Document:

Exhibit 10.1

 

3M 2008 LONG-TERM
INCENTIVE PLAN

 

1.             Purposes.

 

The
purposes of this plan are to help 3M attract, retain and motivate outstanding
employees to increase shareholder value by contributing to the long-term growth
and success of its business; to more closely align the financial interests of
these employees with those of 3M’s other shareholders by linking a significant
portion of their compensation to the performance of the Company and its stock
price; to encourage employees to acquire an equity stake in the Company; to
help 3M attract and retain well-qualified individuals to serve as nonemployee
members of its Board of Directors; and to promote the alignment of interests of
these nonemployee directors with those of 3M’s other shareholders by providing
all or a portion of their compensation for serving as directors in the form of
3M common stock.

 

This
plan is intended to replace and succeed the 2005 Management Stock Ownership
Program, the 3M Performance Unit Plan, and the 1992 Directors Stock Ownership
Program.

 

2.             Definitions.

 

(a)                                  “Affiliate” means any entity
that is directly or indirectly controlled by the Company or in which the
Company has a significant equity interest, as determined by the Committee.

 

(b)                                 “Award” means any Incentive
Stock Option, Nonqualified Stock Option, Progressive Stock Option, Stock
Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Unit,
Performance Share or other Stock Award granted to a Participant under this
Plan.

 

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

 

(d)                                 “Committee” means the
Compensation Committee of 3M’s Board of Directors.

 

(e)                                  “Common Stock” means the
common stock of 3M Company with a par value of $0.01 per share.

 

(f)                                    “Company” means 3M Company,
a Delaware corporation.

 

(g)                                 “Disqualifying Termination”
means a termination of a Participant’s employment with the Company or an
Affiliate due to (i) a material violation of any policy of the Company or
such Affiliate, including, without limitation, any policy contained in the
Company’s Business Conduct Manual, or (ii) embezzlement from or theft of
property belonging to the Company or such Affiliate.

 

(h)                                 “Dividend Equivalents”
means, on any dividend record date, that amount of cash or shares equal in
value to the dividend payable on shares of Common Stock as declared by 3M’s
Board of Directors with respect to such dividend record date.

 

(i)                                     “Fair Market Value” means
the closing price for a share of Common Stock as reported on the New York Stock
Exchange Composite Transactions.

 

(j)                                     “Full Value Award” means any
Award denominated or paid in shares of Common Stock other than an Option or
Stock Appreciation Right.

 

(k)                                  “Grant Date” means the
effective date of an Award granted to a Participant under this Plan.

 

 

 

(l)                                     “Incentive Stock Option”
means an Option granted under this Plan which satisfies the requirements of
section 422 of the Code and is so designated in the written or electronic
documents evidencing such Option.

 

(m)                               “Nonqualified Stock Option”
means an Option granted under this Plan which is not an Incentive Stock Option.

 

(n)                                 “Option” means a Participant’s
right to purchase a specified number of shares of Common Stock at a specified
price for a specified period of time.

 

(o)                                 “Participant” means an
employee of the Company or an Affiliate whose participation in the Plan has
been approved by the Committee, or a nonemployee member of 3M’s Board of
Directors.

 

(p)                                 “Performance Criteria” means
such internal performance criteria for the Company or any business segment
thereof as determined by the Committee with respect to each Performance Unit or
Performance Share and may include any one or more of several criteria, such as,
but not limited to, return on capital employed, return on assets or net assets,
net sales, sales growth, cash flow, earnings per share or improvement in
earnings per share, return on equity, stock price, gross margin, operating
margin, total shareholder return, economic value added, economic profit or
improvements in economic profit (after-tax operating income, excluding
non-recurring items, less the cost of capital), earnings before interest and
taxes, EBITDA, operating income or improvement in operating income,
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, adjusted net
income or improvement in adjusted net income, 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 or Performance Share at
full face value and upper and lower limits for the measurement of payment to
Participants.

 

(q)                                 “Performance Period” means 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 or Performance Share.

 

(r)                                    “Performance Share” means
the right of a Participant to receive a payment in the form of shares of Common
Stock based upon the performance of the Company during a Performance Period as
measured by the Performance Criteria approved by the Committee.

 

(s)                                  “Performance Unit” means the
right of a Participant to receive a payment in cash or shares of Common Stock
based upon the performance of the Company during a Performance Period as
measured by the Performance Criteria approved by the Committee.

 

(t)                                    “Plan” means this 3M 2008
Long-Term Incentive Plan.

 

(u)                                 “Predecessor Plan” means the
1997 Management Stock Ownership Program, the 2002 Management Stock Ownership
Program, and the 2005 Management Stock Ownership Program.

 

(v)                                 “Progressive Stock Option”
means a Nonqualified Stock Option granted to a Participant under this Plan upon
the exercise of a nonqualified stock option granted under the 1997 or the 2002
Management Stock Ownership Programs where such Participant makes payment for
all or part of the purchase price and withholding taxes in shares of Common
Stock.

 

(w)                               “Restricted Period”  means that period of time determined by the Committee
during which a Participant shall not be permitted to sell or transfer shares of
Restricted Stock granted under this Plan, and during which a Participant’s
interest in Restricted Stock Units or Restricted Stock granted 

 

 

under this Plan remains subject to forfeiture.  Unless otherwise determined by the Committee,
any time-based Restricted Period shall be at least three years.

