S E C U R I T I E S A N D E X C H A N G E C O M M I S S I O N
WASHINGTON, D. C. 20549
_______________________
FORM 10-Q
(Mark One)
____X____ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED FEBRUARY 28, 1997
or
__________ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period from __________ to ___________
Commission file number 1-604.
____________________ WALGREEN CO._____________________
(Exact name of registrant as specified in its charter)
ILLINOIS 36-1924025
(State of incorporation) (I.R.S. Employer Identification No.)
200 WILMOT ROAD, DEERFIELD, ILLINOIS 60015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 940-2500
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___X___ No _______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (applicable only to
corporate issuers).
COMMON STOCK, $.3125 PAR VALUE; ISSUED AND OUTSTANDING 246,141,072 AT
MARCH 31, 1997.
Page 1 of 11
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements included herein have
been prepared by the company pursuant to the rules and regulations of the
Securities and Exchange Commission. The Consolidated Condensed Balance
Sheet as of February 28, 1997 and the Consolidated Condensed Statements of
Earnings for the three and six months ended February 28, 1997 and February
29, 1996, and the Consolidated Condensed Statements of Cash Flows for the
six months ended February 28, 1997 and February 29, 1996, have been prepared
without audit. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the company believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these consolidated condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the company's latest annual report on Form 10-K.
In the opinion of the company the condensed statements for the
unaudited interim periods presented include all adjustments, consisting
only of normal recurring adjustments, necessary to present a fair statement
of the results for such interim periods. Because of the influence of
certain holidays, seasonal and other factors on the company's operations,
net earnings for any interim period may not be comparable to the same
interim period in previous years, nor necessarily indicative of earnings for
the full year.
2
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
February 28, August 31,
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 20,895 $ 8,819
Accounts receivable 344,429 288,538
Inventories 1,717,157 1,631,974
Other current assets 78,369 89,707
Total Current Assets 2,160,850 2,019,038
Property and Equipment, at cost, less
accumulated depreciation and amortization
of $727,515,000 at February 28 and
$659,169,000 at August 31 1,542,853 1,448,368
Other Non-Current Assets 207,578 166,240
TOTAL ASSETS $3,911,281 $3,633,646
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 715,926 $ 691,836
Other current liabilities 564,214 490,119
Total Current Liabilities 1,280,140 1,181,955
Non-Current Liabilities:
Deferred income taxes 146,100 145,218
Other non-current liabilities 287,130 263,368
Total Non-Current Liabilities 433,230 408,586
Shareholders' Equity:
Preferred stock $.25 par value; authorized
8,000,000 shares; none issued - -
Common stock $.3125 par value; authorized
800,000,000 shares; issued and outstanding
246,141,072 at February 28 and August 31 76,919 76,919
Retained earnings 2,120,992 1,966,186
Total Shareholders' Equity 2,197,911 2,043,105
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $3,911,281 $3,633,646
========== ==========
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
3
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
(Dollars in Thousands Except Per Share Data)
Net Sales $3,602,620 $3,179,089 $6,656,599 $5,871,856
Costs and Deductions:
Cost of sales 2,596,547 2,289,803 4,820,510 4,243,588
Selling, occupancy and
administration 766,559 682,860 1,474,226 1,318,068
3,363,106 2,972,663 6,294,736 5,561,656
Other (Income) Expense:
Interest income (1,826) (1,240) (2,617) (2,283)
Interest expense 621 645 1,281 1,535
(1,205) (595) (1,336) (748)
Earnings before income tax
provision 240,719 207,021 363,199 310,948
Income tax provision 93,279 80,220 140,740 120,492
Net Earnings $ 147,440 $ 126,801 $ 222,459 $ 190,456
=========== =========== =========== ===========
Per Share:
Net Earnings $ .59 $ .51 $ .89 $ .77
=========== =========== =========== ===========
Dividends Declared $ .12 $ .11 $ .24 $ .22
=========== =========== =========== ===========
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
4
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
February 28, February 29,
1997 1996
(In Thousands)
Net cash provided by operating activities $ 275,750 $ 230,388
Cash Flows from Investing Activities:
Additions to property and equipment (174,808) (159,164)
Other (16,319) (11,582)
Net cash used for investing activities (191,127) (170,746)
Cash Flows from Financing Activities:
Cash dividends paid (56,618) (51,075)
Other (15,929) (23,060)
Net cash used for financing activities (72,547) (74,135)
Changes in Cash and Cash Equivalents:
Net increase (decrease) in cash and cash
equivalents 12,076 (14,493)
Cash and cash equivalents at beginning
of year 8,819 22,245
Cash and Cash Equivalents at end of period $ 20,895 $ 7,752
========== ==========
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
5
WALGREEN CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) Inventories are valued on a lower of last-in, first-out (LIFO) cost or
market basis. At February 28, 1997 and August 31, 1996, inventories would have
been greater by $442,935,000 and $427,767,000 respectively, if they had been
valued on a lower of first-in, first-out (FIFO) cost or market basis. LIFO
inventory costs can only be determined annually when inflation rates and
inventory levels are finalized; therefore, LIFO inventory costs for interim
financial statements are estimated. Cost of sales is primarily computed on an
estimated basis and adjusted based on periodic inventories.
(2) The weighted average number of common shares and equivalents used for
calculating primary net earnings per share was 248,867,000 and 248,299,000 for
the six months ended February 28, 1997 and February 29, 1996, respectively.
Fully diluted net earnings per share are the same as primary net earnings per
share.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Net earnings for the second quarter, ended February 28, 1997, were
$147,440,000 or $.59 per share. This was a 16.3% increase over last year.
Net earnings for the six months were up 16.8% to $222,459,000 or $.89 per
share. Earnings increases resulted from improved sales and lower expense
ratios, which were partially offset by lower gross margins.
Sales increased by 13.3% in the second quarter, to $3.6 billion, and rose by
13.4% to $6.7 billion for the first six months. Drugstore sales increases
resulted from sales gains in existing stores and added sales from new
stores, each of which include an indeterminate amount of market-driven price
changes. Comparable drugstore (those open at least one year) sales were up
8.0% for the quarter and first six months. New store openings accounted for
9.0% and 8.8% of the quarterly and six-month sales increase. The company
operated 2,256 drugstores as of February 28, 1997, compared to 2,131 a year
earlier.
Pharmacy sales increased 17.0% for the second quarter and 16.9% for the
first six months. Prescription sales in comparable stores were up 12.2% and
11.8% for the quarter and six-month period, respectively. Pharmacy sales
trends are expected to continue primarily because of expansion into new
markets, increased penetration in existing markets and demographic changes
such as the aging population.
Gross margins decreased in the quarter to 27.9% of sales from 28.0% last
year and to 27.6% from 27.7% for the six-month period. Prescription margins
continue to decrease as third party retail and mail order sales become a
larger portion of pharmacy sales. The company is responding to gross margin
pressures by emphasizing minimum third party profitability standards.
Improved gross margins in the rest of the store helped offset the decline.
The company uses the LIFO method of inventory valuation, which can only be
determined annually when inflation rates and inventory levels are finalized;
therefore, LIFO inventory costs for interim financial statements are
estimated. Cost of sales include a LIFO provision of $9.2 million ($.02 per
share) and $15.2 million ($.04 per share) for the quarter and six-month
period ended February 28, 1997 versus $5.5 million ($.01 per share) and
$14.0 million ($.03 per share) for the same period a year ago.
Selling, occupancy and administration expenses decreased to 21.3% from 21.5%
of sales in the quarter and to 22.1% from 22.4% of sales for the six months.
Lower advertising expenses, as a percent to sales, was the principal reason
for the decline in the quarter and six months. The growth in mail order
pharmacy, which has a lower expense ratio, also contributed to the decrease.
Financial Condition
Cash and cash equivalents were $20.9 million at February 28, 1997, compared
to $7.8 million at February 29, 1996. Short-term investment objectives are
to maximize yields, while minimizing risk and maintaining liquidity. To
attain these objectives, investment limits are placed on the amount, type
and issuer of securities.
7
Net cash provided by operating activities for the first half of fiscal 1997
was $275.8 million compared to $230.4 million a year ago. The company's
ongoing profitability is expected to continue as the principal source for
providing expansion and remodeling programs, dividends to shareholders and
funding for various technological improvements.
Net cash used for investing activities was $191.1 million versus $170.7
million last year. Additions to property and equipment were $174.8 million
compared to $159.2 million last year. During the first six months of fiscal
1997, 102 new or relocated drugstores were opened. This compares to 90 new
or relocated drugstores opened in the same period last year. New stores are
owned and leased. There were 48 owned locations opened during the first
half of the year or under construction at February 28, 1997 versus 27 for
the same period last year. Capital expenditures for fiscal 1997 are
expected to exceed $400 million.
The company expects to open 230 new stores in fiscal 1997, including units
in the new markets of Detroit and Kansas City. Plans are to escalate new
store openings to 280 per year beginning in 1998 and to be operating 3,000
stores across the country by the year 2000. This may necessitate future
long-term borrowings. Intercom Plus, an advanced pharmacy computer and
workflow system, is expected to be fully implemented in early fiscal 1998.
Net cash used for financing activities was $72.5 million compared to $74.1
million provided a year ago. At February 28, 1997, the company had $142
million in unused bank lines of credit and $100 million of unissued
authorized debt securities, previously filed with the Securities and
Exchange Commission.
In fiscal 1995, the company received an unfavorable Tax Court ruling
concerning the depreciable lives of certain assets. The company appealed,
and on October 17, 1995, the United States Court of Appeals rendered an
opinion which reversed the ruling. The case, which involves approximately
$50 million of tax, including after tax interest, was remanded back to the
Tax Court for further findings which are in the process of being finalized.
As of February 28, 1997, the company has adequately provided for the tax and
related interest.
Financial Accounting Board Statement No. 123 "Accounting for Stock-Based
Compensation" was issued in October 1995. This pronouncement, which must be
implemented by fiscal year end, will require the company to disclose the
effect on income of stock options based on a formula outlined in the
bulletin. This pronouncement is not expected to materially impact the
company's consolidated financial position or results of operations.
In March 1997, Statement No. 128 "Earnings Per Share" was issued. Under
this pronouncement, which must be adopted in our fiscal 1998 second quarter,
"basic earnings per share" and "diluted earnings per share", as defined by
the bulletin, will replace "primary earnings per share" and "fully diluted
earnings per share." The objective is to make the computation more
compatible with international accounting standards. The company does not
expect basic earnings per share to be materially different from primary
earnings per share.
8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The company held its Annual Meeting of Shareholders on
January 8, 1997.
(c) The matters voted upon at the company's annual meeting
and the results of the voting were as follows:
(1) The shareholders voted for election of the
following directors to serve until the next annual
meeting or until their successors are elected and
qualified:
Votes
Votes For Withheld
Charles R. Walgreen III 199,352,057 2,894,006
William C. Foote 199,120,272 2,894,006
James J. Howard 199,330,255 2,894,006
Charles D. Hunter 199,320,335 2,894,006
L. Daniel Jorndt 199,372,579 2,894,006
Cordell Reed 199,303,857 2,894,006
John B. Schwemm 199,264,994 2,894,006
William H. Springer 199,314,573 2,894,006
Marilou M. von Ferstel 199,335,653 2,894,006
(2) The shareholders voted 200,560,573 shares for and
709,224 shares against with 925,829 abstaining to
ratify the appointment of Arthur Andersen LLP as
auditors.
(3) The shareholders voted 191,944,691 shares for and
5,679,566 shares against with 2,692,963 abstaining
to approve the amendment of the Walgreen Co.
Restricted Performance Share Plan.
(4) The shareholders voted 162,366,825 shares for and
5,291,343 shares against with 3,811,757 abstaining
to approve the amendment of the Walgreen Co.
Executive Stock Option Plan. There were 30,725,701
broker non-votes.
9
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
10.(a) Walgreen Co. Restricted Performance Plan, as
amended.
(b) Walgreen Co. Executive Stock Option Plan, as
amended.
(c) Walgreen Co. 1997 Executive Deferred
Compensation/Capital Accumulation Plan Series 1.
(d) Walgreen Co. 1997 Executive Deferred
Compensation/Capital Accumulation Plan Series 2.
(e) Walgreen Co. Nonemployee Director Stock Plan.
27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter
which ended February 28, 1997.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WALGREEN CO._________
(Registrant)
Date April 10, 1997 R. L. Polark_________
Senior Vice President
(Chief Financial Officer)
Date April 10, 1997 R. H. Clausen________
Controller
(Chief Accounting Officer)
11
INDEX TO EXHIBITS
DOCUMENTS FILED WITH THIS REPORT
Exhibit 10(a) Walgreen Co. Restricted Performance Plan, as
amended.
Exhibit 10(b) Walgreen Co. Executive Stock Option Plan, as
amended.
Exhibit 10(c) Walgreen Co. 1997 Executive Deferred
Compensation/Capital Accumulation Plan Series 1.
Exhibit 10(d) Walgreen Co. 1997 Executive Deferred
Compensation/Capital Accumulation Plan Series 2.
Exhibit 10(e) Walgreen Co. Nonemployee Director Stock Plan.
Exhibit 27 Financial Data Schedule
EXHIBIT 10(a)
WALGREEN CO.
RESTRICTED PERFORMANCE SHARE PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE
1.1 Establishment. WALGREEN CO., hereby establishes, effective as of
September 1, 1980, a restricted performance share plan for executives as
described herein which shall be known as the "WALGREEN CO. RESTRICTED
PERFORMANCE SHARE PLAN" (hereinafter called the "Plan").
1.2 Purpose. This Plan is intended to promote the interest of WALGREEN
CO. (the "Company"), by providing a method whereby certain full-time key
employees of the Company may be offered rewards that will encourage them to
continue in the employ of the Company, and by providing such employees with an
opportunity to become owners of WALGREEN CO.'s common stock under the terms and
conditions, and in the manner contemplated by this Plan.
