying proxy statement, the Board of Directors recommends that you vote FOR the director nominees, FOR the proposals in Items 2, 3, and 4, and AGAINST the stockholder proposals in Items 5 and 6.

We hope that you will be able to attend the meeting. If you have a disability and need an accommodation in order to attend the meeting, please contact the Corporate Secretary, at least one week in advance of the meeting, at Wells Fargo Center, MAC #N9305-173, Sixth and Marquette, Minneapolis, Minnesota 55479, telephone 612-667-8655. Whether or not you expect to attend, to make sure that your vote is received, please vote promptly by mail, telephone, or internet as instructed on your proxy card or voting instruction card. Thank you for your interest in the Company.

Please vote promptly by mail, telephone, or internet regardless of whether you plan to attend the

meeting. You may later decide to vote in person at the meeting if you are a stockholder

of record, or you may revoke your proxy or voting instructions for any

other reason at any time before your shares are voted.

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

APRIL 22, 2003

To the Holders of

Common Stock of Wells Fargo & Company:

The annual meeting of stockholders of Wells Fargo & Company (the “Company”) will be held in the Penthouse Boardroom, 420 Montgomery Street, San Francisco, California, on Tuesday, April 22, 2003, at 1:00 p.m., Pacific daylight time. The purpose of the meeting is to:

The Board recommends that stockholders vote FOR the director nominees named in the accompanying proxy statement, FOR Items 2, 3, and 4, and AGAINST Items 5 and 6.

Only holders of common stock at the close of business on March 4, 2003 may vote at the annual meeting or at any adjournment thereof. A list of stockholders of record who may vote at the meeting will be available during business hours for any stockholder of the Company to examine for any purpose relevant to the meeting. The list will be available for at least ten days before the meeting at the office of the General Counsel of the Company, 633 Folsom Street, San Francisco, California.

March 18, 2003

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420 Montgomery Street

San Francisco, California 94104

PROXY STATEMENT

The Board of Directors of Wells Fargo & Company is soliciting proxies from its stockholders to be used at the annual meeting on Tuesday, April 22, 2003. This proxy statement contains information related to the annual meeting. This proxy statement and the proxy card or a voting instruction card were mailed to stockholders of the Company beginning on or about March 18, 2003. Certain information appearing in this proxy statement reflects that in November 1998, Norwest Corporation changed its name to “Wells Fargo & Company” upon the merger (the “Merger”) of the former Wells Fargo & Company (the “former Wells Fargo”) into a wholly-owned subsidiary of Norwest Corporation. Norwest Corporation as it existed before the Merger is referred to as the “former Norwest.” As used in this proxy statement, the “Company” refers to the corporation named Norwest Corporation before the Merger and now named Wells Fargo & Company.

ABOUT THE ANNUAL MEETING

What is the purpose of the annual meeting?

At the annual meeting, stockholders will be asked to elect directors, to approve the Company’s Performance-Based Compensation Policy and the Directors Stock Compensation and Deferral Plan, to ratify the appointment of independent auditors for the year 2003, and to vote on two stockholder proposals relating to stock options

Will stockholders be asked to vote on any other matters?

As far as the Company’s Board of Directors and management know, stockholders at the meeting will vote only on the matters described in this proxy statement. However, if any other matters properly come before the meeting, the persons named as proxies for stockholders will vote on those matters in the manner they consider appropriate.

Who is entitled to vote at the annual meeting?

Only stockholders of record at the close of business on March 4, 2003 may vote at the meeting. On March 4, 2003, the record date for the meeting, there were 1,678,983,829 shares of common stock outstanding. Each outstanding share is entitled to one vote.

If your shares are registered in your name on the Company’s stock records, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote your shares in person or by proxy at the annual meeting. The Company has sent its proxy materials directly to you, including a proxy card for you to use.

If you hold shares of common stock through an account with a broker, bank, or other nominee rather than directly in your own name, then your broker, bank, or other nominee is considered the

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stockholder of record, and you are considered the beneficial owner of these shares. The Company has supplied copies of its proxy materials for its 2003 annual meeting to the broker, bank, or other nominee holding your shares of record, and they have the responsibility to send these proxy materials to you. As the beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote your shares at the annual meeting. The broker, bank, or other nominee that is the stockholder of record for your shares is obligated to provide you with a voting instruction card for you to use for this purpose. However, since you are not the stockholder of record, you may not vote these shares in person at the meeting, although you may attend the annual meeting. If you hold your shares in a brokerage account but you fail to return your voting instruction card to your broker, stock exchange rules will determine whether your broker may vote your shares without first receiving instructions from you on the items being presented to stockholders for approval at the annual meeting.

For additional information on how to vote your shares, including shares you beneficially own, and how that vote is counted, see the information below under the questions How do I vote?, Can I change my vote?, and How is the vote counted? Information on how to vote can also be found on your proxy card if you are a stockholder of record, or the instruction card you received from your broker or bank if you are a beneficial owner.

What are the Board’s recommendations on how to vote my shares?

The Board recommends that stockholders vote:

How do I vote? Can I vote by telephone or internet?

If you are a stockholder of record, you can vote your shares of common stock in person at the annual meeting or by proxy by returning your signed proxy card, by telephone or on the internet. The deadline for voting by telephone or internet is 12 noon, Central daylight time, on April 21, 2003.

If your shares of common stock are voted by proxy, the shares will be voted as you instruct. If you vote by returning your signed proxy card, but you do not give any voting instructions on your proxy card, your shares will be voted by the persons named in the proxy card by following the Board’s recommendations given above.

If you hold your shares through a bank, broker, or other nominee, you should follow the directions on the voting instruction card supplied to you for voting your shares.

Can I change my vote?

Yes. If you are a stockholder of record, you can revoke your signed proxy card at any time before it is voted—either by signing and returning a proxy card with a later date or by attending the annual

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meeting in person and voting your shares by ballot at the meeting. If you have voted your shares by telephone or internet, you can revoke your prior telephone or internet vote by recording a different vote, or by signing and returning a proxy card dated as of a date that is later than your last telephone or internet vote.

If you are the beneficial owner of your shares, you may submit new instructions to your broker, bank, or other nominee.

How do I vote my shares held in the Company’s 401(k) Plan or Stock Purchase Plan or in the Wells Fargo Financial Thrift and Profit Sharing Plan?

If you participate in the Company’s 401(k) Plan or its Stock Purchase Plan, or both plans, you will receive a single instruction and proxy card that reflects all shares you may vote under each of these plans, either with a copy of this proxy statement or, if you are a participant in one of these plans who also has a Company e-mail address, after you were notified by e-mail that you can review a copy of this proxy statement on the internet. If you are an employee of a Wells Fargo Financial subsidiary of the Company who participates in the Thrift and Profit Sharing Plan (the “TAPS Plan”) and have elected to invest any portion of your TAPS Plan account in the Company’s common stock, you will receive with a copy of this proxy statement an instruction card that reflects all shares you may vote under that plan. Under the terms of the Company’s 401(k) Plan and the TAPS Plan, all shares held by each of the 401(k) Plan and TAPS Plan are voted by Wells Fargo Bank Minnesota, National Association as trustee (the “Trustee”) of each plan, but you have the right to instruct the Trustee to vote the shares of the Company’s common stock allocable to your 401(k) Plan or your TAPS Plan account as of March 4, 2003, the record date for the annual meeting. Under the Stock Purchase Plan, you can vote all your Stock Purchase Plan shares directly. You can instruct the Trustee how to vote your 401(k) Plan shares and/or vote your Stock Purchase Plan shares or your TAPS Plan shares by marking and returning the 401(k) Plan and Stock Purchase Plan instruction and proxy card or the TAPS Plan instruction card. In the case of the Company’s 401(k) Plan and the Stock Purchase Plan only, you can also give your voting instructions by telephone or by using the internet following the instructions on the card. The deadline for giving your voting instructions to the Trustee and for voting your Stock Purchase Plan shares, whether by mail, telephone, or internet, is April 18, 2003. With respect to your 401(k) Plan or TAPS Plan shares only, the Trustee will have the votes from all participants received by the deadline tabulated and will determine the ratio of votes for and against each item. The Trustee will then vote all shares held in the 401(k) Plan or the TAPS Plan according to these ratios.

Who pays the cost for soliciting proxies?

The cost of soliciting proxies will be paid by the Company. The Company has retained Georgeson Shareholder Communications Inc. to aid in the solicitation for a fee of $15,000 plus out-of-pocket expenses. Proxies may also be solicited by employees and directors of the Company by mail, telephone, fax, e-mail, or in person.

What vote is required to approve each item?

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How is the vote counted?

A quorum consisting of the holders of a majority of the outstanding shares of common stock on the record date must be present in person or represented by proxy for the transaction of business at the annual meeting. Shares present in person at the meeting that are not voted for a director nominee or shares present by proxy where the stockholder has withheld authority to vote for a nominee will be counted in determining whether a quorum is present, but will not count toward a nominee’s plurality. Shares properly voted as “ABSTAIN” on a particular matter are considered as shares present at the meeting for quorum purposes but are treated as having voted against the matter.

If a stockholder holds shares through a broker, stock exchange rules prohibit a broker from voting shares held in a brokerage account on some proposals (a “broker non-vote”) unless the beneficial owner has given voting instructions to the broker. Shares that are subject to a broker non-vote are counted for determining the quorum but not as having voted on the proposal. Under New York Stock Exchange (“NYSE”) rules in effect on the date of this proxy statement, a member broker may not vote in its discretion on Items 5 and 6, the stockholder proposals being presented at the annual meeting. If new proposed NYSE rules relating to broker voting by proxy on equity compensation plans go into effect before the vote is counted at the 2003 annual meeting, then a member broker also may not vote in its discretion on Item 3, the Directors Stock Compensation and Deferral Plan.

