<PAGE>
PAGE 1 of 2
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
WALGREEN CO.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
J. A. OETTINGER
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- ----------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
PAGE 2 of 2
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
LOGO OF WALGREENS
200 WILMOT ROAD
DEERFIELD, ILLINOIS 60015
November 21, 1994
Dear Walgreens Shareholder:
You are cordially invited to our Annual Shareholders' Meeting on Wednesday,
January 11, 1995, at 2:00 p.m., Central Standard Time. The meeting will again
be held in the Arthur Rubloff Auditorium of the Art Institute of Chicago,
Michigan Avenue and Adams Street. Please use the Columbus Drive entrance,
located at the rear of the building.
This meeting will be an opportunity to publicly recognize two gentlemen who
have been key figures in our Company's success over the last several decades.
Fred Canning, who has continued to serve as a Director since his retirement as
President in 1990, is now leaving the Board. His association with Walgreens
spans nearly 50 years, beginning in 1946 when he joined us as an apprentice
pharmacist. Since 1977, Fred has offered invaluable counsel and experience to
the Board of Directors and he will be sorely missed.
Charles D. Hunter, our Chief Financial Officer, is retiring from his
position in January, though we are pleased to report he has been nominated for
re-election to our Board of Directors. Chuck, who joined Walgreens in 1967 and
has been a Director since 1974, is the architect of many decisions which have
provided huge benefit to Walgreens and to our shareholders. We will miss his
day-to-day guidance, but look forward to his continued participation on the
Board.
We hope to see you January 11. Whether or not you plan to attend, it is
important that you sign the enclosed proxy and return it to us as soon as
possible so your shares will be represented. Meanwhile, our best wishes for a
pleasant holiday season.
Sincerely,
SIGNATURE LOGO SIGNATURE LOGO
C. R. WALGREEN III L. DANIEL JORNDT
Chairman President
<PAGE>
LOGO OF WALGREENS
200 WILMOT ROAD
DEERFIELD, ILLINOIS 60015
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, JANUARY 11, 1995
To the Shareholders of Walgreen Co.:
The Annual Meeting of Shareholders of WALGREEN CO., an Illinois corporation,
will be held at the Arthur Rubloff Auditorium of the Art Institute of Chicago,
Michigan Avenue and Adams Street, Chicago, Illinois, on Wednesday, January 11,
1995, at 2:00 P.M. Central Standard Time. The Annual Meeting is for the
following purposes:
(1) To elect nine directors to hold office until the next Annual Meeting of
Shareholders or until their successors are elected and qualified;
(2) To ratify the appointment of Arthur Andersen LLP as auditors; and
(3) To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Only shareholders of record at the close of business on November 14, 1994,
are entitled to vote at the meeting.
Shareholders are cordially invited to attend the Annual Meeting. Please sign,
date and return the enclosed proxy in the envelope provided whether or not you
plan to attend the Annual Meeting in person. The proxy may be revoked at any
time before it is voted. If you are present at the meeting, you may vote your
shares in person and the proxy will not be used.
For further information concerning individuals nominated as directors, the
appointment of Arthur Andersen LLP as auditors and the use of the proxy, you
are respectfully urged to read the proxy statement on the following pages.
The Company's Annual Report to shareholders for 1994 is enclosed with this
proxy statement.
By order of the Board of Directors.
SIGNATURE LOGO
Julian A. Oettinger
Secretary
November 21, 1994
<PAGE>
LOGO OF WALGREENS
200 WILMOT ROAD
DEERFIELD, ILLINOIS 60015
November 21, 1994
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies to be voted at the Annual Meeting of Shareholders of Walgreen Co. to
be held on January 11, 1995, and further to inform the shareholders concerning
the use of the proxy and the business to be transacted at the meeting.
The enclosed proxy is solicited by the Board of Directors of the Company.
The proxy may be revoked at any time before it is voted, provided that written
notice thereof has been given to the Secretary of the Company. The items
enumerated herein constitute the only business which the Board of Directors
intends to present or is informed that others will present at the meeting. The
proxy does, however, confer discretionary authority upon the persons named
therein, or their substitutes, with respect to any other business which may
properly come before the meeting. Shareholders are entitled to one vote for
each share. Only shareholders of record at the close of business on November
14, 1994, are entitled to notice of, and to vote at, the meeting.
The expenses in connection with the solicitation of proxies will be borne by
the Company. Solicitation will be made by mail, but may in some cases also be
made by telephone or personal call by officers, directors or regular employees
of the Company who will not be specially compensated for such solicitation.
The Company may request brokerage houses and other nominees or fiduciaries to
forward copies of the Company's proxy material and Annual Report to beneficial
owners of stock held in their names, and the Company may reimburse them for
reasonable out-of-pocket expenses incurred in so doing. The Company may also
elect to retain professional solicitors to assist in the solicitation of
proxies. Any professional solicitors will be paid by the Company.