SECTION 2. ADMINISTRATION
2.1 Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Committee"). No member of the
Committee shall be eligible to participate in this Plan nor in any other plan
through which the Company's stock may be acquired.
2.2 Finality of Determination. The determination of the Committee as to
any disputed questions arising under this Plan, including questions of
construction and interpretation, shall be final, binding and conclusive upon all
persons.
2.3 Expenses. The expenses of administering the Plan shall be borne by
the Company.
SECTION 3. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Shares of common stock, subject to performance
requirements and restrictions as hereafter specified, may be granted only to
full-time key employees of the Company without limitation as to length of
service.
3.2 Restricted Performance Award Grants. The Chief Executive Officer of
the Company shall recommend, subject to approval of the Committee, who will be
granted restricted performance awards, the amount of each individual grant, and
the time or times when awards will be granted. The Committee shall determine
whether the Chief Executive Officer will be granted a restricted performance
award, the size of each grant, and the time or times when the award will be
granted. Each grant shall be subject to the execution of a written agreement
between the Company and the grantor setting forth the terms and conditions of
the grant as determined by the Committee.
SECTION 4. SHARES SUBJECT TO PLAN
4.1 Shares Subject to Plan. An aggregate of 250,000 shares of common
stock, $2.50 par value per share, of the Company (the "Shares") shall be subject
to this Plan either from authorized but heretofore unissued Shares, treasury
shares or from Shares reacquired by the Company, including Shares purchased in
the open market.
4.2 Stock Splits/Stock Dividends. In the event of any change in the
outstanding Shares of the Company by reason of a stock dividend,
recapitalization, merger, consolidation, split-up, combination, exchange of
Shares, or the like, the aggregate number of and class of Shares issuable
pursuant to subsection 4.1 and pursuant to any grant hereunder may be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
<PAGE>
4.3 Reacquired Shares. If Shares issued pursuant hereto shall have been
reacquired by the Company in connection with the restrictions imposed on such
Shares pursuant to this Plan, such reacquired Shares again shall become
available for issuance under the Plan prior to its termination.
SECTION 5. PERFORMANCE REQUIREMENTS
5.1 Minimum Performance. The performance requirements hereafter specified
are subject to a minimum return on invested capital performance level. The
Chief Executive Officer, subject to approval by the Committee, shall establish
the minimum return on invested capital level.
5.2 Target Performance. The Chief Executive Officer, subject to approval
by the Committee, shall establish a target performance goal at which 100% of the
restricted performance award granted will be earned.
5.3 Threshold Performance. The Chief Executive Officer, subject to
approval by the Committee, shall also establish a threshold performance goal at
which a reduced amount of the award granted will be earned. Below threshold
performance, no award will be earned.
5.4 Interim Performance. The Chief Executive Officer, subject to approval
by the Committee, shall also establish various performance levels below the
Target Performance Goal and above the Threshold Performance Goal at which a
proportionate amount of the restricted performance award granted will be earned.
5.5 Performance Period. Performance awards will be earned, to the extent
prescribed by the performance standards, over a period of one year, the
"Performance Period."
5.6 Earned Awards. The earned restricted performance awards shall be paid
in restricted performance shares and restricted cash. The amount of the award
paid in restricted shares and cash shall be established by the Chief Executive
Officer, subject to approval by the Committee, and the ratio of shares and cash
may be varied, including payment of 100% in shares. The restricted shares shall
be treated as described in Sections 6 and 7, and the restricted cash shall be
treated as described in Section 8.
SECTION 6. RESTRICTED PERFORMANCE SHARES
6.1 Transferability. The Restricted Performance Shares earned pursuant to
subsection 5.5 may not be sold or otherwise alienated or hypothecated as long as
the Company has the right to reacquire the Shares as hereinafter provided in
this Section 6.
6.2 Removal of Restrictions. Except as otherwise provided in Section 9,
Restricted Performance Shares covered by each Restricted Performance Share award
made under this Plan will become freely transferable by the participant at the
end of a specified period of continued employment, the "Restriction Period." The
Chief Executive Officer, subject to Committee approval, shall establish the
restriction period.
6.3 Other Restrictions. The Committee shall impose such other
restrictions on any Shares granted pursuant to this Plan as it may deem
advisable including, without limitation, restrictions under the Securities Act
of 1933, as amended, under the requirements of any stock exchange upon which
such Shares or Shares of the same class are then listed and under any blue sky
or securities laws applicable to such Shares. Such other restrictions imposed
on any grant need not be identical to other restrictions contained in grants to
other grantees.
6.4 Certificate Legend. In addition to any legends placed on certificates
pursuant to subsection 6.3, each certificate representing Restricted Performance
Shares granted pursuant to this Plan shall bear the following legend:
"The sale or other transfer of shares of stock represented by this certificate,
whether voluntary, involuntary, or by operation of law, is subject to the
restrictions on transfer and resale obligations set forth in the Restricted
Performance Share Plan of the Company. A copy of the Restricted Performance
Share Plan may be obtained from the Secretary of the Company."
<PAGE>
SECTION 7. VOTING AND DIVIDEND RIGHTS
7.1 Voting Rights. Participants holding Restricted Performance Shares
granted hereunder shall have full voting rights on those Shares.
7.2 Dividend Rights. Participants holding Restricted Performance Shares
granted hereunder shall have full dividend rights with such dividends being paid
currently. If all or part of a dividend is paid in Shares, the Shares shall be
subject to the same restrictions on transferability as the Restricted
Performance Shares that are the basis for the dividend.
SECTION 8. RESTRICTED CASH PAYMENT
8.1 Removal of Restrictions. Except as otherwise provided in Section 9,
restricted cash awards made under this Plan will be paid to the participant at
the end of a specified period of continued employment, the "Restricted Period,"
as described in subsection 6.2.
SECTION 9. TERMINATION OF EMPLOYMENT
9.1 Termination of Employment. In the event of a termination of
employment with the Company of a participant prior to the end of the time
periods specified in subsections 6.2 and 8.1, if such termination is for any
reason other than normal retirement, death, total and permanent disability, or
early retirement with the consent of the Committee, that participant's grant
shall automatically be forfeited and rescinded as to all the Shares and Cash
which are, at the date of such termination of employment, still subject to the
time period restrictions imposed hereunder.
9.2 Retirement, Death, Total and Permanent Disability. In the event that
a participant granted Shares and Cash hereunder terminated employment with the
Company because of normal retirement, death, total and permanent disability, or
early retirement with the consent of the Committee, any uncompleted portion of a
time period restriction, as set forth in subsections 6.2 and 8.1, shall be
waived by the Company. The Shares thereby released from the time period
restriction shall be thereafter freely transferable by the participant and the
restricted cash awards made pursuant to subsection 8.1 shall be paid to the
participant.
SECTION 10. AMENDMENT, SUSPENSION AND TERMINATION
10.1 Amendment. This Plan may be amended at any time by the Board
provided that, if this Plan shall have been approved by the shareholders of the
Company, no such amendment shall increase the maximum number of Shares that may
be issued pursuant to this Plan except pursuant to Section 4 hereof without the
further approval of such shareholders.
10.2 Suspension or Termination. The Board of Directors reserves the right
to suspend or terminate the Plan at any time. The suspension or termination of
this Plan, however, shall not affect any restrictions previously imposed on
Shares and Cash issued pursuant to this Plan.
SECTION 11. MERGER, CONSOLIDATION, OR ACQUISITION
11.1 Merger. Consolidation, or Acquisition. In the event of a merger,
consolidation, or acquisition where the Company is not the surviving
corporation, unless the successor or acquiring corporation shall elect to
continue and carry on the Plan, all restrictions shall lapse on Shares and Cash
issued pursuant to this Plan.
SECTION 12. GOVERNING LAW
12.1 Governing Law. The Plan and each Restricted Performance Share issued
under the Plan shall be construed, administered, and governed in all respects
under and by the laws of the State of Illinois.
<PAGE>
AMENDMENTS TO WALGREEN CO. RESTRICTED PERFORMANCE SHARE PLAN
------------------------------------------------------------
The WALGREEN CO. Restricted Performance Share Plan is hereby amended in the
following respects, effective as of October 18, 1988:
(1) Amend Section 9 by adding a new Section 9.3 to read as follows:
9.3 Change of Control. Notwithstanding any other provisions of this Plan,
upon a Change of Control all Shares shall be immediately released from the time
period restriction and shall be freely transferable by participant and the
restricted cash awards made pursuant to subsection 8.1 shall be paid to the
participant within 30 days of the Change of Control.
For the purposes of this Plan, "Change of Control" means any of the
following events:
(i) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either the then outstanding shares of common stock of the
Company or the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors, but
excluding, for this purpose, any such acquisition by the Company or any of its
subsidiaries, or any employee benefit plan (or related trust) of the Company or
its subsidiaries, or any corporation with respect to which, following such
acquisition, more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
the individuals and entities who were the beneficial owners, respectively, of
the common stock and voting securities of the Company immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the then outstanding shares of common stock of the
Company or the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors, as the
case may be; or
(ii) Individuals who, as of the date hereof, constitute the Board (as of
the date hereof the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened
<PAGE>
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(iii) Approval by the stockholders of the Company of a reorganization, merger
or consolidation, in each case, with respect to which all or substantially all
the individuals and entities who were the respective beneficial owners of the
common stock and voting securities of the Company immediately prior to such
reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation, or a complete
liquidation or dissolution of the Company or of the sale or other disposition of
all or substantially all of the assets of the Company.
<PAGE>
Walgreen Co. Restricted Performance Share Plan
Amendment No. 2
I
A new Section 10.3 shall be added to read as follows:
10.3 With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934 ("1934 Act"), transactions under this plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. To the extent any provision of the
plan or action by the plan administrators fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed
advisable by the plan administrators.
II
In all respects, except as otherwise set forth, the Plan shall remain in force
and effect.
<PAGE>
Walgreen Co. Restricted Performance Share Plan
Amendment No. 3
I
A new Section 5.7 shall be added to the Plan to read as follows:
"Following the determination by the Committee of the degree of
attainment of the performance requirements established prior to the
beginning of each Performance Period, the Committee may, at its sole
discretion, negatively adjust the sizes of the awards which otherwise
would be payable based on the degree of attainment of the performance
requirements; provided, however, that in no event shall the Committee
use its subjective discretion to increase the awards payable as
determined pursuant to the preestablished goals."
II
Section 9.2 of the Plan shall be amended to read as follows:
"Retirement, Death, Total and Permanent Disability. Except as
otherwise stated herein, in the event that a participant granted
Shares and Cash hereunder terminated employment with the Company
because of normal retirement, death, total and permanent disability,
or early retirement with the consent of the Committee, any uncompleted
portion of a time period restriction, as set forth in subsections 6.2
and 8.1., shall be waived by the Company. Provided, however, that in
the event such a waiver on behalf of a Covered Employee under Section
162(m) of the Internal Revenue Code would result in the loss of the
performance based exception under Section 162(m) and regulations
promulgated thereunder, no such waiver shall apply in respect to a
Covered Employee. The Shares thereby released from the time period
restriction shall be thereafter freely transferable by the Participant
and the restricted cash awards made pursuant to subsection 8.1 shall
be paid to the Participant."
III
In all respects, except as otherwise set forth, the Plan shall remain in force
and effect.
<PAGE>
Walgreen Restricted Performance Share Plan
Amendment No. 4
I.
Section 2.1 of the Plan shall be amended to read as follows:
2.1 Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"),
consisting of three or more members appointed by the Board of
Directors of the Company from those of its members not eligible to
receive Awards and who satisfy such other requirements as may be
necessary to qualify as "Nonemployee Directors" as that phrase is
defined for purposes of the Securities and Exchange Commission's rules
and regulations issued under Section 16 of the Securities Exchange Act
of 1934 (the "1934 Act") and as "Outside Directors" as that phrase is
defined for purposes of the Internal Revenue Service's (the Department
of Treasury's) regulations issued under Section 162(m) of the Internal
Revenue Code. The Committee may take action with regard to this Plan
only upon the vote of a majority of the entire Committee or by written
consent. The day-to-day administration of the Plan may be carried out
by such officers and employees of the Company as may be designated by
the Committee.
II.
Subsection 3.1 of the Plan shall be amended to read as follows:
3.1 Eligibility. Shares of common stock, subject to performance
requirements and restrictions as hereafter specified, may be granted
only to full-time, key employees of the Company who are classified in
Grade 18 (or its equivalent) or above, without limitation as to length
of service. Eligible employees of the Company who have been granted
shares of common stock are hereunder referred to as "participants."
III.
Subsection 3.2 of the Plan shall be amended to read as follows:
3.2 Restricted Performance Award Grants. The Committee may from time
to time, in its discretion and subject to the provisions of the Plan,
determine those employees of the Company or its subsidiaries to whom
restricted performance awards will be granted, the time or times when
restricted performance awards will be granted, the number of shares of
any restricted common stock which will be
<PAGE>
granted and the amount of any restricted cash award that will be
granted. The amount of any restricted performance award shall be
expressed in terms of the number of restricted shares awarded, the
amount of restricted cash awarded or a combination of such restricted
shares and restricted cash, provided that, as of the date of grant,
the maximum number of restricted shares that may be awarded as part
of a restricted performance award for any participant for any
performance period (as defined in Subsection 5.5) shall not exceed
50,000 shares and the maximum amount of any restricted cash that
may be awarded as part of a restricted performance award for any
participant for any performance period (as defined in Subsection 5.5)
shall not exceed $750,000. No restricted performance award shall
actually become payable, whether payable in stock, cash, or partially
in each, unless such restricted performance award has become an
earned award pursuant to Section 5. Each grant shall be subject
to the execution of a written agreement between the Company and
the participant to whom the award has been granted which agreement
shall set forth the terms and conditions of the grant as determined
by the Committee, including the precise performance target and
performance threshold (described in Subsections 5.2 and 5.3) that
must be attained for the award to be earned.
