Document:

Exhibit 10.8 to 3M Company Form 10-K (12-31-03)

EXHIBIT 10.8 

(Including amendments
through 2/10/03) 

3M 

PERFORMANCE UNIT PLAN 

SECTION 1 

Purpose 

        The
purpose of this plan is to attract talented, competent and resourceful managers to the
Company and to provide a strong incentive for such management employees to remain with the
Company. The purpose of the plan is also to provide such management employees an
opportunity to acquire shares of the Company’s common stock, with the belief that
such equity participation will provide incentive for added effort toward the
Company’s growth and success. The plan is intended to provide management incentive
compensation related to the long-range planning functions of management participants and
the success of the Company in the long-term context. 

SECTION 2 

Definitions 

         (a)       
          “Company” shall mean 3M Company. 

         (b)       
          “Plan” shall mean the Company’s Performance Unit Plan. 

         (c)       
          “Committee” shall mean the Compensation Committee of the
          Company’s Board of Directors, excluding any members who are eligible to
          receive an award under the Plan. 

         (d)       
          “Participant” shall mean a management employee of the Company or any
          of its subsidiaries or affiliates who is designated as a Participant by the
          Committee. 

         (e)       
          “Award” shall mean the determination by the Committee that a
          Participant should receive a given number of Performance Units, as evidenced by
          a document of notification given a Participant at the time of such
          determination. 

         (f)       
          “Performance Unit” shall mean a unit of participation with a face
          value of $120 which shall constitute the basis from which a Participant’s
          payment shall be determined with regard to performance criteria established by
          the Committee. 

         (g)       
          “Performance Criteria” shall mean such internal performance criteria
          for the Company as determined by the Committee with respect to each Award and
          may include any one or more of several criteria, such as, but not limited to,
          return on capital employed, sales growth, return on equity, total shareholder
          return, economic profit or improvements in economic profit (after-tax operating
          income, excluding non-recurring items, less the cost of capital), improvements
          in certain asset or financial measures (including working capital and the ratio
          of sales to net working capital), reductions in certain asset or cost areas
          (including reductions in inventories or accounts receivable or reductions in
          laboratory, engineering, sales or administrative costs), net income or
          variations of income criteria in varying time periods, or general comparisons
          with other peer companies or industry groups or classifications with regard to
          one or more of these criteria. Such criteria shall include a target for payment
          of the Performance Unit at full face value and upper and lower limits for the
          measurement of payment to Participants. 

 

         (h)       
          “Performance Period” shall mean a period of no less than three years,
          as determined by the Committee, during which Performance Criteria shall be
          measured for purposes of calculating the payment with respect to each
          Performance Unit. The Committee may elect, during the initial years of granting
          Performance Units, to provide for shorter periods of less than three years. 

         (i)       
          “Payment Date” shall mean a date determined by the Committee at the
          time of the Award for purposes of making payment to the Participant. This date
          shall be no later than the last day of the sixth month following completion of
          the respective Performance Period, but may be extended, at the election of the
          Committee, to a date not to extend beyond the tenth anniversary of the
          completion of the Performance Period. 

SECTION 3 

Participation 

         (a)       
          The Committee shall determine and designate from time to time those management
          employees of the Company and its subsidiaries or affiliates who are to be
          granted Performance Units, and thereby become Participants, and the number of
          Performance Units to be granted to each Participant. 

         (b)       
          Performance Units granted by the Committee shall be by letters of notification
          to Participants evidencing the Award in such form as the Committee shall
          approve, which letters shall comply with and be subject to the terms and
          conditions of this Plan. Further Performance Units may be granted by the
          Committee from time to time to Participants, so long as this Plan shall continue
          in full force and effect. 

SECTION 4 

Granting of
Performance Units 

         (a)       
          Grants of Performance Units shall be determined and directed by the Committee
          from time to time. The letter of notification evidencing the Award shall specify
          the number of Performance Units granted to the Participant, the proration of
          such Performance Units if the Participant retires during the year of grant, the
          commencement and expiration of the relevant Performance Period, the Performance
          Criteria by which the payment value of the Performance Units will be determined,
          and the Payment Date. 

