UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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CALIFORNIA RESOURCES CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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“Low Carbon Intensity Fuel for Today and Net Zero Fuel for The Future” California resources corporation 20192022 proxy report and notice of annual meeting
California Resources Corporation
Letter to Shareholders from the ChairmanChair of the Board
Dear Shareholders,
Strong execution, financial disciplineI am proud of the progress and sustained community engagement are compelling hallmarkschanges CRC made during 2021. With a strengthened balance sheet, strong low-decline low carbon intensity assets, dedicated employees and an experienced management team operating under the direction of California Resources Corporation (“CRC”), reflecting the Company’s core values of Character, Responsibility and Commitment and the high expectations set by thenew Board of Directors, (the “CRC was able to demonstrate operational excellence and accomplish significant financial success.
I am honored to have helped guide the Company as the Chair of CRC’s Board”). of Directors. The separation between the CEO and Chair roles demonstrated CRC’s strong governance commitment while the addition of several new directors enhanced the diversity of perspectives and skill sets on our Board. In 2018,2021, we brought on three new Board members which provided us with significant experience in renewables, carbon capture, environmental, social and governance (ESG), as well as sustainability reporting. CRC achieved strong results through the exceptional leadership of our management teamis committed to its ESG goals and the dedication of our diverse workforce who operate critical infrastructurecompany’s current assets are well positioned to help California reach its energy transition goals. This year, the Board unanimously approved a 2045 Full-Scope Net Zero Goal. The Company’s Sustainability Committee remains dedicated to supporting and supply essential resourcesguiding CRC down the path to Californiansreach this goal.
In 2022, CRC will not only remain dedicated to enhancing its sustainability initiatives but will also focus on maintaining its robust financial foundation through its base E&P business. The Company will continue to focus on core areas with an innovative and entrepreneurial mindset. With the Board’s active direction, CRC thoughtfully navigated a volatile pricing environment with a dynamic and flexible operating planstrong margins that prioritized projects to deliver value both in the immediate and longer term,generate significant cash flow while continuing to meaningfully strengthen our financial position. We believe this value-driven approachemphasize cost reductions and operational excellence. These cash flow generating assets will continue to managing our business truly sets CRC apart. It enables us to capture the full value of our robust portfolio of assets throughout the commodity cycle and ensures effective capital allocation that delivers positive results for our shareholders. Coupled with an unwavering focus on operational excellence that unifies the organization, it is a powerful strategic approach that sustains CRC’s high levels of safety, environmental stewardship, reliability and quality.
In 2018, an engaged Board aligned withhelp fund additional shareholder priorities brought to bear a wealth of experience and varied perspectives from within the energy industry,friendly initiatives, as well as from financial services, accounting, real estate, human resourcesthe advancement of CRC’s Carbon Management Business and organizational disciplines. To ensure that CRC continues to attract and maintain the most effectivesolar projects.
We believe we have a strong mix of diversity and experience among our current Board talent, we regularly engage in a review process to evaluate desired skill sets that strengthen governance, promote diversity of thought,members, and align with the evolving demands of our business. In 2018, Laurie Siegel joined our Board. Her breadth of experience as a human resources executive and public company director strengthens our Board’s diversity of relevant skills in the areas of talent management, succession planning, organizational capability, and corporate culture.
Our commitment to investor outreach and engagement continues on numerous fronts. Consistent with investor feedback, we are once again proposingalways looking for ways to eliminate CRC’s supermajority thresholds in its certificateimprove our governance structure, enhance our abilities and expand our horizons. We frequently review best practices, host annual reviews, and encourage feedback from our shareholders. Each member of incorporation. While these efforts failed to reach the requisite vote lastBoard is up for re-election this year many shareholders regarded the action favorably and encouraged CRC to provide shareholders with another opportunitywe would encourage you to vote at or prior to our Annual Meeting on this governance measure this year. Additionally, we received supportive shareholder feedback around our executive compensation practices, fostering a transparent and balanced approach that both aligns with industry practices and rewards executives appropriately based on specific quantitative annual and multi-year performance metrics, as well as progress toward longer-term organizational objectives, including our 2030 Sustainability Goals.May 4, 2022.