 

(x)                                   “Restricted Stock”  means shares of Common Stock granted to a Participant under
the Plan subject to certain restrictions during the Restricted Period
established by the Committee.

 

(y)                                 “Restricted Stock Unit”
means the right of a Participant to receive an amount of cash or Common Stock
based on the Fair Market Value of a specified number of shares of Common Stock
following a Restricted Stock Period, subject to such terms and conditions as
the Committee may establish.

 

(z)                                   “Retires” or “Retirement”
means the termination of a Participant’s employment with the Company or an
Affiliate after attaining age 55 with at least five years of employment
service.

 

(aa)                            “Stock Appreciation Right”  means a Participant’s right to receive an amount of cash or
shares of Common Stock equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on the date the right is exercised
over the Fair Market Value of such number of shares of Common Stock on the
Grant Date.

 

(bb)                          “Stock Award” means any
award of Common Stock under the Plan and may include Restricted Stock awards or
other awards of Common Stock as determined appropriate by the Committee.

 

3.             Eligibility.

 

The
Committee will have the exclusive power and authority (except as it may
delegate such power and authority as permitted herein) to select the executives
and other employees of the Company and its Affiliates who may participate in
this Plan by receiving Awards made hereunder. 
All nonemployee members of the 3M Board of Directors shall also be
eligible to participate in and receive Awards made hereunder.

 

4.             Shares Available
for Awards.

 

Unless
otherwise authorized by the Company’s stockholders, the total number of shares
of Common Stock that may be issued or delivered pursuant to Awards granted
under this Plan will be 35,000,000.  Of
this total, no more than 35,000,000 may be issued or delivered upon the
exercise of Incentive Stock Options.  The
necessary shares shall be made available at the discretion of the Board of
Directors from authorized but unissued shares, treasury shares, or shares
reacquired by the Company under corporate repurchase programs.

 

The
following rules shall apply for the purpose of determining the number of
shares of Common Stock remaining available for issuance under the Plan:

 

(a)           If
an Award is denominated in a fixed number of shares of Common Stock on the
Grant Date, the number of shares covered by such Award (as in the case of an
Option or Restricted Stock grant) or to which such Award relates (as in the
case of a Stock Appreciation Right) will be counted on the Grant Date against
the total number of shares available for issuance or delivery under the
Plan.  If an Award is not denominated in
a fixed number of shares of Common Stock on the Grant Date (but is potentially
payable in such shares or the final number of shares is not determined until
the completion of a Performance Period), only the number of shares of Common
Stock actually issued or delivered as a result of such Award, if any, shall be
counted against the total number of shares available for issuance or delivery
under the Plan.

 

(b)           Notwithstanding
the provisions of Section 4(a) above, each Full Value Award will be
counted against the total number of shares available for issuance or delivery
under the Plan as 3.38 shares for every one share covered by such Award.

 

(c)           When
an Award granted under this Plan and denominated in shares of Common Stock (or
any portion thereof) expires, is cancelled, is forfeited or is otherwise
terminated without the issuance of such shares, or is settled in cash or
consideration other than shares of Common Stock, then the shares of Common 

 

 

 

Stock
previously counted against the total number of shares available for issuance or
delivery under the Plan on account of such Award (or portion thereof) will
again be made available for issuance hereunder. 
When an award granted under a Predecessor Plan and denominated in shares
of Common Stock (or any portion thereof) expires, is cancelled, is forfeited or
is otherwise terminated without the issuance of such shares, or is settled in
cash or consideration other than shares of Common Stock, then the shares of
Common Stock previously counted against the total number of shares available
for issuance or delivery under such Predecessor Plan on account of such Award
(or portion thereof) will be added to the total number of shares available for
issuance or delivery under this Plan. 
Notwithstanding the rest of this Section 4(c), the following shares
of Common Stock will not be added to the total number of shares available or be
made available again for issuance under this Plan: (i) shares not issued
or delivered as a result of the net settlement of an outstanding stock option
or stock appreciation right; (ii) shares delivered to or withheld by the
Company to pay the exercise price of or the withholding taxes with respect to
an award; and (iii) shares repurchased on the open market with the
proceeds from the payment of the exercise price of an option.

 

(d)           Any
shares of Common Stock related to Awards granted through the assumption of, or
in substitution for, outstanding awards previously granted by a company
acquired by the Company or an Affiliate or with which the Company or any
Affiliate combines, shall not be counted against the total number of shares
available for issuance or delivery under the Plan.

 

(e)           The
payment of stock dividends and Dividend Equivalents settled in shares of Common
Stock in  conjunction with outstanding Awards
shall not be counted against the total number of shares available for issuance
or delivery under the Plan.