ELECTION OF DIRECTORS
There are nine nominees for election to the Board of Directors. Fred F.
Canning is retiring from the Board of Directors and is not standing for re-
election. The remaining incumbent directors have been nominated for re-
election.
In the election of the Board of Directors, shareholders have the right to
vote the number of shares owned by them for each of the nine nominees, or they
may cumulate their votes and give nine votes to one nominee for each share
owned, or they may distribute their votes on the same principal among as many
nominees as they choose. Directors are elected by the votes of a majority of
the shares represented in person or by proxy at the meeting. As of the close
of business on November 14, 1994, the Company had outstanding 123,070,536
shares of Common Stock.
Proxy votes will be cast for the election of the nominees named below to
hold office for one year or until their successors are elected and qualified,
but should any of such individuals unexpectedly become unavailable for
election, the proxies reserve the right to nominate and vote for such other
person as they shall designate.
<PAGE>
The following tabulation sets forth the names, ages, principal occupations
and other information respecting the director nominees:
<TABLE>
<CAPTION>
NAMES AND AGES OF DIRECTOR NOMINEES, PERIOD OF SERVICE
THEIR PRINCIPAL OCCUPATIONS AS DIRECTOR BEGAN
AND OTHER INFORMATION IN
------------------------------------ -----------------
<S> <C>
Charles R. Walgreen III, 59--Chairman of the Board and Chief 1963
Executive Officer.
Theodore Dimitriou, 68--Chairman of the Board of Wallace 1986
Computer Services, Inc. Mr. Dimitriou was previously also
Chief Executive Officer and President of Wallace Computer
Services, Inc.
Mr. Dimitriou is also a director of Wallace Computer
Services, Inc. and General Binding Corp.
James J. Howard, 59--Chairman of the Board and Chief 1986
Executive Officer of Northern States Power Company. Prior
to July 1990, Mr. Howard was Chairman of the Board,
President and Chief Executive Officer of Northern States
Power Company (March 1988-June 1990).
Mr. Howard is also a Director of Northern States Power
Company, Honeywell Inc., Ecolab, Inc. and NWNL Companies,
Inc.
Charles D. Hunter, 64--Vice Chairman and Chief Financial 1974
Officer. Prior to 1990, Mr. Hunter was Executive Vice
President and Chief Financial Officer.
L. Daniel Jorndt, 53--President and Chief Operating Officer. 1990
Prior to 1990,
Mr. Jorndt was Senior Vice President and Treasurer.
Cordell Reed, 56--Senior Vice President of Commonwealth 1994
Edison Co.
Mr. Reed is also a director of LaSalle National Corporation,
LaSalle National Bank, LaSalle National Trust Company,
LaSalle Talman Bank and LaSalle Cragin Bank.
John B. Schwemm, 60--Former Chairman and Chief Executive 1985
Officer of
R.R. Donnelley & Sons Company.
Mr. Schwemm is also a director of USG Corporation and
William Blair Mutual Funds, Inc.
William H. Springer, 65--Former Vice Chairman of Ameritech 1988
Corporation (1991 to 1992). Prior to 1991, Mr. Springer was
Vice Chairman and Chief Financial and Administrative
Officer of Ameritech (1987-1991).
Mr. Springer is also a director of The Benchmark Funds,
Goldman Sachs Institutional Group of Funds and Baker,
Fentress and Company.
Marilou M. von Ferstel, 56--Executive Vice President and 1987
General Manager of Ogilvy Adams & Rinehart (formerly Ogilvy
& Mather, Inc.) since June 1990. Prior to that time Mrs.
von Ferstel was Managing Director and Senior Vice President
of Hill and Knowlton, Inc.
Mrs. von Ferstel is also a director of Illinois Power
Company.
</TABLE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met four times and there were 17 meetings of Board
Committees during the 1994 fiscal year. All directors attended more than 75%
of the aggregate of the meetings of the Board of Directors and the meetings of
the Board Committees on which he or she served.
2
<PAGE>
COMPENSATION OF DIRECTORS
Full-time employees of the Company who serve as Directors receive only
reimbursement of expenses incurred in attending meetings. Directors who are
not employees currently receive a quarterly retainer of $6,000 for Board
service, a fee of $1,200 for each Board of Directors and Board Committee
meeting attended, and reimbursement for expenses incurred in connection with
such meetings.
Messrs. Canning, Dimitriou, Howard, Schwemm, Springer and Ms. von Ferstel
participate in unfunded deferred compensation plans that permitted Directors
to defer a portion of his or her retainer fees (or a portion of consultant's
fees, as applicable). During fiscal 1994, payments were made under such plans
as follows: Mr. Canning, $4,808; Mr. Dimitriou, $31,878; Mr. Howard, $32,057;
Mr. Schwemm, $32,057; and Ms. von Ferstel, $20,355.
