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Walgreen Company 10-K 2008
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0000104207-08-000093.txt : 20081030
0000104207-08-000093.hdr.sgml : 20081030
20081030151826
ACCESSION NUMBER: 0000104207-08-000093
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 20
CONFORMED PERIOD OF REPORT: 20080831
FILED AS OF DATE: 20081030
DATE AS OF CHANGE: 20081030

FILER:

COMPANY DATA:
COMPANY CONFORMED NAME: WALGREEN CO
CENTRAL INDEX KEY: 0000104207
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912]
IRS NUMBER: 361924025
STATE OF INCORPORATION: IL
FISCAL YEAR END: 0831

FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-00604
FILM NUMBER: 081150850

BUSINESS ADDRESS:
STREET 1: 200 WILMOT RD
CITY: DEERFIELD
STATE: IL
ZIP: 60015
BUSINESS PHONE: 8479402500

MAIL ADDRESS:
STREET 1: 200 WILMOT RD
CITY: DEERFIELD
STATE: IL
ZIP: 60015


10-K
1
fy2008_10k.htm
AUGUST 31, 2008 FORM 10-K



fy2008_10k.htm







United
States

Securities
and Exchange Commission

Washington,
D.C. 20549



FORM
10-K










x


ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934



For
the fiscal year ended August 31, 2008.










o


TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934



For the
Transition Period From ____________ to ___________



Commission
file number1-604.

 

 



 































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)
914-2500



Securities
registered pursuant to Section 12(b) of the Act:

























Title
of each class


 


Name
of each exchange on which registered



Common
Stock ($.078125 Par Value)

 

New
York Stock Exchange

 
 

The
NASDAQ Stock Market LLC

 
 

Chicago
Stock Exchange





Securities
registered pursuant to section 12(g) of the Act:    None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.       Yes
xNo o



Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.    Yes oNo x



Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed 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 xNo o



Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ¨



Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definition of "large accelerated filer”, and
“accelerated filer" and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):

Large
accelerated filer x                                                                           Accelerated
filer o

Non-accelerated
filer o                                                                           Smaller
Reporting Company o



Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yes oNo x

 

As of
February 29, 2008, the aggregate market value of Walgreen Co. common stock, par
value $.078125 per share, held by non-affiliates (based upon the closing
transaction price on the New York Stock Exchange) was approximately
$36,161,583,000.  As of September 30, 2008, there were 989,364,303
shares of Walgreen Co. common stock outstanding.



DOCUMENTS
INCORPORATED BY REFERENCE

 

Portions
of the Annual Report to Shareholders for the year ended August 31, 2008, to the
extent stated in this Form 10-K, are incorporated by reference into Parts I, II
and IV of this Form 10-K.  Portions of the registrant's proxy
statement for its 2008 annual meeting of shareholders to be held January 14,
2009, are incorporated by reference into Part III of this Form 10-K.




 









 






TABLE OF
CONTENTS



































































































































Part
1

 
 




























 
 

Part
II

 
 


























 Other Information
 
 

            Part
III

 
 




















 
 

            Part
IV

 
 













 









 




PART
I












Business












(a)


General development of
business.



 

Walgreen
Co. (The "company" or "Walgreens") was incorporated as an Illinois corporation
in 1909 as a successor to a business founded in 1901.  In 2008 the
company opened or acquired 1,031 locations for a net increase of 937 locations
after relocations and closings.  As of August 31, 2008, we operated
6,934 locations in 49 states, the District of Columbia, Puerto Rico and
Guam.  Total locations do not include 217 convenient care clinics
operated by Take Care Health Systems, Inc.

















































































































 
 
Number
of Locations

 

Location
Type

 
2008

   
2007

   
2006

 

Drugstores

    6,443       5,882       5,414  

Worksite
Facilities

    364       3       -  

Home
Care Facilities

    115       101       38  

Specialty
Pharmacies

    10       8       6  

Mail
Service Facilities

    2       3       3  

Total

    6,934       5,997       5,461  


 

Retail
organic growth continues to be our primary growth vehicle, but we carefully
consider unique acquisition opportunities when they are a good fit with the
existing store base.  In 2008, for example, we acquired I-trax, Inc.
and Whole Health Management, operators of worksite health services, including
primary and acute care, wellness, pharmacy and disease management services and
health and fitness programming.

 

Walgreens
corporate strategy is to continue to leverage and enhance its fundamental
competitive advantage – the best, most convenient, community-based store network
in America. The company intends to focus on its core business – providing the
most convenient access to consumer goods and services for customers and
pharmacy, health and wellness for patients, employers and payors in communities
where people live and work across America.


 


Prescription
sales continue to be a large portion of the company's business.  This
year prescriptions accounted for 64.9% of sales compared to 65.0% last
year.  Third party sales, where reimbursement is received from managed
care organizations, government and private insurance, were 95.3% of prescription
sales compared to 94.8% a year ago.  Overall, Walgreens filled
approximately 617 million prescriptions in 2008, an increase of 5.7% from the
previous year.

 

Walgreens
pharmacy sales are expected to continue to grow due, in part, to the aging
population and the continued development of innovative drugs that improve
quality of life and control health care costs.  Also, generic
introductions continue to boost the number of prescriptions
filled.  Although generics reduce sales dollars, they save both
patients and payors money and generally offer higher gross profit than brand
name drugs.

 

During
fiscal 2008, Walgreens' market share in 58 of the top 60 front-end categories
increased, as compared to all food, drug and mass merchandise
competitors.  Today, 147 million people live within
two miles of a Walgreens and 5.3 million shoppers walk into a
Walgreens store daily.

 

During
fiscal year 2008 the company added $2.2 billion to property and
equipment, which included approximately $1.9 billion related to stores, $166
million for distribution centers, and $147 million related to other
locations.  Capital expenditures for fiscal 2009 are expected to be
approximately $1.8 billion, excluding
acquisitions and prescription file purchases.

 

In fiscal
2007, the company opened a distribution center in Anderson, South
Carolina.  This is the first of a new-generation of distribution
centers and will increase the company’s productivity.  A second
new-generation center in Windsor, Connecticut is planned to open in fiscal
2009.

 








(b)


Financial
information about industry
segments.



 

The
company is principally in the retail drugstore business and its operations are
within one reportable segment.










(c)


Narrative description of
business.












        (i)    


   
Principal products produced and services
rendered.





The
company’s drugstores are engaged in the retail sale of prescription and
non-prescription drugs and general merchandise.  General merchandise
includes, among other things, beauty care, personal care, household items,
candy, photofinishing, greeting cards, convenience foods, and seasonal
items.  Customers can have prescriptions filled at the drugstore
counter, as well as through the mail, by telephone and via the
Internet.



The
estimated contributions of various product classes to sales for each of the last
three fiscal years are as follows:




















































































 

 
Percentage

 
Product Class  
2008

   
2007

   
2006

 

Prescription
Drugs

    65       65       64  

Non-prescription
Drugs

    10       10       11  

General
Merchandise

    25       25       25  

Total
Sales

    100       100       100  












 


(ii)


Status
of a product or segment.





Not
applicable.









1



















 


(iii)


Sources
and availability of raw materials.





Inventories
are purchased from numerous domestic and foreign suppliers.  The loss
of any one supplier or group of suppliers under common control would not have a
material effect on the company’s business.











 


(iv)


Patents,
trademarks, licenses, franchises and concessions
held.





Walgreens
markets products under various trademarks, trade dress and trade names and holds
assorted business licenses (such as pharmacy, occupational, and liquor) having
various lives, which are necessary for the normal operation of
business.  The company also has filed various patent applications
relating to its business and products, eight of which have been
issued.











 


(v)


Seasonal
variations in business.





The
business is seasonal in nature, with Christmas generating a higher proportion of
front-end sales and earnings than other periods.  Both prescription
and non-prescription drug sales are affected by the timing and severity of the
cold/flu season.  See the caption "Summary of Quarterly Results
(Unaudited)" on page 35 of the Annual Report to Shareholders for the year ended
August 31, 2008 ("2008 Annual Report"), which section is incorporated herein by
reference.











 


(vi)


Working
capital practices.





The
company generally finances its inventory and expansion needs with internally
generated funds.  In fiscal 2008 we supplemented cash provided by
operations with short-term borrowings and long-term debt.  See Note 6,
"Short-Term Borrowings and Long-Term Debt" on page 31 and "Management's
Discussion and Analysis of Financial Condition" on pages 18 through 22 of the
2008 Annual Report, which sections are incorporated herein by
reference.



Due to
the nature of our business, 95.3% of all prescription sales are now covered by
third party payors.  Prescription sales represent 64.9% of total
company sales.  The remaining store sales are principally for cash,
credit and debit cards.  Customer returns are immaterial.











 


(vii)


Dependence
upon limited number of customers.





The
company sells to numerous customers including various managed care
organizations; therefore, the loss of any one customer or a group of customers
under common control would not have a material effect on the
business.  No customer accounts for ten percent or more of the
company's consolidated net sales.



(viii)           Backlog
orders.



Not
applicable.











 


(ix)


Government
contracts.





The
company fills prescriptions for many state public assistance plans. Revenues
from all such plans are approximately 5.4% of total sales.











 


(x)


Competitive
conditions.





The
drugstore industry is highly competitive.  As a volume leader in the
retail drug industry, Walgreens competes with various retailers, including chain
and independent drugstores, mail order prescription providers, grocery stores,
convenient stores, mass merchants and dollar stores.  Competition
remained keen during the fiscal year with the company competing on the basis of
service, convenience, variety and price.  The company's geographic
dispersion tends to offset the impact of temporary economic and competitive
conditions in individual markets.  The number and location of the
company's drugstores appears under Item 2 - "Properties" in this Form
10-K.











 


(xi)


Research
and development activities.





The
company does not engage in any material research and development
activities.











 


(xii)


Environmental
disclosures.





Federal,
state and local environmental protection requirements have no material effect
upon capital expenditures, earnings or the competitive position of the
company.











 


(xiii)


Number
of employees.





The
company employs approximately 237,000 persons, about 74,000 of whom are
part-time employees working less than 30 hours per week.










(d)


Financial
information about foreign and domestic operations and export
sales.





All the
company sales occurred within the United States and Puerto
Rico.  There are no export sales.

 

 







2











 








(e)


Available
information



 

The
company maintains a website at investor.walgreens.com.  The company
makes copies of its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and any amendments to those reports filed with or
furnished to the SEC available to investors on or through its website free of
charge as soon as reasonably practicable after the company electronically files
them with or furnishes them to the SEC.  The contents of the company's
website are not, however, a part of this report.  In addition,
charters of all committees of the company's Board of Directors, as well as the
company's Corporate Governance Guidelines and Ethics Policy Statement, are
available on the company's website at investor.walgreens.com or, upon written
request, in printed hardcopy form.  Written requests should be sent to
Walgreen Co., Attention: Shareholder Relations, Mail Stop #2261, 200 Wilmot
Road, Deerfield, Illinois 60015.  Changes to or waivers, if any, of
the company's Ethics Policy Statement for directors and executive officers would
be promptly disclosed on the company's website.

 


The
company has also adopted a Code of Ethics for Financial
Executives.  This Code applies to and has been signed by the Chief
Executive Officer, the Chief Financial Officer and the
Controller.  The full text of the Code of Ethics for Financial
Executives is available at the company's website,
investor.walgreens.com.  Changes to or waivers, if any, of the
company's Code of Ethics for Financial Executives would be promptly disclosed on
the company's website.








Cautionary
Note Regarding Forward Looking Statements

 

Certain
information in this annual report, as well as in our other public filings, the
company website, press releases and oral statements made by our representatives,
is forward-looking information based on the company’s current expectations and
plans, which involve risks and uncertainties.  Forward-looking
information includes statements concerning pharmacy sales trends, prescription
margins, number and location of new store openings, outcomes of litigation, the
level of capital expenditures, demographic trends.  Forward-looking
information also includes statements with words such as "expects," "estimates,"
"believes," "plans," "anticipates" or similar language. For such statements, we
claim the protection of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.

 

Forward-looking
statements involve risks and uncertainties, known or unknown to the company that
could cause results to differ materially from management expectations as
projected in such forward-looking statements.  These risks and
uncertainties are discussed in Item 1A below.  Unless otherwise
required by applicable securities laws, the company assumes no obligation to
update its forward-looking statements to reflect subsequent events or
circumstances.





Item
1A
.
                 Risk
Factors

 

The risks
described below could materially and adversely affect our business, financial
condition and results of operations. These risks are not the only risks that we
face. Our business operations could also be affected by additional factors that
are not presently known to us or that we currently consider to be immaterial to
our operations.

 

The
retail drugstore and pharmacy benefit services industries are highly competitive
and further increases in competition could adversely affect us.

 

We face
intense competition with local, regional and national companies, including other
drug store chains, independent drug stores, mail-order prescription providers
and various other retailers such as grocery stores, convenience stores, mass
merchants and dollar stores, many of which are aggressively expanding in markets
we serve.  In the pharmacy benefit services industry, our competitors
include large national and regional pharmacy benefit managers and insurance
companies and managed care providers, some of which are owned by or have
affiliations with our retail drug store competitors.  As competition
increases in the markets in which we operate, a significant increase in general
pricing pressures could occur, which could require us to reevaluate our pricing
structures to remain competitive.  Our failure to reduce prices could
result in decreased revenue, and reducing prices without also reducing costs
could negatively affect profits.

 

Reductions
in third-party reimbursement levels, from private or government plans, for
prescription drugs could reduce our margin on pharmacy sales and could have a
significant effect on our retail drugstore profits.

 

The
continued efforts of health maintenance organizations, managed care
organizations, pharmacy benefit management companies, government entities, and
other third-party payors to reduce prescription drug costs and pharmacy
reimbursement rates, as well as litigation relating to how brand name drugs are
priced, may impact our profitability.  In addition, some of these
entities may offer pricing terms that we may not be willing to accept or
otherwise restrict our participation in their networks of pharmacy providers.
Certain provisions of the Deficit Reduction Act of 2005 seek to reduce federal
spending by altering the Medicaid reimbursement formula for multi-source (i.e.,
generic) drugs.  These changes are expected to result in reduced
Medicaid reimbursement rates for retail pharmacies.  Reduced
reimbursement rates could adversely affect our revenues and
profits.



We
are subject to governmental regulations and procedures and other legal
requirements. A significant change in, or noncompliance with, these regulations,
procedures and requirements could have a material adverse effect on
profitability.

 

Our
retail drugstore, pharmacy benefit and health services businesses are subject to
numerous federal, state and local regulations. Changes in these regulations may
require extensive system and operating changes that may be difficult to
implement. Untimely compliance or noncompliance with applicable regulations
could result in the imposition of civil and criminal penalties that could
adversely affect the continued operation of our business, including: suspension
of payments from government programs; loss of required government
certifications; loss of authorizations to participate in or exclusion from
government reimbursement programs, such as the Medicare and Medicaid programs;
loss of licenses; or significant fines or monetary penalties, and could
adversely affect the continued operation of our business. The regulations to which
we are subject include, but are not limited to: federal, state and local
registration and regulation of pharmacies; applicable Medicare and Medicaid
regulations; the Health Insurance Portability and Accountability Act, or HIPAA;
accounting standards; tax laws and regulations; laws and regulations relating to
the protection of the environment and health and safety matters, including those
governing exposure to, and the management and disposal of, hazardous substances;
regulations of the U.S. Food and Drug Administration, the U.S. Federal Trade
Commission, the Drug Enforcement Administration, and the Consumer Product Safety
Commission, as well as state regulatory authorities, governing the sale,
advertisement and promotion of products we sell; anti-kickback laws; false
claims laws; laws against the corporate practice of medicine; and federal and
state laws governing the practice of the profession of pharmacy. In addition, we
are party to a Corporate Integrity Agreement with the U.S. Department of Health
and Human Services under which we have agreed to maintain a corporate compliance
program.  We are also governed by federal and state laws of general
applicability, including laws regulating matters of working conditions, health
and safety and equal employment opportunity.  In addition, we could
have exposure if we are found to have infringed another party's intellectual
property rights.