IV.
Subsection 5.2 of the Plan shall be amended to read as follows:
5.2 Performance Targets. The Committee shall establish the
performance targets which must be attained for restricted awards
to be earned, provided that the requirements of Subsection 5.1
have been met. Such performance goals shall be based upon increases
in FIFO pretax earnings, adjusted for certain benefit costs and
certain accounting adjustments deemed necessary by the Company to
accurately reflect such earnings ("Pre-Tax FIFO Earnings").
Subject to the limitations of Subsection 3.2, such performance
targets shall be determined as follows:
a. Performance Target. The Committee shall establish a performance
target, expressed as an increase in Pre-Tax FIFO Earnings, which
must be attained for 100 percent of a participant's restricted
performance award to be earned.
b. Maximum Performance Target. The Committee shall establish a
performance target, expressed as an increase in Pre-Tax FIFO
Earnings greater than the level determined under Subsection
5.2(a), which must be attained for 120 percent of a participant's
restricted performance award to be earned, provided that no award
may be increased by operation of this Subsection 5.2(b) above the
maximum level of such awards described in Subsection 3.2.
<PAGE>
V.
Subsection 5.4 of the Plan shall be amended to read as follows:
5.4 Interim Performance. subject to Subsection 5.1, the Committee
shall establish various performance targets between the Threshold
Performance Goal and the Maximum Performance Target at which a
proportionate amount of the restricted performance award will be
earned.
VI.
Subsection 5.1, 5.3, 5.6, and 6.2 of the Plan shall each be amended
by deleting the phrase "Chief Executive Officer, subject to approval
by" where that phrase appears in such Subsections.
VII.
Subsection 9.2 of the Plan shall be amended to read as follows:
9.2 Retirement, Death, Total and Permanent Disability. In the
event that a participant granted Shares and Cash hereunder
terminated employment with the Company because of normal
retirement, death, total and permanent disability, or early
retirement with the consent of the Committee, any uncompleted
portion of a time period restriction (as set forth in Subsections
6.2 and 8.1) shall be waived by the Company. The earned Shares
thereby released from the time period restrictions shall be
thereafter freely transferable by the participant and the restricted
cash awards made pursuant to Subsection 8.1 shall be paid to the
participant. Notwithstanding any provision of this Plan to the
contrary, in the event of the participant's death any shares which
were previously transferable but were not previously transferred
in a manner consistent with this Plan, any Shares which have
become transferable because of the participant's death and any
Cash which remains payable to the participant hereunder shall be
distributed to the beneficiary or beneficiaries designated for
this purpose on the most recent beneficiary designation form which
was properly completed by the participant for such purpose on a
form supplied by the Committee. If no such beneficiary or
beneficiaries designated for this purpose on the most recent
beneficiary designation has been made, the Committee shall
distribute any Shares or Cash which remain to be distributed to
the participant to the person, persons, trust, trusts, or other
payees entitled to receive such amounts. If the Committee is not
presented with reliable evidence that a recipient is entitled to
receive such amounts pursuant to an appropriate transfer document
signed by the participant, the Committee shall cause such amounts
to be tendered to the participant's estate for distribution
pursuant to applicable laws governing the distribution of the
property of a deceased person, by will or pursuant to the laws of
descent and distribution.
EXHIBIT 10(b)
WALGREEN CO.
EXECUTIVE STOCK OPTION PLAN
(AS AMENDED EFFECTIVE OCTOBER 13, 1992)
<PAGE>
WALGREEN CO.
EXECUTIVE STOCK OPTION PLAN
(AS AMENDED EFFECTIVE OCTOBER 13, 1992)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1. ESTABLISHMENT AND PURPOSE........................... 1
1.1 THE PLAN........................................ 1
1.2 PURPOSE......................................... 1
1.3 EFFECTIVE DATE OF THE PLAN...................... 1
SECTION 2. PLAN ADMINISTRATION................................. 1
2.1 ADMINISTRATION.................................. 1
2.2 AUTHORIZED ACTIONS.............................. 2
2.3 FINALITY OF DETERMINATION....................... 2
SECTION 3. ELIGIBILITY AND PARTICIPATION....................... 2
3.1 ELIGIBILITY..................................... 2
3.2 RIGHTS OF EMPLOYEES............................. 3
SECTION 4. SHARES SUBJECT TO THE PLAN.......................... 3
4.1 NUMBER.......................................... 3
4.2 UNUSED SHARES................................... 3
4.3 ADJUSTMENT IN CAPITALIZATION.................... 4
SECTION 5. OPTIONS............................................. 4
5.1 GRANT OF OPTIONS................................ 4
5.2 ADDITIONAL ISO OPTION LIMITATION................ 4
5.3 OPTION AGREEMENT................................ 5
5.4 OPTION PRICE.................................... 5
5.5 DURATION OF OPTIONS............................. 5
5.6 OTHER TERMS AND CONDITIONS...................... 5
5.7 EXERCISE........................................ 5
5.8 PERIODS OF NON-EXERCISE......................... 6
SECTION 6. PURCHASE OF SHARES.................................. 6
6.1 WRITTEN NOTICE.................................. 6
6.2 PAYMENT......................................... 6
6.3 ISSUANCE OF STOCK CERTIFICATES.................. 6
6.4 PRIVILEGES OF A SHAREHOLDER..................... 6
SECTION 7. TERMINATION OF EMPLOYMENT........................... 7
7.1 GENERAL......................................... 7
7.2 DEATH........................................... 7
7.3 DISABILITY...................................... 7
7.4 RETIREMENT...................................... 7
7.5 COMMITTEE DISCRETION TO EXTEND EXERCISE PERIOD.. 7
</TABLE>
<PAGE>
SECTION 8. DURATION OF THE PLAN......................................... 8
8.1 DURATION OF THE PLAN......................................... 8
SECTION 9. AMENDMENT OR DISCONTINUANCE.................................. 8
9.1 AMENDMENT OR DISCONTINUANCE.................................. 8
SECTION 10. OTHER CONDITIONS............................................. 9
10.1 TRANSFERABILITY OF OPTIONS................................... 9
10.2 OTHER BENEFIT PLANS.......................................... 9
10.3 GOVERNMENT REGULATIONS....................................... 9
10.4 SECTION 16 REQUIREMENTS...................................... 9
<PAGE>
WALGREEN CO.
EXECUTIVE STOCK OPTION PLAN
(AS AMENDED EFFECTIVE OCTOBER 13, 1992)
SECTION 1. ESTABLISHMENT AND PURPOSE
1.1 THE PLAN. Effective as of October 13, 1982, Walgreen Co. (the "Company")
established this stock option plan for certain officers and key employees, which
plan was then known as the "Walgreen Co. 1982 Executive Incentive Stock Option
Plan." Effective as of January 1, 1989, the Plan was amended, restated and
renamed as the "Walgreen Co. 1982 Executive Stock Option Plan." The plan as
described herein is a further amendment and continuation of such plan and shall
be known as the "WALGREEN CO. EXECUTIVE STOCK OPTION PLAN" (the "Plan").
1.2 PURPOSE. The purpose of the Plan is to enable the Company and its
subsidiaries (as subsidiaries are defined in Section 425(f) of the Internal
Revenue Code of 1986, as amended, hereinafter referred to as the "Code") to
attract and retain key employees of outstanding ability, to stimulate the
efforts of such employees toward achievement of Company objectives and to
encourage the identification of their interest with that of the Company's
shareholders. It is intended that options issued pursuant to the Plan prior to
January 1, 1989 shall constitute "Incentive Stock Options", containing such
terms and conditions as required by Section 422A of the Code. Options granted on
or after January 1, 1989 are only intended to constitute "Incentive Stock
Options" to the extent that the Committee specifies such intention at the time
such options are granted. The term "ISO Options" shall mean Incentive Stock
Options granted pursuant to this Plan. The term "Nonqualified Options" shall
mean options other than ISO Options granted pursuant to this Plan. The term
"Options" shall mean both ISO Options and Nonqualified Options granted pursuant
to this Plan.
1.3. EFFECTIVE DATE OF THE PLAN. The Plan as originally adopted was effective
as of October 13, 1982 (the "Original Effective Date"). The effective date of
the Plan as set forth herein is October 13, 1992 (the "Effective Date").
SECTION 2. PLAN ADMINISTRATION
2.1 ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"), consisting
of three
<PAGE>
or more members appointed by the Board of Directors of the Company from those of
its members not eligible to receive Options and who satisfy such other
requirements as may be necessary to qualify as "disinterested persons" as that
phrase is defined for purposes of the Securities and Exchange Commission
regulations issued under Section 16 of the Securities Exchange Act of 1934 (the
"1934 Act"). The Committee may take action with regard to this Plan only upon
the vote of a majority of the entire Committee or by written consent. The day-
to-day administration of the Plan may be carried out by such officers and
employees of the Company as may be designated by the Committee.
2.2 AUTHORIZED ACTIONS. The Committee shall have full power and authority to
interpret the Plan, to establish, amend and rescind rules and regulations
relating to the Plan, to determine the form and content of Options to be issued
under the Plan, to provide for conditions and assurances deemed necessary or
advisable to protect the interests of the Company, and to make all other
determinations necessary or advisable for the administration of the Plan, but
only to the extent not contrary to the express provisions of the Plan. The
Committee shall determine, within the limits of the express provisions of the
Plan, the employees to whom, and the time or times at which, Options shall be
granted, the number of shares of stock to be subject to each Option, the
duration of each Option, the Option price of each Option, and the time or times
within which (during the term of the Option) all or portions of each Option may
be exercised.
2.3 FINALITY OF DETERMINATION. The determination of the Committee as to any
disputed question arising under the Plan, including questions of construction
and interpretation, shall be final, binding, and conclusive upon all persons
including the Company, its shareholders, and persons having any interests in
Options which may be granted under the Plan.
SECTION 3. ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. Full-time, key employees of the Company or its subsidiaries,
without limitation as to length of service as designated by the Committee from
time to time by Option grants, shall be eligible to receive Options under the
Plan. No Option shall be granted to any person who owns, directly or indirectly,
shares of stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company.
2
<PAGE>
Eligible employees of the Company or its subsidiaries who have been granted and
are in receipt of valid Options are hereunder referred to as "Participants."
3.2 RIGHTS OF EMPLOYEES. Nothing in this Plan or in any Option shall
interfere with or limit in any way the right of the Company and any of its
subsidiaries to terminate any Participant's or employee's employment at any
time, nor confer upon any employee any right to continue in the employ of the
Company and any of its subsidiaries. No employee shall have a right to be
selected as a Participant, nor, having been so selected to be selected again as
a Participant.
SECTION 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER. The maximum number of shares of common stock, $0.625 par value,
of the Company (the "Shares") that may be optioned under the Plan on or after
the effective date shall be the amount specified in (a) below, reduced in the
manner specified in (b) below and adjusted, from time to time, in the manner
specified in (c) below:
(A) NUMERICAL LIMITATION. Except as provided in (b) and (c) below, no more
than 2,404,480 shares of such common stock may be optioned after the
effective date;
(B) PRE-EFFECTIVE DATE GRANT REDUCTION. The number of shares determined in
accordance with (a) above shall be reduced by the number of such
shares of common stock with respect to which options are granted after
July 7, 1992 and prior to October 13, 1992; and
(C) CAPITALIZATION ADJUSTMENT. The number of shares determined in
accordance with (a) and (b) above shall be subject to the adjustments,
if any, required by Section 4.3 below.
Shares may consist, in whole or in part, of authorized but heretofore unissued
Shares, treasury Shares or Shares reacquired by the Company, including Shares
purchased by the Company in the open market.
4.2 UNUSED SHARES. In the event any Shares that are subject to an Option
which, for any reason, expires, is canceled, or is terminated unexercised as to
such Shares, such Shares may again be subjected to an Option pursuant to this
Plan.
3
<PAGE>
4.3 ADJUSTMENT IN CAPITALIZATION. In the event of any change (increase or
decrease) in the outstanding shares of the Company by reason of a stock
dividend, recapitalization, merger, consolidation, stock split, combination or
exchange of Shares, or otherwise, the aggregate number of Shares available under
this Plan and the number of Shares subject to each outstanding Option and the
Option prices shall be appropriately adjusted by the Committee, whose
determination shall be conclusive; provided, however, that fractional Shares
shall be rounded to the nearest whole Share.
SECTION 5. OPTIONS
5.1 GRANT OF OPTIONS. The Committee may from time to time at its discretion,
subject to the provisions of the Plan, determine those employees of the Company
or its subsidiaries to whom Options shall be granted, the Option price, the
number of shares subject to such Options, and the dates on which such Options
are to be granted. An eligible employee may be granted more than one Option. The
aggregate number of Shares that may be optioned under the Plan and outstanding
to any employee under this Plan is limited to the extent provided in Section
4.1. Notwithstanding the foregoing, no Options shall be granted under this Plan
after the effective date and prior to shareholder approval of this Plan unless
such grant or grants are expressly conditioned upon such shareholder approval.
5.2 ADDITIONAL ISO OPTION LIMITATION. The grant and exercise of ISO Options
are subject to the following annual limitations in addition to any other
limitations applicable under the terms of this Plan:
(A) With respect to ISO Options granted prior to January 1, 1987, the
aggregate amount of fair market value of shares (the fair market value of
a Share on the date of grant times the number of Shares optioned under
the grant) for which any employee may be granted ISO Options in any
calendar year under this Plan (and any other Incentive Stock Option plan
which the Company or its subsidiaries may have) shall not exceed $100,000
plus any unused limit carryover calculated in accordance with the
provisions of Section 422A(c)(4) of the Code, as then in effect; and
(B) With respect to ISO Options granted after December 31, 1986, the
aggregate amount of fair market value of shares (the fair market value of
a Share on the date of grant times the number of Shares optioned under
the grant) for which an employee may first exercise ISO Options in any
calendar year under this Plan (and any other Incentive Stock Option plan
which the Company or its
4
<PAGE>
subsidiaries may have) shall not exceed $100,000.