The Company has a retirement plan for non-employee Directors who retire from
the Board with five or more years of service as a Director. The annual
benefits payable to a Director for the shorter of (i) the number of years the
Director served as a non-employee member of the Board, or (ii) ten years, are
equal to the sum of 80% of the annual Board retainer in effect on the date of
retirement, plus 4% of the Director's final annual retainer for each year of
service as a non-employee Director in excess of ten years. In no case may the
annual benefit payment exceed 100% of the annual retainer in effect and
payable to the Director on the date of his or her retirement from the Board of
Directors.
COMMITTEES
The Board of Directors had standing Executive, Audit, Compensation, Finance
and Nominating Committees during fiscal 1994, each of which is described
below.
The Executive Committee met four times during the fiscal year. The Committee
was composed of Charles R. Walgreen III, Chairman; Fred F. Canning; Theodore
Dimitriou; Charles D. Hunter; and L. Daniel Jorndt. During intervals between
meetings of the Board of Directors, the Executive Committee possesses such
powers of the Board of Directors in the management of the business and affairs
of the Company as may be delegated by the Board of Directors, subject to such
limitations as may be imposed by law and the By-Laws of the Company.
The Audit Committee met four times during the fiscal year. The Committee was
composed of Theodore Dimitriou, Chairman; John B. Schwemm; and Marilou M. von
Ferstel. The Committee's responsibilities include evaluation of significant
matters relating to the audit and internal controls of the Company and review
of the scope and results of audits by the independent auditors.
The Compensation Committee met four times during the fiscal year. The
Committee was composed of William H. Springer, Chairman; James J. Howard; and
John B. Schwemm. The Committee reviews the Company's remuneration policies and
practices, including executive salaries, compensation and other employee
benefits; and administers the Company's Restricted Performance Share Plan, the
1982 Employees Stock Purchase Plan, the Executive Stock Option Plan and the
1986, 1988 and 1992 Executive Deferred Compensation/Capital Accumulation
Plans.
The Finance Committee met four times during the fiscal year. The Committee
was composed of Charles D. Hunter, Chairman; Fred F. Canning; L. Daniel
Jorndt; Cordell Reed; and Charles R. Walgreen III. The Finance Committee
reviews the financial requirements and practices of the Company and makes
recommendations to the Board of Directors concerning such matters.
The Nominating Committee met one time during the fiscal year. The Committee
was composed of John B. Schwemm, Chairman; Fred F. Canning; and James J.
Howard. The
3
<PAGE>
Nominating Committee develops general criteria regarding the qualifications
and selection of board members and recommends candidates for election to the
Board of Directors. The Nominating Committee will consider persons recommended
by shareholders for inclusion as nominees for election to the Board of
Directors, if the names of such persons are submitted in writing in a timely
manner to the Secretary of the Company. All recommendations should be
accompanied by a complete statement of such person's qualifications and an
indication of the person's willingness to serve.
SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following tabulation sets forth information as of November 14, 1994,
concerning the ownership of Common Stock by each Director, each of the
executive officers named in the Summary Compensation Table included in this
Proxy Statement, and all current Directors and executive officers as a group.
Except as otherwise noted, the individual named possessed sole voting and
investment power over such shares.
<TABLE>
<CAPTION>
AMOUNT OF SHARES PERCENT OF
NAME OF INDIVIDUAL BENEFICIALLY OWNED CLASS
- ------------------ --------------------- ----------
<S> <C> <C>
Charles R. Walgreen, III...................... 737,441(1)(2)(5)(9) .5984
Vernon A. Brunner............................. 62,263(3)(5)(9) .0506
Fred F. Canning............................... 179,551(1)(4) .1459
Theodore Dimitriou............................ 4,000 .0033
James J. Howard............................... 3,303 .0027
Charles D. Hunter............................. 1,025,014(1)(5)(8)(9) .8324
L. Daniel Jorndt.............................. 108,564(5)(6)(9) .0882
Glenn S. Kraiss............................... 53,138(5)(7)(9) .0432
Cordell Reed.................................. 800 .0007
John B. Schwemm............................... 3,500(10) .0028
William H. Springer........................... 3,000 .0024
Marilou M. von Ferstel........................ 2,000(11) .0016
All Directors and executive officers as a
group (22 individuals)....................... 2,557,182(5)(9)(12) 2.0683
</TABLE>
- --------
(1) Included in the table for Mr. Hunter and Mr. Canning are 64,389 shares
owned by four trusts for which each serves as a co-trustee. Mr. Hunter
and Mr. Canning possess shared voting power and investment power with
others with respect to all of the shares held by such trusts. These
shares are listed pursuant to the requirements of Section 13(d) of the
Securities Exchange Act of 1934 and the definition of beneficial
ownership therein. Mr. Hunter and Mr. Canning each disclaim any
beneficial interest in these shares. Mr. Walgreen III has shared
beneficial interest in 9,684 shares owned by one of the trusts; these
shares are also included in the table for Mr. Walgreen III.