3











Our
ability to hire and retain pharmacy personnel is important to the continued
success of our business.

 

As our
business expands, we believe that our future success will depend greatly on our
continued ability to attract and retain skilled and qualified pharmacists. The
retail drugstore industry is experiencing an ongoing shortage of licensed
pharmacists. This has resulted in continued upward pressure on pharmacist
compensation packages. Although we generally have been able to meet our
pharmacist staffing requirements in the past, any future inability to do so
could limit our ability to offer extended pharmacy hours and negatively impact
our revenue and our ability to deliver high levels of customer
service.

 

Should
a product liability issue, recall or personal injury issue arise, inadequate
product or other liability insurance coverage or our inability to maintain such
insurance may result in a material adverse effect on our business and financial
condition.

 

Products
that we sell could become subject to contamination, product tampering,
mislabeling, recall or other damage. In addition, errors in the dispensing and
packaging of pharmaceuticals could lead to serious injury. Product liability or
personal injury claims may be asserted against us with respect to any of the
products or pharmaceuticals we sell or services we provide. Our health and
wellness business also involves exposure to professional liability claims
related to medical care.  Should a product or other liability issue
arise, the coverage limits under our insurance programs and the indemnification
amounts available to us may not be adequate to protect us against claims. We
also may not be able to maintain this insurance on acceptable terms in the
future. Damage to our reputation in the event of a product liability or personal
injury issue or judgment against us or a product recall could have an adverse
effect on our business, financial condition or results of
operations.

 

Our
ability to grow our business may be constrained by our inability to find
suitable new store locations at acceptable prices or by the expiration of our
current leases.

 

Our
ability to grow our business may be constrained if suitable new store locations
cannot be identified with lease terms or purchase prices that are acceptable to
us. We compete with other retailers and businesses for suitable locations for
our stores. Local land use and other regulations applicable to the types of
stores we desire to construct may impact our ability to find suitable locations
and influence the cost of constructing our stores. The expiration of leases at
existing store locations may adversely affect us if the renewal terms of those
leases are unacceptable to us and we are forced to close or relocate stores.
Further, changing local demographics at existing store locations may adversely
affect revenue and profitability levels at those stores.



Changes
in economic conditions could adversely affect consumer buying practices and
reduce our revenues and profitability.

 

Our
performance may be negatively influenced by changes in national, regional or
local economic conditions and consumer confidence. External factors that affect
consumer confidence and over which we exercise no influence include unemployment
rates, levels of personal disposable income, national, regional or local
economic conditions, the introduction of new merchandise or brand and generic
prescription drugs, and acts of war or terrorism. Changes in economic conditions
and consumer confidence could adversely affect consumer preferences, purchasing
power and spending patterns. A decrease in overall consumer spending as a result
of changes in economic conditions could adversely affect our front-end and
pharmacy sales. Profit margins are greater on front-end sales than on pharmacy
sales, and any decrease in sales of front-end products would have a negative
impact on our profitability. All these factors could impact our revenues,
operating results and financial condition.



Our
profitability can be adversely affected by a decrease in the introduction of new
brand name and generic prescription drugs.

 

Our sales
and profit margins are affected by the introduction of new brand name and
generic drugs.  New brand name drugs can result in increased drug
utilization and associated sales revenues, while the introduction of lower
priced generic alternatives typically result in higher gross profit
margins.  Accordingly, a decrease in the number of significant new
drugs or generics successfully introduced could adversely affect our results of
operations.



If
we fail to offer the merchandise and services that our customers want, our sales
may be affected.

 

Our
success depends on our ability to offer a superior shopping experience, a
quality assortment of available merchandise and superior customer service. We
must identify, obtain supplies of, and offer to our customers, attractive,
innovative and high-quality merchandise on a continuous basis. Our products and
services must satisfy the desires of our customers, whose preferences may change
in the future.  If we misjudge either the demand for products and
services we sell or our customers’ purchasing habits and tastes, we may be faced
with excess inventories of some products and missed opportunities for products
and services we chose not to offer.  In addition, our sales may
decline or we may be required to sell the merchandise we have obtained at lower
prices. This would have a negative effect on our business and results of
operations.





We
have made and expect to continue to make acquisitions that could disrupt our
operations and harm our operating results.

 

We have
grown our business through acquisitions in recent years and expect to continue
to acquire drugstore chains, independent drugstores and related businesses in
the future. Acquisitions involve numerous risks, including difficulties in
integrating the operations and personnel of the acquired companies, distraction
of management from overseeing our existing operations, difficulties in entering
markets in which we have no or limited direct prior experience, and difficulties
in achieving the synergies we anticipated. Acquisitions may also cause us to
significantly increase our interest expense, leverage and debt service
requirements if we incur additional debt to pay for an acquisition, issue common
stock that would dilute our current shareholders’ percentage ownership, or incur
write-offs and restructuring and other related expenses.  No assurance
can be given that our acquisitions will be successful and will not materially
adversely affect our results of operations.





Our
credit ratings are important to our cost of capital and lease terms for our
stores.

 

The major
credit rating agencies have given us and our corporate debt investment grade
credit ratings. These ratings are based on a number of factors, which include
our financial strength and financial policies. We aim to maintain our high
ratings as they serve to lower our borrowing costs and facilitate our access to
a variety of lenders and other creditors, including landlords for our leased
stores, on terms that we consider advantageous to our
business.  Failure to maintain our credit ratings could adversely
affect our cost of funds, liquidity, competitive position and access to capital
markets.








4











 

There
are a number of additional business risks which could adversely affect our
financial results.

 

Our
success depends on our ability to establish effective advertising, marketing and
promotional programs. If we are unsuccessful in our advertising, merchandising
or promotional strategies, sales or sales margins could be negatively affected.
Our success also depends on our continued ability to attract and retain store
and management personnel, and the loss of key personnel could have an adverse
effect on the results of our operations, financial condition or cash flow. We
also may not be able to successfully and timely implement new computer systems
and technology or business processes, or may experience disruptions or delays to
the computer systems we depend on to manage our ordering, pricing,
point-of-sale, inventory replenishment and other processes, which could
adversely impact our operations and our ability to attract and retain customers.
Severe weather conditions, terrorist activities, health epidemics or pandemics
or the prospect of these events can impact our store operations or damage our
facilities in affected areas or have an adverse impact on consumer confidence
levels and spending in our stores. Furthermore, the products we sell are sourced
from a wide variety of domestic and international vendors, and any future
inability to find qualified vendors and access products in a timely and
efficient manner could adversely impact our business.





Item
1B.
                  Unresolved Staff
Comments

 

There are
no unresolved staff comments outstanding with the Securities and Exchange
Commission at this time.


 













Properties



 

The
company's locations by state for fiscal 2008 and 2007 are listed
below.



























































































































































































































































































































































































































































State

 
2008

   
2007

 
State

 
2008

   
2007

 
State

 
2008

   
2007

 

Alabama

  90     67  
Maine

  9     1  
Oregon

  62     47  

Arizona

  241     234  
Maryland

  48     38  
Pennsylvania

  106     83  

Arkansas

  50     45  
Massachusetts

  153     126  
Rhode
Island

  26     20  

California

  525     476  
Michigan

  211     190  
South
Carolina

  83     66  

Colorado

  150     130  
Minnesota

  122     111  
South
Dakota

  13     13  

Connecticut

  109     71  
Mississippi

  63     51  
Tennessee

  242     213  

Delaware

  64     59  
Missouri

  180     165  
Texas

  631     587  

District
of Columbia

  3     -  
Montana

  11     9  
Utah

  36     27  

Florida

  781     736  
Nebraska

  56     49  
Vermont

  4     2  

Georgia

  166     125  
Nevada

  76     63  
Virginia

  93     72  

Hawaii

  1     -  
New
Hampshire

  31     20  
Washington

  115     106  

Idaho

  32     20  
New
Jersey

  138     101  
West
Virginia

  11     1  

Illinois

  549     528  
New
Mexico

  57     54  
Wisconsin

  221     195  

Indiana

  205     181  
New
York

  208     117  
Wyoming

  8     8  

Iowa

  68     59  
North
Carolina

  148     113  
Guam

  1     -  

Kansas

  61     57  
North
Dakota

  1     1  
Puerto
Rico

  95     73  

Kentucky

  89     69  
Ohio

  259     223  
TOTAL

  6,934     5,997  

Louisiana

  127     109  
Oklahoma

  105     86    
           


 

Most of
the company's stores are leased.  The leases are for various terms and
periods.  See Note 2, "Leases" on page 29 of the 2008 Annual Report,
which section is incorporated herein by reference.  The company owns
approximately 19.9% of the
retail stores open at August 31, 2008.  The company has a moderate
expansion program of adding new stores and remodeling and
relocating existing stores.  Net retail selling space was increased
from 66 million square feet at August 31, 2007, to 73 million square feet at
August 31, 2008.  Approximately 38.5% of company stores have
been opened or remodeled during the past five years.

 

The
company's retail store operations are supported by thirteen major distribution
centers with a total of approximately 11 million square feet of space in all
distribution centers, of which 7 million square feet is owned.  The
remaining space is leased.  All distribution centers are served by
modern systems for order processing control, operating efficiencies and rapid
merchandise delivery to stores.  In addition, the company uses public
warehouses to handle certain distribution needs.  A new distribution
center in Anderson, South Carolina opened in fiscal 2007.  A new
distribution center is scheduled to open in Windsor, Connecticut in fiscal
2009.

 

There are
31 principal office facilities containing approximately 3 million square feet of
which approximately 2 million square feet is owned and the remainder is
leased.  The company operates two mail service facilities containing
approximately 237 thousand square feet of which approximately 133 thousand
square feet is owned and the remainder is leased.

 

The
company also owns 28 strip shopping malls containing approximately 1 million
square feet of which approximately 683 thousand square feet is leased to
others.














Legal
Proceedings



 

The
information in response to this item is incorporated herein by reference to Note
7 "Contingencies" on page 31 of the 2008 Annual Report.














Submission of Matters
to a Vote of Security
Holders



 

No
matters were submitted to a vote of security holders during the fourth quarter
of the fiscal year.




 



5







 



Item
4.1
 
                 Executive Officers of the
Registrant



The
following information is furnished with respect to each executive officer of the
company as of October 15, 2008:

 






























































































































































































































































































































































































































NAME AND BUSINESS
EXPERIENCE

 

AGE


OFFICE HELD

 
 
 
 
 

Alan
G. McNally

 

62


Chairman
of the Board and Acting Chief Executive
Officer

 

Special
Advisor to Harris Financial Corporation since
January
2007

 
 

 

 

Director
of Harris Financial Corporation May 2006 to
December
2006

 
 
 
 

Chairman
of the Board of Harris Financial Corporation
April
1998 to May 2006

 
 
 
 
Chairman
of the Board of Harris Trust and Savings Bank
and
Harris Bankcorp, Inc. April 1995
to
January 2004

     
 
Chief
Executive Officer of Harris Trust and Savings Bank and Harris Bankcorp.
Inc. from
September
1993 to September 2002

     
 

Senior
Advisor to TeleTech North America February 2003
to
September 2006

 
 
 
 

Director
since 1999

 
 
 
 
 
 
 
 

Gregory
D. Wasson

 

50


President
and Chief Operating Officer

 

President
and Chief Operating Officer since May 2007

 
 
 
 

Executive
Vice President from October 2005 to April
2007

 
 
 
 

Senior
Vice President February 2004 to October 2005

 
 
 
 

Vice
President October 2001 to February 2004

 
 
 
 

President,
Walgreens Health Initiatives, Inc. March
2002
to April 2007

 
 
 
 
 
 
 
 

George
J. Riedl

 

48


Executive
Vice President

 

Executive
Vice President since January 2006

 
 
 
 

Senior
Vice President January 2003 to January 2006

 
 
 
 
 
 
 
 

Mark
A. Wagner

 

47


Executive
Vice President

 

Executive
Vice President since March 2006

 
 
 
 

Senior
Vice President February 2002 to March 2006

 
 
 
 
 
 
 
 

Stanley
B. Blaylock

 

45


Senior
Vice President

 

Senior
Vice President since January 2008

 
 
 
 

Vice
President October 2007 to January 2008

 
 
 
 

Divisional
Vice President January 2007 to October 2007

 
 
 
 

Senior
Vice President, Walgreens Health Services
January
2007 to October 2007

 
 
 
 

Vice
President, Specialty Pharmacy,
Walgreens
Health
Services
August 2006
to
January 2007

 
 
 
 

President
and Chief Executive Officer, Medmark Inc.
October
2005 to August 2006

 
 
 
 

President,
Medmark Inc. June 2005 to October 2005

 
 
 
 

Executive
Vice President, Chief Financial Officer and
Chief
Administrative Officer, Medmark
Inc.
August
2003
to June 2005

 
 
 
 
 
 
 
 

R.
Bruce Bryant

 

58


Senior
Vice President

 

Senior
Vice President since September 2000

 
 
 
 
 
 
 
 

Sona
Chawla

 

41


Senior
Vice President

 

Senior
Vice President since July 2008

 
 
 
 

Vice
President, Global Online Business, Dell, Inc.
December
2006 to May 2008

 
 
 
 

Executive
Vice President, Online Sales, Service and
Marketing,
Wells Fargo & Company
March
2005 to
October
2006

 
 
 
 

Executive
Vice President, Web Channel Management,
Wells
Fargo & Company June 2003 to
February
2005

 
 
 
 
 
 
 
 

Kermit
R. Crawford

 

49


Senior
Vice President

 

Senior
Vice President since September 2007

 
 
 
 

Vice
President from October 2005 to September 2007

 
 
 
 

Executive
Vice President, Walgreens Health Initiatives,
Inc.
October 2005 to September 2007

 
 
 
 

Vice
President, Walgreens Health Initiatives, Inc.
September
2004 to October 2005

 
 
 
 

Operations
Vice President October 2000 to September
2004

 
 
 
 
 
 
 
 

Debra
M. Ferguson

 

51


Senior
Vice President

 

Senior
Vice President since February 2007

 
 
 
 

Operations
Vice President April 2002 to April 2007

 
 
 
 
 
 
 
 

Dana
I. Green

 

58


Senior
Vice President, General Counsel and
Corporate Secretary

  Senior
Vice President, General Counsel and Corporate
Secretary
since January 2005
     
 

Senior
Vice President February 2004 to January 2005

 
 
 
 

Vice
President May 2000 to February 2004

 
 
 



 







6












OFFICERS OF THE REGISTRANT –
continued:





















































































































































































































































































































































































































 NAME
AND BUSINESS EXPERIENCE        
 
 AGE

 OFFICE
HELD
 
 
 
 
 

William
M. Handal

 

59


Senior
Vice President

 

Senior
Vice President since March 2006

 
 
 
 

Operations
Vice President September 2000 to March
2006

 
 
 
 
 
 
 
 

Donald
C. Huonker, Jr.

