<PAGE>
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 [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[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)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] 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:
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<PAGE>
[WALGREENS DRUG STORES LOGO]
200 WILMOT ROAD
DEERFIELD, ILLINOIS 60015
November 20, 1995
Dear Walgreens Shareholder:
You are cordially invited to our Annual Shareholders' Meeting on Wednesday,
January 10, 1996, 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.
We look forward to sharing news of our 21st consecutive record year and
plans for both aggressive store expansion and the rollout of Intercom Plus,
which we expect to be the most advanced pharmacy system in the industry.
We hope to see you January 10. 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 C. R. WALGREEN III LOGO] [SIGNATURE L. DANIEL JORNDT LOGO]
C. R. WALGREEN III L. DANIEL JORNDT
Chairman President
<PAGE>
[WALGREEN CO. LOGO]
200 WILMOT ROAD
DEERFIELD, ILLINOIS 60015
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, JANUARY 10, 1996
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 10,
1996, 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 13, 1995,
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 1995 is enclosed with this
proxy statement.
By order of the Board of Directors.
[SIGNATURE JULIAN A. OETTINGER LOGO]
Julian A. Oettinger
Secretary
November 20, 1995
<PAGE>
[WALGREEN CO. LOGO]
200 WILMOT ROAD
DEERFIELD, ILLINOIS 60015
November 20, 1995
PROXY STATEMENT
This proxy statement is being sent on November 20, 1995, in connection with
the solicitation of proxies to be voted at the Annual Meeting of Shareholders
of Walgreen Co. to be held on January 10, 1996, 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
13, 1995, 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. All
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 13, 1995, the Company had outstanding 246,141,072
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, 60--Chairman of the Board and Chief 1963
Executive Officer.
Theodore Dimitriou, 69--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, 60--Chairman of the Board, Chief Executive 1986
Officer and President of Northern States Power Company.
Mr. Howard is also a Director of Northern States Power
Company, Honeywell Inc., Ecolab, Inc. and ReliaStar
Financial Corp. (formerly NWNL Companies, Inc.)
Charles D. Hunter, 65--Retired Vice Chairman and Chief 1974
Financial Officer.
L. Daniel Jorndt, 54--President and Chief Operating Officer. 1990
Cordell Reed, 57--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, 61--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, 66--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 Investment Funds and Baker, Fentress and
Company.
Marilou M. von Ferstel, 57--Executive Vice President and 1987
General Manager of Ogilvy Adams & Rinehart (formerly Ogilvy
& Mather, Inc.).
Ms. 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 1995 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.
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 $6,375 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.
2
<PAGE>
Mr. Hunter did not receive Director's fees; however, he received $24,444 in
consulting fees from the Company during fiscal 1995 pursuant to a Consulting
Agreement entered into prior to his retirement as an officer of the Company.
The Consulting Agreement will provide Mr. Hunter with one year's base salary
over a three-year term for consulting services and continues until June 7,
1998.
Messrs. 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. During fiscal 1995, payments were made
under such plans as follows: Mr. Dimitriou, $31,878; Mr. Howard, $57,107; Mr.
Schwemm, $57,107; Mr. Springer, $19,894; and Ms. von Ferstel, $43,305.
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 1995, each of which is described
below.
The Executive Committee met four times during the fiscal year. The Committee
is composed of Charles R. Walgreen III, Chairman; Theodore Dimitriou; Charles
D. Hunter; L. Daniel Jorndt; and John B. Schwemm. 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 is
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 is 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, the 1986,
1988 and 1992 Executive Deferred Compensation/Capital Accumulation Plans and
the Walgreen Co. Section 162(m) Deferred Compensation Plan.