In addition, the table for Mr. Hunter contains 847,159 shares owned by
twenty other trusts for which he serves as co-trustee. These shares are
also listed pursuant to the requirements of Section 13(d) of the Securities
Exchange Act of 1934. Mr. Hunter disclaims any beneficial interest in these
shares.
(2) Does not include 1,685 shares owned by Mr. Walgreen III's wife, 16,634
shares held in trust for her benefit, and 36,484 shares owned by his son
and other family members. These shares are listed pursuant to the
requirements of Section 13(d) of the Securities Exchange Act of 1934 and
the definition of beneficial ownership therein. Mr. Walgreen III
disclaims any beneficial interest in these shares.
(3) Does not include 3,250 shares owned by Mr. Brunner as custodian for his
daughter and 200 shares owned by his daughter. These shares are listed
pursuant to the requirements of Section 13(d) of the Securities Exchange
Act of 1934 and the definition of beneficial ownership therein. Mr.
Brunner disclaims any beneficial interest in them.
4
<PAGE>
(4) Does not include 34,046 shares held in trust for the benefit of Mr.
Canning's wife. Mr. Canning disclaims any beneficial interest in such
shares.
(5) Includes shares granted pursuant to the Walgreen Restricted Performance
Share Plan as follows: Mr. Walgreen III, 10,749 shares; Mr. Brunner,
4,048 shares; Mr. Hunter, 5,303 shares; Mr. Jorndt, 7,169 shares; Mr.
Kraiss, 4,048 shares; all Directors and executive officers as a group,
52,782 shares. Each individual possesses sole voting power with respect
to these shares.
(6) Does not include 8,060 shares owned by Mr. Jorndt's children living at
home, 14,703 shares owned by Mr. Jorndt's wife, and 2,712 shares owned by
Mr. Jorndt's wife as custodian for one of their children. Mr. Jorndt has
no voting or investment power with respect to such shares and disclaims
any beneficial interest in them.
(7) Does not include 7,498 shares owned by Mr. Kraiss' wife. Mr. Kraiss
disclaims any beneficial interest in such shares.
(8) Does not include 74,874 shares held in trust for the benefit of Mr.
Hunter's wife. Mr. Hunter serves as a co-trustee for such trust and
disclaims any beneficial interest in such shares.
(9) Includes shares of stock which may be acquired within 60 days after
November 14, 1994, by exercise of stock options as follows: Mr. Walgreen
III, 161,572 shares; Mr. Brunner, 19,998 shares; Mr. Hunter, 73,670
shares; Mr. Jorndt, 51,458 shares; Mr. Kraiss, 46,464 shares; and all
Directors and executive officers as a group, 566,892 shares.
(10) Does not include 300 shares owned by Mr. Schwemm's wife. Mr. Schwemm
disclaims any beneficial interest in these shares.
(11) Does not include 350 shares owned by Mrs. von Ferstel's husband. Mrs. von
Ferstel disclaims any beneficial interest in these shares.
(12) Includes 58,236 shares held by family members of executive officers, the
beneficial ownership of which has been disclaimed by such officers in
reports filed with the Securities and Exchange Commission.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than
ten percent (10%) of the Company's Common Stock, to file initial reports of
ownership and changes in ownership with the Securities and Exchange
Commission. During fiscal 1994, Mr. Walgreen made a late filing to include
shares held in trusts benefitting his son and inadvertently omitted from prior
reports.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of the Company's Chairman and
Chief Executive Officer, as well as the four most highly compensated executive
officers for the last three fiscal years.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ------------------------------------
AWARDS PAYOUTS
------------------------- ----------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK OPTIONS LTIP COMPENSATION
POSITION YEAR SALARY ($)(1) BONUS ($) SATION($) AWARD(S)($)(2) (#) PAYOUTS($) ($)(3)
- ------------------------ ---- ------------- --------- --------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles R. Walgreen III 1994 770,000 360,489 95,988 134,780 29,324 0 412,866
Chairman of the Board
and 1993 710,000 373,410 61,532 185,773 27,361 0 446,140
Chief Executive Officer 1992 658,333 333,560 63,115 140,594 25,657 0 294,277
L. Daniel Jorndt 1994 558,333 258,423 39,201 97,537 21,221 0 233,542
President and Chief Op-
erating 1993 483,333 250,263 26,843 124,719 18,371 0 248,869
Officer 1992 411,667 204,134 13,758 86,522 15,789 0 167,398
Charles D. Hunter 1994 415,000 189,308 61,710 65,427 10,546 0 210,587
Vice Chairman and Chief 1993 385,000 196,838 44,510 90,757 9,902 0 224,698
Financial Officer 1992 355,000 174,401 30,177 68,131 9,210 0 170,092
Vernon A. Brunner 1994 321,667 144,303 19,946 49,449 7,974 0 157,486
Executive Vice Presi-
dent 1993 301,667 151,563 12,157 69,267 7,557 0 164,334
1992 281,667 135,923 14,830 52,559 7,105 0 116,567
Glenn S. Kraiss 1994 321,667 144,303 21,271 49,449 7,974 0 164,950
Executive Vice Presi-
dent 1993 301,667 151,563 13,024 69,267 7,557 0 171,169