 

47


Senior
Vice President

 

Senior
Vice President since July 2007

 
 
 
 

Vice
President from April 2006 to July 2007

 
 
 
 

Vice
President, Pharmacy Services April
2005
to April
2006

 
 
 
 

Operations
Vice President April 2003 to April 2005

 
 
 
 
 
 
 
 

J.
Randolph Lewis

 

58


Senior
Vice President

 

Senior
Vice President since January 2000

 
 
 
 
 
 
 
 

Wade
D. Miquelon

 

43


Senior
Vice President and Chief Financial
Officer

 
Senior
Vice President and Chief Financial Officer since
June
2008

     
 

Executive
Vice President and Chief Financial Officer,
Tyson
Foods, Inc. June 2006 to June 2008

 
 
 
 

Vice
President, Finance, Western Europe, The Proctor &
Gamble
Company September 2003 to
June
2006

 
 
 
 
 
 
 
 

Hal
F. Rosenbluth

 

56


Senior
Vice President

 

Senior
Vice President since August 2008

 
 
 
 

Vice
President April 2008 to August 2008

 
 
 
 

Chairman,
Take Care Health Systems
since October
2004

 
 
 
 

Chairman
and Chief Executive Officer, Rosenbluth
International
through November 2003

 
 
 
 
 
 
 
 

William
M. Rudolphsen

 

53


Senior
Vice President and Chief Risk Officer

 
Senior
Vice President and Chief Risk Officer since June
2008 

     
 

Senior
Vice President and Chief Financial Officer
January
2004 to June 2008

 
 
 
 

Controller
January 1998 to January 2004

 
 
 
 
 
 
 
 

William
A. Shiel

 

57


Senior
Vice President

 

Senior
Vice President since July 1993

 
 
 
 
 
 
 
 

Kevin
P. Walgreen

 

47


Senior
Vice President

 

Senior
Vice President since January 2006

 
 
 
 

Operations
Vice President January 1995 to January 2006

 
 
 
 
 
 
 
 

Kenneth
R. Weigand

 

51


Senior
Vice President

 

Senior
Vice President since January 2007

 
 
 
 

Vice
President January 2005 to January 2007

 
 
 
 

Divisional
Vice President May 2000 to January 2005

 
 
 
 
 
 
 
 

Kimberly
L. Feil

 

49


Vice
President and Chief Marketing Officer

 
Vice
President and Chief Marketing Officer since
September
2008
 

     
 

Senior
Vice President and Chief Marketing Officer, Sara
Lee
North America September 2005 to
May
2008

 
 
 
 

Vice
President and Senior Marketing Officer, Kimberly-
Clark
Corporation February 2005 to
September
2005

 
 
 
 

Chief
Executive Officer, Mosaic InfoForce, March 2003 to
February
2005

 
 
 
 
 
 
 
 

Mia
M. Scholz

 

42


Vice
President and Controller

 

Vice
President since October 2007

 
 
 
 

Controller
since January 2004

 
 
 
 

Divisional
Vice President January 2004 to October 2007

 
 
 
 

Director,
Internal Audit November 1999 to January
 2004

 
 
 
 
 
 
 
 

John
W. Spina

 

49


Vice
President and Treasurer

 

Vice
President and Treasurer since April 2007

 
 
 
 

Operations
Vice President April 2005 to April 2007

 
 
 
 

Director,
Drugstore Administration April 2003 to April
2005

 
 
 



 







7











 

OFFICERS OF THE REGISTRANT -
continued
:

 

 




























































































































 NAME
AND BUSINESS EXPERIENCE        
 
AGE

 OFFICE
HELD
 
 
 
 
 

David
A. Van Howe

 

50


Vice
President

 

Vice
President since April 2007

 
 
 
 

Divisional
Vice President January 2004 to April 2007

 
 
 
 
 
 
 
 

Denise
K. Wong

 

50


Vice
President and Chief Information Officer

 

Vice
President and Chief Information Officer since May
2007

 
 

 

 

Divisional
Vice President December 2001 to May 2007

 
 
 
 
 
 
 
 

Robert
G. Zimmerman

 

56


Vice
President

 

Vice
President since April 2006

 
 
 
 

Chief
Administration and Finance Officer, Walgreens
Health
Initiatives, Inc. since April 2006

 
 
 
 

Divisional
Vice President, Walgreens Health Initiatives,
Inc.
September 2001 to April 2006

 
 
 
 
 
 
 
 

Chester
G. Young

 

63


General
Auditor

 

Divisional
Vice President since January 1995

 
 
 
 
 
 
 
 





Kevin P.
Walgreen is the son of Charles R. Walgreen III, who is a director of the
company.






 



8







 




PART
II












Market for
Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity
Securities



 

The
company's common stock is listed on the New York Stock Exchange, Chicago Stock
Exchange and The Nasdaq Stock Market LLC under the symbol WAG.  As of
September 30, 2008 there were approximately 97,000 recordholders of company
common stock.

 

The range
of the sales prices of the company's common stock by quarters during the years
ended August 31, 2008 and August 31, 2007 are incorporated herein by reference
to the caption "Common Stock Prices" on page 35 of the 2008 Annual
Report.



The
company's cash dividends per common share during the two fiscal years ended
August 31 are as follows:






































































Quarter
Ended

 
2008

   
2007

 

November

  $ .0950     $ .0775  

February

    .0950       .0775  

May

    .0950       .0775  

August

    .1125       .0950  

Fiscal
Year

  $ .3975     $ .3275  


 

The
following table provides information about purchases by the company during the
quarter ended August 31, 2008 of equity securities that are registered by the
company pursuant to Section 12 of the Exchange Act:





































































































Issuer Purchases of Equity
Securities

 

Period

 

Total
Number of Shares Purchased (1)


   

Average
Price Paid per Share


   

Total
Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(2)


   

Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or
Programs (2)


 

06/01/2008
- 06/30/2008

    -       -       -     $ 655,123,821  

07/01/2008-
07/31/2008

    1,000,000     $ 37.3743       -     $ 655,123,821  

08/01/2008-08/31/2008

    1,000,000     $ 36.4917       -     $ 655,123,821  

Total

    2,000,000     $ 36.9330       -     $ 655,123,821  















(1)


The
company repurchased an aggregate of 2,000,000 shares of its common stock
in open-market transactions to satisfy the requirements of the company's
employee stock purchase and option plans, as well as the company's
Nonemployee Director Stock Plan.  These share repurchases were
not made pursuant to a publicly announced repurchase plan or
program.


(2)


On
January 10, 2007, the Board of Directors approved a stock repurchase
program ("2007 repurchase program"), pursuant to which up to $1,000
million of the company's common stock may be purchased prior to the
expiration date of the program on January 10, 2011.  This
program was announced in the company's report on Form 8-K, which was filed
on January 11, 2007.  The total remaining authorization under
the repurchase program was $655,123,821 as of August 31,
2008.





Item
6.
                    Selected Financial
Data

 

The
information in response to this item is incorporated herein by reference to the
caption "Five-Year Summary of Selected Consolidated Financial Data" on page 17
of the 2008 Annual Report.












Management's
Discussion and Analysis of Financial Condition and Results of
Operations



 

The
information in response to this item is incorporated herein by reference to the
caption "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 18 through 22 of the 2008 Annual
Report.



Item
7A.
                Qualitative and Quantitative
Disclosures about Market Risk

 

Management
does not believe that there is any material market risk exposure with respect to
derivative or other financial instruments that would require disclosure under
this item.












Financial Statements
and Supplementary Data



 

See Item
15.












Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure



 

None.

 







9










 











Controls and
Procedures



 

Based on
their evaluation as of August 31, 2008 pursuant to Exchange Act Rule 13a-15(b),
the company's management, including its Chief Executive Officer and Chief
Financial Officer, believe the company's disclosure controls and procedures (as
defined in Exchange Act Rule 13a-15(e)) are effective.

 

Management's
report on internal control and the attestation report of Deloitte & Touche
LLP, the company's independent registered public accounting firm, are included
in our Annual Report to Shareholders for the year ended August 31, 2008 and are
incorporated in this Item 9A by reference.  Our 2008 Annual Report to
Shareholders is included as an Exhibit to this Annual Report on Form
10-K.

 

In
connection with the evaluation pursuant to Exchange Act Rule 13a-15(d) of the
company's internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f)) by the company's management, including its Chief Executive
Officer and Chief Financial Officer, no changes during the quarter ended August
31, 2007 were identified that have materially affected, or are reasonably likely
to materially affect, the company's internal control over financial
reporting.

 










Other
Information


 

On
October 8, 2008, the company’s Board of Directors amended and restated the
Walgreen Co. Management Incentive Plan effective as of September 1,
2008.  Among other things, the amendment provides greater discretion
to the Compensation Committee: (1) to select bonus performance metrics each
year; (2) to set bonus targets each year and to vary those targets (and the
variability around those targets) for different levels of employees; and (3) to
adjust bonuses up or down based on individual performance.  The
amended and restated Walgreen Co. Management Incentive Plan is filed as Exhibit
10.3 to this Form 10-K.

 


PART
III












Directors, Executive
Officer and Corporate
Governance



 

The
information required by Item 10, with the exception of the information relating
to the executive officers of the company, which is presented in Item I above
under the heading "Executive Officers of the Registrant," is incorporated herein
by reference to the following sections of the company's 2008 Proxy
Statement:  Proposal 1, Election Of Directors; Information Concerning
Corporate Governance, the Board of Directors and its Committees; and Section
16(a) Beneficial Ownership Reporting Compliance.












Executive
Compensation



 

The
information required by Item 11 is incorporated herein by reference to the
following sections of the company's 2008 Proxy Statement: Compensation of
Directors; and Executive Compensation – Compensation Disclosure and
Analysis.












Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters



 

The
information required by Item 12 is incorporated herein by reference to the
following sections of the company's 2008 Proxy Statement: Security Ownership of
Certain Beneficial Owners; and Management and Equity Plan
Information.












Certain Relationships
and Related Party Transactions and Director
Independence



 

The
information required by Item 13 is incorporated herein by reference to the
following sections of the company's 2008 Proxy Statement: Certain Relationships
and Related Party Transactions; and Information Concerning Corporate
Governance.

 










Principal Accounting
Fees and Services



 


 

Fees
Paid to the Independent Registered Public Accounting Firm

 

All fees billed by Deloitte &
Touche LLP for services rendered during fiscal years 2008 and 2007 are as
follows:

 

























































 

Fiscal Year
2008


   Fiscal Year
2007


Audit
Fees (1)                                                                      


$


1,980,000

 
 $


1,916,000

 

Audit-Related
Fees (2)                                                                      

 
11,000

   
11,000

 

Tax
Fees (3)                                                                      

 
22,000

   
77,000

 

All
Other
Fees                                                                      

 
 


 
 
 


 

Total
Fees                                                                      

 

$


2,013,000

 
 

$


2,004,000

 


 

























(1)

 

Audit
fees cover:  professional services performed by Deloitte in the
audit of the Company’s annual financial statements included in the annual
report on Form 10-K; audit of the effectiveness of internal control over
financial reporting; the review of financial statements included in the
Company’s quarterly reports on Form 10-Q; and services normally provided
in connection with statutory and regulatory filings or
engagements.

 

(2)

 

Audit-related
fees consist of fees billed for assurance and related services performed
by Deloitte that are reasonably related to the performance of the audit or
review of the Company’s financial statements.  This includes
audits of employee benefits plans and consultations with respect to
financial reporting and accounting standards.  There were no
audit-related fees approved during fiscal years 2008 and 2007 pursuant to
the de minimis exception under Rule 2-01(c)(7)(i)(C) of Regulation S-X
promulgated by the SEC.

 

(3)

 

Tax
fees consist of fees billed for professional services performed by
Deloitte with respect to tax compliance, tax advice and tax
planning.  This includes preparation of original and amended tax
returns for the Company and its subsidiaries, refund claims, tax appeals,
and tax work stemming from “Audit-Related” items.  There were no
tax fees approved during fiscal years 2008 and 2007 pursuant to the de
minimis exception provided in Rule 2-01(c)(7)(i)(C) of Regulation S-X
promulgated by the SEC.









10











 

Pre-Approval
of Services Provided By the Independent Registered Public Accounting
Firm

 

The Audit
Committee is responsible for appointing, setting compensation for and overseeing
the work of the Company’s independent registered public accounting firm, and has
established a policy concerning the preapproval of services performed by the
Company’s independent registered public accounting firm.  Each
proposed engagement not specifically identified by the SEC as impairing
independence is evaluated for independence implications prior to entering into a
contract with the independent registered public accounting firm for such
services.  The Audit Committee has approved in advance certain
permitted services whose scope is consistent with auditor
independence.  These services are (i) statutory audits of Company
subsidiaries, (ii) services associated with SEC registration statements, other
documents filed with the SEC or other documents issued in connection with
securities offerings (for example, comfort letters or consents), (iii)
consultations related to adoption of new accounting or auditing pronouncements,
disclosure requirements or other accounting related regulations, and (iv) audits
of employee benefit plans.  If the project is in a permitted category,
it is considered pre-approved by the Audit Committee. All other services require
specific pre-approval by the Audit Committee. Engagements with total fees less
than $100,000 require the approval of one member of the Audit Committee.
Engagements with total fees greater than $100,000 require the approval of the
full Audit Committee. On a quarterly basis, the Audit Committee reviews a
summary listing all service fees, along with a reasonably detailed description
of the nature of the engagement.

 

All
audit, audit-related, and tax services performed by Deloitte in fiscal year 2008
were pre-approved by the Audit Committee in accordance with the regulations of
the SEC.  The Audit Committee considered and determined that the
provision of nonaudit services by Deloitte during fiscal year 2008 was
compatible with maintaining auditor independence.

 

 

Review
of Deloitte’s Independence

 

On
September 22, 2008, Deloitte advised us that it had recently become aware of
unauthorized personal securities transactions in the Company’s securities by a
Deloitte partner who served as the advisory partner on Deloitte’s audit team for
the Company until his resignation from Deloitte in September 2008 (the “Former
Advisory Partner”).  Deloitte believes that the Former Advisory
Partner engaged in trading in the Company’s common stock, or options relating
thereto, as well as common stock, or options relating thereto, issued by Option
Care, Inc., which was acquired by the Company in 2007.  The Company’s
Deloitte audit engagement team consisted of an Audit Partner, a Concurring
Partner, the Former Advisory Partner, a Senior Manager and additional Deloitte
professional staff.  The Audit Partner had responsibility for all
substantive issues with respect to the planning, scope and conduct of the
Company’s audit, while the Former Advisory Partner was responsible for client
relationship management and service assessment.  Pursuant to the SEC’s
rules, and to Deloitte’s own rules, on auditor independence, the Former Advisory
Partner was not permitted to own or trade in the Company’s
securities.

 

Deloitte
has informed the Company that Deloitte’s investigation of the facts and
circumstances related to the Former Advisory Partner determined that,
notwithstanding the violation of the SEC’s independence rules, Deloitte’s
objectivity and integrity with respect to the Company’s audits was unaffected
such that Deloitte’s independence with respect to the audits remained unimpaired
and that, in Deloitte’s opinion, it remains independent.  Accordingly,
in the written disclosures and the letter from Deloitte & Touche LLP
required by Independence Standards Board Standard No. 1 and
the rules of the Public Company Accounting Oversight Board (PCAOB), Deloitte
stated that the behavior of the Former Advisory Partner had not impaired
Deloitte’s independence with respect to the Company and that Deloitte remained
independent accountants with respect to the Company, within the meaning of the
Securities Act and the Securities Exchange Act and the requirements of the
PCAOB.  In discussions with the Audit Committee, Deloitte stated that
its conclusion was based on, among other things, the results of its internal
investigation, which concluded that (i) the Audit Partner, rather than the
Former Advisory Partner, was responsible for the planning, scope and conduct of
the Company’s audits, including setting materiality levels and determining audit
procedures, (ii) while the Former Advisory Partner did review the audit plan
document and offer high-level editorial comments, he did not offer any
substantive changes, (iii) the Former Advisory Partner did not prepare or review
work papers with respect to the Company’s audits, (iv) although he was made
aware of certain technical issues, the Former Advisory Partner was not consulted
on any technical accounting, auditing or independence issues related to the
Company’s audits by the Audit Partner, the Concurring Partner or any other
members of the audit engagement team, and (v) no Deloitte personnel, including
the audit engagement team, had any knowledge of the Former Advisory Partner’s
trading activities.