The Finance Committee met four times during the fiscal year. The Committee
is composed of Charles D. Hunter, Chairman; 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
is composed of John B. Schwemm, Chairman; James J. Howard; and Marilou M. von
Ferstel. The 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
3
<PAGE>
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 13, 1995,
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 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...................... 1,633,006(1)(2)(5)(9) .6621
John R. Brown................................. 134,412(3)(5)(9) .0546
Vernon A. Brunner............................. 183,378(4)(5)(9) .0745
Theodore Dimitriou............................ 12,000 .0049
James J. Howard............................... 6,683 .0027
Charles D. Hunter............................. 2,086,174(1)(5)(8)(9) .8468
L. Daniel Jorndt.............................. 352,272(5)(6)(9) .1430
Glenn S. Kraiss............................... 143,796(5)(7)(9) .0584
Cordell Reed.................................. 2,400 .0010
John B. Schwemm............................... 8,000(10) .0033
William H. Springer........................... 7,000 .0028
Marilou M. von Ferstel........................ 5,000(11) .0020
All Directors and executive officers as a
group (22 individuals)....................... 5,535,412(5)(9)(12) 2.2320
</TABLE>
- --------
(1) Included in the table for Mr. Hunter are 128,778 shares owned by four
trusts for which he serves as a co-trustee. Mr. Hunter possesses 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 disclaims any
beneficial interest in these shares. Mr. Walgreen III has shared
beneficial interest in 19,368 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 1,656,029 shares owned by
nineteen 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 2,524 shares owned by Mr. Walgreen III's wife, 33,268
shares held in trust for her benefit, and 73,936 shares owned by his son
and other family members. These shares are noted 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 934 shares owned by Mr. Brown's wife and 60,096 shares
held in trust for her benefit. Mr. Brown disclaims any beneficial
interest in such shares.
(4) Does not include 6,500 shares owned by Mr. Brunner as custodian for his
daughter and 1,000 shares owned by his daughter. These shares are noted
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>
(5) Includes shares granted pursuant to the Walgreen Restricted Performance
Share Plan as follows: Mr. Walgreen III, 25,166 shares; Mr. Brown, 6,722
shares; Mr. Brunner, 9,216 shares; Mr. Hunter, 4,879 shares; Mr. Jorndt,
17,844 shares; Mr. Kraiss, 9,216 shares; all Directors and executive
officers as a group, 120,272 shares. Each individual possesses sole
voting power with respect to these shares.
(6) Does not include 8,963 shares owned by Mr. Jorndt's child living at home,
29,406 shares owned by Mr. Jorndt's wife, and 5,502 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 4,112 shares owned by Mr. Kraiss' wife. Mr. Kraiss
disclaims any beneficial interest in such shares.
(8) Does not include 149,748 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 13, 1995, by exercise of stock options as follows: Mr. Walgreen
III, 516,356 shares; Mr. Brown, 101,108 shares; Mr. Brunner, 95,632
shares; Mr. Hunter, 220,646 shares; Mr. Jorndt, 235,022 shares; Mr.
Kraiss, 128,564 shares; all Directors and executive officers as a group,
1,865,554 shares.
(10) Does not include 600 shares owned by Mr. Schwemm's wife. Mr. Schwemm
disclaims any beneficial interest in these shares.
(11) Does not include 1,000 shares owned by Ms. von Ferstel's husband. Ms. von
Ferstel disclaims any beneficial interest in these shares.
(12) Includes 52,737 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. Based on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that all forms were filed in a timely manner
during fiscal 1995, except that one purchase by Mr. Reed of 46 shares was
inadvertently reported late.
