3M 2007 Annual Report Download - page 87

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81
ESOP Debt Shares 2007 2006 2005
Allocated 14,039,070 15,956,530 16,729,528
Committed to be released 278,125 286,620 366,969
Unreleased 2,457,641 3,831,425 5,145,039
Total ESOP debt shares 16,774,836 20,074,575 22,241,536
NOTE 15. Management Stock Ownership Program (MSOP) and General Employees’ Stock Purchase Plan
(GESPP)
The Company issues MSOP options to eligible employees annually in May using the closing stock price on the grant
date, which is the date of the Annual Stockholders’ Meeting. In May 2005, shareholders approved 36.75 million
shares for issuance under the MSOP in the form of management stock options, restricted stock, restricted stock units
and stock appreciation rights. Under the plan, the Company has principally issued stock options to management
employees that are granted at market value on the date of grant. Prior to 2005, under previous plans, these options
were generally exercisable one year after the date of grant, with expiration 10 years from the date of grant. Effective with
the May 2005 grant, the Company changed its vesting period from one to three years with the expiration date remaining
at 10 years from date of grant. In addition to grants to management employees, the Company makes other minor stock
option grants to employees, for which vesting terms and option lives are not substantially different, and also makes
minor grants of restricted stock units and other stock-based grants.
Outstanding shares under option include grants from previous plans. There were approximately 15,400 participants in the
plan with either outstanding options or restricted stock units at December 31, 2007.
Management Stock Ownership Program
2007 2006 200
5
Number of Exercise Number of Exercise Number of Exercise
Options
Price* Options Price* Options Price*
Under option –
January 1 82,867,903 $67.41 80,157,713 $62.40 78,293,754 $58.70
Granted
Annual 4,434,583 84.81 11,255,448 87.31 10,821,092 76.81
Progressive (Reload) 461,815 87.12 652,552 80.44 751,995 81.19
Other 51,730 82.93 84,400 76.45 570,631 78.07
Exercised (12,498,051) 55.34
(8,693,946) 47.71 (9,027,646) 48.30
Canceled (704,929) 77.36 (588,264) 74.72
(1,252,113) 75.65
December 31 74,613,051 $70.50 82,867,903 $67.41 80,157,713 $62.40
Options exercisable
December 31 58,816,963 $66.83 64,218,738 $62.85 68,714,166 $60.03
*Weighted average
For options outstanding at December 31, 2007, the weighted-average remaining contractual life was 66 months and
the aggregate intrinsic value was $1.070 billion. For options exercisable at December 31, 2007, the weighted-average
remaining contractual life was 57 months and the aggregate intrinsic value was $1.042 billion. As of December 31,
2007, there was $118 million of compensation expense that has yet to be recognized related to non-vested stock
option-based awards. This expense is expected to be recognized over the remaining vesting period with a weighted-
average life of 18 months. The total intrinsic values of stock options exercised during 2007, 2006 and 2005,
respectively, was $373 million, $289 million and $278 million. Cash received from options exercised during 2007,
2006 and 2005, respectively, was $692 million, $414 million and $437 million.
The Company’s actual tax benefits realized for the tax deductions related to the exercise of employee stock options
for 2007, 2006 and 2005, respectively, was $122 million, $93 million and $95 million. The Company does not have a
specific policy to repurchase common shares to mitigate the dilutive impact of options; however, the Company has
historically made adequate discretionary purchases, based on cash availability, market trends and other factors, to
satisfy stock option exercise activity.
Beginning in 2007, the Company began reducing the number of traditional stock options granted under its long-term
incentive compensation plan by reducing the number of employees eligible to receive annual grants and by shifting a