Item 5.02. Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As
reported in 3M Company’s press release dated June 3, 2020, Nicholas C. Gangestad, Senior Vice President and Chief
Financial Officer, has announced his intention to retire, effective
August 1, 2020. Mr. Gangestad will stay on through July 31, 2020, to help ensure a smooth transition to his successor.
As
also reported in the press release, 3M announced the appointment of Monish Patolawala as Senior Vice President and Chief Financial
Officer, effective July 1, 2020.
Mr. Patolawala, age 51, has served as Chief Financial
Officer of GE Healthcare since June 2015 and vice president of operational transformation of General Electric Company since
2019. Prior to that, Mr. Patolawala served as Chief Financial Officer of GE Transportation from April 2010 to May 2015.
Cash
Compensation; Benefits. In connection with Mr. Patolawala’s appointment, the Company extended an offer letter
to him on May 19, 2020 (the “Offer Letter”), which he accepted. Under the terms of the Offer Letter, Mr. Patolawala
will receive an annual base salary of $885,000 and a target annual incentive compensation opportunity of $885,000, each of which
will be prorated for 2020. He also will receive a hiring bonus of $700,000 and be eligible to participate in the Company’s
long-term incentive compensation, retirement and other benefit plans and programs offered to the Company’s other senior executives.
The hiring bonus will be payable in two installments: $400,000 payable within 30 days of his start date and the remainder payable
within 30 days of the first anniversary of his start date.
Initial
Long-Term Incentive Awards. It is expected that Mr. Patolawala will enter into an agreement upon his commencement of
employment that protects 3M’s confidential information and includes noncompetition and non-solicitation covenants (the “Protective
Covenant Agreement”). In consideration of Mr. Patolawala’s execution of the Protective Covenant Agreement and as an
inducement for him to join 3M, the Offer Letter provides that he will receive (i) a special one-time make-whole restricted stock
unit grant (referred to as the “Special Make-whole RSU Award”) covering a number of shares of 3M common stock determined
by dividing $2,765,246 by the average closing sales price for a share of 3M common stock over 45 consecutive trading days ending
with the grant date (referred to as the “45-day Average FMV”), vesting in a series of equal installments on each of
the first three anniversaries of the grant date, (ii) a special one-time inducement restricted stock unit grant (referred to as
the “Special Inducement RSU Award”) covering a number of shares of 3M common stock determined by dividing $1,000,000
by the 45-day Average FMV, vesting in a single installment on the fifth anniversary of the grant date, (iii) a special one-time
inducement 2020 performance share award (referred to as the “Special Inducement PSA”) with a target number of performance
shares determined by dividing $1,000,000 by the 45-day Average FMV, vesting in a single installment on December 31, 2022, (iv)
a pro rata 2020 performance share award with a target number of performance shares determined by dividing $812,500 by the 45-day
Average FMV, vesting in a single installment on December 31, 2022, and (v) a pro rata 2020 stock option award covering a number
of shares of 3M common stock determined by dividing $812,500 by the fair value of a stock option covering one share of 3M common
stock, as determined in accordance with FASB ASC Topic 718, excluding the effect of forfeitures, vesting in a series of equal installments
on each of the first three anniversaries of the grant date. Each of the equity awards will be granted on Mr. Patolawala’s
start date. The performance period and goals for both the inducement and pro rata 2020 performance share awards will be the same
as those of other grants made to 3M’s executive officers on March 2, 2020. The per share exercise price of the stock option
will equal the closing sales price of a share of 3M common stock on the grant date.
Severance.
Mr. Patolawala will be eligible to participate in the Company’s Executive Severance Plan (the “Severance Plan”),
the benefits of which are described in the Company’s definitive proxy statement on Schedule 14A filed with the United States
Securities and Exchange Commission (“SEC”) on March 25, 2020. A copy of the Severance Plan was included as Exhibit
10.20 to the Company’s annual report on Form 10-K filed with the SEC on February 6, 2020. In the event that Mr. Patolawala
voluntarily resigns from employment with the Company for “Good Reason” (as defined in the Severance Plan) or his employment
is terminated by the Company other than for “Misconduct” (as defined in the 3M Company 2016 Long-Term Incentive Plan),
he also will be entitled to receive (i) accelerated payment of any then unpaid portion of the hiring bonus and (ii) accelerated
vesting of the Special Make-whole RSU Award and the Inducement RSU Award and continued vesting of a pro rata portion of the Special
Inducement PSA and Pro Rata 2020 PSA, in each case, subject to his execution of an effective and irrevocable general release of
all claims against the Company and its affiliates.
The foregoing description of the Offer Letter is qualified in
its entirety by reference to the full text of the Offer Letter, a copy of which is attached hereto as Exhibit 99.1 and incorporated
by reference in this Item 5.02.