SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 31, 2014

 

 

WALGREENS BOOTS ALLIANCE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36759   47-1758322

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

 

108 Wilmot Road, Deerfield, Illinois   60015
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (847) 315-2500

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01. Entry into a Material Definitive Agreement.

The information set forth in the first two paragraphs of Item 2.03 of this Report is incorporated herein by reference.

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

Completion of the Reorg Merger

On December 31, 2014, Walgreen Co., an Illinois corporation (“Walgreens”), and Walgreens Boots Alliance, Inc., a Delaware corporation (“WBA” or “Walgreens Boots Alliance”) completed their previously announced reorganization pursuant to the Reorganization Merger Agreement, dated as of October 17, 2014, as amended (the “Reorganization Merger Agreement”), by and among Walgreens Boots Alliance, Walgreens and Ontario Merger Sub, Inc., an Illinois corporation and a wholly owned subsidiary of Walgreens Boots Alliance (“Merger Sub”). The Reorganization Merger Agreement was approved and adopted by Walgreens’ shareholders at a special meeting of shareholders held on December 29, 2014 (the “Special Meeting”).

Pursuant to the Reorganization Merger Agreement, on December 31, 2014 Merger Sub merged (the “Reorg Merger”) with and into Walgreens, with Walgreens surviving the Reorg Merger as a wholly owned subsidiary of WBA, and each issued and outstanding share of Walgreens common stock, par value $0.078125 (“Walgreens Common Stock”) was converted into one share of WBA common stock, par value $0.01 (“WBA Common Stock”). Effective as of the completion of the Reorg Merger, WBA replaced Walgreens as the publicly held corporation, and immediately following the Reorg Merger and prior to the Step 2 Acquisition (as defined below) the holders of Walgreens Common Stock held the same number of shares of WBA Common Stock and the same ownership percentage of WBA as they held of Walgreens immediately prior to the Reorg Merger. Prior to the open of trading on December 31, 2014, The NASDAQ Stock Market LLC (“NASDAQ”), the New York Stock Exchange, and the Chicago Stock Exchange each halted trading of Walgreens Common Stock. On December 31, 2014, shares of WBA Common Stock began trading on NASDAQ under the ticker symbol “WBA”. The new CUSIP number for WBA Common Stock is 931427 108. Shareholders need not return stock certificates or otherwise take any action to exchange their former shares of Walgreens Common Stock for shares of WBA Common Stock. Following completion of the Reorg Merger, each certificate for shares of Walgreens Common Stock automatically represents a certificate for the same number of shares of WBA Common Stock.

Pursuant to the Reorganization Merger Agreement, at the effective time of the Reorg Merger (the “Effective Time”), Walgreens’ equity-based compensation plans were assumed by WBA and each Walgreens award outstanding pursuant to those plans as of immediately prior to the Effective Time was converted automatically into an equivalent award with respect to the number of shares of WBA Common Stock that is equal to the number of shares of Walgreens Common Stock to which such award related immediately prior to the Effective Time, which equivalent award otherwise continues to be subject to the same terms and conditions that were applicable to such award immediately prior to the Effective Time.


The issuance of WBA Common Stock in connection with the Reorganization Merger Agreement, as described above, was registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to a registration statement on Form S–4 (File No. 333–198768), as amended (the “Registration Statement”), filed with the Securities and Exchange Commission (the “SEC”) and declared effective on November 24, 2014. The Registration Statement and the definitive proxy statement/prospectus, as amended and supplemented from time to time (the “Proxy Statement/Prospectus”) filed by WBA with the SEC on November 24, 2014 contains additional information about the Reorganization Merger Agreement, the Reorg Merger, the Step 2 Acquisition (described below) and related matters.

Upon completion of the Reorg Merger, WBA Common Stock was deemed to be registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, pursuant to Rule 12g-3(a) promulgated thereunder. For purposes of Rule 12g-3(a), WBA is the successor issuer to Walgreens. The description of WBA Common Stock set forth in the Proxy Statement/Prospectus is incorporated herein by reference.

The foregoing description of the Reorganization Merger Agreement is not complete and is qualified in its entirety by reference to the Reorganization Merger Agreement, filed as Exhibit 2.3 to Walgreens’ Annual Report on Form 10-K for the fiscal year ended August 31, 2014, and Amendments No. 1 and 2 thereto, filed as Exhibit 2.1 to WBA’s Current Report on Form 8-K filed December 24, 2014 and Exhibit 2.3 to WBA’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2014, respectively, which are incorporated herein by reference.

Completion of the Step 2 Acquisition

On December 31, 2014, following the completion of the Reorg Merger, WBA completed the previously announced acquisition of the remaining 55% of Alliance Boots GmbH (“Alliance Boots”) that Walgreens did not previously own (the “Step 2 Acquisition”) in exchange for £3.133 billion in cash and 144,333,468 shares of WBA Common Stock issued, in the aggregate, to AB Acquisitions Holdings Limited (“AB Acquisitions”) and to or pursuant to the direction of the trustee of the Alliance Boots management equity plan (collectively, the “Sellers”) pursuant to the Purchase and Option Agreement dated June 18, 2012, as amended (the “Purchase and Option Agreement”). The issuance of shares of WBA Common Stock in connection with the Step 2 Acquisition was approved by Walgreens’ shareholders at the Special Meeting. Stefano Pessina, a director of WBA and, prior to the Reorg Merger, Walgreens, and investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P. jointly control AB Acquisitions. Mr. Pessina or certain of his affiliates are parties to certain transactions with Walgreens which are described in the Proxy Statement/Prospectus and Item 13 of Walgreens’ Annual Report on Form 10-K for the fiscal year ended August 31, 2014, as amended, which description is incorporated herein by reference.

The foregoing description of the Purchase and Option Agreement is not complete and is qualified in its entirety by reference to the Purchase and Option Agreement, filed as Exhibit 2.1 to Walgreens’ Current Report on Form 8-K filed June 19, 2012, and Amendment No. 1 thereto, filed as Exhibit 2.1 to Walgreens’ Current Report on Form 8-K filed August 6, 2014, which are incorporated herein by reference.


A copy of the press release announcing the completion of the Reorg Merger and the Step 2 Acquisition is filed as Exhibit 99.1 hereto and is incorporated herein by reference.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off Balance Sheet Arrangement.

On December 31, 2014, Walgreens Boots Alliance fully and unconditionally guaranteed the outstanding (i) 1.000% Notes due 2015, (ii) 1.800% Notes due 2017, (iii) 5.250% Notes due 2019, (iv) 3.100% Notes due 2022 and (v) 4.400% Notes due 2042, in each case, issued by Walgreens, on an unsecured and unsubordinated basis on substantially the terms set forth in the form of guarantee attached hereto as Exhibit 4.1.

The foregoing description of the guarantee is not complete and is qualified in its entirety by reference to the form of guarantee which is filed as Exhibit 4.1 hereto and is incorporated herein by reference.

On December 31, 2014, Walgreens Boots Alliance borrowed £1.45 billion to partially fund the Step 2 Acquisition under the Term Loan Credit Agreement, dated as of November 10, 2014, (the “Term Loan Credit Agreement”) among Walgreens, Walgreens Boots Alliance, the lenders party thereto, Bank of America, N.A., as administrative agent, and HSBC Bank plc, as syndication agent. The foregoing description of the Term Loan Credit Agreement is not complete and is qualified in its entirety by reference to the full text of the Term Loan Credit Agreement, filed as Exhibit 10.1 to Walgreens’ Current Report on Form 8-K filed on November 12, 2014, which is incorporated herein by reference.

 

Item 3.02. Unregistered Sales of Equity Securities.

The information set forth in this Report under Item 2.01 regarding the completion of the Step 2 Acquisition is incorporated herein by reference.

The issuance of approximately 144.3 million shares of WBA Common Stock in connection with the closing of the Step 2 Acquisition has not been registered under the Securities Act, in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and rules and regulations of the SEC promulgated thereunder. The offering was made only to the Sellers in connection with the transactions contemplated by the Purchase and Option Agreement, as described in Item 3.02 of Walgreens’ Current Report on Form 8-K filed with the SEC on June 19, 2012, which description is incorporated herein by reference.

 

Item 3.03. Material Modifications to Rights of Security Holders.

The information set forth in Items 2.01 and 5.03 of this Report is incorporated herein by reference.


Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On December 31, 2014, each of the directors of Walgreens immediately prior to the Reorg Merger was appointed as a director of WBA, and each of Thomas J. Sabatino, Jr. and Timothy R. McLevish ceased to be a director of WBA. Each of the directors of WBA was appointed to serve on the same committee(s) of the Board of Directors of WBA (the “Board”) as such director had served on as a member of the Walgreens Board of Directors immediately prior to the Reorg Merger. Each director of WBA will be entitled to the same compensation as he or she was entitled to as a director of Walgreens prior to the Reorg Merger, as described in Walgreens’ Annual Report on Form 10-K/A filed with the SEC on November 20, 2014, which description is incorporated herein by reference.

Pursuant to the Reorganization Merger Agreement, at the Effective Time, Walgreens’ equity-based compensation plans, including those in which its named executive officers participate, were assumed by WBA and each Walgreens award outstanding pursuant to those plans as of immediately prior to the Effective Time was converted automatically into an equivalent award with respect to the number of shares of WBA Common Stock that is equal to the number of shares of Walgreens Common Stock to which such award related immediately prior to the Effective Time, which equivalent award otherwise continues to be subject to the same terms and conditions that were applicable to such award immediately prior to the Effective Time. In order to reflect such assumption, the Walgreen Co. 2013 Omnibus Incentive Plan and the Walgreen Co. Employee Stock Purchase Plan were amended and restated, effective as of the Effective Time, in the forms attached hereto as Exhibits 10.1 and 10.2, respectively, which are incorporated herein by reference.

In addition, in connection with the Reorg Merger the following compensation plans in which the Walgreens named executive officers participate were assumed by WBA, and amended and restated in order to reflect such assumption, effective as of the Effective Time: the Walgreen Co. Executive Deferred Profit-Sharing Plan, the Walgreen Co. Executive Severance and Change in Control Plan, the Walgreen Co. 2011 Cash-Based Incentive Plan and the Walgreen Co. Management Incentive Plan. Such amended and restated plans are attached hereto as Exhibits 10.3, 10.4, 10.5 and 10.6, respectively, which are incorporated herein by reference.

 

Item 5.03. Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year.

In connection with the Reorg Merger, WBA adopted an amended and restated Certificate of Incorporation, effective December 31, 2014, in the form set forth as Annex E to the Proxy Statement/Prospectus. Effective that same date, WBA adopted amended and restated bylaws in the form set forth as Annex F to the Proxy Statement/Prospectus. The Amended and Restated Certificate of Incorporation of WBA and the Amended and Restated Bylaws of WBA are attached hereto as Exhibits 3.1 and 3.2, respectively, and are incorporated herein by reference.


Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

The audited consolidated financial statements of Alliance Boots as of March 31, 2014 and 2013, and for each of the years in the three-year period ended March 31, 2014, are filed as Exhibit 99.2 hereto and are incorporated herein by reference.

(b) Pro Forma Financial Information.

The required unaudited pro forma consolidated financial information is attached hereto as Exhibit 99.3 and is incorporated herein by reference.

(d) Exhibits. The following exhibits are provided as part of this Form 8-K:

 

Exhibit

  

Description

  3.1    Walgreens Boots Alliance, Inc. Amended and Restated Certificate of Incorporation
  3.2    Walgreens Boots Alliance, Inc. Amended and Restated Bylaws
  4.1    Form of Guarantee of Walgreens Boots Alliance, Inc.
10.1    Walgreens Boots Alliance, Inc. 2013 Omnibus Incentive Plan (Amended and Restated Effective December 31, 2014)
10.2    Walgreens Boots Alliance, Inc. Employee Stock Purchase Plan (As amended and restated effective December 31, 2014)
10.3    Walgreens Boots Alliance, Inc. Executive Deferred Profit-Sharing Plan (As Amended and Restated Effective December 31, 2014)
10.4    Walgreens Boots Alliance, Inc. Executive Severance and Change in Control Plan (as amended and restated effective December 31, 2014)
10.5    Walgreens Boots Alliance, Inc. 2011 Cash-Based Incentive Plan (As amended and restated effective December 31, 2014)
10.6    Walgreens Boots Alliance, Inc. Management Incentive Plan (As amended and restated effective December 31, 2014)
99.1    Press release issued on December 31, 2014
99.2    Alliance Boots GmbH audited consolidated financial statements (incorporated by reference to Exhibit 99.1 to Walgreen Co.’s Current Report on Form 8-K filed on May 15, 2014)
99.3    Unaudited Pro Forma Consolidated Financial Information


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      WALGREENS BOOTS ALLIANCE, INC.
Date:   December 31, 2014     By:  

/s/ Thomas J. Sabatino, Jr.

      Name:   Thomas J. Sabatino, Jr.
      Title:   Executive Vice President, Global Chief Legal and Administrative Officer and Corporate Secretary

Exhibit 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF

WALGREENS BOOTS ALLIANCE, INC.

Walgreens Boots Alliance, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

 

  1. The name of the corporation is Walgreens Boots Alliance, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State was September 2, 2014.

 

  2. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, and restates and integrates and further amends the provisions of the corporation’s Certificate of Incorporation.

 

  3. The text of the Certificate of Incorporation of the corporation is hereby amended and restated in its entirety as set forth below.

 

  4. This Amended and Restated Certificate of Incorporation shall be effective at 12:01 a.m. Eastern Standard Time on December 31, 2014.

IN WITNESS WHEREOF, said Walgreens Boots Alliance, Inc. has caused this Certificate to be signed by Thomas Sabatino, Jr., its Vice President & Secretary this 30th day of December.

 

WALGREENS BOOTS ALLIANCE, INC.
By:  

/s/ Thomas J. Sabatino, Jr.

Name:   Thomas J. Sabatino, Jr.
Title:   Vice President & Secretary

ARTICLE I

The name of the corporation (which is hereinafter referred to as the “Corporation”) is: Walgreens Boots Alliance, Inc.

ARTICLE II

The address of its registered office in the State of Delaware on the date of this Certificate of Incorporation is: 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, New Castle County, and the name of its Registered Agent at said address is: Corporation Service Company.

ARTICLE III

The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE IV

Section 1. The Corporation shall be authorized to issue 3,232,000,000 shares of capital stock, of which 3,200,000,000 shares shall be shares of Common Stock, par value $0.01 per share (“Common Stock”) and 32,000,000 shares shall be shares of Preferred Stock, par value $0.01 per share (“Preferred Stock”).

Section 2. Shares of Preferred Stock may be issued from time to time in one or more series and/or classes. The Board of Directors of the Corporation (the “Board”) is hereby authorized to fix the voting rights, if any,


designations, powers, preferences and the relative, participation, optional or other rights, if any, and the qualification, limitations or restrictions thereof, of any unissued series and/or class of Preferred Stock, and to fix the number of shares constituting such series and/or class, and to increase or decrease the number of shares of any such series and/or class (but not below the number of shares thereof then outstanding).

Section 3. Except as otherwise provided by law, or by the resolution or resolutions adopted by the Board designating the rights, powers and preferences of any series and/or class of Preferred Stock, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote. Each share of Common Stock shall have one vote, and the Common Stock shall vote together as a single class.

ARTICLE V

Unless and except to the extent that the By-Laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.

ARTICLE VI

In all elections of directors, every stockholder shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) such stockholder would be entitled to cast for the election of directors with respect to such stockholder’s shares of stock multiplied by the number of directors to be elected by such stockholder, and such stockholder may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them as such stockholder may see fit.

ARTICLE VII

The directors of the Corporation shall not be personally liable to the Corporation or to the stockholders of the Corporation for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended.

Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to such repeal or modification.

ARTICLE VIII

In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized and empowered to make, alter and repeal the By-Laws of the Corporation by a majority vote at any regular or special meeting of the Board or by written consent, subject to the power of the stockholders of the Corporation to alter or repeal any By-Laws made by the Board.

ARTICLE IX

Special meetings of the stockholders may be called by the Board of Directors, by the President, by the Secretary of the Corporation at the written request of stockholders of record who have, or are acting on behalf of beneficial owners who have, not less than one-fifth of all the outstanding shares entitled to vote generally for the election of directors as of a record date fixed in accordance with the By-Laws of the Corporation, subject to and in accordance with the procedures and requirements set forth in the By-Laws of the Corporation, and by such other officers or persons as may be authorized by the By-Laws of the Corporation.

ARTICLE X

The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and any other provisions authorized by the laws of the State


of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article.

Exhibit 3.2

AMENDED AND RESTATED

BY-LAWS

of

Walgreens Boots Alliance, Inc.

(A Delaware Corporation)

ARTICLE I

OFFICES

SECTION 1.1. Registered Office. The registered office of the corporation shall be located in the City of Wilmington, County of New Castle, State of Delaware. The name and address of its registered agent is The Corporation Trust Company.

SECTION 1.2. Other Offices. The corporation may have such other offices, either within or without the State of Delaware, as the Board of Directors may from time to time designate or as the business of the corporation may require.

ARTICLE II

STOCKHOLDERS

SECTION 2.1. Annual Meeting. The annual meeting of the stockholders of the corporation shall be held on such date and at such place and time as may be fixed by resolution of the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to and in accordance with Section 211(a) of the General Corporation Law of the State of Delaware.

SECTION 2.2. Special Meetings. (a) Special meetings of the stockholders may be called by the Chairman of the Board, by the Chief Executive Officer, by the President, by the Board of Directors or by the Secretary of the corporation at the written request of stockholders of record who have, or are acting on behalf of beneficial owners who have, not less than one-fifth of all of the outstanding shares of the corporation entitled to vote generally for the election of directors as of the record date fixed in accordance with this Section 2.2 of Article II of these By-laws to determine who may deliver a written request to call such special meeting. The Board of Directors shall determine the place, and fix the date and time, of any special meeting of stockholders. The Board of Directors may submit its own proposal or proposals for consideration at a special meeting called at the request of one or more stockholders.

(b) Any stockholder of record (whether acting for him, her or itself, or at the direction of a beneficial owner) may, by written notice to the Secretary (the “Record Date Request Notice”) by registered mail, return receipt requested, demand that the Board of Directors fix a record date to determine the stockholders who are entitled to deliver a written request to call a special meeting (such record date, the “Request Record Date”). The Record Date Request Notice must, to be in proper written form, set forth the information required by Section 2.15(b)(ii) of Article II of these By-laws (as though such meeting were an annual meeting), shall be signed by one or more stockholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice) and


shall bear the date of signature of each such stockholder (or such agent). Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten (10) days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within twenty (20) days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date and make a public announcement of such Request Record Date, the Request Record Date shall be the close of business on the tenth (10th) day after the first date on which the Record Date Request Notice is received by the Secretary.

(c) A beneficial owner who wishes to deliver a written request to call a special meeting must cause the nominee or other person who serves as the stockholder of record of such beneficial owner’s stock to sign the written request to call a special meeting. If a stockholder of record is the nominee for more than one beneficial owner of stock, the stockholder of record may deliver a written request to call a special meeting solely with respect to the shares of the corporation owned by the beneficial owner who is directing the stockholder of record to sign such written request to call a special meeting. Each written request to call a special meeting shall include the signature(s) of the stockholder(s) of record submitting such request and the date such request was signed, and the information required by Section 2.15(b)(ii) of Article II of these By-laws (as though such meeting were an annual meeting).

SECTION 2.3. Places of Meeting. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of the meeting for any annual meeting or for any special meeting, or may designate that the meeting be held by means of remote communication. If no designation is made, the place of such meeting shall be the registered office of the corporation in the State of Delaware.

SECTION 2.4. Notice of Meetings. Written, printed or electronic notice stating the place, day and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting or, in the case of a merger or consolidation or a sale, lease or exchange of all or substantially all of the property and assets of the corporation, not less than twenty (20) nor more than sixty (60) days before the date of the meeting, either personally, electronically in the manner provided in Section 232 of the General Corporation Law of the State of Delaware (except to the extent prohibited by Section 232(e) of the General Corporation Law of the State of Delaware) or by mail, by or at the direction of the Chairman of the Board, the Chief Executive Officer, the President, or the Secretary to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the stockholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. If notice is given by electronic transmission, such notice shall be deemed to be given at the times provided in the General Corporation Law of the State of Delaware.

SECTION 2.5. Fixing of Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend or other distribution or allotment of rights, or stockholders entitled to

 

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consent in writing to corporate action without a meeting, or for the purpose of any other lawful action, the Board of Directions of the corporation may fix a record date in advance, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and (i) in the case of the record date for the entitlement to notice of, or to vote at, a meeting of stockholders, such record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, (ii) in the case of the record date for the entitlement to consent in writing to corporate action without a meeting, such record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted and (iii) in case of the record date for the entitlement to receive payment of any dividend or other distribution or allotment of rights or for the purpose of any other lawful action, such record date shall not be more than sixty (60) days prior to such action. If no record date is fixed by the Board of Directors, (i) the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, (ii) the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation, (iii) the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when prior action by the Board of Directors is required, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action and (iv) the record date for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights, or for the purpose of any other lawful action, shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section 2.5 of Article II of these By-laws, such determination shall apply to any adjournment thereof.

SECTION 2.6. Voting Lists. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing contained in this Section 2.6 of Article II of these By-laws shall require the corporation to include electronic mail addresses or other electronic contact information on such list. Such list, for a period of at least ten days prior to such meeting, shall be open to the examination of any stockholder for any purpose germane to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the

 

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meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine such list or stock ledger or to vote at any meeting of stockholders.

SECTION 2.7. Quorum. A majority of outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum at any meeting of stockholders; provided that if less than a majority of outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting without further notice.

If a quorum is present, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote on a matter shall be the act of the stockholders, unless the vote of a greater or different number or voting by classes is required by the General Corporation Law, the Certificate of Incorporation of the corporation or these By-laws.

SECTION 2.8. Proxies. A stockholder may vote by proxy executed in writing (or in such manner prescribed by the General Corporation Law of the State of Delaware) by the stockholder, or by his duly authorized attorney in fact. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, a stockholder may appoint a proxy to vote or otherwise act for him or her by executing a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature. Additionally, a stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. No stockholder may name more than three persons as proxies to attend and vote the stockholder’s shares at any such meeting. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after 3 years from the date of its executing, unless otherwise provided in the proxy. Every duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. Such revocation may be affected by a writing delivered to the corporation stating that the proxy is revoked, or by a subsequent proxy executed by, or by attendance at the meeting and voting in person by, the person executing the proxy. The dates contained on the forms of the proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed.

 

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SECTION 2.9. Voting of Shares. Subject to the provisions of Section 2.11 of this Article II, each outstanding share, regardless of class, shall be entitled to one vote upon each matter submitted to a vote at a meeting of stockholders.

SECTION 2.10. Voting of Shares by Certain Holders. Shares of the corporation held by the corporation in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at a given time.

Shares registered in the name of another corporation, domestic or foreign, may be voted by any officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation. The corporation may treat the president or other person holding the position of chief executive officer of such other corporation as authorized to vote such shares, together with any other person indicated and any other holder of an office indicated by the corporate stockholder to the corporation as a person or an office authorized to vote such shares as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.

Shares registered in the name of a deceased person, a minor ward or person under legal disability, may be voted by his or her administrator, executor, or court appointed guardian, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, or court appointed guardian. Shares registered in the name of a trustee may be voted by him or her, either in person or by proxy.

Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

SECTION 2.11. Cumulative Voting. Stockholders shall be entitled to cumulative voting at elections of directors to the extent provided in or pursuant to the Certificate of Incorporation.

SECTION 2.12. Voting by Ballot. Voting on any question or in any election may be viva voce unless the presiding officer shall order that voting be by ballot.

SECTION 2.13. Adjournments. The Chairman of the Board of Directors or the President may adjourn the meeting from time to time, whether or not there is a quorum. No notice of the time and place, if any, of adjourned meetings need be given except as required by law. At an adjourned meeting at which a quorum is present or represented, any business may be transacted which could have been transacted at the meeting originally called. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

SECTION 2.14. Inspectors of Election. The Board of Directors, in advance of any meeting of stockholders, shall appoint one or more persons as inspectors to act at such meeting or any adjournment thereof and make a written report thereof. Each inspector, before

 

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discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties and powers prescribed by and shall comply with Section 231 of the General Corporation Law of the State of Delaware.

SECTION 2.15. Notice of Annual Meeting Business. (a) At any annual meeting of the stockholders of the corporation, only such business shall be conducted as shall have been brought before the meeting (i) pursuant to the corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly made at the annual meeting, by or at the direction of the Board of Directors or (iii) by any stockholder of the corporation who (A) is a stockholder of record at the time of giving notice provided for in this By-law and at the time of the annual meeting, (B) shall be entitled to vote at the meeting and (C) meets the requirements of and complies with the procedures set forth in this By-law. Clause (iii) shall be the exclusive means for a stockholder to submit business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the corporation’s notice of meeting) before an annual meeting of stockholders.

(b) (i) For business (other than nominations of directors by stockholders, which must be made in compliance with Section 2.15(c) of Article II of these By-laws, or matters properly brought under Rule 14a-8 under the Exchange Act and included in the corporation’s notice of meeting) to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the corporation. To be timely, a stockholder’s notice must be delivered or mailed and received at the principal executive offices of the corporation not earlier than the close of business on the one-hundred twentieth (120th) day and not later than the close of business on the ninetieth (90th) day prior to the first (1st) anniversary of the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date (or, if no annual meeting was held in the previous year and a meeting date has been disclosed in a Public Announcement in accordance with these By-laws, and the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such previously announced meeting date), to be timely, notice by the stockholder must be so delivered not earlier than the close of business on the one-hundred twentieth (120th) day prior to the date of such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to the date of such annual meeting or, if the first Public Announcement of the date of such annual meeting is less than one-hundred (100) days prior to the date of such annual meeting, the tenth (10th) day following the day on which Public Announcement of the date of such meeting is first made by the corporation. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.

(ii) To be in proper written form, a stockholder’s notice to the Secretary shall set forth in writing as to each matter the stockholder proposes to bring before the annual meeting (A) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, the Ownership Information (as defined below) and (B) (1) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such

 

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business at the annual meeting, and any material interest of such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, if any, in such business, (2) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such proposal or business includes a proposal to amend the By-laws of the corporation, the text of the proposed amendment) and (3) a description of all agreements, arrangements and understandings between such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, if any, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder. The Chairman of an annual meeting shall have the power to determine whether business proposed to be before the meeting was proposed in accordance with these By-laws and, if any proposed business is not in compliance with these By-laws, to declare that no action shall be taken on such business and such proposal shall be disregarded, provided, that the Chairman shall state the reasons for such determination. Notwithstanding the foregoing provisions of this By-law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-law, provided, however, that any references in these By-laws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the separate and additional requirements set forth in these By-laws with respect to nominations or proposals as to any other business to be considered. In addition, to be considered timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information (with respect to the Ownership Information and any interests, agreements, arrangements or understandings of such stockholder, such beneficial owner and their respective affiliates or associates or others any in concert therewith) provided or required to be provided in such notice shall also be true and correct in all material respects as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof. For the avoidance of doubt, the requirement to update and supplement a stockholder’s notice shall not allow a stockholder to change or add to the proposed business or nominees.

(c) (i) Nominations of persons for election to the Board of Directors may be made at an annual meeting of the stockholders of the corporation, (1) by or at the direction of the Board of Directors or (2) by any stockholder of the corporation who is a stockholder of record at the time of giving notice provided for in this Section 2.15(c) and at the time of the annual meeting; who shall be entitled to vote at the meeting; and who meets the requirements of and complies with the procedures set forth in this Section 2.15(c). For nominations of directors to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not earlier than the close of business on the one-hundred twentieth (120th) day and not later than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is more than

 

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thirty (30) days before or more than sixty (60) days after such anniversary date (or, if no annual meeting was held in the previous year and a meeting date has been disclosed in a Public Announcement in accordance with these By-laws, and the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such previously announced meeting date), to be timely, notice by the stockholder must be so delivered not earlier than the close of business on the one-hundred twentieth (120th) day prior to the date of such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to the date of such annual meeting or, if the first (1st) Public Announcement of the date of such annual meeting is less than one-hundred (100) days prior to the date of such annual meeting, the tenth (10th) day following the day on which Public Announcement of the date of such meeting is first made by the corporation. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above. To be in proper form, a stockholder’s notice to the Secretary must (x) set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, the Ownership Information; (y) set forth, as to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board of Directors (A) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and (B) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and (z) with respect to each nominee whom the stockholder proposes to nominate for election or reelection to the Board of Directors, include the completed and signed questionnaire, representation and agreement, in proper form, required by Section 2.17 of Article II of these By-laws. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. In addition, to be considered timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information (with respect to the Ownership Information and such stockholder, such beneficial owners, such nominee and their respective affiliates and associates, or others acting in concert therewith) provided or required to be provided in such notice shall also be true and correct in all material respects as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the corporation not later than five (5) business days

 

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after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof. For the avoidance of doubt, the requirement to update and supplement a stockholder’s notice shall not allow a stockholder to change or add to the proposed business or nominees.

(ii) Notwithstanding anything to the contrary, only persons who are nominated in accordance with the procedures set forth in this Section 2.15(c) of Article II of these By-laws shall be eligible for election at an annual meeting of stockholders as directors of the corporation. The Chairman of an annual meeting shall have the power to determine whether a nomination was made in accordance with the provisions of these By-laws and, if any proposed nomination is not in compliance with these By-laws, to declare that no action shall be taken on such nomination and such nomination shall be disregarded, provided, that the Chairman shall state the reasons for such determination. Notwithstanding the foregoing provisions of this By-law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this By-law, provided, however, that any references in these By-laws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the separate and additional requirements set forth in these By-laws with respect to nominations or proposals as to any other business to be considered.

(d) For purposes of these Sections 2.15 and 2.16 of Article II of these By-laws, (i) “Ownership Information” is defined as (A) the name and address of such stockholder, as they appear on the corporation’s books, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith (but only to the extent that information with respect or relating to any such affiliates or associates or others is required to be disclosed pursuant to Section 2.15 or Section 2.16 of these Bylaws, including the remainder of this definition of “Ownership Information”), (B) (1) the class or series and number of shares of the corporation which are, directly or indirectly, owned beneficially and of record by such stockholder and such beneficial owner, and their respective affiliates or associates or others acting in concert therewith, (2) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the corporation or with a value derived in whole or in part from the value of any class or series of shares of the corporation, or any other derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the corporation, or any other contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the corporation, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of shares of the corporation, through the delivery of cash or other property, or otherwise, and without regard to whether the stockholder of record, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, may have entered into transactions that hedge or mitigate the economic effect of such

 

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instrument, contract or right, or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the corporation (any of the foregoing, a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, (3) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith have any right to vote any class or series of shares of the corporation, (4) any agreement, arrangement, understanding, relationship or otherwise, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, involving such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, directly or indirectly, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of shares of the corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith with respect to any class or series of shares of the corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of shares of the corporation (any of the foregoing, a “Short Interest”), (5) any rights to dividends on the shares of the corporation owned beneficially by such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith that are separated or separable from the underlying shares of the corporation, (6) any proportionate interest in shares of the corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership, and (7) any performance-related fees (other than an asset-based fee) that such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith are entitled to based on any increase or decrease in the value of shares of the corporation or Derivative Instruments, if any, including without limitation any such interests held by members of the immediate family sharing the same household of such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (C) any direct or indirect interest of such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith in any contract with the corporation or any affiliate of the corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), and (D) any other information relating to such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) “Public Announcement” is defined as disclosure in a press release reported by a national news service or in a document publicly filed by the corporation (or, at any time the corporation is a direct or indirect subsidiary of another corporation, the corporation’s ultimate parent corporation) with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

 

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SECTION 2.16. Notice of Special Meeting Business. Only such business shall be conducted at a special meeting of stockholders as shall have been properly brought before the meeting pursuant to the corporation’s notice of meeting. To be properly brought before a special meeting, proposals of business must be (i) specified in the corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the special meeting, by or at the direction of the Board of Directors, or (iii) specified in the corporation’s notice of meeting (or any supplement thereto) given by the corporation pursuant to a valid stockholder request in accordance with Section 2.2 of Article II of these By-laws; provided, however, that nothing herein shall prohibit the Board of Directors from submitting additional matters to stockholders at any such special meeting. Clause (iii) shall be the exclusive means for a stockholder to submit business (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the corporation’s notice of meeting) before a special meeting of stockholders. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected only (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the corporation who (i) is a stockholder of record at the time of giving of notice provided for in this By-law and at the time of the special meeting, (ii) is entitled to vote at the meeting, and (iii) meets the requirements of and complies with the procedures set forth in this By-law as to such nomination. In the event that the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the corporation’s notice of meeting, if the stockholder’s notice required by Section 2.15(c)(i) of Article II of these By-laws with respect to any nomination (including, without limitation, the applicable Ownership Information and the completed and signed questionnaire, representation and agreement required by Section 2.17 of Article II of these By-laws), in proper form, shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the one-hundred twentieth (120th) day prior to the date of such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to the date of such special meeting or, if the first Public Announcement of the date of such special meeting is less than one-hundred (100) days prior to the date of such special meeting, the tenth (10th) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall any adjournment or postponement of a special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. The Chairman of any special meeting shall have the power to determine whether any business proposed to be brought before the meeting was proposed in accordance with these By-laws and, if any proposed business is not in compliance with these By-laws, to declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-laws, and if he should so determine, to declare that no action shall be taken on such proposal and such proposal shall be disregarded, provided, that the Chairman shall state the reasons for any such determinations. Notwithstanding the foregoing provisions of this By-law, a stockholder

 

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shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.16 of Article II of these By-laws with respect to both proposed business and nominations, provided, however, that any references in these By-laws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the separate and additional requirements set forth in these By-laws with respect to nominations or proposals as to any other business to be considered. In addition, to be considered timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information (with respect to the Ownership Information and such stockholder, such beneficial owners, such nominee and their respective affiliates and associates, or others acting in concert therewith) provided or required to be provided in such notice shall also be true and correct in all material respects as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof. For the avoidance of doubt, the requirement to update and supplement a stockholder’s notice shall not allow a stockholder to change or add to the proposed business or nominees.

SECTION 2.17. Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any stockholder for election or reelection as a director of the corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Sections 2.15 and 2.16 of Article II of these By-laws) to the Secretary at the principal executive offices of the corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (a) is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed therein, including, without limitation, any Voting Commitment that could limit or interfere with such individual’s ability to comply, if elected as a director of the corporation, with such individual’s fiduciary duties under applicable law, (b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, (c) in such person’s individual capacity and on behalf of any person or entity on whose behalf, directly or indirectly, the nomination is being made, would be in compliance, if elected as a director of the corporation, and will comply with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation publicly disclosed from time to time and (d) will abide by the requirements of Section 2.18 of Article II of these By-laws.

 

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SECTION 2.18. Procedure for Election of Directors; Required Vote. (a) Except as set forth below, election of directors at all meetings of the stockholders at which directors are to be elected shall be by ballot, and a majority of the votes cast at any meeting for the election of directors at which a quorum is present shall elect directors. For purposes of this By-law, (i) a majority of votes cast shall mean that the number of votes “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election and (ii) votes cast shall include direction to withhold authority or abstain, and votes “against”, and exclude “broker non-votes”, in each case with respect to that director’s election. Notwithstanding the foregoing, in the event of a “contested election” of directors, directors shall be elected by the vote of a plurality of the votes cast at any meeting for the election of directors at which a quorum is present. For purposes of this By-law, a “contested election” shall mean any election of directors in which the number of candidates for election as directors exceeds the number of directors to be elected, with the determination thereof being made by the Secretary as of the close of the applicable notice of nomination period set forth in Sections 2.15 and 2.16 of Article II of these By-laws or under applicable law, based on whether one or more notice(s) of nomination were timely filed in accordance with said Sections 2.15 and 2.16 of Article II; provided, however, that the determination that an election is a “contested election” shall be determinative only as to the timeliness of a notice of nomination and not otherwise as to its validity. If, prior to the time the corporation mails its initial proxy statement in connection with such election of directors, one or more notices of nomination are withdrawn such that the number of candidates for election as director no longer exceeds the number of directors to be elected, the election shall not be considered a contested election, but in all other cases, once an election is determined to be a contested election, directors shall be elected by the vote of a plurality of the votes cast.

(b) If a nominee for director who is an incumbent director is not elected and no successor has been elected at such meeting, the director shall promptly tender his or her resignation to the Board of Directors in accordance with the agreement contemplated by clause (d) of Section 2.17 of Article II of these By-laws. The Nominating and Governance Committee shall make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation, or whether other action should be taken. The Board of Directors shall act on the tendered resignation, taking into account the Nominating and Governance Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within ninety (90) days from the date of the certification of the election results. The Nominating and Governance Committee in making its recommendation, and the Board of Directors in making its decision, may each consider any factors or other information that it considers appropriate and relevant. The director who tenders his or her resignation shall not participate in the recommendation of the Nominating and Governance Committee or the decision of the Board of Directors with respect to his or her resignation. If such incumbent director’s resignation is not accepted by the Board of Directors, such director shall continue to serve until the next annual meeting and until his or her successor is duly elected, or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board of Directors pursuant to this By-law, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 3.8 of Article III of these By-laws or may decrease the size of the Board of Directors pursuant to the provisions of Section 3.2 of Article III of these By-laws.

 

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SECTION 2.19. Action by Written Consent. (a) In the case of action to be taken by a stockholder or stockholders by written consent, the stockholder or stockholders proposing to take such action shall give notice of the proposed action, which notice shall be in writing and delivered to and received by the Secretary at the principal office of the corporation, a reasonable period (but not less than thirty-five days) before the proposed effective date of such action. To the extent relevant, such notice shall include the information referred to in Sections 2.15 and 2.16 of Article II of these By-laws, including, in the case of any nomination of a director, a completed and signed questionnaire, representation and agreement in accordance with the requirements set forth in Section 2.17 of Article II of these By-laws.