5.3 OPTION AGREEMENT. Each Option granted under the Plan shall be evidenced
by a written stock Option Agreement setting forth the terms upon which the
Option is granted. Each Option Agreement shall state the number of Shares, as
designated by the Committee, to which that Option pertains. The appropriate
officers of the Company are hereby authorized to execute and deliver Option
agreements in the name of the Company, as directed from time to time by the
Committee. No Participant shall have any rights with respect to the exercise of
an Option unless and until he or she shall have executed and delivered to the
Committee an Option Agreement in form and substance acceptable to the Committee.
5.4 OPTION PRICE. The Option price per Share under each Option shall be
determined by the Committee and stated in the Option Agreement. The Option price
shall not be less than 100 percent of the fair market value, and in any event
not less than the par value, of a Share on the day the Option is granted, as
such value is determined by the Committee. Such fair market value shall be not
less than the closing price of a share of stock on the New York Stock Exchange
on the last trading day preceding the day the Option is granted.
5.5 DURATION OF OPTIONS. Each Option shall be of a duration specified in the
Option Agreement. All rights to exercise an Option shall expire not later than
ten years from the date on which the Option is granted.
5.6 OTHER TERMS AND CONDITIONS. Options may contain such other provisions,
which shall not be inconsistent with any of the foregoing terms, as the
Committee shall deem appropriate.
5.7 EXERCISE. Subject to Section 5.8, each Option may be exercised, as long
as it is valid and outstanding, from time to time, in part or as a whole and in
such manner and subject to such conditions as the Committee in its discretion
may provide in the Option Agreements, provided that no partial exercise may be
for less than ten (10) full Shares. Notwithstanding the above, no ISO Option
granted to an employee under this Plan prior to July 13, 1988 shall be
exercisable while there is outstanding (within the meaning of Section 422A(c)(7)
of the Code) any Option, previously granted to such employee under this Plan or
5
<PAGE>
any other Plan of the Company meeting the requirements of Section 422A of the
Code, to purchase Shares. For such purpose an Option shall be treated as
outstanding until such Option is exercised in full or expires by reason of lapse
of time.
5.8 PERIODS OF NON-EXERCISE. To the extent required to satisfy exemptions
established from time to time by the Securities and Exchange Commission issued
under Section 16 of the 1934 Act, the Committee may prohibit or restrict the
effectiveness of any exercise hereunder for a period of up to six months.
Options not subject to such restrictions may be exercised at such time as the
Committee, in its discretion, may designate. No Options granted subject to the
shareholder approval condition described in Section 5.1 may be exercised until
such shareholder approval has been received.
SECTION 6. PURCHASE OF SHARES
6.1 WRITTEN NOTICE. The holder of an Option wishing to exercise an Option
shall give written notice to the Company. The date the Company receives written
notice of an exercise, and full payment for the Shares exercised pursuant to the
Option, shall be considered as the date such Option, or the portion thereof
specified in written notice, is exercised (the "Exercise Date").
6.2 PAYMENT. Payment in full shall be made for the number of Shares
purchased, as specified in the written notice, at the same time written notice
of exercise of an Option is given to the Company. Payment of the Option price
may be made in cash, or by delivery of Shares of the Company equivalent in fair
market value to the Option price on the Exercise Date, or partly in cash and
partly in Shares, as the Committee may from time to time determine. The proceeds
from such payment shall constitute general funds of the Company.
6.3 ISSUANCE OF STOCK CERTIFICATES. As soon as possible after receipt of
written notice and payment, the Company shall, without stock issue or transfer
taxes to the Participant, deliver to the holder of the Option a certificate or
certificates for the requisite number of Shares.
6.4 PRIVILEGES OF A SHAREHOLDER. The holder of an Option shall not have
shareholder privileges with respect to any Share covered by the Option until the
date of issuance of a stock certificate to him or her for such Shares. No
adjustments shall be made for dividends or distributions or other rights in
respect to such Shares for which the record
6
<PAGE>
date is prior to the date on which the Participant became the holder of record
thereof.
SECTION 7. TERMINATION OF EMPLOYMENT
7.1 GENERAL. If the employment of an employee to whom an Option is granted
should terminate for any reason, other than death, retirement, or total and
permanent disability, his or her Option shall terminate on the date employment
terminates unless the Committee, in its discretion, grants the right to exercise
the Option within 90 days after the date employment terminates, but only to the
extent he or she was entitled to exercise the Option on the date of termination.
Any Options or portions of Options of terminated employees not exercised shall
terminate.
7.2 DEATH. Except as provided in Section 7.5, if the employee to whom an
Option was granted shall die while in the employ of the Company or a subsidiary,
the executor or administrator of his or her estate or the person or persons who
acquired the right to exercise the Option by bequest or inheritance or by reason
of his or her death may, at any time within one year after the date of death but
not later than the date of expiration of the Option, exercise the Option to the
extent the optionee was entitled to do so on the date of death. Options or
portions of Options of deceased employees not so exercised shall terminate.
7.3 DISABILITY. Except as provided in Section 7.5, in the event of
termination of employment with the Company or a subsidiary due to total and
permanent disability, the employee to whom an Option is granted may exercise the
Option, to the extent that it is exercisable, at any time within one year after
the date of such total and permanent disability but not later than the date of
expiration of the Option.
7.4 RETIREMENT. Except as provided in Section 7.5, if the employee to whom an
Option was granted shall be retired in good standing from the employ of the
Company for reasons of age under the then-established rules of the Company, the
employee may exercise the Option, to the extent that it is exercisable, at any
time within 90 days after the date of such retirement but not later than the
date of expiration of the Option.
7.5 COMMITTEE DISCRETION TO EXTEND EXERCISE PERIOD. Notwithstanding the
provisions of Sections 7.1, 7.2, 7.3 and 7.4, the Committee may extend the time
periods for exercise of Options which would otherwise be applicable under such
Sections, at its sole discretion, to reflect the employee's role, if any, in
developing the Company's long term
7
<PAGE>
business objectives or to accomplish such other business purposes of the Company
as may be determined by the Committee. The Committee may extend such time
periods for a period not to exceed 60 months from the date of the employee's
death, disability, retirement or employment termination, provided that such
exercise period shall not extend beyond the original expiration date specified
in the Option Agreement.
SECTION 8. DURATION OF THE PLAN
8.1 DURATION OF THE PLAN. The Plan shall remain in effect until October 13,
2002, but Options may extend beyond that date in accordance with the provisions
of the Plan.
SECTION 9. AMENDMENT OR DISCONTINUANCE
9.1 AMENDMENT OR DISCONTINUANCE. The Board of Directors of the Company may
alter, suspend, or discontinue the Plan, but may not, without the approval of
the shareholders of the Company, make any alteration which would:
(A) Increase the aggregate number of Shares subject to Option under the
Plan, except as provided in Section 4.3;
(B) Decrease the minimum Option price;
(C) Increase the maximum number of shares for which an Option or Options
may be granted to any one employee, except as provided in Section
4.3;
(D) Permit any member of the Board of Directors of the Company who is
not an officer or employee of the Company or subsidiary, or any
member of the Committee, to become eligible for Options under the
Plan; or
(E) Extend the term of the Plan or the maximum period during which any
Option may be exercised.
The Board of Directors may not revoke or alter, in a manner unfavorable to the
holder, any outstanding Option, without the consent of the holder. Amendments
may only be made more frequently than once every six months if the Committee
determines such amendments will not adversely affect an exemption from the
restrictions of Section 16 of the 1934 Act.
8
<PAGE>
SECTION 10. OTHER CONDITIONS
10.1 TRANSFERABILITY OF OPTIONS. An Option shall not be transferable except
by will or the laws of descent and distribution and an Option may be exercised,
during the optionee's lifetime, only by the optionee.
10.2 OTHER BENEFIT PLANS. No Options under this Plan shall be taken into
account in determining any benefits under any other benefit plan or profit
sharing plan maintained by the Company.
10.3 GOVERNMENT REGULATIONS. The Plan, and the granting and exercise of
Options thereunder, and the obligation of the Company to sell and deliver Shares
under such Options, shall be subject to all applicable laws, rules and
regulations, and to such approvals, registration, and listing requirements by
any governmental agencies or national securities exchanges as may be required.
10.4 SECTION 16 REQUIREMENTS. With respect to persons subject to Section 16
of the 1934 Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the
extent any provision of the Plan or action by the Committee or of any person or
persons acting on the Committee's behalf fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee.
9
<PAGE>
AMENDMENT TO WALGREEN CO. EXECUTIVE STOCK OPTION PLAN
-----------------------------------------------------
I.
Section 1.1 of the Plan shall be amended to read as follows:
1.1 The Plan. Effective as of October 13, 1982, Walgreen Co. (the
"Company") established this stock option plan for certain officers and key
employees, which plan was then known as the "Walgreen Co. 1982 Executive
Incentive Stock Option Plan." Effective as of January 1, 1989, the Plan was
amended, restated, and renamed as the "Walgreen Co. 1982 Executive Stock
Option Plan." Effective as of October 13, 1992, the Plan was amended,
restated, and renamed as the "Walgreen Co. Executive Stock Option Plan" (the
"Plan"). The Plan as described herein reflects a further amendment effective
as of October 9, 1996.
II.
Section 1.3 of the Plan shall be amended to read as follows:
1.3 Effective Date of the Plan. The Plan as originally adopted was
effective as of October 13, 1982 (the "Original Effective Date"). The
effective date of the Plan as set forth herein is October 9,1996 (the
"Effective Date.").
III.
Section 2.1 of the Plan shall be amended to read as follows:
2.1 Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee")
consisting of three or more members appointed by the Board of Directors of
the Company from those of its members not eligible to receive Options and who
satisfy such other requirements as may be necessary to qualify as "Non-
Employee Directors" as that phrase is defined for purposes of the Securities
and Exchange Commission's (the "Commission") rules and regulations issued
under Section 16 of the Securities and Exchange Act of 1934 (the "1934 Act")
and as "Outside Directors" as that phrase is defined for purposes of the
Internal Revenue Service's (the Department of Treasury's) regulations issued
under Section 162(m) of the Internal Revenue Code. This Committee may take
action with regard to this Plan only upon the vote of a majority of the
entire Committee or by written consent. The day-to-day administration of the
Plan may be carried out by such officers and employees of the Company as may
be designated by the Committee.
IV.
Section 3.1 of the Plan shall be amended to read as follows:
3.1 Eligibility. Full-time, key employees of the Company or its
subsidiaries who are classified in Grade 12 (or its equivalent) or above, as
designated by the Committee from time to time and without limitation as to
length of service, shall be eligible to receive Options under the Plan. No
Option shall be granted to any person who owns, directly or indirectly,
shares of stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company. Eligible employees of the
Company or its subsidiaries who have been granted and are in receipt of valid
Options pursuant to this Plan are hereunder referred to as "Participants."
<PAGE>
V.
Section 4.1 of the Plan shall be amended to read as follows:
4.1 Number. The aggregate number of shares of common stock, $.3125 par
value of the Company (the "Shares"), that may be optioned under the Plan
shall be determined as follows:
(a) Prior to October 9, 1996. No more than 9,600,000 shares may be
optioned during the period beginning on the Original Effective Date
and ending immediately prior to the Effective Date; and
(b) On or After October 9, 1996. No more than 9,600,000 shares may be
optioned hereunder on or after the Effective Date. Notwithstanding the
foregoing, no Options shall be granted under this Plan on or after the
Effective Date and Prior to shareholder approval of the amendment of
the Plan effective as of such date unless such grant or grants are
expressly conditioned upon such shareholder approval.
Shares may consist, in whole or in part, of authorized but heretofore
unissued Shares, treasury Shares, or Shares reacquired by the Company,
including Shares purchased by the Company in the open market.
VI.
Section 5.1 of the Plan shall be amended to read as follows:
5.1 Grant of Options. The Committee may from time to time at its
discretion, subject to the provisions of the Plan, determine those
employees of the Company or its subsidiaries to whom Options shall be
granted, the Option price, the number of shares subject to such Options,
and the dates on which such Options are to be granted. An eligible employee
may be granted more than one Option. The aggregate number of Shares with
respect to which options may be granted during any 12-month period to any
participant under this Plan is limited to 250,000 shares as adjusted by
Section 4.3.
VII.
Section 7.2 of the Plan shall be amended to read as follows:
7.2 Death. Except as provided in Section 7.5, if the employee to whom an
Option was granted shall die while in the employ of the Company or a
subsidiary, the Participant's designated beneficiary (or the executor or
administrator of his or her estate or the person or persons who acquired
the right to exercise the Option by bequest or inheritance or by reason of
his or her death, if the Participant failed to properly designate a
beneficiary) may, at any time within one year after the date of death but
not later than the date of expiration of the Option, exercise the Option to
the extent the optionee was entitled to do so on the date of death. Options
or portions of Options of deceased employees not so exercised shall
terminate. A Participant may designate a beneficiary for this purpose,
including a beneficiary that is a trust, by properly completing a
beneficiary designation form supplied by the Committee.
VIII.
Section 8.1 of the Plan shall be amended to read as follows:
8.1 Duration of the Plan. The Plan shall remain in effect until October
9, 2006, but Options may extend beyond that date in accordance with the
provisions of the Plan.
<PAGE>
IX.