 

Following
Deloitte’s disclosure, the Company and the Audit Committee engaged counsel to
independently investigate the facts relating to the Former Advisory
Partner.  In the course of the investigation, counsel interviewed
relevant Deloitte personnel and the members of the Company’s executive team who
had regular contact with the Former Advisory Partner.  Counsel
informed the Audit Committee that its investigation had confirmed that (i) none
of the Company executives interviewed by counsel could recall the Former
Advisory Partner participating in any steps of the actual audit process or in
any discussions regarding accounting treatment of any items appearing on the
Company’s financial statements, (ii) while the Former Advisory Partner regularly
attended Audit Committee meetings, neither management nor the Audit Committee
looked to the Former Advisory Partner for input on substantive issues relating
directly to the Company at those meetings, (iii) the Deloitte Audit Partner
always led the discussions relating to all aspects of the audit at Audit
Committee meetings, while the Former Advisory Partner’s role at Audit Committee
meetings was limited to comments on the qualifications and firm-wide legal risk
exposure of Deloitte, any PCAOB reviews of Deloitte, non-audit services that
Deloitte might be able to offer the Company, client satisfaction issues, and
global best practices for audit committees, and (iv) none of the interviewed
Company employees had any indication that the Former Advisory Partner had
engaged in securities trading activities that may have violated the independence
rules of the SEC, or of Deloitte, prior to September 22,
2008.  Furthermore, in the course of an Audit Committee meeting the
Audit Committee Chairman confirmed with each of the members of the Audit
Committee, as well as with the Company’s Chief Executive Officer and Chief
Operating Officer, that their experiences with the Former Advisory Partner were
consistent with the foregoing.

 

Based on
the report by Deloitte and the results of the independent investigation by
counsel, the Audit Committee concluded that, notwithstanding the actions of the
Former Advisory Partner resulting in the violation of the SEC’s auditor
independence rule, Deloitte’s independence with respect to the Company was not
impaired.  Following this determination, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company’s Annual Report on Form 10-K for the year ended August 31,
2008.  After a review of the quality of Deloitte’s audit work, the
professional abilities and experience of the Deloitte staff assigned to the
audit and Deloitte’s internal controls designed to provide reasonable assurance
of independence, the Audit Committee appointed Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for the fiscal year
ending August 31, 2009.

 

The
Company and Deloitte subsequently discussed their conclusions regarding the
Former Advisory Partner with, and on October 20, 2008 the Company furnished a
detailed written analysis to, the staff of the SEC.

 

 







11














PART
IV












Exhibits and Financial
Statement Schedules












(a)


Documents
filed as part of this report













 


(1)


The
following financial statements, supplementary data, and report of
independent public accountants appearing in the 2008 Annual Report are
incorporated herein by reference.



































 


Annual
Report Page Number



Consolidated
Statements of Earnings and Shareholders' Equity for the years ended August
31, 2008, 2007 and 2006


23


Consolidated
Balance Sheets at August 31, 2008 and 2007


25


Consolidated
Statements of Cash Flows for the years ended August 31, 2008, 2007 and
2006


26


Notes
to Consolidated Financial Statements


27
- 34


Management's
Report on Internal Control


36


Report
of Independent Registered Public Accounting Firm


36



 









 


(2)


The
following financial statement schedule and related report of the
independent registered public accounting firm is included
herein.



















 

10-K Page Number


Schedule
II Valuation and Qualifying Accounts


24


Report
of Independent Registered Public Accounting Firm


25





Schedules
I, III, IV and V are not submitted because they are not applicable or not
required or because the required information is included in the Financial
Statements in (1) above or notes thereto.



Other
Financial Statements -



Separate
financial statements of the registrant have been omitted because it is primarily
an operating company, and all of its subsidiaries are included in the
consolidated financial statements.











 


(3)


Exhibits
10(a) through 10(r) constitute management contracts or compensatory plans
or arrangements required to be filed as exhibits pursuant to Item 15(b) of
this Form 10-K.













(b)


Exhibits



 





































































































 

1.


Underwriting
Agreement dated July 14, 2008, by and among Walgreen Co. and Banc of
America Securities LLC and J.P. Morgan Securities Inc., as representatives
of the several underwriters named therein, filed with the Securities and
Exchange Commission on July 17, 2008 as Exhibit 1.1 to the Walgreen Co.’s
Current Report on Form 8-K (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

2.1


Agreement
and Plan of Merger, dated as of July 2, 2007, by and among Walgreen Co.,
Bison Acquisition Sub Inc. and Option Care, Inc., filed with the
Securities and Exchange Commission on July 3, 2007 as Exhibit 2.1 to
Walgreen Co.’s Current Report on Form 8-K (File No. 1-00604), and
incorporated by reference herein.

 
 
 
 

2.2


Agreement
and Plan of Merger dated March 14, 2008 by and among Walgreen Co., Putter
Acquisition Sub, Inc. and I-trax, Inc., filed with the Securities and
Exchange Commission on March 17, 2008 as Exhibit 2.1 to Walgreen Co.’s
Current Report on Form 8-K (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

3.1


Articles
of Incorporation of Walgreen Co., as amended, filed with the Securities
and Exchange Commission as Exhibit 3(a) to Walgreen Co.’s Quarterly Report
on Form 10-Q for the quarter ended February 28, 1999 (File No. 1-00604),
and incorporated by reference herein.

 
 
 
 

3.2


Amended
and Restated By-Laws of Walgreen Co., as amended effective as of September
1, 2008, filed with the Securities and Exchange Commission on September 5,
2008 as Exhibit 3.1 to Walgreen Co.’s Current Report on Form 8-K (File No.
1-00604), and incorporated by reference herein.

 
 
 
 

4.1


Form
of 4.875% Note due 2013, filed with the Securities and Exchange Commission
on July 17, 2008 as Exhibit 4.1 to Walgreen Co.’s Current Report on Form
8-K (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

4.2


Form
of Indenture between Walgreen Co. and Wells Fargo Bank, National
Association, filed with the Securities and Exchange Commission on July 14,
2008 as Exhibit 4.3 to the Walgreen Co.’s registration statement on Form
S-3ASR (File No. 333-152315), and incorporated by reference
herein.

 
 
 
 

10.1


Top
Management Long-Term Disability Plan, filed with the Securities and
Exchange Commission as Exhibit 10 to Walgreen Co.’s Annual Report on Form
10-K for the fiscal year ended August 31, 1990 (File No. 1-00604), and
incorporated by reference herein.

 
 
 
 

10.2


Executive
Short-Term Disability Plan Description, filed with the Securities and
Exchange Commission as Exhibit 10 to Walgreen Co.’s Annual Report on Form
10-K for the fiscal year ended August 31, 1990 (File No. 1-00604), and
incorporated by reference herein.

 
 
 
 

10.3


Walgreen
Co. Management Incentive Plan (as amended and restated effective September
1, 2008).



 







12





















































 
 
 
 

10.4


Walgreen
Co. Long-Term Performance Incentive Plan (amendment and restatement of the
Walgreen Co. Restricted Performance Share Plan), filed with the Securities
and Exchange Commission on January 11, 2007 as Exhibit 10.1 to Walgreen
Co.’s Current Report on Form 8-K (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.5


Walgreen
Co. Long-Term Performance Incentive Plan Amendment No. 1 (effective
January 10, 2007), filed with the Securities and Exchange Commission as
Exhibit 10.2 to Walgreen Co.’s Quarterly Report on Form 10-Q for the
quarter ended February 28, 2007 (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.6


Walgreen
Co. Executive Stock Option Plan (effective January 11, 2006), as amended
and restated, filed with the Securities and Exchange Commission on January
17, 2006 as Exhibit 10.1 to Walgreen Co.’s Current Report on Form 8-K
(File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.7


Walgreen
Co. Executive Stock Option Plan Amendment No. 1 (effective October 11,
2006), filed with the Securities and Exchange Commission as Exhibit 10(a)
to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended
November 30, 2006 (File No. 1-00604), and incorporated by reference
herein.
















 

 
 

 

 


10.8


Walgreen
Co. Executive Stock Option Plan Amendment No. 2 (effective September 1,
2007), filed with the Securities and Exchange Commission as Exhibit
10(e)(iii) to Walgreen Co.’s Annual Report on Form 10-K for the fiscal
year ended August 31, 2007, and incorporated by reference
herein.



 






























































































































































 

10.9


Form
of Stock Option Agreement (Grades 12 through 17), filed with the
Securities and Exchange Commission as Exhibit 10(e)(ii) to Walgreen Co.’s
Annual Report on Form 10-K for the fiscal year ended August 31, 2004 (File
No. 1-00604), and incorporated by reference herein.

 
 
 
 

10.10


Form
of Stock Option Agreement (Grades 18 and above), filed with the Securities
and Exchange Commission as Exhibit 10(e)(iii) to Walgreen Co.’s Annual
Report on Form 10-K for the fiscal year ended August 31, 2004 (File No.
1-00604), and incorporated by reference herein.

 
 
 
 

10.11


Form
of Stock Option Agreement (Grades 12 through 17) (effective September 1,
2008).

 
 
 
 

10.12


Form
of Stock Option Agreement (Grades 18 and above) (effective September 1,
2008).

 
 
 
 

10.13


Form
of Restricted Stock Unit Award Agreement (effective September 1,
2008).

 
 
 
 

10.14


Form
of Performance Share Contingent Award Agreement (effective September 1,
2008).

 
 
 
 

10.15


Form
of Restricted Stock Award Agreement (effective June
2008).

 
 
 
 

10.16


Walgreen
Co. 1986 Director’s Deferred Fee/Capital Accumulation Plan, filed with the
Securities and Exchange Commission as Exhibit 10 to Walgreen Co.’s Annual
Report on Form 10-K for the fiscal year ended August 31, 1986 (File No.
1-00604), and incorporated by reference herein.

 
 
 
 

10.17


Walgreen
Co. 1987 Director’s Deferred Fee/Capital Accumulation Plan, filed with the
Securities and Exchange Commission as Exhibit 10 to Walgreen Co.’s
Quarterly Report on Form 10-Q for the quarter ended November 30, 1986
(File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.18


Walgreen
Co. 1988 Director’s Deferred Fee/Capital Accumulation Plan, filed with the
Securities and Exchange Commission as Exhibit 10 to Walgreen Co.’s
Quarterly Report on Form 10-Q for the quarter ended November 30, 1987
(File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.19


Walgreen
Co. 1992 Director’s Deferred Retainer Fee/Capital Accumulation Plan, filed
with the Securities and Exchange Commission as Exhibit 10 to Walgreen
Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 1992
(File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.20


Walgreen
Co. 1986 Executive Deferred Compensation/Capital Accumulation Plan, filed
with the Securities and Exchange Commission as Exhibit 10 to Walgreen
Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 1986
(File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.21


Walgreen
Co. 1988 Executive Deferred Compensation/Capital Accumulation Plan, filed
with the Securities and Exchange Commission as Exhibit 10 to Walgreen
Co.’s Quarterly Report on Form 10-Q for the quarter ended November 30,
1987 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.22


Amendments
to Walgreen Co. 1986 and 1988 Executive Deferred Compensation/Capital
Accumulation Plans, filed with the Securities and Exchange Commission as
Exhibit 10 to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter
ended November 30, 1988 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.23


Walgreen
Co. 1992 Executive Deferred Compensation/Capital Accumulation Plan Series
1, filed with the Securities and Exchange Commission as Exhibit 10 to
Walgreen Co.’s Annual Report on Form 10-K for the fiscal year ended August
31, 1992 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.24


Walgreen
Co. 1992 Executive Deferred Compensation/Capital Accumulation Plan Series
2, filed with the Securities and Exchange Commission as Exhibit 10 to
Walgreen Co.’s Annual Report on Form 10-K for the fiscal year ended August
31, 1992 (File No. 1-00604), and incorporated by reference
herein.



 







13























 
 
 
 

10.25


Walgreen
Co. 1997 Executive Deferred Compensation/Capital Accumulation Plan Series
1, filed with the Securities and Exchange Commission as Exhibit 10(c) to
Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997 (File No. 1-00604), and incorporated by reference
herein.



































 
 
 
 

10.26


Walgreen
Co. 1997 Executive Deferred Compensation/Capital Accumulation Plan Series
2, filed with the Securities and Exchange Commission as Exhibit 10(d) to
Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.27


Walgreen
Co. 2001 Executive Deferred Compensation/Capital Accumulation Plan, filed
with the Securities and Exchange Commission as Exhibit 10(g) to Walgreen
Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2001
(File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.28


Walgreen
Co. 2002 Executive Deferred Compensation/Capital Accumulation Plan, filed
with the Securities and Exchange Commission as Exhibit 10(g) to Walgreen
Co.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2002
(File No. 1-00604), and incorporated by reference
herein.


























































































































































 

10.29


Walgreen
Co. 2006 Executive Deferred Compensation/Capital Accumulation Plan
(effective January 1, 2006), filed with the Securities and Exchange
Commission as Exhibit 10(b) to Walgreen Co.’s Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 2005 (File No. 1-00604),
and incorporated by reference herein.

 
 
 
 

10.30


Share
Walgreens Stock Purchase/Option Plan (effective October 1, 1992), as
amended, filed with the Securities and Exchange Commission as Exhibit
10(d) to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter
ended February 28, 2003 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.31


Share
Walgreens Stock Purchase/Option Plan Amendment No. 4 (effective July 15,
2005), as amended, filed with the Securities and Exchange Commission as
Exhibit 10(h)(ii) to Walgreen Co.’s Annual Report on Form 10-K for the
fiscal year ended August 31, 2005 (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.32


Share
Walgreens Stock Purchase/Option Plan Amendment No. 5 (effective October
11, 2006), filed with the Securities and Exchange Commission as Exhibit
10(b) to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter
ended November 30, 2006 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.33


Walgreen
Select Senior Executive Retiree Medical Expense Plan, filed with the
Securities and Exchange Commission as Exhibit 10(j) to Walgreen Co.’s
Annual Report on Form 10-K for the fiscal year ended August 31, 1996 (File
No. 1-00604), and incorporated by reference herein.

 
 
 
 

10.34


Walgreen
Select Senior Executive Retiree Medical Expense Plan Amendment No. 1
(effective August 1, 2002), filed with the Securities and Exchange
Commission as Exhibit 10(a) to Walgreen Co.’s Quarterly Report on Form
10-Q for the quarter ended February 28, 2003 (File No. 1-00604), and
incorporated by reference herein.

 
 
 
 

10.35


Walgreen
Co. Profit-Sharing Restoration Plan (as restated effective January 1,
2003), filed with the Securities and Exchange Commission as Exhibit 10(b)
to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended May
31, 2003 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.36


Walgreen
Co. Profit-Sharing Restoration Plan Amendment No. 1 (effective January 1,
2008).

 
 
 
 

10.37


Walgreen
Co. Retirement Plan for Outside Directors, filed with the Securities and
Exchange Commission as Exhibit 10 to Walgreen Co.’s Annual Report on Form
10-K for the fiscal year ended August 31, 1989 (File No. 1-00604), and
incorporated by reference herein.

 
 
 
 

10.38


Walgreen
Section 162(m) Deferred Compensation Plan (effective October 12, 1994),
filed with the Securities and Exchange Commission as Exhibit 10(d) to
Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended
November 30, 1994 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.39


Walgreen
Section 162(m) Deferred Compensation Plan Amendment No. 1 (effective July
9, 2003), filed with the Securities and Exchange Commission as Exhibit
10(n) to Walgreen Co.’s Annual Report on Form 10-K for the fiscal year
ended August 31, 2003 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.40


Walgreen
Section 162(m) Deferred Compensation Plan Amendment No. 2 (effective
January 1, 2008), filed with the Securities and Exchange Commission as
Exhibit 10(a) to Walgreen Co.’s Quarterly Report on Form 10-Q for the
quarter ended November 30, 2007 (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.41


Walgreen
Co. Nonemployee Director Stock Plan, as amended and restated (effective
January 14, 2004), filed with the Securities and Exchange Commission as
Exhibit 10(a) to Walgreen Co.’s Quarterly Report on Form 10-Q for the
quarter ended February 29, 2004 (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.42


Walgreen
Co. Nonemployee Director Stock Plan Amendment No. 1 (effective October 12,
2005), filed with the Securities and Exchange Commission as Exhibit 10(a)
to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended
November 30, 2005 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.43


Walgreen
Co. Nonemployee Director Stock Plan Amendment No. 2 (effective October 11,
2006), filed with the Securities and Exchange Commission as Exhibit 10(f)
to Walgreen Co.’s Quarterly Report on Form 10-Q for the quarter ended
November 30, 2006 (File No. 1-00604), and incorporated by reference
herein.