(b) In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date pursuant to and in accordance with Section 2.5 of Article II of these By-laws. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date pursuant to and in accordance with Section 2.5 of Article II of these By-laws.

(c) Every written consent shall be signed by one or more persons who as of the record date are stockholder of record on such record date, shall bear the date of signature of each such stockholder, and shall set forth the name and address, as they appear in the corporation’s books, of each stockholder signing such consent and the class and number of shares of the corporation which are owned of record and beneficially by each such stockholder and shall be delivered to and received by the Secretary of the corporation at the corporation’s principal office by hand or by certified or registered mail, return receipt requested. If a record stockholder is the nominee for more than one beneficial owner of stock, the record stockholder may deliver a signed written consent pursuant to this paragraph solely with respect to the shares of the corporation owned by the beneficial owner who is directing the record stockholder to sign such written request to call a special meeting. No written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the record date established in accordance with paragraph (a) of this Section 2.19 of Article II of these By-laws, a written consent or consents signed by a sufficient number of stockholders to take such action are delivered to the corporation in the matter prescribed in paragraph (a) of this Section 2.19 of Article II of these By-laws.

(d) In the event of the delivery, in the manner provided by this Section 2.19 of Article II of these By-laws, to the corporation of the requisite written consent or consents to take corporate action and/or any related revocation or revocations, the corporation shall engage nationally recognized independent inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and revocations. For the purpose of permitting a prompt ministerial review by the independent inspectors, no action by written consent without a meeting shall be effective until the earlier of (i) five (5) business days following delivery to the corporation of consents signed by the holders of the requisite minimum number of votes that would be necessary to take such action, which delivery shall be accompanied by a certification by the stockholder of record (or his or her designee) who delivered, in accordance with paragraph (a) above, the written notice to the Secretary requesting

 

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the Board of Directors to fix a record date or (ii) such date as the independent inspectors certify to the corporation that the consents delivered to the corporation in accordance with this Article II represent at least the minimum number of votes that would be necessary to take the corporate action. Nothing contained in this paragraph (d) shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any consent or revocation thereof, whether during or after such five (5) business day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto).

ARTICLE III

DIRECTORS

SECTION 3.1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of its Board of Directors. In addition to the powers and authorities by these By-laws expressly conferred upon them, the Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-laws required to be exercised or done by the stockholders.

SECTION 3.2. Number, Tenure and Qualifications. The number of directors of the corporation shall be determined from time to time by resolution of the Board of Directors or by resolution of the stockholders. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent director. The directors shall be elected at the annual meetings of stockholders except as otherwise provided in the Certificate of Incorporation and in these By-laws, and each director shall hold office until his or her successor shall have been elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be residents of the State of Delaware or stockholders of the corporation.

A director may resign at any time by giving written notice to the Board of Directors, its Chairman or to the Chief Executive Officer or to the President or Secretary of the corporation. A resignation shall be effective when the notice is given, unless the notice specifies a future date.

SECTION 3.3. Regular Meetings. A regular annual meeting of the Board of Directors shall be held without other notice than this By-law, at such time and place, either within or without the State of Delaware, as the Board of Directors may determine from time to time. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Delaware, for the holding of additional regular meetings without other notice than such resolution; but if not so provided then such additional regular meetings may be convened in the same manner as provided in Section 3.4 of this Article III of these By-laws in respect to special meetings.

SECTION 3.4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the Chief Executive Officer, the President, or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Delaware, as the place for holding any special meeting of the Board of Directors called by them.

 

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SECTION 3.5. Notice. Notice of any special meeting shall be given to each director at his business or residence in writing by hand delivery, first-class or overnight mail or courier service, telegram, email or facsimile transmission, or orally by telephone. If by telegram, overnight mail or courier service such notice shall be deemed to be adequately delivered when the telegram is delivered to the telegraph company, or the notice is delivered to the overnight mail or courier service company at least two days prior to such meeting. If by email, facsimile transmission, telephone or by hand, such notice shall be deemed adequately delivered when the notice is transmitted at least one day prior to such meeting. If mailed by first-class mail, such notice shall be deemed to adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need to be specified in any waiver of notice of such meetings, except for amendments to these By-laws, as provided under Section 14.1 of Article XIV of these By-laws.

SECTION 3.6. Quorum. A majority of the Board of Directors then in office shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, provided that if less than a majority of the directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

SECTION 3.7. Manner of Acting. Except as provided in the Certificate of Incorporation of the corporation, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

SECTION 3.8. Vacancies. Any vacancy occurring in the Board of Directors and any directorship to be filled by reason of an increase in the number of directors or for any other reason may be filled by election at an annual meeting of stockholders, election at a special meeting of stockholders called for that purpose or by election by the affirmative vote of a majority of the remaining directors at a regular or special meeting of the Board of Directors.

SECTION 3.9. Presumption of Assent. A director of the corporation who is present at a meeting of Board of Directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent or abstention is entered in the minutes of the meeting or unless such director shall file his or her written dissent or abstention to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent or abstention by registered or certified mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent or abstain shall not apply to a director who voted in favor of such action.

SECTION 3.10. Action in Writing by Directors. Any action required to be taken at a meeting of the Board of Directors, or any committee thereof, or any other action which may be taken at a meeting of the Board of Directors, or any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, or by electronic transmission, and the writing or writings or electronic

 

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transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

SECTION 3.11. Adjournment. Any meeting of the Board of Directors may be adjourned. Notice of the adjourned meeting or of the business to be transacted there, other than by announcement at the meeting at which the adjournment is taken, shall not be necessary. At an adjourned meeting at which a quorum is present, any business may be transacted that could have been transacted at the meeting originally called.

SECTION 3.12. Directors Conflict of Interest. If a transaction is fair to the corporation at the time it is authorized, approved or ratified, the fact that a director of the corporation is directly or indirectly a party to the transaction shall not be grounds for invalidating the transaction.

SECTION 3.13. Compensation of Directors. By the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any member of the Board of Directors, the Board of Directors may establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. No such establishment of reasonable compensation shall be deemed a director conflict of interest.

ARTICLE IV

COMMITTEES OF THE BOARD OF DIRECTORS

SECTION 4.1. Establishment of Committees. A majority of the directors may create one or more committees and appoint members of the Board of Directors to serve on the committee or committees. Each committee shall have two or more members, who serve at the pleasure of the Board of Directors.

The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. Any vacancy in a committee may be filled by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors as required.

SECTION 4.2. Manner of Action. A majority of any committee shall constitute a quorum and a majority of a quorum shall be necessary for action by any committee. A committee may act by unanimous consent in writing without a meeting. The committee, by majority vote of its members, shall determine the time and place of meetings and the notice required therefore.

SECTION 4.3. Authority of Committees. To the extent specified by resolution of the Board of Directors and these By-laws, each committee may exercise the authority of the Board of Directors, provided, however, a committee may not exercise such authority of the Board of Directors to the extent action by the Board of Directors (without delegation to a committee thereof) is expressly required by the General Corporation Law of the State of Delaware from time to time.

 

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SECTION 4.4. Executive Committee. The Board of Directors may establish an Executive Committee. The Executive Committee, during intervals between meetings of the Board of Directors, shall have, and may exercise, subject to the limitations contained in Section 4.3 of Article IV of these By-laws, the powers of the Board of Directors in the management of the business and affairs of the corporation.

SECTION 4.5. Compensation Committee. The Board of Directors shall establish a Compensation Committee consisting of directors who are not otherwise employed by the corporation. The Compensation Committee shall review, from time to time, the salaries, compensation and employee benefits of the officers and employees of the corporation and shall make recommendations to the Board of Directors concerning such matters.

SECTION 4.6. Audit Committee. The Board of Directors shall establish an Audit Committee consisting of directors who are not otherwise employed by the corporation. The Audit Committee shall appoint, compensate and evaluate the corporation’s outside auditor employed to audit the financial statements of the corporation. The Audit Committee shall also consider recommendations made by the outside auditor, review the internal financial audits of the corporation, and report any additions or changes it deems advisable to the Board of Directors. The Audit Committee shall conduct such other activities as may be required or appropriate.

SECTION 4.7. Nominating and Governance Committee. The Board of Directors shall establish a Nominating and Governance Committee consisting of directors who are not otherwise employed by the corporation. The Nominating and Governance Committee shall consider matters related to corporate governance, develop general criteria regarding the selection and qualifications for members of the Board of Directors and shall recommend candidates for election to the Board of Directors.

SECTION 4.8. Finance Committee. The Board of Directors may establish a Finance Committee. The Finance Committee shall review major financial decisions of the corporation and shall make recommendations to the Board of Directors concerning such matters.

ARTICLE V

OFFICERS

SECTION 5.1. Number. The officers of the corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, and such Executive or Senior Vice Presidents and other Vice Presidents as the Board of Directors may from time to time elect or appoint, a Treasurer, a Controller, a General Auditor and a Secretary, and such Assistant Treasurers, Assistant Secretaries, Assistant Controllers or other officers as may be from time to time elected or appointed by the Board of Directors. Any two or more offices may be held by the same person.

SECTION 5.2. Election and Term of Office. The officers of the corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided.

 

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SECTION 5.3. Removal. Any officer or agent of the corporation may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

SECTION 5.4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.

SECTION 5.5. Chief Executive Officer. The Chairman of the Board may, but need not, be the Chief Executive Officer of the corporation. The Chief Executive Officer shall determine and administer the policies of the corporation, subject to the instructions of the Board of Directors.

Except where, by law, the signature of some other officer or agent of the corporation is required, the Chief Executive Officer may sign: certificates for shares of the corporation; any deeds, mortgages, bonds, leases concerning real and personal property both as landlord and as tenant; contracts and other instruments in furtherance of the business of the corporation, including instruments of guaranty as to any of such documents which may be executed by subsidiaries of the corporation; proxies on behalf of the corporation with respect to the voting of any shares of stock owned by the corporation; and assignments of shares of stock owned by the corporation. The Chief Executive Officer shall have the power to appoint such agents and employees as in the Chief Executive Officer’s judgment may be necessary or proper for the transaction of the business of the corporation and to fix their compensation, all subject to the ratification of the Board of Directors.

The Chief Executive Officer shall submit to the Board of Directors, prior to the date of the annual meeting of stockholders, an annual report of the operations of the corporation and its subsidiaries, including a balance sheet showing the financial condition of the corporation and its subsidiaries consolidated as at the close of such fiscal year and statements of consolidated income and surplus. The Chief Executive Officer shall perform such other duties as may be prescribed by the Board of Directors from time to time.

SECTION 5.6. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors.

SECTION 5.7. President. The President shall be the Chief Operating Officer of the corporation and shall in general be in charge of the operations of the corporation. The President may, but need not, be the Chief Executive Officer.

Except where, by law, the signature of some other officer or agent of the corporation is required, the President or a Vice President may sign: certificates for shares of the corporation; any deeds, mortgages, bonds, leases concerning real and personal property both as landlord and as tenant; contracts or other instruments in furtherance of the business of the corporation,

 

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including instruments of guaranty as to any of such documents which may be executed by subsidiaries of the corporation; proxies on behalf of the corporation with respect to the voting of any shares of stock owned by the corporation; and assignments of shares of stock owned by the corporation. The President shall perform such other duties as may be prescribed by the Board of Directors from time to time.

SECTION 5.8. The Vice Presidents. In the absence of the President or in the event of the President’s inability or refusal to act, a Vice President, selected by the Board of Directors, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President may execute documents as provided in Section 5.7 of this Article V of these By-laws and shall perform such other duties as from time to time may be assigned to such Vice President by the Chief Executive Officer, the President or by the Board of Directors. The Board of Directors may designate one or more of the Vice Presidents as Executive or Senior Vice President with such additional duties as from time to time may be assigned by the Chief Executive Officer, the President or by the Board of Directors.

SECTION 5.9. The Treasurer. The Treasurer shall have the custody of all of the funds and securities of the corporation. When necessary and proper the Treasurer shall endorse, or authorize on behalf of the corporation the endorsement of, all checks, notes or other obligations and evidences of the payment of money, payable to the corporation or coming into the Treasurer’s possession, and shall deposit the funds arising therefrom with all other funds of the corporation, coming into the Treasurer’s possession, in such banks as may be selected as the depositories of the corporation, or properly care for them in such other manner as the Board of Directors may direct. Either alone or jointly with the Chief Executive Officer, the President or such other officers as may be designated by the Board of Directors, the Treasurer shall, except as herein otherwise provided, be authorized to sign all checks and other instruments drawn on or payable out of the funds of the corporation, and all bills, notes and other evidences of indebtedness of the corporation. Whenever required by the Board of Directors to do so, the Treasurer shall exhibit a complete and true statement of the Treasurer’s cash account and of the securities and other property in the Treasurer’s possession, custody or control. The Treasurer shall enter, or direct or cause to be entered, regularly in books belonging to the corporation and to be kept by the Treasurer for such purpose, a full and accurate account of all money received and paid by the Treasurer on account of the corporation, together with all other business transactions. The Treasurer shall, at all reasonable times within the hours of business, exhibit the Treasurer’s books and accounts to any director. The Treasurer shall perform all duties that are incident to the office of the Treasurer of a corporation, subject, however, at all times to the direction and control of the Board of Directors. If the Board of Directors shall so require, the Treasurer shall give bond, in such sum and with such securities as the Board of Directors may direct, for the faithful performance of the Treasurer’s duties and for the safe custody of the funds and property of the corporation coming into the Treasurer’s possession.

SECTION 5.10. The Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, the minutes of all meetings of the committees of the Board of Directors, and the minutes of all meetings of the stockholders, in books provided by the corporation for such purposes, and shall act as Secretary at all such meetings. The Secretary shall attend to the giving and serving of all notices of the corporation of meetings of the Board of Directors, committees of the Board of Directors and stockholders. The Secretary shall prepare all lists of

 

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stockholders and their addresses required to be prepared by the provisions of any present or future statute of the State of Delaware. The Secretary may sign with the Chief Executive Officer, the President or a Vice President, in the name of the corporation, all contracts and instruments and may affix the seal of the corporation thereto. The Secretary shall have charge of such books and papers as the Board of Directors may direct. The Secretary shall have the authority to certify the By-laws, resolutions of the Board of Directors and the committees thereof, and other documents of the corporation as true and correct copies thereof. The Secretary shall, in general, perform all the duties that are incident to the office of Secretary of a corporation, subject at all times to the direction and control of the Board of Directors.

SECTION 5.11. The Controller. The Controller shall be the principal accounting officer of the corporation and shall be in charge of all general and cost accounting books and records of the corporation, and shall see that all moneys due to the corporation, all disbursements and all properties and assets are properly accounted for. The Controller shall prepare the corporation’s balance sheets, income accounts and other financial statements and reports, and render on a periodic basis a report covering the operations of the corporation for the month and year to date. The Controller shall perform all duties which are incident to the office of the Controller of a corporation, subject, however, at all times to control of the Board of Directors.

SECTION 5.12. General Auditor. The General Auditor shall be responsible for the conduct of audits in order to determine that the corporation’s accounting systems of internal checks and balances are properly designed and function so that the corporation’s assets are being adequately protected. The General Auditor shall perform audits of any of the corporation’s operations and accounting which will permit him or her to adequately discharge the General Auditor’s responsibilities. The General Auditor shall render findings to the General Auditor’s immediate superior and, in the event that in the General Auditor’s opinion, proper corrective action is not being taken or the General Auditor is being denied free access to information needed to perform the General Auditor’s duties, shall have the right, and it is the General Auditor’s responsibility, to report this to the Chief Executive Officer of the corporation or directly to the Board of Directors.

SECTION 5.13. Assistant Treasurers, Assistant Secretaries and Assistant Controllers. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. Each Assistant Treasurer, Assistant Secretary and Assistant Controller, in the absence or inability or refusal to act of the Treasurer, the Secretary or the Controller, as the case may be, may perform the duties of the office to which he or she is an assistant and in general shall perform such duties as shall be assigned to him or her by the Treasurer, the Secretary or the Controller, respectively, or by the Chief Executive Officer, the President or the Board of Directors.

SECTION 5.14. Execution of Agreements. The Chief Executive Officer, the Chairman of the Board or the President or any Vice President, at any time and without any express authority of the Board of Directors may sign and execute all agreements to sell, purchase, lease or otherwise acquire stores or other property of, on behalf of, and for the corporation. The authority herein given by this Section 5.14 of Article V of these By-laws shall not impair or restrict any authority, expressed, implied or otherwise, herein conferred upon any officer or officers.

 

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SECTION 5.15. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that such officer is also a director of the corporation.

ARTICLE VI

INDEMNIFICATION OF OFFICERS,

DIRECTORS, EMPLOYEES AND AGENTS

SECTION 6.1. Right to Indemnification. (a) Each person who is or was a party or is otherwise threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was, at any time during which this By-law is in effect (whether or not such person continues to serve in such capacity at the time any indemnification or advancement of expenses pursuant hereto is sought or at the time any proceeding relating thereto exists or is brought), a director or officer, trustee, fiduciary, employee or agent of the corporation or is or was at any such time serving at the request of the corporation as a director, officer, employee, trustee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the corporation (hereinafter, a “Covered Person”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, trustee, fiduciary or agent or in any other capacity while serving as a director, officer, trustee, employee or agent, shall be (and shall be deemed to have a contractual right to be) indemnified and held harmless by the corporation (and any successor of the corporation by merger or otherwise) to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended or modified from time to time (but, in the case of any such amendment or modification, only to the extent that such amendment or modification permits the corporation to provide greater indemnification rights than said law permitted the corporation to provide prior to such amendment or modification), against all expense, liability and loss (including attorneys’ fees), judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement actually and reasonably incurred or suffered by such person in connection with such proceeding if the person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful. Such indemnification shall continue as to a person who has ceased to be a director, officer, employee, trustee, fiduciary or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 6.2 of Article VI of these By-laws, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the corporation.

 

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(b) To obtain indemnification under this By-law, a claimant shall submit to the corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification, a determination, if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as follows: (i) by a majority of disinterested directors, even though less than a quorum, or (ii) by a committee of disinterested directors designated by majority vote of the disinterested directors, even though less than a quorum, or (iii) if there are no disinterested directors, or if the disinterested directors so direct, by independent counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (iv) if a majority of the disinterested directors so directs, by a majority vote of the stockholders of the corporation. In the event that the determination of entitlement to indemnification is to be made by independent counsel, the independent counsel shall be selected by the disinterested directors unless there shall have occurred within two (2) years prior to the date of the commencement of the proceeding for which indemnification is claimed a “Change of Control” as defined in the Walgreen Co. 2013 Omnibus Incentive Plan, as amended and as assumed by the corporation, or any successor plan, in which case the independent counsel shall be selected by the claimant unless the claimant shall request that such selection be made by the disinterested directors. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within ten (10) days after such determination.

(c) To the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended or modified from time to time (but, in the case of any such amendment or modification, only to the extent that such amendment or modification permits the corporation to provide greater rights to advancement of expenses than said law permitted the corporation to provide prior to such amendment or modification), each Covered Person shall have (and shall be deemed to have a contractual right to have) the right, without the need for any action by the Board of Directors, to be paid by the corporation (and any successor of the corporation by merger or otherwise) the expenses incurred in connection with any proceeding in advance of its final disposition, such advances to be paid by the corporation within twenty (20) days after the receipt by the corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, that if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking (hereinafter, the “Undertaking”) by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal (a “final disposition”) that such director or officer is not entitled to be indemnified for such expenses under this By-law or otherwise.

SECTION 6.2. Right of Claimant to Bring Suit. (a) If a claim for indemnification under Section 6.1(b) of Article VI of these By-laws is not paid in full by the corporation within thirty (30) days after a written claim has been received by the corporation or if a request for

 

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advancement of expenses under this Article VI is not paid in full by the corporation within twenty (20) days after a statement pursuant to Section 6.1(c) of Article VI of these By-laws and the required Undertaking, if any, have been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim for indemnification or request for advancement of expenses and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action that, under the General Corporation Law of the State of Delaware, the claimant has not met the standard of conduct which makes it permissible for the corporation to indemnify the claimant for the amount claimed or that the claimant is not entitled to the requested advancement of expenses, but (except where the required Undertaking, if any, has not been tendered to the corporation) the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that indemnification of the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(b) If a determination shall have been made pursuant to Section 6.1(b) of Article VI of these By-laws that the claimant is entitled to indemnification, the corporation shall be bound by such determination in any judicial proceeding commenced pursuant to paragraph (a) of this Section 6.2 of Article VI of these By-laws.

(c) The corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to paragraph (a) of this Section 6.2 of Article VI of these By-laws that the procedures and presumptions of this By-law are not valid, binding and enforceable and shall stipulate in such proceeding that the corporation is bound by all the provisions of this By-law.

SECTION 6.3. Non-Exclusivity of Rights. All of the rights conferred in this Article VI, as to indemnification, advancement of expenses and otherwise, shall not be exclusive of any other rights to which any person seeking indemnification or advancement of expenses may be entitled or hereafter acquire under any statute, provision of the corporation’s Certificate of Incorporation, By-laws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office and cannot be terminated or impaired by the corporation, the Board of Directors or the stockholders of the corporation with respect to a person’s service prior to the date of such termination.

SECTION 6.4. Insurance; Other Indemnification and Advancement of Expenses. (a) The corporation may maintain insurance, at its expense, to protect itself and any current or former director, officer, employee, fiduciary, trustee or agent of the corporation, or any person who is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise (including employee benefit plans) against any expense, liability or loss asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the

 

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corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. To the extent that the corporation maintains any policy or policies providing such insurance, each such current or former director or officer, and each such employee or agent to which rights to indemnification have been granted as provided in this paragraph (a) of this Section 6.4 of Article VI of these By-laws, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such current or former director, officer, employee or agent.

(b) The corporation may, to the extent authorized from time to time by the Board of Directors or the Chief Executive Officer, grant rights to indemnification and rights to advancement of expenses incurred in connection with any proceeding in advance of its final disposition, to any current or former employee or agent of the corporation to the fullest extent of the provisions of these By-laws with respect to the indemnification and advancement of expenses of current or former directors and officers of the corporation.

SECTION 6.5. Contractual Nature. All of the rights conferred in this Article VI, as to indemnification, advancement of expenses and otherwise, shall be applicable to all proceedings commenced or continuing after its adoption, whether such arise out of events, acts or omissions which occurred prior or subsequent to such adoption, and shall continue as to a person who has ceased to be a director, officer or a person serving at the request of the corporation as a director, trustee, fiduciary, employee, agent or officer of another corporation, partnership, joint venture, trust or other enterprise and shall inure to the benefit of the heirs, executors, and administrators of such person. This Article VI shall be deemed to be a contract between the corporation and each person who, at any time that this Article VI is in effect, serves or agrees to serve in any capacity that entitles him or her to indemnification hereunder, which shall vest at the commencement of such person’s service to, or at the request of, the corporation, and any repeal, amendment or other modification of this Article VI or any repeal, amendment or modification of the General Corporation Law of the State of Delaware or any other applicable law shall not limit any rights of indemnification for proceedings then existing or later arising out of events, acts or omissions occurring prior to such repeal or modification, including, without limitation, the right to indemnification for proceedings commenced after such repeal or modification to enforce this Article VI with regard to proceedings arising out of acts, omissions or events occurring prior to such repeal or modification.

SECTION 6.6. Severability. If any portion of this Article VI shall be invalidated or held to be unenforceable on any ground by any court of competent jurisdiction, the decision of which shall not have been reversed on appeal, such invalidity or unenforceability shall not affect the other provisions hereof, and this Article VI shall be construed in all respects as if such invalid or unenforceable provisions had been omitted therefrom.

SECTION 6.7. Primacy of Indemnification. Notwithstanding that a person may have certain rights to indemnification, advancement of expenses and/or insurance provided by other persons (collectively, the “Other Indemnitors”), with respect to the rights to indemnification, advancement of expenses and/or insurance set forth herein, the corporation: (i) shall be the indemnitor of first resort (i.e., its obligations to such person are primary and any obligation of the Other Indemnitors to advance expenses or to provide indemnification for the same expenses or

 

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liabilities incurred by such person are secondary); and (ii) shall be required to advance the full amount of expenses incurred by such person and shall be liable for the full amount of all liabilities, without regard to any rights such person may have against any of the Other Indemnitors. No advancement or payment by the Other Indemnitors on behalf of a person with respect to any claim for which such person has sought indemnification from the corporation shall affect the immediately preceding sentence, and the Other Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such person against the corporation.

ARTICLE VII

CONTRACTS, CHECKS AND DEPOSITS

SECTION 7.1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

SECTION 7.2. Checks, Drafts, and Orders for the Payment of Money. The Board of Directors may appoint one or more persons who may severally be authorized by the Board of Directors to sign checks, drafts, or orders for the payment of money and any or all of whom may be further authorized by the Board of Directors, in its discretion, to authorize other individuals to sign checks, drafts, or orders for the payment of money.

SECTION 7.3. Deposits. The Board of Directors may appoint one or more persons who may severally be authorized by the Board of Directors to select and designate as a depository of and for the moneys and funds of the corporation such bank or banks as such person may from time to time determine; and the said person or persons so authorized by the Board of Directors may further be authorized severally to terminate and cancel the designation of any bank or banks as a depository of this corporation.

ARTICLE VIII

CERTIFICATES FOR SHARES AND THEIR TRANSFER

SECTION 8.1. Certificates for Shares. The shares of the corporation may be uncertificated or may be represented by certificates signed by the Chairman of the Board, the Treasurer or an Assistant Treasurer, the President or a Vice President and the Secretary or an Assistant Secretary and sealed with the seal of the corporation. Such seal may be a facsimile. Where such certificate is countersigned by a transfer agent other than the corporation itself or an employee of the corporation, or by a transfer clerk and registered by a registrar, the signatures of the Chairman of the Board, the Treasurer or an Assistant Treasurer, the President or Vice President and the Secretary or Assistant Secretary upon such certificate may be facsimiles, engraved or printed. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if such officer had not ceased to be such at the date of its issue. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. The

 

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Board of Directors of the corporation may provide by resolution that some or all of any or all classes and series of its shares shall be uncertificated shares; provided that such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this Section 8.1 of Article VIII of these By-laws. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and rights and obligations of the holders of certificates representing shares of the same class and series shall be identical. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate or uncertificated shares shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefore upon such terms and indemnity to the corporation as the Board of Directors may prescribe.

SECTION 8.2. Transfer of Shares. Transfer of shares of the corporation shall be made only on the books of the corporation by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney thereunto authorized by the power of attorney duly executed and filed with the Secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation.

SECTION 8.3. Transfer Agent and Registrar. The Board of Directors may from time to time appoint such Transfer Agents and Registrars in such locations as it shall determine, and may, in its discretion, appoint a single entity to act in the capacity of both Transfer Agent and Registrar in any one location.

ARTICLE IX

FISCAL YEAR

The fiscal year of the corporation shall begin on the first day in September in each year and shall end on the succeeding thirty-first (31st) day of August.

ARTICLE X

DIVIDENDS

The Board of Directors may from time to time declare and the corporation may pay dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation.

ARTICLE XI

SEAL

The Board of Directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the words “Corporate Seal”, the year of incorporation and around the margin thereof the words “Walgreens Boots Alliance, Inc., Delaware”.

 

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ARTICLE XII

WAIVER OF NOTICE

Whenever any notice whatever is required to be given under the provisions of these By-laws or under the provisions of the Certificate of Incorporation or under the provisions of the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

ARTICLE XIII

FORUM AND VENUE

Unless the corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the corporation to the corporation or the corporation’s stockholders, creditors or other constituents, (iii) any action asserting a claim against the corporation or any director or officer or other employee of the corporation arising pursuant to any provision of the General Corporation Law of the State of Delaware or the Certificate of Incorporation of the corporation or these By-laws (as either may be amended from time to time), or (iv) any action asserting a claim against the corporation or any director or officer or other employee of the corporation governed by the internal affairs doctrine; provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware).

ARTICLE XIV

AMENDMENTS

SECTION 14.1. By Directors. These By-laws may be altered, amended or repealed and new By-laws may be adopted, at any meeting of the Board of Directors of the corporation by a majority vote of the directors present at the meeting, subject to the restrictions set forth in Section 14.2 of Article XIV of these By-laws.

SECTION 14.2. By Stockholders. These By-laws may be altered, amended or repealed, or new by-laws may be adopted, by the stockholders at any annual meeting, or at any special meeting called for such purpose (provided that in the notice of such special meeting, notice of such purpose shall be given). If such By-law so provides, a By-law adopted by the stockholders may not be altered, amended or repealed by the Board of Directors. This Section 14.2 of Article XIV may not be altered, amended or repealed by the Board of Directors.

 

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Exhibit 4.1

GUARANTEE AGREEMENT, dated as of December 31, 2014 (as amended from time to time, this “Guarantee Agreement”), made by Walgreens Boots Alliance, Inc., a Delaware corporation (the “Guarantor”), in favor of (a) the Holders of (i) 1.000% Notes due 2015, (ii) 1.800% Notes due 2017, (iii) 5.250% Notes due 2019, (iv) 3.100% Notes due 2022 and (v) 4.400% Notes due 2042 (collectively, the “Notes”), in each case, of Walgreen Co., an Illinois corporation (the “Company”), and (b) Wells Fargo Bank, National Association (together with its successors and assigns, the “Trustee”), as trustee under the Indenture (as defined below; unless otherwise defined herein, capitalized term shall have the meanings assigned to them in the Indenture) with respect to the Notes.

WITNESSETH:

WHEREAS, on August 2, 2012, the Company completed the initial investment contemplated by the Purchase and Option Agreement dated June 18, 2012, as amended on August 5, 2014 (the “Amendment”), by and among the Company, Alliance Boots GmbH and AB Acquisitions Holdings Limited (as amended by the Amendment, the “Purchase and Option Agreement”), which resulted in the Company’s acquisition of 45% of the issued and outstanding share capital of Alliance Boots GmbH.

WHEREAS, the Purchase and Option Agreement also provided, among other things and subject to the satisfaction or waiver of specified closing conditions, that the Company had the right, but not the obligation, to acquire the remaining 55% of the issued and outstanding share capital of Alliance Boots GmbH (the “Call Option”) in exchange for £3.133 billion in cash, payable in British pounds sterling, and 144,333,468 shares of the Guarantor’s common stock, subject to certain specified adjustments (the “Second Step Transaction”).

WHEREAS, pursuant to the Amendment, the Call Option became exercisable by the Company on August 5, 2014, and the Company, through an indirect wholly owned subsidiary to which it previously assigned its rights under the Call Option, exercised the Call Option on August 5, 2014.

WHEREAS, in connection with consummation of the Second Step Transaction, the Guarantor issued seven separate series of Dollar denominated notes in aggregate principal amount equal to $8,000,000,000 (the “WBA Dollar Notes”), two separate series of British pound sterling denominated notes in aggregate principal amount equal to £700,000,000 (the “WBA Sterling Notes”) and one series of euro denominated notes in aggregate principal amount equal to €750,000,000 (the “WBA Euro Notes” and together with the WBA Dollar Notes and WBA Sterling Notes, the “WBA Notes”) under an indenture with Wells Fargo Bank, National Association, dated as of November 18, 2014, the proceeds of which will be used, among other things, to fund a portion of the cash consideration payable in connection with the Second Step Transaction.

WHEREAS, the Company executed that certain Guarantee Agreement, dated as of November 18, 2014, in connection with the Guarantor’s issuance of the WBA Dollar Notes and that certain Guarantee Agreement, dated as of November 20, 2014, in connection with the Guarantor’s issuance of the WBA Sterling Notes and WBA Euro Notes, in consideration, among other things, of the benefits the Company will obtain as a result of the consummation of the Second Step Transaction.


NOW, THEREFORE, in consideration of the aforesaid premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound, the Guarantor hereby agrees as follows:

Section 1. Guarantee. The Guarantor hereby fully and unconditionally guarantees (the “Guarantee”) to each Holder of the Notes and to the Trustee, on an unsecured, unsubordinated basis, the full and prompt payment of principal of, premium, if any, interest on, and Additional Amounts, if any, with respect to, each series of Outstanding Notes when and as the same become due and payable, whether at stated maturity, upon redemption, by declaration of acceleration or otherwise, including all fees and expenses due and owing to the Trustee pursuant to the terms of the Indenture dated as of July 17, 2008 (as it may from time to time be supplemented or amended by one or more indentures supplemental thereto entered into pursuant to the applicable provisions thereof and, with respect to any Security, including each series of the Notes, by the terms and provisions of such Security established pursuant to Section 3.1 thereof (as such terms and provisions may be amended pursuant to the applicable provisions thereof), the “Indenture”), between the Company and the Trustee (collectively, the “Obligations”). The Guarantee hereunder constitutes a guarantee of payment and not of collection.

Section 2. Guarantee Absolute. The Guarantor guarantees that the Obligations will be paid strictly in accordance with the terms of the Indenture and the Notes, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Holders of the Notes with respect thereto. The liability of the Guarantor under the Guarantee shall be absolute and unconditional irrespective of:

(a) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from the Indenture; or

(c) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Company or a guarantor (other than a defense of payment in full and other than as set forth in Section 3 hereof).

Section 3. Termination of Guarantee.

(a) This Guarantee Agreement will automatically terminate, and the obligations of the Guarantor hereunder will be unconditionally released and discharged, if and when the aggregate outstanding principal amount of the Notes is less than $400,000,000.

(b) In addition, this Guarantee Agreement will automatically terminate, and the obligations of the Guarantor hereunder will be unconditionally released and discharged with respect to any series of Outstanding Notes, upon the occurrence of a Ratings Event (as defined below) with respect to such series of Outstanding Notes.

 

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(c) As used herein:

(i) “Applicable Rating” means, at the time of determination, a rating equal to the rating assigned by each Rating Agency on the WBA Notes at such time.

(ii) “Moody’s” means Moody’s Investors Service, Inc. and its successors.

(iii) “Rating Agencies” means (1) each of Moody’s and S&P; and (2) if either of Moody’s or S&P ceases to rate the Notes or WBA Notes, as applicable, or fails to make a rating of the Notes or WBA Notes, as applicable, publicly available for reasons outside of the Guarantor’s control, a “nationally recognized statistical rating organization” as defined under Section 3(a)(62) of the Exchange Act selected by the Guarantor (as certified by a resolution of its board of directors or any authorized committee thereof) as a replacement agency for Moody’s or S&P, or both of them, as the case may be.

(iv) “Rating Event” means, with respect to any series of Outstanding Notes, the receipt by the Guarantor of written confirmation from each Rating Agency that it would continue to assign a rating to such series of Outstanding Notes equal to or higher than the Applicable Rating after giving effect to the termination of this Guarantee Agreement and the unconditional release and discharge of the obligations of the Guarantor hereunder, in each case, with respect to such series of Outstanding Notes.

(v) “S&P” means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., and its successors.

(d) Once released in accordance with its terms, this Guarantee Agreement will not subsequently be required to be reinstated for any reason.

Section 4. Waiver; Subrogation.

(a) The Guarantor hereby waives notice of acceptance of the Guarantee, diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding filed first against the Company, protest or notice with respect to the Notes or the indebtedness evidenced thereby and all demands whatsoever.

(b) The Guarantor shall be subrogated to all rights of the Trustee or the Holders of any Notes against the Company in respect of any amounts paid to the Trustee or such Holder by the Guarantor pursuant to the provisions of this Guarantee Agreement; provided, however, that the Guarantor shall not be entitled to enforce, or to receive any payments arising out of, or based upon, such right of subrogation until all Obligations shall have been paid in full.

Section 5. No Waiver; Remedies. No failure on the part of the Trustee or any Holder of any series of Notes to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

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Section 6. Transfer of Interest. This Guarantee Agreement shall be binding upon the Guarantor, and its successors, transferees and assigns, and shall inure to the benefit of and be enforceable by any Holder of Notes, the Trustee, and by their respective successors, transferees and assigns, pursuant to the terms hereof. This Guarantee Agreement shall not be deemed to create any right in, or to be in whole or in part for the benefit of, any other person.

Section 7. Amendment.

(a) Without the consent of any Holders of Notes, the Guarantor and the Trustee, at any time and from time to time, may enter into one or more amendments or modifications hereto, for any of the following purposes:

(i) to evidence the succession of another Person to the Guarantor, and the assumption by any such successor of the covenants of the Guarantor contained herein; or

(ii) to add to the covenants of the Guarantor for the benefit of the Holders of all or any series of Notes or to surrender any right or power herein conferred upon the Guarantor with respect to all or any series of Notes; or

(iii) to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Guarantee Agreement which shall not adversely affect the interests of the Holders of Notes of each applicable series then Outstanding in any material respect, provided that any amendment made solely to conform the provisions of this Guarantee Agreement to the corresponding description of the Guarantee contained in the applicable prospectus or prospectus supplement for the applicable WBA Notes shall be deemed to not adversely affect the interests of the Holders; or

(iv) to amend or supplement any provision contained herein, provided that no such amendment or supplement shall materially adversely affect the interests of the Holders of Notes of each applicable series then Outstanding.

(b) Subject to Section 7(a) above, with respect to each separate series of Outstanding Notes, the Guarantor may and the Trustee shall, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Notes of each such series affected by such amendment, modification or waiver, by Act of said Holders delivered to the Guarantor and the Trustee, enter into an agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Guarantee Agreement in respect of such series of Outstanding Notes, of modifying in any manner the rights of the Holders of Notes of such series under this Guarantee Agreement, of releasing the Guarantor from any or all of its obligations under this Guarantee Agreement in respect of such series or of waiving any past default hereunder with respect to such series and its consequences; provided, however, that no such agreement, without the consent of the Holder of each Outstanding Note of the series affected thereby, shall modify this Section 7(b) in respect of such series.