Section 10.1 of the Plan shall be amended to read as follows:
10.1 Transferability of Options. An option shall not be transferable
except by beneficiary designation, by will, or the laws of descent and
distribution (as described in Section 7.2). An Option may be exercised,
during the optionee's lifetime, only by the optionee. Notwithstanding the
foregoing, transfers by a Participant of options granted after October 9,
1996 shall be recognized and given effect if such options are transferred
to a grantor trust established pursuant to Sections 674, 675, 676, and 677
of the Internal Revenue Code of 1986 for the benefit of the participant or
a person or persons who are members of his or her immediate family (or for
the benefit of their descendants), provided that any such transfer has not
been disclaimed prior to the exercise of such options by the trustee of
such trust and the trustee of such trust certifies to the Committee that
such transfer occurred without any payment of consideration for such
transfer.
X.
In all other respects, except as otherwise set forth, the Plan shall
remain in force and effect.
EXHIBIT 10(c)
WALGREEN CO. 1997 EXECUTIVE DEFERRED
COMPENSATION/CAPITAL ACCUMULATION PLAN
SERIES 1
Walgreen Co. (the "Employer") hereby establishes a nonqualified
deferred compensation program for certain of its employees as
described herein. The following shall constitute the terms and
conditions of Walgreen Co. 1997 Executive Deferred
Compensation/Capital Accumulation Plan (the "Plan"), effective
January 1, 1997:
1.Administration. Full power and authority to construe,
interpret, and administer the Plan shall be vested in the
Compensation Committee of the Board of Directors (the
"Committee"). The Committee shall have the authority to make
determinations provided for or permitted to be made under the
Plan, to interpret the Plan, and to promulgate such rules and
regulations, if any, as the Committee considers necessary and
appropriate for the implementation of the Plan.
2.Eligibility and Participation. Only those persons who are
employed in Salary Grades 14 through 31, and their equivalent
as of January 1, 1997 and have never been eligible to
participate in previous Walgreen Co. Executive Deferred
Compensation/Capital Accumulation Plans shall be eligible to
become a participant in the Plan. An eligible employee shall
become a participant upon the execution of an irrevocable
election under the Plan and the acceptance of the election by
the Committee.
3.Deferred Compensation Account.
A. Each participant shall make an irrevocable election
in writing of the amount of compensation to be deferred
under the Plan (the "deferral amount"). Such amount shall
not be in excess of ten percent (10%) of the participant's
base salary as of January 1, 1997, and shall be in
increments of no less than one thousand dollars
($1,000.00). The election shall be made prior to January
1, 1997 and shall be for the period January 1, 1997
through December 31, 1997. The deferral amount shall be
reduced in substantially equal amounts from the base
salary otherwise periodically payable to the participant
during the period January 1, 1997 through December 31,
1997, and attributable to service by the participant for
the Employer after the date of participant's election.
B. The Employer shall establish and maintain a
bookkeeping account in the name of each participant, which
shall be known as his or her "Deferred Account," and which
shall be credited with the amount of compensation
deferred, and which shall reflect the accumulated value of
the deferral amount. The accumulated value of the
deferral amount shall equal the amount arrived at by
increasing the deferral account balance by assumed simple
interest compounded annually but credited as of the last
day of each calendar month, calculated from January 1,
1997. Amounts paid to or on behalf of the participant or
his beneficiary pursuant to this Plan, shall be deducted
from the account balance as of the first day of the month
in which such payment is made. The rate to be used in
determining the accumulated value of the deferral amount
shall be that rate specified in the Plan paragraph under
which payment is to be made.
C. The participant's Deferred Account shall at all times
be reflected on the Employer's books in accordance with
generally accepted accounting practices as a general
unsecured and unfunded obligation of the Employer and the
Plan shall not give any person any right or security
interest in any asset of the Employer nor shall it imply
any trust or segregation of assets by the Employer. The
participant's Deferred Account shall be distributed from
the general assets of the Employer.
4.Time and Manner of Payment. The participant's Deferred
Account shall be distributed as follows:
A. Installment Payments
(1) A participant who has not attained age fifty-five
(55) as of January 1, 1997 shall be entitled to
fifteen (15) equal annual installment payments
commencing at the January 1 of the year following his
or her attainment of age sixty-five (65) or as soon as
practicable thereafter, if one of the following
conditions is met:
a. The participant remains in the continuous
employ of the Employer during the period from
January 1, 1997 until the participant reaches age
sixty-five (65); or
b. The participant retires after a period of
continuous employment beginning on or before
January 1, 1997.
(2) A participant who attained age fifty-five (55)
but not age sixty-five (65) as of January 1, 1997,
shall elect, at the time of making the deferral
election pursuant to Paragraph 3A, to receive
installment payments in one of the following manners:
a. Fifteen (15) equal annual installments as
described in paragraph (1) above; or
b. Ten (10) equal annual installments commencing
at the January 1 of the year following his or her
attainment of age seventy (70), or as soon as
practicable thereafter.
(3) A participant who attained age sixty-five (65)
but not age seventy (70) as of January 1, 1997, shall
receive ten (10) equal annual installments commencing
at the January 1 following his or her attainment of
age seventy (70), or as soon as practicable
thereafter.
(4) A participant who attained age seventy (70) as of
January 1, 1997, shall receive equal annual
installments commencing at the January 1 following the
deferral period and ending on January 1 following his
or her seventy-ninth (79th) birthday.
Installment payments shall be calculated to amortize fully the
accumulated value of the deferral amount over the payment
period. For purposes of this Subsection A, the rate to be
credited in the calculation of the accumulated value of the
deferral amount shall be fifteen percent (15%).
B. Interim Payments
(1) Effective January 1, 2004, or as soon as
practicable thereafter, a participant shall be
entitled to a lump sum payment in an amount equal to
the amount deferred under Paragraph 3 of this Plan if
one of the following conditions is met:
a. The participant has remained in the continuous
employ of the Employer during the period beginning
January 1, 1997 and ending December 31, 2003 and is
not receiving Installment Payments pursuant to
Subsection A; or
b. The participant retires after a period of
continuous employment from January 1, 1997 and is
not receiving Installment Payments pursuant to
Subsection A.
(2) Effective January 1, 2005, or as soon as
practicable thereafter, a participant shall be
entitled to a lump sum payment in an amount equal to
the amount deferred under Paragraph 3 of this Plan if
one of the following conditions is met:
a. The participant has remained in the continuous
employ of the Employer during the period beginning
January 1, 1997 and ending December 31, 2004 and is
not receiving Installment Payments pursuant to
Subsection A; or
b. The participant retires after a period of
continuous employment from January 1, 1997
and is not receiving Installment Payments
pursuant to Subsection A.
C. Payment Upon Termination
(1) A participant who voluntarily terminates his
employment with the Employer prior to retirement shall
receive, as soon as practicable after such
termination, a lump sum payment in the amount of the
accumulated value of the deferral amount. For
purposes of this Paragraph 4, Subsection C(1), the
rate to be credited in the calculation of the
accumulated value of the deferral amount shall be ten
percent (10%).
(2) A participant whose employment with the Employer
is involuntarily terminated by the Employer prior to
the participant's retirement for reasons other than
those described in Sections 5 and 6 below, shall
receive, as soon as practicable after such
termination, a lump sum payment in the amount of the
accumulated value of the deferral amount. For
purposes of this Paragraph 4, Subsection C(2), the
rate to be credited in the calculation of the
accumulated value of the deferral amount shall be
fifteen percent (15%).
For purposes of this Paragraph 4, retirement shall mean
leaving the active employ of the Employer at or after age
sixty-five (65), or after at least ten (10) years of service
and at least age fifty-five (55), or for reason of disability
as described in Paragraph 9 of the Plan.
5.Noncompetition. Notwithstanding any other provision of this
Plan, if the Committee at any time determines that
participant, without having obtained the prior written consent
of the Committee or its designee, has engaged in competition
with the Employer either during the term of his
employment with the Employer and continuing throughout such period
thereafter that participant is entitled to receive payments
pursuant to this Plan, the sole amount payable to participant
hereunder shall be a lump sum payment of the accumulated value
of the deferral amount, payable as soon as practicable after
such determination. For purposes of this Paragraph 5, the
simple rate of interest applied to determine the accumulated
value of the deferral amount shall be two percent (2%).
"Competition with the Employer" shall mean engaging, within
any geographical area or market served by the Employer and
without the Employer's written consent, in the provision of
goods or services, or in any other business activity of a type
offered or engaged in by the Employer, on participant's own
behalf or on behalf of another business enterprise while
employed by the Employer or within sixty (60) months of
participant's termination of employment with the Employer.
6.Dishonest Conduct. Notwithstanding any other provision of
this Plan, if participant's employment with the Employer is
terminated at any time for reason of dishonest or fraudulent
conduct injurious to the Employer, the sole amount payable to
or on behalf of participant hereunder shall be a lump sum
payment of the accumulated value of the participant's deferral
amount, payable as soon as practicable after such termination
of employment. For purposes of this Paragraph 6, the simple
rate of interest to be credited in the calculation of the
accumulated value of the deferral amount shall be zero percent
(0%).
7.Payment Upon Death of Participant
A. If participant dies after leaving the active employ
of the Employer for retirement as provided in Paragraph 4
hereof, but prior to receiving any or all interim payments
due participant pursuant to Paragraph 4, Subsection B, the
Employer shall pay any such unpaid interim payments to the
participant's beneficiary commencing with the next interim
payment due following the date of participant's death.
B. If participant dies after leaving the active employ
of the Employer for retirement, after annual payments have
become payable as provided in Paragraph 4, Subsection A
hereof, but prior to receiving any or all annual
installment payments due participant pursuant to
Paragraph 4, Subsection A, the Employer shall pay any such
unpaid annual payments to the participant's beneficiary,
commencing with the next annual payment due following the
date of participant's death.
C. If participant dies while actively employed by the
Employer, but prior to the commencement of annual
installment payments, no further interim payments or
annual installments pursuant to Paragraph 4, Subsections A
and B shall be paid by the Employer after the date of the
participant's death, but the Employer shall, as soon as
practicable after participant's death, pay to the
participant's beneficiary, in a lump sum, the accumulated
value of the deferral amount. For purposes of this
Paragraph 7, the rate to be credited in the calculation of
the accumulated value of the deferral amount shall be
fifteen percent (15%).
D. If participant dies while actively employed by the
Employer after commencement of annual installment payments
at either age 65 or 70, the Employer shall pay any such
unpaid annual installment payments to the participant's
beneficiary commencing with the next annual payment due
following the date of the participant's death.
8.Beneficiary Designation. A participant may, from time to
time, designate any legal or natural person or persons (who
may be designated contingently or successively) to whom
payments are to be made if participant dies before receiving
payment of all amounts due hereunder, by signing a form
approved by the Committee. A beneficiary designation form
shall be effective only after the signed form is filed with
the Employer while participant is alive. A properly filed
designation shall cancel all beneficiary designation forms
signed and filed earlier. If participant fails to designate a
beneficiary as provided above, or if all designated
beneficiaries of participant die before participant or before
complete payment of all amounts due hereunder, the Employer,
in its discretion, may pay the unpaid amounts to one or more
of such participant's relatives by blood, adoption, or
marriage in any manner permitted by law which the Committee
considers to be appropriate, including, but not limited to,
payment to the legal representative or representatives of the
estate of the last to die of participant and participant's
designated beneficiaries.
9.Disability. If participant's employment with the Employer is
terminated prior to participant's retirement as provided in
Paragraph 4 hereof by reason of participant's disability,
participant's employment with the Employer, for purposes of
this Plan, shall be deemed to continue until participant's
retirement as provided in Paragraph 4 and the provisions of
this Plan shall be applicable to such participant to the same
extent as if participant were, in fact, employed by the
Employer during that period. However, if such termination of
employment occurs prior to January 1, 1998, as a condition of
the application of this Paragraph, participant shall have any
compensation payable to him from the Employer (either directly
or through Employer-provided disability compensation) reduced
by an amount equal to the balance of any deferred amount the
participant elected under Paragraph 3 hereof which has not
been credited to the participant's account as of the time of
disability. For purposes of this Section, "disability" shall
mean any total and permanent disability which would prevent
participant's return to active employment, as determined by
the Committee.
10.Facility of Payment. If the Employer has, for any reason,
doubt as to the proper person to whom to make payment, the
Employer may withhold payment until instructed by a final
order of a court of competent jurisdiction. Any payment
hereunder made by the Employer in good faith shall fully
discharge the Employer from its obligation with respect to
such payment.
11.Insurance. The Employer may, in its sole discretion, purchase
a policy or policies of insurance on the life of participant
or disability insurance with respect to participant, the cash
value, if any, and proceeds of which may, but need not, be
used by the Employer to satisfy part or all of its obligations
hereunder. The Employer will be the owner of any such
policies and neither participant nor any other person or
entity claiming through participant shall have any ownership
rights in such policies or any proceeds thereof. Participant,
as a condition of receiving any benefits hereunder, on behalf
of himself or any person or entity claiming through him, shall
cooperate with the Employer in obtaining any such insurance
that the Employer desires to purchase by submitting to such
physical examinations, completing such forms, and making such
records available as may be required by the Employer from time
to time.
12.Effect on Other Benefits. The deferral amount attributable to
each year shall be included in participant's 1997
compensation, respectively, for the purpose of calculating
participant's bonuses and awards under any incentive or
similar compensation plan or program of the Employer,
insurance, and other employee benefits, except that in
accordance with the terms of any plan qualified under Section
401 of the Internal Revenue Code maintained by the Employer,
the amount deferred under Paragraph 3 shall not be included as
1997 calendar year compensation in calculating participant's
benefits or contributions by or on behalf of participant under
such plan or plans. Payments shall be excluded from
compensation in years paid for purposes of calculating
participant's bonuses and awards under any incentive or
similar compensation plan or program of the Employer,
insurance, and other employee benefits, except that in
accordance with the terms of any plan qualified under Section
401 of the Internal Revenue Code maintained by the Employer,
payments to active employees shall be included as compensation
in the year paid.