Is my vote confidential?

Yes. It is the Company’s policy that all stockholder meeting proxies, ballots, and voting records that identify the vote of a particular stockholder are confidential. The vote of any stockholder will not be disclosed to any third party before the final vote count at the annual stockholders’ meeting, except (i) to meet legal requirements; (ii) to assert claims for or defend claims against the Company; (iii) to allow the inspectors of election to certify the results of the stockholder vote; (iv) if a proxy solicitation in opposition to the Board of Directors takes place; or (v) to respond to stockholders who have written comments on proxy cards or who have requested disclosure. Inspectors of election and those who count stockholder votes may not be employees of the Company but may be employees of an affiliated bank who have been instructed to comply with this policy.

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STOCK OWNERSHIP

Does any stockholder own more than 5% of the Company’s common stock?

The Company does not know of any person or group that beneficially owned more than 5% of its common stock on December 31, 2002. A person is the beneficial owner of securities, as defined by the Securities and Exchange Commission, if he or she has or shares voting or investment power for such securities or has the right to obtain beneficial ownership within 60 days after such date.

How much stock do the Company’s directors and executive officers own?

The table below shows for current directors, executive officers (including a former executive officer) named in the Summary Compensation Table on page 23 of this proxy statement, and all directors and executive officers as a group, the shares of common stock beneficially owned as of February 28, 2003 unless otherwise indicated and phantom common shares credited to plan accounts as of January 1, 2003.

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ITEM 1—ELECTION OF DIRECTORS

Directors Standing for Election

The Board has set 14 directors as the number to be elected at the annual meeting and has nominated the individuals named below. All nominees are currently directors of the Company.

Directors are elected to hold office until the next annual meeting and until their successors are elected and qualified. All nominees have informed the Company that they are willing to serve as directors. If any nominee is no longer a candidate for director at the annual meeting, the proxyholders will vote for the rest of the nominees and may vote for a substitute nominee in their discretion.

Biographical information about each director nominee appears below.

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THE BOARD OF DIRECTORS AND COMMITTEES

Meetings of the Board

The Board of Directors held six regular meetings during 2002. The Board met in executive session without management present during three of the regular meetings held. The Board has established committees, including committees with audit, compensation, and nominating responsibilities, that also met during 2002. Director attendance at these meetings averaged 97% during 2002. Each director attended 75% or more of the total number of meetings of the Board and committees on which he or she served.

Committees of the Board

Audit and Examination Committee

Credit Committee

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Finance Committee

Governance and Nominating Committee

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Human Resources Committee

Section 162(m) Committee

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Director Compensation

Annual Compensation.    The annual retainer for non-employee directors is paid in the form of cash and shares of common stock. During 2002, half of the annual retainer for non-employee directors was paid in common stock under the 1999 Directors Formula Stock Award Plan discussed below. Within five years after joining the Board, directors are expected to own Company common stock having a value equal to five times the cash portion of the annual retainer.

Each non-employee director who served on the Board of the Company during 2002 received a cash retainer at an annual rate of $35,000 plus $1,500 for each Board or committee meeting attended. Effective January 1, 2003, the annual cash retainer was set at $50,000. For the period January 1 through September 30, 2002, the Chair of the Audit and Examination Committee was paid an additional fee at an annual rate of $10,000. Effective October 1, 2002, the Board increased this annual fee to $20,000 in recognition of the additional time commitment this position requires. The Chairs of the Credit, Finance, Governance and Nominating, and Human Resources Committees were paid an additional annual fee of $10,000.

The Company has three compensation plans for directors: the 1999 Directors Formula Stock Award Plan, the 1999 Directors Stock Option Plan, and the 1999 Deferral Plan for Directors. Subject to stockholder approval at the 2003 annual meeting, the Board proposes to combine these three plans into a single plan named the “Directors Stock Compensation and Deferral Plan.” A description of the terms of the proposed plan can be found below under the heading “Item 3—Approve the Directors Stock Compensation and Deferral Plan.”

Directors Formula Stock Award Plan.    Under the 1999 Directors Formula Stock Award Plan, a non-employee director who has served on the Board for at least the month of April in any year and is re-elected as a director at the annual meeting of stockholders held that year or who is elected to the Board before September 30 in that year will receive as of the date of his or her election an award of shares of Company common stock worth $35,000. Non-employee directors who are elected to the Board at other times and who attend at least one meeting receive an award of Company stock worth $17,500. For their service on the Board for 2002, all current non-employee directors received 697 shares of common stock under this plan as of April 23, 2002, except for Mr. Hernandez, who joined the Board effective January 29, 2003.

Directors Stock Option Plan.    Under the 1999 Directors Stock Option Plan, each non-employee director elected or re-elected at the annual meeting of stockholders receives an option, having a Black-Scholes value of $50,000, to purchase Company common stock at an option exercise price equal to the market value of the common stock as of the date of the meeting. A non-employee director joining the Board at another time will receive a stock option with a pro-rated value and an option exercise price equal to the market value of the common stock as of the date of joining the Board. The options become exercisable six months after grant and remain exercisable for ten years. Directors who exercise an option under the plan by delivering shares of previously owned common stock or shares purchased in the market are granted a reload option. A reload option allows the director to purchase the same number of whole shares of common stock, at their fair market value on the date the original option was exercised, as were used to pay the option exercise price. A reload option is exercisable at any time during the remaining term of the original option. Under this plan, all current non-employee directors received options to purchase 3,199 shares of common stock at $50.22 per share as of April 23, 2002, except for Mr. Hernandez, who joined the Board on January 29, 2003. He received, as of January 29, 2003, options to purchase 1,306 shares of common stock at $46.60 per share.

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Deferral Plan.    Non-employee directors may defer all or part of their annual retainer, meeting fees, formula stock awards, and gains from the exercise of stock options using previously owned stock under the 1999 Deferral Plan for Directors. The annual retainer and meeting fees may be deferred into either an interest-bearing account or phantom shares of Company common stock with dividends reinvested. All other deferrals may be made only into phantom shares of Company common stock with the reinvestment of dividends. Deferred amounts are paid in the same form in which they are invested, either in a lump sum or in installments, at the election of the director.

Agreements and Other Transactions with Certain Directors

Spencer F. Eccles.    The Company entered into an employment agreement with Spencer F. Eccles, the former chairman and chief executive officer of First Security Corporation (“First Security”), effective upon completion of the Company’s acquisition of First Security on October 25, 2000 (the “Effective Date”). Pursuant to this employment agreement, Mr. Eccles has served as a director of the Company since the Effective Date and will retire as a director at the 2003 annual meeting. He will continue to serve as the chairman of the Company’s Intermountain Banking Region in Salt Lake City, Utah through August 2004.

Pursuant to his employment agreement, Mr. Eccles received a salary and bonus in 2002 of approximately $1,100,000. Mr. Eccles will receive a bonus of approximately $108,000 in 2003 for the period January 1, 2002 through April 23, 2002, and base salary for 2003 through August 2004 (the month and year in which Mr. Eccles will reach the age of 70) at an annual rate of $800,000. Mr. Eccles will also be entitled to participate in the Company’s employee benefit, medical, and other plans and programs generally applicable to the Company’s senior executives, excluding certain salary continuation and severance programs, through August 2004.

Mr. Eccles is also entitled to certain payments and benefits if his employment is terminated prior to August 31, 2004. In the event such termination occurs, Mr. Eccles will be entitled to receive continued medical and dental benefits for himself and his spouse, a retirement benefit of $800,000 per year until he reaches the age of 70, and thereafter the retirement benefit described below.

Beginning on his 70th birthday, Mr. Eccles will receive an annual retirement benefit of $1,000,000, less the amount of any accrued benefits payable to him under the Company’s qualified and non-qualified retirement plans. Upon his death, his current spouse (if she survives him) will receive 50% of Mr. Eccles’ retirement benefit. He will also receive a special bonus of $1,500,000 on his 70th birthday. In addition, Mr. Eccles will be entitled to receive post-retirement welfare benefits based on the greater of the benefits he would have been eligible to receive if he had retired at the time the Company completed its acquisition of First Security and the benefits provided to the Company’s retired executive officers at any time after the acquisition was completed.

Mr. Eccles’ employment agreement also obligates the Company to make an additional payment if any payment or distribution received by him under the terms of his employment agreement would result in an excise tax liability so that after the payment of all income and excise taxes, he would be in the same after-tax position as if no excise tax had been imposed. Alternatively, if any such payment or distribution does not exceed 110% of the minimum amount for imposition of an excise tax, no additional payment to cover any excise taxes will be paid. Instead, the payment or distribution owed to Mr. Eccles will be reduced to an amount that would not result in any excise tax liability to him.

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Robert L. Joss.    Robert L. Joss, a director of the Company, has an agreement with Wells Fargo Bank, N.A. pursuant to which he has agreed to serve as a director of Shanghai Commercial Bank Limited (“SCB”) in which Wells Fargo Bank has a 20% interest, and to provide advice to the Bank on specific issues relating to SCB for an annual fee of $30,000.