(c) No amendment, modification or waiver in respect of this Guarantee Agreement will be effective unless in writing and executed by each of the parties hereto.

 

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(d) Upon the execution of any amendment, modification or waiver under this Section 7, this Guarantee Agreement shall be deemed to be modified and amended in accordance therewith, and such amendment, modification or waiver shall form a part of this Guarantee Agreement for all purposes; and the respective rights, limitation of rights, duties, powers, trusts and immunities under this Guarantee of the Trustee, the Guarantor and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be determined, exercised and enforced thereunder to the extent provided therein.

(e) As a condition to executing any amendment, modification or waiver under this Section 7, the Trustee shall receive an Opinion of Counsel stating that such amendment, modification or waiver is authorized or permitted by this Guarantee Agreement and complies with the provisions hereof, and an Officers’ Certificate stating that all conditions precedent to the execution of such amendment, modification or waiver have been fulfilled.

(f) As used herein:

(i) “Officers’ Certificate” means a certificate signed by the Chairman of the Board, the Chief Executive Officer, a President or a Vice President, and by the Chief Financial Officer, the Treasurer or the Secretary of the Guarantor, that complies with the requirements of Section 314(e) of the TIA (as defined below) and is delivered to the Trustee.

(ii) “Opinion of Counsel” means a written opinion of counsel, who may be an employee of or counsel for the Guarantor or other counsel, that, if required by the TIA, complies with the requirements of Section 314(e) of the TIA.

Section 8. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 9. No Recourse Against Others. A director, officer, employee, stockholder, partner or other owner of the Guarantor, as such, shall not have any liability for any obligations of the Guarantor under this Guarantee Agreement or for any claim based on, in respect of or by reason of such obligations or their creation.

Section 10. Consolidation, Amalgamation and Merger. The Guarantor shall not consolidate or amalgamate with or merge into any other Person (whether or not affiliated with the Guarantor), unless the Guarantor is the surviving Person or the surviving Person (if other than the Guarantor) is organized and existing under the laws of the United States, any state thereof or the District of Columbia and shall expressly assume the obligations hereunder.

Section 11. Limitation on Liability. Any term or provision of this Guarantee Agreement to the contrary notwithstanding, the maximum aggregate amount of the Obligations guaranteed hereunder by the Guarantor shall not exceed the maximum amount that can be hereby guaranteed by the Guarantor without rendering the Guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or capital maintenance or corporate benefit rules applicable to guarantees for obligations of affiliates.

 

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Section 12. Separability. In case any provision in this Guarantee Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the fullest extent permitted by law.

Section 13. Headings. The section headings of this Guarantee Agreement have been inserted for convenience of reference only, are not to be considered a part of this Guarantee Agreement and shall in no way modify or restrict any of the terms or provisions hereof.

Section 13. Notices, Etc., to the Guarantor. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Guarantee Agreement to be made upon, given or furnished to, or filed with, the Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Guarantor addressed to the address last furnished in writing to the Trustee by the Guarantor, or, if no such address has been furnished, to Treasurer, 108 Wilmot Road, Deerfield, Illinois 60015.

Section 14. Rights of the Trustee. The Trustee shall have no duties under this Guarantee Agreement other than those expressly set forth herein, and in entering into or in taking (or forbearing from) any action under or pursuant to the Guarantee Agreement, the Trustee shall have and be protected by all of the rights, powers, immunities, indemnities and other protections granted to it under the Indenture.

Section 15. Counterparts; Effectiveness. This Guarantee Agreement may be executed in any number of counterparts. This Guarantee Agreement shall become effective upon the execution and delivery by the Guarantor of a counterpart hereof.

Section 16. Trust Indenture Act; Application. The Guarantor understands that this Guarantee Agreement may be qualified under the Trust Indenture Act of 1939 (the “TIA”) and any provision of this Guarantee Agreement required by the TIA or deemed to be included in this Guarantee Agreement by virtue of the TIA is hereby incorporated by reference. If any provision hereof limits, qualifies or conflicts with another provision which is required or deemed to be included in this Guarantee Agreement by any of the provisions of the TIA, such required or deemed provision shall control. If any provision of this Guarantee Agreement modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed to apply to this Guarantee Agreement as so modified or to be excluded, as the case may be.

 

- 6 -


IN WITNESS WHEREOF, the Guarantor has caused this Guarantee Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

WALGREENS BOOTS ALLIANCE, INC.
By:  

 

  Name:   Timothy R. McLevish
  Title:   Executive Vice President and
    Chief Financial Officer and Treasurer

Agreed and Accepted:

WELLS FARGO BANK, NATIONAL ASSOCIATION

  as Trustee
By:  

 

  Name:   Julius R. Zamora
  Title:   Vice President

Exhibit 10.1

WALGREENS BOOTS ALLIANCE, INC.

2013 OMNIBUS INCENTIVE PLAN

AMENDED AND RESTATED EFFECTIVE DECEMBER 31, 2014


Walgreens Boots Alliance, Inc.

2013 Omnibus Incentive Plan

TABLE OF CONTENTS

 

              Page  
I.   Background      1  
II.   Purpose      2  
III.   Definitions      2  
IV.   Administration      10  
  4.01   

Authority of the Committee

     10  
  4.02   

Manner of Exercise of Committee Authority

     11  
  4.03   

Advisors and Agents of the Committee

     12  
  4.04   

Records and Reports of the Committee

     12  
  4.05   

Limitation of Liability; Indemnification

     12  
  4.06   

Expenses

     12  
  4.07   

Service in More than One Capacity

     12  
V.   Shares Subject to Plan      13  
  5.01   

Overall Number of Shares Available for Delivery

     13  
  5.02   

Share Counting Rules

     13  
  5.03   

Per Person Award Limits

     14  
  5.04   

Adjustments

     14  
  5.05   

Former Plans

     15  
VI.   Eligibility and General Conditions for Awards      15  
  6.01   

Eligibility

     15  
  6.02   

Awards

     15  
  6.03   

Award Agreement

     15  
  6.04   

Vesting; Termination of Service

     15  
  6.05   

Nontransferability of Awards

     17  
  6.06   

Cancellation and Rescission of Awards

     19  
  6.07   

Stand-Alone, Tandem and Substitute Awards

     19  
  6.08   

Deferred Awards

     20  
VII.   Specific Provisions for Awards      21  
  7.01   

Options

     21  
  7.02   

Stock Appreciation Rights

     22  
  7.03   

Restricted Stock Shares

     23  

 

i


  7.04   

Restricted Stock Units

     24  
 

7.05

  

Dividend Equivalents

     24  
 

7.06

  

Performance Shares and Performance Units

     25  
 

7.07

  

Annual Equity Grants, Deferred Stock Units and Deferrals for Non-Employee Directors

     26  
 

7.08

  

Bonus Stock and Other Awards

     28  
 

7.09

  

Cash Awards

     28  
VIII.  

Performance Awards

     28  
 

8.01

  

Performance Awards Generally

     28  
 

8.02

  

Performance Awards Under Section 162(m) of the Code

     29  
 

8.03

  

Performance Criteria

     30  
 

8.04

  

Settlement of Performance Awards

     32  
 

8.05

  

Written Determinations

     32  
 

8.06

  

Additional and Substitute Awards

     32  
 

8.07

  

Interest

     33  
 

8.08

  

Exemptions from Section 16(b) Liability

     33  
IX.  

Change in Control

     33  
 

9.01

  

Committee Discretion for Awards that are not 409A Compensation

     33  
 

9.02

  

Effect of Change in Control on 409A Compensation

     34  
X.  

General Provisions

     34  
 

10.01

  

Additional Award Forfeiture Provisions

     34  
 

10.02

  

Compliance with Legal and Other Requirements

     34  
 

10.03

  

Designation of Beneficiary

     35  
 

10.04

  

Tax Provisions

     36  
 

10.05

  

Limitation on Benefits

     37  
 

10.06

  

Amendment and Termination of the Plan

     39  
 

10.07

  

No Repricing

     39  
 

10.08

  

Clawback; Right of Setoff

     39  
 

10.09

  

Nonexclusivity of the Plan

     39  
 

10.10

  

Treatment of Awards by Other Plans

     39  
 

10.11

  

Payments in the Event of Forfeitures; Fractional Shares

     40  
 

10.12

  

Considerations Under Section 409A of the Code

     40  
 

10.13

  

Governing Law

     40  
 

10.14

  

Awards to Participants Outside the United States

     40  
 

10.15

  

Limitation on Rights Conferred under Plan

     41  
 

10.16

  

Severability; Entire Agreement

     41  
 

10.17

  

Plan Term

     41  
 

10.18

  

Gender and Number

     42  
 

10.19

  

General Creditor Status

     42  

 

ii


Walgreens Boots Alliance, Inc.

2013 Omnibus Incentive Plan

 

I. Background

1.01 Walgreen Co., an Illinois corporation (“Walgreens”), previously maintained the Walgreen Co. Executive Option Plan, which was originally effective October 13, 1982 and then known as the Walgreen Co. 1982 Executive Incentive Stock Option Plan (the “Former Stock Option Plan”). The Former Stock Option Plan was thereafter amended and restated from time to time and most recently was amended and restated effective January 13, 2010 and approved by the shareholders of Walgreens at the annual shareholder meeting on January 13, 2010.

1.02 Walgreens previously maintained the Walgreen Co. Long-Term Performance Incentive Plan, which was originally effective September 1, 1980 and then known as the Walgreen Co. Restricted Performance Share Plan (the “Former Incentive Plan”). The Former Incentive Plan was thereafter amended from time to time and most recently was amended and restated effective January 10, 2007 and was approved by the shareholders of Walgreens at the annual shareholder meeting on January 10, 2007.

1.03 Walgreens previously maintained the Walgreen Co. Nonemployee Director Stock Plan, which was originally effective November 1, 1996 (the “Former Director Plan”). The Former Director Plan was thereafter amended form time to time and most recently amended and restated effective January 14, 2004 and approved by the shareholders of the Company at the annual shareholder meeting on January 14, 2004, and subsequently amended.

1.04 Walgreens previously maintained the Walgreen Co. Broad Based Employee Stock Option Plan, which was originally effective July 10, 2002 (the “Former Broad Based Plan”). The Former Broad Based Plan was amended from time to time.

1.05 Effective as of January 9, 2013, Walgreens consolidated the Former Stock Option Plan, the Former Incentive Plan, the Former Director Plan, and the Former Broad Based Plan (the “Former Plans”) into a single amended and restated document in the form of the Walgreen Co. 2013 Omnibus Incentive Plan (the “Plan”) and provided in that document a framework for administration of the annual Management Incentive Plan, for ease of administration and transparency to shareholders. From and after January 9, 2013, the date upon which shareholder approval of the Plan was obtained, no further awards may be granted under the Former Stock Option Plan, Former Incentive Plan, Former Director Plan or Former Broad Based Plan as in effect prior to the adoption of the Plan.

1.06 Walgreens established the Plan effective January 9, 2013 (“Effective Date”).

1.07 Unless the context requires otherwise, the terms and provisions of the Plan shall apply to outstanding awards granted prior to the Effective Date under the Former Stock Plan, the Former Incentive Plan, and the Former Director Plan.

1.08 On December 31, 2014, a reorganization of Walgreens into a holding company structure (the “Reorganization”) was completed. Pursuant to the Reorganization, Walgreens became a wholly owned subsidiary of a new Delaware corporation named Walgreens Boots

 

1


Alliance, Inc. (the “Company”). In connection with the Reorganization, the Plan and all Awards then outstanding under the Plan were assumed by the Company. Accordingly, the Plan is hereby amended and restated as set forth herein, effective as of December 31, 2014, in order to reflect its assumption by the Company.

 

II. Purpose

The purpose of the Plan is to aid the Company in attracting, retaining, motivating and rewarding employees, Non-Employee Directors, and other persons who provide substantial services to the Company or its Affiliates, to provide for equitable and competitive compensation opportunities, including deferral opportunities, to encourage long-term service, to recognize individual contributions and reward achievement of Company goals, and promote the creation of long-term value for shareholders by closely aligning the interests of Participants with those of shareholders. The Plan authorizes stock-based and cash-based incentives for Participants.

 

III. Definitions

In addition to the terms defined in Article I above and elsewhere in the Plan, the following capitalized terms used in the Plan have the respective meanings set forth in this Section:

 

  3.01 Affiliate” means any person with whom the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code, except that in applying Sections 1563(a)(1), (2) and (3) of the Code for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Sections 1563(a)(1), (2) and (3) of the Code, and in applying Treas. Reg. §1.414(c)-2 for purposes of determining a controlled group of trades or businesses under Section 414(c) of the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Treas. Reg. §1.414(c)-2. Notwithstanding the foregoing, where justified by legitimate business criteria as determined by the Committee in its sole discretion, “at least 20 percent” shall be substituted for “at least 50 percent” in the preceding sentence in determining whether a Participant has had a Termination of Service.

 

  3.02 Award” means any Option, SAR, Restricted Stock Share, Restricted Stock Unit, Performance Share, Performance Share Unit, Stock granted as a bonus or in lieu of another award, together with any related right or interest, granted to an Eligible Person under the Plan.

 

  3.03 Award Agreement” means the agreement setting forth the terms and conditions to which an Award is subject, to the extent not provided in the Plan, together with any additional documents (such as Beneficiary designations) relating to a specific Award.

 

  3.04 Beneficiary” means the individual or entity designated by the Participant to receive the benefits specified under the Participant’s Award upon such Participant’s death. See Section 10.03. No Beneficiary shall have any rights under the Plan prior to the death of the Participant.

 

2


  3.05 Beneficial Owner” has the meaning specified in Rule 13d-3 under the Exchange Act.

 

  3.06 Board” means the Board of Directors of the Company.

 

  3.07 Cause” means any one or more of the following, as determined by the Committee or its delegate in its sole discretion:

 

  (a) a Participant’s commission of a felony or any crime of moral turpitude;

 

  (b) a Participant’s dishonesty or material violation of standards of integrity in the course of fulfilling his or her employment duties to the Company or any Affiliate;

 

  (c) a material violation of a material written policy of the Company or any Affiliate violation of which is grounds for immediate termination;

 

  (d) willful and deliberate failure on the part of the Participant to perform his or her employment duties to the Company or any Affiliate in any material respect, after reasonable notice of such failure and an opportunity to correct it; or

 

  (e) failure to comply in any material respect with the Foreign Corrupt Practices Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Truth in Negotiations Act, or any rules or regulations thereunder.

 

  3.08 Change in Control” means

 

  (a) except as provided in (b) and (c), for Awards granted on and after the Effective Date, any one or more of the following:

 

  (i) any one person, or more than one person acting as a group other than (A) an employee benefit plan (or related trust) of the Company or a subsidiary or (B) the Company or a subsidiary (collectively, the “Excluded Persons”) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company; or

 

  (ii)

any one person, or more than one person acting as a group (other than any Excluded Person), acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the

 

3


  Company that constitutes thirty percent (30%) or more of the total fair market value or total voting power of the stock of the Company; or

 

  (iii) any one person, or more than one person acting as a group (other than any Excluded Person), acquires (or has acquired during the twelve (12)-month period ending on date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions; or

 

  (iv) a majority of members of the Company’s Board is replaced during any twelve (12)-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election; and

 

  (b) for Awards granted before the Effective Date, a “change in control” as defined under the applicable Former Plan; and

 

  (c) for Awards that are 409A Compensation granted prior to January 8, 2014, a “change in control” as defined in the Plan prior to January 8, 2014; provided that such change in control is a change in ownership of the Company (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(v)), a change in effective control of the Company (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vi)(A)), or a change in the ownership of a substantial portion of the Company’s assets (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vii)).

Notwithstanding the provisions of Section 3.08(a), there shall not be a Change in Control if any event described in Section 3.08(a) occurs, and immediately following such event: (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the outstanding Stock and outstanding Company voting securities immediately prior to such event will beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the outstanding shares of Stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such event (including, without limitation, a corporation which as a result of such event owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such corporate transaction, of the outstanding Stock and outstanding Company voting securities, as the case may be; (2) no person (other than an Exempt Person or a corporation resulting from such event) will beneficially own, directly or indirectly, thirty percent (30%) or more of,

 

4


respectively, the outstanding shares of common stock of the corporation resulting from such event or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors, except to the extent that such ownership existed prior to the event; and (3) individuals who were members of the incumbent Board at the time of the Board’s approval of the execution of the initial agreement providing for such corporate transaction will constitute at least a majority of the members of the board of directors of the corporation resulting from such corporate transaction.

 

  3.09 Code” means the Internal Revenue Code of 1986, as amended. Reference to any provision of the Code or regulation thereunder shall include any successor provision and any regulations and other applicable guidance or pronouncement of the Internal Revenue Service or the Department of the Treasury and applicable case law relating to such Section of the Code.

 

  3.10 Committee” means except for purposes of Section 7.07 and Awards thereunder, the Compensation Committee of the Board, the composition and governance of which is established in the Committee’s charter as approved from time to time by the Board. Each member of the Committee is intended to qualify as “independent” as determined in accordance with the regulations of the stock exchange on which the Stock is principally registered, and the Company’s categorical standards, and to qualify as a “non-employee director” under SEC Rule 16b-3, and as an “outside director” under Section 162(m) of the Code. However, no action of the Committee shall be void or deemed to be without authority due to the failure of any member, at the time the action was taken, to meet the foregoing qualification standards. For purposes of Section 7.07 and Awards thereunder, “Committee” means the Nominating and Governance Committee of the Board, the composition and governance of which is established in the Committee’s charter as approved from time to time by the Board. The full Board may perform any function of the Committee hereunder except to the extent limited under the applicable stock exchange policies and requirements for listed companies or the Company’s bylaws, in which case the term “Committee” shall refer to the Board. To the extent the Committee has delegated authority to another person or persons the term “Committee” shall refer to such other person or persons.

 

  3.11 Company” means Walgreens Boots Alliance, Inc. and any successor thereto.

 

  3.12 Deferred Award” means any Award to the extent that by its terms the Award will not or might not be paid or otherwise settled in full no later than the 15th day of the third month after the later of (a) the last day of the first calendar year in which the Award is no longer subject to a Substantial Risk of Forfeiture or (b) the last day of the Company’s first fiscal year in which the Award is no longer subject to a Substantial Risk of Forfeiture.

 

  3.13 Director” means a member of the Board.

 

5


  3.14 Disability” means that the Participant has become disabled as provided in the long-term disability plan of the Company or an Affiliate applicable to the Participant (or which would be applicable if the Participant elected coverage under such plan).

 

  3.15 Dividend Equivalent” means a right granted to an Eligible Person to receive cash, Stock, or other property equal in value to all or a specified portion of the dividends paid with respect to a specified number of shares of Stock in connection with dividend declarations, reclassifications, spin-offs, and the like.

 

  3.16 Effective Date” is defined in the Preamble.

 

  3.17 Eligible Person” means an employee of the Company or any Affiliate, including any executive officer or Non-Employee Director of the Company.

 

  3.18 Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time and the rules and regulations thereunder.

 

  3.19 Fair Market Value” means as of any applicable date:

 

  (a) If the Stock is listed on the NASDAQ Stock Market or other United States national securities exchange registered under the Exchange Act, the value under such of the following as the Committee shall determine based on actual reported transactions in such Stock on the NASDAQ Stock Market or such other exchange:

 

  (i) The last sale before or the first sale after the date the Award is granted;

 

  (ii) the closing sales price on such date or (whether or not sales are reported on such date) the last preceding date on which a sale was reported;

 

  (iii) the arithmetic mean of the high and low prices on such date or (whether or not sales are reported on such date) the last preceding date on which sales were reported;

 

  (iv) the average selling price of the Stock over a specified period beginning within 30 days before and ending within 30 days after the applicable date, based on the arithmetic mean of such selling prices during the specified period, or an average of such prices weighted based on the volume of trading of the Stock on each trading date during the specified period; provided, however, that such method may be used only if the relevant Eligible Person, the number and class of shares of Stock subject to such method, and the method for determining such price including the period over which the average are determined, are irrevocably determined and set forth in an Award Agreement before the beginning of the specified period.

 

6


The Committee may apply different of the foregoing methods for different purposes; provided, however, that if no other method is determined by the Committee the Fair Market Value shall be determined based on the closing sales price on the last preceding date on which a sale was reported, and the grant price for an Option or Stock Appreciation Right shall be (i) the closing sales price on the date of grant if Stock is traded on such date, or (ii) the closing sales price on the next date on which Stock is traded.

 

  (b) If Stock publicly traded but is not listed on any such exchange, any of the methods set forth in subsection (a) applied to the bid quotations with respect to a share of Stock on the OTC Bulletin Board or other over-the-counter quotation system then in use as the principle system then available for reporting or ascertaining quotations for the Stock; and

 

  (c) If Stock is not publicly traded, the fair market value on the applicable date of a share of Stock as determined by the Committee in good faith.

 

  3.20 Former Plan” means any of the Walgreen Co. Executive Option Plan, the Walgreen Co. Long-Term Performance Incentive Plan, the Walgreen Co. Nonemployee Director Stock Plan, and the Walgreen Co. Broad-Based Employee Stock Option Plan.

 

  3.21 409A Compensation” means a Deferred Award or other compensation that is “nonqualified deferred compensation” subject to Section 409A of the Code, regardless of when granted or awarded.

 

  3.22 Incentive Stock Option” or “ISO” means any Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code, and qualifying thereunder.

 

  3.23 Non-Employee Director” means a Director who is not an employee of the Company or an Affiliate.

 

  3.24 Nonstatutory Option” means an Option that is not an Incentive Stock Option.

 

  3.25 Option” means a right granted to an Eligible Person to purchase a number of shares of Stock (which may be Restricted Stock) at a specified price during a specified time period, and subject to such other terms and conditions as the Committee may determine. The term “Option” includes both an Incentive Stock Option and a Nonstatutory Option.

 

  3.26 Other Awards” means cash or Stock-based Awards granted to an Eligible Person under Section 7.08 or 7.09.

 

7


  3.27 Participant” means an Eligible Person (or former Eligible Person) who has been granted an Award under the Plan which remains outstanding or which remains subject to any provision of this Plan, including without limitation Sections 10.01 and 10.08.

 

  3.28 Performance Award” means an Award that (in addition to any other conditions) is conditional based upon the degree of satisfaction of performance criteria specified by the Committee. Performance Awards include, but are not limited to, Performance Shares and Performance Units.

 

  3.29 Performance Share” means a conditional right granted to an Eligible Person to receive a variable number of shares of Stock based upon the degree of satisfaction of performance criteria specified by the Committee.

 

  3.30 Performance Unit” means a conditional right granted to an Eligible Person to receive a payment equal to the value of the performance unit based upon the degree of satisfaction of criteria specified by the Committee.

 

  3.31 Restricted Stock” means a Restricted Stock Share or a Restricted Stock Unit.

 

  3.32 Restricted Stock Share” means a share of Stock granted to an Eligible Person under Section 7.03 which is subject to certain restrictions and to a substantial risk of forfeiture.

 

  3.33 Restricted Stock Unit” or “RSU” means a bookkeeping entry representing a hypothetical share of Stock granted to an Eligible Person under Section 7.04 which is subject to certain restrictions and to a substantial risk of forfeiture. A Restricted Stock Unit shall have a nominal value on any date equal to the Fair Market Value of one share of Stock on that date. A Restricted Stock Unit may be settled for cash, property, or shares of Stock, and may be a Performance Award. Restricted Stock Units represent an unfunded an unsecured obligation of the Company.

 

  3.34 Retire” or “Retirement” means a Termination of Service for any reason other than a Termination of Service for Cause, Disability, or death after attaining age 55 and having at least 10 years of service (whether as an employee or Director) with the Company or any Affiliate.

 

  3.35 Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.

 

  3.36 Separation from Service” means

 

  (a)

In the case of an individual who is an employee of the Company or an Affiliate, the employee’s termination of employment with the Company and its Affiliates. Whether a termination of employment has occurred shall be determined based on whether the facts and circumstances indicate

 

8


  the individual and the employer reasonably anticipate that no further services will be performed by the individual for the Company and its Affiliates; provided, however, that an individual shall be deemed to have a Separation from Service if the level of services he or she would perform for the Company and its Affiliates after a certain date permanently decreases to no more than twenty percent (20%) of the average level of bona fide services performed for the Company and its Affiliates (whether as an employee or independent contractor) over the immediately preceding 36-month period (or the full period of services to the Company and its Affiliates if the individual has been providing services for less than 36 months). For this purpose, an individual is not treated as having a Separation from Service while he or she is on a military leave, sick leave, or other bona fide leave of absence, if the period of such leave does not exceed six months (90 days in the case of an Incentive Stock Option), or if longer, so long as the individual has a right to reemployment with the Company or an Affiliate under an applicable statute or by contract; and

 

  (b) In the case of a Director, the individual ceases to be a Director of the Company and all Affiliates, unless immediately upon such cessation the individual has a relationship with the Company or an Affiliate such that such cessation would not be a separation from service under Section 409A of the Code, in which case a Separation from Service will occur upon the cessation of such relationship as provided in Section 409A of the Code; and

 

  (c) In the case of a consultant or advisor, the individual ceases to have a contractual obligation to perform consulting services for the Company and all Affiliates, unless immediately upon such cessation the individual has a relationship with the Company or an Affiliate such that such cessation would not be a separation from service under Section 409A of the Code, in which case a Separation from Service will occur upon the cessation of such relationship as provided in Section 409A of the Code.

 

  (d) Notwithstanding the foregoing, no such event shall be a Separation from Service if immediately upon such event the individual continues to be an Eligible Person by reason of another relationship with the Company or any Affiliate from which no Separation from Service has occurred.

3.37Specified Employee” means an individual who, as of the date of his or her Termination of Service, is a key employee of the Company or any Affiliate whose stock is publicly traded, as determined under the policy of the Company as in effect from time to time, for determining “specified employees” consistent with the requirements of Section 409A of the Code.

3.38Stock” means a share of the Company’s common stock $0.01 par value and any other equity securities of the Company that may be substituted or resubstituted for such Stock.

 

9


3.39Stock Appreciation Right” or “SAR” means a right granted to an Eligible Person to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee, which grant price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such SAR.

3.40Substantial Risk of Forfeiture” means such term as described in Treas. Reg. §§ 1.409A-1(d) and 1.409A-1(b)(4).

3.41Termination of Service” “termination of employment”, and words of similar import, unless the context clearly indicates otherwise, mean termination of employment (or for a Participant who is not an employee, termination of service), as determined by the Committee; provided that in the case of an Award that is 409A Compensation, such term shall mean Separation from Service.

 

IV. Administration

4.01 Authority of the Committee. The Plan shall be administered by the Compensation Committee of the Board or by a duly appointed delegate of the Committee, which shall have full and final authority, in its discretion, in each case subject to and consistent with the provisions of the Plan,

 

  (a) to determine which Eligible Persons shall be granted Awards;

 

  (b) to determine the type and size of Awards, the dates on which Awards may be granted, exercised or settled and on which the risk of forfeiture or any deferral period relating to Awards shall lapse or terminate, and to accelerate any such dates;

 

  (c) to determine the expiration date of any Award;

 

  (d) to determine whether an Award will be granted on a standalone or tandem basis;

 

  (e) to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property;

 

  (f) to determine other terms and conditions of, and all other matters relating to, Awards;

 

  (g) to prescribe Award Agreements evidencing or setting terms of Awards (such Award Agreements need not be identical for each Participant);

 

  (h)

to adopt amendments to Award Agreements; provided that, except as set forth herein or in the Award Agreement, the Committee shall not amend an Award Agreement in a manner that materially and adversely affects the Participant without the consent of the Participant (for this purpose, actions

 

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  that alter the timing of federal income taxation of a Participant will not be deemed material unless such action results in an income tax penalty on the Participant);

 

  (i) to establish rules and regulations for the administration of the Plan and amendments thereto and to create sub-plans;

 

  (j) to determine whether, to what extent, and under what circumstances any Award shall be terminated or forfeited or the Participant shall be required to disgorge to the Company gains or earnings attributable to an Award;

 

  (k) to construe and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein;

 

  (l) to make all other decisions and determinations (including factual determinations) in its discretion as the Committee may deem necessary or advisable for the administration of the Plan.

Decisions of the Committee with respect to the administration and interpretation of the Plan and any Award Agreement shall be final, conclusive, and binding upon all persons interested in the Plan, including all Eligible Persons, Participants, Beneficiaries, transferees under Section 6.05(c) and other persons claiming rights from or through a Participant, and shareholders. The foregoing notwithstanding, to the extent required by the Company’s bylaws, the Board shall perform the functions of the Committee for purposes of granting Awards under the Plan to Non-Employee Directors and shall have all the powers of the Committee with respect thereto (authority with respect to other aspects of Non-Employee Director awards is not exclusive to the Board, however).

4.02 Manner of Exercise of Committee Authority.

 

  (a) The Committee may act through subcommittees, including for purposes of perfecting exemptions under Rule 16b-3 (in which case the members of the Committee who qualify as Non-Employee Directors shall act as the Committee), or qualifying Awards under Section 162(m) of the Code as performance-based compensation (in which case the members of the Committee who qualify as outside Directors under Section 162(m) of the Code shall act as the Committee). The express grant of any specific power to the Committee, and the taking of any action by the Committee or a subcommittee, shall not be construed as limiting any power or authority of the Committee.

 

  (b) Subject to the Company’s by-laws and applicable law, the Committee may delegate to any other Committee of the Board or to one or more members of the Board the authority, subject to such terms as the Committee may determine, to exercise such powers and authority and perform such functions as the Committee in its discretion may determine. Such delegation may be revoked at any time.

 

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  (c) The Committee may delegate to officers of the Company or any Affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions and exercise such powers and authority, as the Committee in its discretion may determine, to the fullest extent permitted under the Delaware General Corporation Law and the Company’s bylaws. Such delegation may be revoked at any time.

 

  (d) Except to the extent prohibited by applicable law, the Committee may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to the Committee under the Plan. Such delegation may be revoked at any time.

4.03 Advisors and Agents of the Committee. The Committee may (i) authorize one or more of its members or an agent to execute or deliver any instrument, and make any payment on its behalf and (ii) utilize and cause the Company to pay for the services of associates and engage accountants, agents, clerks, legal counsel, record keepers and professional consultants (any of whom may also be serving another Affiliate of the Company) to assist in the administration of this Plan or to render advice with regard to any responsibility under this Plan.

4.04 Records and Reports of the Committee. The Committee shall maintain records and accounts relating to the administration of the Plan.

4.05 Limitation of Liability; Indemnification. The members of the Board, the Compensation Committee, and their delegates, shall have no liability with respect to any action or omission made by them in good faith nor from any action made in reliance on (i) the advice or opinion of any accountant, legal counsel, medical adviser or other professional consultant or (ii) any resolutions of the Board certified by the secretary or assistant secretary of the Company. Each member of the Board, the Compensation Committee, and each employee of the Company or any Affiliate to whom are delegated duties, responsibilities and authority with respect to the Plan shall be indemnified, defended, and held harmless by the Company and its Affiliates and their respective successors against all claims, liabilities, fines and penalties and all expenses (including but not limited to attorneys fees) reasonably incurred by or imposed on such member or employee that arise as a result of his actions or failure to act in connection with the operation and administration of the Plan, to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty or expense is not paid for by liability insurance purchased by or paid for by the Company or an Affiliate. Notwithstanding the foregoing, the Company or an Affiliate shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Company or Affiliate consents in writing to such settlement or compromise.

4.06 Expenses. Expenses relating to the Plan prior to its termination shall be paid from the general assets of the Company or an Affiliate. Any individual who serves as a member of the Committee shall receive no compensation for such service.

4.07 Service in More than One Capacity. Any person or group of persons may serve the Plan in more than one capacity.

 

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V. Shares Subject to Plan

5.01 Overall Number of Shares Available for Delivery. Subject to adjustment as provided in Section 5.04, the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall be:

 

  (a) Shares of Stock available as of the Effective Date under the Former Plans;

 

  (b) Shares of Stock which become available from the Former Plans or the Share Walgreens Walgreen Co. Stock Purchase/Option Plan after the Effective Date in accordance with Section 5.02; and

 

  (c) Forty million (40,000,000) additional shares of Stock, subject to the approval of this Plan by shareholders of the Company;

provided, however, that the total number of shares with respect to which ISOs may be granted shall not exceed 15,000,000. Of the shares described in (a), (b) and (c), 100% may be delivered in connection with “full-value Awards,” meaning Awards other than Options, SARs, or Awards for which the Participant pays the intrinsic value either directly or in exchange for (or by foregoing) a right to receive a cash payment from the Company equal to the intrinsic value of the Award; provided, however, that any shares granted under Options or SARs shall be counted against the share limit on a one-for-one basis and any shares granted as full-value Awards shall be counted against the share limit as three (3) shares for every one (1) share subject to such Award. The Company shall at all times during the term of the Plan retain as authorized and unissued Stock or treasury Stock at least the number of shares of Stock from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.

5.02 Share Counting Rules.

 

  (a) The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award.

 

  (b) Shares of Stock subject to an Award will again be available for Awards if the Award (or an award under a Former Plan or under the Share Walgreens Walgreen Co. Stock Purchase/Option Plan) is canceled, expired, forfeited, settled in cash or otherwise terminated or settled without delivery of the full number of shares of Stock subject to such Award. The following shares of Stock will not be added to the total number of shares available or to be made available again for delivery under the Plan: (i) Shares not issued or not delivered as a result of the net settlement of an outstanding Option or Stock Appreciation Right; (ii) Shares delivered to or withheld by the Company to pay the exercise price of or withholding taxes with respect to an Award; and (iii) shares of Stock repurchased by the Company on the open market with the proceeds from the payment of the exercise price of an Option.

 

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  (c) In the case of any Award granted in substitution for an award of a company or business acquired by the Company or an Affiliate, shares delivered or to be delivered in connection with such substitute Award shall not be counted against the number of shares reserved under the Plan, but shall be available under the Plan by virtue of the Company’s assumption of the plan or arrangement of the acquired company or business.

 

  (d) This Section shall apply to the number of shares reserved and available for ISOs only to the extent consistent with applicable regulations relating to ISOs under the Code.

 

  (e) Because shares will count against the number reserved in Section 5.01 upon delivery (or later vesting) and subject to the share counting rules under this Section 5.02, the Committee may determine that Awards may be outstanding that relate to more shares than the aggregate remaining available under the Plan, so long as Awards will not result in delivery and vesting of shares in excess of the number then available under the Plan.

5.03 Per Person Award Limits. Subject to Section 5.04, the aggregate number of shares of Stock subject to Awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code granted during any calendar year to any one Eligible Person (taking into account the maximum number payable based on performance exceeding target objectives) shall not exceed 1,000,000. This 1,000,000 share maximum also applies to options and SARs. The maximum amount payable as a cash Award for any performance period to an Eligible Person that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code shall be $10 million per calendar year. In the case of an award with a multi-year performance period, the 1,000,000 Share and $10 million limit shall apply to each calendar year (or portion thereof) in the performance period.

5.04 Adjustments. In the event that any large, special and non-recurring dividend or other distribution (whether in the form of cash or property other than Stock), recapitalization, forward or reverse split, stock dividend, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the shares of Stock such that an adjustment is appropriate, or, in the case of any outstanding Award, necessary, in order to prevent dilution or enlargement of the rights of the Participant, then the Committee shall, in an equitable manner as determined by the Committee, adjust any or all of (i) the aggregate number and kind of shares of Stock which may be delivered in connection with Awards granted under the Plan, (ii) the number and kind of shares of Stock by which annual per person Award limitations are measured under Section 5.03, (iii) the number and kind of shares of Stock subject to or deliverable in respect of outstanding Awards, and (iv) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, the Committee may make provision for a payment of cash or property to the holder of an outstanding Option provided that no such adjustment shall be authorized or made if

 

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and to the extent that the existence of such authority (i) would cause Options, SARs, or Performance Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code to otherwise fail to qualify as “performance-based compensation” under Section 162(m) of the Code, or (ii) would cause the Committee to be deemed to have authority to change the targets, within the meaning of Treas. Reg. § 1.162-27(e)(4)(vi), under the performance goals relating to Options; SARs or Performance Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

5.05 Former Plans. Upon shareholder approval of this Plan, no further grants of Awards will be made under any Former Plan.

 

VI. Eligibility and General Conditions for Awards

6.01 Eligibility. Awards may be granted under the Plan only to Eligible Persons. An employee on leave of absence, including for a Disability, who has not had a Termination of Service may be considered as still in the employ of the Company or an Affiliate for purposes of eligibility for participation in the Plan.

6.02 Awards. Awards may be granted on the terms and conditions set forth in this Plan. In addition, the Committee may impose on any Award, or the exercise thereof, at the date of grant or thereafter (subject to Section 10.06), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine in its sole discretion, including performance conditions for the exercise or vesting of an Award, terms requiring forfeiture of Awards in the event of Termination of Service by the Participant or other events or actions by the Participant, terms for deferred payment or other settlement of an Award, and terms permitting a Participant to make elections relating to his or her Award. Such terms and conditions need not be uniform among types of Awards nor among Eligible Persons receiving the same type of Award. The Committee shall retain full power and discretion with respect to any term or condition of an Award that is not mandatory under the Plan. The Committee shall require the payment of lawful consideration for an Award to the extent necessary to satisfy the requirements of the Delaware General Corporation Law, and may otherwise require payment of consideration for an Award except as limited by the Plan.

6.03 Award Agreement. To the extent not set forth in the Plan, the terms and conditions of each Award shall be set forth in an Award Agreement.