13.Nonalienation. Neither participant nor anyone claiming
through him shall have any right to commute, sell, assign,
transfer or otherwise convey the right to receive any payments
hereunder, which payments and the rights thereto hereby are
expressly declared to be nonassignable and nontransferable,
nor shall any such right to receive payments hereunder be
subject to the claims of creditors of participant or anyone
claiming through him or to any legal, equitable, or other
proceeding or process for the enforcement of such claims.
14.Tax Withholding. Notwithstanding the provisions of Section
13, the Employer may withhold from any payment made by it
under the Plan such amount or amounts as may be required for
purposes of complying with the tax withholding or other
provisions of the Internal Revenue Code or the Social Security
Act or any state income tax act or for purposes of paying any
estate, inheritance, or other tax attributable to any amounts
payable hereunder.
15.Nonsecured Promise. The rights under this Plan of participant
and any person or entity claiming through him shall be solely
those of an unsecured, general creditor of the Employer. Any
insurance policy or other asset acquired or held by the
Employer shall not be deemed to be held by the Employer for or
on behalf of participant, or any other person, or to be
security for the performance of any obligations hereunder of
the Employer, but shall, with respect to this Plan, be, and
remain, a general, unpledged, unrestricted asset of the
Employer.
16.Independence of Plan. Except as otherwise expressly provided
herein, this Plan shall be independent of, and in addition to,
any other employment agreement or employment benefit agreement
or plan or rights that may exist from time to time between the
parties hereto. This Plan shall not be deemed to constitute a
contract of employment between the parties hereto, nor shall
any provision hereof restrict the right of the Employer to
discharge participant, or restrict the right of participant to
terminate his employment with the Employer.
17.Paragraph Headings. The Paragraph headings used in this Plan
are for convenience of reference only and shall not be
considered in construing this Plan.
18.Responsibility for Legal Effect. Neither party hereto makes
any representations or warranties, express or implied, or
assumes any responsibility concerning the legal, tax, or other
implications or effects of this Plan.
19.Committee Determinations Final. Each determination provided
for in the Plan shall be made in the absolute discretion of
the Committee. Any such determinations shall be binding on
all persons.
20.Amendment. The Employer may in its sole discretion amend the
Plan from time to time. No such amendment shall alter a
participant's right to receive a payment due under the terms
of the Plan at the date of amendment. Notwithstanding any
other provision of the Plan, from and after a Change of
Control, the Employer may not amend the Plan to reduce the
rate to be credited in calculating the accumulated value of
participant's deferral amount below the rate that would have
been utilized had his employment been terminated or the plan
terminated as of the date of the adoption of this amendment
or, if more favorable, below the highest rate provided at any
time during the ninety (90) day period prior to the Change of
Control. Neither the terms of this Section 20 nor those of
Section 22 may be amended so as to diminish the rights of a
participant under such provision from or after a Change of
Control or in anticipation of a Change of Control, and any
such purported amendment shall be null and void. For this
purpose, a "Change of Control" shall mean:
(i) The acquisition, other than from the Company,
by any individual, entity, or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended [the "Exchange Act"]) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent
(20%) or more of either the then outstanding shares of
common stock of the Company or the combined voting power
of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors,
but excluding, for this purpose, any such acquisition by
the Company, or any of its subsidiaries, or any employee
benefit plan (or related trust) of the Company or its
subsidiaries, or any corporation with respect to which,
following such acquisition, more than fifty percent (50%)
of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power
of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or
indirectly, by the individuals and entities who were the
beneficial owners, respectively, of the common stock and
voting securities of the Company immediately prior to
such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition,
of the then outstanding shares of common stock of the
Company or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, as the case
may be; or
(ii) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any
individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual was a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an
actual or threatened election contest relating to the
election of the directors of the Company (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or
(iii) Approval by the stockholders of the Company of
a reorganization, merger, or consolidation, in each case,
with respect to which all or substantially all the
individuals and entities who were the respective
beneficial owners of the common stock and voting
securities of the Company immediately prior to such
reorganization, merger, or consolidation do not,
following such reorganization, merger, or consolidation,
beneficially own, directly or indirectly, more than fifty
percent (50%) of, respectively, the then outstanding
shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may
be, of the corporation resulting from such
reorganization, merger, or consolidation, or a complete
liquidation or dissolution of the Company or of the sale
or other disposition of all or substantially all of the
assets of the Company.
21.Termination at the Employer's Option. Notwithstanding any
other provision of this Plan, the Employer may terminate this
Plan at any time if the Committee, in its sole and absolute
discretion, determines that any change in federal or state
law, or judicial or administrative interpretation thereof, has
materially affected the Employer's cost of providing the
benefits otherwise payable under this Plan, or for any other
reason whatsoever. Upon such termination, the sole amount
payable to participant shall be a lump sum payment, as soon as
practicable after such termination, of the accumulated value
of the deferral amount. For purposes of this Paragraph 21,
the rate to be credited in the calculation of the accumulated
value of the deferral amount shall be fifteen percent (15%).
22.Successors; Change of Control. The terms and conditions of
this Plan and Deferral Election shall inure to the benefit of
and bind Walgreen Co., the participant, his successors,
assigns, and personal representatives. If substantially all
of the assets of the Employer are acquired by another
corporation or entity or if the Employer is merged into, or
consolidated with, another corporation or entity, then the
obligations created hereunder shall be obligations of the
successor corporations or entity. Further, if the employment
of participant were to be terminated during a period of five
(5) years following a Change of Control for reasons other than
dishonest conduct, such termination would be treated as
retirement by participant after a period of continuous
employment from January 1, 1997, for all purposes of this Plan
except to the extent that such treatment would result in any
payment made under this Plan being nondeductible by the
Employer for federal income tax purposes by reason of Section
280G of the Internal Revenue Code of 1986, as amended. A
payment shall only be deemed to be nondeductible for purposes
of this Section 22 if the Employer provides the participant
with an opinion of counsel reasonably acceptable to the
participant to that effect.
23.Controlling Law. The Plan shall be construed in accordance
with the laws of the State of Illinois.
EXHIBIT 10(d)
WALGREEN CO. 1997 EXECUTIVE DEFERRED
COMPENSATION/CAPITAL ACCUMULATION PLAN
SERIES 2
Walgreen Co. (the "Employer") hereby establishes a nonqualified
deferred compensation program for certain of its employees as
described herein. The following shall constitute the terms and
conditions of Walgreen Co. 1997 Executive Deferred
Compensation/Capital Accumulation Plan (the "Plan"), effective
January 1, 1997:
1.Administration. Full power and authority to construe,
interpret, and administer the Plan shall be vested in the
Compensation Committee of the Board of Directors (the
"Committee"). The Committee shall have the authority to make
determinations provided for or permitted to be made under the
Plan, to interpret the Plan, and to promulgate such rules and
regulations, if any, as the Committee considers necessary and
appropriate for the implementation of the Plan.
2.Eligibility and Participation. Only those persons who are
employed in Salary Grades 14 through 31, and their equivalent
as of January 1, 1997 and who have had opportunities to
participate in Deferred Compensation/ Capital Accumulation
Plans with Walgreens prior to 1997, shall be eligible to
become a participant in the Plan. An eligible employee shall
become a participant upon the execution of an irrevocable
election under the Plan and the acceptance of the election by
the Committee.
3.Deferred Compensation Account.
A. Each participant shall make an irrevocable election
in writing of the amount of compensation to be deferred
under the Plan (the "deferral amount"). Such amount shall
not be in excess of ten percent (10%) of the
participant's base salary as of January 1, 1997, and
shall be in increments of no less than one thousand
dollars ($1,000.00). The election shall be made prior to
January 1, 1997 and shall be for the period January 1,
1997 through December 31, 1997. The deferral amount
shall be reduced in substantially equal amounts from the
base salary otherwise periodically payable to the
participant during the period January 1, 1997 through
December 31, 1997, and attributable to service by the
participant for the Employer after the date of
participant's election.
B. The Employer shall establish and maintain a
bookkeeping account in the name of each participant,
which shall be known as his or her "Deferred Account,"
and which shall be credited with the amount of
compensation deferred, and which shall reflect the
accumulated value of the deferral amount. The
accumulated value of the deferral amount shall equal the
amount arrived at by increasing the deferral account
balance by assumed simple interest compounded annually
but credited as of the last day of each calendar month,
calculated from January 1, 1997. Amounts paid to or on
behalf of the participant or his beneficiary pursuant to
this Plan, shall be deducted from the account balance as
of the first day of the month in which such payment is
made. The rate to be used in determining the accumulated value
of the deferral amount shall be that rate specified in
the Plan paragraph under which payment is to be made.
C. The participant's Deferred Account shall at all
times be reflected on the Employer's books in accordance
with generally accepted accounting practices as a general
unsecured and unfunded obligation of the Employer and the
Plan shall not give any person any right or security
interest in any asset of the Employer nor shall it imply
any trust or segregation of assets by the Employer. The
participant's Deferred Account shall be distributed from
the general assets of the Employer.
4.Time and Manner of Payment. The participant's Deferred
Account shall be distributed as follows:
A. Installment Payments
(1) A participant who has not attained age fifty-
five (55) as of January 1, 1997 shall be entitled to
fifteen (15) equal annual installment payments
commencing at the January 1 of the year following his
or her attainment of age sixty-five (65) or as soon
as practicable thereafter, if one of the following
conditions is met:
a. The participant remains in the continuous
employ of the Employer during the period from
January 1, 1997 until the participant reaches age
sixty-five (65); or
b. the participant retires after a period of
continuous employment beginning on or before
January 1, 1997.
(2) A participant who attained age fifty-five (55)
but not age sixty-five (65) as of January 1, 1997,
shall elect, at the time of making the deferral
election pursuant to Paragraph 3A, to receive
installment payments in one of the following manners:
a. Fifteen (15) equal annual installments as
described in paragraph (1) above; or
b. Ten (10) equal annual installments commencing
at the January 1 of the year following his or her
attainment of age seventy (70), or as soon as
practicable thereafter.
(3) A participant who attained age sixty-five (65)
but not age seventy (70) as of January 1, 1997, shall
receive ten (10) equal annual installments commencing
at the January 1 following his or her attainment of
age seventy (70), or as soon as practicable
thereafter.
(4) A participant who attained age seventy (70) as
of January 1, 1997, shall receive equal annual
installments commencing at the January 1 following
the deferral period and ending on January 1 following
his or her seventy-ninth (79th) birthday.
Installment payments shall be calculated to amortize fully
the accumulated value of the deferral amount over the payment
period. For purposes of this Subsection A, the rate to be
credited in the calculation of the accumulated value of the
deferral amount shall be twelve percent (12%).
B. Interim Payments
Effective January 1, 2004, a participant who is age
49 or younger as of January 1, 1997, shall be entitled to
a lump sum payment in an amount equal to the amount
deferred under Paragraph 3 of this Plan if one of the
following conditions is met:
(1) The participant has remained in the continuous
employ of the Employer during the period beginning
January 1, 1997 and ending December 31, 2003 and is
not receiving Installment Payments pursuant to
Subsection A; or
(2) The participant retires after a period of
continuous employment from January 1, 1997 and is not
receiving Installment Payments pursuant to Subsection
A.
Payments under Subsections B(1) and B(2), shall be
debited from the participant's Deferral Account as of the
first day of the month in which payment is made.
C. Payment Upon Termination
(1) A participant who voluntarily terminates his
employment with the Employer prior to retirement
shall receive, as soon as practicable after such
termination, a lump sum payment in the amount of the
accumulated value of the deferral amount. For
purposes of this Paragraph 4, Subsection C(1), the
rate to be credited in the calculation of the
accumulated value of the deferral amount shall be ten
percent (10%).
(2) A participant whose employment with the Employer
is involuntarily terminated by the Employer prior to
the participant's retirement for reasons other than
those described in Sections 5 and 6 below, shall
receive, as soon as practicable after such
termination, a lump sum payment in the amount of the
accumulated value of the deferral amount. For
purposes of this Paragraph 4, Subsection C(2), the
rate to be credited in the calculation of the
accumulated value of the deferral amount shall be
twelve percent (12%).
For purposes of this Paragraph 4, retirement shall mean
leaving the active employ of the Employer at or after age
sixty-five (65), or after at least ten (10) years of service
and at least age fifty-five (55), or for reason of disability
as described in Paragraph 9 of the Plan.
5.Noncompetition. Notwithstanding any other provision of this
Plan, if the Committee at any time determines that
participant, without having obtained the prior written
consent of the Committee or its designee, has engaged in
competition with the Employer either during the term of his
employment with the Employer and continuing throughout such
period thereafter that participant is entitled to receive
payments pursuant to this Plan, the sole amount payable to
participant hereunder shall be a lump sum payment of the
accumulated value of the deferral amount, payable as soon as
practicable after such determination. For purposes of this
Paragraph 5, the simple rate of interest applied to determine
the accumulated value of the deferral amount shall be two
percent (2%). "Competition with the Employer" shall mean
engaging, within any geographical area or market served by
the Employer and without the Employer's written consent, in
the provision of goods or services, or in any other business
activity of a type offered or engaged in by the
Employer, on participant's own behalf or on behalf of another
business enterprise while employed by the Employer or within
sixty (60) months of participant's termination of employment
with the Employer.
6.Dishonest Conduct. Notwithstanding any other provision of
this Plan, if participant's employment with the Employer is
terminated at any time for reason of dishonest or fraudulent
conduct injurious to the Employer, the sole amount payable to
or on behalf of participant hereunder shall be a lump sum
payment of the accumulated value of the participant's
deferral amount, payable as soon as practicable after such
termination of employment. For purposes of this Paragraph 6,
the simple rate of interest to be credited in the calculation
of the accumulated value of the deferral amount shall be zero
percent (0%).