 







14











































































































































































































 
 
 
 

10.44


Walgreen
Co. Option 3000 Plan (effective May 2, 2000), filed with the Securities
and Exchange Commission as Exhibit 10(e) to Walgreen Co.’s Quarterly
Report on Form 10-Q for the quarter ended February 28, 2003 (File No.
1-00604), and incorporated by reference herein.

 
 
 
 

10.45


Walgreen
Co. Option 3000 Plan Amendment No. 1 (effective October 11, 2006), filed
with the Securities and Exchange Commission as Exhibit 10(d) to Walgreen
Co.’s Quarterly Report on Form 10-Q for the quarter ended November 30,
2006 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.46


Walgreen
Co. Broad-Based Stock Option Plan (effective July 10, 2002), filed with
the Securities and Exchange Commission as Exhibit 10(p) to Walgreen Co.’s
Annual Report on Form 10-K for the fiscal year ended August 31, 2002 (File
No. 1-00604), and incorporated by reference herein.

 
 
 
 

10.47


Walgreen
Co. Broad-Based Employee Stock Option Plan Amendment No. 1 (effective
April 1, 2003), filed with the Securities and Exchange Commission as
Exhibit 10(c) to Walgreen Co.’s Quarterly Report on Form 10-Q for the
quarter ended May 31, 2003 (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.48


Walgreen
Co. Broad-Based Employee Stock Option Plan Amendment No. 2 (effective
October 11, 2006), filed with the Securities and Exchange Commission as
Exhibit 10(e) to Walgreen Co.’s Quarterly Report on Form 10-Q for the
quarter ended November 30, 2006 (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.49


Form
of Memorandum Summarizing Executive Retirement Benefits, filed with the
Securities and Exchange Commission as Exhibit 10(a) to Walgreen Co.’s
Quarterly Report on Form 10-Q for the fiscal quarter ended February 28,
2005 (File No. 1-00604), and incorporated by reference
herein.

 
 
 
 

10.50


Form
of Change of Control Employment Agreements, filed with the Securities and
Exchange Commission as Exhibit 10 to Walgreen Co.’s Current Report on Form
8-K dated October 18, 1988 (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.51


Amendment
to Employment Agreements adopted July 12, 1989, filed with the Securities
and Exchange Commission as Exhibit 10 to Walgreen Co.’s Annual Report on
Form 10-K for the fiscal year ended August 31, 1989 (File No. 1-00604),
and incorporated by reference herein.

 
 
 
 

10.52


Separation
and Release Agreement entered into between Walgreen Co. and Trent E.
Taylor, dated February 27, 2008, filed with the Securities and
Exchange Commission on March 4, 2008 as Exhibit 99.1 to Walgreen Co.’s
Current Report on Form 8-K (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

10.53


Retirement
and Non-Competition Agreement effective as of October 10, 2008 between
Jeffrey A. Rein and Walgreen Co., filed with the Securities and
Exchange Commission on October 17, 2008 as Exhibit 99.1 to Walgreen Co.’s
Current Report on Form 8-K (File No. 1-00604), and incorporated by
reference herein.

 
 
 
 

11.


The
required information for this Exhibit is contained in the Consolidated
Statements of Earnings and Shareholders Equity for the years ended August
31, 2008, 2007 and 2006 and also in the Notes to Consolidated Financial
Statements, each appearing in the Annual Report and previously referenced
in Part IV, Item 15, Section (a)(1).

 
 
 
 

12.


Computation
of Ratio of Earnings to Fixed Charges.

 
 
 
 

13.


Annual
Report to shareholders for the fiscal year ended August 31,
2008.  This report, except for those portions thereof which are
expressly incorporated by reference in this Form 10-K, is being furnished
for the information of the Securities and Exchange Commission and is not
deemed to be "filed" as a part of the filing of this Form
10-K.

 
 
 
 

21.


Subsidiaries
of the Registrant.

 
 
 
 

23.


Consent
of Independent Registered Accounting Firm.

 
 
 
 

31.1


Certification
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

 
 
 
 

31.2


Certification
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

 
 
 
 

32.1


Certification
of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

 
 
 
 

32.2


Certification
of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350.




 

 





 



15







 






WALGREEN CO. AND
SUBSIDIARIES



SCHEDULE II--VALUATION AND
QUALIFYING ACCOUNTS



FOR THE YEARS ENDED AUGUST
31, 2008, 2007 AND 2006



(Dollars
in Millions)
















































































































































































Classification

 
Balance
at Beginning of Period

   
Additions
Charged to Costs and Expenses

   
Deductions

   
Balance
at End of Period

 
 
                       
 
                       

Allowances
deducted from receivables for doubtful accounts -

                       
 
                       

          Year
Ended August 31, 2008

  $ 69     $ 88     $ (61 )   $ 96  
 
                               

          Year
Ended August 31, 2007

  $ 57     $ 72     $ (60 )   $ 69  
 
                               

Year
Ended August 31, 2006

  $ 45     $ 58     $ (46 )   $ 57  







 



16







 












REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





 

To the
Board of Directors and Shareholders of Walgreen Co.:

 

 

We have
audited the consolidated financial statements of Walgreen Co. and Subsidiaries
(the "Company") as of August 31, 2008 and 2007, and for each of the three years
in the period ended August 31, 2008, and the Company's internal control over
financial reporting as of August 31, 2008, and have issued our report thereon
dated October 28, 2008 (which report expresses an unqualified opinion and
includes an explanatory paragraph related to the adoption of Financial
Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109,
and Statement of
Financial Accounting Standards No. 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106, and 132(R)
); such consolidated financial statements and
report are included in your 2008 Annual Report to Shareholders and are
incorporated herein by reference.  Our audits also included the
consolidated financial statement schedule of the Company listed in Item
15.  This consolidated financial statement schedule is the responsibility
of the Company's management.  Our responsibility is to express an opinion
based on our audits.  In our opinion, such consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

 



/s/
DELOITTE & TOUCHE LLP



Chicago,
Illinois

October
28, 2008




 











 






SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) 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)

 
 
 
 
 
 
 

By

 
 
 
 
 
 


/s/


 


Wade
D. Miquelon


 

Senior
Vice President and

 

Date:
October 28, 2008

 
 

Wade
D. Miquelon

 

Chief
Financial Officer

 
 







 











 




SIGNATURES





Pursuant
to the requirements of the Securities and Exchange Act of 1934 this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.




















































































































































































































































































































































 
 

Name

 

Title

 

Date

             

/s/

 


Alan
G. McNally


 

Chairman
of the Board and

 

 
October 28, 2008

 
 

Alan
G. McNally

 

acting
Chief Executive Officer

 
 
 
 
 
 

(Principal
Executive Officer)

 
 
 
 
 
 
 
 
 

/s/

 


Wade
D. Miquelon


 

Senior
Vice President and

 
 
October 28, 2008
 
 

Wade
D. Miquelon

 

Chief
Financial Officer

 
 
 
 
 
 

(Principal
Financial

 
 
 
 
 
 

Officer)

 
 
 
 
 
 
 
 
 

/s/

 


Mia
M. Scholz


 

Vice
President and Controller

 
 
October 28, 2008
 
 

Mia
M. Scholz

 

(Principal
Accounting Officer)

 
 
 
 
 
 
 
 
 

/s/

 


William
C. Foote


 

Director

 
 
October 28, 2008
 
 

William
C. Foote

 
 
 
 
 
 
 
 
 
 
 

/s/

 


Cordell
Reed


 

Director

 
 
October 28, 2008
 
 

Cordell
Reed

 
 
 
 
 
 
 
 
 
 
 

/s/


 



Nancy
M. Schlichting


 

Director

 
 
October 28, 2008
 
 

Nancy
M. Schlichting

 
 
 
 
 
 
 
 
 
 
 

/s/

 


David
Y. Schwartz


 

Director

 
 
October 28, 2008
 
 

David
Y. Schwartz

 
 
 
 
 
 
 
 
 
 
 

/s/

 


Alejandro
Silva


 

Director

 
 
October 28, 2008
 
 

Alejandro
Silva

 
 
 
 
 
 
 
 
 
 
 

/s/

 


James
A. Skinner


 

Director

 
 
October 28, 2008
 
 

James
A. Skinner

 
 
 
 

 

 
 
 
 
 
 

/s/

 


Marilou
M. von Ferstel


 

Director

 
 
October 28, 2008
 
 

Marilou
M. von Ferstel

 
 
 
 
 
 
 
 
 
 
 

/s/

 


C.R.
Walgreen III


 

Director

 
 
October 28, 2008
 
 

C.R.
Walgreen III

 
 
 
 







 











 










EX-10.3
2
exhibit_10pt3.htm
MANAGEMENT INCENTIVE PLAN



exhibit_10pt3.htm




EXHIBIT 10.3


WALGREEN CO. MANAGEMENT
INCENTIVE PLAN

(As
amended and restated effective September 1, 2008)










1.


Purpose:  The
purpose of the Walgreen Co. Management Incentive Plan (the "Plan") is to
provide special incentive and motivation to management-level employees
through annual bonuses.












2.


Definitions:  Whenever
used in the Plan, the following terms shall have the meanings set forth
below, unless the context clearly provides
otherwise:












a.  


The
term "Base Salary" shall mean the base salary paid during the fiscal year
to a Participant, and any such base salary earned but deferred or reduced
pursuant to a Company Section 401(k) plan, or Section 125 plan, or another
Company deferral plan.  The term Base Salary does not include
any incentive or performance bonuses, Christmas bonus, stock purchase
discounts, or other fringe benefits or supplementary
remuneration.












b.  


The
term "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company.












c.  


The
term "Company" shall mean Walgreen Co., an Illinois corporation, and all
wholly-owned subsidiaries of Walgreen
Co.












d.  


The
term “Disability” shall mean total disability as determined by the
Committee, consistent with how the Company determines whether termination
of employment is upon disability for other benefit plan
purposes.












e.  


The
term "Employee" shall mean any employee of the Company, including, but not
limited to, the officers of Walgreen Co.  Employee shall not
include any person who is not classified as an employee in the common law
sense in the records of the Company, even if those records are
subsequently determined to have been in error or the person is
subsequently reclassified as an employee.  For example, no
person shall be considered to be an Employee for any period of time during
which he or she:  (1) is a leased employee; (2) is an
independent contractor; or (3) is otherwise not classified as an employee
in the records of the Company.












f.  


The
term "Extraordinary Items" shall mean significant transactions that are
different from the typical or customary business transactions and are not
expected to occur frequently as determined by the informed professional
judgment of the Chief Financial Officer of the Company after taking into
consideration all the facts involved in a particular situation and the
objectives of the Plan.












g.  


The
term "Individual Adjustment" shall mean the amount of any increase or
reduction in the bonus share that would otherwise be allocated to a
Participant.












h.  


The
term "Participant" shall mean any Employee who participates in and is
eligible to receive incentive compensation pursuant to paragraph 3 of the
Plan.












i.  


The
term "Plan Year" shall mean the fiscal year of Walgreen Co., which runs
from September 1 to the following August
31.












j.  


The
term “Retirement” shall
mean termination of employment from the Company in good standing, as
determined by the Committee or its delegates, and after having attained at
least age 55 and at least 10 years of continuous
service.












k.  


The
term "Salary Grade" shall mean the salary grades to which job positions
are assigned under the Walgreen Co. Salary Administration
Program.  To the extent such Program is revised, references
hereunder to Salary Grade and specific Salary Grade levels shall be
appropriately adjusted by the Committee or its delegates to reflect such
revised Program.












3.  


Eligibility and
Participation
:  The Committee shall have the authority
and discretion to determine the class or classes of Employees eligible to
participate in the Plan for any Plan Year.  As of the effective
date of this amended and restated Plan, the following categories of
Employees shall be eligible to participate in the
Plan:












a.  


Any
Employee whose job position is within Salary Grades 12 and above or their
equivalent and is not covered by another Company management incentive
plan; and












b.  


Any
other Employee who is approved for participation by the Committee, based
on the recommendation of Company management that he or she is in a
position to make a substantial contribution to the success of the Company
by exceptional service in a supervisory or staff
position.





The
Committee shall also have the authority to approve or deny Plan participation to
any individual Employee.  No Employee shall have a contractual right
to receive any incentive award or payment, as all awards and payments are
ultimately subject to the approval and authorization of the
Committee.










4.  


Determination of
Bonuses
:  Participant bonuses for each Plan Year shall be
determined as follows:












a.  


Prior
to the beginning of the Plan Year, or as early in the Plan Year as is
practical considering the circumstances, management will recommend for
Committee approval the bonus structure and accompanying details for that
Plan Year.  Such recommendation shall cover the following areas
and any other pertinent bonus
provisions:












(1)  


The
class or class of employees eligible to participate in the Plan for such
Plan Year.












(2)  


The
performance measure or measures upon which bonuses shall be based, and the
extent to which such measures shall be based on Company, division, or
business unit performance, or some combination thereof.  The
application of such performance measures may vary among different
categories of employees.












(3)  


Threshold,
target and maximum bonus levels (typically expressed as a percentage of
Base Salary), and the corresponding Company performance measure or
measures.  Such bonus levels may vary for different groups of
Participants as determined by the
Committee.












(4)  


Any
Individual Adjustments that may be applied, whether based on
pre-established individual performance measures or determined on a
discretionary basis.












b.  


After
the end of each Plan Year when the computations and accounting
determinations required to determine Plan bonuses have been completed, the
highest-ranking accounting officer of the Company will report to the
Committee that in his or her opinion those computations and accounting
determinations were made in reasonable accordance with the terms of the
Plan, and generally accepted accounting principles, subject to any
adjustments provided for under the terms of paragraph 4c of the Plan and
the certifications provided for under the terms of this paragraph
4b.












c.  


In
the event that the Company experiences any Extraordinary Items, the
Finance Committee of the Board of Directors will recommend to the
Committee, which will in turn make its recommendations to the full Board
of Directors, whether such Extraordinary Items will be included in or
excluded from the determination of the Company’s financial performance
measure or measures used in determining the bonus for the Plan Year, and a
report of the Board of Directors' decision will be delivered in writing to
the Chief Accounting Officer of the
Company.












d.  


The
bonuses earned by Participants under the terms of the Plan will be paid to
Participants after the first meeting of the Board of Directors which
follows the end of the applicable Plan Year, but in no event later than
the date by which such bonuses must be paid in order to be allowed as a
Federal income tax deduction for the fiscal year coinciding with such Plan
Year.












e.  


Except
as otherwise determined by the Committee or its delegates, bonuses for
Participants in salary grades 12 and 13 (or their equivalent) shall be a
portion of full bonuses for such Participants’ first and second years of
Plan participation, as follows:













 


(1)


One
third for the first full or partial Plan Year of participation;
and













 


(2)


Two
thirds for the second Plan Year of
participation.





For
purposes of the above, the following periods shall count for purposes of
determining years of Plan participation:











 


(3)


Periods
of Plan participation in Salary Grades 12 and
13;













 


(4)


Periods
of participation in other Company incentive plans;
and













 


(5)


Such
other periods of Company employment as determined by the Committee in its
discretion.












5.  


Participation for
Partial Plan Years
:












a.  


Any
Plan Participant whose employment with the Company terminates during a
Plan Year for reasons other than Retirement, Disability or death shall not
be eligible for a bonus for that Plan Year.  It is not intended
that this paragraph of the Plan shall prohibit Company management from
recommending to the Committee for its approval a discretionary bonus if in
the sole judgment of management such a discretionary bonus is
warranted.












b.  


A
Participant who is eligible for a bonus hereunder for a portion of a Plan
Year (due to hire, promotion or transfer during that Plan Year), shall
generally be eligible for a bonus under this Plan based on Base Salary
earned during the eligible portion of the Plan
Year.  Notwithstanding the foregoing, the bonus amount payable
to a Participant who is hired within the Plan Year, moves to a different
bonusable grade level during the Plan Year, or receives payment under
another Company incentive plan during the current or prior year, shall be
subject to the discretion of the Committee and its
delegates.












c.  