 

5.             Terms of Awards.

 

The
Committee shall determine the type or types of Awards to be granted to each
Participant, which shall be evidenced by such written or electronic documents
as the Committee shall authorize; provided, however, that nonemployee members
of the 3M Board of Directors shall not be eligible to receive Incentive Stock
Options, Progressive Stock Options, Performance Units or Performance
Shares.  The following types of Awards
may be granted under this Plan:

 

(a)           Incentive
Stock Options — Incentive Stock Options granted hereunder shall have an
exercise price equal to one hundred percent (100%) of the Fair Market Value of
a share of Common Stock on the Grant Date. 
Incentive Stock Options granted hereunder shall become exercisable at
such time as shall be established by the Committee and reflected in the
documents evidencing such Options, and unless sooner terminated shall expire on
the tenth anniversary of the Grant Date.

 

(b)           Nonqualified
Stock Options — Nonqualified Stock Options granted hereunder shall have an
exercise price equal to no less than one hundred percent (100%) of the Fair
Market Value of a share of Common Stock on the Grant Date.  Nonqualified Stock Options granted hereunder
shall become exercisable and shall expire at such time or times as shall be
established by the Committee and reflected in the documents evidencing such
Options; provided, however, that no Nonqualified Stock Option shall expire
later than ten years after the Grant Date (except that the Committee may extend
the exercise period for Nonqualified Stock Options granted to Participants in
any country or countries for an additional period of up to one year if and to
the extent necessary to prevent adverse tax consequences to such Participants
under the laws of such country).

 

(c)           Progressive
Stock Options -  Whenever  a
Participant exercises a nonqualified stock option granted under the 1997 or
2002 Management Stock Ownership Program and makes payment of all or part of the
purchase price and withholding taxes, if any, in Common Stock, the Committee
may in its discretion grant such Participant a Progressive Stock Option.  The number of shares subject to such
Progressive Stock Option shall be equal to the number of shares of Common Stock
utilized by the Participant to effect payment of the exercise price and
withholding taxes, if any, for such nonqualified stock option.  Each Progressive Stock Option granted
hereunder shall have an exercise price equal to one hundred percent (100%) of
the Fair Market Value of a share of Common Stock on the date of exercise of the
nonqualified stock option, which 

 

 

 

shall
be the Grant Date of such Progressive Stock Option.  Each Progressive Stock Option granted
hereunder shall be exercisable six months after the Grant Date, and shall
expire at the same time the nonqualified stock option exercised by the Participant
would have expired.

 

(d)           Stock
Appreciation Rights - The term of a Stock Appreciation Right shall be fixed by
the Committee and set forth in the documents evidencing such right, but no
Stock Appreciation Right shall be exercisable more than ten years after the
Grant Date.  Each Stock Appreciation
Right shall become exercisable at the time or times determined by the Committee
and set forth in the documents evidencing such right.  Each Stock Appreciation Right granted
hereunder shall have a grant price equal to one hundred percent (100%) of the
Fair Market Value of a share of Common Stock on the Grant Date.

 

(e)           Restricted
Stock - At the time a grant of Restricted Stock is made, the Committee, in its
sole discretion, shall establish a Restricted Period and such additional terms
and conditions as may be deemed appropriate for the incremental lapse or
complete lapse of restrictions with respect to all or any portion of the shares
of Common Stock represented by the Restricted Stock.  The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any terms or
conditions for the lapse of restrictions with respect to all or any portion of
the shares of Common Stock represented by the Restricted Stock.  During the Restricted Period the Participant
shall generally have the rights and privileges of a stockholder as to such
Restricted Stock, including the right to vote such Restricted Stock and receive
dividend payments, except that the following restrictions shall apply: (i) none
of the Restricted Stock may be sold, transferred, assigned, pledged, or
otherwise encumbered or disposed of during the Restricted Period and until the
satisfaction of any other terms and conditions prescribed by the Committee, if
any; and (ii) all of the Restricted Stock shall be forfeited and all
rights of the Participant shall terminate without further obligation on the
part of the Company unless the Participant shall have remained a regular
full-time employee of the Company or an Affiliate until the expiration or
termination of the Restricted Period and the satisfaction of the other terms
and conditions prescribed by the Committee, if any.  Any Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee may determine, in its discretion,
including, without limitation, book-entry registration or issuance of one or
more stock certificates bearing an appropriate legend recognizing the terms,
conditions and restrictions applicable to such Restricted Stock.  Upon the forfeiture of any Restricted Stock,
such shares of Common Stock represented by the Restricted Stock shall be
transferred to the Company without further action by the Participant.

 

(f)            Restricted
Stock Units - At the time a grant of Restricted Stock Units is made, the Committee,
in its sole discretion, shall establish a Restricted Period and such additional
terms and conditions as may be deemed appropriate for the incremental lapse or
complete lapse of restrictions with respect to all or any portion of such
Restricted Stock Units.  The Committee
may also, in its sole discretion, shorten or terminate the Restricted Period or
waive any terms or conditions for the lapse of restrictions with respect to all
or any portion of the Restricted Stock Units. 
During the Restricted Period the Participant will not have the rights
and privileges of a stockholder as to such Restricted Stock Units, including
the right to vote and receive dividend payments with respect to the shares of
Common Stock corresponding to such Restricted Stock Units; provided, however,
that at the sole discretion of the Committee, Dividend Equivalents may be
either currently paid in cash or shares or withheld by the Company for the
Participant’s account and reinvested in additional Restricted Stock Units.  Each grant of Restricted Stock Units shall be
subject to the following restrictions: (i) the Participant shall not be
entitled to the payment of cash or the delivery of the shares of Common Stock
corresponding to such Restricted Stock Units until the expiration or termination
of the Restricted Period and the satisfaction of any other terms and conditions
prescribed by the Committee, if any; (ii) none of the Restricted Stock
Units may be sold, transferred, assigned, pledged, or otherwise encumbered or
disposed of at any time; and (iii) all of the Restricted Stock Units shall
be forfeited and all rights of the Participant shall terminate without further
obligation on the part of the Company upon the termination of the Participant’s
employment with the Company or an Affiliate prior to the end of the Restricted
Period for any reason other than Retirement, total disability or death.