         (b)       
          Awards shall be granted to Participants in recognition of their positions and
          ability to affect the Company’s performance. Either the Company’s
          books and records or the Participant’s letter of notification of the Award
          shall be deemed conclusive evidence of the granting of an Award and, in the
          event of inconsistency or ambiguity, the Company’s books and records shall
          supersede and prevail. 

SECTION 5 

Company Performance 

        The
Performance Criteria established by the Committee with respect to each Award shall provide
a means by which the Company’s performance may be measured during the Performance
Period specified in the Award. Actual Company performance during the Performance Period
shall determine the amount of payment to be received by the Participant at the Payment
Date. The payment value of the Performance Units shall be adjusted to reflect the actual
Company performance during the Performance Period, within lower and upper limits
established by the Committee at the time of the Award. 

 

SECTION 6 

Payment 

         (a)       
          The amount payable with respect to each Performance Unit shall be contingent
          upon the attainment of Performance Criteria as established in the Award during
          the specified Performance Period and the continued employment of the Participant
          until the Payment Date as defined in Section 2(i) hereof. 

         (b)       
          Amounts payable with respect to Performance Units under this Plan shall be paid
          to Participants in cash, reacquired shares of the Company’s common stock,
          or any combination of cash and reacquired shares of common stock, as determined
          at the sole discretion of the Committee at the Payment Date. The number of
          shares of common stock to be transferred by way of payment shall be determined
          by dividing the dollar amount of payment to be effected thereby by one hundred
          percent (100%) of the fair market value of such common stock as reported on the
          New York Stock Exchange Composite Index on the payment date. The fair market
          value shall be the average of the high and low prices so reported. 

         (c)       
          A Participant shall obtain no absolute rights under any Award under this Plan
          until the Payment Date, except as provided in Sections 9 and 10 hereof. 

         (d)       
          The maximum payment to any Participant under this Plan with respect to a single
          Award shall not exceed the amount reasonably determined by the Committee to
          equal three-tenths of one percent (0.3%) of the consolidated net income of the
          Company, excluding non-recurring items, for the calendar year immediately
          preceding the year including the Payment Date. 

SECTION 7 

Special Payments 

         (a)       
          In the event that the Committee elects a Payment Date more than six months
          subsequent to the expiration of a Performance Period, the Participant shall earn
          and receive at the Payment Date additional compensation from the expiration of
          the Performance Period, as determined by the Committee. 

         (b)       
          The Committee may elect, at its sole option, to advance the Payment Date of any
          Award in the event of a Participant’s termination of employment for any
          cause. This provision shall not confer any right upon a Participant not
          otherwise conferred under Sections 6, 9 and 10 hereof. 

SECTION 8 

Administration 

        The
Plan shall be administered under the supervision and direction of the Committee. In
administering the Plan, the Committee will determine the Participants and the number of
Performance Units to be granted to individual participants, establish appropriate
Performance Periods and Performance Criteria as bases for payments under the Plan, and
determine the Payment Date and methods and procedures for payment of Awards under the
Plan. Further, it may be necessary from time to time to change or waive requirements of
the Plan, or outstanding Performance Units, to conform with the law, to meet special
circumstances not anticipated or covered in the Plan, or to carry on successful operation
of the Plan, and in connection therewith, the Committee shall have the full power and
authority to: 

         (a)       
          Prescribe, amend and rescind rules and regulations relating to the Plan, or
          outstanding Performance Units, establish procedures deemed appropriate for its
          administration, and make any and all other determinations not herein
          specifically authorized which may be necessary or advisable for its effective
          administration; 

 

         (b)       
          Make any amendments to or modifications of the Plan which may be required or
          necessary to make the Plan set forth herein comply with the provisions of any
          laws, federal or state, or any regulations issued thereunder, and to cause the
          Company at its expense to take any action related to the Plan which may be
          required under such laws or regulations; and 

         (c)       
          Contest on behalf of Participants or the Company, at the expense of the Company,
          any ruling or decision on any issue related to the Plan, and conduct any such
          contest and any resulting litigation to a final determination, ruling or
          decision. 

