GOVERNANCE AND NOMINATING COMMITTEE CHARTER
This Governance and Nominating Committee Charter was adopted by the Board of Directors (the "Board") of Longs Drug Stores Corporation (the "Company") on March 2, 2004.
The purpose of the Governance and Nominating Committee (the "Committee") of the Board is to assist the Board in discharging the Board’s responsibilities regarding: (a) the identification of qualified candidates to become Board members and Chief Executive Officer of the Company; (b) the selection of nominees for election as directors at the next annual meeting of stockholders (or special meeting of stockholders at which directors are to be elected); (c) the selection of candidates to fill any vacancies on the Board; (d) the development and recommendation to the Board of a set of corporate governance guidelines and principles applicable to the Company (the "Corporate Governance Guidelines"); (e) oversight of the evaluation of the Board, the Board committees and management; and (f) review the effectiveness of the functioning of the Board and its committees.
In addition to the powers and responsibilities expressly delegated to the Committee in this Charter, the Committee may exercise any other powers and carry out any other responsibilities delegated to it by the Board from time to time consistent with the Company’s bylaws. The powers and responsibilities delegated by the Board to the Committee in this Charter or otherwise shall be exercised and carried out by the Committee as it deems appropriate without requirement of Board approval, and any decision made by the Committee (including any decision to exercise or refrain from exercising any of the powers delegated to the Committee hereunder) shall be at the Committee’s sole discretion. While acting within the scope of the powers and responsibilities delegated to it, the Committee shall have and may exercise all the powers and authority of the Board. To the fullest extent permitted by law, the Committee shall have the power to determine which matters are within the scope of the powers and responsibilities delegated to it.
The Committee will work in concert with the Lead Director, Chairman of the Board and the Chief Executive Officer in fulfilling its responsibilities, as appropriate.
II. Committee Authority and Responsibilities
The Committee has the following authority and responsibilities:
1. Review and make recommendations to the Board regarding Board organization, structure and protections, including without limitation:
(a) the size of the Board and each standing committee;
(b) succession policies for directors;
(c) experience and professional criteria for membership on the Board of Directors;
(d) candidates to be appointed as the members and Chair of each Board committee;
(e) members to serve as Chairman of the Board and as Lead Director; and
(f) the duties of the Chairman of the Board and the Lead Director as they relate to coordinating and supporting the work of the several committees and the Board.
2. Review and make recommendations to the Board regarding nominees to fill vacancies as they occur among directors and, prior to each annual meeting of stockholders, a slate of nominees for election or reelection as directors by the stockholders at the annual meeting. This responsibility includes:
(a) identifying, evaluating and recruiting highly qualified candidates as directors; and
(b) identifying the characteristics of new director appointments needed to maintain effectiveness of the Board.
For purposes of the foregoing, the Committee may consider the criteria set forth in the attached Addendum in recommending candidates for election or appointment to the Board.
3. Review at least annually the performance of each current director, as well as the relationships that each such director has with the Company, and consider the results of such evaluation when determining whether or not to recommend the nomination of such director for an additional term.
4. In appropriate circumstances, in its discretion, consider and recommend the removal of a director for cause, in accordance with the applicable provisions of the Company’s certificate of incorporation, bylaws and Corporate Governance Guidelines.
5. Oversee the Board and each Board committee in the Board’s and each committee’s annual review of its performance (including its composition and organization) and the performance of management, and make appropriate recommendations to improve performance.
6. At its discretion, make recommendations to the Board regarding governance matters, including, but not limited to, the Company’s certificate of incorporation, bylaws, this Charter and the charters of the Company’s other Board committees.
7. Develop and recommend to the Board the Corporate Governance Guidelines.
8. Evaluate its own performance on an annual basis, including its compliance with this Charter, and provide the Board with any recommendations for changes in procedures or policies governing the Committee. The Committee shall conduct such evaluation and review in such manner as it deems appropriate.
9. Develop, in concert with the Chief Executive Officer, an effective management succession plan. Monitor progress in achieving that plan, including receiving periodically from the chief executive officer recommendations regarding his or her successor, the development of other executive talent and the executive management needs of the Company. This responsibility includes:
(a) conferring with the Chief Executive Officer on a regular basis regarding progression and performance of senior corporate officers and his or her thinking on promotion and/or increased responsibilities of those officers;
(b) reviewing the Chief Executive Officer’s nomination of senior corporate officers in the context of the management succession plan and making recommendations to the Chief Executive Officer and the Board as deemed appropriate;
(c) arranging for the Chief Executive Officer to review annually the current status of the management succession plan with the Board of Directors during executive session; and
(d) recommending formally to the Board a successor to the chief executive officer when a vacancy occurs.