 

(g)           Other
Stock Awards - The Committee may, in its sole discretion, grant Stock Awards
other than Restricted Stock grants or Restricted Stock Units, and such Stock
Awards may be granted singly, in combination or in tandem with, in replacement
of, or as alternatives to grants or rights under this Plan or any 

 

 

 

other
employee benefit or compensation plan of the Company, including the plan of any
acquired entity.  If the Committee shall
stipulate terms and conditions with respect to such Stock Awards, the terms and
conditions will be set forth in the documents evidencing the Award.  If the terms and conditions with respect to
any Stock Award shall require the surrender or forfeiture of other grants or
rights under this Plan or any other employee benefit or compensation plan of
the Company, then the Participant shall not have any rights under such Stock
Award until the grants or rights exchanged have been fully and effectively
surrendered or forfeited.

 

(h)           Performance
Units and Performance Shares — At the time it approves each grant of
Performance Units or Performance Shares, the Committee shall determine the
number of Performance Units or Performance Shares granted to each Participant,
the proration, if any, of such Performance Units or Performance Shares if the
Participant retires prior to the completion of the relevant Performance Period,
the commencement and expiration of the relevant Performance Period, and the
Performance Criteria by which the payment value of the Performance Units or
Performance Shares will be determined. 
Payment of each Performance Unit and Performance Share shall occur no
later than the March 15 of the year immediately following the completion
of the respective Performance Period, unless a Participant shall have made an
effective election to defer the receipt of such payment pursuant to the terms
of the 3M Deferred Compensation Plan and all applicable laws.  The amount payable with respect to each
Performance Unit and Performance Share shall be contingent upon the attainment
of the Performance Criteria selected by the Committee during the respective
Performance Period, and upon the continued employment of the Participant throughout
such Performance Period (or upon the Participant’s Retirement prior to the end
of such Performance Period).

 

6.             Payment of Awards.

 

Payment
of Awards may be in the form of cash, shares of Common Stock or combinations
thereof as the Committee shall determine, and with such other restrictions as
it may impose.  The Committee may permit
or require the deferral of any Award payment, subject to such terms, rules and
conditions as the Committee may establish, which may include provisions for the
payment or crediting of interest or Dividend Equivalents; provided, however,
that the Committee shall not have any authority to permit or require the
deferral of any Award payment to the extent that the exercise of such authority
would cause any excise tax to become due under section 409A of the Code.

 

No
shares of Common Stock shall be issued to any Participant upon the exercise of
an Option granted under this Plan until full payment of the exercise price has
been made to the Company and the Participant has remitted to the Company the
required withholding taxes, if any. 
Payment of the exercise price and withholding taxes, if any, may be made
in whole or in part in shares of Common Stock, pursuant to such terms and
conditions as may be established from time to time by the Committee.  If payment is made in shares of Common Stock,
such shares shall be valued at their Fair Market Value on the day the
Participant exercises the Option or, as regards a withholding tax, on the date
when the tax obligation becomes due.  A Participant
need not surrender shares of already owned Common Stock as payment, and the
Company may, upon the giving of satisfactory evidence of ownership of such
shares by the Participant, deliver the appropriate number of additional shares
of Common Stock reduced by the number of shares required to pay the exercise
price and any required withholding taxes. 
Such form of evidence shall be determined by the Committee in its
discretion.

 

In
no event will the Company be required to deliver any fractional share of Common
Stock in connection with any Award.  In
the event that a Participant shall be entitled to receive a fraction of a share
of Common Stock in connection with an Award granted under the Plan, the Company
shall pay in cash, in lieu thereof, the Fair Market Value of such fractional
share.

 

7.             Termination of
Awards.

 

If
a Participant’s employment with the Company or an Affiliate is terminated for
any reason other than (i) a Disqualifying Termination, (ii) Retirement,
(iii) a physical or mental disability as recognized under a benefit 

 

 

 

plan
maintained by the Participant’s employer, or (iv) death, and prior to the
date of termination the Participant has not fully exercised an Option or Stock
Appreciation Right granted under this Plan, such Participant may exercise the
Option or Stock Appreciation Right within ninety (90) days following the date
of termination (but not beyond the expiration date of such Option or Right) for
the number of shares which the Participant could have purchased or received a payment
on the date of termination.  At the
conclusion of such ninety-day period (with respect to the Participant’s Options
and Stock Appreciation Rights, and at the time of termination with respect to
any other Awards), participation hereunder shall cease and all of the
Participant’s Awards granted under this Plan shall be automatically forfeited
unless the documents evidencing such Awards provide otherwise.