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 five 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 ($)(1) SATION($) AWARD(S)($)(2) (#) PAYOUTS($) ($)(3)
- ------------------------ ---- ------------- ------------ --------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles R. Walgreen III 1995 826,833 492,613 102,518 245,992 261,528 0 526,342
Chairman of the Board
and 1994 770,000 360,489 95,988 134,780 58,648 0 412,866
Chief Executive Officer 1993 710,000 373,410 61,532 185,773 54,722 0 446,140
L. Daniel Jorndt 1995 605,000 356,674 70,420 179,998 191,362 0 336,446
President and Chief Op-
erating 1994 558,333 258,423 39,201 97,537 42,442 0 233,542
Officer 1993 483,333 250,263 26,843 124,719 36,742 0 248,869
Charles D. Hunter(4) 1995 340,000 197,480 96,732 91,786 105,248 0 236,763
Vice Chairman and Chief 1994 415,000 189,308 61,710 65,427 21,092 0 210,587
Financial Officer 1993 385,000 196,838 44,510 90,757 19,804 0 224,698
Vernon A. Brunner 1995 338,750 193,516 13,313 89,096 78,936 0 191,519
Executive Vice Presi-
dent 1994 321,667 144,303 19,946 49,449 15,948 0 157,486
1993 301,667 151,563 12,157 69,267 15,114 0 164,334
Glenn S. Kraiss 1995 338,750 193,516 17,049 89,096 78,936 0 224,991
Executive Vice Presi-
dent 1994 321,667 144,303 21,271 49,449 15,948 0 164,950
1993 301,667 151,563 13,024 69,267 15,114 0 171,169
John R. Brown 1995 272,000 152,612 52,296 64,790 43,056 0 155,711
Senior Vice President 1994 257,500 113,362 27,929 36,154 9,838 0 130,717
1993 242,500 119,418 19,997 50,924 9,380 0 134,997
</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 1995 is payable in cash (reflected in the
All Other Compensation column), and the remaining fifty percent is payable
in restricted shares. Except for the awards to Mr. Hunter, both the cash
and stock awards vest in equal amounts over a four-year period. The cash
and stock awards to Mr. Hunter vested on the date of grant due to his
retirement on June 7, 1995. The total number of restricted shares and
their aggregate market value at August 31, 1995: Mr. Walgreen III held
25,166 shares valued at $616,567; Mr. Jorndt held 17,844 shares valued at
$437,178; Mr. Hunter held 4,879 shares valued at $119,536; Mr. Brunner
held 9,216 shares valued at $225,792; Mr. Kraiss held 9,216 shares valued
at $225,792; and Mr. Brown held 6,722 shares valued at $164,689. The
aggregate market value is based on the fair market value of Common Stock
as of August 31, 1995 of $24.50. 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.
6
<PAGE>
(3) Detail of the amounts reported in the "All Other Compensation" column for
1995 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 13 years.
<TABLE>
<CAPTION>
MR. MR. MR. MR. MR. MR.
ITEM WALGREEN JORNDT HUNTER BRUNNER KRAISS BROWN
---- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Split-Dollar Life Insur-
ance................... $ 83,577 $ 49,609 $ 30,904 $ 26,944 $ 53,749 $ 27,047
Above-Market Interest
Earned on Deferred Com-
pensation.............. 68,157 22,664 49,079 25,643 33,045 24,793
Profit-Sharing Retire-
ment Plan.............. 5,821 5,821 5,821 5,821 5,821 5,821
Profit-Sharing Restora-
tion Plan.............. 122,779 78,350 59,145 44,007 43,272 33,240
Restricted Performance
Share Plan Cash Award.. 246,008 180,002 91,814 89,104 89,104 64,810
-------- -------- -------- -------- -------- --------
Total................ $526,342 $336,446 $236,763 $191,519 $224,991 $155,711
======== ======== ======== ======== ======== ========
</TABLE>
(4) Mr. Hunter retired on June 7, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding non-qualified
stock options granted to the named executive officers during the Company's
last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------
SECURITIES
UNDERLYING
OPTIONS % OF TOTAL OPTIONS GRANTED EXERCISE OR BASE GRANT DATE
NAME GRANTED(#) TO EMPLOYEES IN FISCAL YEAR(1) PRICE ($/SH)(2) EXPIRATION DATE PRESENT VALUE($)(3)
- ---- ---------- ------------------------------ ---------------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
Charles R. Walgreen III. 87,176 4.12 18.8125 09/01/04 591,925
87,176 4.12 18.8125 09/01/04 591,925
87,176 4.12 18.8125 09/01/04 591,925
L. Daniel Jorndt........ 63,786 3.02 18.8125 09/01/04 433,107
63,788 3.02 18.8125 09/01/04 433,121
63,788 3.02 18.8125 09/01/04 433,121
Charles D. Hunter....... 35,082 1.66 18.8125 06/07/00 200,283
35,082 1.66 18.8125 06/07/00 200,283
35,084 1.66 18.8125 06/07/00 200,295
Vernon A. Brunner....... 26,312 1.24 18.8125 09/01/04 178,658
26,312 1.24 18.8125 09/01/04 178,658
26,312 1.24 18.8125 09/01/04 178,658
Glenn S. Kraiss......... 26,312 1.24 18.8125 09/01/04 178,658
26,312 1.24 18.8125 09/01/04 178,658
26,312 1.24 18.8125 09/01/04 178,658
John R. Brown........... 14,352 0.68 18.8125 09/01/04 97,450
14,352 0.68 18.8125 09/01/04 97,450
14,352 0.68 18.8125 09/01/04 97,450
</TABLE>
- --------
(1) Based on 2,114,590 options granted to all employees.