6.04 Vesting; Termination of Service. The Committee may determine and set forth in the Award Agreement the vesting schedule for the Award and the extent to which an Award not vested shall be forfeited or shall terminate upon a Participant’s Termination of Service. Unless otherwise stated in the Award Agreement, an Award that vests based on the continued performance of services shall not be vested until the third anniversary of the date of grant of the Award, at which time the Award shall vest in full, provided the Participant has not had a Termination of Service. Except as otherwise provided in such Award Agreement or subsection (e), (f) or (g) below, Awards held by a Participant upon Termination of Service shall be treated as follows, based on the determination by the Committee in its sole discretion of the reason for Termination of Service:

 

  (a) Death or Disability. Upon a Participant’s Termination of Service on account of death or Disability, all Awards that are not Performance Awards shall become fully vested and nonforfeitable. Options and SARs outstanding at the time of death (whether or not then exercisable) shall become and remain exercisable for one year following the date of death or Termination of Service on account of Disability (or until the expiration of their stated term, if shorter) and then terminate. Performance Awards shall become vested (or be forfeited) based on actual performance and shall be settled at the same time as such Performance Awards to other Participants are settled.

 

15


  (b) Cause. Upon a Participant’s Termination of Service for Cause, all Awards (whether or not then vested or forfeitable under the terms of the Award) shall be forfeited and terminate. In the event that within one year after Termination of Service a Participant commits an act or omission that would be Cause, or it is discovered that the Participant has committed such act or omission before Termination of Service, then the Committee may in its discretion determine that the Termination of Service shall be deemed to have occurred for Cause.

 

  (c) Involuntary Termination Other Than for Cause, or Retirement. Upon a Participant’s Termination of Service due to involuntary termination by the Company or Affiliate for a reason other than Cause, or upon the Participant’s Retirement, the Participant shall be deemed to have one year of additional service for purposes of all Awards vesting based on continued performance of services. Any Option or SAR shall remain exercisable for the lesser of one month following the date of Termination of Service (e.g., if Termination of Service occurs on the 14th day of a calendar month, the Award shall remain exercisable until the 13th day of the following calendar month) or until the expiration of its stated term, if shorter, and then terminate. Any Performance Awards (other than an Option or SAR) for which one year or less remains in the Performance Period shall become vested pro rata (subject to achievement of the performance conditions) based on ratio of the full months of service prior to Termination of Service to the total number of months in the Performance Period; and shall be settled at the same time as such Performance Awards to other Participants are settled. To the extent continued or additional vesting is not provided under this subsection, the Awards shall be forfeited.

 

  (d) Voluntary Termination Other than for Retirement or Disability. Upon a Participant’s voluntary Termination of Service for a reason other than Retirement or Disability, all outstanding Awards, whether or not then vested or forfeitable under the terms of the Award (other than a vested Deferred Award or an Award to a Non-Employee Director under Section 7.07) shall be forfeited and terminate. Vested Deferred Award and Awards to a Non-Employee Director under Section 7.07 shall remain payable in accordance with their terms.

 

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  (e) Automatic Extended Exercisability in Certain Cases. Notwithstanding the foregoing provisions of this Section, if the date an Award would otherwise terminate is a date that the Participant is prohibited from exercising the Award under the Company’s insider trading policy or such other conditions under applicable securities laws as the Committee shall specify, the term of the Award shall be extended to the second business day after the Participant is no longer so prohibited from exercising the Award, but in no event shall the Award be extended beyond the original stated term of the Award.

 

  (f) Automatic Exercise in Certain Cases. In addition, if determined by the Committee in its discretion, on such terms and conditions and under such circumstances as the Committee shall establish, which may be applied differently among Participants or Awards, Options and SARs will be deemed exercised by the Grantee (or in the event of the death of or authorized transfer by the Grantee by the beneficiary or transferee) on the expiration date of the Option or SAR using a net share settlement (or net settlement) method of exercise to the extent that as of such expiration date the Option or SAR is vested and exercisable and the per share exercise price of the Option or SAR is below the Fair Market Value of a share of Stock on such expiration date.

 

  (g) Waiver by Committee. Notwithstanding the foregoing provisions of this Section, the Committee may in its sole discretion as to all or part of any Award as to any Participant, at the time the Award is granted or thereafter, which treatment need not be uniform among Participants, determine that Awards shall become exercisable or vested upon a Termination of Service, determine that Awards shall continue to become exercisable or vested in full or in installments after Termination of Service, extend the period for exercise of Options or SARs following Termination of Service (but not beyond the original stated term of the Option or SAR), or provide that any Performance Based Award shall in whole or in part not be forfeited upon such Termination of Service.

6.05 Nontransferability of Awards.

 

  (a) During the Participant’s lifetime, each Award and each right under any Award shall be exercisable only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative, or by a transferee receiving such Award pursuant to a domestic relations order issued by a court with jurisdiction over the Company, requiring the transfer of the award. Nothing herein shall be construed as requiring the Committee to honor a domestic relations order except to the extent required under applicable law.

 

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  (b) No Award (prior to the time, if applicable, unrestricted shares of Stock are delivered in respect of such Award or Restricted Stock becomes unrestricted), and no right under any Award, may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution (or in the case of Restricted Stock Shares, by transfer to the Company); and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate.

 

  (c) Notwithstanding subsections (a) and (b) above, a Participant may transfer a Nonstatutory Option or SAR for no consideration to a Permitted Transferee in accordance with rules and subject to such conditions as may be specified by the Committee in the Award Agreement or in the Committee’s rules or procedures of general application. For this purpose, a “Permitted Transferee” in respect of any Participant means any member of the Immediate Family of such Participant, any trust of which all of the primary beneficiaries are such Participant or members of his or her Immediate Family, or any partnership (including limited liability companies and similar entities) of which all of the partners or members are such Participant or members of his or her Immediate Family; and the “Immediate Family” of a Participant includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the employee) control the management of assets, and any other entity in which these persons (or the employee) own more than fifty percent of the voting interests. Such Award may he exercised by such transferee in accordance with the terms of such Award. Following the transfer of a Nonstatutory Stock Option or SAR to a Permitted Transferee, the Permitted Transferee shall have all of the rights and obligations of the Participant to whom the Award was granted and such Participant shall not retain any rights with respect to the transferred Award, except that (i) the payment of any tax attributable to the exercise of the Nonstatutory Stock Option or SAR shall remain the obligation of the Participant, (ii) the period during which the Nonstatutory Stock Option or SAR shall become exercisable or remain exercisable shall depend on the service of the original Participant and the circumstances of his or her Termination of Service. A Permitted Transferee may not again transfer an Award to another Permitted Transferee.

 

  (d)

If for any reason an Award is exercised or shares of Stock are to be delivered or payment is to be made under any Award to a person other than the original Participant, the person exercising or receiving delivery or

 

18


  payment under such Award shall, as a condition to such exercise, delivery or receipt, supply to the Committee such evidence as the Committee may reasonably require to establish the identity of such person and such person’s right to exercise or receive delivery or payment under such Award. A Permitted Transferee or other transferee, Beneficiary, guardian, legal representative or other person claiming any rights under the Plan from or through any Participant shall be subject to the provisions of the Plan and any applicable Award Agreement, except to the extent the Plan and Award Agreement otherwise provide with respect to such persons, and to any additional restrictions or limitations deemed necessary or appropriate by the Committee.

6.06 Cancellation and Rescission of Awards. Unless the Award Agreement specifies otherwise, the Committee may cancel, rescind, suspend, withhold, or otherwise limit or restrict any unexercised Award at any time if the Participant is not in compliance with all applicable provisions of the Award Agreement and the Plan.

6.07 Stand-Alone, Tandem and Substitute Awards.

 

  (a) Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan; provided that if the stand-alone, tandem or substitute Award is intended to qualify as performance-based compensation under Section 162(m) of the Code, it must separately satisfy the requirements for performance-based compensation. If an Award is granted in substitution for another Award or any non-Plan award or benefit, the Committee shall require the surrender of such other Award or non-Plan award or benefit in consideration for the grant of the new Award. Awards granted in addition to or in tandem with other Awards or non-Plan awards or benefits may be granted either at the same time as or at a different time from the grant of such other Awards or non-Plan awards or benefits.

 

  (b) The Committee may, in its discretion and on such terms and conditions as the Committee considers appropriate in the circumstances, grant Awards under the Plan (“Substitute Awards”) in substitution for stock and stock-based awards (“Acquired Entity Awards”) held immediately prior to such merger, consolidation or acquisition by employees or directors of another corporation or entity who become Eligible Persons as the result of a merger or consolidation of the employing corporation or other entity (the “Acquired Entity”) with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the Acquired Entity, in order to preserve for such newly Eligible Persons the economic value of all or a portion of such Acquired Entity Award, at such price as the Committee determines necessary to achieve preservation of economic value.

 

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6.08 Deferred Awards. The Committee may provide in an Award Agreement that the Award shall be in whole or in part a Deferred Award. In addition, the Committee may provide, in a manner specified by the Committee in the Award Agreement or in the Committee’s rules and procedures of general application, that a Participant may elect to defer settlement of an Award so that the Award becomes a Deferred Award, subject to the following terms and to such additional terms and conditions as the Committee shall designate in its discretion:

 

  (a) Deferral Elections. An election to defer an Award shall be made on or before December 31 of the calendar year preceding the calendar year in which the Award is granted, on a form (which may be electronic) authorized by the Committee, and except as provided in Section 7.07 shall not carry over from year to year unless the Committee timely provides otherwise. Such election shall become irrevocable for the period to which it applies as of the last date for making such election. The deferral election shall include (i) the designation and portion of the Award to be deferred, (ii) the date on which settlement of the deferred Award shall be made or commence (which may be a fixed date such as the Participant’s attainment of a particular age, the Participant’s Termination of Service for any reason, or such other dates or circumstances as may be required or permitted by the Committee); and (iii) whether settlement shall be made on a single date or in installments over a period and subject to such terms and conditions as may be set by the Committee at the time of the deferral election. If there is no election as to form of settlement, then settlement shall be made no later than 90 days following the date designated in (ii), in a lump sum in cash, shares of Stock, or such other medium as the Committee may designate.

 

  (b) New Participants. Notwithstanding subsection (a) above, the Committee may permit a deferral election to be made by a Participant who never previously received an Award and never previously had deferred compensation under any other plan required by Section 409A of the Code to be aggregated with his or her Awards under that Plan. Such an individual’s deferral election shall be made within 30 days of the grant of the Award and shall be effective only with respect to a fractional portion of the Award determined by multiplying (separately with respect to each applicable vesting date), the grant date value of the number of applicable portion of shares of Stock (or other portion of an Award not denominated in shares of Stock) vesting on such vesting date by a fraction, the numerator of which is the number of calendar days between the date the deferral election is received by the Committee and the date such Award (or portion thereof) vests, and the denominator of which is the total number of calendar days between the grant date and the vesting date.

 

  (c)

Performance-Based Compensation. Notwithstanding subsection (a) above, the Committee may permit a deferral election to be made by a Participant with respect to a Performance Award on or before a date that is at least six months before the end of the applicable performance period of

 

20


  at least 12 months, provided the Participant has continuously performed services from the later of the beginning of the performance period or the date the performance criteria are established (provided they are established within 90 days of the beginning of the performance period) through the date such election is made, and provided that the compensation to be paid under the Performance Award is not at the time of the election readily ascertainable within the meaning of Treas. Reg. § 1.409A-2(a)(8).

 

  (d) Awards Vesting in More than Twelve Months. Notwithstanding subsection (a) above, the Committee may permit a deferral election to be made by a Participant with respect to an Award that is subject to a condition requiring the Participant to continue to remain employed for a period of at least 12 months from the date of the grant. Such a deferral election, if permitted, must be made on or before the 30th day after the grant date, provided that the election is made at least 12 months in advance of the earliest vesting date (other than vesting on account of death or a Change in Control).

 

  (e) Dividend Equivalents on Deferred Awards. To the extent specified in the Award Agreement, Dividend Equivalents may be credited to deferred Awards (other than Options and SARs) during the deferral period, subject to such terms and conditions as the Committee shall specify.

 

VII. Specific Provisions for Awards

7.01 Options. The Committee is authorized to grant Options to Eligible Persons on the following terms and conditions:

 

  (a) Exercise Price. The exercise price per share of Stock purchasable under an Option (including both ISOs and Nonstatutory Options) shall be determined by the Committee, provided that such exercise price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option.

 

  (b)

Option Term; Time and Method of Exercise. The Committee shall determine the term of each Option, which in no event shall exceed a period of ten years from the date of grant. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or deemed to be paid and the form of such payment, including, without limitation, cash, Stock (including Stock deliverable upon exercise), Restricted Stock or other property that does not have a deferral feature, other Awards or awards granted under other plans of the Company or any Affiliate, or other property (including through “net exercise” or “cashless exercise” arrangements, to the extent permitted by applicable law), and the methods by or forms in which Stock

 

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  will be delivered or deemed to be delivered in satisfaction of Options. If no other time for exercise of an Option is specified in the Award Agreement, the Option shall become exercisable on the third anniversary of the date of grant of such Option or, if earlier, upon the death or Termination of Service for Disability of the Participant.

 

  (c) Incentive Stock Options.

 

  (i) Only employees (as determined in accordance with Section 3401(c) of the Code) of the Company or any of its subsidiaries may be granted Incentive Stock Options. For this purpose, “subsidiary” means any company (other than the Company) in an unbroken chain beginning with the Company; provided each company in the unbroken chain (other than the Company) owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain.

 

  (ii) If and to the extent that the aggregate Fair Market Value of the Stock (determined as of the date of grant) with respect to which a Participant’s Incentive Stock Options are exercisable for the first time during any calendar year exceeds $100,000, such Options shall be treated as Nonstatutory Options. For purposes of applying this limitation, Incentive Stock Options shall be taken into account in the order in which they were granted.

 

  (iii) No Incentive Stock Option shall be granted more than 10 years after the earlier of the adoption of the Plan or shareholder approval of the Plan; provided that after the initial adoption of the Plan, such 10-year period shall be measured from the earlier of a subsequent amendment of the Plan requiring shareholder approval or shareholder approval of the Plan as so subsequently amended.

 

  (iv) Award Agreements evidencing Incentive Stock Options shall contain such other terms and conditions as may be necessary to comply with the applicable provisions of Section 422 of the Code.

7.02 Stock Appreciation Rights. The Committee is authorized to grant SARs to Eligible Persons. The Committee shall determine the term of each SAR, provided that in no event shall the term of an SAR exceed a period of ten years from the date of grant. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which an SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method of exercise, method of settlement, form of consideration payable in settlement (whether cash, Stock, or other property), and the method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not an SAR shall be free-standing or in tandem or combination with any other Award. If no other time for exercise of an SAR is specified in the Award Agreement, the SAR shall become exercisable on the third anniversary of the date of grant of such SAR.

 

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7.03 Restricted Stock Shares. The Committee is authorized to grant Restricted Stock Shares to Eligible Persons on the following terms and conditions:

 

  (a) Grant and Restrictions. Restricted Stock Shares shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise and under such other circumstances as the Committee may determine at the date of grant or thereafter. A Participant shall pay such consideration for the Restricted Stock Shares as the Committee may require, which shall not be less than the par value of the Restricted Stock Shares on the date of grant unless the Restricted Stock Shares are to be settled in Treasury shares. Section 10.04(b) (restricting elections under Section 83(b)of the Code) shall apply to Restricted Stock Shares except to the extent provided in the Award Agreement. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to the Restricted Stock Shares, a Participant granted Restricted Stock Shares shall have all of the rights of a shareholder, including the right to vote the Restricted Stock Shares and the right to receive dividends thereon (subject to subsection (c) below).

 

  (b) Evidence of Stock Ownership. Restricted Stock Shares granted under the Plan may be evidenced in such manner as the Committee shall determine, including appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company. If certificates representing Restricted Stock Shares are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock Shares, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock Shares.

 

  (c) Dividends and Splits. Any cash dividends paid on a Restricted Stock Share shall be automatically reinvested in additional Restricted Stock Shares or held in kind, which shall be subject to the same terms as applied to the original Restricted Stock to which it relates. Unless otherwise determined by the Committee, cash, shares of Stock or other property distributed in connection with a stock split or stock dividend, and other property distributed as a non-cash dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock Shares with respect to which such Stock or other property has been distributed.

 

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7.04 Restricted Stock Units. The Committee is authorized to grant RSUs to Eligible Persons, subject to the following terms and conditions:

 

  (a) Award and Restrictions. RSUs shall be subject to restrictions constituting a Substantial Risk of Forfeiture, which conditions may be time-based or performance-based. Unless deferred pursuant to Section 6.08, settlement of RSUs by delivery of cash, shares of Stock, or other property, as specified in the Award Agreement, shall occur upon the lapse of the Substantial Risk of Forfeiture, but no later than within two and one-half months after the last day of the calendar year in which the Substantial Risk of Forfeiture lapses. In addition, RSUs shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose, which restrictions may lapse at the same time as the Substantial Risk of Forfeiture or at earlier or later specified times, separately or in combination, in installments or otherwise, and under such other circumstances as the Committee may determine at the date of grant or thereafter. If no other time for lapse of restrictions on RSU is specified in the Award Agreement, the RSUs shall become vested and nonforfeitable and the Substantial Risk of Forfeiture shall lapse on the third anniversary of the date of grant of such RSUs. Except as restricted under the terms of the Plan, and any Award Agreement relating to the RSUs, prior to settlement a Participant granted RSUs shall have the right to receive dividend equivalents thereon pursuant to subsection (b) but shall have no right to vote respecting the RSUs or any other rights of a shareholder.

 

  (b) Dividend Equivalents. Unless otherwise determined by the Committee, Dividend Equivalents on RSUs shall be automatically deemed reinvested in RSUs and shall be paid when the RSUs to which they relate are settled. Notwithstanding the foregoing, Dividend Equivalents shall be forfeited if the RSUs to which they relate are forfeited or otherwise not earned. Unless otherwise determined by the Committee, cash, shares of Stock or other property distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the RSUs with respect to which such Stock or other property has been distributed.

7.05 Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to an Eligible Person, entitling the Participant to receive cash, shares of Stock, other Awards, or other property equivalent to all or a portion of the dividends paid with respect to a specified number of shares of Stock. Dividend Equivalents may be awarded on a freestanding basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to restrictions on transferability, risks of forfeiture and such other terms as the Committee may specify with due regard to the applicability of Section 409A of the Code. Notwithstanding the foregoing, (a) Dividend Equivalents shall not be provided with respect to Options or Stock Appreciation Rights, and (b) any Dividend Equivalents associated with a Performance Award shall be forfeited to the extent the Performance Award is forfeited or otherwise not earned.

 

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7.06 Performance Shares and Performance Units. The Committee is authorized to grant Performance Shares and Performance Units to Eligible Persons, subject to the following terms and conditions:

 

  (a) Performance Shares shall be denominated in shares of Stock. Performance Units shall be denominated in dollars and have an initial value that is established by the Committee at the time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units or Performance Shares that will be paid out to the Participant, and shall set a Performance Period in accordance with Section 8.01.

 

  (b) After the applicable Performance Period has ended, the holder of Performance Units or Performance Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.

 

  (c) Unless the Performance Shares or Performance Units are deferred as provided in Section 6.08, payment of earned Performance Units and Performance Shares shall be made in a single lump sum, as soon as practicable after the Committee has certified the number of Performance Units or Performance Shares earned for the Performance Period, but in no event later than within two and one-half months after the last day of the calendar year in which the Participant’s rights to such Units/Shares have become vested and nonforfeitable and the Substantial Risk of Forfeiture has lapsed. Except as otherwise provided in an Award Agreement, the Committee shall pay earned Performance Shares in Stock but may in its sole discretion pay earned Performance Units in the form of cash or in Stock (or in a combination thereof) which have an aggregate Fair Market Value equal to the value as of the date of distribution of the number of earned Performance Units at the close of the applicable Performance Period. Such Stock may be made subject to any further restrictions deemed appropriate by the Committee.

 

  (d) Unless otherwise provided in the Award Agreement, Participants shall be entitled to receive Dividend Equivalents paid with respect to Stock which has been earned and become vested as of the close of the performance period in connection with grants of Performance Units or Performance Shares but not yet distributed to Participants, such dividends to be subject to the same terms and conditions as apply to dividends earned with respect to RSUs as set forth in Section 7.04(b).

 

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7.07 Annual Equity Grants, Deferred Stock Units and Deferrals for Non-Employee Directors.

 

  (a) Unless the Board sets a different equity award policy for Non-Employee Directors, on the date specified by the Board of each year, each Non-Employee Director shall receive a fully vested annual grant of shares of Stock (an “Annual Equity Grant”), with the number determined by dividing a dollar amount by the Fair Market Value of a share of Stock on the date of the Annual Equity Grant. If the Non-Employee Director has then not served for the full period since the date of the prior Annual Equity Grant, his or her Annual Equity Grant shall be a pro-rata grant based on the full months of service as a Non-Employee Director since the date of the prior Annual Equity Grant. The dollar amount shall be $155,000 or such lesser or greater amount as may be approved by the Nominating and Governance Committee of the Board from time to time as part of its periodic evaluation of Non-Employee Director compensation. Unless deferred under subsection (b) below, the Annual Equity Grant shall be immediately distributed in Stock.

 

  (b) A Non-Employee Director may elect to defer all or any part (in 10% increments) of his or her Annual Equity Grant into either deferred stock units (“DSUs”) or into the account (the “Deferred Cash Compensation Account”) established under subsection (c) below.

 

  (i) An election to defer the Annual Equity Grant shall be made on or before December 31 of the calendar year preceding the calendar year in which the 12-month period over which the Annual Equity Grant is earned begins (except for a new non-Employee Director, in which event Section 6.08(b) shall apply), on a form (which may be electronic) authorized by the Committee. Such election shall become irrevocable for the period to which it applies as of the last date for making such election. Notwithstanding Section 6.08(a) a deferral election under this subsection (b) shall carry over from year to year, unless changed or revoked at the same time and in the same manner as the a deferral election could be made under this subsection (b). The deferral election shall include (i) the designation and portion of the Annual Equity Grant to be deferred, and (ii) whether it shall be deferred into DSUs or into the Deferred Cash Compensation Account.

 

  (ii) The value of any DSU at any time shall be the Fair Market Value of one share of Stock. Prior to the Non-Employee Director’s Termination of Service, Dividend Equivalents shall be earned on DSUs, converted into additional DSUs based on the Fair Market Value of the Stock on the date the dividends are converted.

 

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  (iii) DSUs will be paid out in cash in two installments. The first installment shall be paid within 30 days after the date of the Non-Employee Director’s Termination of Service in an amount equal to one-half of his or her then-outstanding DSUs. The second installment shall be paid on the first annual anniversary of the first installment payment in an amount equal to the Non-Employee Director’s remaining DSUs. Pending payment off the second installment, DSUs will be credited with interest on a monthly basis at a monthly compounding rate (the “Prime Borrowing Rate”) equal to the prime lending rate of interest in effect as of the first business day of that month as quoted by the Company’s then-current lending bank financing source for commercial borrowings.

 

  (c) A Non-Employee Director may elect to defer all or any part (in 10% increments) of his or her annual retainer, committee fees, meeting fees, or any similar fees for service as a Non-Employee Director (“Directors Fees”), plus all or any portion (in 10% increments) of his or her Annual Equity Grant, into a Deferred Cash Compensation Account.

 

  (i) An election to defer Directors Fees into the Deferred Cash Compensation Account shall be made on or before December 31 of the calendar year preceding the calendar year in which the Directors Fees are earned (except for a new Non-Employee Director, in which event Section 6.08(b) shall apply), on a form (which may be electronic) authorized by the Committee. Such election shall become irrevocable for the period to which it applies as of the last date for making such election. Notwithstanding Section 6.08(a), a deferral election under this subsection (c) shall carry over from year to year, unless changed or revoked at the same time and in the same manner as a deferral election could be made under this subsection (c). The deferral election shall include the designation and portion of the Directors Fees to be deferred.

 

  (ii) The Deferred Cash Compensation Account shall accrue interest on a monthly basis at a monthly compounding rate equal to 120% of the applicable federal midterm rate (as determined under Section 1274(d) of the Code) until the Non-Employee Director’s Termination of Service.

 

  (iii)

The Deferred Cash Compensation Account will be paid out in cash in two installments. The first installment shall be paid within 30 days after the date of the Non-Employee Director’s Termination of Service in an amount equal to one-half of the balance of his or her Deferred Cash Compensation Account. The second installment shall be paid on the first annual anniversary of the first installment payment in an amount equal to the remaining balance of the Non-Employee Director’s Deferred Cash Compensation Account.

 

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  Pending payment of the second installment, the Deferred Cash Compensation Account will be credited with interest on a monthly basis at a monthly compounding rate (the “Prime Borrowing Rate”) equal to the prime lending rate of interest in effect as of the first business day of that month as quoted by the Company’s then-current lending bank financing source for commercial borrowings.

 

  (d) Annual Equity Grants, Deferred Stock Units, and the Deferred Cash Compensation Account, shall be fully vested at all times.

 

  (e) The Board may from time to time establish other compensation and deferral arrangements for Nonemployee Directors in addition to or in lieu of the program outlined above in this Section 7.07.

7.08 Bonus Stock and Other Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Stock or factors that may influence the value of shares of Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Stock, purchase rights for shares of Stock, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee, and Awards valued by reference to the book value of shares of Stock or the value of securities of or the performance of specified subsidiaries or Affiliates or other business units. The Committee is authorized to grant shares of Stock as a bonus, or to grant shares of stock or other Awards in lieu of obligations of the Company or an Affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee. The Committee shall determine the terms and conditions of such Awards, which may include the right to elective deferral thereof, subject to such terms and conditions as the Committee may specify in its discretion. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, shares of Stock, other Awards, or other property, as the Committee shall determine, subject to any applicable restrictions of this Plan.

7.09 Cash Awards. The Committee is authorized to grant cash Awards to Eligible Persons as a bonus on such terms and condition as the Committee shall determine, subject to any applicable restrictions of this Plan.

 

VIII. Performance Awards

8.01 Performance Awards Generally. The Committee is authorized to grant any Award in the form of a Performance Award. Performance Awards may be denominated as a cash amount, number of shares of Stock, or specified number of other Awards or property (or a combination) which may be earned upon achievement or satisfaction of performance conditions specified by the Committee over a performance period established by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award

 

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by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. After the end of each performance period, the Committee shall determine the amount, if any, of the Performance Award for that performance period payable to each Participant. The Committee may, in its discretion, determine that the amount payable to any Participant as a Performance Award shall be reduced from the amount of his or her potential Performance Award, including a determination to make no final Award whatsoever, and may exercise its discretion to increase the amounts payable under any Performance Award, except as limited under Section 8.02 (relating to Performance Awards intended to qualify as “performance-based compensation” under Section 162(m)) of the Code. The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of Termination of Service by the Participant or other event (including a Change in Control) prior to the end of a performance period or otherwise prior to settlement of such Performance Awards. Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, as provided in the Award Agreement in the discretion of the Committee.

8.02 Performance Awards Under Section 162(m) of the Code. If the Committee determines that a Performance Award should qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of one or more preestablished performance goals and shall be subject to other terms set forth in this Section 8.02.

 

  (a) Performance Goal Generally. The performance goal for Performance Awards intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code shall consist of one or more of the business criteria listed in Section 8.03, including or excluding the adjustments described in Section 8.03, and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Article VIII. The Performance Award may also have threshold levels of performance (below which no Performance Award shall be paid) and maximum levels of Performance Award, regardless of the degree to which the actual performance exceeds the target level. The performance goal shall be objective. Any performance goal may be established for one performance period or averaged over time, as the Committee may deem appropriate. Performance may, but need not be, based on a change or an increase or positive result. Performance goals may differ for Performance Awards granted to any one Eligible Person or to different Eligible Persons. The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies.

 

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  (b) Performance Period; Timing for Establishing Performance Goals; Per-Person Limit. Achievement of performance goals in respect of a Performance Award intended to qualify for the “performance-based compensation” exception under Section 162(m) of the Code shall be measured over a performance period specified by the Committee. A performance goal shall be established not later than the earlier of (A) 90 days after the beginning of any performance period applicable to such Performance Award or (B) the time 25% of such performance period has elapsed. The level of attainment of performance goals be substantially uncertain at the time such goals are established, as required under Treas. Reg. § 1.162-27. In all cases, the maximum Performance Award of any Participant intended to qualify for the “performance-based compensation” exception under Section 162(m) of the Code shall be subject to the per-person limitation set forth in Section 5.03.

 

  (c) Performance Award Pool. The Committee may establish a Performance Award pool, which shall be an unfunded pool, for purposes of measuring performance in connection with Performance Awards. The amount of such Performance Award pool shall be based upon the achievement of one or more performance goals based on one or more of the business criteria set forth in Section 8.02(b) during the performance period, as specified by the Committee. The Committee may specify the amount of the Performance Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria. The maximum amount payable to any Participant shall be a stated percentage of the bonus pool; provided the sum of such percentages shall not exceed 100%.

8.03 Performance Criteria. If the Committee determines that a Performance Award should qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, the performance criteria shall be selected from among the following:

 

  (a) Sales, on a corporate, divisional or unit basis, including (i) net sales; (ii) unit sales volume; (iii) aggregate product price; (iv) same store sales or (v) comparable store sales;

 

  (b) Share price, including (i) market price per share; and (ii) share price appreciation;

 

  (c)

Earnings, on a corporate, divisional or unit basis, including (i) earnings per share, reflecting dilution of shares; (ii) gross or pre-tax profits; (iii) post-tax profits; (iv) operating profit; (v) earnings net of or including dividends; (vi) earnings net of or including the after-tax cost of capital; (vii) earnings before (or after) interest and taxes (“EBIT”); (viii) earnings per share from continuing operations, diluted or basic; (ix) earnings before (or after) interest, taxes, depreciation and amortization (“EBITDA”); (x) pre-tax

 

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  operating earnings after interest and before incentives, service fees and extraordinary or special items; (xi) operating earnings; (xii) growth in earnings or growth in earnings per share; and (xiii) total earnings;

 

  (d) Return on equity, on a corporate, divisional or unit basis; including (i) return on equity; (ii) return on invested capital; (iii) return or net return on assets; (iv) return on net assets; (v) return on equity; (vi) return on gross sales; (vii) return on investment; (viii) return on capital; (ix) return on invested capital; (x) return on committed capital; (xi) financial return ratios; (xii) value of assets; and (xiii) change in assets;

 

  (e) Cash flow(s), on a corporate, divisional or unit basis, including (i) operating cash flow; (ii) net cash flow; (iii) free cash flow; (iv) cash flow on investment;

 

  (f) Revenue, on a corporate, divisional or unit basis, including (i) gross or net revenue; and (ii) changes in annual revenues;

 

  (g) Margins, on a corporate, divisional or unit basis, including (i) adjusted pre-tax margin; and (ii) operating margins;

 

  (h) Income, on a corporate, divisional or unit basis, including (i) net income; and (ii) consolidated net income,

 

  (i) Economic value added;

 

  (j) Costs, on a corporate, divisional or unit basis, including (i) operating or administrative expenses; (ii) operating expenses as a percentage of revenue; (iii) expense or cost levels; (iv) reduction of losses, loss ratios or expense ratios; (v) reduction in fixed costs; (vi) expense reduction levels; (vii) operating cost management; and (viii) cost of capital;

 

  (k) Financial ratings, on a corporate, divisional or unit basis, including (i) credit rating; (ii) capital expenditures; (iii) debt; (iv) debt reduction; (v) working capital; (vi) average invested capital; and (vii) attainment of balance sheet or income statement objectives;

 

  (l) Market or category share, on a corporate, divisional or unit basis, including (i) market share; (ii) volume; (iii) unit sales volume; and (iv) market share or market penetration with respect to specific designated products or product groups and/or specific geographic areas;

 

  (m) Shareholder return, including (i) total shareholder return, stockholder return based on growth measures or the attainment of a specified share price for a specified period of time; and (ii) dividends; and

 

  (n)

Objective nonfinancial performance criteria on a corporate, divisional or unit basis, including (i) attainment of strategic and business goals;

 

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  (ii) regulatory compliance; (iii) productivity and productivity improvements; (iv) inventory turnover, average inventory turnover or inventory controls; (v) net asset turnover; (vi) customer satisfaction based on specified objective goals or company-sponsored customer surveys; (vii) employee satisfaction based on specified objective goals or company-sponsored employee surveys; (viii) objective employee diversity goals; (ix) employee turnover; (x) specified objective environmental goals; (xi) specified objective social goals; (xii) specified objective goals in corporate ethics and integrity; (xiii) specified objective safety goals; (xiv) specified objective business integration goals; (xv) specified objective business expansion goals or goals relating to acquisitions or divestitures; and (xvi) succession plan development and implementation.

The Committee may provide in any Performance Award that any evaluation of performance shall include or exclude any of the following items: (1) asset write-downs; (2) litigation or claim judgments or settlements; (3) the effect of changes in tax laws, accounting principles, regulations, or other laws or regulations affecting reported results; (4) any reorganization and restructuring programs; (5) acquisitions or divestitures; (6) unusual nonrecurring or extraordinary items identified in the Company’s audited financial statements, including footnotes; (7) annual incentive payments or other bonuses; or (8) capital charges.

8.04 Settlement of Performance Awards. Prior to settlement of a Performance Award intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, the Committee shall certify the level of attainment of performance goals and the satisfaction of other material terms of the Award upon which settlement of the Award was conditioned. The Committee may not exercise discretion to increase the amount payable to a covered employee (as defined in Section 162(m)(3)) of the Code in respect of a Performance Award intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code. Any settlement which changes the form of payment from that originally specified shall be implemented in a manner such that the Performance Award and other related Awards intended to qualify for the “performance-based compensation” exception under Section 162(m) of the Code do not, solely for that reason, fail to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code.

8.05 Written Determinations. Determinations by the Committee as to the establishment of performance goals, the amount potentially payable in respect of Performance Awards, the level of actual achievement of the specified performance goals, and the amount of any actual Performance Award shall be recorded in writing in the case of Performance Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

8.06 Additional and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either in addition to, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity acquired or to be acquired by the Company or an Affiliate. An Award may specify that the Participant is to receive payment from the Company or any Affiliate. Awards granted in addition to other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards.

 

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8.07 Interest. Unless interest is specifically provided for in this Plan or the Award Agreement, no interest will be paid on Awards. The Award Agreement may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the granting or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock.

8.08 Exemptions from Section 16(b) Liability. With respect to a Participant who is then subject to the reporting requirements of Section 16(a) of the Exchange Act in respect of the Company, the Committee shall grant Awards under the Plan and otherwise administer the Plan in a manner so that the grant and exercise of each Award with respect to such a Participant may qualify for an available exemption from liability under Rule 16b-3, Rule 16b-6, or otherwise not be subject to liability under Section 16(b), provided that this provision shall not be construed to limit sales or other dispositions by such a Participant (in connection with an exercise or otherwise), and shall not limit a Participant’s ability to engage in other non-exempt transactions under the Plan. The Committee may authorize the Company to repurchase any Award or shares of Stock deliverable or delivered in connection with any Award in order to avoid a Participant who is subject to Section 16 of the Exchange Act incurring liability under Section 16(b). Unless otherwise specified by the Participant, equity securities or derivative securities acquired under the Plan which are disposed of by a Participant shall be deemed to be disposed of in the order acquired by the Participant.

 

IX. Change in Control

9.01 Committee Discretion for Awards that are not 409A Compensation. Unless otherwise provided in the Award Agreement, in the event there is any Change in Control, the Committee may, in its discretion, with respect to any Award or agreement that is not 409A Compensation, without the consent of the Participant, provide for any or all of the following to occur:

 

  (a) the assumption or substitution of, or adjustment to, such outstanding Award or agreement;

 

  (b) acceleration of the vesting of such Award and termination of any restrictions or performance conditions on such Award; or

 

  (c) the cancellation of such Award or agreement for a payment to the Participant in cash or other property in an amount determined by the Committee.

The Committee may provide for the preceding to occur immediately upon the Change in Control or upon the Termination of Service of the Participant initiated by the Company or an Affiliate other than for Cause within a fixed time following the Change in Control. In addition, with respect to any unexercised Option or SAR, the Committee may extend the period for exercising the vested portion thereof for a stated period following such a Termination of Service within such fixed time (but only during the stated term of the Option or SAR).

 

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9.02 Effect of Change in Control on 409A Compensation. Unless otherwise provided at the time of grant of an Award providing for 409A Compensation, in the event there is a Change in Control, and within the one-year period thereafter, an affected Participant has a Termination of Service initiated by the Company or an Affiliate other than for Cause, then such Participant’s outstanding Awards shall thereupon become fully vested, any restrictions or performance conditions on such Award shall thereupon lapse; and the Award shall be settled as promptly as practicable but no more than 30 days following such termination, subject to Section 10.12(b).

 

X. General Provisions

10.01 Additional Award Forfeiture Provisions. The Committee may condition an Eligible Person’s right to receive a grant of an Award, or a Participant’s right to exercise an Award, to retain Stock, cash or other property acquired in connection with an Award, or to retain the profit or gain realized by a Participant in connection with an Award, including cash or other property received upon sale of Stock acquired in connection with an Award, upon the Participant’s compliance with specified conditions relating to non-competition, confidentiality of information relating to the Company, non-solicitation of customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of the Company and its officers, Directors and Affiliates, or other requirements applicable to the Participant, as determined by the Committee, at the time of grant or otherwise, including during specified periods following Termination of Service.

10.02 Compliance with Legal and Other Requirements.

 

  (a) The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation (including, without limitation, obtaining any approval, order or ruling from the Securities and Exchange Commission, the Internal Revenue Service or any other governmental agency that the Committee or the Company shall determine to be necessary or advisable), listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Company are listed or quoted, or compliance with any other obligation of the Company, as the Company may consider appropriate, and may require any Participant, as a condition of receiving payment under an Award or delivery of Stock under an Award, to make such representations and covenants, furnish such information and comply with or be subject to such other conditions as the Company deems necessary or advisable in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations.