EXECUTIVE COMPENSATION

(How the Company Pays Its Executive Officers)

Report of the Human Resources and Section 162(m) Committees on Executive Compensation

This Report on Executive Compensation is furnished jointly by the Board’s Human Resources Committee (the “HRC”) and the Section 162(m) Committee (the “162(m) Committee”) (collectively, the “Committees”). This report describes, using a question-and-answer format, the Committees’ objectives and the procedures used to determine 2002 compensation for the Chief Executive Officer and the other executive officers listed in the Summary Compensation Table.

What are the goals of the Company’s compensation policies?

The Company’s compensation policies have two goals:

What is the function of the Committees?

The Committees jointly review competitive compensation data, including salary, bonus, and long-term incentives, from a comparison group of banking organizations for the purpose of establishing overall compensation for executive officers. The HRC sets, and submits to the Board of Directors for ratification, the annual base salary for the Chief Executive Officer and approves the annual base salaries for the other executive officers named in the Summary Compensation Table. The HRC also conducts the annual performance evaluation of the Chief Executive Officer and the Chair of the HRC presides at the presentation of this evaluation to the Board of Directors meeting in executive session. The 162(m) Committee administers the Company’s “Performance-Based Compensation Policy” (the “Performance Policy” or “Policy”), including establishing performance goals at the beginning of each year for each executive officer covered by the Performance Policy, certifying achievement of the goals, and determining the amount of annual incentive compensation payable to executive officers who have met their goals, subject to the maximum limit on incentive compensation under the Policy. The 162(m) Committee also determines long-term compensation awards for executive officers in the form of stock options and other stock-based awards under the Company’s Long-Term Incentive Compensation Plan (the “LTICP”). In the case of the Chief Executive Officer, the 162(m) Committee approves, and submits to the Board of Directors for ratification, the annual incentive and long-term compensation awards to be made to the Chief Executive Officer. The members of the 162(m) Committee include all of the members of the HRC, except Robert L. Joss. Because Mr. Joss was an officer of the former Wells Fargo during a period that ended in 1993, he is not considered an “outside director” under Internal Revenue Code regulations.

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More detailed information on the Committees and their procedures for determining compensation for the Chief Executive Officer and the executive officers named in the Summary Compensation Table can be found below under the heading “How does the Company pay its executive officers?”

What is the purpose of the Performance Policy?

The Company adopted the Performance Policy to comply with Section 162(m) of the Internal Revenue Code with respect to incentive compensation. This law places limits on tax deductions for annual compensation expense in excess of $1,000,000 for each of the executive officers named in the Company’s proxy statement. These deduction limits do not apply if:

The Performance Policy, which contains these business criteria and the maximum compensation amount, was originally approved by stockholders at the 1994 annual meeting, and was amended and reapproved by stockholders at the 1998 annual meeting. Under Section 162(m), stockholders must approve the business criteria and the maximum compensation amount by approving the Policy every five years. Stockholders are being asked to approve the Performance Policy, as amended by the 162(m) Committee, at the 2003 annual meeting. A more complete description of the Performance Policy can be found on pages 43 to 45 of this proxy statement under “Item 2—Approve the Performance-Based Compensation Policy.”

How does the Company pay its executive officers?

Compensation for the executive officers named in the Summary Compensation Table consists of annual compensation (base salary and an incentive compensation award under the Policy) and long-term compensation. The HRC sets base salary ranges for executive officers using available compensation data for the prior year from a comparison group of 15 banking organizations. The 162(m) Committee awards annual incentive compensation under the Policy and long-term compensation in the form of stock options or other stock-based awards under the Company’s LTICP to the executive officers named in the Summary Compensation Table who are considered “covered executive officers” as described below. The discussion below applies generally to the 2002 annual salary, incentive compensation, and long-term compensation approved by the Committees and submitted to the Board of Directors for ratification in the case of Mr. Kovacevich, as Chief Executive Officer of the Company, and approved by the Committees for the other executive officers named in the Summary Compensation Table, other than compensation paid to Les Biller and 2002 salary for Howard I. Atkins. A more complete description of Mr. Kovacevich’s 2002 compensation can be found below under the heading “How is the Chief Executive Officer’s compensation determined?”

Les Biller, who is named in the Summary Compensation Table, resigned as a director and executive officer of the Company effective September 30, 2002. Mr. Biller will remain an employee of the Company until his retirement on March 31, 2003. In connection with his resignation, Mr. Biller entered into a separation agreement with the Company that provides for continuation of his 2002 base salary until his retirement as an employee, and specified incentive compensation for that portion of 2002 during which he served as an executive officer of the Company, as well as certain retirement and

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other benefits. Howard I. Atkins, who is also named in the Summary Compensation Table, is considered a covered executive officer under the Policy. Mr. Atkins entered into an employment arrangement with the Company upon his employment as Chief Financial Officer in August 2001. This arrangement provided for a minimum bonus for 2002, and certain stock-based compensation awarded in 2001, as well as certain other benefits. The terms of Mr. Biller’s separation agreement and Mr. Atkins’ employment arrangement are discussed on pages 31 to 32 of this proxy statement under the heading “Other Compensation Arrangements for Certain Executive Officers.”

Annual Compensation.    To establish base salaries and determine final annual incentive compensation awards under the Policy, the Committees considered available competitive compensation data from a comparison group (the “Peer Group”), defined as the 15 largest publicly-traded bank holding companies based on total market capitalization as of December 31, 2001.¹ The Committees consider that these banking organizations, based on their size and prominence in the financial services market, compete directly with the Company for talented management. As a result, these companies set the competitive compensation levels the Company must consider in order to retain and attract talented management.

Base Salaries.    Mr. Kovacevich, as the Company’s Chief Executive Officer, recommends the individual base salaries for all other executive officers. The HRC approves base salaries for these executive officers and sets and recommends Mr. Kovacevich’s base salary for approval by the Board of Directors. For these other executive officers, salaries are reviewed each year and adjusted periodically, typically at intervals of 12 months or more. The HRC adjusts salaries after considering the relationship of the executive officer’s current salary to the base salary range for the position and after its subjective evaluation of the executive officer’s overall performance. Base salaries paid in 2002 to executive officers named in the Summary Compensation Table were near the median of estimated base salaries of the Peer Group.

Incentive Compensation.    The Performance Policy governs annual incentive compensation for each covered executive officer. The Policy defines a covered executive officer as an individual who, on the last day of a taxable year, is the Chief Executive Officer of the Company or is acting in such capacity or is among the four highest paid executive officers (other than the Chief Executive Officer) of the Company determined under Securities and Exchange Commission rules. Except for Les Biller, each person named in the Summary Compensation Table is a covered executive officer under the Policy.

Under the Policy, payment of an incentive compensation award to a covered executive officer depends upon achievement of one or more performance goals. The 162(m) Committee establishes these goals in writing at the beginning of each year. The 162(m) Committee has the discretion under the Policy to reduce the incentive compensation award to a covered executive officer from the maximum award permitted by the Policy, even though the officer may have met the performance goals.

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In exercising this discretion, the 162(m) Committee reviews available competitive market data from the prior year and reasonable estimates of incentive compensation to be paid by the banking organizations in the Peer Group to their executive officers for the most recently completed year. To determine the incentive compensation award to the Chief Executive Officer that the 162(m) Committee approves and submits to the Board of Directors for ratification, the 162(m) Committee also considers the quality of the Company’s earnings based on the factors discussed below under the heading “How is the Chief Executive Officer’s compensation determined?” For covered executive officers other than the Chief Executive Officer, the 162(m) Committee also reviews the Chief Executive Officer’s recommendations.

The maximum amount of an incentive compensation award payable under the current Policy for any year to any covered executive officer who has met one or more of his or her pre-established performance goals may not be greater than eight-tenths of one percent (0.8%) of the Company’s Net Income² for the year. Based on the Company’s 2002 Net Income of $5.710 billion, the maximum incentive compensation award payable under the Policy would have been $45,680,000 (0.8% of $5.710 billion).

For 2002, the 162(m) Committee established alternative performance goals for Mr. Kovacevich, as Chief Executive Officer, and for each other covered executive officer. These performance goals were based on the Company’s “Earnings Per Share” and “Return on Realized Common Equity,” as defined in the Policy.

Messrs. Kovacevich, Oman, Stumpf, Hoyt, Edwards, and Atkins, who are covered executive officers, each met his respective performance goals for 2002. Based on the 162(m) Committee’s certification that the performance goals established by the Committee had been met, its review of projected 2002 executive officer incentive compensation data from the Peer Group, and the Company’s performance for 2002, the 162(m) Committee determined and approved and submitted to the Board of Directors for ratification with respect to Mr. Kovacevich, and awarded to each of Messrs. Oman, Stumpf, Hoyt, Edwards, and Atkins an incentive award under the Policy. None of the foregoing covered executive officers, including the Chief Executive Officer, received the maximum incentive compensation award under the Policy. Under his employment arrangement with the Company, Mr. Atkins was entitled to a minimum incentive award for 2002 of $990,000. Because Mr. Atkins had met his performance goals for 2002, the Committee awarded him incentive compensation in the amount of $1,650,000. Mr. Biller, who is also named in the Summary Compensation Table, received an incentive compensation award in an amount established under the terms of his separation agreement with the Company. Each incentive award, including the awards to Messrs. Atkins and Biller, consists of cash in the amount shown for 2002 in column (d) of the Summary Compensation Table.

Long-Term Compensation.    Long-term compensation is provided primarily in the form of stock option grants and/or restricted share rights (“RSRs”) awarded under the LTICP. The purpose of long-

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term compensation is to increase management ownership of stock and to provide an incentive to executive officers to improve the long-term performance of the Company. Stock options granted by the 162(m) Committee to covered executive officers under the LTICP are considered performance-based compensation under Section 162(m) of the Internal Revenue Code and are not subject to the Performance Policy. Under stock ownership guidelines established by the Committee, each executive officer is expected to retain shares of the Company’s common stock equal to at least 50% of the after-tax profit shares (assuming a 50% tax rate) acquired through option exercises. The number of shares expected to be owned under these guidelines continues to increase each time an executive officer exercises a stock option.