As a responsible California oil and natural gas company operating in
On behalf of the world’s fifth largest economy, CRC promotes safety first, with the protection of people, our communities and the environment as our top priority in the design, construction, maintenance and operation of our facilities. This commitment to California values is implemented through our statewide Project Labor Agreement that ensures our facilities are built and maintained by a highly-qualified local workforce. It is reflected in our ongoing dialogue with neighbors, regulators and other stakeholders, as well as through investments that promote conservation of water, habitat and energy throughout our operations. Theentire Board, holds the management team and our entire workforce accountableI thank you for these principles by measuring CRC’s progress annually with quantitative safety, spill prevention and water conservation metrics that directly affect incentive compensation of our employees. In addition, management works to advance our Board’s 2030 Sustainability Goals, which include specific quantitative targets for water recycling, reduction of methane emissions, renewable power and carbon capture and storage. We have already implemented several projects that have increased our volume of recycled produced water and reduced methane emissions compared to a 2013 baseline. The Company also facilitates numerous large-scale solar power projects in several oil and gas fields through surface use agreements, in addition to designing CRC owned and operated solar projects on two of our properties. Our sustainability efforts are further supported by the ongoing development of an innovative carbon capture and sequestration system at our Elk Hills field. In these ways, we are proud to work together with the State of California to fulfill our shared commitment to conserve natural resources and protect our environment.
While stakeholders often think about sustainability in environmental terms, we believe diversity is also a key success factor for our business and for California’s future. We view diversity holistically, from the composition of our Board and management to growing and developing our workforce to reflect the communities where we operate. CRC’s employee-led Women’s Interest Network provides professional development and support to women throughout our operations with strongyour support and participation from the Board and management. Our community outreach efforts similarly champion inclusivity – from an array of childhood health, education and training programs to civic empowerment of diverse communities – because at our core, we believe that CRC succeeds when Californians thrive.engagement.
Helping meet the needs of Californians positions CRC to create and sustain value for our shareholders for years to come. Our confidence in the future is due in no small part to CRC’s extraordinary workforce. Our employees embrace an entrepreneurial “OneCRC” mindset that promotes innovative thinking, increased collaboration and accountability, and a focus on process improvements in everything we do. We expect this to translate into continued growth for shareholders as we manage our assets for margin expansion and cash-on-cash returns using our value-driven approach in 2019 and beyond.
Regards,Tiffany (TJ) Thom Cepak
William “Bill” Albrecht
ChairmanChair of the Board
California Resources Corporation
PLEASE NOTE: This letter and the Proxy Statement contain forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects. For a discussion of these risks and uncertainties, please refer to the “Risk Factors” and “Forward-Looking Statements” described in our Annual Report on Form 10-K. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will” or “would” and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Such statements are based on management's expectations as of the date of this filing, unless an earlier date is specified, and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in our Form 10-K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation and expressly disclaim any duty to correct or update any forward-looking statement, except as required by applicable law.
We have included in this letter and the Proxy Statement certain voluntary disclosures regarding our Sustainability Goals, Sustainability Reports and related matters because we believe these matters are of interest to our investors; however, we do not believe these disclosures are “material” as that concept is defined by or construed in accordance with the securities laws or any other laws of the U.S. or any other jurisdiction, or as that concept is used in the context of financial statements and financial reporting. These disclosures speak only as of the date on which they are made, and we undertake no obligation and expressly disclaim any duty to correct or update such disclosures, whether as a result of new information, future events or otherwise, except as required by applicable law.
Notice of the 20192022 Annual Meeting of Stockholders
Meeting Date: | May |
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Meeting Time: | 11:00 a.m., |
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Record Date: | March |
Purposes of the 20192022 annual meeting of stockholders:
| (1) | To elect the |
| (2) | To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
| (3) | To hold an advisory vote to approve named executive officer compensation; |
| (4) | To approve the |
| (5a) | To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement; and |
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| To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend certain provisions of the Certificate of Incorporation to a majority vote |
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Information relevant to these matters is set forth in the accompanying proxy statement.
The close of business on March 11, 20197, 2022 was fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof. Only our stockholders of record or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.
The annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the annual meeting physically. If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 67 of the proxy statement. We have also provided information regarding how stockholders can engage during the Annual Meeting, including how they can vote, ask questions, request technical support and access information following the Annual Meeting within this proxy statement.