Subject
to the end-of-year employment requirement set forth in paragraph 5a above,
a Plan Participant who is on a Company-approved leave of absence for a
portion of a Plan Year shall remain eligible for a bonus for up to the
first six months of such leave of absence.  Any short-term
disability pay during any such leave of absence shall be included in such
Participant’s bonusable Base
Salary.












6.  


Administration.  Subject
to the terms of the Plan and the powers granted to the full Board of
Directors, the Committee has ultimate authority and responsibility for the
administration of the Plan.  The Committee shall have all powers
necessary to administer the Plan, including, without limitation, the power
to interpret the provisions of the Plan, to decide all questions of
eligibility, to establish rules and forms for the administration of the
Plan, and to delegate specific duties and responsibilities to officers or
other employees of the Company.  All determinations,
interpretations, rules, and decisions of the Committee with respect to any
question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and regulations
promulgated hereunder shall be final, conclusive and binding upon all
persons having or claiming to have any interest or right under the
Plan.












7.  


Indemnification.  The
Company shall indemnify the members of the Committee, the other members of
the Board of Directors and all Company officers and other employees
responsible for administering the Plan against any and all liabilities
arising by reason of any act or failure to act made in good faith in
accordance with the provisions of the Plan.  For this purpose,
liabilities include expenses reasonably incurred in the defense of any
claim relating to the Plan.












8.  


Amendment and
Termination
.  The Plan may be amended from time to time
or terminated at any time by the Board of Directors of Walgreen
Co.












9.  


General Plan
Provisions
:












a.  


Nothing
in this Plan is intended to limit the authority of the Committee to award
additional discretionary bonuses to one or more senior executives of the
Company as the Committee deems appropriate from time to
time.












b.  


The
impact of the payment of bonuses under the Plan on Participants’ other
Company employee benefits shall be based on the governing terms of such
other employee benefit plans and programs, or as determined by the
Committee or its delegates, where
necessary.












c.  


Neither
the existence of the Plan nor any substantive aspect of the Plan shall
give any Participant the right to continued employment with the Company
for any period of time or shall interfere with the right of the Company to
discipline or discharge a Participant at any
time.












d.  


The
Company shall withhold from any bonus payment made pursuant to the Plan
any taxes required to be withheld from such payment under local, state or
federal law.












e.  


Bonuses
otherwise payable hereunder may be paid on a deferred basis pursuant to
the Walgreen Co. Section 162(m) Deferred Compensation Plan or pursuant to
any other deferred compensation program that may be implemented with
Committee approval in compliance with the requirements of Internal Revenue
Code Section 409A and the regulations
thereunder.












f.  


The
Company shall not be required to fund or otherwise segregate any cash or
other assets for purposes of meeting its obligations under the
Plan.












g.  


The
provisions of the Plan shall be construed and interpreted according to the
laws of the State of Illinois, except as preempted by federal
law.












h.  


A
Participant shall not have any right to pledge, hypothecate, anticipate or
in any way create a lien upon any amounts provided under this Plan and no
benefits payable hereunder shall be assignable in anticipation of payment
either by voluntary or involuntary acts, or by operation of
law.












i.  


The
Plan shall be binding upon the Company and any successor of the Company,
including without limitation any corporation or other entity acquiring
directly or indirectly all or substantially all of the assets of the
Company whether by merger, consolidation, sale or
otherwise.  Such successor shall thereafter be deemed the
"Company" for the purposes of the
Plan.












EX-10.11
3
exhibit_10pt11.htm
STOCK OPTION AGREEMENT (GRADES 12-17)



exhibit_10pt11.htm




EXHIBIT 10.11


SAMPLE – Executive Plan –
Grades 12-17





WALGREEN
CO.

EXECUTIVE
STOCK OPTION PLAN - STOCK OPTION AGREEMENT



Employee
(the "Optionee"):  «First» «MI» «Last»

Social
Security No.:  «SSN2»

Date of
Grant:  «Grant_Date»

Expiration
Date:  «Expiration_Date»

Number of
Shares Optioned:  «Opts»

Option
Price Per Share of Common Stock:  «OptPrice»



This
document (referred to below as this “Agreement” or this “Option Agreement”)
spells out the terms and conditions of the stock option granted by Walgreen Co., an
Illinois corporation (the “Company”), to the individual employee designated
above (the “Employee”) pursuant to the Walgreen Co. Executive Stock Option Plan
(the “Plan”) on and as of the Date of Grant designated above.  Except
as otherwise defined herein, capitalized terms used in this Option Agreement
have the respective meanings set forth in the Plan.  The Plan, as in
effect on the date of this Option Agreement and as it may be amended from time
to time, is incorporated in this Option Agreement by reference, and all rights
granted by this Option Agreement are subject to the terms and conditions of the
Plan.



1.         Grant of Stock
Option
.  The Company hereby grants to the Optionee a stock
option to purchase all or any part of the Number of Shares set forth above of
Common Stock of the Company, par value $.078125 ("Common Stock"), at the Option
Price set forth above, which is 100% of the fair market value of such Common
Stock on the Date of Grant, in the manner and subject to the terms and
conditions of the Plan and this Option Agreement.  This stock option
is intended to be a "non-qualified stock option" and shall not be treated as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended.



2.         Vesting/Exercise/Expiration.  The
Optionee may not exercise the stock option granted prior to the “Vesting Date,”
which is the three-year anniversary of the Date of Grant, absent action by the
Compensation Committee of the Board of Directors to waive or alter such
restrictions.  Thereafter, except as hereinafter provided, the
Optionee may exercise the stock option granted herein at any time and from time
to time until the close of business on the Expiration Date set forth
above.  The stock option granted herein may be exercised to purchase
any number of whole shares of Common Stock, except that no purchase shall be for
less than ten (10) full shares, or the remaining unexercised shares, if
less.  This stock option is deemed to be "outstanding" until it has
been exercised in full or expired pursuant to the terms of this Option
Agreement.



3.         Retirement After 10 (but
Less than 25) Years of Service
.  If, without having fully
exercised this stock option, the Optionee leaves the employ of the Company (or a
subsidiary of the Company if the Optionee is then in the employ of such
subsidiary), in good standing, after the employee has attained fifty-five (55)
years of age and has completed at least ten (10) but less than twenty-five (25)
years of continuous service with the Company and subsidiaries of the Company,
then the Optionee's right to exercise this stock option shall terminate upon the
earlier of the Expiration Date or a date which is one year following the
Optionee’s retirement, subject to the right of the Compensation Committee of the
Board of Directors to extend the exercise period of this stock
option.  The Optionee may exercise this stock option at any time
between the Vesting Date and the date the Optionee’s right to exercise this
stock option expires.



4.         Retirement After 25 Years of
Service
.  If, without having fully exercised this stock option,
the Optionee leaves the employ of the Company (or a subsidiary of the Company if
the Optionee is then in the employ of such subsidiary), in good standing, after
the employee has attained fifty-five (55) years of age and has completed at
least twenty-five (25) years of continuous service with the Company and
subsidiaries of the Company, then the following shall apply:



a.          Subject
to the last sentence of this Section 4, if such retirement occurs prior to the
Vesting Date, then the Optionee may exercise this stock option at any time
between the Vesting Date and the later of one year following the date of
retirement or 150 days following the Vesting Date, at which time this stock
option shall expire, subject to the right of the Compensation Committee of the
Board of Directors to extend the exercise period of this stock
option.



b.          If
such retirement occurs on or after the Vesting Date, then the provisions of
Section 3 above shall apply.



For
purposes of subsection (a) above, if the Optionee’s date of retirement (which is
defined per Company practices as his or her “paid-through date”) is less than 12
months following the Date of Grant, then the maximum number of shares that may
be exercised pursuant to subsection (a) shall be equal to the total Number of
Shares referenced in Section 1 above, multiplied by the number of days between
the Date of Grant and the date of retirement, divided by 365; and the remaining
shares shall be forfeited.



5.         Disability.  If,
without having fully exercised this stock option, the Optionee's employment with
the Company (or a subsidiary of the Company if the Optionee is then in the
employ of such subsidiary) is terminated due to total and permanent disability
(as determined by the Compensation Committee of the Board of Directors or its
designee), then the Optionee's right to exercise this stock option shall
terminate upon the earlier of the Expiration Date or a date which is one year
following the date of termination of employment, subject to the right of the
Compensation Committee of the Board of Directors to extend the exercise period
of this stock option.  The Optionee may exercise this stock option at
any time between the Vesting Date and the date the Optionee’s right to exercise
this stock option expires.



6.         Death.  If,
without having fully exercised this stock option, the Optionee shall die while
in the employ of the Company (or a subsidiary of the Company if the Optionee is
then in the employ of such subsidiary), then this stock option shall be
exercisable by the executor or administrator of the Optionee's estate or by such
person or persons who shall have acquired the Optionee's rights hereunder by
bequest or inheritance or by reason of his or her death, for a period ending on
the earlier of the Expiration Date or one year following the date of the
Optionee's death, subject to the right of the Compensation Committee of the
Board of Directors to extend the exercise period of this stock
option.  This stock option may be exercised at any time between the
Vesting Date and the date the right to exercise this stock option
expires.



7.         Other Termination of
Employment
.  If, without having fully exercised this stock
option, the Optionee's employment with the Company (or a subsidiary of the
Company if the Optionee is then in the employ of such subsidiary) is terminated
for reasons other than the Optionee’s retirement (as defined in Section 3 or 4
above), death, or total and permanent disability (as defined in Section 5
above), then the Optionee's right to exercise this stock option shall terminate
as of the date of his or her termination of employment, subject to the right of
the Compensation Committee of the Board of Directors to extend the exercise
period of this stock option.



8.         Disqualifying
Termination
.  Notwithstanding any other provision of this
Option Agreement to the contrary, if without having fully exercised this stock
option, the Optionee’s employment with the Company (or a subsidiary of the
Company if the Optionee is then in the employ of such subsidiary) is terminated
for Cause, then the Optionee’s rights to exercise this stock option shall
terminate immediately.  For purposes of this Option Agreement, “Cause”
shall mean: (a) any act or acts of dishonesty committed by the Optionee; or (b)
any violation of the policies or procedures of the Company applicable to the
Optionee’s employment or job category which is either: (i) grossly negligent; or
(ii) willful and deliberate. The determination of
whether the Optionee’s employment has been terminated for Cause shall be within
the discretion of the Compensation Committee of the Board of Directors or its
designee.



9.         Forfeiture of Outstanding
Options Following Termination of Employment
.  Notwithstanding
the remainder of this Option Agreement, the Optionee’s remaining right, if any,
to exercise stock options covered by this Option Agreement shall immediately
terminate if and when the Optionee violates any post-employment obligation that
he or she may have to the Company, including but not limited to any
non-competition, non-solicitation, confidentiality, non-disparagement or other
restrictive covenant.



10.         Limited
Transferability
.  This stock option is nonassignable and not
transferable other than by beneficiary designation, by will or by the laws of
descent and distribution.  During the lifetime of the Optionee this
stock option and all rights granted hereunder shall be exercisable only by the
Optionee.  Notwithstanding the foregoing, transfers by the Optionee of
options 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, as amended, for the benefit of the Optionee or a
person or persons who are members of the Optionee's 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 Compensation Committee of the
Board of Directors or its designee that such transfer occurred without any
payment of consideration for such transfer.



11.         Change in Common
Stock
.  In the event of any change in Common Stock by reason of
any stock dividend, recapitalization, reorganization, split-up, merger,
consolidation, exchange of shares, or of any similar change affecting Common
Stock, the number of shares of Common Stock subject to this stock option and the
Option Price shall be equitably adjusted by the Compensation Committee of the
Board of Directors.



12.         Exercise
Process
.  This stock option may be exercised by giving written
notice to Walgreen Co., Attention: Finance Department, Corporate Offices, 200
Wilmot Road, MS 2261, Deerfield, Illinois 60015 (or such other address as may be
specified by the Company to the Optionee).  Alternatively, the Company
may designate one or more third parties to administer the stock option exercise
process and direct the Optionee accordingly.  Such notice (a) shall be
signed by the Optionee or (in the event of his or her death) the Optionee’s
legal representative, (b) shall specify the number of full shares then elected
to be purchased, and (c) shall be accompanied by payment in full of the Option
Price of the shares to be purchased.  Payment may be made in cash or
by check payable to the order of the Company, and such payment shall include any
tax withholding obligation, as set forth in Section 13
below.  Alternatively, the Company may allow for one or more of the
following methods of exercising stock options:



a.          Payment
for shares as to which this stock option is being exercised and/or payment of
any federal, state, local or other tax withholding obligations may be made by
transfer to the Company of shares of Common Stock already owned by the Optionee,
or any combination of such shares and cash, having a fair market value
determined at the close of business on the date of stock option exercise equal
to, but not exceeding, the Option Price and/or the tax withholding obligation,
as the case may be.



b.          The
Company may also allow for “same day sale” transactions pursuant to which a
third party (engaged by the Company or the Optionee) loans funds to the Optionee
to enable the Optionee to purchase the shares and pay any tax withholding
obligations, and then sells a sufficient number of the exercised shares on
behalf of the Optionee to enable the Optionee to repay the loan and any
fees.  The remaining shares and/or cash are then issued by the third
party to the Optionee.



As
promptly as practicable after receipt of such notice and payment (including
payment with respect to any tax withholding obligations), the Company shall
cause to be issued and delivered to the Optionee or in the event of his or her
death to the Optionee’s legal representative, as the case may be, certificates
for the shares of Common Stock so purchased.  Alternatively, such
shares may be issued and held in book entry form.



13.         Tax
Withholding
.  The Company may make such provisions and take
such actions as it may deem necessary or appropriate for the withholding of any
Federal, state, local and other taxes required by law to be withheld with
respect to this stock option, including, but not limited to, deducting the
amount of any such withholding taxes from the amount to be paid hereunder,
whether in Common Stock or in cash, or from any other amount then or thereafter
payable to the Optionee, or requiring the Optionee, his or her beneficiary, or
legal representative to pay to the Company the amount required to be withheld or
to execute such documents as the Compensation Committee of the Board of
Directors or its designee deems necessary or desirable to enable the Company to
satisfy its withholding obligations.



14.         Rights as
Shareholder
.  The Optionee shall have no rights as a
shareholder of the Company with respect to the shares of Company Common Stock
subject to this Option Agreement until such time as the purchase price has been
paid and a certificate of stock for such shares has been issued to the
Optionee.  Except as provided in Section 11 above, no adjustment shall
be made for dividends or distributions or other rights with respect to such
shares for which the record date is prior to the date on which the Optionee
becomes the holder of record thereof.  Anything herein to the contrary
notwithstanding, if a law or any regulation of the Securities and Exchange
Commission or of any other body having jurisdiction shall require the Company or
the Optionee to take any action before shares of Common Stock can be delivered
to the Optionee hereunder, then the date of delivery of such shares may be
delayed accordingly.



15.         No Guarantee of
Employment
.  Nothing in this Option Agreement shall interfere
with or limit in any way the right of the Company or any of its subsidiaries to
terminate any Optionee's employment at any time, nor confer upon any employee
any right to continue in the employ of the Company or any of its
subsidiaries.  No employee shall have a right to be selected as an
Optionee.



16.         Option Plan/Compensation
Committee
.  This Option Agreement and the rights of the
Optionee hereunder are subject to all the terms and conditions of the Plan, as
the same may be amended from time to time, as well as to such rules and
regulations as the Compensation Committee of the Board of Directors may adopt
for administration of the Plan.  It is expressly understood that the
Compensation Committee is authorized to administer, construe, and make all
determinations necessary or appropriate for the administration of the Plan and
this Option Agreement, all of which shall be binding upon the
Optionee.  Any inconsistency between this Option Agreement and the
Plan shall be resolved in favor of the Plan.



