Walgreens 2009 Annual Report Download - page 36

Individual Defendant the cost of his or her defense. Each Individual Defendant has
agreed that, if found liable of wrongdoing that harmed Walgreens, he or she will
reimburse the Company for the funds advanced on his or her behalf. Walgreens’
investigation to date suggests that the allegations are without merit, and that the
Individual Defendants acted in good faith, exercised prudent business judgment and
acted in a manner that they reasonably believed to be in the Company’s best interests
during the period at issue. Walgreens intends to vigorously contest the allegations.
Although the outcome in the Himmel suit and the Plumbers and Steamfitters suit, to
the extent the plaintiff in such suit elects to appeal the District Court’s dismissal, and
other legal proceedings and investigations to which the Company is subject cannot
be forecast with certainty, management believes the final disposition of these matters
will not have a material adverse effect on the Company’s consolidated financial
position or results of operations.
The Company guarantees a credit agreement on behalf of SureScripts-RxHub, LLC,
which provides electronic prescription data services. This credit agreement, for which
SureScripts-RxHub, LLC is primarily liable, has an expiration date of June 30, 2011.
The liability was $10 million at August 31, 2009, and $8 million at August 31, 2008.
The maximum amount of future payments that could be required under the guaranty
is $25 million, of which $13 million may be recoverable from another guarantor. In
addition, under certain circumstances the Company maybe required to provide an
additional guarantee of up to $10 million, of which $8 million may be recoverable
from other guarantors. This guarantee arose as a result of a business decision
between parties to ensure that the operations of SureScripts-RxHub, LLC would have
additional support to access financing. Should SureScripts-RxHub, LLC default or
become unable to pay its debts, the Company would be required to fulfill our portion
of this guarantee.
12. Capital Stock
On January 10, 2007, the Board of Directors approved a new 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. For fiscal years ended 2009 and 2008, the Company
did not purchase anyshares related to the 2007 repurchase program. On October 14,
2009, the Board of Directors authorized a new stock repurchase program (“2009
repurchase program”) which replaced the 2007 repurchase program. The 2009
repurchase program allows for the repurchase of up to $2,000 million of the
Company’s common stock prior to its expiration on December 31, 2013.
Tosupport the long-term needs of the employee stock plans, $280 million of shares
were purchased in fiscal 2009, which compares to $294 million in fiscal 2008.
At August 31, 2009, 58,807,515 shares of common stock were reserved for future
stock issuances under the Company’s various employee benefit plans.
13. Stock Compensation Plans
The Walgreen Co. Stock Purchase/Option Plan (Share Walgreens) provides for the
granting of options to purchase common stock over a 10-year period to eligible
non-executive employees upon the purchase of Companyshares, subject to certain
restrictions. Employees may purchase the Company shares through cash purchases
or loans. For options granted on or after October 1, 2005, the option price is the closing
price of a share of common stock on the grant date. 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, 2009, there were 13,536,347 shares available for future
grants. The options granted during fiscal 2009 have a three-year vesting period while
the options granted during fiscal 2008 and 2007 have a two-year vesting period.
The Walgreen Co. Executive Stock Option Plan provides for the granting of options to
eligible key employees to purchase common stock over a 10-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 January 11, 2016, for an aggregate of 38,400,000 shares of
common stock. As of August 31, 2009, 7,323,523 shares were available for future
grants. The options granted during fiscal 2009, 2008 and 2007 have a three-year
vesting period.
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 conjunc-
tion 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 Plan authorized the
grant of options, issued at fair market value on May 11, 2000, to purchase up to an
aggregate of 15,500,000 shares of common stock and 14,892,200 shares were
granted. 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.
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. The Plan authorized the grant of an aggregate of 15,000,000
shares of common stock. As of August 31, 2009, 7,610,021 shares were available
for future grants. The options vested and became 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.
The Walgreen Co. 1982 Employees Stock Purchase Plan permits eligible employees to
purchase common stock at90% of the fair market value at the date of purchase.
Employees maypurchase shares through cash purchases, loans or payroll deductions
up to certain limits. The aggregate number of shares that may be purchased under
this Plan is 94,000,000. At August 31, 2009, 20,666,835 shares were available for
future purchase.
The Walgreen Co. Long-Term Performance Incentive Plan (amended and restated
Restricted Performance Share Plan) was approved by the shareholders on January
10, 2007. The Plan offers performance-based incentive awards and equity-based
awards to key employees. The awards are subject to restrictions as to continuous
employment except in the case of death, normal retirement or total and permanent
disability. Restrictions generally lapse over a multiyear period from the date of grant.
The Long-Term Performance Incentive Plan was authorized to grant an aggregate of
10,000,000 shares of common stock (which constituted a significant reduction from
the then remaining authorized shares under the Restricted Performance Share Plan).
As of August 31, 2009, 9,670,789 shares were available for future issuance under
the Long-Term Performance Incentive Plan. Compensation expense related to the
Restricted Performance Share Plan is recognized on a straight-line basis over the
employee’s vesting period or to the employee’s retirement eligible date, if earlier.
Compensation expense related to the Plan was $6 million in fiscal 2009. This
compares to no expense in fiscal 2008 and $12 million in fiscal 2007.
Beginning in fiscal 2009, the Company introduced the Restricted Stock Unit and
Performance Share Plans under the Long-Term Performance Incentive Plan. In
accordance with SFAS No. 123(R), compensation expense is recognized on a straight-
line basis based on a three-year cliff vesting schedule for the restricted stock units
and straight line over a three-year vesting schedule for the performance shares.
For the fiscal year ended August 31, 2009, the Companyrecognized $12 million
of expense related to these new plans.
The Walgreen Co. Nonemployee Director Stock Plan provides that each nonemployee
director receives an equity grant of shares each year on November 1. Through fiscal
year 2009, the Plan determined the number of shares granted by dividing $120,000
Notes to Consolidated Financial Statements (continued)
Page 34 2009 Walgreens Annual Report