Document:

EXHIBIT
10.1

 

(Including amendments

through February 2009)

 

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.

 

 

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(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.

 

 

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(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

 

 

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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

 

 

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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

 

 

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account and either
maintained in cash to be paid upon the expiration of the Restricted Period or
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 and any deferred Dividend Equivalents 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; provided, however,
that if the Committee so decides and the documents evidencing an Award of
Restricted Stock Units so provide, the preceding exception allowing such
Restricted Stock Units to vest following the Participant’s Retirement shall not
apply so that such Restricted Stock Units and any deferred Dividend Equivalents
will be forfeited and all rights of the Participant shall terminate without
further obligation on the part of the Company upon the Retirement of such
Participant prior to the end of the Restricted Period.

 

(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

 

 

6

 

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
termination in connection with which the Participant executes a written release
of employment-related claims in favor of the Company that provides (with the
approval of the Company) for the nonforfeiture of Options and Stock
Appreciation Rights, (iv) a physical or mental disability as recognized
under a benefit plan maintained by the Participant’s employer, or (v) 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,
terminates employment with the Company or an Affiliate and in connection with
such termination the Participant executes a written release of
employment-related claims in favor of the Company that provides (with the
approval of the Company) for the nonforfeiture of Options and Stock
Appreciation Rights, 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 (provided, however, that in the event of a termination in connection with
which the Participant executes a written release of employment-related claims
in favor of the Company that provides (with the approval of the Company) for
the nonforfeiture of Options and Stock Appreciation Rights, the additional time
to exercise Options and Stock Appreciation Rights shall apply only to those
Options and Stock Appreciation Rights which have vested prior to the date of
termination of employment).  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

 

 

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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 “disabled” within the
meaning of section 409A(a)(2)(C) of the Code, and has not yet received the
stock certificate for the shares of Common Stock represented by a grant of
Restricted Stock, Restricted Stock Units 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 upon the Participant’s
demonstration to the satisfaction of the Committee that such Participant is
considered “disabled” for purposes of section 409A(a)(2)(C) of the Code.

 

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

 

 

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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.

 

 

9

 

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.

 

 

10

 

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.

 

 

11

 

(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 only if a “change
in the ownership” or a “change in effective control” and/or a “change in the
ownership of a substantial portion of the assets” of the Company has taken
place (as those terms are defined in Treasury Regulations §1.409A-3(i)(5) or
such other regulation or guidance issued under section 409A of the Code.

 

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. 
Payment of this additional amount shall be made as soon as
administratively feasible, but no later than two and one-half months following
the end of the Participant’s taxable year in which the amount of the excise tax
payable has been determined.

 

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.  Payment of these legal and accounting fees
and expenses, as well as these tax and financial planning fees and expenses,
shall be made as soon as administratively feasible, but no later than two and
one-half months following the end of the Participant’s taxable year in which
these fees and expenses have been incurred.

 

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

 

 

12

 

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.

 

 

13EXHIBIT 10.3

 

3M COMPANY

3M 2008 LONG-TERM INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

FOR U.S. EMPLOYEES

 

[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, as
long as you remain continuously employed by the Company or an Affiliate from
the Grant Date until each vesting date or if you die or Retire before any such
date.  This means that you may exercise
the first one-third of the shares subject to this Option on or after the first
anniversary of the Grant Date, the second one-third of these shares on or after
the second anniversary of the Grant Date, and the remaining one-third of these
shares on or after 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 February 8, 2019
or the 90th day following the end of your 3M
employment, except in cases of Retirement, death, disability, Disqualifying
Termination or a termination in connection with which you execute a written
release of employment-related claims in favor of the Company that provides
(with the approval of the Company) for the nonforfeiture of stock options (but
only to the extent this Option has vested prior to the date of the termination
of your employment).

 

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

 

 

1

 

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.

 

 

2

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