In determining original option grants each year, the 162(m) Committee considers the stock option grant practices of the Peer Group at the time of grant. The 162(m) Committee also encourages executive officers to achieve their stock ownership goals by including in original option grants a reload feature. If the optionee exercises the original option and pays for the option shares by delivering shares of previously owned common stock or shares purchased in the market, the optionee receives a reload option. Under a reload option, the optionee can purchase the same number of whole shares of stock, at their fair market value on the date the original option is exercised, as were used to pay the option exercise price and related taxes. Reload options are exercisable at any time during the remaining term of the original option. Reload options allow the exercise of the original option early in its term while preserving the executive officer’s opportunity for future appreciation in the shares delivered to exercise the original option. The 162(m) Committee believes that the reload feature encourages executive officers to acquire and retain the Company’s stock.

An RSR award generally entitles the executive officer to receive a specified number of shares of common stock upon the expiration of a stated vesting period and dividend equivalents payable in cash during the vesting period equal to the dividend rate for the Company’s common stock. RSRs awarded to executive officers generally vest over a period of five years, beginning one year from the date of the original award. Once an RSR award vests, the shares of common stock specified in the award will be issued to the recipient. An executive officer who has been awarded an RSR may not vote the shares of common stock subject to the RSR until the shares are issued. Until the vesting period applicable to an RSR award expires, the executive officer also may not transfer or encumber any interest in the RSR or in any related dividend equivalents.

Under the terms of an RSR award, and except in the case of the executive officer’s death, disability, or retirement or a change of control of the Company, the executive officer will forfeit the right to receive the shares and any related dividend equivalents subject to the RSR, if he or she is not continuously employed by the Company or an affiliate until the restrictions end.

Information with respect to option grants, including reload options, made in 2002 and RSR awards made in 2001 and 2002 under the LTICP to the executive officers named in the Summary Compensation Table appears with respect to option grants in the table headed “Option/SAR Grants in Last Fiscal Year” (page 25), and with respect to RSR awards in column (f) and footnote 3 to the Summary Compensation Table (page 23).

Other Compensation.    Executive officers also receive various perquisites and supplemental retirement benefits of a type and value comparable to those made available to executive officers of Peer Group banking organizations. They also receive retirement and medical benefits generally available to the Company’s employees.

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How is the Chief Executive Officer’s compensation determined?

The HRC determined Mr. Kovacevich’s 2002 salary based on the salary procedures described above for covered executive officers. With respect to Mr. Kovacevich’s incentive award under the Policy, the 162(m) Committee certified that Mr. Kovacevich had met his performance goals based on the Company’s 2002 Return on Realized Common Equity and Earnings Per Share, as determined pursuant to the Policy. The 162(m) Committee concluded that Mr. Kovacevich was eligible to receive the maximum incentive compensation award under the Policy, but used its discretion to reduce the award.

In exercising its discretion, the 162(m) Committee evaluated the quality of the Company’s earnings based on factors including total stockholder return (assuming reinvestment of dividends), total market capitalization, return on common equity, return on assets, earnings per share growth, loan loss reserves as a percentage of total non-performing loans, and non-performing loans as a percentage of total loans. The 162(m) Committee also compared the Company’s performance to that of the banking organizations included in the Peer Group using these same factors. In particular, the Committee noted that the Company’s return on common equity, earnings per share growth, and loan loss reserves placed the Company at or near the top of its Peer Group banking organizations. Furthermore, the Company achieved superior earnings and revenue growth, while at the same time strengthening its overall financial position, despite challenges presented by an uncertain geopolitical, economic, and financial market outlook. The 162(m) Committee ultimately exercised its discretion to determine Mr. Kovacevich’s 2002 incentive award based on (a) its evaluation of the Company’s 2002 overall performance and (b) the aggregate compensation paid by Peer Group banking organizations to their chief executive officers. Based on Mr. Kovacevich’s achievement of his performance goals, and the 162(m) Committee’s exercise of its discretion under the Policy, the 162(m) Committee awarded incentive compensation for 2002 to Mr. Kovacevich of $7,000,000, and submitted this award to the Board of Directors for ratification. The Board of Directors of the Company, meeting in executive session, ratified the award to Mr. Kovacevich.

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STOCK PERFORMANCE

The graphs presented below compare the cumulative total return on the Company’s common stock for the five- and ten-year periods ended December 31, 2002, with the cumulative total returns for the same periods for the S&P 500 Index and the Keefe, Bruyette and Woods 50 Total Return Index (the “KBW 50 Index”).

The cumulative total stockholder return computations in the graphs assume the investment of $100 in Company common stock, the S&P 500 Index, and the KBW 50 Index. For purposes of these graphs, the stock performance used to compute total stockholder return for the Company for all years prior to 1998 is the stock performance of the former Norwest, as the ongoing company after the Merger.

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COMPENSATION TABLES AND INFORMATION

The table below shows the cash and non-cash compensation paid to the Chief Executive Officer and the six next highest paid executive officers of the Company for the last three years. For 2002, two executive officers, David A. Hoyt and Howard I. Atkins, each received similar salary and bonus. In addition, Les Biller, who resigned as an executive officer of the Company in September 2003, received salary and bonus for 2002 that would have placed him among the highest paid executive officers as of December 31, 2002. As a result, compensation information for Messrs. Biller, Hoyt, and Atkins has been included in the Summary Compensation Table.

Summary Compensation Table

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Option Grants and Exercises

These tables summarize for 2002 option grants under the Company’s Long-Term Incentive Compensation Plan and option exercises by the executive officers named in the Summary Compensation Table, and the value of the options held by them as of December 31, 2002.

Option/SAR Grants in Last Fiscal Year

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Aggregated Option/SAR Exercises in

Last Fiscal Year and Fiscal Year-End Option/SAR Values

Pension Plans and Other Retirement Arrangements

Effective July 1, 1999, the Company adopted the “Wells Fargo & Company Cash Balance Plan” (the “Cash Balance Plan”) and the “Wells Fargo & Company Supplemental Cash Balance Plan” (the “Supplemental Cash Balance Plan”) (the “Combined Plans”). These Plans amended and restated the Norwest Corporation Pension Plan (the “Norwest Pension Plan”) and the Norwest Corporation Supplemental Pension Plan (the “Norwest Supplemental Pension Plan”) (the “Norwest Plans”). All employees of the Company who meet certain eligibility requirements automatically participate in the Combined Plans. All of the individuals named in the Summary Compensation Table on page 23 of this proxy statement participate in the Combined Plans.

Les Biller, who is named in the Summary Compensation Table on page 23 of this proxy statement, resigned as a director and executive officer of the Company on September 30, 2002, and will retire as an employee of the Company effective March 31, 2003. Information with respect to retirement benefits payable to Mr. Biller under the Combined Plans and a supplemental retirement arrangement is provided below under the heading “Other Compensation Arrangements for Certain Executive Officers.”

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Cash Balance Plan.    The Cash Balance Plan is a defined benefit plan intended to qualify under the Internal Revenue Code (the “Code”) and comply with the Employee Retirement Income Security Act of 1974 (“ERISA”). Under the Cash Balance Plan, pension benefits generally are determined by the value of the employee’s vested cash balance account (the “Account”). Each quarter, an employee’s Account is credited with compensation credits. Compensation credits to the Account are based on a percentage of the employee’s certified compensation for each quarter. Certified compensation means compensation paid to an employee during the year which is reportable on Form W-2, subject to an annual IRS maximum ($200,000 for 2002). Certified compensation includes salary reduction amounts made under Section 401(k) and Section 125 of the Code, but generally excludes contributions to any non-qualified deferred compensation plan maintained by the Company, perquisites, severance pay, gross-ups, payments in lieu of vacation, and stock option or equity-like gains. Incentive compensation amounts will be included in compensation for Cash Balance Plan purposes in the year received rather than the year earned.

The Cash Balance Plan bases the percentage on which compensation credits are calculated on “points” assigned to each employee equal to the sum of the employee’s age and years of credited service as of the end of each quarter. This percentage ranges from 4% to 8% of an employee’s certified compensation. The Account balance vests 100% after five years of service with the Company. All employees of the former Wells Fargo and First Interstate Bancorp received credit for Account balance vesting and compensation credit purposes for their years of service with the former Wells Fargo.

As of the quarter ended December 31, 2002, the years of credited service and the percentages used to calculate compensation credits under the Combined Plans for the indicated executive officers named in the Summary Compensation Table are as follows: Mr. Kovacevich, 16 years, 7%; Mr. Oman, 23 years (including his years of service with Wells Fargo Financial, Inc.), 7%; Mr. Stumpf, 20 years, 6%; Mr. Hoyt, 21 years, 6%; Mr. Edwards, 18 years (including his years of service with First Interstate Bancorp), 7%; and Mr. Atkins, 1 year, 5%.

Each Account will also be credited, on the last day of each quarter, with “investment credits.” For 2002, the quarterly investment credit was determined by multiplying the amount of the Account balance by 25% of an average of 30-year U.S. Treasury rates (adjusted quarterly), plus 0.375%. The value of the vested Account balance is payable to the employee upon termination of employment with the Company either in a lump sum or as a monthly annuity.