17.         Governing
Law
.  Subject to Section 18 below, the stock option covered by
this Option Agreement, this Option Agreement and all determinations made and
actions taken pursuant thereto, to the extent otherwise not governed by the
Internal Revenue Code of 1986, as amended, or any other laws of the United
States, shall be governed by and construed in accordance with the laws of the
State of Illinois.



18.         Conformity with Applicable
Law
.  If any provision of this Option Agreement is determined
to be invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of any other provision
of this Option Agreement or the validity, legality or enforceability of such
provision in any other jurisdiction, but this Option Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.



19.         Successors.  This
Option Agreement shall be binding upon and inure to the benefit of any successor
or successors of the Company and any person or persons who shall, upon the death
of the Optionee, acquire any rights
hereunder.










EX-10.12
4
exhibit_10pt12.htm
STOCK OPTION AGREEMENT (GRADES 18+)



exhibit_10pt12.htm




EXHIBIT 10.12


SAMPLE – Executive Plan –
Grades 18+





WALGREEN
CO.

EXECUTIVE
STOCK OPTION PLAN - STOCK OPTION AGREEMENT



Employee
(the "Optionee"):  «First» «MI» «Last»

Social
Security No.:  «SSN2»

Date of
Grant:  «Grant_Date»

Expiration
Date:  «Expiration_Date»

Number of
Shares Optioned:  «Opts»

Option
Price Per Share of Common Stock:  «OptPrice»



This
document (referred to below as this “Agreement” or this “Option Agreement”)
spells out the terms and conditions of the stock option granted by Walgreen Co., an
Illinois corporation (the “Company”), to the individual employee designated
above (the “Employee”) pursuant to the Walgreen Co. Executive Stock Option Plan
(the “Plan”) on and as of the Date of Grant designated above.  Except
as otherwise defined herein, capitalized terms used in this Option Agreement
have the respective meanings set forth in the Plan.  The Plan, as in
effect on the date of this Option Agreement and as it may be amended from time
to time, is incorporated in this Option Agreement by reference, and all rights
granted by this Option Agreement are subject to the terms and conditions of the
Plan.



1.         Grant of Stock
Option
.  The Company hereby grants to the Optionee a stock
option to purchase all or any part of the Number of Shares set forth above of
Common Stock of the Company, par value $.078125 ("Common Stock"), at the Option
Price set forth above, which is 100% of the fair market value of such Common
Stock on the Date of Grant, in the manner and subject to the terms and
conditions of the Plan and this Option Agreement.  This stock option
is intended to be a "non-qualified stock option" and shall not be treated as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended.



2.         Vesting/Exercise/Expiration.  The
Optionee may not exercise the stock option granted prior to the “Vesting Date,”
which is the three-year anniversary of the Date of Grant, absent action by the
Compensation Committee of the Board of Directors to waive or alter such
restrictions.  Thereafter, except as hereinafter provided, the
Optionee may exercise the stock option granted herein at any time and from time
to time until the close of business on the Expiration Date set forth
above.  The stock option granted herein may be exercised to purchase
any number of whole shares of Common Stock, except that no purchase shall be for
less than ten (10) full shares, or the remaining unexercised shares, if
less.  This stock option is deemed to be "outstanding" until it has
been exercised in full or expired pursuant to the terms of this Option
Agreement.



3.          Retirement.  Subject
to the last sentence of this Section 3, if, without having fully exercised this
stock option, the Optionee retires, or is retired, from the employ of the
Company (or a subsidiary of the Company if the Optionee is then in the employ of
such subsidiary) then the Optionee's right to exercise this stock option shall
terminate upon the earlier of the Expiration Date or a date which is sixty (60)
months following the Optionee's retirement.  For purposes of this
section, retirement shall be defined as a cessation of employment, in good
standing, after the employee has attained fifty-five (55) years of age and has
completed at least ten (10) years of continuous service with the
Company.  The foregoing shall apply regardless of whether such
retirement occurs before or after the Vesting Date.  For purposes of
this Section 3, if the Optionee’s date of retirement (which is defined per
Company practices as his or her “paid-through date”) is less than 12 months
following the Date of Grant, then the maximum number of shares that may be
exercised pursuant to this Section 3 shall be equal to the total Number of
Shares referenced in Section 1 above, multiplied by the number of days between
the Date of Grant and the date of retirement, divided by 365; and the remaining
shares shall be forfeited.





4.         Disability.  If,
without having fully exercised this stock option, the Optionee's employment with
the Company (or a subsidiary of the Company if the Optionee is then in the
employ of such subsidiary) is terminated due to total and permanent disability
(as determined by the Compensation Committee of the Board of Directors or its
designee), then the Optionee's right to exercise this stock option shall
terminate upon the earlier of the Expiration Date or a date which is sixty (60)
months following the date of termination of employment.  The Optionee
may exercise this stock option at any time between the Vesting Date and the date
the Optionee’s right to exercise this stock option expires.



5.         Death.  If,
without having fully exercised this stock option, the Optionee shall die while
in the employ of the Company (or a subsidiary of the Company if the Optionee is
then in the employ of such subsidiary), then this stock option shall be
exercisable by the executor or administrator of the Optionee's estate or by such
person or persons who shall have acquired the Optionee's rights hereunder by
bequest or inheritance or by reason of his or her death, for a period ending on
the earlier of the Expiration Date or sixty (60) months following the date of
the Optionee's death.  This stock option may be exercised at any time
between the Vesting Date and the date the right to exercise this stock option
expires.



6.         Other Termination of
Employment
.  If, without having fully exercised this stock
option, the Optionee's employment with the Company (or a subsidiary of the
Company if the Optionee is then in the employ of such subsidiary) is terminated
for reasons other than the Optionee’s retirement (as defined in Section 3
above), death, or total and permanent disability (as defined in Section 4
above), then the Optionee's right to exercise this stock option shall terminate
as of the date of his or her termination of employment, subject to the right of
the Compensation Committee of the Board of Directors to extend the exercise
period of this stock option.



7.         Disqualifying
Termination
.  Notwithstanding any other provision of this
Option Agreement to the contrary, if without having fully exercised this stock
option, the Optionee’s employment with the Company (or a subsidiary of the
Company if the Optionee is then in the employ of such subsidiary) is terminated
for Cause, then the Optionee’s rights to exercise this stock option shall
terminate immediately.  For purposes of this Option Agreement, “Cause”
shall mean: (a) any act or acts of dishonesty committed by the Optionee; or (b)
any violation of the policies or procedures of the Company applicable to the
Optionee’s employment or job category which is either: (i) grossly negligent; or
(ii) willful and deliberate. The determination of
whether the Optionee’s employment has been terminated for Cause shall be within
the discretion of the Compensation Committee of the Board of Directors or its
designee.



8.         Forfeiture of Outstanding
Options Following Termination of Employment
.  Notwithstanding
the remainder of this Option Agreement, the Optionee’s remaining right, if any,
to exercise stock options covered by this Option Agreement shall immediately
terminate if and when the Optionee violates any post-employment obligation that
he or she may have to the Company, including but not limited to any
non-competition, non-solicitation, confidentiality, non-disparagement or other
restrictive covenant.



9.         Limited
Transferability
.  This stock option is nonassignable and not
transferable other than by beneficiary designation, by will or by the laws of
descent and distribution.  During the lifetime of the Optionee this
stock option and all rights granted hereunder shall be exercisable only by the
Optionee.  Notwithstanding the foregoing, transfers by the Optionee of
options 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, as amended, for the benefit of the Optionee or a
person or persons who are members of the Optionee's 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 Compensation Committee of the
Board of Directors or its designee that such transfer occurred without any
payment of consideration for such transfer.



10.         Change in Common
Stock
.  In the event of any change in Common Stock by reason of
any stock dividend, recapitalization, reorganization, split-up, merger,
consolidation, exchange of shares, or of any similar change affecting Common
Stock, the number of shares of Common Stock subject to this stock option and the
Option Price shall be equitably adjusted by the Compensation Committee of the
Board of Directors.



11.         Exercise
Process
.  This stock option may be exercised by giving written
notice to Walgreen Co., Attention: Finance Department, Corporate Offices, 200
Wilmot Road, MS 2261, Deerfield, Illinois 60015 (or such other address as may be
specified by the Company to the Optionee).  Alternatively, the Company
may designate one or more third parties to administer the stock option exercise
process and direct the Optionee accordingly.  Such notice (a) shall be
signed by the Optionee or (in the event of his or her death) the Optionee’s
legal representative, (b) shall specify the number of full shares then elected
to be purchased, and (c) shall be accompanied by payment in full of the Option
Price of the shares to be purchased.  Payment may be made in cash or
by check payable to the order of the Company, and such payment shall include any
tax withholding obligation, as set forth in Section 12
below.  Alternatively, the Company may allow for one or more of the
following methods of exercising stock options:



a.          Payment
for shares as to which this stock option is being exercised and/or payment of
any federal, state, local or other tax withholding obligations may be made by
transfer to the Company of shares of Common Stock already owned by the Optionee,
or any combination of such shares and cash, having a fair market value
determined at the close of business on the date of stock option exercise equal
to, but not exceeding, the Option Price and/or the tax withholding obligation,
as the case may be.



b.          The
Company may also allow for “same day sale” transactions pursuant to which a
third party (engaged by the Company or the Optionee) loans funds to the Optionee
to enable the Optionee to purchase the shares and pay any tax withholding
obligations, and then sells a sufficient number of the exercised shares on
behalf of the Optionee to enable the Optionee to repay the loan and any
fees.  The remaining shares and/or cash are then issued by the third
party to the Optionee.



As
promptly as practicable after receipt of such notice and payment (including
payment with respect to any tax withholding obligations), the Company shall
cause to be issued and delivered to the Optionee or in the event of his or her
death to the Optionee’s legal representative, as the case may be, certificates
for the shares of Common Stock so purchased.  Alternatively, such
shares may be issued and held in book entry form.



12.         Tax
Withholding
.  The Company may make such provisions and take
such actions as it may deem necessary or appropriate for the withholding of any
Federal, state, local and other taxes required by law to be withheld with
respect to this stock option, including, but not limited to, deducting the
amount of any such withholding taxes from the amount to be paid hereunder,
whether in Common Stock or in cash, or from any other amount then or thereafter
payable to the Optionee, or requiring the Optionee, his or her beneficiary, or
legal representative to pay to the Company the amount required to be withheld or
to execute such documents as the Compensation Committee of the Board of
Directors or its designee deems necessary or desirable to enable the Company to
satisfy its withholding obligations.



13.         Rights as
Shareholder
.  The Optionee shall have no rights as a
shareholder of the Company with respect to the shares of Company Common Stock
subject to this Option Agreement until such time as the purchase price has been
paid and a certificate of stock for such shares has been issued to the
Optionee.  Except as provided in Section 10 above, no adjustment shall
be made for dividends or distributions or other rights with respect to such
shares for which the record date is prior to the date on which the Optionee
becomes the holder of record thereof.  Anything herein to the contrary
notwithstanding, if a law or any regulation of the Securities and Exchange
Commission or of any other body having jurisdiction shall require the Company or
the Optionee to take any action before shares of Common Stock can be delivered
to the Optionee hereunder, then the date of delivery of such shares may be
delayed accordingly.



14.         No Guarantee of
Employment
.  Nothing in this Option Agreement shall interfere
with or limit in any way the right of the Company or any of its subsidiaries to
terminate any Optionee's employment at any time, nor confer upon any employee
any right to continue in the employ of the Company or any of its
subsidiaries.  No employee shall have a right to be selected as an
Optionee.



15.         Option Plan/Compensation
Committee
.  This Option Agreement and the rights of the
Optionee hereunder are subject to all the terms and conditions of the Plan, as
the same may be amended from time to time, as well as to such rules and
regulations as the Compensation Committee of the Board of Directors may adopt
for administration of the Plan.  It is expressly understood that the
Compensation Committee is authorized to administer, construe, and make all
determinations necessary or appropriate for the administration of the Plan and
this Option Agreement, all of which shall be binding upon the
Optionee.  Any inconsistency between this Option Agreement and the
Plan shall be resolved in favor of the Plan.



16.         Governing
Law
.  Subject to Section 17 below, the stock option covered by
this Option Agreement, this Option Agreement and all determinations made and
actions taken pursuant thereto, to the extent otherwise not governed by the
Internal Revenue Code of 1986, as amended, or any other laws of the United
States, shall be governed by and construed in accordance with the laws of the
State of Illinois.



17.         Conformity with Applicable
Law
.  If any provision of this Option Agreement is determined
to be invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of any other provision
of this Option Agreement or the validity, legality or enforceability of such
provision in any other jurisdiction, but this Option Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.



18.         Successors.  This
Option Agreement shall be binding upon and inure to the benefit of any successor
or successors of the Company and any person or persons who shall, upon the death
of the Optionee, acquire any rights
hereunder.










EX-10.13
5
exhibit_10pt13.htm
RESTRICTED STOCK UNIT AGREEMENT



exhibit_10pt13.htm






EXHIBIT 10.13

WALGREEN
CO.

LONG-TERM
PERFORMANCE INCENTIVE PLAN



RESTRICTED
STOCK UNIT AWARD AGREEMENT





EMPLOYEE:  __________________



AWARD DATE:  >__________________



TOTAL
NUMBER OF RESTRICTED STOCK UNITS:  _________



VESTING
DATE:  [Third anniversary of Award Date]





This document (referred to below as the
“Agreement” or the “Award Agreement”) spells out the terms and conditions of the
Restricted Stock Unit Award provided by Walgreen Co., an
Illinois corporation (the “Company”), to the individual employee designated
above (the “Employee”) pursuant to the Walgreen Co. Long-Term Performance
Incentive Plan and related plan documents (the “Plan”) on and as of the Award
Date designated above.  Except as otherwise defined herein,
capitalized terms used in this Agreement have the respective meanings set forth
in the Plan.



The
parties hereto agree as follows:



1. Grant of Restricted Stock
Units
.  Pursuant to the approval and direction of the
Compensation Committee of the Company’s Board of Directors (the “Committee”)
under Sections 3.2, 5 and 6 of the Plan, the Company hereby grants to the
Employee, the number of restricted stock units specified above (the “Restricted
Stock Units”), subject to the terms and conditions of the Plan and this
Agreement.

 

2. Restrictions.  The
Restricted Stock Units may not be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated, whether voluntarily or involuntarily or by
operation of law.  The Employee shall have no rights in the shares of
Company common stock (the “Common Stock”) underlying the Restricted Stock Units
until the termination of the applicable Period of Restriction (as defined in
Section 4 below) or as otherwise provided in the Plan or this
Agreement.  The Employee shall not have any voting rights with respect
to the Restricted Stock Units.

 

3. Restricted Stock Unit
Account and Dividend Equivalents
.  The Company shall maintain
an account (the “Account”) on its books in the name of the
Employee.  Such Account shall reflect the number of Restricted Stock
Units awarded to the Employee as well as any additional Restricted Stock Units
credited as a result of dividend equivalents, administered as
follows:

 

(a) The
Account shall be for recordkeeping purposes only, and no assets or other amounts
shall be set aside from the Company’s general assets with respect to such
Account.

 

(b) As of
each record date with respect to which a cash dividend is to paid with respect
to shares of Common Stock, the Company shall credit the Employee’s Account with
an equivalent amount of Restricted Stock Units based upon the value of Common
Stock on such date.

 

(c) If
dividends are paid in the form of shares of Common Stock rather than cash, then
the Employee will be credited with one additional Restricted Stock Unit for each
share of Common Stock that would have been received as a dividend had the
Employee’s outstanding Restricted Stock Units been shares of Common
Stock.

 

(d) Additional
Restricted Stock Units credited via dividend equivalents shall vest or be
forfeited at the same time as the Restricted Stock Units to which they
relate.