10. Monitor the consistency between the performance of the Chief Executive Officer and the expectations of the Board. This responsibility includes:
(a) reviewing at least annually the performance of the Chief Executive Officer;
(b) arranging for the Chief Executive Officer to discuss performance matters with the Board of Directors at least annually during executive session; and
(c) reporting annually the results of the evaluation of the Chief Executive Officer to the Compensation Committee.
11. Develop and recommend to the Board a policy regarding the consideration of director candidates recommended by the Company’s security holders and procedures for submission by security holders of director nominee recommendations.
12. Periodically report to the Board on its findings and actions.
13. Review and reassess this Charter at least annually and submit any recommended changes to the Board for its consideration.
14. Perform such other functions as may be assigned by the Board from time to time.
The Committee shall consist of at least three directors all of whom (a) shall be "independent" as defined in the rules of the New York Stock Exchange, and (b) shall have experience, in the business judgment of the Board, that would be helpful in addressing the matters delegated to the Committee, and shall be a standing committee of the Board. The members of the Committee, including the Chair of the Committee, shall be appointed by the Board. Committee members may be removed from the Committee, with or without cause, by the Board.
IV. Meetings and Procedures
The Committee shall meet four times per year and may call special meetings as required.
The Chair (or in his or her absence, a member designated by the Chair) shall preside at each meeting of the Committee and set the agendas for Committee meetings. The Committee shall have the authority to establish its own rules and procedures for notice and conduct of its meetings so long as they are consistent with the provisions of the Company’s bylaws that are applicable to the Committee or the Company’s Corporate Governance Guidelines.
All non-management directors that are not members of the Committee may attend and observe meetings of the Committee, but shall not participate in any discussion or deliberation unless invited to do so by the Committee, and in any event shall not be entitled to vote. The Committee may, at its discretion, include in its meetings members of the Company’s management, or any other person whose presence the Committee believes to be desirable and appropriate. Notwithstanding the foregoing, the Committee may exclude from its meetings any person it deems appropriate, including but not limited to, any director that is not a member of the Committee.
The Committee shall have the authority, as it deems appropriate, to retain or replace, as needed, any independent counsel or other outside expert or advisor that the Committee believes to be desirable and appropriate. The Committee, in its discretion, may also use the services of the Company’s regular internal or external legal counsel or other internal or external advisors to the Company. The Committee shall have sole authority to retain and terminate any search firm to be used to identify director and Chief Executive Officer candidates, including sole authority to approve such search firm’s fees and other retention terms. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to any such persons retained by the Committee and for ordinary administrative expenses, including those related to the identification and recruitment of director and Chief Executive Officer candidates, of the Committee that are necessary or appropriate in carrying out its duties.
V. Delegation of Duties
In fulfilling its responsibilities, the Committee shall be entitled to delegate any or all of its responsibilities to a subcommittee of the Committee, to the extent consistent with the Company’s certificate of incorporation, bylaws, Corporate Governance Guidelines and applicable law and rules of markets in which the Company’s securities then trade.
The Lead Director’s and Chairman's Responsibilities for Committees:
The Lead Director and Chairman of the Board are responsible for coordinating the activities of the several committees of the Board. Through office staff, the Chairman shall provide the necessary financial, technical and clerical services required by the committees.
Criteria for Board Membership:
The Committee may consider the following criteria, among others the Committee shall deem appropriate, in recommending candidates for election to the Board:
(a) directors chosen with a view to bringing to the Board a variety of expertise, experience and diversity;
(b) some directors who will form a central core of executive business and financial expertise;
(c) some directors who have substantial experience outside the business community in the professional, public, academic or scientific communities;
(d) directors who are free of conflicts of interest;
(e) directors who will represent the balanced, best interests of the stockholders as a whole;
(f) directors who have sufficient time available to devote to the affairs of the Company in order to carry out the responsibilities of a director;
(g) some directors with experience in corporate governance, experience in the Company’s industry and/or experience as a board member of another publicly held company;
(h) directors with personal and professional integrity, ethics and values;
(i) directors with practical and mature business judgment;
(j) a substantial majority of directors who are not employees or former employees of the Company; and
(k) directors who maintain expertise that contributes significantly to the functioning of the Board throughout their Board service.
It is the general policy of the Company that no director may stand for election to the Board after his or her 72nd birthday. At the discretion of the Committee, incumbent directors may be nominated for re-election for an additional three-year period of service through the end of the year during which they reach age 72. In exceptional cases, a director may be nominated for re-election after reaching age 72 when the Committee believes that it would be in the best interests of the stockholders and the Company for the individual to continue in his or her position. In such cases, there should exist substantial evidence that the candidate possesses unique skills or experiences that an exception to the policy. Such exceptions would normally be limited to one additional 3-year period of service.