Walgreens 2014 Annual Report Download - page 34

each of the SP Investors, KKR Investors and the Other Investors is expected to significantly increase following
completion of the second step transaction. AB Acquisitions may not distribute any of the shares of Walgreens
Boots Alliance (or Walgreens, as applicable) common stock it will receive on completion of the second step
transaction to its investors until the date that is nine months after the completion of the second step transaction
and, unless the SP Investors and the KKR Investors have elected to put certain guarantees in place, may not
distribute more than 10% of such shares until the date that is twelve months after the completion of the second
step transaction.
For so long as the SP Investors and the KKR Investors continue to meet certain beneficial ownership thresholds
and subject to certain other conditions, the SP Investors and the KKR Investors, respectively, will each be
entitled to designate one nominee to our Board of Directors for inclusion in the Company’s slate of directors (the
SP Investor Designee and the KKR Investor Designee, respectively). Mr. Pessina currently serves as the SP
Investor Designee and Mr. Dominic Murphy currently serves as the KKR Investor Designee. Under the Company
Shareholders Agreement, the SP Investors and the KKR Investors have agreed to, for so long as the SP Investors
have the right to designate the SP Investor Designee (or Mr. Pessina continues to serve as Executive Chairperson
or Chief Executive Officer of Alliance Boots) and for so long as the KKR Investors have the right to designate
the KKR Investor Designee, respectively, vote all of their shares of common stock in accordance with our Board
of Directors’ recommendation on matters submitted to a vote of the Company’s shareholders (including with
respect to the election of directors). Whether or not subject to these voting provisions, the SP Investors’ and/or
the KKR Investors’ significant interest in our common stock could be determinative in matters submitted to a
vote by our shareholders.
The influence of the SP Investors and/or the KKR Investors could result in Walgreens Boots Alliance (or
Walgreens, as applicable) taking actions that some other shareholders do not support or failing to take actions
that some other shareholders support.
Shares issued to significant Alliance Boots shareholders will become available for future sale after the
lapse of contractual transfer restrictions.
We issued approximately 83.4 million shares of our common stock to Alliance Boots shareholders in connection
with the first step transaction and, if the second step transaction is completed, we will issue an additional
144.3 million shares of common stock, subject to certain potential adjustments, as partial consideration in that
transaction. It is expected that, following the closing of the second step transaction, AB Acquisitions would
distribute the cash and shares received by it in connection with the transaction to the SP Investors, the KKR
Investors and the Other Investors, subject to the timing considerations described in the preceding risk factor.
Pursuant to the Company Shareholders Agreement, certain significant Alliance Boots shareholders, including the
SP Investors and the KKR Investors, are subject to various contractual restrictions that generally prohibit them
from transferring their shares for specified time periods. With respect to the shares issued in the first step
transaction in August 2012, and subject to certain permitted exceptions, (i) the SP Investors cannot transfer their
shares until the first to occur of the closing of the second step transaction or Mr. Pessina’s earlier death or
permanent disability, and (ii) the KKR Investors cannot transfer their shares until the closing of the second step
transaction. If the second step transaction is completed, with respect to the Walgreens Boots Alliance (or
Walgreens, as applicable) shares issued in the second step transaction, all Alliance Boots holders receiving such
shares (including the SP Investors and the KKR Investors) will be subject to certain restrictions on transfer under
the Company Shareholders Agreement until the date nine months after the closing of the second step transaction.
We also granted, pursuant to the Company Shareholders Agreement, certain Alliance Boots shareholders,
including the SP Investors and the KKR Investors, the right to cause us, in certain instances, at our expense, to
file registration statements under the Securities Act of 1933, as amended (the Securities Act), covering resales of
our common stock held by them or to “piggyback” on a registration statement in certain circumstances. These
shares also may be sold pursuant to Rule 144 under the Securities Act, depending on their holding period and
subject to restrictions in the case of shares held by persons deemed to be our affiliates. The sale, or possibility of
the sale, of a substantial number of shares of our common stock into the market could cause the market price of
our common stock to decline.
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