Supplemental Cash Balance Plan.    As permitted by ERISA and the Code, employees who participate in the Cash Balance Plan, including the executive officers named in the Summary Compensation Table, whose benefits under the Cash Balance Plan are limited pursuant to Code Sections 401(a)(17) and 415, also participate in the Supplemental Cash Balance Plan. Under this plan, participants also receive compensation and investment credits to their plan accounts, determined by points assigned to each employee at the end of each year based on years of service and age. Certified compensation under the Supplemental Cash Balance Plan includes the participant’s base salary as well as designated incentive compensation, whether or not that compensation is deferred.

In the case of Messrs. Kovacevich, Oman, Stumpf, Hoyt, Edwards, and Atkins, all of whom are named in the Summary Compensation Table, the amount shown as “Salary” for 2002 (column (c) in the table) and the amount shown as “Bonus” for 2001 (column (d)) were treated as certified compensation for 2002 under the Combined Plans. The amount shown as “Bonus” for 2002 (column (d)) will be included in each such executive officer’s certified compensation for purposes of compensation credits to his Account for 2003.

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Under the Combined Plans, “normal retirement age” is defined as the earlier of completion of five years of service with the Company, or age 65. As of December 31, 2002, the current executive officers named in the Summary Compensation Table (other than Mr. Atkins) indicated below had attained “normal retirement age” for purposes of the Combined Plans and had accrued an estimated benefit under the Combined Plans, assuming payment of such annual benefit in the form of a single-life annuity, as follows: Richard M. Kovacevich, $539,283; Mark C. Oman, $142,758; John G. Stumpf, $58,456; David A. Hoyt, $22,886; C. Webb Edwards, $96,161; and Howard I. Atkins, $447.

Alternative Retirement Benefits Under the Former Norwest Plans. Participants in the former Norwest Plans who were at least 45 years of age and had at least five years of credited service as employees of the former Norwest on June 30, 1999, will receive the greater of the benefits under the Combined Plans or the benefits he or she would have received under the former Norwest Plans. Richard M. Kovacevich and John G. Stumpf, each of whom is an executive officer named in the Summary Compensation Table, is eligible to receive retirement benefits under this formula. If each of them had retired as of December 31, 2002, Mr. Kovacevich and Mr. Stumpf would be eligible to receive a greater benefit under the former Norwest Plans, as shown in the table appearing on page 29 of this proxy statement, than under the Combined Plans. Les Biller, who will retire as an employee of the Company in March 2002, is also eligible to receive an alternative retirement benefit under the former Norwest Plans.

Benefits based on the former Norwest Plans formula were determined by age, years of credited service, and compensation. Mr. Kovacevich’s and Mr. Stumpf’s years of credited service as of December 31, 2002 for purposes of computing their alternative benefits are 16.83 years and 20.92 years, respectively. The monthly benefit at regular retirement age was a life annuity equal to 1.1% of final average monthly earnings up to the “Integration Level” plus 1.6% of final average monthly earnings greater than the Integration Level multiplied by years of credited service. The former Norwest Plans do not take into account more than 35 years of credited service. The Integration Level for any year is $1,400 times the Social Security wage base for the current year ($84,900 for 2002) divided by $48,000. The Integration Level (stated as an amount per month) is $2,476.25 for participants retiring in 2002.

A participant’s final average monthly earnings are defined as the highest average monthly compensation paid during any 36 consecutive months within the last 120 months of employment. Compensation for purposes of this calculation is similar to the definition of “certified compensation” under the Combined Plans. The alternative Norwest Pension Plan benefit for a plan year is subject to the same limitations imposed by the Code on benefits under the Cash Balance Plan.

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The table below shows the estimated total annual average alternative retirement benefits that would be payable using the former Norwest Plans formula for individuals with various combinations of annualized final average compensation and years of credited service. These estimated benefits do not take into account any Internal Revenue Code limits on retirement benefits. The annual amounts shown below, as estimated and when paid, are not reduced by the amount of Social Security benefits.

Supplemental Retirement Arrangements for Executive Officers.    Mark C. Oman and C. Webb Edwards, who are executive officers named in the Summary Compensation Table and were employees of the former Norwest, are eligible to receive certain benefits under the Combined Plans. In the case of Mr. Oman, these benefits result from his service as an employee of Wells Fargo (formerly Norwest) Financial, Inc. (“WFFI”). In the case of Mr. Edwards, they relate to his service as an employee of First Interstate Bancorp, a predecessor corporation to the former Wells Fargo, until 1995 when he joined the former Norwest. Mr. Oman and Mr. Edwards are also entitled to certain supplemental retirement benefits under the arrangements described below.

Mr. Oman was employed by WFFI and was an active participant in its retirement plan (the “WFFI Retirement Plan”) from April 30, 1979 until January 1, 1990, when he transferred to Wells Fargo

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Home Mortgage, Inc. (formerly Norwest Mortgage, Inc.) and became eligible to participate in the former Norwest Plans. As a result of certain amendments made to the Combined Plans as of January 1, 2001 to include former WFFI’s employees’ years of credited service with WFFI for purposes of computing points and calculating compensation credits, Mr. Oman’s Account balance was re-calculated retroactive to July 1, 1999 to reflect his additional years of credited service. The information given with respect to Mr. Oman on pages 27 and 28 of this proxy statement with respect to his years of credited service and his estimated benefit as of December 31, 2002 under the Combined Plans takes into account the amendments made to the Combined Plans described above.

Mr. Oman is also entitled to receive a supplemental annual retirement benefit under a supplemental retirement arrangement with the Company. This supplemental benefit will be determined based upon the difference between what Mr. Oman would receive under the Combined Plans and a hypothetical benefit calculated using a formula which takes into account his final average monthly earnings and years of credited service with the Company (excluding his years of service with WFFI) as of the date his employment with the Company terminates. For purposes of this formula, Mr. Oman’s benefit will be adjusted by an additional amount based upon his actual final average earnings as of the date of his transfer from WFFI, his final average earnings as of the date his employment with the Company terminates, the benefit he had accrued under the WFFI Retirement Plan as of the date of his transfer, and certain additional subsidies if he terminates employment with the Company prior to age 65. Assuming that Mr. Oman had reached the age of 55 as of December 31, 2002 (the earliest retirement age at which benefits become payable under the WFFI Retirement Plan) and that his final average earnings, for purposes of calculating his supplemental benefit under this arrangement, were the amounts shown as “Salary” for 2002 and “Bonus” for 2001 in columns (c) and (d) of the Summary Compensation Table on page 23 of this proxy statement, Mr. Oman would receive an annual supplemental benefit of $460,550 under this arrangement.

In addition to his benefits under the Combined Plans and the supplemental retirement arrangement described above, Mr. Oman is entitled to receive certain accrued retirement benefits under the WFFI Retirement Plan. His accrued benefits under this plan were frozen upon his transfer to the Company in 1990. As of December 31, 2002, the annual retirement benefits Mr. Oman would be entitled to receive under the WFFI Retirement Plan beginning at age 55 and at age 65 (normal retirement age under the WFFI Retirement Plan) would be $6,516 and $15,492, respectively.

C. Webb Edwards is entitled to receive an alternative retirement benefit calculation under the Combined Plans. Mr. Edwards was an employee of First Interstate Bancorp, a predecessor corporation of the former Wells Fargo, until 1995 when he joined the former Norwest. Mr. Edwards also participated in the First Interstate Plan which was frozen for purposes of additional benefit accruals in 1996. For any participant in the Combined Plans who terminates employment with the Company and who was a participant in the First Interstate Plan, was at least 45 years of age, and had at least five years of credited service on June 30, 1999, the Company will compare the opening balance in that participant’s Account, plus investment credits made to the Account through the date payment of benefits to the participant are to commence, to the lump sum value of the participant’s frozen First Interstate Plan benefit as of such payment date. If the value of the frozen First Interstate Plan benefit is greater than the participant’s total Account balance, the participant will receive the difference in the form of an extra benefit amount credited to the Account. Mr. Edwards will be eligible for this special transition comparison calculation at the time he terminates his employment with the Company. Based on an estimated special transition benefit comparison, assuming Mr. Edwards had terminated his

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employment with the Company as of December 31, 2002 and elected to receive payment of his benefits under the Combined Plans as of that date, a special transition benefit amount equal to $111,707 would be added to Mr. Edwards’ Account under the Combined Plans.

Mr. Edwards is also entitled to a supplemental annual retirement benefit pursuant to an agreement made in 1995 at the time he was employed by the former Norwest. To determine the amount of this benefit, the Company first will calculate a hypothetical annual retirement benefit assuming Mr. Edwards had been employed by the Company since July 23, 1984 (the date of his original employment by First Interstate Bancorp). The Company will calculate this hypothetical amount under the Combined Plans and, alternatively, under the former Norwest Plans, using the greater of the two amounts as the hypothetical annual retirement benefit for purposes of determining Mr. Edwards’ supplemental annual retirement benefit. The Company then will subtract from the hypothetical annual retirement benefit (1) the actual combined annual retirement benefit Mr. Edwards will receive under the Combined Plans and (2) the amount by which the annuitized value of Mr. Edwards’ combined balances in the Company’s 401(k) and Supplemental 401(k) Plans (referred to in footnote (4) of the Summary Compensation Table) exceeds the annuitized value of a hypothetical combined account balance under the First Interstate 401(k) and Supplemental 401(k) Plans. The Company will calculate the annuitized value of Mr. Edwards’ combined balances in these plans using certain actuarial, contribution, and investment rate assumptions. If Mr. Edwards had terminated his employment with the Company as of December 31, 2002, he would be entitled to receive an annual supplemental benefit of approximately $216,852 under this agreement.