 

If
a Participant Retires or changes employment status as a result of a physical or
mental disability as recognized under a benefit plan maintained by the
Participant’s employer, without having fully exercised an Option or Stock
Appreciation Right, the Participant shall be entitled, within the remaining
term of the Option or Stock Appreciation Right (but not beyond the expiration
date of such Option or Right), to exercise such Option or Stock Appreciation
Right.  If a Participant who has thus
Retired dies, without having fully exercised an Option or Stock Appreciation
Right, the Option or Stock Appreciation Right (including any portion thereof
not already exercisable at the time of the Participant’s death) may be
exercised within two years after the date of his or her death (but not beyond
the expiration date of such Option or Right) by the Participant’s estate or by
a person who acquired the right to exercise such Option or Stock Appreciation
Right by bequest or inheritance or by reason of the death of the Participant.

 

If
a Participant, prior to Retirement, dies without having fully exercised an
Option or Stock Appreciation Right, the Option or Stock Appreciation Right
(including any portion thereof not already exercisable at the time of the
Participant’s death) may be exercised within two years following his or her
death (but not beyond the expiration date of such Option or Right) by the
Participant’s estate or by a person who acquired the right to exercise such
Option or Stock Appreciation Right by bequest or inheritance or by reason of
the death of the Participant.

 

Notwithstanding
the rest of this Section 7, if a Participant’s employment with the Company
or an Affiliate is terminated before he or she has fully exercised an Option or
Stock Appreciation Right under circumstances which the Committee believes to
warrant special consideration and the Committee has determined that the
Participant’s rights should not be forfeited at the time or times specified
above, the Option or Stock Appreciation Right (including any portion thereof
not already exercisable at the time of termination) may be exercised within two
years following his or her termination of employment (but not beyond the
expiration date of such Option or Right).

 

If
a Participant dies, either prior to or following Retirement, or becomes totally
disabled because of a physical or mental disability, and has not yet received
the stock certificate for the shares of Common Stock represented by a grant of
Restricted Stock, Restricted Stock Unit or other Stock Award, then all
restrictions imposed during the Restricted Period and any other terms and
conditions prescribed by the Committee, if any, shall automatically lapse and a
stock certificate shall be delivered to the Participant or the Participant’s
beneficiary, representative, or estate, as the case may be.

 

If
a Participant Retires or changes employment status as a result of a physical or
mental disability as recognized under a benefit plan maintained by the
Participant’s employer prior to the payment date for an Award of Performance
Shares or Performance Units, such Retirement or change in status shall not
affect any rights of the Participant with respect to such Performance Shares or
Performance Units; provided, however, that the Committee may provide for the
proration of the Performance Shares or Performance Units granted to a
Participant who Retires prior to the completion of the Performance Period for
such Performance Shares or Performance Units.

 

If
a Participant dies without having received payment of any Performance Shares or
Performance Units granted under this Plan, payment of such Shares or Units
shall be made no later than March 15 of the year following the year in
which the Participant died 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 for such Performance Shares or Performance
Units, the payment shall be at the same rate as that paid to other Participants
who survive until the payment date; and

 

(ii)  If the Participant dies before the
expiration of a Performance Period for such Performance Shares or Performance
Units, the amount of payment shall be at the lesser of:

 

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

 

•                                        any other amount approved,
in its discretion, by the Committee.

 

If
a Participant’s employment with the Company or an Affiliate is terminated due
to a Disqualifying Termination, participation hereunder shall cease and all of
the Participant’s Awards granted under this Plan shall be automatically
forfeited.

 

Participation
hereunder shall cease and all rights under the Plan with respect to Restricted
Stock or other Stock Awards granted to a Participant who has been participating
in this Plan as a nonemployee member of the 3M Board of Directors are
automatically forfeited by the Participant upon the date of termination of his
or her membership on the 3M Board of Directors for any reason other than: (i) retirement,
(ii) physical or mental disability as determined by the Committee, or (iii) death.

 

8.             Limits on Awards.

 

No
Participant shall be granted Options and Stock Appreciation Rights under this
Plan with respect to more than 1,000,000 shares of Common Stock in any calendar
year.  No Participant shall receive cash,
vested shares of Common Stock or other property as a result of Awards granted
under this Plan, other than Options and Stock Appreciation Rights, having a
value exceeding $30,000,000 in any calendar year.

 

9.             Plan
Administration.

 

This
Plan will be administered by the Committee, which shall have full power and
authority to select the Participants, interpret the Plan, continue, accelerate
or suspend the exercisability or vesting of an Award, and adopt such rules and
procedures for operating the Plan as it may deem necessary or appropriate.  Its power and authority shall include, but
not be limited to, making any amendments to or modifications of the Plan which
may be required or necessary to make such Plan comply with the provisions of
any laws or regulations of any country or unit thereof in which the Company or
any Affiliate operates.  To do so, the
Committee may establish different terms and conditions for Awards made to
Participants who live in or are subject to taxation in one or more countries
other than the United States in order to accommodate the tax or other relevant
laws of such countries.  The Committee
may adopt one or more supplements or sub-plans under the Plan to implement
these different terms and conditions.