        Nothing
herein shall be deemed to authorize, and the Committee will have no discretion, to alter
or amend the Performance Criteria or the specific performance goals of Awards under the
Plan after they have been approved by the Committee or communicated to Participants,
whichever shall occur later in time. 

        If
required for compliance with legal or tax guidelines with regard to its role in
administering the Plan, the Committee may act through a subcommittee of at least two of
its members, none of whom shall be eligible to participate in the Plan. 

SECTION 9 

Termination of Award 

        Participation
hereunder shall cease and all rights under the Plan and any Award thereunder are forfeited
by the Participant upon termination of employment for any cause prior to the Payment Date
other than (i) retirement pursuant to any income or pension plan of the Company or any of
its subsidiaries or affiliates, (ii) retirement because of physical or mental disability,
or (iii) death. The foregoing shall not affect the right of the Committee to effect
special payments as provided in Section 7(b). 

SECTION 10 

Retirement or Death 

    (a)
       If
a Participant retires pursuant to a pension plan maintained by the Company
                    or changes employment status as a result of physical or mental
disability prior                     to the Payment Date of an Award, such retirement or
change in status shall not                     affect any rights of the Participant under
any Performance Unit grants received                     by such Participant prior to
such retirement or change in employment status;                     provided, however,
that the Committee may provide for the proration of the                     Performance
Units granted to a Participant in the year that such Participant
                    retires from employment with the Company.  

    (b)
       If a Participant dies without having
received payment of any Performance Units under outstanding Awards, payment of
such Units shall be made within six months following the date of death to such
Participant’s surviving beneficiary or beneficiaries or, if there shall be
no such surviving beneficiaries, to such Participant’s estate in the
following manner: 

	  	
(i) If the Participant dies after the expiration of a Performance Period of an
Award, the payment shall be at the full rate previously determined, together
with any interest earned thereon until the date of payment; and 

	  	
(ii) If the Participant dies before the expiration of a Performance Period of an
Award, the amount of payment shall be at the lesser of: 

	  	
– the
face value of each outstanding Performance Unit for which payment has not been made; or  

	  	
– any
other amount approved, in its discretion, by the Compensation Committee of the Board of
Directors.  

 

         (c)       
          Each Participant shall have the right at any time to designate any person,
          persons or entity as the beneficiary or beneficiaries to whom payment of the
          Participant’s outstanding Performance Units shall be made in the event of
          the Participant’s death. Any designation filed under the Plan may be
          revoked or changed by written instrument so signed and filed prior to the
          Participant’s death. 

         (d)       
          If a Participant designates more than one beneficiary to receive such
          Participant’s outstanding Performance Units and any beneficiary shall
          predecease the Participant, the Company shall pay the deceased
          beneficiary’s share to the surviving beneficiary or beneficiaries
          proportionately, as the portion designated by the Participant for each bears to
          the total portion designated for all surviving beneficiaries. 

SECTION 11 

Transferability 

        Any
rights of a Participant under this Plan, and in or to an Award, shall be personal in
nature and may not be assigned or transferred (other than a transfer by will or the laws
of descent and distribution). Any attempted assignment or transfer of the Award shall be
null and void and without effect. 

SECTION 12 

Withdrawal, Amendment
or Termination of the Plan 

        The
term of the Plan shall be indefinite and the Plan shall continue in full force and effect
indefinitely until terminated at any time by action of the Company’s Board of
Directors or the Committee. Any such termination shall not adversely affect Awards
theretofore granted. 

        The
Company’s Board of Directors or the Committee may at any time withdraw or amend the
Plan, except that there shall be no withdrawal or amendment which shall adversely affect
Awards theretofore granted. 