 

  (b)

Without limiting the generality of the foregoing, no Stock or other form of payment shall be delivered with respect to any Award unless the Company

 

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  shall be satisfied based on the advice of its counsel that such issuance will be in compliance with applicable federal, state and other securities laws. All certificates, or book-entry accounts, for shares of Stock delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Stock is then listed and any applicable federal, state or other securities laws, and the Company may cause a legend or legends to be placed on any such certificates, or notations on such book-entry accounts, to make appropriate reference to such restrictions. The foregoing provisions of this paragraph 10.02(b) shall not be effective with respect to Awards held by United States residents (a) if and to the extent that the shares of Stock delivered under the Plan are covered by an effective and current registration statement under the Securities Act of 1933, as amended, and the Stock is a “covered security” within the meaning of Section 18 of the Securities Act of 1933, as amended, or (b) if and so long as the Company determines that application of such provisions are no longer required or desirable. Without limiting the foregoing, the Committee may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by a Participant of any shares of Stock delivered under the Plan, including, without limitation, restrictions under the Company’s insider trading policy and restrictions as to the use of a specified brokerage firm for such resales or other transfers.

10.03 Designation of Beneficiary. By written instrument filed with the Company during the Participant’s lifetime in a manner specified by the Committee in the Award Agreement or in the Committee’s rules and procedures of general application, each Participant may file with the Committee a written designation of one or more persons or revocable trusts as the Beneficiary who shall be entitled to receive the amount, if any, payable hereunder after the Participant’s death or to exercise an Award or to receive settlement of an Award after the Participant’s death. No such designation of Beneficiary shall be effective until filed with the Committee. A Participant may, from time to time, revoke or change his or her Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Committee. The last such designation received by the Committee prior to the Participant’s death shall be controlling. If no such Beneficiary designation is in effect at the time of the Participant’s death, or if no designated Beneficiary survives the Participant, the Participant’s estate shall be deemed to have been designated his or her Beneficiary and the executor or administrator thereof shall receive the amount, if any, payable hereunder and shall be entitled to exercise or receive settlement of an Award after the Participant’s death. If the Committee is in doubt as to the right of any person as Beneficiary, the Company may retain any amount in question until the rights thereto are determined, or the Company may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Company therefor.

 

35


10.04 Tax Provisions.

 

  (a) Withholding. The Company and any Affiliate is authorized to withhold, at the time of grant or settlement or other time as appropriate, from any Award or Account, any payment relating to an Award or Account, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes required to be withheld by the Company or Affiliate. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of the Company’s (or an Affiliate’s) withholding obligations in the discretion of the Committee. Unless the Committee otherwise specifies, Participants shall satisfy withholding tax amounts by having the Company (or an Affiliate) withhold from the Stock to be delivered upon exercise of an Option or vesting or settlement of a Stock Award that number of shares of Stock having a Fair Market Value equal (but not in excess of) to the minimum amount required by law to be withheld, and any additional required withholding shall be satisfied in cash.

 

  (b) Required Consent to and Notification of Section 83(b) Election of the Code. No election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award Agreement or by action of the Committee in writing prior to the making of such election. In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Committee of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code or other applicable provision.

 

  (c) Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code. If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Committee of such disposition within ten days thereof.

 

  (d)

Payment of Tax Amount. Notwithstanding anything herein to the contrary, in the event the Internal Revenue Service should finally determine that an Award that has not been settled is nevertheless required to be included in the Participant’s or a Beneficiary’s gross income for federal income tax purposes, then an amount necessary to pay the minimum applicable federal, state or local income taxes on such includible value shall be distributed with respect to the Award in a lump sum cash payment within

 

36


  sixty (60) days after such determination, without the requirement of separate approval by the Committee. A “final determination” of the Internal Revenue Service is a determination in writing ordering the payment of additional tax, reporting of additional gross income or otherwise requiring an Account or portion thereof to be included in gross income, which is not appealable or which the Participant or Beneficiary does not appeal within the time prescribed for appeals. For avoidance of doubt, this Section 10.04(d) applies to all Awards and Accounts both 409A Compensation and non-409A Compensation.

 

  (e) Participant Responsibility. Each Participant is solely responsible for all taxes of any nature imposed on the Participant in connection with any Award, including without limitation any taxes under Section 409A or Section 4999 of the Code. Nothing in this Plan or any Award Agreement shall be construed to guarantee the tax consequences to the Participant of any Award.

10.05 Limitation on Benefits.

 

  (a) In the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Participant (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise) (a “Payment”) would be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of amounts payable or distributable to or for the benefit of the Participant to this Plan (such payments or distributions pursuant to this Plan are hereinafter referred to as “Plan Payments”) shall be reduced to the Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Plan Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. Such reduction shall be applied after any reduction to zero if necessary under the Walgreens Boots Alliance, Inc. Executive Severance and Change in Control Plan but before any reduction of any other payments that are not Plan Payments unless the plan or agreement calling for such payments expressly provides to the contrary making specific reference to this Plan. Anything to the contrary notwithstanding, if the Reduced Amount is zero and it is determined further that any Payment which is not a Plan Payment would nevertheless be nondeductible by the Company for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of Payments which are not Plan Payments shall also be reduced (but not below zero) to an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. For purposes of this Section, present value shall be determined in accordance with Section 280G(d)(4) of the Code.

 

37


  (b) The Committee shall select a firm of certified public accountants of national standing, (the “Accounting Firm”), which may be the firm regularly auditing the financial statements of the Company. The Accounting Firm shall make all determinations required to be made under this Section and shall provide detailed supporting calculations both to the Company and the Participant within 15 business days of the Termination of Service or such earlier time as is requested by the Company and an opinion to the Participant that he has substantial authority not to report any Excise Tax on his Federal income tax return with respect to any Payments. Any such determination by the Accounting Firm shall be binding upon the Company and the Participant. The Accounting Firm shall determine which and how much of the Plan Payments or Payments, as the case may be, shall be eliminated or reduced consistent with the requirements of this Section 10.05, provided that, if the Accounting Firm does not make such determination within 15 business days of the Termination of Service the Company shall elect which and how much of the Plan Payments or Payments, as the case may be, shall be eliminated or reduced consistent with the requirements of this Section 10.05 and shall notify the Participant promptly of such election. Within five business days thereafter, the Company shall pay to or distribute to or for the benefit of the Participant such amounts as are then due to the Participant under this Plan.

 

  (c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Plan Payments or Payments, as the case may be, will have been made by the Company which should not have been made (“Overpayment”) or that additional Plan Payments or Payments, as the case may be, which will not have been made by the Company could not have been made (“Underpayment”), in each case, consistent with the calculations required to be made hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the Participant which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, promptly on notice and demand the Participant shall repay to the Company any such Overpayment paid or distributed by the Company to or for the benefit of the Participant together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such amount shall be payable by the Participant to the Company if and to the extent such payment would not either reduce the amount on which the Participant is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

 

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10.06 Amendment and Termination of the Plan. The Company, acting through its Board directly or on the recommendation of the Committee, may at any time terminate, and from time to time may amend or modify the Plan; provided, however, that no amendment or modification may become effective without approval of the amendment or modification by the shareholders if shareholder approval is required to enable the Plan to satisfy any applicable federal or state statutory or regulatory requirements or applicable exchange listing requirements; and provided further, that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any outstanding Award (for this purpose, actions that alter the timing of federal income taxation of a Participant will not be deemed material unless the Committee determines that such action would result in an income tax penalty on the Participant).

10.07 No Repricing. Without the approval of shareholders, the Committee will not amend or replace previously granted Options or SARs in a transaction that constitutes a “repricing,” as such term is used in Section 303A.08 of the Listed Company Manual of the New York Stock Exchange. In addition, and for avoidance of doubt, none of the following is permitted to occur without approval of shareholders: (a) lowering the grant price of outstanding Options and SARs, and (b) cancelling outstanding Options and SARs in exchange for cash, other Awards, or replacement Options and SARs with grant prices that are less than the grant prices of the cancelled Options or SARs.

10.08 Clawback; Right of Setoff. Awards are subject to the Company’s policy on recoveries and such other terms and conditions as the Committee may impose. The Company or any Affiliate may, to the extent permitted by applicable law, deduct from and set off against any amounts the Company or an Affiliate may owe to the Participant from time to time, including amounts payable in connection with any Award, owed as wages, fringe benefits, or other compensation owed to the Participant, such amounts as may be owed by the Participant to the Company, although the Participant shall remain liable for any part of the Participant’s payment obligation not satisfied through such deduction and setoff. By accepting any Award granted hereunder, the Participant agrees to any deduction or setoff under this Section. Notwithstanding the foregoing, no setoff form 409A Compensation may be made if it results in acceleration or deferral of the permitted payment date under Section 409A of the Code.

10.09 Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements, apart from the Plan, as it may deem desirable, including incentive arrangements and awards which do not qualify under Section 162(m) of the Code, and such other arrangements may be either applicable generally or only in specific cases.

10.10 Treatment of Awards by Other Plans. No Award shall be treated as compensation for the purpose of determining benefits based on compensation under any other plan or arrangement of the Company or any Affiliate unless such plan or arrangement provides to the contrary making specific reference to this Plan or to such form of compensation under a Former Plan.

 

39


10.11 Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration, or if less, the Fair Market Value on the date of forfeiture of the Stock for which the Participant paid. Distributions in Stock shall be made in whole shares only, with the value of any fractional share distributed in cash.

10.12 Considerations Under Section 409A of the Code.

 

  (a) Construction in Compliance with Code Section 409A. The Company intends that none of the grant, exercise, settlement or amendment or termination of any Award under the Plan will cause the Participant to be liable for payment of interest or a tax penalty under Code Section 409A. The provisions of the Plan and any Award Agreement shall be construed consistent with that intent.

 

  (b) Six-Month Delay. Any distribution or settlement of 409A Compensation triggered by the Termination of Service of a Specified Employee that would otherwise be made prior to the Deferred Distribution Date (as defined below) shall not occur earlier than the Deferred Distribution Date. The “Deferred Distribution Date” is the day that is six (6) months and one (1) day after a Participant’s Termination of Service (or the Specified Employee’s date of death, if earlier).

 

  (c) Certain Grandfathered Awards. Awards under a Pre-Existing Plan that are “grandfathered” under Section 409A of the Code and that, but for such grandfathered status, would be deemed to be subject to Section 409A of the Code shall be subject to the terms and conditions of the applicable Pre-Existing Plan, provided that if any provision adopted by amendment to a Pre-Existing Plan or an Award Agreement after October 3, 2004, would constitute a material modification of such grandfathered Award, such provision will not be effective as to such Award unless so stated by the Committee in writing with specific reference to revoking such grandfathered status.

10.13 Governing Law. The Plan and all agreements and forms hereunder shall be construed in accordance with and governed by the laws of the State of Illinois without giving effect to principles of conflicts of laws, and applicable provisions of federal law.

10.14 Awards to Participants Outside the United States. The Committee may adopt rules and procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures for a Participant or group of participants who are then resident or primarily employed outside of the United States. Without limiting the generality of the foregoing, the Committee is specifically authorized (a) to adopt the rules and procedures regarding the conversion of local currency, withholding procedures and handling of evidence of Stock ownership which vary with local requirements and (b) to adopt sub-plans, and Plan addenda as the Committee deems desirable, to accommodate foreign laws, regulations and

 

40


practice; and (C) to modify the terms of any Award under the Plan in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States.

10.15 Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or an Affiliate, (ii) interfering in any way with the right of the Company or an Affiliate to terminate any Eligible Person’s or Participant’s employment or service at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a shareholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award. Neither the Plan nor any action taken hereunder shall be construed to alter the status of any Eligible Person or Participant as an employee at will. Except as expressly provided in the Plan or an Award Agreement, neither the Plan nor any Award Agreement shall confer on any person other than the Company and the Participant any rights or remedies thereunder.

10.16 Severability; Entire Agreement. If any of the provisions of this Plan or any Award Agreement are finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining provisions shall not be affected thereby; provided, that, if any of provision of a restrictive covenant applicable to an Award pursuant to Section 10.01 (a “Restrictive Covenant”) is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder; and further provided that if any portion of a Restrictive Covenant is finally held to be invalid, illegal or unenforceable notwithstanding such modification or because such modification of the acceptable scope does not cure such invalidity, illegality or unenforceability, such provision shall not be severable, the entire Award shall be deemed invalid, illegal and unenforceable; the Company and its Affiliates shall have no liability or obligation respecting such Award, and the Participant shall forthwith restore to the Company any payment or settlement previously made pursuant to that Award. The Plan and any Award Agreements contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.

10.17 Plan Term. Unless earlier terminated by action of the Board of Directors, the Plan will remain in effect until such time as no Stock remains available for delivery under the Plan, and the Company has no further rights or obligations under the Plan with respect to outstanding Awards under the Plan; subject to Section 7.01(C)(iii) regarding Incentive Stock Options.

 

41


10.18 Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definitions of any term herein in the singular shall also include the plural.

10.19 General Creditor Status. With respect to any award other than Restricted Stock Shares, each Participant and Beneficiary shall be and remain an unsecured general creditor of the Company with respect to any payments due and owing to such Participant or Beneficiary hereunder. All payments to persons entitled to benefits hereunder shall be made out of the general assets of the Company and shall be solely the obligation of the Company. To the extent the Plan is a promise by the Company to pay benefits in the future and it is the intention of the Company and Participants that the Plan be “unfunded” for tax purposes (and for the purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended).

 

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Exhibit 10.2

WALGREENS BOOTS ALLIANCE, INC.

EMPLOYEE STOCK PURCHASE PLAN

(As amended and restated effective December 31, 2014)


WALGREENS BOOTS ALLIANCE, INC.

EMPLOYEE STOCK PURCHASE PLAN

Walgreen Co. (“Walgreens”) previously maintained the Walgreen Co. 1982 Employees Stock Purchase Plan which was amended and restated in the form of the Walgreen Co. Employee Stock Purchase Plan effective July 1, 2014 (the “Plan”). On December 31, 2014, a reorganization of Walgreens into a holding company structure (the “Reorganization”) was completed. Pursuant to the Reorganization, Walgreens became a wholly owned subsidiary of a new Delaware corporation named Walgreens Boots Alliance, Inc. (the “Company”). In connection with the Reorganization, the Plan and all Options then outstanding under the Plan were assumed by the Company. Accordingly, the Plan is hereby amended and restated as set forth herein, effective as of December 31, 2014, in order to reflect its assumption by the Company. This plan document sets forth the terms and conditions of the Plan.

1. Definitions. Whenever used in the Plan, the words and phrases defined in this Section 1 shall have the following meaning unless a different meaning is clearly required by the context of the Plan, and when the defined meaning is intended the term is capitalized.

 

  (a) Administrator” means the person or persons who are designated by the Committee to performing Plan administrative functions on behalf of the Committee.

 

  (b) Authorization Form” means an Employee’s payroll deduction authorization form, containing such terms and provisions as may be authorized by the Administrator, and in such paper or electronic form as may be prescribed by the Administrator.

 

  (c) Board of Directors” or “Board” means the Board of Directors of the Company.

 

  (d) Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.

 

  (e) Committee” means the Compensation Committee of the Board of Directors. Members of the Committee shall not be eligible to participate in the Plan.

 

  (f) Company” means Walgreens Boots Alliance, Inc., a Delaware corporation.

 

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  (g) Compensation” means for any Participant, the largest of (i) his or her then base salary rate annualized plus the amount of any Company bonus earned by the Participant in the immediately preceding calendar year, (ii) total earnings projected to be reported on Internal Revenue Service form W-2 for the current calendar year by using actual year-to-date W-2 earnings plus the remaining months of the calendar year projected on the same basis as the most recent month’s W-2 base salary, and (iii) the earnings amount that would be applicable to him or her under Federal Minimum Wage laws for the current calendar year.

 

  (h) Date of Grant” shall be the first day of each Option Period.

 

  (i) Employee” means an employee of an Employer who meets the eligibility requirements in Section 6 of this Plan.

 

  (j) Employer” or “Participating Employer” means the Company and all U.S. and Puerto Rico Subsidiaries of the Company, except to the extent any such Subsidiary has been designated by the Board or the Committee as not a Participating Employer under the Plan.

 

  (k) Option” or “Options” means a right or rights to purchase Stock under the Plan.

 

  (l) Option Period” means the one-month period commencing on the day following the last trading day of any calendar month and ending on the last trading day of the next succeeding calendar month.

 

  (m) Participant” means any Employee who has been granted an Option under the Plan and has elected to participate in the Plan in accordance with Section 7 of this Plan.

 

  (n) Plan” means the Walgreens Boots Alliance, Inc. Employee Stock Purchase Plan (formerly the Walgreen Co. Employee Stock Purchase Plan), as amended and restated effective December 31, 2014, as it may be further amended and in effect from time to time.

 

  (o) Purchase Date” with respect to purchase made pursuant to the payroll deductions described under Section 7 of this Plan, means the last trading day of each month in which any payroll deductions are made under the Plan; with respect to purchases made pursuant to a cash contribution as described in Section 7 of this Plan, means the date on which the Employee exercises his or her option to purchase Stock under the Plan.

 

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  (p) Purchase Price” means the purchase price of Stock determined under Section 10 of this Plan.

 

  (q) Stock” means the common stock of the Company, par value $0.01 per share.

 

  (r) Subsidiary” means a corporation 50% or more of which the voting stock of which is owned either directly or indirectly by the Company.

2. Effective Date. This Plan was originally established effective as of October 13, 1982, and has subsequently been amended from time to time. This amended and restated Plan is hereby effective as of December 31, 2014.

3. Purpose. The Plan is designed to assist Employees of the Company and its designated Subsidiaries in acquiring the Company’s Stock as an investment over a period of years on discounted and tax-advantageous bases.

4. Administration. The Plan is administered by the Committee, which consists of three or more members who are appointed by and serve at the discretion of the Board. Members of the Committee are not employees of the Company and are therefore not eligible to participate in the Plan.

The Committee has the general responsibility for maintaining and operating the Plan and the authority to construe and interpret the Plan and any agreement or instrument entered into under the Plan and to establish, amend, or waive rules and regulations for the Plan’s administration. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. The Committee may delegate its authority to such person or persons as it may deem appropriate, including officers or other employees of the Company. References in this document to the “Administrator” shall mean the person or persons who are performing Plan administrative functions on behalf of the Committee. The Company will pay all expenses of administering the Plan, including brokerage commissions for stock purchases under the Plan.

5. Shares Subject to the Plan. The maximum aggregate number of shares of Stock for which Options may be granted to all participants under the Plan is 94,000,000. Shares of Stock under the Plan may consist of shares purchased

 

-3-


in the open market by the Administrator on behalf of the Plan and its participants or authorized but unissued shares or shares reacquired by the Company. Shares of Stock represented by any unexercised portion of any terminated Option granted under the Plan may again be subject to Options granted under the Plan.

6. Eligibility. Any Employee who has completed 90 days of employment with the Employer and who, at the time the Employee seeks to participate in the Plan pursuant to this Section 7, works an average of at least 20 hours per week (pursuant to the measurement approach set by the Administrator), shall be eligible to become a Participant in the Plan, in accordance with such rules as may be prescribed by the Committee; provided, that any Employee who is a citizen or resident of a foreign jurisdiction may be excluded from participating in the Plan to the extent permitted by section 423 of the Code and the regulations issued thereunder.

No Employee may be granted an Option hereunder if immediately after the Option is granted such Employee owns 5% or more of the total combined voting power or value of the stock of the Company or any Subsidiary. For the purposes thereof, the attribution rules of section 425(d) of the Code shall apply in determining the Stock ownership of an Employee, and the Stock which he may purchase under outstanding options under any plan maintained by the Company shall be treated as Stock owned by the Employee.

7. Participation. A person who is an Employee on the first day of an Option Period may become a Participant in the Plan by completing and forwarding an Authorization Form to the Administrator. The form will authorize regular payroll deductions from the Employee’s pay checks. An Employee may also become a Participant by making periodic cash contributions to the extent permitted by the Committee; provided, however, that in no event shall the combined total payroll deductions and cash contributions annually exceed 25% of the Participant’s Compensation.

Notwithstanding the foregoing, no Employee may be granted an Option which permits his rights to purchase Stock under this Plan and any other tax qualified employee Stock purchase plan of the Company and its subsidiaries to accrue at a rate which exceeds $25,000 of fair market value (as determined under Section 10 of the Plan) of such Stock for each calendar year in which the Option is outstanding at any time.

 

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8. Payroll Deductions and Cash Contributions. An Employee may, in accordance with the rules adopted by the Committee or the Administrator, authorize a payroll deduction of any whole percentage from 1% to 25% of his or her base salary each pay period; provided, however, that a Participant’s payroll deduction shall be at least in a minimum amount established in accordance with the rules adopted by the Committee or the Administrator.

An Employee may, in accordance with the rules adopted by the Committee, make a cash contribution once per Option Period; provided, however, that each such cash contribution shall be no less than $250.

Prior to January 8, 2014, Employees were permitted to apply to the Company for loans for the purpose of making cash contributions to acquire Stock as provided in Section 7 of this Plan. At no time shall the total principal amount outstanding on any loans granted to an Employee pursuant to this Plan exceed 50% of the Employee’s then current base salary rate annualized. Such loans shall be at such terms, rates, and conditions (including repayment provisions) as may be determined from time to time by the Committee.

Effective January 8, 2014, loans described in the preceding paragraph are longer provided by the Company. Loans outstanding as of January 8, 2014, shall continue to be repaid in accordance with their repayment terms.

9. Deduction Changes and Discontinuance. A Participant may increase, decrease or discontinue his or her payroll deduction at any time by filing a new Authorization Form with the Administrator. The foregoing is subject to any timing or frequency restrictions that may be imposed on a uniform basis by the Committee or the Administrator.

10. Purchase Price. The Purchase Price of Stock purchased pursuant to the exercise of an Option for any Option Period shall be equal to 90% of the closing market price of the Company’s Stock on the NASDAQ Stock Market on the Purchase Date for such Option Period. The Purchase Price for any Option exercised hereunder shall in no event be less than the lesser of $1.00 per share, or 90% of the closing market price of the Company’s Stock on the Grant Date.

 

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11. Manner of Purchasing Stock. With respect to those Employees who have authorized regular payroll deductions, the Administrator shall establish an account in the name of each Participant in the Plan. A Participant’s payroll deduction shall be credited to his or her account, shall be accumulated in such account without interest and shall be applied as of each Purchase Date to purchase at the Purchase Price for such date the maximum number of whole and fractional shares of Stock that may be purchased with such funds. Funds in the Participant’s account may not be withdrawn except as provided in Section 14.

If a Participant’s account contains sufficient funds to purchase shares of Stock as of any Purchase Date, he or she shall be deemed to have exercised an Option to purchase Stock at the Purchase Price for such date. As of the Purchase Date, a Participant’s entitlement to such share or shares of Stock shall be appropriately noted on the records of the Administrator. To the extent that an Option is not exercised between the Date of Grant and the end of an Option Period, the Option shall terminate.

With respect to a cash contribution, the Administrator shall purchase at the Purchase Price for the applicable Purchase Date the maximum number of whole shares of Stock that may be purchased with such cash contribution. As of the Purchase Date, a Participant’s entitlement to such shares of Stock so acquired shall be appropriately noted on the records of the Administrator.

Upon any purchase of Stock in the open market pursuant to the Plan, the Company shall pay all additional costs of acquiring such Stock.

In no event shall the number of shares of Stock purchased by any Participant for any Option Period exceed 5,000, or such other maximum number of shares as may be designated by the Committee from time to time.

12. Issuance of Stock Certificates and Shareholders Rights. The Administrator shall establish procedures for the shares of Stock purchased by each Participant to be issued to such Participant by the Company in book

 

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entry form, in a brokerage account, in stock certificate form or such other acceptable method of issuance. None of the rights or privileges of a shareholder of the Company shall exist with respect to Stock purchased under the Plan unless and until the Participant shall become the beneficial owner of such Stock on the records of the Company. The Company shall have the right and shall be authorized to retain, as collateral, any Stock purchased with a cash contribution for which an Employee has received a loan for the purchase of Stock pursuant to Section 8 of the Plan.

If a Participant has an outstanding loan for the purchase of Stock pursuant to Section 8 of the Plan, the Administrator may apply dividends paid on such Stock to pay off the outstanding principal and any accrued interest on such loan. Cash dividends paid on all other shares of Stock accruing to a Participant’s account under the Plan shall be paid to the Participant in cash, unless the Participant elects to have the Administrator reinvest such dividends through the purchase of Stock at the prevailing market price on the open market.

13. Registration of Stock. Stock issued hereunder, will be registered only in the name of the Participant, or, if his or her Authorization Form so specifies, in the name of the Participant and any other person as joint tenants with right of survivorship. No other names may be included in the Stock registration.

14. Rights on Retirement, Death, or Termination of Employment. In the event of a Participant’s retirement, death, or other termination of employment, the balance in his or her account shall be distributed to the Participant, or in the event of death (i) to the executor or administrator of the Participant’s estate, or (ii) if none, to the Participant’s heirs in accordance with the laws of descent and distribution.

15. Rights Not Transferable. Rights and Options granted under this Plan are not transferable by the Participant other than by will or by the laws of descent and distribution, and are exercisable only by the Participant during his or her lifetime.

 

-7-


16. Changes in Capitalization. In the event of any change (increase or decrease) in the outstanding shares of Company Stock by reason of a stock dividend, recapitalization, merger, consolidation, stock split, split up, spin off, combination or exchange of shares, reorganization, liquidation, or other change in corporate capitalization, the aggregate number and class of shares of Stock available under this Plan, the number and class of shares of Stock subject to each outstanding Option, the Purchase Price for each Option and the other limits set forth in this Plan in the form of shares of Stock or Purchase Price shall be appropriately and proportionately adjusted by the Committee to prevent dilution or enlargement of rights and preserve the value of outstanding awards; provided that fractional shares of Stock shall be rounded to the nearest whole share. The Committee’s determination shall be final and conclusive.

17. No Purchase of Stock by Company. The Company will be under no obligation to repurchase from any Participant any shares of Stock he or she has acquired under the Plan.

18. Amendment of the Plan. The Board of Directors may at any time, or from time to time, amend the Plan in any respect, including but not limited to any amendments as may be necessary or advisable to maintain the Plan as an employee stock purchase plan meeting the requirements of section 423 of the Code and the regulations issued thereunder; provided, however, that without the approval of a majority of the shares of Stock of the Company then issued and outstanding and entitled to vote, no amendment or modification may become effective if shareholder approval is required to enable the Plan to satisfy any applicable federal or state statutory or regulatory requirements or applicable exchange listing requirements.

19. Termination of the Plan. While it is intended that the Plan remain in effect indefinitely, the Board of Directors may terminate the Plan at any time in its discretion. The Plan shall be terminated by the Board of Directors if at any time the number of shares of Stock authorized for purposes of the Plan is not sufficient to meet all purchase requirements and the number of authorized shares is not increased to meet all prior purchase requirements at the next annual meeting of shareholders.

 

-8-


Upon termination of the Plan, the Administrator shall give notice thereof to Participants, and shall terminate all payroll deductions and apportion the remaining available shares of Stock among Participants for purchase in accordance with the Plan in such manner as the Administrator may deem equitable. Cash balances in Participants’ accounts shall be refunded promptly.

20. Listing, Registration, and Qualification of Shares. The granting of Options for, and the sale of delivery of, Stock under the Plan, shall be subject to the effecting by the Company of any listing, registration, or qualification of the shares subject to that Option upon any securities exchange or under any federal or state law, or the obtaining of the consent or approval of any governmental regulatory body deemed necessary or desirable for the issue or purchase of the shares covered.

21. Employment Rights. Neither the establishment of the Plan, nor the grant of any Options thereunder nor the exercise thereof shall be deemed to (a) give to an Employee the right to be retained in the employ of the Employer (b) interfere with the right of the Employer to discharge any Employee at any time, (c) give to the Employer the right to require the Employee to remain in its employ, or (d) interfere with the Employee’s right to sever his employment at any time.

 

-9-

Exhibit 10.3

WALGREENS BOOTS ALLIANCE, INC. EXECUTIVE

DEFERRED PROFIT-SHARING PLAN

(As Amended and Restated Effective December 31, 2014)


TABLE OF CONTENTS

 

            Page  

ARTICLE I

    

INTRODUCTION

     1   

1.1.

    

Name and Purpose

     1   

1.2.

    

Effective Date and Plan Year

     1   

ARTICLE II

    

DEFINITIONS

     1   

ARTICLE III

    

ELIGIBILITY AND PARTICIPATION

     2   

3.1.

    

Eligibility

     2   

3.2.

    

Status under ERISA

     3   

ARTICLE IV

    

DEFERRAL OF COMPENSATION

     3   

4.1.

    

Participant Deferral Credits

     3   

4.2.

    

Deferral Elections

     3   

4.3.

    

Vesting

     3   

ARTICLE V

    

EMPLOYER PROFIT-SHARING CREDITS

     3   

5.1.

    

Amount of Employer Profit Sharing Credits

     3   

5.2.

    

Vesting

     4   

ARTICLE VI

    

PLAN ACCOUNTING

     4   

6.1.

    

Accounts

     4   

6.2.

    

Adjustments to Participant Accounts

     4   

ARTICLE VII

    

PAYMENT OF BENEFITS

     5   

7.1.

    

Payment of Account Balances

     5   

7.2.

    

Time and Manner of Payment of Grandfathered Account

     5   

7.3.

    

Time and Manner of Payment of Non-Grandfathered Account

     5   

7.4.

    

Effect on Other Benefit Plans

     7   

7.5.

    

Facility of Payment

     7   

7.6.

    

Effect of Payment

     7   

7.7.

    

Withholding for Taxes

     7   

ARTICLE VIII

    

ADMINISTRATION

     8   

8.1.

    

Administration

     8   

8.2.

    

Claims Procedures

     8   

ARTICLE IX

    

AMENDMENT AND TERMINATIONS

     8   

9.1.

    

Amendment or Termination

     8   

ARTICLE X

    

MISCELLANEOUS

     8   

10.1.

    

Non-Alienation

     8   

10.2.

    

Employment Rights

     8   

10.3.

    

Trust Fund

     9   

 

-i-


TABLE OF CONTENTS

(continued)

 

            Page  

10.4.

    

Successors

     9   

10.5.

    

Controlling Law

     9   

10.6.

    

Severability

     9   

10.7.

    

Section 409A

     9   

 

-ii-


WALGREENS BOOTS ALLIANCE, INC. EXECUTIVE

DEFERRED PROFIT-SHARING PLAN

(As Amended and Restated Effective December 31, 2014)

ARTICLE I

INTRODUCTION

1.1. Name and Purpose. Walgreen Co. (“Walgreens”) established the Walgreen Co. Executive Deferred Profit Sharing Plan (the “Plan”), effective January 1, 1990, for the benefit of eligible employees. The Plan was amended and restated in its entirety effective January 1, 2003, was further amended effective as of January 1, 2005 and January 1, 2008, was again amended and restated in its entirety effective as of January 1, 2012, and was further amended effective as of January 1, 2013 and to be effective as of January 1, 2015. On December 31, 2014, a reorganization of Walgreens into a holding company structure (the “Reorganization”) was completed. Pursuant to the Reorganization, Walgreens became a wholly owned subsidiary of a new Delaware corporation named Walgreens Boots Alliance, Inc. (the “Company”). In connection with the Reorganization, the Plan was assumed by the Company, and the Plan is hereby further amended and restated in its entirety, effective as of December 31, 2014, as set forth herein in order to reflect such assumption. The purpose of the Plan, as amended and restated herein, is to provide eligible employees with the opportunity to defer compensation on a pre-tax basis, and to receive Employer Profit-Sharing Credits.

1.2. Effective Date and Plan Year. The Effective Date of the amended and restated Plan is December 31, 2014. The Plan shall be administered on a calendar year basis (the “Plan Year”).

ARTICLE II

DEFINITIONS

2.1. “Account” means the recordkeeping account established by the Administrators pursuant to Article VI to record a Participant’s accrued benefit under the Plan.

2.2. “Administrators” means the persons appointed to administer the Plan pursuant to Section 8.1.

2.3. “Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.

2.4. “Deferral Credits” means the portions of a Participant’s base salary and/or bonus, if any, that he or she elects to defer under Article IV.

 

1


2.5. “Deferral Election” means an election by a Participant to defer base salary and/or bonuses in accordance with the provisions of Article IV.

2.6. “Earnings Gains and Losses” means the amount of earnings, gains, losses and expenses debited or credited to a Participant’s Account pursuant to Section 6.2.

2.7. “Employee Deferral Subaccount” means the portion of a Participant’s Account consisting of Deferral Credits and Earnings Gains and Losses thereon.

2.8. “Employer Profit-Sharing Credits” means the amounts credited to a Participant’s Employer Profit-Sharing Subaccount pursuant to Article V.

2.9. “Employer Profit-Sharing Subaccount” means the portion of a Participant’s Account consisting of Employer Profit-Sharing Credits and Earnings Gains and Losses thereon.

2.10. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder.

2.11. “Grandfathered Account” means the portion of a Participant’s Account that were credited to the Account and became fully vested prior to January 1, 2005.

2.12. “Non-Grandfathered Account” means the portion of a Participant’s Account that is not a Grandfathered Account.

2.13. “Plan Year” means the calendar year.

2.14. “Profit-Sharing Plan” means the Walgreen Profit-Sharing Retirement Plan, as amended and restated effective January 1, 2010, and as further amended from time to time.

2.15. “Profit-Sharing Plan Compensation Limitation” means the limitation imposed by Section 401(a)(17) of the Code on the amount of a Participant’s compensation that may be taken into account under the Profit-Sharing Plan.

ARTICLE III

ELIGIBILITY AND PARTICIPATION

3.1. Eligibility. Each employee of the Company or one of its subsidiaries who is eligible to participate in the Profit-Sharing Plan shall be eligible to become a Participant in the Plan if the employee’s “Salary Conversion Contributions” under Section 4.1 of the Profit-Sharing Plan are limited by the Profit-Sharing Plan Compensation Limitation – or would be so limited if participating in the Profit-Sharing Plan. Effective January 1, 2013, solely for purposes of determining Plan eligibility, prior Plan Year contributions to this Plan are included in a Participant’s compensation to determine whether the Participant has met the Profit-Sharing Plan Compensation Limitation.

 

2


3.2. Status under ERISA. The Plan is an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of “management or highly-compensated employees” within the meaning of Sections 201, 301, and 401 of ERISA, and therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. The Board of Directors of the Company may terminate the Plan or remove certain employees as Participants if it is determined by the United States Department of Labor, a court of competent jurisdiction, or an opinion of counsel, that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA which is not so exempt.

ARTICLE IV

DEFERRAL OF COMPENSATION

4.1. Participant Deferral Credits. A Participant may elect to defer under the Plan by filing a Deferral Election in accordance with Section 4.2. The amount of such deferral shall not be in excess of 50 percent of the Participant’s base salary (as in effect at the time the election is made) and 85 percent of the Participant’s annual bonus. Deductions will be made pursuant to such Deferral Election during the Plan Year. The deferral applicable to base pay shall be reduced in substantially equal amounts from the base salary otherwise periodically payable to the Participant over the Plan Year (or over a portion of such Plan Year as deemed administratively practicable). All Deferral Credits shall be credited to the Participant’s Employee Deferral Subaccount.

4.2. Deferral Elections. A Participant’s Deferral Election shall be in writing (or by electronic means established by the Administrators), and must be made during the election period established by the Administrators which period shall end no later than the day preceding the first day of the Plan Year in which the base salary or bonus is earned. An employee who first becomes a Participant in the Plan on or after the first day of a Plan Year may make a Deferral Election within 30 days after he or she first becomes a Participant, if and to the extent permitted by Code Section 409A; provided, however, that such Deferral Election shall only apply to base salary and bonuses earned after the Participant’s Deferral Election is received by the Administrators. All Deferral Elections shall become irrevocable as of the end of the deferral election period.

4.3. Vesting. A Participant shall at all times be 100 percent vested in amounts credited to his or her Employee Deferral Subaccount.

ARTICLE V

EMPLOYER PROFIT-SHARING CREDITS

5.1. Amount of Employer Profit Sharing Credits. For each Plan Year, each Participant’s Employer Profit-Sharing Subaccount shall be credited with the sum of the following amounts:

 

  (a) the additional amount that would have been allocated to the Participant’s “Employer Contribution Account” under the Profit-Sharing Plan (including a share of certain deemed forfeitures) if the Profit-Sharing Plan Compensation Limitation did not apply; and

 

  (b) such additional amount as determined each year by resolution of the Company’s Board of Directors (or its delegate) to each Participant who qualifies for such additional credit based on the criteria set forth in such resolution.

 

3


For purposes of the foregoing calculations and credits for Plan Year 2015 and subsequent Plan Years, it shall be assumed that the Participant contributes the maximum annual amount permissible under the Profit-Sharing Plan, regardless of the Participant’s actual contribution level, if any.

5.2. Vesting. A Participant shall be vested in his or her Employer Profit-Sharing Subaccount to the same extent as the Participant is vested in his or her Employer Contribution Account under the Profit-Sharing Plan.

ARTICLE VI

PLAN ACCOUNTING

6.1. Accounts. The Company shall establish and maintain, or cause to be established and maintained, a recordkeeping account (the “Account”) in the name of each Participant, which Account shall be comprised of the Employee Deferral Subaccount and the Employer Profit-Sharing Subaccount. A Participant’s Account shall at all times be reflected on the Company’s books as a general unsecured and unfunded obligation of the Company, and the Plan shall not give any person any right or security interest in any asset of the Company or any subsidiary of the Company nor shall it imply any trust or segregation of assets by the Company or any subsidiary of the Company.