7.Payment Upon Death of Participant
A. If participant dies after leaving the active employ
of the Employer for retirement as provided in Paragraph 4
hereof, but prior to receiving any or all interim payments
due participant pursuant to Paragraph 4, Subsection B,
the Employer shall pay any such unpaid interim payments
to the participant's beneficiary commencing with the next
interim payment due following the date of participant's
death.
B. If participant dies, after leaving the active employ
of the Employer for retirement, after annual payments
have become payable as provided in Paragraph 4,
Subsection A hereof, but prior to receiving any or all
annual installment payments due participant pursuant to
Paragraph 4, Subsection A, the Employer shall pay any
such unpaid annual payments to the participant's
beneficiary, commencing with the next annual payment due
following the date of participant's death.
C. If participant dies while actively employed by the
Employer, but prior to the commencement of annual
installment payments, no further interim payments or
annual installments pursuant to Paragraph 4, Subsections
A and B shall be paid by the Employer after the date of
the participant's death, but the Employer shall, as soon
as practicable after participant's death, pay to the
participant's beneficiary, in a lump sum, the accumulated
value of the deferral amount. For purposes of this
Paragraph 7, the rate to be credited in the calculation
of the accumulated value of the deferral amount shall be
twelve percent (12%).
D. If participant dies while actively employed by the
Employer after commencement of annual installment
payments, at either age 65 or 70, the Employer shall pay
any such unpaid annual installment payments to the
participant's beneficiary commencing with the next annual
payment due following the date of the participant's
death.
8.Beneficiary Designation. A participant may, from time to
time, designate any legal or natural person or persons (who
may be designated contingently or successively) to whom
payments are to be made if participant dies before receiving
payment of all amounts due hereunder, by signing a form
approved by the Committee. A beneficiary designation form
shall be effective only after the signed form is filed with
the Employer while participant is alive. A properly filed
designation shall cancel all beneficiary designation forms
signed and filed earlier. If participant fails to designate
a beneficiary as provided above, or if all designated
beneficiaries of participant die before participant or before
complete payment of all amounts due hereunder, the Employer,
in its discretion, may pay the unpaid amounts to one or more
of such participant's relatives by blood, adoption, or
marriage in any manner permitted by law which the Committee
considers to be appropriate, including, but not limited to,
payment to the legal representative or representatives of the
estate of the last to die of participant and participant's
designated beneficiaries.
9.Disability. If participant's employment with the Employer is
terminated prior to participant's retirement as provided in
Paragraph 4 hereof by reason of participant's disability,
participant's employment with the Employer, for purposes of
this Plan, shall be deemed to continue until participant's
retirement as provided in Paragraph 4 and the provisions of
this Plan shall be applicable to such participant to the same
extent as if participant were, in fact, employed by the
Employer during that period. However, if such termination of
employment occurs prior to January 1, 1998, as a condition of
the application of this Paragraph, participant shall have any
compensation payable to him from the Employer (either
directly or through Employer-provided disability
compensation) reduced by an amount equal to the balance of
any deferred amount the participant elected under Paragraph 3
hereof which has not been credited to the participant's
account as of the time of disability. For purposes of this
Section, "disability" shall mean any total and permanent
disability which would prevent participant's return to active
employment, as determined by the Committee.
10.Facility of Payment. If the Employer has, for any reason,
doubt as to the proper person to whom to make payment, the
Employer may withhold payment until instructed by a final
order of a court of competent jurisdiction. Any payment
hereunder made by the Employer in good faith shall fully
discharge the Employer from its obligation with respect to
such payment.
11.Insurance. The Employer may, in its sole discretion,
purchase a policy or policies of insurance on the life of
participant or disability insurance with respect to
participant, the cash value, if any, and proceeds of which
may, but need not, be used by the Employer to satisfy part or
all of its obligations hereunder. The Employer will be the
owner of any such policies and neither participant nor any
other person or entity claiming through participant shall
have any ownership rights in such policies or any proceeds
thereof. Participant, as a condition of receiving any
benefits hereunder, on behalf of himself or any person or
entity claiming through him, shall cooperate with the
Employer in obtaining any such insurance that the Employer
desires to purchase by submitting to such physical
examinations, completing such forms, and making such
records available as may be required by the Employer
from time to time.
12.Effect on Other Benefits. The deferral amount attributable
to each year shall be included in participant's 1997
compensation, respectively, for the purpose of calculating
participant's bonuses and awards under any incentive or
similar compensation plan or program of the Employer,
insurance, and other employee benefits, except that in
accordance with the terms of any plan qualified under Section
401 of the Internal Revenue Code maintained by the Employer,
the amount deferred under Paragraph 3 shall not be included
as 1997 calendar year compensation in calculating
participant's benefits or contributions by or on behalf of
participant under such plan or plans. Payments shall be
excluded from compensation in years paid for purposes of
calculating participant's bonuses and awards under any
incentive or similar compensation plan or program of the
Employer, insurance, and other employee benefits, except that
in accordance with the terms of any plan qualified under
Section 401 of the Internal Revenue Code maintained by the
Employer, payments to active employees shall be included as
compensation in the year paid.
13.Nonalienation. Neither participant nor anyone claiming
through him shall have any right to commute, sell, assign,
transfer or otherwise convey the right to receive any
payments hereunder, which payments and the rights thereto
hereby are expressly declared to be nonassignable and
nontransferable, nor shall any such right to receive payments
hereunder be subject to the claims of creditors of
participant or anyone claiming through him or to any legal,
equitable, or other proceeding or process for the enforcement
of such claims.
14.Tax Withholding. Notwithstanding the provisions of Section
13, the Employer may withhold from any payment made by it
under the Plan such amount or amounts as may be required for
purposes of complying with the tax withholding or other
provisions of the Internal Revenue Code or the Social
Security Act or any state income tax act or for purposes of
paying any estate, inheritance, or other tax attributable to
any amounts payable hereunder.
15.Nonsecured Promise. The rights under this Plan of
participant and any person or entity claiming through him
shall be solely those of an unsecured, general creditor of
the Employer. Any insurance policy or other asset acquired
or held by the Employer shall not be deemed to be held by the
Employer for or on behalf of participant, or any other
person, or to be security for the performance of any
obligations hereunder of the Employer, but shall, with
respect to this Plan, be, and remain, a general, unpledged,
unrestricted asset of the Employer.
16.Independence of Plan. Except as otherwise expressly provided
herein, this Plan shall be independent of, and in addition
to, any other employment agreement or employment benefit
agreement or plan or rights that may exist from time to time
between the parties hereto. This Plan shall not be deemed to
constitute a contract of employment between the
parties hereto, nor shall any provision hereof restrict the right
of the Employer to discharge participant, or restrict the
right of participant to terminate his employment with the
Employer.
17.Paragraph Headings. The Paragraph headings used in this Plan
are for convenience of reference only and shall not be
considered in construing this Plan.
18.Responsibility for Legal Effect. Neither party hereto makes
any representations or warranties, express or implied, or
assumes any responsibility concerning the legal, tax, or
other implications or effects of this Plan.
19.Committee Determinations Final. Each determination provided
for in the Plan shall be made in the absolute discretion of
the Committee. Any such determinations shall be binding on
all persons.
20.Amendment. The Employer may in its sole discretion amend the
Plan from time to time. No such amendment shall alter a
participant's right to receive a payment due under the terms
of the Plan at the date of amendment. Notwithstanding any
other provision of the Plan, from and after a Change of
Control, the Employer may not amend the Plan to reduce the
rate to be credited in calculating the accumulated value of
participant's deferral amount below the rate that would have
been utilized had his employment been terminated or the plan
terminated as of the date of the adoption of this amendment
or, if more favorable, below the highest rate provided at any
time during the ninety (90) day period prior to the Change of
Control. Neither the terms of this Section 20 nor those of
Section 22 may be amended so as to diminish the rights of a
participant under such provision from or after a Change of
Control or in anticipation of a Change of Control, and any
such purported amendment shall be null and void. For this
purpose, a "Change of Control" shall mean:
(i) The acquisition, other than from the Company,
by any individual, entity, or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended [the "Exchange Act"])
of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Exchange Act) of twenty percent
(20%) or more of either the then outstanding shares of
common stock of the Company or the combined voting power
of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors,
but excluding, for this purpose, any such acquisition by
the Company, or any of its subsidiaries, or any employee
benefit plan (or related trust) of the Company or its
subsidiaries, or any corporation with respect to which,
following such acquisition, more than fifty percent
(50%) of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by the individuals and entities who were the
beneficial owners, respectively, of the common stock and
voting securities of the Company immediately prior to
such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition,
of the then outstanding shares of common stock of the
Company or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, as the case
may be; or
(ii) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any
individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual was a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an
actual or threatened election contest relating to the
election of the directors of the Company (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or
(iii) Approval by the stockholders of the Company of
a reorganization, merger, or consolidation, in each
case, with respect to which all or substantially all the
individuals and entities who were the respective
beneficial owners of the common stock and voting
securities of the Company immediately prior to such
reorganization, merger, or consolidation do not,
following such reorganization, merger, or consolidation,
beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from
such reorganization, merger, or consolidation, or a
complete liquidation or dissolution of the Company or of
the sale or other disposition of all or substantially
all of the assets of the Company.
21.Termination at the Employer's Option. Notwithstanding any
other provision of this Plan, the Employer may terminate this
Plan at any time if the Committee, in its sole and absolute
discretion, determines that any change in federal or state
law, or judicial or administrative interpretation thereof,
has materially affected the Employer's cost of providing the
benefits otherwise payable under this Plan, or for any other
reason whatsoever. Upon such termination, the sole amount
payable to participant shall be a lump sum payment, as soon
as practicable after such termination, of the accumulated
value of the deferral amount. For purposes of this Paragraph
21, the rate to be credited in the calculation of the
accumulated value of the deferral amount shall be twelve
percent (12%).
22.Successors; Change of Control. The terms and conditions of
this Plan and Deferral Election shall inure to the benefit of
and bind Walgreen Co., the participant, his successors,
assigns, and personal representatives. If substantially all
of the assets of the Employer are acquired by another
corporation or entity or if the Employer is merged into, or
consolidated with, another corporation or entity, then the
obligations created hereunder shall be obligations of the
successor corporations or entity. Further, if the employment
of participant were to be terminated during a period of five
(5) years following a Change of Control for reasons other
than dishonest conduct, such termination would be treated as
retirement by participant after a period of continuous
employment from January 1, 1997, for all purposes of this
Plan except to the extent that such treatment would result in
any payment made under this Plan being nondeductible by the
Employer for federal income tax purposes by reason of Section
280G of the Internal Revenue Code of 1986, as amended. A
payment shall only be deemed to be nondeductible for purposes
of this Section 22 if the Employer provides the participant
with an opinion of counsel reasonably acceptable to the
participant to that effect.
23.Controlling Law. The Plan shall be construed in accordance
with the laws of the State of Illinois.
EXHIBIT 10(e)
NONEMPLOYEE DIRECTOR STOCK PLAN
Walgreen Co.
CONTENTS PAGE
Article 1. Establishment, Purpose, and Duration 1
Article 2. Definitions 1
Article 3. Administration 3
Article 4. Participation 4
Article 5. Annual Equity Grants 4
Article 6. Retainer Share Payments 4
Article 7. Annual Deferral Opportunity 4
Article 8. Deferred Stock Units 5
Article 9. Amendment, Modification, and Termination 6
Article 10. Miscellaneous 6
WALGREEN CO.
NONEMPLOYEE DIRECTOR STOCK PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Walgreen Co. hereby
establishes an incentive compensation plan to be known as the
"Walgreen Co. Nonemployee Director Stock Plan" (the "Plan"), as
set forth in this document. The Plan provides for the grant of
Shares to Nonemployee Directors and for the acquisition of
Deferred Stock Units by Nonemployee Directors, subject to the
terms and provisions set forth herein.
Upon approval by the Board of Directors of the Company, the
Plan shall become effective as of November 1, 1996 (the
"Effective Date"), and shall remain in effect as provided in
Section 1.3 herein.
This plan is intended as a replacement for certain
compensation arrangements for Nonemployee Directors in effect
prior to the Effective Date, including the Walgreen Co.
Retirement Plan for Outside Directors (the "Prior Program"). The
Prior Program will continue to apply in the future only with
respect to compensation earned by Nonemployee Directors for
periods of service prior to November 1, 1996.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to
promote the achievement of long-term objectives of the Company by
linking the personal interests of Nonemployee Directors to those
of the Company's shareholders and to attract and retain
Nonemployee Directors of outstanding competence.
1.3 DURATION OF THE PLAN. The Plan shall commence on
November 1, 1996 and shall remain in effect, subject to the right
of the Board of Directors to terminate the Plan at any time
pursuant to Article 9.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the defined meaning is
intended, the initial letter of the word is capitalized:
(a) "Annual Retainer" means the annual base compensation
received by a Nonemployee Director for service on the
Board.
(b) "Award" means, individually or collectively, an award
under this Plan of Shares or Deferred Stock Units.
(c) "Board" or "Board of Directors" means the Board of
Directors of the Company.
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(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" means the Compensation Committee of the
Board of Directors of the Company.
(f) "Committee Fees" means compensation received by a
Nonemployee Director for service on one or more Board
committees.
(g) "Company" means Walgreen Co., an Illinois
corporation, together with any and all Subsidiaries, and
any successor thereto as provided in Section 10.6.
(h) "Decreased Value" means the depreciation in the worth
of a Deferred Stock Unit from the date of award up to and
including the Valuation Date, as determined by the
Committee pursuant to a Valuation.
(i) "Deferred Stock Unit" or "Unit" means an Award
acquired by a Participant as a measure of participation
under the Plan, and having a value which changes in
direct relation to changes in the value of Shares, as
determined pursuant to a Valuation.
(j) "Director" means any individual who is a member of
the Board of Directors of the Company.