Former Wells Fargo Retirement Plans.    David A. Hoyt also participated in a defined benefit plan sponsored by the former Wells Fargo. This plan was terminated in 1984, and annuities were purchased for all participants eligible to receive benefits under this plan. Mr. Hoyt’s annual benefit payable under this annuity beginning at age 65 is $16,226.

Long-Term Disability Plans

The Company’s Long-Term Disability Plan covers compensation of up to a total of $500,000 in salary and designated incentive compensation. The plan provides a monthly benefit to an eligible employee, who is totally disabled (as defined in the plan) for more than 22 weeks, equal to 65% of the participant’s average covered compensation, up to a maximum compensation of $500,000 per year and a maximum monthly benefit of $27,083. The Supplemental Long-Term Disability Plan extends similar disability coverage for the base salary earned by Richard M. Kovacevich in excess of $500,000. The monthly benefit payable under either plan may be offset by other sources of income.

Other Compensation Arrangements for Certain Executive Officers

Howard I. Atkins.    In connection with his employment as the Chief Financial Officer of the Company in August 2001, Mr. Atkins entered into an employment arrangement with the Company pursuant to which he received an initial annual base salary of $550,000 and certain minimum bonus amounts for 2001 and 2002. Mr. Atkins also received certain relocation benefits under the Company’s Relocation Program discussed on pages 36 through 38 of this proxy statement, a stock option grant for 253,100 shares, and an RSR award for 107,000 shares under the Company’s LTICP. Mr. Atkins also receives certain other perquisites under this arrangement consistent with those available to all executive officers. Information with respect to Mr. Atkins’ salary, incentive compensation for 2001 and 2002, certain relocation benefits and other perquisites in 2002, and the stock option grant and RSR

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award in 2001 under this arrangement is included in the Summary Compensation Table on pages 23 and 24 of this proxy statement in column (c) “Salary,” column (d) “Bonus,” column (e) “Other Annual Compensation,” column (f) “Restricted Stock Awards,” and column (g) “Securities Underlying Options SARs(#)” and related footnotes.

Mr. Atkins also is entitled to certain retirement and severance benefits under this arrangement with the Company. With respect to retirement benefits, if Mr. Atkins’ employment terminates before the date he is 100% vested for benefit purposes under the terms of the Company’s 401(k) Plan, Supplemental 401(k) Plan, and the Combined Plans, he will receive a retirement benefit computed in accordance with those plans as if he were fully vested as of the date of such termination. With respect to severance benefits, if Mr. Atkins’ employment is involuntarily terminated by the Company for any reason other than for cause within three years from the date of his employment, Mr. Atkins will be entitled to receive certain severance benefits for a period equal to the longer of three years from his original employment date and two years from his employment termination date. These benefits will include his then current salary, incentive compensation awards, eligibility for additional stock option grants, and full vesting of his initial RSR award and any additional stock options granted during this period. Mr. Atkins’ right to receive these benefits is conditioned upon his entering into a customary non-competition, confidentiality, and release agreement with the Company. If Mr. Atkins’ employment with the Company is involuntarily terminated other than for cause more than three years from his employment date, he will be eligible to receive severance benefits under the severance plan, if any, then maintained by the Company for comparable employees.

Les Biller.    Les Biller resigned as a director and executive officer of the Company effective September 30, 2002 but will remain an employee of the Company until his retirement on March 31, 2003 after he reaches the age of 55. In connection with his resignation, Mr. Biller entered into a separation agreement with the Company. Under the terms of this agreement, Mr. Biller received a bonus for 2002 equal to $3,375,000, and will continue to receive his 2002 salary and all current perquisites and benefits until his retirement date. Upon his retirement, Mr. Biller will receive an annual retirement benefit of $1,500,000 for his lifetime, payable in equal monthly installments, which benefit includes the annual retirement benefits payable to him upon retirement at age 55 under the terms of the Combined Plans described on pages 26 to 29 of this proxy statement, based upon 15 years and 7 months of credited service as of his expected retirement date and an alternate retirement benefit under the former Norwest Plans. Upon his death and assuming Mr. Biller’s current wife survives him, Mr. Biller’s spouse will continue to receive this annual benefit until March 31, 2013, and an annual benefit of $750,000 thereafter. In addition, all of Mr. Biller’s stock options will become vested and immediately exerciseable in accordance with their terms upon his retirement date. The Company will continue to provide Mr. Biller with an office, secretarial assistance, and the use of a car and driver until the earlier of the date he finds new permanent employment or March 31, 2005.

Severance Agreements.    In addition to the severance benefits under the employment arrangement with Howard I. Atkins and the benefits under the separation agreement with Les Biller described above, the Company has severance agreements with Messrs. Kovacevich, Oman, and Edwards, each of whom is named in the Summary Compensation Table.

The change-of-control severance agreements with Messrs. Kovacevich, Oman, and Edwards are intended to encourage them to continue to carry out their duties if there is a change of control of the Company. Under the terms of these agreements, these executive officers may receive certain payments if their employment is terminated or if their job duties or compensation and benefits are substantially

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reduced within three years following a change of control of the Company. The maximum payments are two times the sum of the executive officer’s (i) base salary rate, (ii) the value of perquisites provided by the Company, and (iii) the highest potential incentive compensation award or, in the case of Mr. Kovacevich, an amount equal to the two-year average of his incentive compensation awards. The agreements also continue certain medical, dental, and life insurance benefits for up to two years after termination. If payments received by any such officer as a result of a change of control result in an excise tax liability for such officer, the Company will also pay to the officer an additional amount equal to the excise tax plus a gross-up for additional income taxes, interest, and penalties related to the excise tax.

Mr. Kovacevich also has a severance agreement with the Company under which he can receive benefits of a minimum payment of 12 months’ salary (less the amount of any other severance payments to which he may be entitled under any severance plan of the Company then in effect), a pro rata portion of his incentive compensation, and certain life and health insurance benefits. The benefits are payable if his employment is terminated by the Company for a reason other than for cause or if his job duties are substantially reduced and he resigns within 90 days thereafter.

The Company also has a plan that provides salary continuation pay to any executive officer or other employee who is discharged under the circumstances stated in the plan and who does not have another separation agreement with the Company. The amount of salary continuation pay under this plan is based on years of service and job level and includes payment of base salary and continuation of benefits for specified monthly periods.

OTHER INFORMATION ABOUT DIRECTORS

AND EXECUTIVE OFFICERS

Loans

During 2002, certain directors, executive officers, members of their immediate families, and their associates had banking transactions, including loans, in the ordinary course of business with the Company’s bank subsidiaries. In addition, prior to the adoption of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) effective July 30, 2002, Wells Fargo Investments, LLC, a broker-dealer subsidiary, made margin loans in the ordinary course of business to certain executive officers. All loans were made on substantially the same terms, including interest rates and collateral, as those available at the time for similar transactions with other persons. The loans did not involve more than the normal risk of collection or have other unfavorable features.

Certain directors, executive officers, and members of their immediate families had mortgage and other loans from three of the Company’s non-bank subsidiaries. Information on these loans is given below.

Three non-employee directors and 18 executive officers of the Company (including Les Biller and the current executive officers named in the Summary Compensation Table), as well as members of the immediate families of certain directors and executive officers, obtained mortgage loans from Wells Fargo Home Mortgage, Inc. (“WFHMI”), a mortgage lending subsidiary of Wells Fargo Bank, N.A. Prior to the adoption of Sarbanes-Oxley, WFHMI waived an origination fee equal to 1% of each loan amount in connection with the mortgage loans to the directors and executive officers, a benefit available to all Company employees.

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The mortgage loans made by WFHMI include loans made to Richard M. Kovacevich, Les Biller, John G. Stumpf, and Howard I. Atkins, all of whom are named in the Summary Compensation Table, under the Company’s relocation program (the “Relocation Program”) described on pages 36 through 38 of this proxy statement. Information about the mortgage loans made to these individuals also appears in the loan table and related footnotes on pages 35 and 36.

During 2002, certain executive officers of the Company who were officers of the former Wells Fargo had outstanding mortgage loans made under its Executive Loan Program and outstanding loans to facilitate their exercise of stock options granted under the former Wells Fargo’s Long-Term Incentive Plan. These loans are now held by WFC Holdings Corporation (“WFC Holdings”) as successor to the former Wells Fargo after the Merger. Under the Executive Loan Program, an eligible employee could obtain a mortgage loan for purchasing, constructing, improving, or refinancing the employee’s principal residence. Mortgage loans were available in amounts which, when aggregated with other debt secured by the residence, would not exceed the lesser of $1,500,000 or 100% of the fair market value of the residence. New mortgage loans under this loan program are no longer being made. The stock option loans had maximum terms of six years and variable interest rates that were adjusted each year based on the greater of the average annual rate for three-year U.S. Treasury notes for the immediately preceding calendar year and the applicable rate under the Internal Revenue Code.

As a result of certain provisions of Sarbanes-Oxley, the Company and its subsidiaries (with certain exceptions) are generally prohibited from making loans to directors and executive officers. Any loan made by the Company or one of its subsidiaries to a director or an executive officer prior to July 30, 2002, may remain outstanding. The Company’s bank and consumer lending subsidiaries, including WFHMI, may continue to make loans to the Company’s directors and executive officers on non-preferential terms. In accordance with Sarbanes-Oxley, directors and executive officers are no longer permitted to participate in WFHMI’s program waiving a 1% mortgage origination fee for Company employees who obtain mortgage loans from WFHMI. WFC Holdings also has discontinued making stock option exercise loans to executive officers of the Company who were officers of the former Wells Fargo.