 

10.          Delegation of
Authority.

 

To the extent permitted by Delaware law, the
Committee may delegate to officers of the Company any or all of its duties,
power and authority under this Plan subject to such conditions or limitations
as the Committee may establish; provided, however, that no officer shall have
or obtain the authority to grant Awards to (i) himself or herself, (ii) nonemployee
members of the 3M Board of Directors, or (iii) any person subject to
section 16 of the Securities Exchange Act of 1934.

 

11.          Adjustments.

 

In
the event of any change in the outstanding Common Stock of the Company by
reason of a stock split, stock dividend, combination or reclassification of
shares, recapitalization, merger or similar event, the 

 

 

Committee
shall adjust proportionately: (a) the number of shares of Common Stock (i) available
for issuance or delivery under this Plan in accordance with Section 4, (ii) for
which Awards may be granted to a single Participant in accordance with Section 8,
and (iii) subject to outstanding Awards granted under this Plan; (b) the
exercise prices of outstanding Awards; and (c) the appropriate Fair Market
Value and other price determinations for such Awards.  In the event of any other change affecting
the Common Stock or any distribution (other than normal cash dividends) to
holders of Common Stock, such adjustments in the number or kind of shares and
the exercise prices, Fair Market Value and other price determinations of the
affected Awards as the Committee shall, in its sole discretion, determine are
equitable, shall be made and shall be effective and binding for all purposes of
such outstanding Awards.  In the event of
a corporate merger, consolidation, acquisition of assets or stock, separation,
reorganization or liquidation, the Committee shall be authorized to cause the
Company to assume outstanding employee awards or issue replacement Awards to
affected employees, whether or not in a transaction to which section 424(a) of
the Code applies, and to make such adjustments in the terms of such awards as
it shall deem appropriate in order to maintain reasonable comparability or
equitable treatment between the assumed awards and the Awards granted under
this Plan as so adjusted.

 

12.          Withholding.

 

Prior
to the payment or settlement of any Award, the Participant must pay, or make
arrangements satisfactory to the Company for the payment of, any and all tax
withholding that in the opinion of the Company is required by law.  The Company or any Affiliate shall have the
right to deduct applicable taxes from any Award payment, to withhold from the
shares of Common Stock being issued or delivered in connection with an Award an
appropriate number of shares for the payment of taxes required by law, or to
take such other action as may be necessary in the opinion of the Company or
such Affiliate to satisfy all obligations for the withholding of such taxes.

 

13.          Transferability.

 

Except
as permitted in this Section 13, no Award granted under this Plan may be
assigned, transferred (other than a transfer by will or the laws of descent and
distribution as provided in Section 7), pledged, or hypothecated (whether
by operation of law or otherwise). 
Awards granted under this Plan shall not be subject to execution,
attachment, or similar process.  The
Committee may, in its sole discretion, permit individual Participants to
transfer the ownership of all or any of their Nonqualified Options granted
under this Plan to (i) the spouse, children or grandchildren of such
Participant (“Immediate Family Members”), (ii) a trust or trusts for the
exclusive benefit of such Immediate Family Members, or (iii) a partnership
in which such Immediate Family Members are the only partners, provided that (x) there
may be no consideration for any such transfer, and (y) subsequent
transfers of transferred Nonqualified Options shall be prohibited except those
in accordance with Section 7 (by will or the laws of descent and
distribution).  The Committee may, in its
sole discretion, create further conditions and requirements for the transfer of
Nonqualified Options.  Following
transfer, any such Nonqualified Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer.  The events causing termination of Awards in
accordance with Section 7 hereof shall continue to be applied with respect
to the original Participant, following which the Nonqualified Options shall be
exercisable by the transferee only to the extent, and for the periods specified
in Section 7.

 

14.          Validity.

 

In
the event any provision of this Plan should be determined to be illegal or
invalid for any reason, it shall not affect the remaining provisions of the
Plan which shall remain in effect as if the illegal or invalid provision had
never been included herein.

 

15.          Governing Law.

 

The
provisions of this Plan shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Delaware.

 

 

 

16.          Effective Date, Term, Amendment and Termination of the Plan.

 

This
Plan will become effective on the date it is approved by the requisite vote of
the stockholders of 3M Company, and shall expire (unless it is terminated
before then) on the tenth anniversary of such effective date.  Such expiration shall not adversely affect
Awards granted under this Plan prior to such expiration date.  The Board of Directors may at any time amend
or terminate this Plan, except that no amendment or termination shall adversely
affect Awards granted under this Plan prior to the effective date of such
amendment or termination; provided, however, that no amendment shall be made
without the prior approval of the holders of a majority of the issued and
outstanding shares of Common Stock represented and entitled to vote on such
amendment which would (i) increase the aggregate number of shares of
Common Stock available for issuance or delivery under this Plan in accordance
with Section 4 (except for adjustments made in accordance with Section 11),
(ii) permit the granting of Awards with purchase prices lower than those
specified in Section 5, or (iii) be a material amendment for which
stockholder approval is required by applicable law, regulation or stock
exchange rule.