6.2. Adjustments to Participant Accounts.

 

  (a) General. The amounts credited to a Participant’s Account shall be adjusted to reflect the Earnings Gains and Losses that would have been debited or credited to such amounts had they been allocated to the Participant’s accounts under the Profit-Sharing Plan and invested in the same manner as such accounts are invested thereunder (or under the applicable Profit-Sharing Plan default investment fund, if no investment elections are made by the Participant under the Profit-Sharing Plan). Such adjustment shall be determined by the Administrators, and their determination shall be final and conclusive.

 

  (b) Timing of Adjustments and Credits. All credits and adjustments to a Participant’s Account shall be made within reasonable proximity to the dates such credits and adjustments would have been made if they were effected under the Profit-Sharing Plan.

 

4


ARTICLE VII

PAYMENT OF BENEFITS

7.1. Payment of Account Balances. A Participant who incurs a separation from service with the Company, dies or becomes disabled shall be entitled to payment of the vested portion of his or her Account at the time and in the manner provided in Section 7.2 below. For purposes of this Article VII, the terms ‘separation from service’ and ‘disabled’ shall have the meanings set forth in Code Section 409A. If a Participant is not 100 percent vested in his or her Employer Profit-Sharing Subaccount at the time of the distribution event, the non-vested portion shall be forfeited.

7.2. Time and Manner of Payment of Grandfathered Account Balances. The Administrators, in their sole discretion, shall determine the time and manner in which a Participant’s Grandfathered Account balance shall be distributed, which may include the methods permitted under the Profit-Sharing Plan.

7.3. Time and Manner of Payment of Non-Grandfathered Account Balances.

 

  (a) Following a Participant’s separation from service or disability, distribution of the portion of the Participant’s Non-Grandfathered Account credited to his or her Employer Profit-Sharing Subaccount shall be made as follows:

 

  (i) If the portion of the Participant’s Non-Grandfathered Account balance credited to his or her Employer Profit-Sharing Subaccount (without taking into account any Company matching contributions credited following separation from service, death or disability) is less than the Lump-Sum Threshold (as defined below), then such portion of the Participant’s Non-Grandfathered Account shall be paid to the Participant (or in the event of the Participant’s death, to his or her designated beneficiary) in one lump sum as of the date of the distribution event, or as soon as practicable thereafter, but in no event later than the later of (i) the last day of the calendar year in which the distribution event occurs, or (ii) the date which is 2-1/2 months following the distribution event.

 

  (ii)

If the portion of the Participant’s Non-Grandfathered Account balance credited to his or her Employer Profit-Sharing Subaccount (without taking into account any Company matching contributions credited following separation from service, death or disability) is equal to or greater than the Lump-Sum Threshold (as defined below), then such portion of the Participant’s Non-Grandfathered Account shall be paid to the Participant (or in the event of the Participant’s death, to his or her designated beneficiary) in monthly installments beginning on the date of the distribution event, or as soon as practicable thereafter, but in no event later than the later of

 

5


  (i) the last day of the calendar year in which the distribution event occurs, or (ii) the date which is 2-1/2 months following the distribution event. Each monthly installment shall equal the Lump-Sum Threshold divided by 12.

 

  (iii) For purposes of this Section 7.3(a), “Lump-Sum Threshold” shall equal $50,000 if the Participant is age 55 or older or shall equal $100,000 if the Participant is under age 55; provided that, beginning in 2007, these $50,000 and $100,000 thresholds shall be increased each year by $2,000 and $4,000, respectively. For purposes of this Section 7.3(a), the determination of which Lump-Sum Threshold amount shall apply and the comparison of this Threshold to the Participant’s Account balance shall be made as of the date of the distribution event.

 

  (b) Following a Participant’s separation from service or disability, distribution of the portion of the Participant’s Non-Grandfathered Account that is credited to his or her Employee Deferral Subaccount shall be made in accordance with one of the following options, as elected by the Participant:

 

  (i) A single lump-sum payment, to be made as soon as practicable following the date of the Participant’s separation from service or disability; or

 

  (ii) Annual installments over a period of 5, 10, 15 or 20 years, as elected by the Participant, with the first installment being calculated as soon as practicable following the Plan Year in which such separation from service or disability occurs, and payment made as soon as practicable thereafter, except as provided below with respect to subsequent changes. A Participant may make a distribution election under this Subsection 7.3(b) at the time the Participant makes his or her Deferral Election under Section 4.2; provided, however, that if no such election is made, the Participant shall be deemed to have elected payment under paragraph (b)(i) above. Once made, the Participant may subsequently change his or her election to an allowable alternative payout period by submitting a new election form to the Administrators, provided that any such new election form (i) shall be made at least 12 months in advance of the originally-scheduled distribution date and may not take effect for at least 12 months after the date the new election is made, (ii) shall not accelerate the time or schedule of any payment, except as permitted under Treasury regulations, and (iii) except with respect to distributions on account of death or disability, shall provide for an additional deferral period that is not less than 5 years from the date distribution would have otherwise been made.

 

6


  (c) Notwithstanding any provision of the Plan to the contrary, if a Participant is deemed to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment under the Plan on account of the participant’s separation from service (for reasons other than death or disability), then, to the extent required by Code Section 409A, such payment or benefit shall not be made or provided until the date which is the earlier of (i) the day after the expiration of the six (6)-month period measured from the date of such separation from service, and (ii) the date of the Participant’s death. Upon the expiration of the six-month delay period, all payments delayed pursuant to this provision shall be paid to the Participant in a lump sum without interest, and all remaining payments due under this Plan shall be paid or provided in accordance with the normal payment dates specified for them.

 

  (d) If a Participant dies prior to the time that his or her entire Account has been distributed, such Account, or remaining Account balance, shall be distributed to the Participant’s Beneficiary in a lump sum as soon as practicable following the Participant’s death.

7.4. Effect on Other Benefit Plans. Amounts credited to or paid from the Employer Profit-Sharing Subaccount of the Plan shall not be considered to be compensation for the purposes of any qualified plan maintained by the Company or any subsidiary of the Company. The treatment of such amounts under other employee benefit plans or programs shall be determined pursuant to the provisions of such plans or programs.

7.5. Facility of Payment. If the Participant or his or her beneficiary is entitled to payments under the Plan and in the opinion of the Administrators such person becomes in any way incapacitated so as to be unable to manage his or her financial affairs, the Company may make payments to the Participant’s or beneficiary’s legal representative or similar person, to a custodian under the Uniform Gifts or Transfers to Minors Act of any state, or in such other manner for the benefit of the Participant or beneficiary that the Trustees consider advisable. Any payments made in accordance with the preceding sentence shall be a full and complete discharge of any liability for such payment hereunder. Upon a Participant’s death, payment under the Plan shall be made to the beneficiary or beneficiaries for such Participant under the Profit-Sharing Plan. Any payments made in accordance with the preceding sentences shall be a full and complete discharge of any liability for such payments hereunder.

7.6. Effect of Payment. The full payment of a Participant’s benefit under the Plan shall completely discharge all obligations on the part of the Company to the Participant (and the Participant’s beneficiary) with respect to the operation of the Plan, and the Participant’s (and Participant’s beneficiary’s) rights under the Plan shall terminate.

7.7. Withholding for Taxes. The Company may withhold from any payment made by it under the Plan such amount or amounts as may be required for purposes of complying with the tax withholding or other provisions of the Code or the Social Security Act or any state’s income tax act or for purposes of paying any estate, inheritance or other tax attributable to any amounts payable hereunder.

 

7


ARTICLE VIII

ADMINISTRATION

8.1. Administration. The Plan shall be administered by the Trustees of the Profit-Sharing Plan, who will have, to the extent appropriate, the same powers, rights, duties, obligations and indemnity with respect to the Plan as they do with respect to the Profit-Sharing Plan. Consistent with such rights under the Profit-Sharing Plan, each determination provided for under the Plan shall be made by the Administrators under such procedures as may from time to time be prescribed by them, and shall be made in their absolute discretion. Any such determination shall be conclusive on all persons.

8.2. Claims Procedures. If a Participant or his or her beneficiary is denied all or a portion of an expected benefit under the Plan for any reason, he or she may file a claim (and thereafter appeal any denied claim) in accordance with the procedures set forth in the Summary Plan Description for the Profit-Sharing Plan, which are incorporated by reference herein for this purpose.

ARTICLE IX

AMENDMENT AND TERMINATIONS

9.1. Amendment or Termination. The Company may, in its sole discretion, terminate or amend the Plan at any time. No such termination or amendment shall change the then existing credits to or adjustments of a Participant’s Account or alter his or her right to receive a distribution thereof in accordance with Article VII; provided, however, that if the Company is liquidated, it shall have the exclusive right to determine the value of each Participant’s Account, as of a date established by the Administrators and to pay any unpaid distributions in any manner which such Administrators determine to be just and equitable.

ARTICLE X

MISCELLANEOUS

10.1. Non-Alienation. All rights and benefits under the Plan are personal to the Participant, and neither the Plan nor any right or interest of a Participant or any person arising under the Plan is subject to voluntary or involuntary alienation, sale, transfer, or assignment without the Company’s consent.

10.2. Employment Rights. The Plan is not a contract of employment, and participation in the Plan will not give any Participant the right to be retained in the employ of the Company or any subsidiary of the Company, nor any right or claim to any benefit under the Plan, unless the right or claim has specifically accrued under the Plan.

 

8


10.3. Trust Fund. The Company shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Company may establish one or more trusts, with such trustees as the Administrators may approve, for the purpose of assisting in the payment of such benefits. Although such a trust shall be irrevocable, its assets shall be held for payment of all of the Company’s general creditors in the event of insolvency. To the extent any benefits provided under the Plan are paid from any such trust, the Company shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of the Company.

10.4. Successors. Unless otherwise agreed to, the Plan is binding on and will inure to the benefit of any successor to the Company, whether by way of merger, consolidation, purchase or otherwise.

10.5. Controlling Law. The Plan shall be construed in accordance with the laws of the State of Illinois.

10.6. Severability. If any provision of the Plan shall be found to be invalid or unenforceable by a court of competent jurisdiction, the validity or enforceability of the remaining provisions of the Plan shall remain in full force and effect.

10.7. Section 409A. To the extent that any portion of the Plan is subject to the rules under Code Section 409A, such portion of the Plan is not intended to result in acceleration of income recognition or imposition of penalty taxes by reason of Code Section 409A, and the terms of such portion of the Plan shall be interpreted in a manner (and such portion of the Plan may be amended to the extent determined necessary or appropriate by the Company) to avoid such acceleration and penalties. The Company may modify the time at which any Account balance will be vested or distributed if it determines that such modification may be necessary to avoid acceleration of tax or imposition of penalties under Code Section 409A. For purposes of Code Section 409A, a right to receive installment payments pursuant to the Plan shall be treated as a right to receive a series of separate and distinct payments. Regardless of whether the Company modifies or fails to modify the time at which any Account balance is vested or distributed, each Participant shall be solely liable for any taxes, penalties and interest (including without limitation those imposed under Code Section 409A) incurred with respect to all amounts credited to the Participants under the Plan.

 

9

Exhibit 10.4

WALGREENS BOOTS ALLIANCE, INC.

EXECUTIVE SEVERANCE AND CHANGE IN CONTROL PLAN

AS AMENDED AND RESTATED EFFECTIVE DECEMBER 31, 2014


TABLE OF CONTENTS

 

        

Page

ARTICLE I Statement of Purpose and Effective Date

   1

1.01

 

Purpose

   1

1.02

 

Effective Date

   1

ARTICLE II Definitions

   1

2.01

 

“Accrued Annual Incentive”

   1

2.02

 

“Accrued Base Salary”

   1

2.03

 

“Accrued Obligations”

   1

2.04

 

“Affiliate”

   1

2.05

 

“Base Salary”

   2

2.06

 

“Board”

   2

2.07

 

“Cause”

   2

2.08

 

“CEO”

   2

2.09

 

“Change Date”

   2

2.10

 

“Change in Control”

   2

2.11

 

“Code”

   3

2.12

 

“Committee”

   4

2.13

 

“Company”

   4

2.14

 

“Disability”

   4

2.15

 

“Effective Date”

   4

2.16

 

“Employee”

   4

2.17

 

“Employer”

   4

2.18

 

“ERISA”

   4

2.19

 

“Exchange Act”

   4

2.20

 

“Good Reason”

   4

2.21

 

“Including”

   5

2.22

 

“Involuntary Termination”

   5

2.23

 

“Notice of Termination”

   5

2.24

 

“Participant”

   5

2.25

 

“Plan”

   5

2.26

 

“Plans”

   5

2.27

 

“Policies”

   5

2.28

 

“Post-Change Period”

   5

2.29

 

“Pro-rata Annual Incentive”

   5

2.30

 

“Retire” or “Retirement”

   6

2.31

 

“Section 409A Deferred Compensation”

   6

2.32

 

“Severance Multiple” and “Severance Period”

   6

2.33

 

“Target Annual Incentive”

   6

2.34

 

“Termination Date”

   7

2.35

 

“Termination of Employment”

   7

2.36

 

“Tier I Participant”

   7

2.37

 

“Tier II Participant”

   7

ARTICLE III Participation and Eligibility for Benefits

   7

3.01

 

Eligibility

   7

3.02

 

Participation

   8

 

- i -


3.03

 

Eligibility for Benefits

   8

3.04

 

Termination of Participation

   8

ARTICLE IV General Obligations of the Employer Upon Involuntary Termination

   8

4.01

 

Involuntary Termination

   8

4.02

 

Termination for Any Other Reason

   9

ARTICLE V Obligations of the Employer on Involuntary Termination of Certain Participants in the Post-Change Period

   10

5.01

 

Application

   10

5.02

 

Involuntary Termination in the Post-Change Period

   10

5.03

 

Termination on or After the Change Date for Any Other Reason

   10

5.04

 

Limitation on Benefits

   11

ARTICLE VI Administration

   12

6.01

 

The Company and Committee

   12

6.02

 

Delegation of Committee Authority

   13

6.03

 

Advisors and Agents of the Committee

   13

6.04

 

Records and Reports of the Committee

   13

6.05

 

Limitation of Liability; Indemnification

   13

6.06

 

Plan Expenses

   13

6.07

 

Service in More than One Capacity

   13

ARTICLE VII Amendments; Termination

   14

7.01

 

Amendment or Termination of the Plan

   14

ARTICLE VIII Claims Procedure

   14

8.01

 

Filing a Claim

   14

8.02

 

Review of Claim Denial

   14

ARTICLE IX Release; No Mitigation; No Duplication of Benefits

   15

9.01

 

Release Required

   15

9.02

 

No Mitigation

   15

9.03

 

No Duplication of Benefits

   15

ARTICLE X Miscellaneous

   15

10.01

 

Participant Information

   15

10.02

 

Electronic Media

   15

10.03

 

Notices

   16

10.04

 

No Employment Contract

   16

10.05

 

Headings

   16

10.06

 

Construction

   16

10.07

 

Joint and Several Liability

   16

10.08

 

Successors

   16

10.09

 

Payments to Beneficiary

   16

10.10

 

Non-Alienation of Benefits

   17

 

- ii -


10.11

 

Tax Matters

   17

10.12

 

Governing Law

   18

10.13

 

Severability

   18

 

- iii -


ARTICLE I

Statement of Purpose and Effective Date

1.01 Background. Walgreen Co. (“Walgreens”), an Illinois corporation, previously established the Walgreen Co. Executive Severance and Change in Control Plan (the “Plan”). On December 31, 2014, a reorganization of Walgreens into a holding company structure (the “Reorganization”) was completed. Pursuant to the Reorganization, Walgreens became a wholly owned subsidiary of a new Delaware corporation named Walgreens Boots Alliance, Inc. (the “Company”). In connection with the Reorganization, the Plan was assumed by the Company and the Plan is hereby amended and restated as set forth herein, effective as of December 31, 2014, in order to reflect such assumption.

1.02 Purpose. The Plan is intended to encourage and motivate key employees to devote their full attention to the performance of their assigned duties without the distraction or concerns regarding their involuntary termination of employment. The Company believes that it is in the best interests of its key employees and the shareholders of the Company to provide financial assistance through severance payments and other benefits to eligible key employees who are involuntarily terminated. Walgreens formerly entered into individual employment contracts with certain employees providing for change of control and severance benefits for the above purposes. This Plan is intended to consolidate and replace (with the consent of the respective Participants where required) such individual employment contracts in order to provide uniform administration of change of control and severance benefits. With respect to each Participant, the Plan supersedes all plans, agreements, or other arrangements for severance benefits or for enhanced severance payments whether or not before, on or after a change in control. To the extent the Plan provides deferred compensation it is an unfunded plan primarily for the purposes of providing deferred compensation for a select group of management or highly compensated employees.

1.03 Effective Date. This Plan became effective as of January 1, 2013 (the “Effective Date”).

ARTICLE II

Definitions

When used in this Plan, the terms specified below have the following meanings:

2.01 “Accrued Annual Incentive” means the amount of any annual incentive earned in a year ended before the Termination Date, but not yet paid to a Participant as of the Termination Date, other than amounts that he or she has elected to defer or that have been automatically deferred.

2.02 “Accrued Base Salary” means the amount of a Participant’s Base Salary that is accrued but unpaid as of the Termination Date, other than amounts that he or she has elected to defer.

2.03 “Accrued Obligations” means, as of any date, the sum of a Participant’s Accrued Base Salary, Accrued Annual Incentive, any accrued but unpaid vacation pay, unreimbursed expenses for which proper documentation is provided, and any other vested amounts and benefits that are to be paid or provided to the Participant by the Company under the Company’s plans (other than this Plan and other than any Section 409A Deferred Compensation), but which have not yet been paid or provided (as applicable).

2.04 “Affiliate” means any person with whom the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code and Treas. Reg. §1.409A-3(i)(5)(ii), except that in applying Sections 1563(a)(1), (2), and (3) of the Code for purposes of determining a

 

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controlled group of corporations under Section 414(b) of the Code; the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Sections 1563(a)(1), (2), and (3) of the Code, and in applying Treas. Reg. § 1.414(c)-(2) for purposes of determining a controlled group of trades or businesses under Section 414(c) of the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Treas. Reg. § 1.414(c)-(2). Notwithstanding the foregoing, where justified by legitimate business criteria as determined by the Committee in its sole discretion, “at least 20 percent” shall be substituted for “at least 50 percent” in the preceding sentence in determining whether a Participant has a Termination of Employment.

2.05 “Base Salary” means an Employee’s annual rate of salary as of any date.

2.06 “Board” means the Board of Directors of the Company or, from and after the of a Change in Control that gives rise to a surviving corporation to the Company, the Board of Directors of such surviving corporation.

2.07 “Cause” means any one or more of the following, as determined by the Committee or its delegate in its sole discretion:

(a) a Participant’s commission of a felony or any crime of moral turpitude;

(b) a Participant’s dishonesty or material violation of standards of integrity in the course of fulfilling his or her employment duties to the Company or any Affiliate;

(c) a material violation of a material written policy of the Company or any Affiliate, violation of which would be grounds for immediate dismissal under applicable Company policy;

(d) willful and deliberate failure on the part of the Participant to perform his or her employment duties to the Company or any Affiliate in any material respect, after reasonable notice of such failure and an opportunity to correct it; or

(e) failure to comply in any material respect with the Foreign Corrupt Practices Act, the securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Truth in Negotiations Act, or any rules or regulations thereunder.

2.08 “CEO” means the Chief Executive Officer of the Company.

2.09 “Change Date” means the first date on which a Change in Control occurs before the termination of the Plan.

2.10 “Change in Control” means an event an event that meets the conditions for a “change in the ownership of a corporation” (within the meaning of Section 409A of the Code and Treas. Reg. §1.409A-3(i)(5)(v)), a “change in the effective control of a corporation” (within the meaning of Section 409A of the Code and Treas. Reg. §1.409A-3(i)(5)(vi)(A)) or a “change in the ownership of a substantial portion of a corporation’s assets” (within the meaning of Section 409A and Treas. Reg. §1.409A-3(i)(5)(vii)) through being one or more of the following:

(a) any one person, or more than one person acting as a group other than an employee benefit plan (or related trust) of the Company or the Company or a subsidiary (collectively “Excluded Persons”), acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company;

 

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(b) any one person, or more than one person acting as a group (other than any Excluded Person), acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company that, constitutes thirty percent (30%) or more of the total fair market value or total voting power of the stock of the Company; or

(c) any one person, or more than one person acting as a group, (other than any Excluded Person) acquires (or has acquired during the twelve (12)-month period ending on date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions; or

(d) a majority of members of the Company’s Board is replaced during any twelve (12)-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election.

Notwithstanding subsections (a) through (d), there shall not be a Change in Control if any of the foregoing events occurs, and immediately following such event: (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the outstanding common stock $0.01 par value of the Company and any other equity securities of the Company that may be substituted or resubstituted for such stock (“Common Stock”) and outstanding Company voting securities immediately prior to such corporate transaction will beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the outstanding shares of Common Stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such event (including, without limitation, a corporation which as a result of such event owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such event, of the outstanding Company Common Stock and outstanding Company voting securities, as the case may be; (2) no person (other than an Excluded Person or such corporation resulting from such event) will beneficially own, directly or indirectly, thirty percent (30%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such event or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors, except to the extent that such ownership existed prior to the event; and (3) individuals who were members of the incumbent Board at the time of the Board’s approval of the execution of the initial agreement providing for such corporate transaction will constitute at least a majority of the members of the board of directors of the corporation resulting from such corporate transaction.

Notwithstanding the foregoing provisions of this Section 2.10, with respect to the payment of any deferred compensation that is subject to Section 409A of the Code with respect to any individual who was a Participant prior to January 8, 2014, no amendment to the definition of Change of Control shall have effect to the extent it would cause such Participant to become subject to taxes or penalties under Section 409A of the Code.

2.11 “Code” means the Internal Revenue Code of 1986, as amended. Reference to any provision of the Code or regulation thereunder, shall include any successor provision and any regulations and other applicable guidance or pronouncement of the Internal Revenue Service or the Department of the Treasury, and applicable case law relating to such Section of the Code.

 

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2.12 “Committee” means the Compensation Committee of the Board. To the extent the Committee has delegated authority to another person or persons the term “Committee” shall refer to such other person or persons.

2.13 “Company” means Walgreens Boots Alliance, Inc. and any successor thereto.

2.14 “Disability” means any medically determinable physical or mental impairment of a Participant that:

(i) has lasted for a continuous period of not less than (x) six months or (y) such longer period, if any, that is available to a Participant under his Employer’s Policies relating to the continuation of employee status after the onset of disability,

(ii) can be expected to be permanent or of indefinite duration, and

(iii) renders the Participant unable to perform his duties with or without accommodation.

2.15 “Effective Date” is defined in Section 1.02.

2.16 “Employee” means an individual who is designated as an employee of an Employer on the records of such Employer.

2.17 “Employer” means the Company and an Affiliate any of whose Employees are Participants in the Plan. The term “Employer” includes any successor to the Company or an Employer.

2.18 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. Reference to any provision of ERISA shall also include any successor provision and regulations and others applicable guidance or pronouncement of a federal regulatory agency and applicable case law relating to such Section of ERISA.

2.19 “Exchange Act” means the Securities Exchange Act of 1934.

2.20 “Good Reason” means any one or more of the following actions or omissions occurring during the Post-Change Period and for which Notice of Termination is given during the Post-Change Period:

(i) a material reduction in the Participant’s base compensation;

(ii) requiring the Participant to be based at any office or location more than 50 miles from the pre-Change Date location and also farther from the Participant’s residence than the pre-Change Date location;

(iii) any material diminution in the Participant’s authority, duties or responsibilities;

(iv) any material breach of this Plan by any Employer or the Committee;

provided that, in order for there to be a Termination of Employment by a Participant for Good Reason, the Participant must notify the Participant’s Employer of the event constituting such Good Reason within 90 days of the occurrence of such event, by a Notice of Termination. The Employer must have failed to cure the event constituting Good Reason within 30 days following receipt of the

 

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Notice of Termination and the Participant must terminate employment within five days after the lapse of the cure period if no cure is effected. A delay in the delivery of such Notice of Termination or in the Termination of Employment after the lapse of the cure period shall waive the right of the Participant under this Plan to terminate employment for Good Reason.

2.21 “Including” means including without limitation.

2.22 “Involuntary Termination” means the Termination of Employment of a Participant (a) initiated by the Employer other than for Cause or Disability, and (b) for a reason other than death. During the Post-Change Period, a Termination of Employment initiated by the Participant for Good Reason shall also be an Involuntary Termination. For avoidance of doubt, a Participant shall not have an Involuntary Termination of Employment if he or she (i) voluntarily resigns; (ii) voluntarily Retires; (iii) has a Termination of Employment because of death or Disability; or (iv) on or before the Termination of Employment (other than a Termination of Employment during the Post-Change Period), is offered employment or re-employment with the Company or an Affiliate or any successor to all or a portion of the business of the Company or Affiliate on terms and conditions substantially similar to the terms and conditions of his or her employment before his or her Termination of Employment.

2.23 “Notice of Termination” means a written notice given in accordance with Section 10.03 that sets forth (i) the specific termination provision in this Plan relied on by the party giving such notice, (ii) in reasonable detail the specific facts and circumstances claimed to provide a basis for such Termination of Employment, and (iii) if the Termination Date is other than the date of receipt of such Notice of Termination (and is not determined under Section 2.33(a), (b), or (c)), the Termination Date.

2.24 “Participant” means an Employee who is selected to participate in the Plan and whose participation has not been terminated pursuant to Section 3.04.

2.25 “Plan” means this Walgreens Boots Alliance, Inc. Executive Severance and Change in Control Plan (formerly the Walgreen Co. Executive Severance and Change in Control Plan) as set forth herein and as from time to time amended.

2.26 “Plans” means plans, programs, or Policies of the Company or the Employer that employs a Participant.

2.27 “Policies” means policies, practices or procedures of the Company or the Employer that employs a Participant.

2.28 “Post-Change Period” means the period beginning on the Change Date and ending on the first anniversary of the Change Date.

2.29 “Pro-rata Annual Incentive” means, in respect of an Employer’s fiscal year during which the Termination Date occurs, an amount equal to the product of (a) (i) in the case of a Termination Date before the Change Date, the actual annual incentive the Participant would have been paid if he or she remained employed on the payment date applicable to then-current employees, and (ii) in the case of a Termination Date on or after the Change Date or in situations where calculation of the Participant’s actual annual incentive is impracticable, the Participant’s Target Annual Incentive (determined as of the Termination Date) multiplied by (b) a fraction, the numerator of which equals the number of days from and including the first day of such fiscal year through and including the Termination Date, and the denominator of which equals 365.

 

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2.30 “Retire” or “Retirement” means a voluntary Termination of Employment after attaining age 55 and having at least 10 years of service with the Company or any Employer.

2.31 “Section 409A Deferred Compensation” means a deferral of compensation that is subject to (and not otherwise exempt from) the requirements of Section 409A of the Code.

2.32 “Severance Multiple” and “Severance Period” mean:

(a) for a Tier I Participant, for a Termination Date occurring before the Change Date or after the Post-Change Period, and for a Tier II Participant, for a Termination Date occurring before, on or after the Change Date:

 

Title/Benefit Indicator

  

Severance Multiple

  

Severance Period

CEO    2.0x    24 months
COO, EVP    2.0x    24 months
SVP    1.0x    12 months
Corporate VP    1.0x    12 months
Group VP, “grandfathered” MVP    0.5x    6 months
Divisional VPs (DVPs)    0.5x    6 months
Non-DVP directors in Benefit Indicator 516    0.5x    6 months

(b) for a Tier I Participant, for a Termination Date occurring during the Post-Change Period:

 

Title/Benefit Indicator

  

Severance Multiple

  

Severance Period

CEO    2.5x    30 months
COO, EVP,    2.5x    30 months
SVP    2.5x    30 months
Corporate VP    2.0x    24 months
Group VP, “grandfathered” MVP    2.0x    24 months
Divisional VPs (DVPs)    2.0x    24 months
Non-DVP directors in Benefit Indicator 516    1.0x    12 months

(c) Notwithstanding the foregoing, if on the Termination Date the Company maintains generally applicable severance arrangements for a broad-based group of employees below benefit indicator level 516 with a formula that would provide severance benefits to an Participant in a greater amount than results from the application of the Severance Multiple shown above, the Severance Multiple (and Severance Period) shall be adjusted upward as necessary so that the amount paid to such Participant is not less than the amount that would be paid under such generally applicable severance arrangement. Such adjusted amount shall be paid at the time and in the form of payment in Section 4.01(a)(iii).

2.33 “Target Annual Incentive”, as of any date, means the amount equal to the product of a Participant’s Base Salary multiplied by the percentage of such Base Salary to which such Participant would be entitled as an annual incentive, based on the terms in effect on such date under any annual incentive plans for the performance period for which the annual incentive is awarded if the performance goals established pursuant to such bonus plan were achieved at the 100% (target) level as of the end of the performance period, but disregarding any reduction in Target Annual Incentive that would constitute Good Reason.

 

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2.34 “Termination Date” means the date of the receipt of the Notice of Termination by a Participant (if such Notice of Termination is given by the Company or the Participant’s Employer) or by the Participant’s Employer (if such Notice is given by the Participant), or any later date specified in the Notice of Termination but not more than 35 days after the giving of such Notice if the Notice of Termination is given by the Participant for Good Reason and not more than 15 days after the giving of such Notice of Termination in all other cases, on which an Employee has a Termination of Employment; provided, however, that:

(a) if the Participant’s employment is terminated by reason of death, the Termination Date shall be the date of the Participant’s death;

(b) If the Participant’s employment is terminated by reason of Disability, the Termination Date shall be the date of Disability terminations of employment regularly applied by the Company’s Human Resource function to terminations of employment for Disability; which as of the Effective Date is one year after the onset of the condition causing the Disability;

(c) if no Notice of Termination is given, the Termination Date shall be the last date on which the Participant is at work; and

(d) if the Notice of Termination is for a Termination by the Participant for Good Reason, the Termination Date shall be the 35th day after the giving of the Notice of Termination if the Employer has not cured the Good Reason.

2.35 “Termination of Employment” means in respect of a Participant, a termination of employment as determined by the Committee; provided, however, that with respect to payment of any Section 409A Deferred Compensation, “Termination of Employment” shall mean “separation from service” within the meaning of Section 409A of the Code.

2.36 “Tier I Participant” means, unless otherwise designated by the Committee before the Change Date, a Participant who, on the Termination Date, is classified in a band more senior than the direction band under the employment level categories regularly applied by the Company’s Human Resource function (but disregarding any reduction to a lower employment level category after the Change Date that would constitute Good Reason).

2.37 “Tier II Participant” means, unless otherwise designated by the Committee, a Participant who, on the Termination Date, is classified in the direction band under the employment level categories regularly applied by the Company’s Human Resource function.

ARTICLE III

Participation and Eligibility for Benefits

3.01 Eligibility.

(a) An employee is eligible for participation in this Plan if the Employee is in benefit indicator level 516 or above (as determined under the customary practices of the Company’s Human Resource function), provided that the Committee may determine in its discretion that an Employee at benefit indicator level 516 or above shall not be eligible to participate in this Plan. The Committee in its discretion may designate selected Employees with a benefit indicator lower than 516 to be eligible to participate in this Plan by written notice to such Employee.

 

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(b) Notwithstanding subsection (a), any individual who is (i) a party to an agreement (“Change in Control Employment Agreement”) between the individual and an Employer that provides for payments upon Termination of Employment (either before or after a Change in Control) or (ii) entitled to Section 409A Deferred Compensation paid in installments as severance after a Change in Control pursuant to a broad-based severance plan; shall not be eligible to become a Participant until the next January 1 after he or she ceases to be covered by such Change in Control Employment Agreement or severance plan. Where Employee consent is required to terminate a Change in Control Employment Agreement, such consent shall be given (if at all) at such time and under such circumstances as the Committee may require in its discretion.

(c) The Committee shall maintain a list of Participants, as in effect from time to time.

(d) To become a Participant, an individual who has ever received a grant of restricted stock units or is otherwise required to agree to be subject to restrictive covenants shall agree to restrictive covenants in such form as the Company may require, whether or not the individual becomes eligible for benefits under Article IV or Article V.

3.02 Participation. Except as provided in Section 3.01(b), each eligible Employee shall become Participant in the Plan on the first date (not earlier than the Effective Date) on which he or she is an eligible Employee described in Section 3.01 and has signed an acknowledgement of coverage under this Plan and, if applicable, any restrictive covenants.

3.03 Eligibility for Benefits A Participant becomes eligible for benefits under the Plan if the Participant has an Involuntary Termination. A Tier I Participant also becomes eligible for benefits under the Plan if the Participant has a Termination of Employment for Good Reason within one year after the Change Date.

3.04 Termination of Participation. If before the Termination Date a Participant is demoted below the level of benefit indicator 516 (disregarding in the case of a Tier I Participant any demotion after the Change Date that would constitute Good Reason), such Participant shall thereupon cease to be a Participant as of the date of demotion. If upon Termination of Employment the Participant has not become eligible for a benefit under Article IV, his or her status as a Participant shall cease upon the Termination Date. Any determination as to a termination of Participation under this Section 3.04 shall be made by the Committee (or by the independent members of the Board upon the recommendation of the Committee in the case of a determination regarding the CEO).

ARTICLE IV

General Obligations of the Employer Upon Involuntary Termination

4.01 Involuntary Termination. If a Participant has an Involuntary Termination, then unless Article V applies, the Employer’s sole obligations to such Participant under the Plan shall be as follows:

(a) The Employer shall pay the Participant the following:

(i) all Accrued Obligations;

(ii) subject to Section 9.01, the Participant’s Pro-rata Annual Incentive, reduced (but not below zero) by the amount of any Annual Incentive paid to the Participant with respect to the Employer’s fiscal year during which the Termination Date occurs (for example, if the Annual Incentive is paid quarterly); the Pro-rata

 

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Annual Incentive shall be paid at the same time and in the same form as the Annual Incentives for such fiscal year are paid to ongoing employees; but no later than two and one-half months after the last day of the fiscal year following the fiscal year in which the Termination Date occurs;

(iii) subject to Section 9.01, an amount equal to the sum of Base Salary and the Target Annual Incentive, each determined as of the Termination Date, multiplied by the applicable Severance Multiple (the “Severance Payment”). The Severance Payment shall be paid in the form of salary continuation unless the Notice of Termination is given in the Post-Change Period, in which event the Severance Payment shall be paid in a single lump sum. The Severance Payment shall begin (or be made) no more than sixty days after the Termination Date, provided the applicable revocation period for the release required by Section 9.01 has expired at that time, and subject to Section 10.11(c) and Section 10.11(e). Severance Payments in the form of salary continuation payments shall be made in accordance with the Employer’s regular payroll schedule beginning with the first regularly scheduled payroll date after the Termination Date; provided, however, that any Severance Payment or Payments (whether in the form of salary continuation or in a lump sum) that is or are delayed as required by Section 10.11(c) or Section 10.11(e) or to allow for the lapse of the applicable revocation period for the release required by Section 9.01 shall be cumulated without interest and paid on the first date on which payment is permitted under by Section 10.11(c) or Section 10.11(e) or after lapse of the applicable revocation period required by Section 9.01. The amount of each salary continuation payment shall be determined by dividing the Severance Payment by the number of regularly scheduled payroll periods in the Severance Period (determined without regard to any delays required by Section 10.11(c) or Section 10.11(e) or the applicable revocation period under Section 9.01.

(b) The Employer shall provide for Post-Termination of Employment nonqualified deferred compensation benefits, equity awards, and employee welfare benefits pursuant to the terms of the respective Plans and Policies under which such post-Termination of Employment benefits, awards and welfare benefits, if any, are provided, except as provided in (c) below.

(c) Subject to Section 9.01, if the Participant timely elects post-termination continuation coverage under Section 4980 of the Code (“COBRA”) with respect to medical, vision, prescription and/or dental coverage, then the Employer shall reimburse the Participant (or pay the provider directly) for the premiums for such COBRA coverage for the Participant and his or her eligible dependents during the applicable Severance Period to the extent such premiums exceed the premiums payable for similar employer-provided coverage by active employees. There shall be no reimbursement (or direct payment) of such premiums by the Employer for any COBRA coverage extending beyond the end of the Severance Period. Notwithstanding the forgoing, such reimbursement (or direct payment) shall cease if the Participant becomes eligible for medical, vision, prescription or dental coverage, respectively, from a subsequent employer, or for Medicare.

4.02 Termination for Any Other Reason. If a Participant has a Termination of Employment for any reason other than as described in Section 4.01 (including termination by the Employer for Cause, termination by the Employee whether or not for Good Reason, termination by the Employer or the Employee for Disability, Retirement, or termination on account of death), then unless Article V applies, the Employer’s sole obligations to such Participant under the Plan shall be to pay the Participant all Accrued Obligations determined as of the Termination Date.

 

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ARTICLE V

Obligations of the Employer on Involuntary Termination of

Certain Participants in the Post-Change Period

5.01 Application. During the Post-Change Period a Tier I Participant shall be entitled to benefits under this Article V in lieu of benefits under Article IV.

5.02 Involuntary Termination in the Post-Change Period. If a Tier I Participant has an Involuntary Termination (including a Termination of Employment for Good Reason) for which a Notice of Termination is given during the Post-Change Period, then the Employer’s sole obligations to such Participant under the Plan shall be as follows:

(a) The Employer shall pay the Participant the following in a single lump sum:

(i) all Accrued Obligations;

(ii) subject to Section 9.01, the Participant’s Pro-rata Annual Incentive, reduced (but not below zero) by the amount of any Annual Incentive paid to the Participant with respect to the Employer’s fiscal year during which the Termination Date occurs (for example, if the Annual Incentive is paid quarterly);

(iii) subject to Section 9.01, an amount equal to the sum of Base Salary and the Target Annual Incentive, each determined as of the Termination Date, multiplied by the applicable Severance Multiple (“Post-Change Severance Payment”); provided, however, that any reduction in the Participant’s Base Salary or Target annual incentive that would qualify as Good Reason shall be disregarded for this purpose.