Beginning on March 26, 2019,22, 2022, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders containing instructions on how to access the proxy statement and vote online and made our proxy materials available to our stockholders over the Internet.
By Order of the Board of Directors,
Michael L. Preston
Executive Vice President, Chief Administrative Officer and General Counsel and
Corporate Secretary
IMPORTANT VOTING INFORMATION
If you owned shares of our common stock at the close of business on March 11, 2019,7, 2022, you are entitled to one vote per share upon each matter presented at our 20192022 annual meeting of stockholders to be held on May 8, 2019.4, 2022. In order for stockholders whose shares were held in an account at a brokerage firm, bank or other nominee (i.e., in “street name”) as of March 11, 20197, 2022 to attendvote their shares at the 20192022 annual meeting, they will need to obtain a legal proxy from the broker, bank or other nominee that holds their shares authorizing them to vote in person at the annual meeting.
If you hold shares in “street name,” your broker is not permitted to vote on your behalf on the election of directors and other matters to be considered at the annual meeting, except on ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2019, unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your shares via telephone or the Internet.Internet, your broker is only permitted to vote on your behalf on ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2022, and may not vote on the election of directors and other matters to be considered at the annual meeting. For your vote to be counted,recognized, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the annual meeting.
YOUR VOTE IS IMPORTANT
Your vote is important. Our Board of Directors strongly encourages you to exercise your right to vote. Voting early helps ensure that we receive a quorum of shares necessary to hold the annual meeting.
QUESTIONS
If you have any questions about the proxy voting process, and you own shares that are registered in your own name, please contact AST Shareholder ServicesBroadridge at (866) 659-2647 or (718) 921-8124. If you have any questions about the proxy voting process, and your shares are held in “street name,” please contact the broker, bank or other nominee where you hold your shares.(800) 579-1639. The Securities and Exchange Commission also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. You also may contact our Investor Relations Department by phone at (818) 661-6010661-3731 or by e-mail at IR@crc.com.
ATTENDING THE ANNUAL MEETING IN PERSON
Only stockholders of record or their legal proxy holders as of March 11, 2019 or our invited guests may attend theThe annual meeting will be held in person.a virtual meeting format only at If you planhttps://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the annual meeting in person, you must present a valid form of government-issued photo identification, such as a driver’s license or passport. In addition to such personal identification, you will need an admission ticket or proof of ownership of CRC stock as of the record date to enter the annual meeting.physically. If your shares are registered in your name, you will find an admission ticket attached to the notice regarding the Internet availability of proxy materials or the proxy card sent to you. If your shares are held in street name with a broker, bank or other nominee, you will need to bring a copy of your brokerage statement or other documentation reflecting your stock ownership as of the record date for the meeting, and will need to obtain a proxy from your broker, bank or other nominee if you wish to vote atattend the annual meeting.meeting, you must follow the instructions under “Attending the Annual Meeting” on page 67 of the proxy statement.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF
PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON MAY 8, 20194, 2022
The Notice of the 20192022 Annual Meeting of Stockholders, the Proxy Statement for the 20192022 Annual Meeting of Stockholders and the 20182021 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2018)2021) of California Resources Corporation are available at http://www.astproxyportal.com/ast/20758/www.proxyvote.com. You will need the 16-digit control number included on the Notice that was mailed to you, on your proxy card or on the instructions that accompanied your proxy materials.
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table | 45 |
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Security Ownership of Directors, Management and Certain Beneficial Holders |
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Proposal 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm |
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Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation |
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Annex | A-1 |
Annex | B-1 |
Annex |
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C-1 |
CALIFORNIA RESOURCES CORPORATION i
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Proxy Statement Summary
Proxy StatementStatement Summary
This summary highlights information contained in the proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting. California Resources Corporation, together with its subsidiaries, is referred to herein as “we,” “our,” “us,” the “Company” or “CRC.” The 20192022 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”
20192022 Annual Meeting of Stockholders
Date: | May |
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Time: | 11:00 a.m., |
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Record Date: | March |
The Annual Meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the Annual Meeting physically. If you wish to attend the Annual Meeting, you must follow the instructions under “Attending the Annual Meeting” below.