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Information about loans made or held by WFHMI or WFC Holdings, as the case may be, to directors and to the current executive officers and Les Biller, a former executive officer, named in the Summary Compensation Table is shown in the following table:

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Four executive officers not named in the Summary Compensation Table and two members of their immediate families had outstanding mortgage loans from WFHMI during 2002 (including one mortgage loan made under the Relocation Program) totaling $4,257,184. These mortgage loans (other than the interest-free down payment mortgage loan under the Relocation Program) had annual interest rates ranging from 4.625% (adjustable) to 7.875% (adjustable) and 5.875% (fixed) to 7.0% (fixed). Of these loans, three were sold by WFHMI in the secondary real estate mortgage market and two were paid in full during 2002. One executive officer of the Company who was an officer of the former Wells Fargo had a mortgage loan (ultimately held by WFC Holdings) under the Executive Loan Program, totaling $344,264, with a fixed annual interest rate of 5.375%. This loan was paid in full during 2002.

Three executive officers of the Company also had stock option loans held by WFC Holdings totaling $527,470, with an interest rate during 2002 of 6.22%. One of the loans was paid in full during 2002. The balances given for the mortgage loans described in the preceding paragraph, and the balances given for the stock option loans in this paragraph were the highest outstanding balances during 2002.

Relocation Program

The Company offers a relocation program (the “Relocation Program”) for eligible employees, including executive officers, who relocate at the Company’s request and, in appropriate circumstances, to eligible new employees who relocate in connection with their employment by the Company. The Company believes this program offers a valuable incentive to attract and retain key employees.

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Effective July 30, 2002, the Relocation Program was revised in response to Sarbanes-Oxley to eliminate certain loan benefits for executive officers who relocate at the Company’s request. The following description of the Relocation Program describes benefits available to eligible executive officers prior to this date, and the revisions made to the program for executive officers in response to Sarbanes-Oxley. The relocation benefits made available prior to July 30, 2002, to eligible executive officers, as described below, continue to be made available to eligible employees who are not executive officers of the Company.

Prior to July 30, 2002, executive officers who relocated were eligible to receive a first mortgage loan (subject to applicable lending guidelines) from WFHMI on the same terms as those available to any employee of the Company, which terms include a waiver of the loan origination fee. In addition, prior to July 30, 2002, executive officers who relocated to a designated high cost area (or in certain limited circumstances to a location not designated as a high cost area) may have received from the Company a mortgage interest subsidy on the first mortgage loan of up to 25% of the executive’s annual base salary, payable over a period not less than the first three years of the first mortgage loan, and a 30-year, interest-free second mortgage down payment loan in an amount up to 100% of his or her annual base salary to purchase a new primary residence. The second mortgage loan must be repaid in full if the executive terminates employment with the Company or retires, or if the executive sells the residence. A relocating executive officer may have also received a transfer bonus of up to 30% of the executive’s base salary.

On and after July 30, 2002, executive officers are still eligible (subject to applicable lending criteria) to receive a first mortgage loan from WFHMI, except that the loan must be on the same terms as those available to any residential home mortgage customer. However, executive officers are no longer eligible for a mortgage interest subsidy from the Company relating to the first mortgage loan on, or an interest-free second mortgage down payment loan for the purchase of a new primary residence. Under the revised Relocation Program, the Company may pay a relocating executive officer a transfer bonus in an amount determined by senior management on the earlier of the date he or she commences employment or purchases a new home. Any executive officer who had received the mortgage interest subsidiary and interest-free down payment loan benefit prior to July 30, 2002, pursuant to the Relocation Program may continue to receive such benefits, but may not amend the terms of the loan to which these benefits relate.

For many relocations made at the Company’s request, the Company pays all related home purchase closing costs and household goods moving expenses for the relocating executive officer. The Relocation Program also assists eligible relocating executives in defraying costs associated with selling their current residences. Available benefits may include payment of selling costs customarily incurred by a seller of residential real estate (such as real estate commissions, title and appraisal fees, and other routine closing costs), purchase of the relocating executive’s home at its appraised market value by a third party relocation company using Company funds, and certain cash incentives to executives who locate buyers for their homes directly.

With the exception of expenses paid to or on behalf of the executive officer to move household goods and sell his or her home, the benefits described above (other than the mortgage loans) are treated as taxable income to the executive. The Relocation Program also includes, as a potential additional benefit, reimbursement of the amount of taxes paid on the taxable portion of amounts received by the executive under the Relocation Program.

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During 2000 to 2002, each of Richard M. Kovacevich, Les Biller, John G. Stumpf, and Howard I. Atkins (all of whom are named in the Summary Compensation Table on page 23 of this proxy statement) received benefits under the Relocation Program in one or more years included in this period. Mr. Kovacevich and Mr. Biller received down payment and mortgage loan benefits in 1999 following the relocation of the Company’s headquarters to San Francisco, California. In 2001, each of John G. Stumpf and Howard I. Atkins received certain mortgage loan and other relocation benefits under the prior Relocation Program in connection with, respectively, Mr. Stump’s transfer to Denver, Colorado and Mr. Atkins’ relocation to San Francisco, California upon his employment by the Company. For 2002, Mr. Stumpf received a transfer bonus in connection with his transfer to San Francisco, California and certain other benefits under the amended Relocation Program. Information about the amount and type of benefits received by each of them under the Relocation Program is included in column (e) and footnote (2) of the Summary Compensation Table on pages 23 and 24 of this proxy statement.

Compensation Committee Interlocks and Insider Participation

The Human Resources Committee (the “HRC”) and the Section 162(m) Committee (the “162(m) Committee”) determine the compensation to be paid to the Company’s Chief Executive Officer and other executive officers, including the executive officers named in the Summary Compensation Table. The members of the HRC for 2002 were Michael W. Wright (Chair), Michael R. Bowlin, David A. Christensen, Susan E. Engel, Robert L. Joss, Richard D. McCormick, and Donald B. Rice. The members of the 162(m) Committee for 2002 consisted of all the members of the HRC except Mr. Joss.

The 162(m) Committee was created in November 1999 to administer the Company’s Performance Policy to conform to the requirements of Section 162(m) of the Internal Revenue Code. In order for certain compensation to be deductible by the Company, Section 162(m) regulations require that compensation of executive officers named in the proxy statement be determined under the Policy by a committee of at least three outside directors. Robert L. Joss, who is a member of the HRC, is not eligible to serve on the 162(m) Committee under IRS regulations relating to Section 162(m) because he was an officer of the former Wells Fargo during a period that ended in 1993.

David A. Christensen, Donald B. Rice, and Michael W. Wright are directors and members of the HRC and 162(m) Committees. Mr. Christensen has an adult child and an adult nephew, Mr. Rice has an adult child and an in-law and Mr. Wright has an adult child, each of whom is an employee of the Company or a subsidiary and was paid compensation in 2002 in excess of $60,000 but less than $310,000 and other benefits comparable to those received by employees having similar positions. The compensation of each was established by the Company in accordance with its employment and compensation practices applicable to employees holding comparable positions. These immediate family members are five of the approximately 134,000 employees of the Company and do not report directly to any executive officer of the Company. Mr. Wright, another of his adult children, and three adult children of Mr. Rice (including the adult child who is an employee) each had a mortgage loan from WFHMI during 2002. Information on these loans is included the in the table beginning on page 35 of this proxy statement.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 and related regulations require the Company’s directors, executive officers, and anyone holding more than 10% of the Company’s common stock (“reporting persons”) to report their initial ownership of the Company’s common stock and any changes in that ownership to the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange. The Company assists its directors and executive officers in complying with these requirements and is required to disclose in this proxy statement the failure to file these

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reports on behalf of any reporting person when due. All reporting persons of the Company satisfied these filing requirements except as follows: reports were not timely filed on behalf of Howard I. Atkins and Daniel W. Porter, executive officers of the Company, to report the vesting on July 1, 2002, of 21,400 and 9,892 restricted share rights respectively owned by them. These transactions were subsequently reported on Forms 4. In making these disclosures, the Company relied on written representations of each reporting person and copies of the reports filed with the SEC.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about the Company’s equity compensation plans in effect at December 31, 2002, aggregated for two categories of plans: those approved by stockholders and those not approved by stockholders. The first category consists of the Long-Term Incentive Compensation Plan (the “LTICP”). The second category consists of:

The Norwest Corporation Directors’ Formula Stock Award Plan, the Norwest Corporation Directors’ Stock Deferral Plan, and the Performance Deferral Award Plan for Mortgage Banking Executives were in effect at December 31, 2002, only with respect to the payment of outstanding awards or deferred compensation benefits under those plans. No future awards or deferrals may be made under those plans.

The material features of the 1999 Deferral Plan for Directors, the 1999 Directors Formula Stock Award Plan, and the 1999 Directors Stock Option Plan are described in this proxy statement under “Item 1—Election of Directors—Director Compensation.” As described in “Item 3—Approve the Directors Stock Compensation and Deferral Plan,” those plans will terminate on the date the Company’s stockholders approve the Directors Stock Compensation and Deferral Plan. The material features of the other plans not approved by stockholders are described immediately following the footnotes to the table. All outstanding awards relate to the Company’s common stock. Information is as of December 31, 2002, unless otherwise indicated.