 

17.          Change in Control.

 

For
purposes of this Section 17, the following words and phrases shall have
the meanings indicated below, unless the context clearly indicates otherwise:

 

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

 

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

 

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

 

                (d)           “Continuing Directors” shall have the meaning assigned to
such term in Article Thirteenth of the Restated Certificate of
Incorporation of 3M Company.

 

Notwithstanding
any other provision of this Plan to the contrary, all outstanding Options and
Stock Appreciation Rights shall (i) become immediately exercisable in full
for the remainder of their respective terms upon the occurrence of a Change in
Control of the Company, and (ii) remain exercisable in full for a minimum
period of six months following the Change in Control; provided, however, that
in no event shall any Option or Stock Appreciation Right be exercisable beyond
the original expiration date.               
Similarly, all restrictions regarding the Restricted Period or the satisfaction
of other terms and conditions prescribed by the Committee, if any, with respect
to grants of Restricted Stock, Restricted Stock Units or other Stock Awards,
shall automatically lapse, expire, and terminate and the Participant shall be
immediately entitled to receive a stock certificate for the number of shares of
Common Stock represented by the Restricted Stock, Restricted Stock Units or
Stock Awards upon the occurrence of a Change in Control.

 

Notwithstanding
any other provision of this Plan to the contrary, upon the occurrence of a
Change in Control of the Company each Performance Period shall end and the
Company shall immediately distribute in cash or shares of Common Stock, as
appropriate, to the respective Participants the value of all outstanding
Performance Shares and Performance Units granted under this Plan, as determined
in accordance with the following rules:

 

(x)  With respect to those Performance Shares
or Performance Units for which the Performance Period had not been completed
prior to the Change in Control of the Company, the value of such Shares or
Units for purposes of this Section 17 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:

 

 

 

•                                        the value of such
Performance Shares or 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;

 

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

 

•                                        any other amount approved,
in its discretion, by the Committee.

 

(y)  With respect to those Performance Shares
or 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 Shares or
Units for purposes of this Section 17 shall be the actual value as
adjusted to reflect the actual Company performance during the Performance
Period.

 

For
purposes of this Section 17, a Change in Control of the Company shall be
deemed to have occurred if:

 

(1)           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 twenty percent (20%) or more of the combined voting power
of the Company’s then outstanding securities, unless a majority of the
Continuing Directors of the 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

 

(2)           the
Continuing Directors of the 3M Board of Directors shall at any time fail to
constitute a majority of the members of such 3M Board of Directors.

 

In
the event that the provisions of this Section 17, when considered together
with the other compensation provided by the Company, result in “payments” that
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
sufficient to fully satisfy such excise tax and any additional federal, state,
and local income taxes payable on the additional amount.

 

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 or her rights under this Section 17, 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 17,
unless a lawsuit commenced by the Participant for such purposes is dismissed by
the court as being frivolous or otherwise improper under applicable court
rules.  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 17.

 

18.          Miscellaneous.

 

(a)           Nothing
in this Plan or the fact that a person has received or become eligible to
receive Awards hereunder shall be deemed to give such person any right to be
retained in the employ of the Company or any Affiliate or to interfere with the
right of the Company or any Affiliate to discipline or terminate the employment
of such person at any time for any reason whatsoever.  No person shall have any claim or right to
receive Awards under this Plan, except as provided in accordance with the
provisions of this Plan and as approved by the Committee.  Unless otherwise specifically determined by
the Committee, neither 

 

 

 

the
Awards themselves nor the payments received with respect to such Awards granted
under this Plan will be deemed a part of any Participant’s compensation for
purposes of determining such Participant’s payments or benefits under any
benefit plan or severance program of the Company or any Affiliate or under the
severance pay law of any country.

 

(b)           This
Plan will be unfunded.  The Company does
not intend to create any trust or separate fund in connection with the
Plan.  The Company shall not have any
obligation to set aside funds or segregate assets to ensure the payment of any
Award.  The Plan shall not establish any
fiduciary relationship between the Company and any Participant or other person.  To the extent any person holds any rights by
virtue of an Award under this Plan, such right (unless otherwise determined by
the Committee) shall be no greater than the right of an unsecured general
creditor of the Company.

 

(c)             Prior to the
payment or settlement of any Award, the Participant must pay or make
arrangements satisfactory to the Company and its Affiliates for the payment of
any and all tax withholding that in the opinion of the Company and its
Affiliates is required by law.  The
Company and its Affiliates shall have the right to deduct from any Award or any
payment due on account of any Award granted under this Plan the federal, state,
local or foreign income or other taxes required by law to be withheld with
respect to such Award or payment, to withhold from the shares of Common Stock
being issued or delivered in connection with an Award an appropriate number of
shares for the payment of taxes required by law, and to take such other action
as may be necessary in the opinion of the Company and its Affiliates to satisfy
all obligations for the withholding and payment of such taxes.

 

(d)             The provisions of
this Plan and the documents evidencing Awards granted under this Plan shall be
construed and interpreted according to the laws of the State of Delaware.

 

(e)           In
case any provision of this Plan shall be ruled or declared invalid for any
reason, said illegality or invalidity shall not affect the remaining
provisions, and the remainder of the Plan shall be construed and enforced as if
such illegal or invalid provision had never been included herein.