Agenda and the Board’s Recommendation on Voting Matters
The following table summarizes the items that will be brought for a vote of our stockholders at the annual meeting, along with the recommendation of our Board of Directors as to how stockholders should vote on each item.
Agenda Item |
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| Proposal 1 |
| Election of the |
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| Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal |
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| Advisory vote to approve named executive officer compensation |
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| Approval of the |
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| Approval of amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement |
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| Approval of amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend |
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CALIFORNIA RESOURCES CORPORATION 1
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Proxy Statement Summary
Voting: Stockholders as of the record date are entitled to vote. Each share of common stock entitles its holder to one vote for each director nominee and one vote for each of the proposals to be voted on.
CALIFORNIA RESOURCES CORPORATION 1
2022 PROXY STATEMENT |
Proxy Statement Summary
Directors
TheAs of the Annual Meeting, the Board of Directors iswill be comprised of eight independent directors, our Chairman, andplus Mr. McFarland, our President and Chief Executive Officer (“CEO”). The following table provides summary information about each director including the director nominees and whether the Board of Directors considers each director to be independent under the New York Stock Exchange’s (“NYSE”) independence standards. We have adopted a majority voting policy with respect to the election of directors toAlthough he is not currently independent, the Board has determined that Mr. Bremner will be independent as of Directors. See “Required Vote and Methodthe date of Counting–Majority Voting for Directors” below.
the Annual Meeting. Each director is elected by a plurality of votes cast.
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| Health, Safety | Nominating |
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Director | Positions | Age | Independent | Since | Audit | Compensation | Environmental | Governance |
William E. Albrecht | Chairman | 67 | No | 2014 |
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Justin A. Gannon |
| 69 | Yes | 2014 | Chair | ● |
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Harold M. Korell | Lead Independent Director | 74 | Yes | 2014 |
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Harry T. McMahon |
| 65 | Yes | 2017 | ● | Chair |
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Richard W. Moncrief |
| 76 | Yes | 2014 | ● |
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Avedick B. Poladian |
| 67 | Yes | 2014 |
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Anita M. Powers |
| 63 | Yes | 2017 |
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Laurie A. Siegel |
| 63 | Yes | 2018 | ● | ● |
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Robert V. Sinnott |
| 69 | Yes | 2014 |
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Todd A. Stevens | President & CEO | 52 | No | 2014 |
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Director | Positions | Age | Independent | Since | Audit | Compensation | Governance | Sustainability |
Andrew B. Bremner |
| 31 | No | 2021 |
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Douglas E. Brooks |
| 63 | Yes | 2020 |
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Tiffany (TJ) Thom Cepak | Chair | 49 | Yes | 2020 | ● | ● |
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James N. Chapman |
| 59 | Yes | 2020 |
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Mark A. (Mac) McFarland | President & CEO | 52 | No | 2020 |
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Nicole Neeman Brady |
| 41 | Yes | 2021 |
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Julio M. Quintana |
| 62 | Yes | 2020 | ● |
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William B. Roby |
| 62 | Yes | 2020 | ● | ● |
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Alejandra (Ale) Veltmann |
| 53 | Yes | 2021 | Chair |
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Corporate Governance Highlights
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✓ | 8 out of 9 Board members are independent. The Board has determined 8 out of 9 Board members are independent within the meaning of NYSE listing standards as of the date of the Annual Meeting. |
✓ | Anti-Hedging and Anti-Pledging Policy. In response to feedback in prior years, our Insider Trading Policy specifically addresses the hedging or pledging of our securities. |
| ✓ | Overboarding Policy. |
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| Clawback Policy. |
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| Board is not classified.Our directors are elected on an annual basis. |
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| ✓ | Each committee has the authority to retain independent advisors. |
CALIFORNIA RESOURCES CORPORATION 2
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Proxy Statement Summary
| ✓ | Frequent executive sessions of independent directors. In |
| ✓ | No stockholder rights plan (“poison pill”) in effect. |
| ✓ | Director evaluation process. Each year, each of the Board committees and the full Board of Directors undertakes a self-assessment of its performance. |
| ✓ | CEO and management evaluation process. The Board of Directors conducts an annual performance review of management, including the CEO, and periodically reviews succession planning for the CEO. |
Business Performance Highlights
In 2018, our management team delivered significant accomplishments against our strategic priorities which the Compensation Committee considered as part of its review of management’s performance for compensation purposes.