The amount described in Section 5.01(a)(ii) and the Post-Change Severance Payment shall be paid no more than sixty days after the Termination Date, provided the applicable revocation period required for the release under Section 9.01 has expired at that time; and subject to Section 10.11(c) and Section 10.11(e).

(b) Post-Termination of Employment non-qualified deferred compensation benefits, equity awards, and employee welfare benefits shall be provided pursuant to the terms of the respective Plans and Policies under which such post-Termination of Employment benefits, awards and welfare benefits, if any, are provided, except as provided in (c) below.

(c) Subject to Section 9.01, if the Participant timely elects post-termination continuation coverage under Section 4980 of the Code (“COBRA”) with respect to medical, vision, prescription and/or dental coverage, then the Employer shall reimburse the Participant (or pay the provider directly) for the premiums for such COBRA coverage for the Participant and his or her eligible dependents during the applicable Severance Period to the extent such premiums exceed the premiums payable for similar employer-provided coverage by active employees. There shall be no reimbursement (or direct payment) of such premiums by the Employer for any COBRA coverage extending beyond the end of the Severance Period. Notwithstanding the forgoing, such reimbursement (or direct payment) shall cease if the Participant becomes eligible for medical, vision, prescription or dental coverage, respectively, from a subsequent employer, or for Medicare.

5.03 Termination on or After the Change Date for Any Other Reason. If a Participant has a Termination of Employment for which a Notice of Termination is given during the Post-Change

 

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Period, for any reason other than as described in Section 5.02 (including termination by the Employer for Cause, termination by the Employee other than for Good Reason, termination by the Employer or the Employee for Disability, Retirement, or termination on account of death), then the Employer’s sole obligation to the Participant under this Plan shall be to pay the Participant all Accrued Obligations determined as of the Termination Date.

5.04 Limitation on Benefits.

(a) In the event it shall be determined that any payment or distribution by an Employer to or for the benefit of the Participant (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise) (a “Payment”) would be nondeductible by the Employer for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of amounts payable or distributable to or for the benefit of the Participant pursuant to this Plan (“Plan Payments”) shall be reduced to the Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Plan Payments without causing any Payment to be nondeductible by the Employer because of Section 280G of the Code. Such reduction shall be applied before any reduction of any other payments that are not Plan Payments unless the plan or agreement calling for such payments expressly provides to the contrary making specific reference to this Plan. Anything to the contrary notwithstanding, if the Reduced Amount under the Plan is zero and it is determined further that any Payment that is not a Plan Payment would nevertheless be nondeductible by the Employer for Federal income tax purposes because of Section 280G of the Code, then the aggregate present value of Payments which are not Plan Payments shall also be reduced (but not below zero) to an amount expressed in present value which maximizes the aggregate present value of Payments without causing any Payment to be nondeductible by the Employer because of Section 280G of the Code. For purposes of this Section, present value shall be determined in accordance with Section 280G(d)(4) of the Code.

(b) The Committee shall select a firm of certified public accountants of national standing, (the “Accounting Firm”), which may be the firm regularly auditing the financial statements of the Company or the Employer. The Accounting Firm shall make all determinations required to be made under this Section and shall provide detailed supporting calculations to the Company, the Employer and the Employee within 30 days after the Termination Date or such earlier time as is requested by the Company, and provide an opinion to the Participant that he or she has substantial authority not to report any Excise Tax on his or her Federal income tax return with respect to any Payments. Any such determination by the Accounting Firm shall be binding upon the Company, the Employer and the Participant. The Accounting Firm shall determine which and how much of the Plan Payment or Payments, as the case may be, shall be eliminated or reduced consistent with the requirements of this Section, provided that, if the Accounting Firm does not make such determination within 30 days after the Termination Date the Company shall elect which and how much of the Plan Payment or Payments, as the case may be, shall be eliminated or reduced consistent with the requirements of this Section and shall notify the Participant promptly of such election. Within five business days thereafter, the Employer shall pay to or distribute to or for the benefit of the Participant such amounts as are then due to the Participant under this Plan.

(c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm or the Company hereunder, it is possible that Plan Payments or Payments, as the case may be, will have been made by the Employer which should not have been made (“Overpayment”) or that additional Plan Payments or Payments, as the case may be, which will not have been made by the

 

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Employer could not have been made (“Underpayment”), in each case, consistent with the calculations required to be made hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against the Employee which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, promptly on notice and demand the Participant shall repay to the Employer any such Overpayment paid or distributed by the Employer to or for the benefit of the Participant together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such amount shall be payable by the Participant to the Employer if and to the extent such payment would not either reduce the amount on which the Participant is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Employer to or for the benefit of the Participant together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

ARTICLE VI

Administration

6.01 The Company and Committee.

(a) The Company shall have overall responsibility for the establishment, amendment and termination of the Plan. In carrying out its responsibilities hereunder, the Company shall act through the Committee (except with respect to the CEO, with respect to whom the Company shall act through the independent members of the Board). The Committee shall have, in its discretion, the responsibilities, duties, powers and authority, assigned to it in this Plan and any responsibilities, duties, powers and authority, under this Plan that are not specifically delegated to anyone else, including the following:

(i) to determine which individuals shall be selected as Tier I Participants, and Tier II Participants.

(ii) to decide on questions concerning the Plan and the eligibility of any Participant to participate in the Plan, including whether the Participant should remain (or become) a Participant;

(iii) to determine the nature and timing of any Termination of Employment or the existence of Good Reason;

(iv) subject to any limitations under the Plan or applicable law, to make and enforce such rules and regulations and prescribe the use of such forms as it shall deem necessary for the efficient administration of the Plan;

(v) to require any person to furnish such information as it may request as a condition to receiving any benefit under the Plan;

(vi) to compute or have computed the amount of benefits that shall be payable to any person in accordance with the provisions of the Plan;

(vii) to construe and interpret the Plan and correct defects, supply omissions and reconcile inconsistencies in the Plan;

(viii) to make all other decisions and determinations (including factual determinations) as the Committee may deem necessary or advisable in carrying out its duties and responsibilities or exercising its powers;

 

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provided that if the CEO is a Participant, such duties, responsibilities and powers shall be exercised with respect to him or her by the independent members of the Board. Decisions of the Committee (or the independent members of the Board with respect to the CEO) shall be final, conclusive and binding on all persons interested in the Plan, including Participants, beneficiaries and other persons claiming rights from or through a Participant.

6.02 Delegation of Committee Authority. The Committee may delegate to officers or employees of the Company, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such administrative functions and exercise such administrative powers and authority, as the Committee in its discretion may determine. Such delegation may be revoked at any time.

6.03 Advisors and Agents of the Committee. The Committee may (i) authorize one or more of its members or an agent to execute or deliver any instrument, and make any payment on its behalf and (ii) utilize and cause the Company to pay for the services of associates and engage accountants, agents, clerks, legal counsel, record keepers and professional consultants (any of whom may also be serving an Employer or another Affiliate of the Company) to assist in the administration of this Plan or to render advice with regard to any responsibility under this Plan.

6.04 Records and Reports of the Committee. The Committee or its delegate shall maintain records and accounts relating to the administration of the Plan.

6.05 Limitation of Liability; Indemnification. The members of the Board and the Committee shall have no liability with respect to any action or omission made by them in good faith nor from any action made in reliance on (i) the advice or opinion of any accountant, legal counsel, medical adviser or other professional consultant or (ii) any resolutions of the Board certified by the secretary or assistant secretary of the Company. Each member of the Board, the Committee, and each employee to whom are delegated duties, responsibilities and authority with respect to the Plan shall be indemnified, defended, and held harmless by the Company and the Employers and their respective successors against all claims, liabilities, fines and penalties and all expenses (including but not limited to attorneys fees) reasonably incurred by or imposed on such member or Participant that arise as a result of his actions or failure to act in connection with the operation and administration of the Plan, to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty or expense is not paid for by liability insurance purchased by or paid for by the Company or an Employer. Notwithstanding the foregoing, the Company or an Employer shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Company or an Employer consent in writing to such settlement or compromise.

6.06 Plan Expenses. Expenses relating to the Plan before its termination shall be paid from the general assets of the Company or an Employer. Any individual who serves as a member of the Committee shall receive no additional compensation for such service.

6.07 Service in More than One Capacity. Any person or group of persons may serve the Plan in more than one capacity.

 

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ARTICLE VII

Amendments; Termination

7.01 Amendment or Termination of the Plan. The Company by duly adopted resolution of the Board shall have the sole right to alter, amend or terminate this Plan in whole or in part at any time and to terminate the participation of any Employee; provided, however, that:

(i) any such adverse amendment or termination shall be effective only as to those Participants, if any, who have consented to such amendment or termination or who have received from the Company at least 12 months’ prior written notice (“Amendment Notice” or “Expiration Notice,” respectively) of such adverse amendment or termination that sets forth the date of termination or amendment (“Amendment Date” or “Expiration Date”), and

(ii) no such Amendment Notice or Expiration Notice shall be effective as to any Participant if a Change Date occurs before the Amendment or Expiration Date specified in the Amendment Notice or Expiration Notice.

Any purported Plan termination or amendment in violation of this Section 7.01 shall be void and of no effect.

ARTICLE VIII

Claims Procedure

8.01 Filing a Claim.

(a) No claim shall be required for benefit due under the Plan. Any individual eligible for benefits under this Plan who believes he or she is entitled to additional benefits or who desires to clarify his or her right to future benefits under the Plan (“Claimant”) may submit his application for benefits (“Claim”) to the Committee (or to such other person or persons as may be designated by the Committee) in writing in such form as is provided or approved by the Committee.

(b) When a Claim has been filed properly, it shall be evaluated and the Claimant shall be notified of the approval or the denial of the Claim within 90 days after the receipt of such Claim. A Claimant shall be given a written notice in which the Claimant shall be advised as to whether the Claim is granted or denied, in whole or in part. If a Claim is denied, in whole or in part, the notice shall contain (i) the specific reasons for the denial, (ii) references to pertinent provisions of this Plan on which the denial is based, (iii) a description of any additional material or information necessary to perfect the Claim and an explanation of why such material or information is necessary, and (iv) the Claimant’s right to seek review of the denial.

8.02 Review of Claim Denial. If a Claim is denied, in whole or in part, or if a Claim is neither approved nor denied within the 90-day period specified Section 8.01(b), the Claimant shall have the right, within 60 days after receipt of such denial (or after such claim to deemed denied), (i) request that the Committee (or such other person or persons as shall be designated in writing by the Committee) review the denial or the failure to approve or deny the Claim, (ii) review pertinent documents, and (iii) submit issues and comments in writing. Within 60 days after a such request is received, the Committee shall complete its review and give the Claimant written notice of its decision. The Committee shall include in its notice to Claimant the specific reasons for its decision and references to provisions of this Plan on which its decision is based. A Claimant shall have no right to seek review of a denial or benefits, or to bring any action in any court to enforce a Claim, before to his filing a Claim and exhausting his rights to review under Sections 8.01 and 8.02.

 

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ARTICLE IX Release; No Mitigation; No Duplication of Benefits

9.01 Release Required. Any and all amounts payable and benefits or additional rights provided pursuant to this Plan other than the Accrued Obligations and amounts provided under Section 4.01(b) shall only be payable if the Participant (or Participant’s beneficiary in the event of Participant’s death) timely delivers to the Employer and does not revoke a general waiver and release of claims in favor of the Company and related parties (“Company Parties”) in such form and with such terms and conditions as are reasonably acceptable to the Company, and the revocation period related to such general waiver and release has expired. Such general waiver and release shall be executed and delivered (and the revocation period related thereto, if any, shall have lapsed without revocation having been made) within sixty (60) days following the Termination Date.

9.02 No Mitigation. No Participant shall have any duty to mitigate the amounts payable under this Plan by seeking or accepting new employment or self-employment following termination. Except as specifically otherwise provided in this Plan, all amounts payable pursuant to this Plan shall be paid without reduction regardless of any amounts of salary, compensation or other amounts that may be paid or payable to the Participant as the result of the Participant’s employment by another employer or self-employment.

9.03 No Duplication of Benefits. Subject to Section 10.11(f), to the extent that a Participant shall have received severance payments or other severance benefits under any other Plan or agreement of the Company before receiving severance payments or other severance benefits pursuant to Article IV or Article V, the severance payments or other severance benefits under such other Plan or agreement shall reduce (but not below zero) the corresponding severance payments or other severance benefits to which such Participant shall be entitled under Article IV or Article V. To the extent that a Participant accepts payments made pursuant to Article IV or Article V, he shall be deemed to have waived his right to receive a corresponding amount of future severance payments or other severance benefits under any other Plan or agreement of the Company. Payments and benefits provided under the Plan shall be in lieu of any termination or severance payments or benefits for which the Participant may be eligible under any of the Plans or Policy of the Company or an Affiliate or under the Worker Adjustment Retraining Notification Act of 1988 or any similar statute or regulation.

ARTICLE X

Miscellaneous

10.01 Participant Information. Each Participant shall notify the Committee of his home address and each change of home address. Each Participant shall also furnish the Committee with any other information and data that the Committee considers necessary for the proper administration of the Plan. The information provided by the Participant under this Section shall be binding on the Participant, his dependents and any beneficiary for all purposes of the Plan and the Committee shall be entitled to rely on any representations regarding personal facts made by a Participant, his dependents or beneficiary, unless such representations are known to be false.

10.02 Electronic Media. Under procedures authorized or approved by the Committee, any form for any notice, election, designation, or similar communication required or permitted to be given to or received from a Participant under this Plan may be communicated or made available to the Company or Participant in an electronic medium (including computer network, e-mail or voice response system) and any such communication to or from a Participant or Beneficiary through such electronic media shall be fully effective under this Plan for such purposes as such procedures shall prescribe. Any record of such communication retrieved from such electronic medium under its normal storage and retrieval parameters shall be effective as a fully authentic executed writing for all purposes of this Plan absent manifest error in the storage or retrieval process.

 

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10.03 Notices. All notices and other communications under this Plan shall be in writing and delivered by hand, by nationally recognized delivery service that promises overnight delivery, or by first-class registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Participant, at his most recent home address on

file with the Company.

If to the Company or any other Employer,

Walgreens Boots Alliance, Inc.

108 Wilmot Road

Deerfield, Illinois 60015

Attn.: General Counsel

or to such other address as either party shall have furnished to the other in writing. Notice and communications shall be effective the day of receipt if delivered by hand or electronically, the second business day after deposit with an overnight delivery service if so deposited, or the fifth business day after mailing in the case of first class registered or certified mail.

10.04 No Employment Contract. The existence of this Plan shall not confer any legal or other rights upon any Participant to employment or continuation of employment. Employees are employees at will. The Company and each Employer reserve the right to terminate any Participant with or without cause at any time, notwithstanding the provisions of this Plan.

10.05 Headings. The headings in this Plan are for convenience of reference and shall not be given substantive effect.

10.06 Construction. Any masculine pronoun shall also mean the corresponding female or neuter pronoun, as the context requires. The singular and plural forms of any term used in this Plan shall be interchangeable, as the context requires.

10.07 Joint and Several Liability. In the event that any Employer incurs any obligation to a Participant pursuant to this Plan, such Employer, the Company and each Affiliate, if any, of which such Employer is a subsidiary shall be jointly and severally liable with such Employer for such obligation.

10.08 Successors. This Plan shall inure to the benefit of and be binding upon the Company, each Employer and their respective successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of any Employer to assume expressly and agree to comply with this Plan in the same manner and to the same extent that the Employer would be required to comply with it if no such succession had taken place. Failure to require such assumption will be a material breach of this Plan. Any successor to the business or assets of any Employer that assumes or agrees to perform this Plan by operation of law, contract, or otherwise shall be jointly and severally liable with the Employer under this Plan as if such successor were the Employer.

10.09 Payments to Beneficiary. If a Participant dies after becoming entitled to payments under Section 4.01 or 5.02 but before receiving all amounts to which he is entitled under this Plan, then, subject to Section 9.01, such remaining amounts shall be paid in a lump sum to one or more

 

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beneficiaries designated in writing by the Participant for the purposes of this Plan and received by the Committee before the Participant’s death, which the Participant may change from time to time in the manner without the consent of any previously designated beneficiary, or if none is so designated, to the Participant’s estate.

10.10 Non-Alienation of Benefits. Benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, before actually being received by the Participant, and any such attempt to dispose of any right to benefits payable under this Plan shall be void.

10.11 Tax Matters.

(a) An Employer may withhold from any amounts payable under this Plan or from any other amount due a Participant any federal, state, local and other income, employment and other taxes that are required to be withheld pursuant to any applicable law or regulation.

(b) The intent of the Employers is that payments and benefits under this Plan are exempt from or comply with Section 409A of the Code and, accordingly, to the maximum extent permitted, this Plan shall be interpreted in accordance with that intent. To the extent that any provision hereof is modified in order to comply with Section 409A of the Code, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Participant and the Employer of the applicable provision without violating the provisions of Section 409A of the Code. In no event whatsoever shall the Company or any Employer be liable for any additional tax, interest or penalty that may be imposed on a Participant or Employee by Section 409A of the Code or damages for failing to comply with Section 409A of the Code.

(c) If a Participant is deemed on the Termination Date to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code, then with regard to any payment or the provision of any benefit that is considered “nonqualified deferred compensation” under Section 409A of the Code payable on account of a “separation from service,” then, to the extent required by Section 409A of the Code, such payment or benefit shall not be made or provided until the date which is the earlier of (i) the day after the expiration of the six (6)-month period measured from the date of such “separation from service” of the Employee, and (ii) the date of the Employee’s death. Upon the expiration of the six-month delay period, all payments and benefits delayed pursuant to this provision (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Employee in a lump sum without interest, and all remaining payments and benefits due under this Plan shall be paid or provided in accordance with the normal payment dates specified for them herein.

(d) To the extent that reimbursements or other in-kind benefits under this Plan constitute “nonqualified deferred compensation” for purposes of Section 409A of the Code, (A) all expenses or other reimbursements hereunder shall be made on before to the last day of the taxable year following the taxable year in which such expenses were incurred by the Participant, (B) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

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(e) For purposes of Section 409A of the Code, the Participant’s right to receive installment payments pursuant to this Plan shall be treated as a right to receive a series of separate and distinct payments. Whenever this Plan specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Employer; provided that if the timing of the payment is contingent on the lapse or expiration of the revocation period for the release required under Section 9.01 and such revocation period could, as of the Termination Date, lapse either in the same year as the Termination Date or in the following year, the actual date of payment within the specified period shall be in such following year.

(f) Notwithstanding any other provision of this Plan to the contrary, in no event shall any payment or benefit under this Plan that constitutes “nonqualified deferred compensation” for purposes of Section 409A of the Code be subject to offset by any other amount unless such offset would not trigger additional taxes and penalties under Section 409A of the Code.

10.12 Governing Law. The provisions of this Plan shall be governed, construed and administered in accordance with the laws of the State of Illinois, other than its laws respecting choice of law, except to the extent preempted by federal law.

10.13 Severability. If any one or more Articles, Sections or other portions of this Plan are declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any Article, Section or other portion not so declared to be unlawful or invalid; provided that if the release required under Section 10,01 is declared to be unlawful or unenforceable, then no payments shall be made the payment of which is subject to such release, and the Participant shall forthwith restore to the Employer any payments previously made that were subject to such release. Any Article, Section or other portion so declared to be unlawful or invalid shall be construed so as to effectuate the terms of such article, section or other portion to the fullest extent possible while remaining lawful and valid.

 

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Exhibit 10.5

Walgreens Boots Alliance, Inc.

2011 Cash-Based Incentive Plan

As amended and restated effective

December 31, 2014


Contents

 

 

Article 1. Establishment, Purpose, and Duration

     1   

Article 2. Definitions

     1   

Article 3. Administration

     6   

Article 4. Eligibility and Participation

     7   

Article 5. Awards

     7   

Article 6. Awards Not Assignable or Transferable

     8   

Article 7. Performance Measures

     9   

Article 8. Beneficiary Designation

     10   

Article 9. Rights of Participants

     10   

Article 10. Change of Control

     11   

Article 11. Amendment and Termination

     11   

Article 12. Reporting and Withholding

     12   

Article 13. Successors

     12   

Article 14. General Provisions

     12   


Walgreens Boots Alliance, Inc.

2011 Cash-Based Incentive Plan

Article 1. Establishment, Purpose, and Duration

1.1 Establishment. Walgreen Co., an Illinois corporation (hereinafter referred to as the “Walgreens”), previously established an incentive compensation plan to be known as Walgreen Co. 2011 Cash-Based Incentive Plan (hereinafter referred to as the “Plan”). This Plan permits the grant of Cash-Based Awards. This Plan became effective upon shareholder approval on January 11, 2012 (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof. On December 31, 2014, a reorganization of Walgreens into a holding company structure (hereinafter referred to as the “Reorganization”) was completed. Pursuant to the Reorganization, Walgreens became a wholly owned subsidiary of a new Delaware corporation named Walgreens Boots Alliance, Inc. (hereinafter referred to as the “Company”). In connection with the Reorganization, the Plan was assumed by the Company and the Plan is hereby amended and restated as set forth herein, effective as of December 31, 2014, in order to reflect such assumption.

1.2 Objectives of This Plan. The objectives of this Plan are to optimize the profitability and growth of the Company through incentives consistent with the Company’s goals and that link and align the personal interests of Participants with an incentive for excellence in individual performance, and to promote teamwork. This Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants who make significant contributions to the Company’s success and to allow Participants to share in the success of the Company.

1.3 Duration of This Plan. This Plan shall commence on the Effective Date, as described in Section 1.1, and shall remain in effect until terminated, modified, or amended in accordance with Section 11.1 of the Plan.

Article 2. Definitions

Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.

 

  2.1 Affiliate” means any entity (a) which, directly or indirectly, is controlled by, controls, or is under common control with the Company, or (b) in which the Company has a significant entity interest, in either case as determined by the Committee, and which is designated by the Committee as such for purposes of the Plan.

 

  2.2 Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 5.3.

 

  2.3 Award” means, individually or collectively, a grant to a Participant under an Award Agreement of any Cash-Based Award, subject to the terms of this Plan.

 

  2.4 Award Agreement” means either: (a) a written or electronic agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, including any amendment or modification thereof, or (b) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, Internet, or other non-paper Award Agreements, and the use of electronic, Internet, or other non-paper means for the acceptance thereof and actions thereunder by a Participant.

 

1


  2.5 Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such terms in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

 

  2.6 Board” or “Board of Directors” means the Board of Directors of the Company.

 

  2.7 Cash-Based Award” means a contractual right granted to an Employee under Article 5 entitling such Participant to receive a cash payment or payments, at such times, and subject to such conditions, as are set forth in this Plan and the applicable Award Agreement.

 

  2.8 Cause” means, unless otherwise specified in an Award Agreement or in an applicable employment agreement between the Company and a Participant, with respect to any Participant any of the following:

 

  (a) Any act that would constitute a material violation of the Company’s material written policies;

 

  (b) Willfully engaging in conduct materially and demonstrably injurious to the Company, provided, however, that no act or failure to act, on the Participant’s part, shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that such action or omission was in the best interest of the Company;

 

  (c) Being indicted for, or if charged with but not indicted for, being tried for (i) a crime of embezzlement or a crime involving moral turpitude, or (ii) a crime with respect to the Company involving a breach of trust or dishonesty, or (iii) in either case, a plea of guilty or no contest to such a crime;

 

  (d) Abuse of alcohol in the workplace, use of any illegal drug in the workplace or a presence under the influence of alcohol or illegal drugs in the workplace;

 

  (e) Failure to comply in any material respect with the Foreign Corrupt Practices Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, and the Truth in Negotiations Act, or any rules and regulations issued thereunder; and

 

  (f) Failure to follow the lawful directives of the Company’s Chief Executive Officer, the President or the Board of Directors.

 

  2.9 Change of Control” means a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company as described in Code Section 409A, including:

 

  (a)

An acquisition after the date hereof by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of

 

2


  twenty percent (20%) or more of either (a) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (b) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company or approved by the Incumbent Board (as defined below), (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, (4) any acquisition by an underwriter temporarily holding Company securities pursuant to an offering of such securities, or (5) any acquisition pursuant to a transaction which complies with clauses (1), (2), and (3) of subsection (c) below; or

 

  (b) A change in the composition of the Board such that the individuals who, as of the Effective Date of the Plan, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section, that any individual who becomes a member of the Board subsequent to the effective date of the Plan, whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso), either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or

 

  (c)

Consummation of a reorganization, merger, or consolidation (or similar transaction), a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity (“Corporate Transaction”); in each case, unless immediately following such Corporate Transaction (i) all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the outstanding shares of common stock, and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such

 

3


  corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, twenty percent (20%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors, except to the extent that such ownership existed prior to the Corporate Transaction, and (iii) individuals who were members of the Incumbent Board at the time of the Board’s approval of the execution of the initial agreement providing for such Corporate Transaction will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or

 

  (d) The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

  2.10 Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

 

  2.11 Committee” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee designated by the Board to administer this Plan. The members of the Committee shall be appointed from time to time by and shall serve at the discretion of the Board and shall be composed of not less than two Directors, each of whom is a nonemployee director (within the meaning of Rule 16b-3) and an outside director (within the meaning of Code Section 162(m)) to the extent Rule 16b-3 and Section 162(m) of the Code, respectively, are applicable to the Company and the Plan. If the Committee does not exist or cannot function for any reason, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.

 

  2.12 Company” means Walgreens Boots Alliance, Inc., a Delaware corporation, and any successor thereto as provided in Article 13 herein.

 

  2.13 Covered Employee” means any Employee who is or may become a “Covered Employee,” as defined in Code Section 162(m), and who is designated, either as an individual Employee or class of Employees, by the Committee within the shorter of: (a) ninety (90) days after the beginning of the Performance Period provided the outcome for the Performance Period is substantially uncertain, or (b) twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.

 

  2.14 Director” means any individual who is a member of the Board of Directors of the Company.

 

  2.15 Disability” shall mean disability as determined by the Committee in accordance with standards and procedures similar to those under the applicable Company long-term disability plan, if any. At any time that the Company does not maintain an applicable long-term disability plan, “Disability” shall mean any physical or mental disability which is determined to be total and permanent by a physician selected or relied upon in good faith by the Company.

 

  2.16 Effective Date” has the meaning set forth in Section 1.1.

 

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  2.17 Employee” means any individual performing services for the Company, an Affiliate, or a Subsidiary, including but not limited to officers, and designated as an employee of the Company, an Affiliate, or a Subsidiary on the payroll records thereof. An Employee shall not include any individual during any period he or she is classified or treated by the Company, Affiliate, or Subsidiary as an independent contractor, a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than the Company, Affiliate, or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Company, Affiliate, or Subsidiary during such period. An individual shall not cease to be an Employee in the case of: (a) any leave of absence approved by the Company, or (b) transfers between locations of the Company or between the Company, any Affiliates, or any Subsidiaries. A leave of absence may continue so long as the Employee is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months, or if longer, so long as the Participant retains a right to reemployment with the Company, a Subsidiary, or an Affiliate under an applicable statute or by contract. Neither service as a Director nor payment of a Director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

 

  2.18 Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

 

  2.19 Extraordinary Items” means (a) extraordinary, unusual, and/or nonrecurring items of gain or loss; (b) gains or losses on the disposition of a business; (c) changes in tax or accounting regulations or laws; or (d) the effect of a merger or acquisition, all of which must be identified in the audited financial statements, including footnotes, or Management Discussion and Analysis section of the Company’s annual report.

 

  2.20 Grant Date” means the date an Award is granted to a Participant pursuant to the Plan.

 

  2.21 Participant” means any eligible individual as set forth in Article 4 to whom an Award is granted.

 

  2.22 Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.

 

  2.23 Performance Measures” mean measures as described in Article 7 on which the performance goals are based and which are approved by the Company’s shareholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.

 

  2.24 Performance Period” means the period of time, as determined by the Committee, during which the performance goals must be met in order to determine the degree of payout with respect to an Award; provided, however, that in no event shall such a period be less than twelve (12) consecutive months.

 

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  2.25 Person” has the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.

 

  2.26 Plan” means the Walgreens Boots Alliance, Inc. 2011 Cash-Based Incentive Plan (formerly the Walgreen Co. 2011 Cash-Based Incentive Plan).

 

  2.27 Plan Year” means the Company’s fiscal year which begins September 1 and ends August 31.

 

  2.28 Service” means a Participant’s employment relationship with the Company, an Affiliate, or a Subsidiary.

 

  2.29 Share” means a share of common stock of the Company, $0.01 par value per share.

 

  2.30 Specified Employee” means a “specified employee” within the meaning of Code Section 409A and any specified employee identification policy or procedure of the Company.

 

  2.31 Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, an interest of more than fifty percent (50%) by reason of stock ownership or otherwise.

 

  2.32 Termination of Employment” or “Terminates Employment” means a separation from Service of a Participant, within the meaning of Code Section 409A.

Article 3. Administration

3.1 General. The Committee shall be responsible for administering this Plan, subject to this Article 3 and the other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals.

3.2 Authority of the Committee. Subject to any express limitations set forth in the Plan, the Committee shall have full and exclusive discretionary power and authority to take such actions as it deems necessary and advisable with respect to the administration of the Plan including, but not limited to, the following:

 

  (a) To determine from time to time which of the persons eligible under the Plan shall be granted Awards, when and how each Award shall be granted, what type or combination of types of Awards shall be granted, the provisions of each Award granted (which need not be identical);

 

  (b) To construe and interpret the Plan and Awards granted under it, and to establish, amend, and revoke rules and regulations for its administration. The Committee, in the exercise of this power, may correct any defect, omission, or inconsistency in the Plan or in an Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective;

 

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  (c) To approve forms of Award Agreements for use under the Plan;

 

  (d) To amend the Plan or any Award Agreement as provided in the Plan;

 

  (e) To adopt subplans and/or special provisions applicable to Awards regulated by the laws of a jurisdiction other than and outside of the United States. Such subplans and/or special provisions may take precedence over other provisions of the Plan, but unless otherwise superseded by the terms of such subplans and/or special provisions, the provisions of the Plan shall govern; and

 

  (f) To authorize any person to execute on behalf of the Company any instrument required to effectuate any Award previously granted by the Committee.

3.3 Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company or any Subsidiary or Affiliate or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individuals may have under this Plan. The Committee may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards; (b) determine the size of any such Awards; provided, however, (i) the Committee shall not delegate such responsibilities to any such officer for Awards to be granted to such officer; (ii) the resolution providing such authorization sets forth the total number of Awards such officer(s) may grant; and (iii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated.

3.4 Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of this Plan and all related orders and resolutions of the Board shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Employees, Participants, and their estates and beneficiaries.

Article 4. Eligibility and Participation

4.1 Eligibility. Persons eligible to participate in this Plan include all officers and key Employees of the Company, or those who will become officers or key Employees, whose performance or contribution, as determined by the Committee, benefits or will benefit the Company.

4.2 Actual Participation. Subject to the provisions of this Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of any and all terms permissible by law and the amount of each Award.

Article 5. Awards

5.1 Grant of Cash-Based Awards. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine. The Committee may grant Cash-Based Awards that are payable based on the attainment of a specified performance goal (or goals), with or without additional Service requirements, as established by the Committee in its discretion.

 

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5.2 Value of Cash-Based Awards. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. The Committee may establish a performance goal or goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of such Cash-Based Award (the “Performance-Based Compensation Award”) that will be paid out to the Participant will depend on the extent to which the performance goals are met and additional Service requirements, if any, are met.

5.3 Maximum Cash-Based Awards. The maximum aggregate amount awarded or credited under this Plan with respect to Cash-Based Awards to any one Participant in any one Plan Year may not exceed ten million dollars ($10,000,000), determined as of the date of payout.

5.4 Payment of Cash-Based Awards. Payment, if any, with respect to a Cash-Based Award shall be made in cash, in accordance with the terms of the applicable Award Agreement, and as the Committee determines in accordance with Code Section 409A, to the extent applicable.

5.5 Termination of Employment. The Committee shall determine the extent to which the Participant shall have the right to receive payment for Cash-Based Awards, if any, following termination of the Participant’s employment with or provision of services to the Company or any Affiliate or Subsidiary, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

5.6 Compliance With Section 409A. To the extent applicable, it is intended that the Plan and all Awards hereunder comply with the requirements of Section 409A of the Code, and the Plan and all Award Agreements shall be interpreted and applied by the Committee in a manner consistent with this intent in order to avoid the imposition of any additional tax under Section 409A of the Code. In the event that any provision of the Plan or an Award Agreement is determined by the Committee to not comply with the applicable requirements of Section 409A of the Code, the Committee shall have the authority, pursuant to Section 14.8, to take such actions and to make such interpretations or changes to the Plan or an Award Agreement as the Committee deems necessary to comply with such requirements, provided that the Committee shall act in a manner that is intended to preserve the economic value of the Award to the Participant. In no event whatsoever shall the Company be liable for any additional tax, interest, or penalties that may be imposed on any Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code.

5.7 Compliance With Section 162(m). The Plan shall be interpreted and construed in accordance with Section 162(m) of the Code. A Participant shall be eligible to receive payment with respect to a Performance-Based Compensation Award only to the extent that the performance goals for such Performance Period are achieved and the terms of the Award applied against such performance goals determines that all or a portion of such Participant’s Performance-Based Compensation Award has been earned for the Performance Period. Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance-Based Compensation Award for the Performance Period was achieved and then the amount thereof.

Article 6. Awards Not Assignable or Transferable

Except as expressly authorized by the Committee, during a Participant’s lifetime, his Awards shall be payable only to the Participant. Awards shall not be assignable or transferable other than by will or the

 

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laws of descent and distribution or, subject to the consent of the Committee, pursuant to a domestic relations order entered into by a court of competent jurisdiction; no Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported assignment or transfer in violation of this Article 6 shall be null and void. The Committee may establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable in the event of, or following, the Participant’s death may be provided.

Article 7. Performance Measures

7.1 Performance Measures. The performance goals upon which the payment of a Performance-Based Compensation Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:

 

  (a) Net earnings, net income, or consolidated net income (before or after taxes);

 

  (b) Earnings per Share;

 

  (c) Net sales or revenue growth;

 

  (d) Achievement of balance sheet or income statement objectives;

 

  (e) Gross, pre-tax, post-tax, or net operating profit;

 

  (f) Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);

 

  (g) Cash flow (including, but not limited to, operating cash flow, discounted cash flow, cumulative cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);

 

  (h) Earnings (based on either LIFO or FIFO accounting for inventories), before or after taxes, interest, depreciation, and/or amortization;

 

  (i) Gross, net or operating margins;

 

  (j) Productivity ratios;

 

  (k) Share price (including, but not limited to, growth measures and total shareholder return);

 

  (l) Expense targets;

 

  (m) Costs (including cost reduction or savings);

 

  (n) Performance against operating budget goals;

 

  (o) Operating profit or efficiency;

 

  (p) Unit sales volume;

 

  (q) Market or category share;

 

  (r) Customer satisfaction;

 

  (s) Working capital targets;

 

  (t) Improvements in financial ratings;

 

  (u) Regulatory compliance;

 

  (v) Extent to which strategic and/or business goals are met;

 

  (w) Total return to shareholders equity (including both the market value of the Company’s Shares and dividends thereon); and,

 

  (x) Economic value added or EVA (net operating profit after tax minus the sum of capital multiplied by the cost of capital).

 

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Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate, or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (k) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated payment of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 7; provided, however, that any restrictions on acceleration of payment under Code Section 409A shall be observed.

7.2 Evaluation of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) Extraordinary Items, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Performance-Based Compensation Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.

7.3 Adjustment of Performance-Based Compensation. Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines.

7.4 Committee Discretion. In the event that applicable tax, corporate, or securities laws change to permit the Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base payout on Performance Measures other than those set forth in Section 7.1.

Article 8. Beneficiary Designation

Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant under this Plan, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s death shall be paid to or exercised by the Participant’s executor, administrator, or legal representative.

Article 9. Rights of Participants

9.1 Employment. Nothing in this Plan or an Award Agreement shall: (a) interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries to terminate any Participant’s employment or Service at any time or for any reason not prohibited by law, or (b) confer upon any Participant any right to continue his employment for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or any

 

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Affiliate or Subsidiary and, accordingly, subject to Articles 3 and 11, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.

9.2 Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.

Article 10. Change of Control

10.1 Change of Control of the Company. Notwithstanding any other provision of this Plan to the contrary, the provisions of this Article 10 shall apply in the event of a Change of Control, unless otherwise determined by the Committee in connection with the grant of an Award as reflected in the applicable Award Agreement.

 

  (a) Performance Goals. Upon a Change of Control, all then-outstanding Awards with performance goals yet to be achieved shall be considered to be earned at target values, or at such value otherwise determined by the terms and conditions set forth in the applicable Award Agreement, and payable at the time set forth in the applicable Award Agreement.

 

  (b) Awards With Service Requirements. Upon a Participant’s involuntary termination for a reason other than Cause during the two (2) year period following a Change of Control, any Service requirement applicable to then-outstanding Awards shall be considered satisfied.

Article 11. Amendment and Termination

11.1 Amendment and Termination of the Plan and Award Agreements.

 

  (a) Subject to subparagraph (b) of this Section 11.1 and Section 11.3 of the Plan, the Board may at any time terminate the Plan or an outstanding Award Agreement and the Committee may, at any time and from time to time, amend the Plan or an outstanding Award Agreement.