1992 281,667 135,923 15,470 52,559 7,105 0 127,442
</TABLE>
- --------
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) All restricted shares reflected in this column were granted as a result of
the attainment of performance goals under the Restricted Performance Share
Plan (a description of the Plan and the performance measures are provided
in the Compensation Committee Report on Executive Compensation). Fifty
percent of the award earned in 1994 is payable in cash (reflected in the
All Other Compensation column), and the remaining fifty percent is payable
in restricted shares. Both the cash and stock awards vest in equal amounts
over a four-year period. The total number of restricted shares and their
aggregate market value at August 31, 1994: Mr. Walgreen III held 10,749
shares valued at $404,431; Mr. Jorndt held 7,169 shares valued at $269,734;
Mr. Hunter held 5,303 shares valued at $199,525; Mr. Brunner held 4,048
shares valued at $152,306; and Mr. Kraiss held 4,048 shares valued at
$152,306. The aggregate market value is based on the fair market value of
Common Stock as of August 31, 1994 of $37.625. Dividends are paid on the
restricted shares in the same amount and at the same time as dividends paid
to all other owners of Common Stock.
(3) Detail of the amounts reported in the "All Other Compensation" column for
1994 is provided in the table below. Split-dollar life insurance represents
the actuarial value of the benefit to the executive of the current year's
insurance premium paid by the Company in excess of that required to fund
the death benefit under the policy. Cumulative net life insurance premiums
paid are recovered by the Company at the later of retirement or 14 years.
<TABLE>
<CAPTION>
MR. MR. MR. MR. MR.
ITEM WALGREEN JORNDT HUNTER BRUNNER KRAISS
---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Split-Dollar Life Insurance.... $ 69,574 $ 32,588 $ 25,976 $ 23,270 $ 28,964
Above-Market Interest Earned on
Deferred Compensation......... 72,450 24,616 50,163 27,936 34,515
Profit-Sharing Retirement Plan. 8,720 8,720 8,720 8,720 8,720
Profit-Sharing Restoration
Plan.......................... 127,330 70,070 60,271 48,048 43,239
Restricted Performance Share
Plan Cash Award............... 134,792 97,548 65,457 49,512 49,512
-------- -------- -------- -------- --------
Total....................... $412,866 $233,542 $210,587 $157,486 $164,950
======== ======== ======== ======== ========
</TABLE>
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding non-qualified
stock options granted to the named executive officers during the Company's
last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------
SECURITIES
UNDERLYING
OPTIONS % OF TOTAL OPTIONS GRANTED EXERCISE OR BASE GRANT DATE
NAME GRANTED(#) TO EMPLOYEES IN FISCAL YEAR(1) PRICE ($/SH)(2) EXPIRATION DATE PRESENT VALUE($)(3)
- ---- ---------- ------------------------------ ---------------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
Charles R. Walgreen III. 29,324 13.05 38.875 09/01/03 399,393
L. Daniel Jorndt........ 21,221 9.44 38.875 09/01/03 289,030
Charles D. Hunter....... 10,546 4.69 38.875 09/01/03 143,637
Vernon A. Brunner....... 7,974 3.55 38.875 09/01/03 108,606
Glenn S. Kraiss......... 7,974 3.55 38.875 09/01/03 108,606
</TABLE>
- --------
(1) Based on 224,760 options granted to all employees.
(2) Fair market value on the date of grant. Options are not exercisable until
September 1, 1996.
(3) Present value was determined under the Black-Scholes option pricing model
based on the following assumptions: volatility of 25.753%, representing
the annual variance in the daily percentage change in the price of the
Company's Common Stock over a two-year period prior to the date of grant;
a risk-free interest rate of 5.18%, representing the average eight-year
treasury bill; an average expected term of eight years; and an annual cash
dividend of $.60. The Company's use of this model in accordance with rules
adopted by the Securities and Exchange Commission does not constitute an
endorsement of the model nor an acknowledgement that such model can
accurately determine the value of options. The ultimate realizable value
of an option will depend on the market value of the Company's Common Stock
on the date of exercise as compared to the exercise price of the option.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information regarding stock option exercises by
the named executive officers during fiscal 1994, as well as the assumed value
at August 31, 1994, of unexercised options held by such officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ---------------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Walgreen III. 0 0 161,572 82,342 2,799,204 0
L. Daniel Jorndt........ 0 0 51,458 55,381 851,180 0
Charles D. Hunter....... 0 0 73,670 29,658 1,299,402 0
Vernon A. Brunner....... 0 0 19,998 22,636 262,436 0
Glenn S. Kraiss......... 0 0 46,464 22,636 818,222 0
</TABLE>
- --------
(1) Based on the fair market value of Company stock as of August 31, 1994, of
$37.625.