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CALIFORNIA RESOURCES CORPORATION 32
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Proxy Statement Summary
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Compensation Program Highlights
CRC’s stock price performanceIn connection with the unprecedented circumstances affecting the industry and market volatility resulting from the COVID-19 pandemic, beginning in 2018 wasMarch 2020, the highestFormer Compensation Committee (as defined below) reviewed the annual and long-term incentive programs to determine whether those programs appropriately aligned compensation opportunities with the Company’s then current goals and ensured the stability of the Company’s workforce. Following this review, in May 2020, the Former Compensation Committee approved changing the incentive compensation program for the organization, including the NEOs, to an all cash program consisting of a Retention Bonus Award and a Quarterly Incentive Award.
Following our peer companies. However,emergence from the bankruptcy process, our stock price generally remained at depressed levels, driven in large part by the highly leveraged balance sheet our management team inherited from Occidental Petroleum Corporation (“Occidental”) at our Spin-off from Occidental (the “Spin-off”), and continued to impact the realizable compensationNew Compensation Committee (as defined below) immediately began setting a new course for our named executive officers. For 2018, our Compensation Committee realigned thepost-emergence compensation program, reinstituting long-term performance equity awards in line with compensation to stockholder returns by returning to entirely share-based long-term incentive awards.best practices and good governance policies.
2018 Compensation Actions
In the first quarter of 2018, based on feedback received from stockholder outreach, the Compensation Committee took the following actions:
Reduced the individual portion of the annual incentive to 20%.
Redesigned the performance-based long-term incentive awards to be entirely stock-based, further aligning the most significant executive compensation opportunity with stockholders.
Reduced the portion of time-vested restricted stock unit awards from 50% to 40% of the grant date value of the long-term incentive awards and instead granted premium priced stock options, shifting the long-term incentive program to 60% performance-based.
CALIFORNIA RESOURCES CORPORATION 4
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Proxy Statement Summary
Compensation Program Practices
Our executive compensation program is designed to motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward. It is well designed incorporatingto incorporate compensation best practices, and is governed going forward from our emergence from bankruptcy by an engagedour New Compensation Committee. Our short-termPrior to our restructuring in 2020, our annual incentive awards and long-term incentive plans arewere performance-based and are intended to align with the long-term best interests of stockholders and to retain our highly experienced, high-performing management team. During the first half of 2020, our Former Compensation Committee changed our compensation programs to address the challenging environment and impending restructuring, including the elimination of long-term incentives for 2020 due to the diminished value of the Company’s stock. After we emerged from the bankruptcy process, our New Compensation Committee took action to realign our executive compensation program with our stockholders’ interests and with best practices and good governance policies.
CALIFORNIA RESOURCES CORPORATION 3
2022 PROXY STATEMENT |
Proxy Statement Summary
The New Compensation Committee has engaged in best practices to align executive pay with Company performance and to ensure good governance in the following ways:
WHAT WE DO √ We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. √ We are stockholder-aligned. stockholder aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. A majorityAll of the outstanding long-term incentive awards for our named executive officersexecutives are stock-based. √ We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. √ We solicit feedback from stockholders. We regularly reach out to our largest stockholders for feedback on our governance and executive compensation. √ We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. √ We have stock ownership requirements. We maintain stock ownership guidelines which requirefor our named executive officers and stock grant delivery mechanics for our directors to havethat require meaningful stock ownership in the Company. √ We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. √ We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.
WHAT WE DON’T DO We do not have individual employment agreements. We do not have employment agreements with any of our named executive officers. DO. X We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. X We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. X We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for our executives. X We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create excessive or inappropriate risk for the Company.
CALIFORNIA RESOURCES CORPORATION 54
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Board of Directors and Corporate Governance
Board of Directors and Corporate Governance
Our Board of Directors has nominated 10nine directors for election at the 20192022 Annual Meeting. All of our nominees currently serve as CRC directors. Each nominee has agreed to serve another term, if elected.
Our Board values and exhibits an effective mix of diversity, perspective, skills and experience. Currently one-third of the Board are women and one-third of the Board are members of underrepresented communities as defined under California law.