 

4. Period of
Restriction
.  Subject to the provisions of the Plan and this
Agreement, unless vested or forfeited earlier as described in Section 5, 6, 7 or
8 of this Agreement, as applicable, the Restricted Stock Units awarded hereunder
shall become vested and settled as described in Section 9 below, as of the
vesting date or dates indicated in the introduction to this
Agreement.  The period prior to the vesting date with respect each
Restricted Stock Unit is referred to as the “Period of
Restriction.”

 

5. Vesting upon Termination due
to Disability or Death
.  If, while the Restricted Stock Units
are subject to a Period of Restriction, the Employee terminates employment with
the Company (or a Subsidiary of the Company if the Employee is then in the
employ of such Subsidiary) by reason of Disability (as defined in the Plan) or
death, then any portion of the Restricted Stock Units subject to a Period of
Restriction shall become fully vested as of the date of employment termination
without regard to the Period of Restriction set forth in Section 4 of this
Agreement.  The term “Subsidiary” is defined in the Plan and means a
corporation with respect to which the Company directly or indirectly owns 50% or
more of the voting power.

 

6. Vesting upon Termination due
to Retirement
.  If, while the Restricted Stock Units are
subject to a Period of Restriction, the Employee terminates employment with the
Company (or a Subsidiary of the Company if the Employee is then in the employ of
such Subsidiary) by reason of Retirement (as defined in the Plan), then a
pro-rated portion of the Restricted Stock Units subject to a Period of
Restriction shall become fully vested as of the date of employment termination
without regard to the Period of Restriction set forth in Section 4 of this
Agreement.  Such pro-rated portion shall equal the number of
Restricted Stock Units, multiplied by a fraction equal to the number of full
months completed between the Award Date and the Employee’s retirement date,
divided by the number of full months from the Award Date through the Vesting
Date.  The remaining Restricted Stock Units shall be forfeited as of
the Employee’s termination of employment due to Retirement.

 

7. Forfeiture upon Termination
due to Reason other than Retirement, Disability or Death
.  If,
while the Restricted Stock Units are subject to a Period of Restriction, the
Employee’s employment with the Company (or a Subsidiary of the Company if the
Employee is then in the employ of such Subsidiary) terminates for a reason other
than the Employee’s Retirement, Disability or death, then the Employee shall
forfeit any portion of the Restricted Stock Units that is subject to a Period of
Restriction on the date of such employment termination.

 

8. Vesting upon Change in
Control
.  In the event of a “Change in Control” of the Company,
as defined in Section 11.2 of the Plan, pursuant to Section 11.1 of the Plan the
Restricted Stock Units shall cease to be subject to the Period of Restriction
set forth in Section 4 of this Agreement.  To the extent the
Restricted Stock Units are deemed deferred compensation subject to Internal
Revenue Code Section 409A, a Change in Control shall not be deemed to have
occurred for purposes of this Agreement unless the underlying transaction or
transactions constitute a qualifying change in control in accordance with the
definition set forth in Code Section 409A and the regulations issued
thereunder.

 

9. Settlement of Vested
Restricted Stock Units
.  Subject to the requirements of
Sections 12 and 13 below, as promptly as practicable after Restricted Stock
Units cease to be subject to a Period of Restriction in accordance with Section
4, 5, or 6 of this Agreement, the Company shall transfer to the Employee one
share of Common Stock for each Restricted Stock Unit becoming vested at such
time; provided, however, the Company may withhold shares otherwise transferable
to the Employee to the extent necessary to satisfy withholding taxes in
accordance with Section 12 below.  The Employee shall have no rights
as a stockholder with respect to the Restricted Stock Units awarded hereunder
prior to the date of issuance to the Employee of a certificate or certificates
for such shares.  Certificates for the shares of Common Stock shall be
issued and delivered to the Employee, the Employee’s legal representative, or a
brokerage account for the benefit of the Employee, as the case may be, or such
shares may be held in book entry form.  Restricted Stock Units payable
under this Agreement are intended to be exempt from Internal Revenue Code
Section 409A under the exemption for short-term
deferrals.  Accordingly, Restricted Stock Units will be settled no
later than the 15th day of
the third month following the later of (i) the end of the Employee’s taxable
year in which the Restricted Stock Units cease to be subject to a Period of
Restriction, or (ii) the end of the fiscal year of the Company in which the
Restricted Stock Units cease to be subject to a Period of
Restriction.

 

10. Settlement Following Change
in Control
.  Notwithstanding any provision of this Agreement to
the contrary, in connection with or after the occurrence of a Change in Control
as defined in Section 11.2 of the Plan, the Company may, in its sole discretion,
fulfill its obligation with respect to all or any portion of the Restricted
Stock Units that cease to be subject to a Period of Restriction in accordance
with Section 8 above, by:

 

(a) delivery
of (i) the number of shares of Common Stock that corresponds with the number of
Restricted Stock Units that have ceased to be subject to a Period of Restriction
or (ii) such other ownership interest as such shares of Common Stock that
correspond with the vested Restricted Stock Units may be converted into by
virtue of the Change in Control transaction in accordance with Section 9
above;

 

(b) payment
of cash in an amount equal to the fair market value of the Common Stock that
corresponds with the number of vested Restricted Stock Units at that time;
or

 

(c) delivery
of any combination of shares of Common Stock (or other converted ownership
interest) and cash having an aggregate fair market value equal to the fair
market value of the Common Stock that corresponds with the number of Restricted
Stock Units that have become vested at that time.

 

11. Adjustment in
Capitalization
.  In the event of any change in the Common Stock
of the Company, the provisions of Section 10.2 of the Plan shall govern such
that the number of Restricted Stock Units subject to this Agreement shall be
equitably adjusted by the Committee.

 

12. Tax
Withholding
.  Whenever a Period of Restriction applicable to
the Employee’s rights to some or all of the Restricted Stock Units lapses as
provided in Section 4, 5, 6 or 8 of this Agreement, the Company or its agent
shall notify the Employee of the related amount of tax that must be withheld
under applicable tax laws. Regardless of any action the Company, any Subsidiary
of the Company, or the Employee’s employer takes with respect to any or all
income tax, social security, payroll tax, payment on account or other
tax-related withholding (“Tax”) that the Employee is required to bear pursuant
to all applicable laws, the Employee hereby acknowledges and agrees that the
ultimate liability for all Tax is and remains the responsibility of the
Employee.

 

Prior to receipt of any shares that
correspond to Restricted Stock Units that vest in accordance with this
Agreement, the Employee shall pay or make adequate arrangements satisfactory to
the Company and/or any Subsidiary of the Company to satisfy all withholding and
payment on account obligations of the Company and/or any Subsidiary of the
Company.  In this regard, the Employee authorizes the Company and/or
any Subsidiary of the Company to withhold all applicable Tax legally payable by
the Employee from the Employee’s wages or other cash compensation paid to the
Employee by the Company and/or any Subsidiary of the Company or from the
proceeds of the sale of shares.  Alternatively or in addition, the
Company may sell or arrange for the sale of Common Stock that the Employee is
due to acquire to satisfy the withholding obligation for Tax and/or withhold any
Common Stock.  Finally, the Employee agrees to pay the Company or any
Subsidiary of the Company any amount of any Tax that the Company or any
Subsidiary of the Company may be required to withhold as a result of the
Employee’s participation in the Plan that cannot be satisfied by the means
previously described.  The Company may refuse to deliver Common Stock
if the Employee fails to comply with its obligations in connection with the tax
as described in this section.



The Company advises the Employee to
consult his or her legal and/or tax advisors with respect to the tax
consequences for the Employee under the Plan.



13. Securities
Laws
.  This award is a private offer that may be accepted only
by an individual who is an employee of the Company or a Subsidiary of the
Company and who satisfies the eligibility requirements outlined in the Plan and
the Committee’s administrative procedures.  If a Registration
Statement under the Securities Act of 1933, as amended, is not in effect with
respect to the shares of Common Stock to be issued pursuant to this Agreement,
the Employee hereby represents that he or she is acquiring the shares of Common
Stock for investment and with no present intention of selling or transferring
them and that he or she will not sell or otherwise transfer the shares except in
compliance with all applicable securities laws and requirements of any stock
exchange on which the shares of Common Stock may then be listed.

 

14. No Employment or
Compensation Rights
.  Participation in the Plan is subject to
all of the terms and conditions of the Plan and this Agreement.  This
Agreement shall not confer upon the Employee any right to continuation of
employment by the Company or its Subsidiaries, nor shall this Agreement
interfere in any way with the Company’s or its Subsidiaries’ right to terminate
Employee’s employment at any time.  Neither the Plan nor this
Agreement forms any part of any contract of employment between the Company or
any Subsidiary and the Employee, and neither the Plan nor this Agreement confers
on the Employee any legal or equitable rights (other than those related to the
Restricted Stock Unit award) against the Company or any Subsidiary or directly
or indirectly gives rise to any cause of action in law or in equity against the
Company or any Subsidiary.

 

15. Plan Terms and Committee
Authority
.  This Agreement and the rights of the Employee
hereunder are subject to all of the terms and conditions of the Plan, as it may
be amended from time to time, as well as to such rules and regulations as the
Committee may adopt for administration of the Plan.  It is expressly
understood that the Committee is authorized to administer, construe and make all
determinations necessary or appropriate for the administration of the Plan and
this Agreement, all of which shall be binding upon Employee.  Any
inconsistency between this Agreement and the Plan shall be resolved in favor of
the Plan.  The Employee hereby acknowledges receipt of a copy of the
Plan and this Agreement.

 

16. Non-Competion,
Non-Solicitation and Confidentiality
.  As a condition to the
receipt of this Restricted Stock Unit award, the Employee must agree to the
terms and conditions set forth in the Non-Competition, Non-Solicitation and
Confidentiality Agreement attached hereto as Exhibit A by executing that
Agreement.  Failure to execute and return the Non-Competition,
Non-Solicitation and Confidentiality Agreement within 120 days of the Award Date
shall constitute a decision by the Employee to decline to accept this Restricted
Stock Unit award.

 

17. Amendment or Modification,
Waiver
.  Except as set forth in the Plan, no provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by the Employee and by a duly authorized officer of the
Company. No waiver of any condition or provision of this Agreement shall be
deemed a waiver of a similar or dissimilar condition or provision at the same
time, any prior time or any subsequent time.

 

18. Governing Law and
Jurisdiction
.  This Agreement is governed by the substantive
and procedural laws of the state of Illinois.  The Employee and the
Company shall submit to the exclusive jurisdiction of, and venue in, the courts
in Illinois in any dispute relating to this Agreement.

 



 

****

 

Please
sign the attached Exhibit A to confirm your agreement to be bound by the terms
and conditions set forth in Exhibit A, and to acknowledge your receipt of the
Plan and this Award Agreement and your acceptance of the Restricted Stock Unit
award issued hereunder.

 

Date                                                           Very
truly yours,



 

_____________________________________________



 




 



 







 






EXHIBIT
A



WALGREEN
CO. NON- COMPETITION, NON- SOLICITATIONAND CONFIDENTIALITY
AGREEMENT



This
Exhibit forms a part of the Restricted Stock Unit Award Agreement covering
Restricted Stock Units awarded to an employee of Walgreen Co. or one of its
subsidiary companies (hereinafter referred to as “Employee’’ and the
“Company”).

 

WHEREAS,
the Company develops and/or uses valuable business, technical, proprietary,
customer and patient information it protects by limiting its disclosure and by
keeping it secret or confidential;

 

WHEREAS,
Employee acknowledges that during the course of employment, he or she has or
will receive, contribute, or develop such confidential information;
and

 

WHEREAS,
the Company desires to protect from its competitors such confidential
information and also desires to protect its legitimate business interests and
goodwill in maintaining its employee and customer relationships.

 

NOW
THEREFORE, in consideration of the Restricted Stock Unit award issued to
Employee pursuant the Award Agreement to which this is attached as Exhibit A,
Employee agrees to the following:

 


 

Confidential
Information means information not generally known by the public about processes,
systems, products, services, including proposed products and services, business
information, know-how, or trade secrets of the Company.  Confidential
Information includes, but is not limited to, the following:

 

(a)           Customer
records, identity of vendors, suppliers, or landlords, profit and performance
reports, prices, selling and pricing procedures and techniques, and financing
methods of the Company;

 

(b)           Customer
lists and information pertaining to identities of the customers, their special
demands, and their past, current and anticipated requirements for the products
or services of the Company;

 

(c)           Specifications,
procedures, policies, techniques, manuals, databases and all other information
pertaining to products or services of the Company, or of others for which the
Company has assumed an obligation of confidentiality;

 

(d)           Business
or marketing plans, accounting records, financial statements and information,
and projections of the Company;

 

(e)           Software
developed or used by the Company;

 

(f)           Information
related to the Company’s retailing, distribution or administrative facilities;
and

 

(g)           Any
other information identified or defined as confidential information by Company
policy.

 


 

(a)           contact
any Customer of the Company for the benefit of a Competing Business or interfere
with, or attempt to disrupt the relationship, contractual, or otherwise, between
the Company and any of its Customers.



(b)           hire
employees of the Company.  This restriction includes without
limitation a prohibition on directly or indirectly employing, or knowingly
permitting any Person or business directly or indirectly controlled by Employee,
regardless of whether such Person or business is a Competing Business, from
employing, any person who is employed by the Company.  For the period
following the termination of Employee's employment with the Company, the term
"employee" means an individual employed by the Company as of the date of, or
within 90 days of, Employee's termination of employment.



(c)           solicit
employees of the Company.  This restriction includes without
limitation a prohibition on directly or indirectly (i) interfering with, or
attempting to disrupt the relationship, contractual, or otherwise, between the
Company and any of its employees, and (ii) soliciting, inducing, or attempting
to induce employees of the Company to terminate employment with the
Company.



(d)           compete
with the Company.  This restriction includes without limitation a
prohibition on directly or indirectly engaging or investing in, owning,
managing, operating, financing, controlling, participating in the ownership,
management, operation, financing or control of, or being associated or in any
manner connected with, any Competing Business, whether as a consultant,
independent contractor, agent, employee, officer, partner, director, shareholder
(except (i) limited partnership investments in private equity funds which may
invest in venture capital-backed companies (where Employee's investment
represents less than 1% percent ownership interest of any such company) or (ii)
investments of less than 1% ownership interest of the outstanding securities of
a corporation or other entity whose securities are listed on a stock exchange or
quotation system and such entity files periodic reports with the Securities and
Exchange Commission), distributor, representative, or otherwise, alone or in
association with any other Person(s).  Notwithstanding the foregoing,
Employee may render services for a Competing Business if:  such
service does not conflict with any other restrictions noted in this Paragraph 2;
the Competing Business is diversified, and Employee becomes employed in a part
of the business that is not in direct or indirect competition with Company; and,
prior to the Employee beginning employment with the Competing Business, the
Company receives written assurances satisfactory to the Company, from both the
Competing Business and Employee, that Employee will not render services directly
or indirectly in connection with any product, system, service, or process of any
person or organization which is the same as, comparable to, or competes directly
or indirectly with a product, system, service, or process of the
Company



Employee
agrees that the restrictions contained in paragraphs 2(a), 2(b), and 2(c) have
no geographic limitation.  Employee agrees that the restrictions
contained in Paragraph 2(d) are geographically limited to (a) the entirety of
the United States and (b) any other country if the Company conducts business
within such country at any time during Employee's employment with the
Company.



Employee
acknowledges that (i) the Company's business is and following the date hereof
will be national in scope, (ii) the Company's products and services are and
following the date hereof will be marketed throughout the United States and
(iii) the Company has competed and following the date hereof will compete with
other businesses that are or could be located in any part of the United
States.  Employee further covenants and agrees that restrictive
covenants contained in this Agreement are reasonable and necessary to protect
the legitimate business interests of the Company because of the nature and scope
of the Company's business.



If a
court or arbitrator of competent jurisdiction determines that one or more of the
provisions of this Paragraph 2 are invalid, illegal, or unenforceable for
any reason, then such provision or provisions shall be deemed to be reduced in
scope or length, as the case may be, to the extent required to make this
Paragraph enforceable.  If Emp