Walgreens 2004 Annual Report Download - page 32

32
Contingencies
The company is involved in various legal proceedings incidental to the normal course of business. Company
management is of the
opinion, based upon the advice of General Counsel, that although the outcome of such litigation cannot be forecast with certainty,
the final disposition should not have a material adverse effect on the company's consolidated financial position or results of
operations.
Capital Stock
The company’ s common stock is subject to a Rights Agreement under which each share has attached to it a Right to purchase one
one-hundredth of a share of a new series of Preferred Stock, at a price of $37.50 per Right. In the event an entity acquires or
attempts to acquire 15% of the then outstanding shares, each Right, except those of an acquiring entity, would entitle the holder to
purchase a number of shares of common stock pursuant to a formula contained in the Agreement. These non-voting Rights will
expire on August 21, 2006, but may be redeemed at a price of $.0025 per Right at any time prior to a public announcement that the
above event has occurred.
On July 14, 2004, the Board of Directors announced a stock repurchase program of up to $1 billion, which is expected to be
executed over the next four years. During fiscal 2004, we purchased $21.9 million of company shares related to the stock
repurchase program.
As of August 31, 2004, 108,155,356
shares of common stock were reserved for future stock issuances under the company’ s various
employee benefit plans. Preferred stock of 10,232,927 shares has been reserved for issuance upon the exercise of Preferred Share
Purchase Rights.
Stock Compensation Plans
The Walgreen Co. Stock Purchase/Option Plan (Share Walgreens) provides for the granting of options to purchase common stock
over a ten-year period to eligible non-executive employees upon the purchase of company shares, subject to certain restrictions.
Employees may purchase the company shares through cash purchases or loans. Under the terms of the Plan, the option price
cannot be more than 15% lower than the fair market value at the date of grant. Options may be granted under this Plan until
September 30, 2012, for an aggregate of 42,000,000 shares of common stock. As of August 31, 2004, there were 41,145,875 shares
available for future grants. The options granted during fiscal 2004, 2003 and 2002 have a two-year vesting period. Compensation
expense related to the Plan was $.6 million in fiscal 2004, $1.2 million in fiscal 2003, and $10.9 million in fiscal 2002.
The Walgreen Co. Executive Stock Option Plan provides for the granting of options to eligible key employees to purchase common
stock over a ten-year period, at a price not less than the fair market value on the date of the grant. Under this Plan, options may be
granted until October 9, 2006, for an aggregate of 38,400,000 shares of common stock. As of August 31, 2004, 23,332,653 shares
were available for future grants. The options granted during fiscal 2004, 2003 and 2002 have a three-year vesting period.
Compensation expense related to the plan was less than $1 million in fiscal 2004, fiscal 2003 and fiscal 2002.
The Walgreen Co. Broad Based Employee Stock Option Plan provides for the granting of options to eligible non-executive
employees to purchase common stock over a ten-year period, at a price not less than the fair market value on the date of the grant,
in connection with the achievement of store opening milestones. Under this Plan, on March 11, 2003, substantially all non-
executive employees, in conjunction with the opening of the company's 4,000th store, were granted a stock option to purchase 100
shares. Options may be
granted for an aggregate of 15,000,000 shares of common stock until all options have either been exercised
or have expired. The options will vest and become exercisable on March 11, 2006, and any unexercised options will expire on March
10, 2013, subject to earlier termination if the optionee's employment ends. As of August 31, 2004, 4,816,200 shares were available
for future grants. Except as may be otherwise determined by the Compensation Committee, there is a vesting period of three years
for options granted under this Plan.
The Walgreen Co. Option 3000 Plan offered a stock option award to all non-executive employees who were employed on May 11,
2000. Each eligible employee, in conjunction with opening the company’ s 3,000th store, received a stock option award to purchase
from 75 to 500 shares, based on years of service. The option award, issued at fair market value on May 11, 2000, was authorized to
grant an aggregate of 15,500,000 shares of common stock. The options vested and became exercisable on May 11, 2003, and any
unexercised options will expire on May 10, 2010, subject to earlier termination if the optionee’ s employment ends.