SECTION 13 

Change in Control 

    (a)
       For purposes of this Section 13, the
following words and phrases shall have the meanings indicated below, unless the
context clearly indicates otherwise: 

	  	
(i)
“Person” shall have the meaning associated with that term as it is used in
Sections 13(d) and 14(d) of the Act.  

	  	
(ii) “Affiliates and Associates” shall have the meanings assigned to
such terms in Rule 12b-2 promulgated under Section 12 of the Act. 

	  	
(iii) “Act” means the Securities Exchange Act of 1934. 

	  	
(iv) “Continuing Directors” shall have the meaning assigned to such
term in Article Thirteenth of the Company’s Restated Certificate of
Incorporation. 

	  	
(v) “Code” means the Internal Revenue Code of 1986, as amended.

    (b)
       The
Plan shall terminate and the Company shall immediately distribute in cash
                    to the respective Participants the value of all outstanding
Performance Units,                     as determined in accordance with the other
provisions of this Plan and this                     Section 13, upon the occurrence of a
Change in Control of the Company.  

 

    (c)
       For
purposes of this Section 13, a Change in Control of the Company shall be deemed
to have occurred if: 

	  	
(i) any person (together with its Affiliates and Associates), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the “beneficial owner” (as that term is
defined in Rule 13d-3 promulgated under the Act), directly or indirectly, of
securities of the Company representing thirty percent (30%) or more of the
combined voting power of the Company’s then outstanding securities, unless
a majority of the Continuing Directors of the Company’s Board of Directors
prior to that time have determined in their sole discretion that, for purposes
of this Plan, a Change in Control of the Company has not occurred; or

	  	
(ii) the Continuing Directors of the Company’s Board of Directors shall at
any time fail to constitute a majority of the members of such Board of
Directors. 

    (d)
       With
respect to those Performance Units for which the Performance Period has not been
completed at the time of a Change in Control of the Company, the value of such
Units for purposes of this Section 13 shall be equal to the product of a
fraction, where the numerator of such fraction is the number of full calendar
months completed during the respective Performance Period and prior to the
Change in Control and the denominator of such fraction is 36, multiplied by the
largest of: 

	  	
         (i) the value of such Performance Units computed as if the
         Company’s performance during the remainder of the Performance
         Period following the Change in Control equaled its performance during
         those full calendar quarters completed during the respective
         Performance Period and prior to the date of the Change in Control;
         

         

	  	
         (ii) the value of such Performance Units computed as if the Performance
         Period for such Units was the three consecutive calendar year period
         ending immediately prior to the year in which the Change in Control
         occurs; or 

	  	
         (iii) any other amount approved, in its discretion, by the Committee.
         

    (e)
       With
respect to those Performance Units for which the Performance Period has been
completed at the time of a Change in Control of the Company, the value of such
Units for purposes of this Section 13 shall be the actual value as adjusted to
reflect the actual Company performance during the Performance Period plus
interest up to the date of distribution at the rate determined by the Committee
in accordance with the provisions of Section 7. 

    (f)
       In
the event that the payments made pursuant to this Section 13 are finally
determined to be subject to the excise tax imposed by Section 4999 of the Code,
the Company shall pay to each Participant an additional amount such that the net
amount retained by such Participant, after allowing for the amount of such
excise tax and any additional federal, state and local income taxes paid on the
additional amount, shall be equal to the value of the Performance Units
distributed to such Participant pursuant to this Section 13. 