INDEPENDENCE 20% 80%11% non-independent 89% independent GENDER 33% female 67% male AGE 11.1% 30s 22.3% 40s 33.3% 50s 33.3% 60s
Note: Independence statistics as of the date of the Annual Meeting.
INDEPENDENCE 10% 90% independent non-independent GENDER 20% 80% male female AGE 10% 20% 70%40% 50% 50s 60s 70s
Independence 10% non-independent 90% independent Gender 20% female 80% male AGE 10% 50s 50% 60s 40% 70s
2022 PROXY STATEMENT |
Board of Directors and Corporate Governance
Set forth below is a chart that summarizes the core competenciesspecific experience, qualifications, attributes and skills of our Board,directors and biographical information regarding each of our directors as well as the specific experience, qualifications, attributes and skills that led to the conclusion that such individual should serve as director.directors. There are no family relationships between any of our directors and executive officers. In addition, thereThere are no ongoing arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person waswill be selected as a director or an executive officer.
Director SkillsCalifornia Resources Corporation
PLEASE NOTE: This letter and Qualificationsthe Proxy Statement contain forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects. For a discussion of these risks and uncertainties, please refer to the “Risk Factors” and “Forward-Looking Statements” described in our Annual Report on Form 10-K. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will” or “would” and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Such statements are based on management's expectations as of the date of this filing, unless an earlier date is specified, and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in our Form 10-K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation and expressly disclaim any duty to correct or update any forward-looking statement, except as required by applicable law.
We have included in this letter and the Proxy Statement certain voluntary disclosures regarding our Sustainability Goals, Sustainability Reports and related matters because we believe these matters are of interest to our investors; however, we do not believe these disclosures are “material” as that concept is defined by or construed in accordance with the securities laws or any other laws of the U.S. or any other jurisdiction, or as that concept is used in the context of financial statements and financial reporting. These disclosures speak only as of the date on which they are made, and we undertake no obligation and expressly disclaim any duty to correct or update such disclosures, whether as a result of new information, future events or otherwise, except as required by applicable law.
Notice of the 2022 Annual Meeting of Stockholders
Meeting Date: | May 4, 2022 |
Meeting Time: | 11:00 a.m., Pacific Time |
Location: | Virtual meeting at https://www.virtualshareholdermeeting.com/CRC2022 |
Record Date: | March 7, 2022 |
Purposes of the 2022 annual meeting of stockholders:
(1) | To elect the nine director nominees named in this proxy statement, each to a one-year term; |
(2) | To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022; |
(3) | To hold an advisory vote to approve named executive officer compensation; |
(4) | To approve the Employee Stock Purchase Plan; |
(5a) | To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement; and |
(5b) | To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend certain provisions of the Certificate of Incorporation to a majority vote requirement. |
Information relevant to these matters is set forth in the accompanying proxy statement.
The close of business on March 7, 2022 was fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof. Only our stockholders of record or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.
The annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the annual meeting physically. If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 67 of the proxy statement. We have also provided information regarding how stockholders can engage during the Annual Meeting, including how they can vote, ask questions, request technical support and access information following the Annual Meeting within this proxy statement.
Beginning on March 22, 2022, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders containing instructions on how to access the proxy statement and vote online and made our proxy materials available to our stockholders over the Internet.
By Order of the Board of Directors,
Michael L. Preston
Executive Vice President, Chief Administrative Officer and General Counsel
Corporate Secretary
IMPORTANT VOTING INFORMATION
If you owned shares of our common stock at the close of business on March 7, 2022, you are entitled to one vote per share upon each matter presented at our 2022 annual meeting of stockholders to be held on May 4, 2022. In order for stockholders whose shares were held in an account at a brokerage firm, bank or other nominee (i.e., in “street name”) as of March 7, 2022 to vote their shares at the 2022 annual meeting, they will need to obtain a legal proxy from the broker, bank or other nominee that holds their shares authorizing them to vote in person at the annual meeting.
If you hold shares in “street name,” unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your shares via telephone or the Internet, your broker is only permitted to vote on your behalf on ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2022, and may not vote on the election of directors and other matters to be considered at the annual meeting. For your vote to be recognized, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the annual meeting.
YOUR VOTE IS IMPORTANT
Your vote is important. Our Board of Directors strongly encourages you to exercise your right to vote. Voting early helps ensure that we receive a quorum of shares necessary to hold the annual meeting.