(2) Fair market value on the date of grant. For the first grant shown for each
executive, the options became exercisable on May 17, 1995. For the second
grant shown for each executive, the options are exercisable on September
1, 1999 or when the price of the Company's Common Stock closes at or above
$27.50 a share for 90 consecutive trading days, whichever occurs first.
For the third grant shown for each executive except Mr. Hunter, the
options are exercisable
7
<PAGE>
on September 1, 2001 or when the price of the Company's Common Stock closes
at or above $32.50/share for 90 consecutive trading days, whichever occurs
first. For the third grant shown for Mr. Hunter, the options are
exercisable if the Company's Common Stock closes at or above $32.50/share
for 90 consecutive trading days prior to their expiration date. All numbers
have been adjusted to reflect a two-for-one stock split on July 24, 1995.
(3) Present value was determined under the Black-Scholes option pricing model
based on the following assumptions: volatility of 22.2897%, representing
the annual variance in the daily percentage change in the price of the
Company's Common Stock over a two-year period prior to the date of grant;
a risk-free interest rate of 7.03% (for Mr. Hunter, 6.83%); an average
expected term of eight years (for Mr. Hunter, five and three quarter
years); and a dividend yield of 1.81%. The Company's use of this model in
accordance with rules adopted by the Securities and Exchange Commission
does not constitute an endorsement of the model nor an acknowledgement
that such model can accurately determine the value of options. The
ultimate realizable value of an option will depend on the market value of
the Company's Common Stock on the date of exercise as compared to the
exercise price of the option.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information regarding stock option exercises by
the named executive officers during fiscal 1995, as well as the assumed value
at August 31, 1995, of unexercised options held by such officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ---------------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Walgreen III. 0 0 461,634 287,722 5,415,126 1,579,243
L. Daniel Jorndt........ 0 0 198,280 206,760 1,972,976 1,135,643
Charles D. Hunter....... 0 0 200,842 111,062 2,438,237 611,056
Vernon A. Brunner....... 0 0 80,518 83,686 717,717 460,329
Glenn S. Kraiss......... 20,000 307,500 113,450 83,686 1,250,804 460,329
John R. Brown........... 0 0 91,728 47,922 1,134,398 262,890
</TABLE>
- --------
(1) Based on the fair market value of Company stock as of August 31, 1995, of
$24.50. All numbers have been adjusted to reflect a two-for-one stock
split on July 24, 1995.
EMPLOYMENT AGREEMENTS
The Company has employment agreements (the "Agreements") with the executive
officers named in the Summary Compensation Table (excluding Mr. Hunter, who
retired on June 7, 1995) 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
8
<PAGE>
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 Compensation Committee Report on Executive Compensation and the
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 1995 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.
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
9
<PAGE>
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 its four other most highly
compensated executive officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. It is
the Committee's objective to maximize deductibility under Section 162(m) with
minimal sacrifices in flexibility and corporate objectives. Accordingly, with
respect to compensation payable to an applicable executive officer which would
otherwise be nondeductible, it is the Company's policy that such amounts be
deferred until the limitation on deductibility no longer applies with respect
to such person.
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.