 

(f)            To
the extent permitted by the Committee, 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 Awards 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.  If a Participant designates more than one
beneficiary to receive such Participant’s outstanding Awards 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.

 

(g)           This
Plan is intended to comply and shall be administered in a manner that is
intended to comply with the requirements of Section 409A of the Code
(including the Treasury Department guidance and regulations issued thereunder),
and shall be construed and interpreted in accordance with such intent.  If the Committee determines that an Award,
Award document, payment, transaction or any other action or arrangement
contemplated by the provisions of this Plan would, if undertaken, cause a
Participant to become subject to any additional taxes or other penalties under Section 409A
of the Code, then unless the Committee specifically provides otherwise, such
Award, Award document, payment, transaction or other action or arrangement
shall not be given effect to the extent it causes such result and the related
provisions of the Plan and/or Award documents will be deemed modified or, if
necessary, suspended in order to comply with the requirements of Section 409A
of the Code to the extent determined appropriate by the Committee, in each case
without the consent of or notice to the Participant.

 

(h)           Although
the Company and its Affiliates may endeavor to structure an Award or payment
hereunder so that it (i) qualifies for favorable U.S. or foreign tax
treatment, or (ii) avoids adverse tax treatment, neither the Company nor
any Affiliate makes any representation to that effect and expressly disavows
any commitment or obligation to maintain favorable or avoid unfavorable tax
treatment for any Participant.Exhibit 10.2

 

This document constitutes part of a prospectus
covering securities that have been registered under the Securities Act of 1933.

 

3M COMPANY

3M
2008 LONG-TERM INCENTIVE PLAN

 

STOCK
OPTION AGREEMENT

 

[PARTICIPANT NAME]

 

                1.  Grant of
Option.  This Agreement confirms that on [GRANT DATE]
(the “Grant Date”), 3M Company (the “Company”) granted you a
Nonqualified Stock Option (the “Option”) to purchase [NUMBER OF SHARES GRANTED]
shares of Common Stock of the Company at the exercise price of [GRANT PRICE]
per share (the “Exercise Price”), subject to the terms and conditions of this
Agreement and the 2008 Long-Term Incentive Plan (the “2008 Plan”).

 

                2.  Definitions.  Capitalized terms used and not
defined herein shall have the same meaning as in the 2008 Plan.

 

                3.  Vesting and Term of Option.  Your
Option will vest over three years.  This
means that you may exercise the first one-third of the shares subject to this
Option on the first anniversary of the Grant Date, the second one-third of
these shares on the second anniversary of the Grant Date, and the remaining
one-third of these shares on the third anniversary of the Grant Date, assuming
continued employment.  However, you will
be required to accept this Option as well as this Agreement before being
permitted to exercise the Option.  This
Option will expire on and may not be exercised after the earlier of [TENTH
ANNIVERSARY OF GRANT DATE] or the 90th day following the end of your
3M employment, except in cases of Retirement, death, disability or Disqualifying
Termination.

 

4. 
Nature of Grant.  In accepting
the grant of this Option, you acknowledge that:

 

                (a)           the 2008 Plan is established voluntarily by the Company,
it is discretionary in nature and it may be modified, amended, suspended or
terminated by the Company at any time, unless otherwise provided in the 2008
Plan;

 

                (b)           the grant of the Option is voluntary and occasional and
does not create any contractual or other right to receive future grants of
options, or benefits in lieu of options, even if options have been granted
repeatedly in the past;

 

                (c)           all decisions with respect to future option grants, if
any, will be at the sole discretion of the Compensation Committee of the 3M
Board of Directors;

 

                (d)           your participation in the 2008 Plan shall not create a
right to further employment with your employer and shall not interfere with the
ability of your employer to terminate your employment relationship at any time
with or without cause;

 

                (e)           the Option is not part of your regular or expected compensation
for any purpose, including, but not limited to, calculating any severance
payments, bonuses, life insurance, disability, pension or retirement benefits
or similar payments;

 

                (f)            the Company is not providing any tax, legal or
financial advice, nor is the Company making any recommendations regarding your
participation in the 2008 Plan, or

 

 

 

your acquisition or sale of the underlying shares of Common Stock; and

 

(g)           you are hereby advised to consult with your own personal
tax, legal and financial advisors regarding your participation in the 2008 Plan
before taking any action related to the 2008 Plan.

 

                5.  Transferability.  This Option is not transferable except in the
event of your death, in accordance with the provisions of Section 13 of
the 2008 Plan.

 

                6.  Governing Law. 
This Option and the provisions of this Agreement are governed by, and
subject to, the laws of the State of Delaware, as provided in the 2008 Plan.

 

                For purposes of litigating any
dispute that arises concerning the grant of this Option or this Agreement, you
and the Company agree and consent to the jurisdiction of the State of
Minnesota, and agree that such litigation shall be conducted in the courts of
Ramsey County, Minnesota, or the federal courts for the United States for the
District of Minnesota, where this grant is made and/or to be performed.

 

                7.  Entire
Agreement.  The 2008
Plan and this Agreement constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter contained herein.

 

By
accepting the grant of this Option, you agree to all of the terms and
conditions described above and in the 2008 Plan.

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