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Equity Compensation Plan Information (1)

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Deferred Compensation Plan for Employees.    The Deferred Compensation Plan for employees allows participants to defer receipt of salary and certain other compensation until a future year or years as selected by the participants, subject to the terms of the plan. The plan administrator determines which employees of the Company and its subsidiaries will be eligible to participate in the plan for a given year. The plan administrator may delegate this authority to one or more officers of the Company. Participants in the plan can defer up to 85% of their base salary and all of their bonuses and incentive compensation. Participants can also defer their gains from stock option exercises under the LTICP. Once made, deferral elections are irrevocable. The Company treats amounts deferred by a participant as if invested in the valuation option or options selected by the participant or required under the plan, and determines the deferred compensation benefit payable to the participant based on those valuation options. The plan offers a number of valuation options, including one indexed to the Company’s common stock. For deferral years 2000 and later, participants are required to allocate at least 20% of their deferral to the Company common stock valuation option. Stock option gain deferrals are allocated in full to the Company common stock valuation option. The Company distributes amounts allocated to the Company common stock valuation option in shares of common stock. Participants have no direct interest in any of the valuation options and are general unsecured creditors of the Company with respect to their deferred compensation benefits under the plan.

Non-Qualified Deferred Compensation Plan for Independent Contractors.    The Non-Qualified Deferred Compensation Plan for Independent Contractors is sponsored by WF Deferred Compensation Holdings, Inc., a wholly-owned subsidiary of the Company. The plan allows participants to defer all or part of their eligible compensation payable by participating affiliates of the Company until a future year or years as selected by the participants, subject to the terms of the plan. To be eligible to participate, a person must be an independent contractor who performs qualifying investment or other financial services for a participating affiliate and who has been designated as eligible to participate in the plan by the participating affiliate. The plan sponsor treats amounts deferred by a participant as if invested in the valuation option or options selected by the participant or required under the plan, and determines the deferred compensation benefit payable to the participant based on those valuation options. The plan offers a number of valuation options, including one indexed to the Company’s common stock. The plan sponsor distributes amounts allocated to the Company common stock valuation option in shares of common stock. The Company has guaranteed the obligations of the plan sponsor under the plan. Participants have no direct interest in any of the valuation options and are general unsecured creditors of the plan sponsor and the Company with respect to their deferred compensation benefits under the plan.

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Norwest Corporation Directors’ Formula Stock Award Plan.    Under the Norwest Corporation Directors’ Formula Stock Award Plan, the Company awarded shares of common stock to its non- employee directors. The plan allowed participants to defer receipt of all or a portion of their awards until a future year or years as selected by the participants, subject to the terms of the plan. Participants receive credit for dividends paid on shares of the Company’s common stock. Participants have no direct interest in the shares deferred under the plan and are general unsecured creditors of the Company with respect to payment of their stock awards under the plan. The plan was in effect at December 31, 2002, only with respect to the distribution of deferred stock awards, and no future stock awards or deferrals of stock awards may be made under this plan.

Norwest Corporation Directors’ Stock Deferral Plan.    Under the Norwest Corporation Directors’ Stock Deferral Plan, a participating director could defer receipt of all or part of the annual cash retainer and meeting fees payable to the director until a future year or years as selected by the director, subject to the terms of the plan. A participating director could elect distribution of his or her deferral account in a lump sum in either cash or whole shares of the Company’s common stock, or a combination of both. Alternatively, the director could elect to receive the distribution in up to ten annual installments of cash. The plan was in effect at December 31, 2002, only with respect to the distribution of deferral accounts, and no future deferrals may be made under this plan.

PartnerShares Stock Option Plan.    Under the PartnerShares Stock Option Plan, the Board of Directors, the Human Resources Committee, or a PartnerShares Committee can grant options to buy the Company’s common stock to any employee of the Company or affiliate of the Company other than employees subject to Section 16 of the Securities Exchange Act of 1934 and certain other specified categories of employees. Participants in the LTICP are generally not eligible to receive option grants under the PartnerShares Plan. The PartnerShares Committee determines, subject to the terms of the plan, the exercise price, the expiration date, and the other exercise terms of each option grant including any vesting price or vesting schedule. Under the terms of the PartnerShares Plan, the exercise price may not be less than the closing share price of the common stock on the New York Stock Exchange as of the trading day immediately preceding the grant date and the expiration date may not be more than ten years from the grant date.

Performance Deferral Award Plan for Mortgage Banking Executives.    Under the Performance Deferral Award Plan for Mortgage Banking Executives, a specified portion of a participant’s unvested bonus award was credited to the participant’s plan account in the form of phantom shares of the Company’s common stock. Participants include certain employees of Wells Fargo Home Mortgage, Inc. and other Company subsidiaries in the mortgage banking, home equity, or trust businesses. No future awards may be made under the plan, and 2000 was the last deferral year covered by the plan. The portion of each bonus award covered by the plan vests in three equal annual installments beginning on March 1 of the first year following the year in which the award was granted. For deferral years 1999 and earlier, participants receive the value of the vested portion of their plan account in cash. For deferral year 2000, participants receive the value of the vested portion in shares of the Company’s common stock. Participants can elect to defer receipt of some or all of the vested portion of their plan account into the Deferred Compensation Plan for employees.

Supplemental 401(k) Plan.    The Supplemental 401(k) Plan is a non-qualified supplemental retirement plan that provides benefits to participants in the Company’s 401(k) Plan whose employer matching contributions under that plan are limited because of IRS-imposed limitations on their plan contributions and/or because they elected to defer compensation, that would otherwise have been available for contribution to the 401(k) Plan, into one or more non-qualified deferred compensation

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plans maintained by the Company. The Company credits the account of each participant in the Supplemental 401(k) Plan in the amount of the employer matching contribution that the Company would have made to the participant’s 401(k) Plan account had the IRS limit not existed and/or the participant not deferred compensation. Under the Supplemental 401(k) Plan, credits to a participant’s account are converted to share equivalents as if invested in the Company’s common stock as of the applicable record date. Additional credits are allocated to a participant’s account to reflect dividends paid on the common stock, based on the number of share equivalents credited to the participant’s account. These additional credits are also converted to share equivalents as if invested in common stock. Distribution of a participant’s account begins as soon as administratively feasible in the calendar year following the year the participant retires or the participant’s employment otherwise terminates. Amounts that are treated as if invested in common stock are distributed in shares of common stock. Participants are general unsecured creditors of the Company with respect to their benefits under the plan.

ITEM 2—APPROVE THE

PERFORMANCE-BASED COMPENSATION POLICY

In 1994 and again in 1998 prior to the Merger, the Company’s stockholders approved the “Performance-Based Compensation Policy” in accordance with Section 162(m) and related regulations of the Internal Revenue Code (the “Code”) described below (the “Section 162(m) Rules”). Under the Section 162(m) Rules, stockholders are required to approve the maximum incentive award payable to executive officers covered by the Performance-Based Compensation Policy and the related performance goals every five years. The Board’s Section 162(m) Committee amended and restated the Performance-Based Compensation Policy in connection with its submission to stockholders for approval at the 2003 meeting.

A copy of the Performance-Based Compensation Policy presented for stockholder approval (the “Policy”) is included at the end of this proxy statement as Exhibit A. The discussion that follows is a summary only. Stockholders are urged to read the complete text of the Policy.

Section 162(m) and Performance-Based Compensation

Under the Section 162(m) Rules, a company may not deduct for tax purposes compensation over $1,000,000 paid to its chief executive officer and its four other most highly compensated executive officers unless the compensation is “performance-based.” Compensation is “performance-based” if it meets these tests: (1) it will be paid only if the executive officer meets one or more objective performance goals; (2) the performance goals must be in writing and be set by a compensation committee consisting of two or more members, all of whom must be outside directors; (3) the compensation committee must set the performance goals within certain time periods before the executive officer performs the services and before it can be known whether or not the executive officer will meet these goals; (4) the material terms of the performance goals must be disclosed to, and approved by stockholders before the compensation is paid; and (5) the compensation committee must certify that the executive officer has met the performance goals.

Performance goals may be based on one or more business criteria that apply to an individual, a business unit or the company as a whole. If a company’s stockholders have approved the employees eligible to receive compensation, the maximum amount of compensation, and the business criteria on which performance goals are set, then the fourth test above is met. Because the Policy identifies covered executive officers as the employees eligible to be compensated under the Policy, fixes the

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maximum amount that can be paid to a covered executive officer as compensation under the Policy, and spells out the business criteria used to set performance goal targets, the Policy contains the material terms of the performance goals.

Why Stockholder Approval is Being Requested

Stockholders are being asked to approve the Policy at the 2003 annual meeting in order to comply with the Section 162(m) approval requirements. Stockholders must approve the business criteria used to determine performance goals for, and the maximum compensation amount payable to covered executive officers by approving the Policy every five years.

How the Policy Works

The Policy applies to each covered executive officer of the Company. A covered executive officer is a person who, on the last day of a taxable year, is either the Company’s chief executive officer (or someone acting in that capacity) or one of the four other highest-paid executive officers. Each executive officer listed in the Summary Compensation Table on page 23 (other than Les Biller, who resigned as an executive officer of the Company on September 30, 2002) would be a covered executive officer under the Policy assuming no change in his position or compensation as of the last day of 2003.

A covered executive officer will receive an incentive compensation award only if he or she has met one or more performance goals for each Performance Period. The Policy defines a Performance Period as a calendar year beginning January 1 and ending December 31. The Committee must set performance goals (which can be in the form of alternative goals) in writing for each Performance Period no later than 90 days after it starts.

The Committee may set performance goals using any one or more business criteria stated in the Policy. The business criteria are defined below.