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 1995 by $56,833 (7.38%). In determining Mr. Walgreen's base
salary for 1995, 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.
10
<PAGE>
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 1995, Mr. Walgreen's bonus represented 59.58% of his salary.
This resulted in a bonus award under the Annual Plan of $492,613.
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.
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 the achievement of results which exceeded the annual FIFO earnings
goals and met the Company's return on invested capital standard, Mr. Walgreen
was granted 13,076 restricted performance shares for fiscal 1995. This grant
was above the target grant for the 1995 fiscal year to reflect the performance
level achieved. The target 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.
11
<PAGE>
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 granted in fiscal 1995 and
reflected in the Summary Compensation Table are subject to a tiered vesting
period contingent on the market price of Company Stock. This design focuses
executives on the creation of shareholder value over the long term and
encourages equity ownership in the Company.
In fiscal 1995, Mr. Walgreen received options to purchase 261,528 shares
(adjusted to reflect a two-for-one stock split on July 24, 1995) at the fair
market value of shares on the date of grant. This grant was made after the
Committee's review of a report prepared by its outside compensation
consultants. That report concluded that the stock options previously granted
to Mr. Walgreen were below the competitive median of comparator companies. The
Committee believes that this increased equity interest provides a strong link
to the interests of shareholders.
William H. Springer, Chairman
James J. Howard
John B. Schwemm
12
<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,
1990, and the reinvestment of all dividends.
[COMPARISON GRAPH LOGO]
<TABLE>
<CAPTION>
DOLLAR VALUE OF INVESTMENT AT AUGUST 31
---------------------------------------
1990 1991 1992 1993 1994 1995
---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Walgreen Co. Common................ $100 $153 $173 $178 $176 $233
Peer Group......................... $100 $146 $153 $149 $158 $208
S & P 500.......................... $100 $127 $137 $158 $166 $202
</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, 1996. 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 1995, 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.
13
<PAGE>
SHAREHOLDER PROPOSALS FOR 1997 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 1997 Annual Meeting they must be received by the Company no
later than July 24, 1996. Such proposals should be directed to Walgreen Co.,
Attention: Secretary, 200 Wilmot Road, Deerfield, Illinois 60015.
By order of the Board of Directors.
[SIGNATURE JULIAN A. OETTINGER 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 1995 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.
14
<PAGE>
--- ---
PROXY PROXY
[WALGREEN CO. LOGO]
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 10, 1996, 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.
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.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
--- ---
- --------------------------------------------------------------------------------
. DETACH PROXY CARD .
[WALGREENS LOGO]
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, January 10, 1996
2:00 PM Central Standard Time
Arthur Rubloff Auditorium of the Art Institute of Chicago
Michigan Avenue & Adams Street
Chicago, Illinois
<PAGE>
--- ---
WALGREEN CO.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
--------------------
1. Election of Directors
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.
-----------------------------------
*(Except nominee(s) written above.)
For All
For Withheld Except*
[_] [_] [_]
2. Ratification of the appointment of Arthur Andersen LLP as auditors.
For Against Abstain
[_] [_] [_]
3. In their discretion, the Proxies are authorized to vote on such other
matters as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS (1) AND (2).
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 signatory hereby acknowledges receipt
of the accompanying Notice of Annual
Meeting of Shareholders and Proxy
Statement.
Dated: _______________________
Signature(s)____________________________
________________________________________
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS.
JOINT OWNERS SHOULD EACH SIGN. WHERE
APPLICABLE, INDICATE YOUR OFFICIAL
POSITION OR REPRESENTATION CAPACITY.
--- ---
- --------------------------------------------------------------------------------
PLEASE SIGN AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
----
[PROXY CARD ARROW LOGO]
To Our Shareholders:
Whether or not you are able to attend the Annual Meeting of Shareholders,
it is important that your shares be represented no matter how many shares you
own. Accordingly, please complete and sign the proxy card printed above, tear at
the perforation, and mail in the enclosed postage paid envelope addressed to
Walgreen Co. c/o Harris Trust and Savings Bank.