 

  (b) Notwithstanding the foregoing, no amendment of this Plan shall be made without shareholder approval if shareholder approval is required pursuant to rules promulgated by any stock exchange or quotation system on which Shares are listed or quoted or by applicable U.S. state corporate laws or regulations, applicable U.S. federal laws or regulations, and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

11.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. Subject to Section 7.3, the Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 7.2 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended diminution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan. By accepting an Award under this Plan, a Participant agrees to any adjustment to the Award made pursuant to this Section 11.2 without further consideration or action.

 

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11.3 Awards Previously Granted. Notwithstanding any other provision of this Plan to the contrary, other than Sections 11.2, 11.4, or 14.14, no termination or amendment of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.

11.4 Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Committee may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or an Award Agreement to any present or future law relating to plans of this or similar nature, and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 11.4 to any Award granted under the Plan without further consideration or action.

Article 12. Reporting and Withholding

The Company shall have the power and the right to report income and to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.

Article 13. Successors

All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

Article 14. General Provisions

14.1 Forfeiture Events.

 

  (a) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of employment for Cause, termination of the Participant’s provision of services to the Company, Affiliate, or Subsidiary, violation of material Company, Affiliate, or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, any Affiliate, or Subsidiary.

 

  (b)

If any of the Company’s financial statements are required to be restated resulting from errors, omissions, or fraud, the Committee may (in its sole discretion, but acting in good faith) direct that the Company recover all or a portion of any Award granted or paid to a Participant with respect to any fiscal year of the Company the financial results of which are negatively affected by such restatement. The amount to be recovered from the Participant shall be the amount by which the Award exceeded the

 

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  amount that would have been payable to the Participant had the financial statements been initially filed as restated, or any greater or lesser amount (including, but not limited to, the entire Award) that the Committee shall determine. In no event shall the amount to be recovered by the Company be less than the amount required to be repaid or recovered as a matter of law (including but not limited to amounts that are required to be recovered or forfeited under Section 304 of the Sarbanes-Oxley Act of 2002 or Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010). The Committee shall determine whether the Company shall effect any such recovery: (i) by seeking repayment from the Participant, (ii) by reducing (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement) the amount that would otherwise be payable to the Participant under any compensatory plan, program, or arrangement maintained by the Company, an Affiliate, or any Subsidiary, (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company’s otherwise applicable compensation practices, or (iv) by any combination of the foregoing.

14.2 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

14.3 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

14.4 Requirements of Law. The granting of and settlement of Awards under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

14.5 Employees Based Outside of the United States. Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees and/or Directors, the Committee, in its sole discretion, shall have the power and authority to:

 

  (a) Determine which Affiliates and Subsidiaries shall be covered by this Plan;

 

  (b) Determine which Employees outside the United States are eligible to participate in this Plan;

 

  (c) Modify the terms and conditions of any Award granted to Employees outside the United States to comply with applicable foreign laws;

 

  (d) Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 14.5 by the Committee shall be attached to this Plan document as appendices; and

 

  (e) Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.

 

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Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.

14.6 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, its Subsidiaries, or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company or any Affiliate or Subsidiary under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or the Subsidiary or Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, or the Subsidiary or Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.

14.7 Retirement and Welfare Plans. Neither Awards made under this Plan nor cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both qualified and nonqualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.

14.8 Deferred Compensation.

 

  (a) The Committee may grant Awards under the Plan that provide for the deferral of compensation within the meaning of Code Section 409A. It is intended that such Awards comply with the requirements of Code Section 409A so that amounts deferred thereunder are not includible in income before actual payment and are not subject to an additional tax of twenty percent (20%) at the time the deferred amounts are no longer subject to a substantial risk of forfeiture.

 

  (b) Notwithstanding any provision of the Plan or Award Agreement to the contrary, if one or more of the payments or benefits to be received by a Participant pursuant to an Award would constitute deferred compensation subject to Code Section 409A and would cause the Participant to incur any penalty tax or interest under Code Section 409A or any regulations or Treasury guidance promulgated thereunder, the Committee may reform the Plan and Award Agreement to comply with the requirements of Code Section 409A and to the extent practicable maintain the original intent of the Plan and Award Agreement. By accepting an Award under this Plan, a Participant agrees to any amendments to the Award made pursuant to this Section 14.8(b) without further consideration or action.

14.9 Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.

 

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14.10 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.

14.11 Payments to a Trust. The Committee is authorized to cause to be established a trust agreement or several trust agreements or similar arrangements from which the Committee may make payments of amounts due or to become due to any Participants under the Plan.

14.12 Governing Law. The Plan and each Award Agreement shall be governed by the laws of the state of Illinois, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Illinois to resolve any and all issues that may arise out of or relate to this Plan or any related Award Agreement.

14.13 Delivery and Execution of Electronic Documents. To the extent permitted by applicable law, the Company may: (a) deliver by email or other electronic means (including posting on a Web site maintained by the Company or by a third party under contract with the Company) all documents relating to the Plan or any Award thereunder and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements), and (b) permit Participants to electronically execute applicable Plan documents (including, but not limited to, Award Agreements) in a manner prescribed to the Committee.

14.14 No Representations or Warranties Regarding Tax Effect. Notwithstanding any provision of the Plan to the contrary, the Company, its Affiliates and Subsidiaries, the Board, and the Committee neither represent nor warrant the tax treatment under any federal, state, local, or foreign laws and regulations thereunder (individually and collectively referred to as the “Tax Laws”) of any Award granted or any amounts paid to any Participant under the Plan including, but not limited to, when and to what extent such Awards or amounts may be subject to tax, penalties, and interest under the Tax Laws.

14.15 Indemnification. Subject to applicable requirements of Illinois law and the Delaware General Corporation Law, each individual who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Article 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his/her own behalf, unless such loss, cost, liability, or expense is a result of his/her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

 

15

Exhibit 10.6

WALGREENS BOOTS ALLIANCE, INC. MANAGEMENT INCENTIVE PLAN

(As amended and restated effective December 31, 2014)

Walgreen Co. (“Walgreens”) previously maintained the Walgreen Co. Management Incentive Plan (the “Plan”). On December 31, 2014, a reorganization of Walgreens into a holding company structure (the “Reorganization”) was completed. Pursuant to the Reorganization, Walgreens became a wholly owned subsidiary of a new Delaware corporation named Walgreens Boots Alliance, Inc. (the “Company”). In connection with the Reorganization, the Plan was assumed by the Company and the Plan is hereby amended and restated as set forth herein, effective as of December 31, 2014, in order to reflect such assumption.

 

1. Purpose: The purpose of the Plan is to provide special incentive and motivation to eligible 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 hourly or salaried base compensation 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 other bonuses, 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 Walgreens Boots Alliance, Inc., a Delaware corporation, and, as applicable, subsidiaries and affiliates of Walgreens Boots Alliance, Inc. whose employees are eligible to participate in the Plan.

 

  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 Walgreens Boots Alliance, Inc. 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 Walgreens Boots Alliance, Inc., which runs from September 1 to the following August 31, or such other 12-month period as may be designated by the Committee.

 

  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.

 

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 the Analysis pay band and above or its 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) Target bonus levels (typically expressed as a percentage of Base Salary), threshold and maximum bonus levels (typically expressed as a percentage of the target bonus level), 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.

 

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  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 Chief Financial Officer, in consultation with the Chief Human Resources Officer, will recommend to the Committee, 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.

 

  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.

 

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. Notwithstanding the foregoing, Company management may recommend to the Committee for its approval a discretionary bonus for any terminated Participant if in the judgment of management such a discretionary bonus is warranted.

 

  b. Any Plan Participant whose employment with the Company terminates during a Plan Year due to Retirement, Disability or death shall be eligible for a pro-rated bonus for such Plan Year, based on Base Salary earned while a Participant in the Plan prior to such termination of employment.

 

  c. 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 target bonus 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.

 

  d. 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 (other than a Personal 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.

 

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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 Walgreens Boots Alliance, Inc.

 

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 any 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.

 

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Exhibit 99.1

Walgreens and Alliance Boots Complete Step 2 of Merger

to Form First Global Pharmacy-Led, Health and Wellbeing Enterprise

DEERFIELD, Ill., Dec. 31, 2014 – Walgreen Co. and Alliance Boots GmbH today completed Step 2 of their strategic partnership to form Walgreens Boots Alliance, Inc. (Nasdaq: WBA), finalizing the two-step merger launched in 2012 to create the world’s first global pharmacy-led, health and wellbeing enterprise.

Under a reorganization merger agreement approved earlier this week by Walgreens shareholders, Walgreens is now a wholly owned subsidiary of Walgreens Boots Alliance, Inc. Existing shares of Walgreens common stock were converted automatically into shares of Walgreens Boots Alliance common stock on a one-for-one basis. Walgreens Boots Alliance common stock will trade on the Nasdaq stock exchange under the symbol WBA.

The new global enterprise combines Walgreens, the largest drugstore chain in the USA; Boots, the market leader in European retail pharmacy; and Alliance Healthcare, the leading international wholesaler and distributor. Together, Walgreens Boots Alliance spans more than 25* countries, with over 12,800* stores, over 370,000* employees and more than 340* pharmaceutical distribution centers serving more than 180,000† pharmacies and other points of care. The merger also brings together a unique brand portfolio of outstanding retail, wholesale, service and product brands, alongside the world’s largest pharmaceutical wholesale and distribution network. Walgreens Boots Alliance will be domiciled in the United States and headquartered in Deerfield, Ill.

“The creation of Walgreens Boots Alliance is a crucial milestone for both Walgreens and Alliance Boots, combining iconic brands, complementary geographic footprints, shared values and a heritage of trusted health care services through pharmaceutical wholesaling and community pharmacy care, each dating back more than 100 years,” said Greg Wasson, who is retiring as Walgreens president and CEO after completion of the merger. “The combination instantly establishes a groundbreaking and game-changing new company that will help people across the world lead healthier and happier lives as we advance our industry and the delivery of retail health, wellbeing and beauty products and services worldwide.”


Stefano Pessina, who will become acting CEO of Walgreens Boots Alliance after Wasson’s retirement, said, “The combined strength, scale and expertise of Walgreens Boots Alliance creates a unique and unparalleled global leader. We have forged a worldwide healthcare champion, which will provide innovative ways to address global health and wellbeing challenges by helping to shape retail pharmacy, health care and pharmaceutical wholesale markets around the world. Becoming global gives us the ability to generate significant and sustainable benefits for local markets and all stakeholders, from consumers and patients, to pharmacists, suppliers, business partners and, of course, our employees.”

Walgreens Boots Alliance Chairman Jim Skinner said, “On behalf of the board, I would like to express our gratitude to Greg for his outstanding vision, work and commitment towards creating this new company. I am looking forward to working closely with Stefano and the senior management team of Walgreens Boots Alliance as we start this exciting mission of bringing better health and wellbeing to the world.”

Overseen by an international management team, Walgreens Boots Alliance comprises three Divisions: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. In addition, the company operates a number of global cross divisional functions, including Global Brands and a Global Pharmacy Market Access group.

Walgreens and Alliance Boots announced their two-step strategic transaction in June 2012. They completed Step 1 in August 2012, when Walgreens invested approximately $4.0 billion in cash and 83.4 million shares of its common stock in exchange for a 45 percent equity ownership stake in Alliance Boots. With today’s announcement of the completion of Step 2, Walgreens has acquired the remaining 55 percent of Alliance Boots in exchange for approximately $5.3 billion in cash and 144.3 million shares of stock.

 

2


Since the strategic partnership began in 2012, Walgreens and Alliance Boots have achieved several significant goals while preparing for the merger. These include senior leadership exchanges, successful synergy generation, a joint own-brand sourcing program in Asia and the sharing of best practices and innovative technologies. In addition, the companies launched No7 and other Boots product brands in Walgreens stores across the United States.

The completion of this strategic transaction marks a historic milestone for both companies with roots going back more than a century. Walgreens has grown from a single corner in Chicago in 1901, to the best corners in America. Alliance Boots has grown from two European businesses: Boots the Chemist, established as a community pharmacy in Nottingham, UK in 1849 and now an international leader in health and beauty retailing; and Alliance Healthcare, which developed from its distribution roots in European countries in the 19th century to become an international leader in pharmaceutical wholesaling. In addition, more than 6,000 independent pharmacists across eight European countries are benefitting as members of its Alphega Pharmacy network.

Today, Walgreens Boots Alliance (with its equity method investments) has a retail pharmacy network spanning the United States and Europe as well as key markets in Latin America and Asia, with growth opportunities in many developing and underserved markets across the world.

About Walgreens Boots Alliance

Walgreens Boots Alliance (Nasdaq: WBA) is the first global pharmacy-led, health and wellbeing enterprise in the world.

The company was created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two leading companies with iconic brands, complementary geographic footprints, shared values and a heritage of trusted health care services through pharmaceutical wholesaling and community pharmacy care, dating back more than 100 years.

 

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The company employs over 370,000 people and has a presence in more than 25* countries; it is the largest retail pharmacy, health and daily living destination in the USA and Europe. Including its equity method investments, Walgreens Boots Alliance is the global leader in pharmacy-led, health and wellbeing retail with over 12,800* stores in 11* countries. The company includes the largest global pharmaceutical wholesale and distribution network with over 340* distribution centers delivering to more than 180,000† pharmacies, doctors, health centers and hospitals each year in 19* countries. In addition, Walgreens Boots Alliance is the world’s largest purchaser of prescription drugs and many other health and wellbeing products.

Its portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7 and Botanics. More company information is available at www.walgreensbootsalliance.com.

 

* As at 30 November 2014 including equity method investments on a pro-forma basis excluding Alliance Healthcare Italia which ceased to be an equity method investment of Alliance Boots in December 2014
For year ended 30 November 2014 including equity method investments on a pro-forma basis excluding Alliance Healthcare Italia which ceased to be an equity method investment of Alliance Boots in December 2014

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Contacts:

Media contacts

USA

Michael Polzin, +1 847 315 2935

International

Laura Vergani, +44 (0)207 980 8585

James Murgatroyd / Claire Scicluna, Finsbury, +44 (0)207 251 3801

Investor Relations contacts

Ashish Kohli, +1 847 315 3810

Gerald Gradwell, +44 (0)207 980 8527

 

4


Cautionary Note Regarding Forward-Looking Statements

Statements in this release that are not historical are forward-looking statements for purposes of applicable securities laws. Words such as “expect,” “likely,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “target,” “continue,” “sustain,” “synergy,” “on track,” “headwind,” “tailwind,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” variations of such words and similar expressions are intended to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that could cause actual results to vary materially from those indicated, including, but not limited to: those relating to the Purchase and Option Agreement, dated June 18, 2012, as amended on August 5, 2014, by and among Walgreens, Alliance Boots GmbH and AB Acquisitions Holdings Limited, and other agreements relating to the strategic partnership between Alliance Boots GmbH and Walgreens, the arrangements and transactions contemplated thereby and their possible effects, and the holding company reorganization; the risk of a material adverse change that the Company may suffer as a result of disruption or uncertainty relating to the transactions; risks associated with changes in economic and business conditions generally or in the markets in which we participate; risks associated with new business areas and activities; risks associated with acquisitions, joint ventures, strategic investments and divestitures, including those associated with cross-border transactions; risks associated with governance and control matters; risks relating to the Company’s ability to successfully integrate operations, systems and employees, realize anticipated synergies and achieve anticipated financial results, tax and operating results in the amounts and at the times anticipated; the potential impact of announcement of the transactions or consummation of the transactions on relationships and terms, including with employees, vendors, payers, customers and competitors; the amounts and timing of costs and charges associated with our optimization initiatives; our ability to realize expected savings and benefits in the amounts and at the times anticipated; changes in management’s assumptions; our commercial agreement with AmerisourceBergen, the arrangements and transactions contemplated by our framework agreement with AmerisourceBergen and their possible effects; risks associated with equity investments in AmerisourceBergen including market fluctuations and whether the warrants to invest in AmerisourceBergen will be exercised and the ramifications thereof; the occurrence of any event, change or other circumstance that could give rise to the termination, cross-termination or modification of any of the transaction documents; the risks associated with transitions in supply arrangements; risks that legal proceedings may be initiated related to the transactions; the amount of costs, fees, expenses and charges incurred related to the transactions; the ability to retain key personnel; changes in financial markets, interest rates and foreign currency exchange rates; the risks associated with international business operations; the risk of unexpected costs, liabilities or delays; changes in network participation and reimbursement and other terms; risks of inflation in the costs of goods, including generic drugs; risks associated with the operation and growth of our customer loyalty program; risks associated with outcomes of legal and regulatory matters, and changes in legislation, regulations or interpretations thereof; and other factors described in Item 1A (Risk Factors) of our most recent Form 10-K, as amended, which is incorporated herein by reference, and in other documents that we file or furnish with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, the Company does not undertake, and expressly disclaims, any duty or obligation to update publicly any forward-looking statement after the date of this release, whether as a result of new information, future events, changes in assumptions or otherwise.

 

5

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial statements and related notes present our historical condensed consolidated balance sheet and statements of earnings adjusted to reflect (i) the completion of the reorganization of Walgreen Co. (“Walgreens”) into a holding company structure (the “Reorganization”), pursuant to a merger (the “Reorg Merger”) in which a newly formed Illinois corporation and wholly owned subsidiary of Walgreens Boots Alliance, Inc., a Delaware corporation (“Walgreens Boots Alliance”) (which in turn, prior to the Reorganization was a wholly owned subsidiary of Walgreens), merged with and into Walgreens with Walgreens surviving the Reorg Merger as a wholly owned subsidiary of Walgreens Boots Alliance, (ii) the acquisition of the remaining 55% of the issued and outstanding share capital of Alliance Boots GmbH (“Alliance Boots”), in exchange for £3.133 billion in cash and 144.3 million shares of Walgreens Boots Alliance’s common stock (the “Second Step Transaction”) and (iii) certain related financing transactions (together with the Reorg Merger and the Second Step Transaction, referred to as the “Pro Forma Transaction”). Unless otherwise stated or the context otherwise requires, references in this section to “we,” “us,” “our,” and the “Company” refer, prior to the completion of the Reorg Merger, to Walgreens and its consolidated subsidiaries, which does not include Alliance Boots, and, following the completion of the Reorg Merger, to Walgreens Boots Alliance and its consolidated subsidiaries. The purchase consideration is subject to adjustment under certain circumstances. The pro forma adjustments related to the Pro Forma Transaction, reflect the impact of the following:

 

    the completion of the Reorg Merger;

 

    acquisition of the remaining 55% interest in Alliance Boots through the Second Step Transaction. On August 5, 2014, we exercised the right to acquire the remaining 55% interest in Alliance Boots (the “Call Option”), pursuant to the Purchase and Option Agreement dated June 18, 2012, by and among the Company, Alliance Boots and AB Acquisitions Holdings Limited, as amended (the “Purchase and Option Agreement”);

 

    the elimination of our equity earnings in Alliance Boots, initial 45% equity method investment in Alliance Boots and intercompany transactions;

 

    the impact of the preliminary purchase price allocation to the underlying assets and liabilities acquired;

 

    the impact of acquiring the remaining 27.5% effective interest in Walgreens Boots Alliance Development GmbH (“WBAD”), a 50/50 global sourcing joint venture established in 2012 by us and Alliance Boots, that we consolidate for financial reporting purposes;

 

    the conversion of the Alliance Boots financial information from International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) to generally accepted accounting principles in the United States (“US GAAP”) and the translation of British pounds sterling to US dollars; and

 

    the impact of drawing on the short-term commercial paper facility and the new unsecured term loan from the related private financing of $3.5 billion to fund the cash portion of the Second Step Transaction, repayment of our short-term borrowings due in March 2015 and for general corporate purposes.

The unaudited pro forma condensed consolidated balance sheet gives effect to the Pro Forma Transaction as if it had occurred on November 30, 2014. Alliance Boots results are presented on a three-month lag. The unaudited pro forma condensed consolidated statements of earnings for the three months ended November 30, 2014 and the year ended August 31, 2014 give effect to the Pro Forma Transaction as if it had occurred on September 1, 2013, the first day of our 2014 fiscal year.


The unaudited pro forma condensed consolidated financial information included herein was derived from our historical financial statements and those of Alliance Boots and is based on certain assumptions that we believe to be reasonable, which are described in the notes. We have not completed a final valuation analysis necessary to determine the fair values of all of Alliance Boots’ assets and liabilities. As described in the footnotes to the pro forma condensed consolidated financial statements, the unaudited pro forma condensed consolidated balance sheet includes a preliminary allocation of the purchase price to reflect the fair value of those assets and liabilities. Until the completion of the Pro Forma Transaction, access to the information of Alliance Boots has been limited to the stated rights in the Shareholders’ Agreement, dated August 2, 2012, by and among us, Alliance Boots and AB Acquisitions Holdings Limited, governing, among other things, certain rights of the shareholders of Alliance Boots. As more information becomes available, we will complete a more detailed review of the Alliance Boots preliminary allocation of the purchase price to reflect the fair value of those assets and liabilities. As a result of that review, more information could become available that, when analyzed, could have a material impact on the combined financial statements. Further, changes in certain variables between November 30, 2014, the date of the pro forma condensed balance sheet, and the actual closing date of the Pro Forma Transaction, such as (a) our stock price as of December 22, 2014 (the last practicable date prior to the date of this document) of $74.27; (b) the British pound sterling to US dollar exchange rate as of December 22, 2014 of $1.56 to £1.00; or (c) the composition or value of the assets and liabilities acquired may have a material impact on the unaudited pro forma condensed consolidated financial statements presented herein.

Our fiscal year ends on August 31 and the Alliance Boots fiscal year ends on March 31. As the fiscal year-ends differ by more than 93 days, financial information for Alliance Boots for the three months ended August 31, 2014 and the year ended May 31, 2014 has been used in preparation of the unaudited pro forma condensed consolidated financial statements and has been presented using a three-month lag. Also, the effects of Galenica Ltd. (“Galenica”) and WBAD on the statements of earnings and balance sheet have been excluded from the Alliance Boots financial information for the periods presented.

The historical financial information of Alliance Boots was prepared in accordance with IFRS and prepared in British pounds sterling. The unaudited pro forma condensed financial statements include adjustments to convert the financial statements of Alliance Boots from IFRS to US GAAP and to translate the British pounds sterling amounts into US dollars. Our management has reclassified certain line items from the financial statements of Alliance Boots to conform to the presentation of our financial statements.

The unaudited pro forma condensed consolidated financial statements reflect adjustments to give effect to pro forma events that are directly attributable to the Pro Forma Transaction, factually supportable, and with respect to the statements of earnings, are expected to have a continuing impact on the combined results. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed consolidated financial statements. In addition, the unaudited pro forma condensed consolidated financial statements and notes thereto should be read in conjunction with (1) our audited consolidated financial statements for the year ended August 31, 2014, and the notes relating thereto, (2) our unaudited condensed consolidated financial statements for the three months ended November 30, 2014, and the notes relating thereto, (3) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q, for the three month period ended November 30, 2014, and (4) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 31, 2014, as amended, and (5) the audited consolidated financial statements of Alliance Boots for the years ended March 31, 2014, 2013 and 2012, and the notes relating thereto, contained in our Current Report on Form 8-K as filed with the Commission on May 15, 2014, each of which is incorporated by reference into this proxy statement/prospectus.

The unaudited pro forma condensed consolidated financial information is not intended to represent or be indicative of what the combined company’s financial position or results of operations actually would have been had the Pro Forma Transaction been completed as of the dates indicated. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial position or operating results of the combined company. The unaudited pro forma condensed consolidated statements of earnings do not include the impacts of any revenue, cost or other operating synergies that may result from the acquisition of the remaining 55% interest in Alliance Boots or any related one-time Pro Forma Transaction costs related to the Second Step Transaction. The unaudited pro forma condensed consolidated statements of earnings include recognized synergy

 

2


benefits achieved from the Company’s initial 2012 acquisition of 45% of the share capital of Alliance Boots (the “First Step Acquisition”) as recorded in each company’s financial results for the periods presented. One-time Pro Forma Transaction related costs of $47 million for financing, legal and other professional services were incurred through November 30, 2014 and additional costs are expected throughout fiscal 2015.

 

3


UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Walgreens Boots Alliance and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of November 30, 2014

(In US $ millions)

 

     Walgreen
Co.
     Alliance
Boots GmbH
(Note 3)
     Effects
of the
Transaction
(Note 4)
    Effects of
the Debt
Borrowings
(Note 4i)
    Pro Forma
Consolidated
 

Assets

            

Current Assets:

            

Cash and cash equivalents

   $ 12,861       $ 813       $ (4,887 )(4a)    $ (7,144   $ 1,643   

Accounts receivable, net

     3,579         4,055         (39 )(4j)      —          7,595   

Inventories

     6,518         3,486         51 (4g)      —          10,054   
     —           —           (1 )(4j)      —       

Other current assets

     322         730         (27 )(4g)      (3     994   
     —           —           (28 )(4j)      —       
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total Current Assets

     23,280         9,084         (4,931     (7,147     20,286   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Non Current Assets:

            

Property and equipment, at cost, less accumulated depreciation and amortization

     12,103         3,943         (325 )(4g)      —          15,721   

Equity investment in Alliance Boots

     7,335         —           (7,335 )(4d)      —          —     

Goodwill

     2,356         —           15,483 (4h)      —          17,839   
     —           8,287         (8,287 )(4f)      —       

Intangible assets, net

     1,122         8,589         1,545 (4g)      —          11,256   

Other non-current assets

     2,416         1,216         80 (4g)      (45     3,667   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total Non-Current Assets

     25,332         22,035         1,161        (45     48,483   
  

 

 

    

 

 

    

 

 

     

Total Assets

   $ 48,612       $ 31,119       $ (3,770   $ (7,192   $ 68,769   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Liabilities & Equity Current Liabilities:

            

Short-term borrowings

   $ 774       $ 1,688       $ —        $ (1,418   $ 3,794   
     —           —           —          (750  
     —           —           —          3,500     

Trade accounts payable

     5,189         6,029         —          —          11,218   

Accrued expenses and other liabilities

     3,596         1,453         (68 )(4j)      (14     4,987   
     —           —           20 (4k)      —       

Income taxes

     318         154         —          —          472   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total Current Liabilities

     9,877         9,324         (48     1,318        20,471   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Non-Current Liabilities:

            

Long-term debt

     13,756         8,476         —          (8,476     13,756   

Deferred income taxes

     1,131         1,365         244 (4g)      (5     2,735   

Other non-current liabilities

     3,081         608         —          —          3,689   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total Non-Current Liabilities

     17,968         10,449         244        (8,481     20,180   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Commitments and Contingencies Equity:

            

Preferred stock

     —           —           —          —          —     

Common stock

     80         —           11 (4b)      —          91   
     —           1,791         (1,791 )(4e)      —       

 

4


     Walgreen
Co.
    Alliance
Boots GmbH
(Note 3)
    Effects
of the
Transaction
(Note 4)
    Effects of
the Debt
Borrowings
(Note 4i)
    Pro Forma
Consolidated
 

Paid-in capital

     1,179        —          10,709 (4b)      —          8,649   
     —          —          (3,239 )(4c)      —       
     —          3,625        (3,625 )(4e)      —       

Employee stock loan receivable

     (4     —          —          —          (4

Retained earnings

     22,717        —          (139 )(4d)      (3     22,529   
     —          5,714        (5,714 )(4e)      14     
     —          —          (20 )(4k)      5     
     —          —          —          (45  

Accumulated other comprehensive income/(loss)

     222        —          (42 )(4d)      —          180   
     —          (68     68 (4e)      —       

Treasury stock, at cost

     (3,558     —          —          —          (3,558
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Shareholders Equity

     20,636        11,062        (3,782     (29     27,887   

Noncontrolling interests

     131        284        (68 )(4g)      —          231   
     —          —          (116 )(4c)      —       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Equity

     20,767        11,346        (3,966     (29     28,118   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities & Equity

   $ 48,612      $ 31,119      $ (3,770   $ (7,192   $ 68,769   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

 

5


Walgreens Boots Alliance and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Earnings

For the Three Months Ended November 30, 2014

(In US $ millions, except for per share data)

 

     Walgreen
Co.
     Alliance
Boots GmbH
(Note 3)
     Effects of the
Transaction
(Note 5)
    Effects of
the Debt
Borrowings
(Note 5b)
    Pro Forma
Consolidated
 

Net sales

   $ 19,554       $ 9,127       $ (27 )(5g)    $ —        $ 28,654   

Cost of sales

     14,258         7,106         (26 )(5g)      —          21,338   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Gross Profit

     5,296         2,021         (1     —          7,316   

Selling, general and administrative expenses

     4,456         1,644         23 (5c)      —          6,105   
     —           —           (18 )(5d)      —       

Equity earnings in Alliance Boots

     151         —           (151 )(5a)      —          —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating Income

     991         377         (157     —          1,211   

Interest expense, net

     55         108         —          (122     117   
     —           —           —          75     
     —           —           —          1     

Other (expense)/income

     199         95         —          —          294   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Earnings Before Income Tax Provision and Share of Post-Tax Earnings From Associates and Joint Ventures

     1,135         364         (157     46        1,388   

Income tax provision

     299         55         (48 )(5a)      24        311   
     —           —           (5 )(5c)      (28  
     —           —           7 (5f)      —       
     —           —           7 (5h)      —       

Share of post-tax earnings from associates and joint ventures

     —           57         —          —          57   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Net Earnings

     836         366         (118     50        1,134   

Net earnings attributable to noncontrolling interests

     27         15         (26 )(5e)      —          6   
     —           —           (10 )(5i)      —       
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Net earnings attributable to Walgreens/Walgreens Boots Alliance

   $ 809       $ 351       $ (82   $ 50      $ 1,128   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Net earnings per common share attributable to Walgreens/Walgreens Boots Alliance—basic

     0.86                 (5j)        1.03   

Net earnings per common share attributable to Walgreens/Walgreens Boots Alliance—diluted

     0.85                 (5j)        1.03   

Average shares outstanding

     945.8            144.3          1,090.1   

Dilutive effect of stock options

     10.2            —            10.2   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Average dilutive shares

     956.0         —           144.3        —          1,100.3   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

 

6


Walgreens Boots Alliance and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Earnings

For the Year Ended August 31, 2014

(In US $ millions, except for per share data)

 

     Walgreen
Co.
    Alliance
Boots GmbH
(Note 3)
     Effects of the
Transaction
(Note 5)
    Effects of
the Debt
Borrowings
(Note 5b)
    Pro Forma
Consolidated
 

Net sales

   $ 76,392      $ 37,260       $ (62 )(5g)    $ —        $ 113,590   

Cost of sales

     54,823        29,345         (69 )(5g)      —          84,099   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Gross Profit

     21,569        7,915         7        —          29,491   

Selling, general and administrative expenses

     17,992        6,255         92 (5c)      —          24,308   
     —          —           (29 )(5d)      —       
     —          —           (2 )(5g)      —       

Equity earnings in Alliance Boots

     617        —           (617 )(5a)      —          —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Operating Income

     4,194        1,660         (671     —          5,183   

Interest expense, net

     156        473         —          (417     573   
     —          —           —          356     
     —          —           —          5     

Other (expense)/income

     (481     333         —          —          (148
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Earnings Before Income Tax Provision and Share of Post-Tax Earnings From Associates and Joint Ventures

     3,557        1,520         (671     56        4,462   

Income tax provision

     1,526        22         (205 )(5a)      96        1,331   
     —          —           (18 )(5c)      (134  
     —          —           35 (5f)      (2  
     —          —           11 (5h)      —       

Share of post-tax earnings from associates and joint ventures

     —          24         —          —          24   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net Earnings

     2,031        1,522         (494     96        3,155   

Net earnings attributable to noncontrolling interests

     99        73         (99 )(5e)      —          30   
     —          —           (43 )(5i)      —       
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net earnings attributable to Walgreens/Walgreens Boots Alliance

   $ 1,932      $ 1,449       $ (352   $ 96      $ 3,125   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net earnings per common share attributable to Walgreens/Walgreens Boots Alliance—basic

   $ 2.03                (5j)        2.85   

Net earnings per common share attributable to Walgreens/Walgreens Boots Alliance—diluted

   $ 2.00                (5j)        2.82   

Average shares outstanding

     953.1           144.3          1,097.4   

Dilutive effect of stock options

     12.1           —            12.1   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Average dilutive shares

     965.2        —           144.3        —          1,109.5   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited pro forma condensed consolidated financial statements.

 

7


Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

(Amounts are Presented in US $ Millions, unless otherwise stated)

Note 1: Basis of preparation

The unaudited pro forma condensed consolidated financial statements and related notes present our historical consolidated balance sheet and statements of earnings adjusted to reflect our acquisition of the remaining 55% of the issued and outstanding share capital of Alliance Boots, in exchange for £3.133 billion in cash (approximately $4.9 billion at the December 22, 2014 spot rate of $1.56 to £1.00) and 144.3 million common shares with a value of $10.7 billion based on the December 22, 2014 (the last practicable date prior to the date of this document) closing price of $74.27. The unaudited pro forma condensed consolidated financial statements also present the effects of drawing on the short-term commercial paper facility and the new unsecured term loan for $3.5 billion to fund the cash portion of the Second Step Transaction, repayment of our short-term borrowings due in March 2015 and for general corporate purposes. Further, changes in certain variables between November 30, 2014, the date of the pro forma condensed balance sheet, and the actual closing date of the Pro Forma Transaction may have a material impact on the unaudited pro forma condensed consolidated financial statements presented herein.

Galenica

The Alliance Boots investment in Galenica, a Swiss healthcare group, is excluded from the Alliance Boots financial statements as this investment was held solely for the benefit of other Alliance Boots shareholders and was distributed to such other equity shareholders, other than us, in May 2013 and does not form a part of the Pro Forma Transaction.

Impact of Alliance Boots Acquisition

As part of the Pro Forma Transaction, we will acquire the remaining 55% interest in Alliance Boots and increase our interest in WBAD to 100%. Currently, WBAD is a 50/50 joint venture between us and Alliance Boots. Because we own a 50% direct interest and an additional indirect ownership interest through our 45% ownership of Alliance Boots, the financial results of WBAD are fully consolidated into our condensed consolidated financial statements with the remaining 27.5% effective interest being recorded as noncontrolling interest. After the Pro Forma Transaction, we will own the additional 27.5% effective interest in WBAD through our 100% ownership of Alliance Boots. The Alliance Boots statements of earnings and balance sheet are presented without WBAD.

Because we currently consolidate WBAD, the acquisition of the additional 27.5% effective interest is accounted for as an equity transaction. The difference between the consideration allocated to the acquired noncontrolling interest compared to the previous carrying value of the noncontrolling interest is recognized as an adjustment to paid-in capital.

The assets acquired and liabilities assumed of Alliance Boots are recognized at their fair values as if the acquisition occurred on November 30, 2014. Under ASC 805 Business Combinations, the previously held 45% equity ownership interest in Alliance Boots is remeasured at fair value and any difference between the fair value and the carrying value of the equity interest held is recognized as a gain or loss in the statement of earnings. The one-time gain or loss resulting from the Pro Forma Transaction has not been included in the unaudited pro forma condensed statements of earnings as it will not have a continuing effect on Walgreens Boots Alliance, but will be recognized in Walgreens Boots Alliance’s financial statements on the acquisition date.

Pending and recently completed transactions

The unaudited pro forma condensed consolidated financial statements do not include any impact of Alliance Boots’ 12% investment in Nanjing Pharmaceutical Company Limited for $91 million (RMB560 million) on December 1, 2014. In August 2014, Alliance Boots acquired Farmacias Ahumada S.A. for $579 million (£347 million) and the remaining 50% of the UniDrug Distribution Group for $110 million (£66 million). The Alliance Boots statement of earnings for the three months ended August 2014 includes less than one month of results from the two acquisitions. As part of the UniDrug Distribution Group acquisition, the previously held equity investment in UniDrug Distribution Group was compared to its fair value and recorded a one-time gain of £32 million. None of the transactions are considered significant to the unaudited pro forma condensed consolidated financial statements.

 

8


Note 2: Significant accounting policies

The unaudited pro forma condensed consolidated financial information has been compiled using the significant accounting policies as set forth in our audited consolidated financial statements for the year ended August 31, 2014. The accounting policies of Alliance Boots are similar in most material respects to those of ours. Access to the information of Alliance Boots has been limited to the stated rights in the Shareholders’ Agreement, dated August 2, 2012, by and among us, Alliance Boots and AB Acquisitions Holdings Limited, governing, among other things, certain rights of the shareholders of Alliance Boots. Upon completion of the acquisition, or as more information becomes available, we will complete a more detailed review of the Alliance Boots accounting policies. As a result of that review, differences could be identified between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements. Adjustments were made to convert the financial statements of Alliance Boots from IFRS to US GAAP, as applied by us, and conform to our classification of certain assets and liabilities and translate the British pounds sterling amounts into US dollars, as set out further in Note 3. Apart from these adjustments, we are not aware of any differences that would have a material impact on the combined financial statements. For purposes of the unaudited pro forma condensed consolidated financial information, adjustments arising as part of the acquisition and financing arrangements are described in Notes 4 and 5.

Note 3: IFRS to US GAAP adjustments and foreign currency translation

The historical financial information of Alliance Boots was prepared in accordance with IFRS and prepared in British pounds sterling. The Alliance Boots financial information reflected in the pro forma condensed consolidated financial information has been adjusted for differences between IFRS and US GAAP and translated from the British pounds sterling amounts into US dollars. In addition, certain balances were reclassified from the Alliance Boots historical financial statements so that their presentation would be consistent with ours.

Unaudited Pro Forma Alliance Boots Balance Sheet presented in US GAAP as of August 31, 2014

The following table reflects the adjustments made to the Alliance Boots unaudited pro forma condensed consolidated balance sheet as of August 31,