exhibit_108.htm


    WALGREEN
CO.

    EXECUTIVE
STOCK OPTION PLAN - STOCK OPTION AGREEMENT

    


    Employee
(the "Optionee"):  Alan G. McNally

    Social
Security No.:  «SSN»

    Date of
Grant:  October 10, 2008

    Expiration
Date:  October 10, 2018

    Number of
Shares Optioned:  120,000

    Option
Price Per Share of Common Stock:  $23.22

    


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

    


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

    


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

    


    One half
of the Number of Shares subject to this stock option shall become vested as of
the earlier of the date a new Chief Executive Officer begins employment with the
Company and the six-month anniversary of the Date of Grant.  If the
Optionee continues to serve as Chief Executive Officer beyond the six-month
anniversary of the Date of Grant, then the other half of the Number of Shares
subject to this stock option shall become vested over the course of the ensuing
12-month period of continued employment as Chief Executive Officer, as
follows:  One twelfth of such remaining Number of Shares shall become
vested as of the end of each full month following the six-month anniversary of
the Date of Grant.  The foregoing is subject to ability of the
Committee to waive or accelerate such vesting restrictions as provided
above.

    


    3.          Retirement.  If
without having fully exercised this stock option, the Optionee retires, then the
Optionee's right to exercise this stock option shall terminate upon the earlier
of the Expiration Date or a date which is sixty (60) months following the
Optionee's retirement.  For purposes of this section, retirement shall
be defined as a cessation of employment or Board membership in good standing,
and the applicable retirement date shall be defined as the later of the
Optionees termination of employment or retirement from the Board of
Directors.  Any portion of this stock option that is not vested as of
the Optionee’s retirement date shall be forfeited, subject to ability of the
Committee to waive or accelerate such vesting restrictions as provided
above.

    


    4.         Disability.  If,
without having fully exercised this stock option, the Optionee's employment or
Board membership with the Company is terminated due to total and permanent
disability (as determined by the Compensation Committee of the Board of
Directors or its designee), then the Optionee's right to exercise this stock
option shall terminate upon the earlier of the Expiration Date or a date which
is sixty (60) months following the date of termination of employment or Board
membership.  Any portion of this stock option that is not vested at
that time shall be forfeited, subject to ability of the Committee to waive or
accelerate such vesting restrictions as provided above.

    


    5.         Death.  If,
without having fully exercised this stock option, the Optionee shall die while
in the employ of the Company or while continuing to serve on the Board of
Directors, then this stock option shall be exercisable by the executor or
administrator of the Optionee's estate or by such person or persons who shall
have acquired the Optionee's rights hereunder by bequest or inheritance or by
reason of his death, for a period ending on the earlier of the Expiration Date
or sixty (60) months following the date of the Optionee's death.  Any
portion of this stock option that is not vested as of the Optionee’s death shall
be forfeited, subject to ability of the Committee to waive or accelerate such
vesting restrictions as provided above.

    


    6.         Other Termination of
Employment.  If, without having fully exercised this stock
option, the Optionee ceases to serve as an employee or Board member for reasons
other than the Optionee’s retirement (as defined in Section 3 above), death, or
total and permanent disability (as defined in Section 4 above), then the
Optionee's right to exercise this stock option shall terminate as of the later
of the termination of his employment or Board membership, subject to the right
of the Compensation Committee of the Board of Directors to extend the exercise
period of this stock option.

    


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

    


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

    


    9.         Limited
Transferability.  This stock option is nonassignable and not
transferable other than by beneficiary designation, by will or by the laws of
descent and distribution.  During the lifetime of the Optionee this
stock option and all rights granted hereunder shall be exercisable only by the
Optionee.  Notwithstanding the foregoing, transfers by the Optionee of
options shall be recognized and given effect if such options are transferred to
a grantor trust established pursuant to Sections 674, 675, 676 and 677 of the
Internal Revenue Code of 1986, as amended, for the benefit of the Optionee or a
person or persons who are members of the Optionee's immediate family (or for the
benefit of their descendants); provided that any such transfer has not been
disclaimed prior to the exercise of such options by the trustee of such trust,
and the trustee of such trust certifies to the Compensation Committee of the
Board of Directors or its designee that such transfer occurred without any
payment of consideration for such transfer.

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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