(k) "Employee" means any common law employee of the
Company or of the Company's Subsidiaries. For purposes
of the Plan, an individual whose only employment
relationship with the Company is as a Director, shall not
be deemed to be an Employee.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor Act
thereto.
(m) "Fair Market Value" shall mean the closing price on
the New York Stock Exchange on the relevant date, or ( if
there were no sales on such date) on the last trading
date preceding the relevant date.
(n) "Increased Value" means the appreciation in the worth
of a Deferred Stock Unit from the date of award up to and
including the Valuation Date, as determined by the
Committee pursuant to a Valuation.
(o) "Initial Value" means the value of a Deferred Stock
Unit on the date of award, as determined in accordance
with the provisions of the Plan.
(p) "Meeting Fees" means compensation received by a
Nonemployee Director for meetings attended in relation to
Board service.
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(q) "Nonemployee Director" means any individual who is a
member of the Board of Directors of the Company, but who
is not otherwise an Employee of the Company.
(r) "Participant" means a Nonemployee Director of the
Company who has an outstanding Award granted under the
Plan.
(s) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d).
(t) "Shares" means the shares of Common Stock of the
Company, par value $.3125.
(u) "Subsidiary" means any corporation in which the
Company owns directly, or indirectly through
subsidiaries, at least fifty percent (50%) of the total
combined voting power of all classes of stock, or any
other entity (including, but not limited to, partnerships
and joint ventures) in which the Company owns at least
fifty percent (50%) of the combined equity thereof.
(v) "Valuation" means an evaluation of the worth of a
Deferred Stock Unit based on changes in the Fair Market
Value of the Shares, as determined by the Committee
pursuant to the Plan.
(w) "Valuation Date" means the date on which Deferred
Stock Units are valued pursuant to the Plan.
ARTICLE 3. ADMINISTRATION
3.1 THE COMPENSATION COMMITTEE. The Plan shall be
administered by the Compensation Committee of the Board of
Directors of the Company, subject to the restrictions set forth
in the Plan.
3.2 ADMINISTRATION BY THE COMMITTEE. The Committee shall
have the full power, discretion, and authority to interpret and
administer the Plan in a manner which is consistent with the
Plan's provisions. However, in no event shall the Committee have
the power to determine Plan eligibility, or to determine the
number, the value, the vesting period, or the timing of Awards to
be made under the Plan (all such determinations being automatic
pursuant to the provisions of the Plan).
3.3 DECISIONS BINDING. All determinations and decisions made
by the Committee pursuant to the Plan, and all related orders or
resolutions of the Committee shall be final, conclusive, and
binding on all persons, including the Company, its shareholders,
Employees, Nonemployee Directors, Participants, and their estates
and beneficiaries.
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ARTICLE 4. PARTICIPATION
4.1 PARTICIPATION. Persons eligible to participate in the
Plan are limited to Nonemployee Directors who are serving on the
Board on the date of each scheduled Award under the Plan.
ARTICLE 5. ANNUAL EQUITY GRANTS FOR NONEMPLOYEE DIRECTORS
5.1 ANNUAL EQUITY GRANTS. Commencing November 1, 1997, each
Nonemployee Director shall receive an annual equity grant of
seven hundred (700) Shares on November 1 each year, or a
proportionate share of such grant based on full months of service
as a Nonemployee Director since the prior November 1. In lieu of
issuing fractional shares, the Company shall round to the nearest
full share.
5.2 TIMING OF PAYOUT. The certificates for the Shares shall
be issued as soon as administratively possible following
November 1 each year.
5.3 BIENNIAL REVIEW. The Committee shall conduct a biennial
review of the appropriateness of the annual equity Awards granted
pursuant to this Article 5. In the event the Committee
determines that an adjustment in the amount of equity Awards
pursuant to this Article 5 is appropriate, the Committee shall
make a recommendation to the Board for an appropriate amendment.
ARTICLE 6. RETAINER SHARE PAYMENTS
6.1 PORTION OF RETAINERS PAID IN SHARES. During the term of
this Plan, Nonemployee Directors shall receive fifty percent
(50%) of their Annual Retainer in the form of Shares.
6.2 NUMBER OF SHARES PAID. The number of Shares to be issued
pursuant to Section 6.1 will be determined on a quarterly basis
and shall equal the portion of the Annual Retainer being paid in
the form of Shares, divided by the Fair Market Value of a Share
on the first trading day of the fiscal quarter. In lieu of
issuing fractional Shares, the Company shall round to the nearest
full share.
6.3 TIMING OF PAYOUT. The certificates for the Shares shall
be issued as soon as administratively possible following the
beginning of the calendar quarter that begins within each fiscal
quarter.
ARTICLE 7. ANNUAL DEFERRAL OPPORTUNITY
7.1 DEFERRAL OF RETAINERS, COMMITTEE FEES, AND MEETING FEES.
During the term of this Plan, any Nonemployee Directors may elect
to receive all or a portion of the cash component
-4-
of his or her Annual Retainer, Committee Fees, or Meeting Fees
in the form of Deferred Stock Units. Such election to receive
Deferred Stock Units shall be subject to the provisions of this
Article 7.
7.2 ELECTION. Any election to receive all or a portion of
the cash component of a Nonemployee Director's Annual Retainer,
Committee Fees, or Meeting Fees in the form of Deferred Stock
Units shall be made by December 1 for all payments to be made in
the succeeding calendar year. New Nonemployee Directors shall
make their election with respect to their initial retainer upon
their original election to the Board. Each such election may
pertain to more than one (1) calendar year of scheduled payments.
Deferral elections may only be made in ten percent (10%)
increments.
7.3 NUMBER OF DEFERRED STOCK UNITS. The number of Deferred
Stock Units to be granted in connection with an election pursuant
to Section 7.2 shall equal the portion of the Annual Retainer,
Committee Fees, and Meeting Fees being deferred into Deferred
Stock Units, divided by the Fair Market Value of a Share on the
date of the scheduled payment of the amount deferred.
7.4 VESTING OF DEFERRED STOCK UNITS. Subject to the terms of
this Plan, all Deferred Stock Units acquired under this Article 7
shall vest one hundred percent (100%) upon the acquisition of
such Deferred Stock Units.
ARTICLE 8. DEFERRED STOCK UNITS
8.1 VALUE OF DEFERRED STOCK UNITS. Each Deferred Stock Unit
shall have an Initial Value that is equal to the Fair Market
Value determined for purposes of Section 7.3. Subsequent to such
date of award or acquisition, the value of each Deferred Stock
Unit shall change in direct relationship to changes in the value
of a Share as determined pursuant to a Valuation.
8.2 DIVIDEND EQUIVALENTS. Dividend equivalents shall be
earned on Deferred Stock Units provided under this Plan. Such
dividend equivalents shall be converted into an equivalent amount
of Deferred Stock Units based upon the Valuation of a Deferred
Stock Unit on the date the dividend equivalents are converted
into Deferred Stock Units. The converted Deferred Stock Units
will be fully vested upon conversion.
8.3 AMOUNT OF PAYOUT. Except as provided otherwise in this
plan, the payout of the Initial Value combined with the Increased
Value or the Decreased Value of the vested Deferred Stock Units
shall be made in two cash payments. The first payment shall be
made within thirty (30) days following the Participant's
termination of service on the Board. The second installment
shall be made one year after the Participant's first payment.
-5-
8.4 TIMING OF PAYOUT. Except as provided otherwise in this
plan, the amount payable to a participant shall be the aggregate
Initial Value combined with the Increased Value or Decreased
Value of the Participant's vested Deferred Stock Units, if any,
on the date that the Participant terminates his/her service on
the Board. Fifty percent of this amount shall be paid as the
first cash payment pursuant to Section 8.3. The remainder of
this amount including accrued interest shall be paid as the
second payment. Interest shall accrue on a monthly basis at a
monthly compounding rate equal to the prime lending rate of
interest in effect as of the first business day of that month (as
quoted by the Company's then current lending bank financing
source for commercial borrowings).
8.5 DEFERRED STOCK UNIT ACCOUNT. A Deferred Stock Unit
Account (the "Account") shall be established and maintained by
the Company for each Participant that receives Deferred Stock
Units under the Plan. As the value of each Deferred Stock Unit
changes pursuant to Section 8.1, the Account established on
behalf of each Participant shall be adjusted accordingly. Each
Account shall be the record of the Deferred Stock Units granted
to the Participant under Article 7 of the Plan on each applicable
grant date, is maintained solely for accounting purposes, and
shall not require a segregation of any Company assets.
8.6 QUARTERLY REPORTS. Participants with Deferred Stock
Units shall receive quarterly reports providing detailed
information about their Accounts and changes in their Accounts
during the preceding quarter.
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may
terminate, amend, or modify the Plan at any time and from time to
time.
9.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no
termination, amendment, or modification of the Plan shall in any
material manner adversely affect any Award previously provided
under the Plan, without the written consent of the Participant
holding the Award.
ARTICLE 10. MISCELLANEOUS
10.1 GENDER AND NUMBER. Except where otherwise indicated by
the context, any masculine term used herein also shall include
the feminine; the plural shall include the singular and the
singular shall include the plural.
10.2 SEVERABILITY. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
-6-
10.3 BENEFIT TRANSFERS. The interests of any Participant or
beneficiary entitled to payments hereunder shall not be subject
to attachment or garnishment or other legal process by any
creditor of any such Participant or beneficiary nor shall any
such Participant or beneficiary have any right to alienate,
anticipate, commute, pledge, encumber, or assign any of the
benefits or rights which he or she may expect to receive,
contingently or otherwise under this Plan except as may be
required by the tax withholding provisions of the Code or of a
state's income tax act. Notwithstanding the foregoing, amounts
payable with respect to a Participant hereunder may be paid as
follows:
(a) Payments with respect to a disabled or incapacitated
person may be paid to such person's legal representative
for such person's benefit, to a custodian under the
Uniform Gifts or Transfers to Minors Act of any state,
or to a relative or friend of such person for such
person's benefit; and
(b) Transfers by the Participant to a grantor trust
established pursuant to Sections 674, 675, 676, and 677
of the Internal Revenue Code of 1986 for the benefit of
the participant or a person or persons who are members
of his or her immediate family (or for the benefit of
their descendants) shall be recognized and given effect,
provided that any such transfer has not been disclaimed
prior to the payment, and the trustee of such trust
certifies to the Committee that such transfer occurred
without any payment of consideration for such transfer.
10.4 BENEFICIARY DESIGNATION. Each Participant under the Plan
may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in the event of his or her
death. Each designation will revoke all prior designations by
the same Participant, shall be in a form as provided in
Appendix A hereto, and will be effective only when filed by the
Participant in writing with the Board during his or her lifetime.
In the absence of any such designation, benefits remaining unpaid
at the Participant's death shall be paid to the Participant's
estate.
10.5 NO RIGHT OF NOMINATION. Nothing in the Plan shall be
deemed to create any obligation on the part of the Board to
nominate any Director for reelection by the Company's
shareholders.
10.6 SHARES AVAILABLE. The Shares delivered under the Plan
shall be either treasury shares or Shares which have been
reacquired by the Company, including shares purchased in the open
market.
10.7 STOCK SPLITS/STOCK DIVIDENDS. In the event of any change
in the outstanding Shares of the Company by reason of a stock
dividend, recapitalization, merger, consolidation, split-up,
combination, exchange of Shares, or the like, the aggregate
number of and class of Shares and Deferred Stock Units awarded
hereunder may be appropriately adjusted by the Committee, whose
determination shall be conclusive.
-7-
10.8 SUCCESSORS. All obligations of the Company under the
Plan with respect to Awards granted hereunder shall be binding on
any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
10.9 REQUIREMENTS OF LAW. The granting of Awards under the
Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
10.10 GOVERNING LAW. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the
internal, substantive laws of the State of Illinois.
-8-
APPENDIX A
WALGREEN CO. NONEMPLOYEE DIRECTOR STOCK PLAN BENEFICIARY DESIGNATION
Name (Please Print)
In the event of my death, the following person is to receive any
benefits payable under the Walgreen Co. Nonemployee Director
Stock Plan.
NOTE: The primary beneficiary(ies) will receive your Plan
benefits. If more than one primary beneficiary is indicated, the
benefits will be split among them equally. If you desire to
provide for distribution of benefits among primary beneficiaries
on other than an equal basis, please attach a sheet explaining
the desired distribution in full detail. If the primary
beneficiary(ies) is no longer living, the secondary
beneficiary(ies) will receive the benefits, in a similar manner
as described above for the primary beneficiary(ies).
Primary Beneficiary Secondary Beneficiary
Last Name First M.I. Relationship
Street Address City, State, Zip Code
Beneficiary Social Security or Tax ID Number
Primary Beneficiary Secondary Beneficiary
Last Name First M.I. Relationship
Street Address City, State, Zip Code
Beneficiary Social Security or Tax ID Number
If a trust or other arrangement is listed above, include name,
address, and date of arrangement below:
Name Address Date
For additional beneficiary, check here and attach an additional
sheet of paper.
This supersedes any beneficiary designation previously made by me
under this Plan. I reserve the right to change the beneficiary
at any time.
Date Sign Your Full Name Here
Your Social Security Number
Date received by Walgreen Co.:
By:
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FORM 10-Q QUARTERLY REPORT FOR THE QUARTER ENDED FEBRUARY 28, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<MULTIPLIER> 1,000
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<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 20,895
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<RECEIVABLES> 363,529
<ALLOWANCES> 19,100
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0
0
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<CGS> 4,820,510
<TOTAL-COSTS> 4,820,510
<OTHER-EXPENSES> 1,474,226
<LOSS-PROVISION> 6,199
<INTEREST-EXPENSE> 1,281
<INCOME-PRETAX> 363,199
<INCOME-TAX> 140,740
<INCOME-CONTINUING> 222,459
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<EXTRAORDINARY> 0
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<NET-INCOME> 222,459
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