    (g)
       The
Company shall pay to each Participant the amount of all reasonable legal and
accounting fees and expenses incurred by such Participant in seeking to obtain
or enforce his rights under this Section 13 or in connection with any income tax
audit or proceeding to the extent attributable to the application of Section
4999 of the Code to the payments made pursuant to this Section 13, unless a
lawsuit commenced by the Participant for such purposes is dismissed by the court
as being spurious or frivolous. The Company shall also pay to each Participant
the amount of all reasonable tax and financial planning fees and expenses
incurred by such Participant in connection with such Participant’s receipt
of payments pursuant to this Section 13.Exhibit 10.9 to 3M Company Form 10-K (12-31-03)

Amended August 9, 1998
Compensation Committee 

EXHIBIT 10.9 

3M 

COMPENSATION PLAN FOR
NONEMPLOYEE DIRECTORS 

PART I 

GENERAL PROVISIONS 

     A.    OBJECTIVE 

        It
is the intent of 3M Company (“3M”) to provide a compensation program for its
nonemployee directors which will attract and retain highly qualified individuals to serve
in this capacity. This program shall be called the “Compensation Plan for Nonemployee
Directors” (the “Plan”). 

B.    COMPONENTS OF
COMPENSATION 

        Compensation
for nonemployee directors shall consist of a regular annual retainer for board service,
annual retainer for the chairman of standing or special board committees, meetings fees
for each regular and special board meeting attended, and any committee meetings attended.
Compensation, retainer, and meeting fees shall be paid quarterly in any combination of the
following alternatives: 

        1.        
Cash 

        2.        
3M Common Stock 

        3.        
Deferred Cash 

        4.        
Deferred 3M Common Stock 

        The
combination of alternatives for each nonemployee director shall equal the aggregate
Compensation earned by each nonemployee director. 

     C.    ADMINISTRATION 

        The
Plan shall be administered by the Compensation Committee (the “Committee”) of
the Board of Directors. The Committee shall have full power to formulate additional
details and regulations for carrying out this Plan and to make such amendments or
modifications therein as from time to time they deem proper and in the best interests of
3M, provided that such amendments or modifications shall not affect the obligation of 3M
to pay to the participants the amounts accrued or credited to such participants’
accounts. Any decision or interpretation adopted by the Committee shall be final and
conclusive. 

D.    ELECTION OF
ALTERNATIVES 

          	1. 	  	
               Each nonemployee director of 3M may elect, by written notice to 3M on or before
               each annual stockholders meeting, to participate in the Compensation alternative
               provisions of the Plan. Any combination of the alternatives, Cash, 3M Common Stock, Deferred Cash,
and/or Deferred 3M Stock, may be elected provided the aggregate of the alternatives
elected equals 100 percent of the director’s Compensation. 

               

1 

          	2. 	  	
               The election shall remain in effect for one year, which shall begin at 12:01
               P.M. on the day of the annual meeting of stockholders in May, and terminate at
               12:00 noon on the date of the succeeding annual meeting of stockholders
               (“Plan Year”). 

               

          	3. 	  	
               The Plan Year shall include Plan Quarters, each Plan Quarter to begin as of the
               date of the quarterly board meetings (May, August, November, and February). This
               date (beginning of the Plan Quarter) shall be used to value stock and calculate
               interest. 

               

          	4. 	  	
               A director elected to the board after the May board meeting during a Plan Year
               may elect, by written notice to 3M before such director’s term begins, to
               participate in the Compensation alternatives for the remainder of that Plan
               Year, and election for succeeding years shall be on the same basis as for other
               directors. 

               

          	5. 	  	
               3M shall supply an account statement of his/her participation under the Plan to
               each participant under the Plan as soon as possible after the end of each Plan
               Year. 

               

          	6. 	  	
               Unless otherwise notified, all notices under this Plan shall be sent in writing
               to 3M, attention the Secretary. All correspondence to the participants shall be
               sent to the address which is furnished to the Secretary by each director. 

               

PART II 

CASH COMPENSATION 

         A.       
          Each nonemployee director who elects to participate under the Cash Compensation
          Provision of the Plan shall be paid all or the specified part (percentage) of
          his/her Compensation for the Plan Year in cash, and such cash payment shall be
          made on or about the 15th day of the month following the beginning of the Plan
          Quarter. 

         B.       
          If a participant dies prior to payment in full of all amounts due under the
          Plan, the balance of the amount due shall be payable to such participant’s
          estate in full as soon as possible following death. 