7
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (the "Agreements") with
the five executive officers named in the Summary Compensation Table and other
key employees of the Company which become effective only upon a Change of
Control (as defined in the Agreements).
In the event that an employee is dismissed without Cause or resigns for Good
Reason (as such terms are defined in the Agreements), he will be entitled to
all accrued but unpaid compensation and benefits and a lump sum cash payment
consisting of the employee's base salary through the Date of Termination, a
proportionate bonus based upon the employee's annual bonus pursuant to the
Management Incentive Plan for the last three fiscal years, the sum of the base
salary plus bonus that the employee would be entitled to for the remainder of
the Employment Period under the Agreement, unpaid deferred compensation and
vacation pay, and the difference between the actuarial equivalent of the
retirement benefit the employee would receive if the employee remained
employed for the Employment Period and the actuarial equivalent of the
employee's actual retirement benefits. In addition, for the remainder of the
Employment Period, the employee is entitled to continued employee welfare
benefits. The termination of employment of any of these individuals during the
thirty-day period following the first anniversary of the Effective Date shall
be deemed to be for Good Reason.
The Agreements between the Company and Messrs. Walgreen III and Jorndt also
provide that, in addition to the three-year term of employment described
therein, upon termination of their employment, the Company will enter into
consulting agreements, consistent with the Company's past practice, providing
each of these individuals with one year's base salary over a three-year term
for consulting services. The Company and Mr. Hunter have executed such an
agreement. Mr. Hunter will retire as an executive officer during fiscal year
1995.
The Compensation Committee Report on Executive Compensation and performance
graph which follow shall not be deemed to be incorporated by reference into
any filing made by the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, notwithstanding any general statement
contained in any such filing incorporating this proxy statement by reference,
except to the extent the Company incorporates such Report and graph by
specific reference.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report describes the Company's executive compensation program and the
basis on which fiscal year 1994 compensation determinations were made by the
Committee with respect to the executive officers of the Company, including the
Chief Executive Officer and the other executive officers named in the
compensation tables in this proxy statement. The Committee establishes all
components of executive pay and recommends or reports its decisions to the
Board of Directors for approval.
To ensure the program is administered in an objective manner, the Committee
is comprised entirely of independent directors. Further, Committee members
have no "interlocking" relationships as defined by the Securities and Exchange
Commission.
The duties of the Committee include recommending to the Board of Directors
the base salary levels for all executive officers as well as the design of
awards in connection with all other elements of the executive pay program. The
Committee further evaluates executive performance and addresses other matters
related to executive compensation.
8
<PAGE>
COMPENSATION POLICY AND OVERALL OBJECTIVES
In developing recommendations regarding the amount and composition of
executive compensation, the Committee's goal is to provide a compensation
package that will enable the Company to attract and retain talented
executives, reward outstanding performance and link the interests of the
Company's executives to the interests of the Company's shareholders. In
determining actual compensation levels, the Committee considers all elements
of the program in total rather than any one element in isolation.
The Committee members believe that each element of the compensation program
should target compensation levels at rates that take into account current
market practices. Offering market-comparable pay opportunities allows the
Company to maintain a stable, successful management team.
Competitive market data is provided by an outside compensation consultant.
The data provided compares the Company's compensation practices to those of a
group of comparator companies. The Company's market for compensation
comparison purposes is comprised of a group of companies that have business
operations in the retail drug industry, as well as companies having operations
within broader retail and wholesale industries. In addition, the Committee
considers companies which have similar sales volumes, market capitalizations
and employment levels.
In establishing a comparator group for compensation purposes, the Committee
neither bases its decisions on quantitative relative weights of various
factors, nor follows mathematical formulae. Rather, the Committee exercises
its discretion and makes its judgment after considering the factors described
above.
The companies chosen for the comparator group used for compensation purposes
are not the same companies which comprise the peer group index in the
Performance Graph included in this proxy statement. The Committee believes
that the Company's most direct competitors for executive talent are not
necessarily the companies that would be included in a peer group established
for comparing shareholder returns.
The key elements of the Company's executive compensation are base salary,
annual bonuses, and long-term incentives. Each of these is addressed
separately below. In determining compensation, the Committee considers all
elements of an executive's total compensation package, including severance
plans, insurance, and other benefits.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to a company's Chief Executive Officer and four other most highly
compensated executive officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. The
Committee will consider ways to maximize the deductibility of executive
compensation, while retaining the discretion the Committee deems necessary to
compensate executive officers in a manner commensurate with performance.
BASE SALARIES
The Committee regularly reviews each executive's base salary. The base
salary ranges of the Company's executives are targeted at approximately the
50th percentile of the base pay ranges of similarly positioned executives in
the group of comparator companies selected for compensation comparison
purposes.
9
<PAGE>
Base salaries for executives are initially determined by evaluating
executives' levels of responsibility, prior experience, breadth of knowledge,
internal equity issues, and external pay practices. Increases to base salaries
are driven primarily by performance, evaluated based on sustained levels of
contribution to the Company.
The factors impacting base salary levels are not independently assigned
specific weights. Rather, the Committee reviews all of the factors, and makes
base pay recommendations which reflect the Committee's analysis of the
aggregate impact of these factors. Overall, executive salaries were increased
at rates comparable to the increases provided at other similarly situated
companies and are near or at market levels.
As reflected in the Summary Compensation Table, Mr. Walgreen's salary was
increased in 1994 by $60,000 (8.45%). In determining Mr. Walgreen's base
salary for 1994, the Committee considered the Company's financial performance
for the prior year and over an extended period of time, Mr. Walgreen's
individual performance, and his long-term contributions to the success of the
Company. The Committee also compared Mr. Walgreen's base salary and total
compensation to the base salaries and total compensation of chief executive
officers at comparator companies.
ANNUAL BONUSES
The Walgreen Management Incentive Plan (the "Annual Plan") promotes the
Company's pay-for-performance philosophy by providing executives and other
employees with direct financial incentives in the form of annual cash bonuses
to achieve performance goals tied to return on invested capital.
Annual bonus opportunities allow the Company to communicate specific goals
that are of primary importance during the coming year and motivate executives
to achieve these goals. The Annual Plan emphasizes team performance by
establishing a bonus pool covering all plan participants and by maintaining
terms which are consistent for all participants.
Each year, the Committee establishes specific goals, the achievement of
which will determine the funding of the bonus pool. In turn, the size of the
bonus pool will determine the amount of the relative awards to participants.
Accordingly, executives' opportunities to earn bonuses correspond to the
degree to which the preestablished goals are achieved.
Target bonus awards for the named executive officers are established at
levels approximating the 50th percentile of marketplace practices for
executive positions. Actual payouts can rise above or fall below the targeted
levels, depending upon performance relative to the preestablished performance
objectives. In 1994, Mr. Walgreen's bonus represented 46.82% of his salary.
This resulted in a bonus award under the Annual Plan of $360,489.
LONG-TERM INCENTIVES
Long-term incentives are provided pursuant to the Restricted Performance
Share Plan and the Executive Stock Option Plan.
In keeping with the Company's commitment to provide a total compensation
package which includes at-risk components of pay, the Committee makes annual
decisions regarding appropriate long-term incentive grants for each executive.
When determining these awards, the Committee considers the Company's financial
performance in the prior year, executives' levels of responsibility, prior
experience, historical award data, and compensation practices at comparator
companies. In determining award sizes, the Committee does not assign specific
weights to these factors. Rather, the factors are evaluated on an aggregate
basis.
10
<PAGE>
RESTRICTED PERFORMANCE SHARE PLAN: The Plan provides for contingent grants
of restricted Common Stock and restricted cash at the beginning of one-year
performance periods. The participants, the amounts of the grants to each, the
performance requirements for each period, and the restrictions, are determined
by the Compensation Committee upon recommendation of the Chief Executive
Officer, except that the Chief Executive Officer does not make any
recommendations with respect to grants to be awarded to him.
The performance requirements are annual FIFO earnings goals, subject to a
minimum return on invested capital. The degree to which the goals are met
determines the amount of the contingent grant that is earned, if any. The
restricted Common Stock and restricted cash awards earned for the performance
period ended August 31 of each fiscal year are restricted for a period of four
years, with the restrictions lapsing at the rate of 25% per year.
Based on achievement of the FIFO earnings goals and the Company's minimum
return on invested capital, Mr. Walgreen was granted 3,467 restricted
performance shares for fiscal 1994. This grant level fell below the targeted
grant for the 1994 fiscal year. The targeted grant level was established in
furtherance of the overall objectives detailed above and by comparison to
similar grants to chief executive officers at comparator companies.
EXECUTIVE STOCK OPTION PLAN: Stock options are granted periodically, at the
discretion of the Committee, to the Company's executives, to enhance the link
between shareholder value creation and executive pay. Grant levels are
coordinated with those under the Restricted Performance Share Plan, in order
to maintain competitive levels of long-term incentive pay under the Company's
long-term compensation programs.
Stock options are granted at an option price not less than the fair market
value of the Company's Common Stock on the date of grant. Accordingly, stock
options have value only if the stock price appreciates following the date the
options are granted. Further, stock options reflected in the Summary
Compensation Table are subject to a 36-month vesting period. This design
focuses executives on the creation of shareholder value over the long term and
encourages equity ownership in the Company.
In fiscal 1994, Mr. Walgreen received options to purchase 29,324 shares at
the fair market value of shares on the date of grant. This grant was
established by comparison to 50th percentile long-term incentive grants at
comparator companies. The Committee believes that this equity interest
provides a strong link to the interests of shareholders.