PART III 

3M COMMON STOCK 

         A.       
          Each nonemployee director may elect to receive all or a specified part
          (percentage) of his/her Compensation in 3M common stock which will be paid on or
          about the 15th day of the month following the beginning of each Plan Quarter. 

         B.       
          3M shall insure that an adequate number of 3M common shares (i.e., Treasury) are
          available for distribution to those nonemployee director electing to participate
          in this provision. 

         C.       
          Only whole numbers of shares will be paid, with any fractional share amounts
          paid in cash. 

2 

         D.
       
          For purposes of computing the number of shares to be paid each quarter, the
          value of each share of 3M common stock will be the closing price on the New York
          Stock Exchange as of the beginning of each Plan Quarter.

         E.       
          If a participant dies prior to payment in full of all amounts due under the
          Plan, the balance of the amount due shall be payable to the participant’s
          estate in full as soon as possible following death. 

PART IV 

DEFERRED COMPENSATION 

         A.       
          Each nonemployee director may elect to have all or a specified part (percentage)
          of his/her Compensation for the Plan Year deferred as Deferred Cash and/or
          Deferred Stock until the participant ceases to be a director. 

         B.       
          For each director who has made the Deferred Cash election, 3M shall establish a
          memorandum account and shall credit such account for the Compensation due on the
          15th day of the month following the beginning of the Plan Quarter. 

         1.
       
          Interest shall be credited to each memorandum account from the date of deposit,
          at the end of each Plan Quarter, and immediately preceding any distribution. 

         2.       
          Interest shall be calculated using: 

		     a.     The
prime rate of interest charged by the First National Bank of Minneapolis as           of
the first day of each Plan Quarter.  

		     b.     The
memorandum account balance as of the end of the preceding Plan Quarter, or,           if
applicable, as of the date of any distribution.  

         3.       
          Distribution from the Deferred Cash account shall be in cash as provided in
          paragraph D below. 

    C.
       For
each director who has made the Deferred Stock election, 3M shall establish a
               memorandum account and shall credit such account with 3M common stock
               equivalents (including fractional share equivalence) which could have been
               purchased on the first day of the Plan Quarter using the closing price of
3M                common stock on the New York Stock Exchange on such date.  

    1.       3M
common stock equivalence equal to dividends paid on 3M common stock shall be
               credited to each memorandum account on each dividend payment date. The
share                equivalence shall be determined by using the closing price of 3M
common stock on                the New York Stock Exchange on the sixth business day
preceding the dividend                record date (day preceding ex-dividend on New York
Stock Exchange).  

    2.
       Appropriate
adjustment shall be made to the memorandum account for stock splits,                stock
dividends, merger, consolidation, payment of dividends in other than cash,
               and similar circumstances affecting 3M common stock.  

    3.
                Distribution for the deferred
         stock account share shall be in 3M common stock (whole shares only with
         any fractional share amounts paid in cash) equal to share equivalence
         in accordance with paragraph D below. 

3 

         D.       
          Distribution of the participant’s memorandum account share shall be as
          follows: 

         1.        
          In five equal annual installments on January 1 of each year following the year
          in which the participant ceases to be a director; or 

         2.        
          If approved by the Committee, in some other number of equal annual installments
          (not to exceed ten); or 

         3.        
          If approved by the Committee, in a lump sum on a date within the ten-year period
          following the year in which the participant ceases to be a director. 

		
Each
installment or lump sum payment shall also include amounts earned either as dividends,
appreciation, or interest on the outstanding account balance to the distribution date.
The method of distribution approved by the Committee shall be irrevocable.  

         E.        
          If a participant dies prior to payment in full of all amounts due under the
          Plan, the balance of the amount due shall be payable to the participant’s
          estate in full as soon as possible following death; provided that, if a
          participant shall have designated an alternate beneficiary, the remaining
          balance of amounts payable under the Plan shall be payable to the
          participant’s beneficiary in full as soon as possible following death. 

4

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