William H. Springer, Chairman
James J. Howard
John B. Schwemm
11
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares the five-year cumulative total return of the
Company's Common Stock with the Value Line Drug Store Industry Peer Group and
the S&P 500 Stock Index. The graph assumes a $100 investment made September 1,
1989, and the reinvestment of all dividends.
LOGO
<TABLE>
<CAPTION>
DOLLAR VALUE OF INVESTMENT AT AUGUST 31
--------------------------------------------
1989 1990 1991 1992 1993 1994
---- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Walgreen Co. Common............ $100 $99 $152 $172 $177 $174
Peer Group..................... $100 $89 $129 $135 $132 $139
S & P 500...................... $100 $95 $121 $130 $150 $158
</TABLE>
APPOINTMENT OF INDEPENDENT AUDITORS
Arthur Andersen LLP has been appointed to serve as the independent auditors
for the Company and its subsidiary corporations for the fiscal year ending
August 31, 1995. The appointment is being submitted to the shareholders for
ratification. This firm has served as the independent auditors for the Company
since 1924. Representatives of the firm are expected to be present at the
Annual Meeting to respond to shareholders' questions and to have the
opportunity to make any statements they consider appropriate. In the event the
shareholders do not ratify the appointment of Arthur Andersen LLP, the
selection of an independent auditor will be determined by the Audit Committee
and the Board of Directors after careful consideration of any information
submitted by the shareholders.
During fiscal year 1994, the Audit Committee reviewed and approved in advance
or ratified the scope of all of Arthur Andersen LLP's professional services
rendered to the Company and related entities.
12
<PAGE>
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Shareholders may submit proposals appropriate for shareholder action at the
Company's Annual Meeting consistent with the regulations of the Securities and
Exchange Commission. For proposals to be considered for inclusion in the Proxy
Statement for the 1996 Annual Meeting they must be received by the Company no
later than July 25, 1995. Such proposals should be directed to Walgreen Co.,
Attention: Secretary, 200 Wilmot Road, Deerfield, Illinois 60015.
By order of the Board of Directors.
SIGNATURE LOGO
Julian A. Oettinger
Secretary
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
SOLICITED, AND TO EACH PERSON REPRESENTING THAT AS OF THE RECORD DATE FOR THE
MEETING HE OR SHE WAS A BENEFICIAL OWNER OF SHARES ENTITLED TO BE VOTED AT THE
MEETING, ON WRITTEN REQUEST, A COPY OF THE COMPANY'S 1994 ANNUAL REPORT ON
FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO
WALGREEN CO., ATTENTION: MR. W. LYNN EARNEST, TREASURER, 200 WILMOT ROAD,
DEERFIELD, ILLINOIS 60015.
13
<PAGE>
(LOGO)
WALGREEN CO. PROXY
- --------------------------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints CHARLES R. WALGREEN III, L. DANIEL JORNDT and
CHARLES D. HUNTER, or any of them, with full power of substitution, as
attorneys and proxies to vote all shares of common stock which the undersigned
is entitled to vote, with all powers which the undersigned would possess if
personally present, at the Annual Meeting of Shareholders of WALGREEN CO. (and
any adjournment thereof) to be held at the Arthur Rubloff Auditorium of the Art
Institute of Chicago, Michigan Avenue and Adams Street, Chicago, Illinois, on
Wednesday, January 11, 1995, upon the matters referred to on the reverse side
and, in their discretion, upon such other matters as may properly come before
the meeting.
NOMINEES:
Charles R. Walgreen III, Theodore Dimitriou, James J. Howard, Charles D.
Hunter, L. Daniel Jorndt, Cordell Reed, John B. Schwemm, William H. Springer,
Marilou M. von Ferstel.
PLEASE READ AND VOTE ON PROPOSALS ON REVERSE SIDE.
- --------------------------------------------------------------------------------
/X/ Please mark your votes as in this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
SPECIFIED THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND FOR
RATIFICATION OF ARTHUR ANDERSEN LLP AS AUDITORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS (1) AND (2).
- --------------------------------------------------------------------------------
1. Election of Directors. / / FOR* / / WITHHELD
(see reverse)
*For all nominee(s), except vote
withheld from the following:
__________________________________
2. Approval of the Amendment to
the Articles of Incorporation. / / FOR / / AGAINST / / ABSTAIN
3. Ratification of the appointment of
Arthur Andersen & Co. as auditors. / / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxies are authorized to vote on such other
matters as may properly come before the meeting.
Date: _________________________________
Signature(s): _________________________
_________________________
The signatory hereby acknowledges receipt of the accompanying Notice of An-
nual Meeting of Shareholders and Proxy Statement. (Please date and sign exactly
as name appears above and mail in enclosed envelope. If joint tenants, all
should sign.)