QUESTIONS
If you have any questions about the proxy voting process, please contact Broadridge at (800) 579-1639. The Securities and Exchange Commission also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. You also may contact our Investor Relations Department by phone at (818) 661-3731 or by e-mail at IR@crc.com.
ATTENDING THE ANNUAL MEETING
The annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the annual meeting physically. If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 67 of the proxy statement.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF
PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON MAY 4, 2022
The Notice of the 2022 Annual Meeting of Stockholders, the Proxy Statement for the 2022 Annual Meeting of Stockholders and the 2021 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2021) of California Resources Corporation are available at http://www.proxyvote.com. You will need the 16-digit control number included on the Notice that was mailed to you, on your proxy card or on the instructions that accompanied your proxy materials.
2022 PROXY STATEMENT |
TABLE OF CONTENTS
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table | 45 |
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Security Ownership of Directors, Management and Certain Beneficial Holders | 54 |
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Proposal 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm | 56 |
Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation | 57 |
Proposal 4: Approval of California Resources Corporation Employee Stock Purchase Plan | 58 |
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Annex A – Reconciliation of Non-GAAP Measures | A-1 |
Annex B – California Resources Employee Stock Purchase Plan | B-1 |
C-1 |
CALIFORNIA RESOURCES CORPORATION i
2022 PROXY STATEMENT |
Proxy Statement Summary
This summary highlights information contained in the proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting. California Resources Corporation, together with its subsidiaries, is referred to herein as “we,” “our,” “us,” the “Company” or “CRC.” The 2022 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”
2022 Annual Meeting of Stockholders
Date: | May 4, 2022 |
Time: | 11:00 a.m., Pacific Time |
Place: | Virtual meeting at https://www.virtualshareholdermeeting.com/CRC2022 |
Record Date: | March 7, 2022 |
The Annual Meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the Annual Meeting physically. If you wish to attend the Annual Meeting, you must follow the instructions under “Attending the Annual Meeting” below.
Agenda and the Board’s Recommendation on Voting Matters
The following table summarizes the items that will be brought for a vote of our stockholders at the annual meeting, along with the recommendation of our Board of Directors as to how stockholders should vote on each item.
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| Election of the nine director nominees named in this proxy statement each for a one-year term |
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| Proposal 2 | Ratification of | FOR | |||||||
3. | Proposal 3 | Advisory vote to approve named executive officer compensation | FOR | ||||||||
4. | Proposal 4 | Approval of the Employee Stock Purchase Plan | FOR | ||||||||
5. | Proposal 5(a) | Approval of amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement | FOR | ||||||||
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| Approval of amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend certain provisions of the Certificate of Incorporation to a majority vote requirement |
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CALIFORNIA RESOURCES CORPORATION 61
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Proxy Statement Summary
Directors
As of the Annual Meeting, the Board of Directors will be comprised of eight independent directors, plus Mr. McFarland, our President and Chief Executive Officer (“CEO”). The following table provides summary information about each director and whether the Board of Directors considers each director to be independent under the New York Stock Exchange’s (“NYSE”) independence standards. Although he is not currently independent, the Board has determined that Mr. Bremner will be independent as of the date of the Annual Meeting. Each director is elected by a plurality of votes cast.
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Director | Positions | Age | Independent | Since | Audit | Compensation | Governance | Sustainability |
Andrew B. Bremner |
| 31 | No | 2021 |
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Douglas E. Brooks |
| 63 | Yes | 2020 |
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Tiffany (TJ) Thom Cepak | Chair | 49 | Yes | 2020 | ● | ● |
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James N. Chapman |
| 59 | Yes | 2020 |
| Chair | ● |
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Mark A. (Mac) McFarland | President & CEO | 52 | No | 2020 |
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Nicole Neeman Brady |
| 41 | Yes | 2021 |
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Julio M. Quintana |
| 62 | Yes | 2020 | ● |
| Chair |
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William B. Roby |
| 62 | Yes | 2020 | ● | ● |
| Chair |
Alejandra (Ale) Veltmann |
| 53 | Yes | 2021 | Chair |
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Corporate Governance
Highlights
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Mr. Albrecht has served on the Board of Directors of CRC since 2014. He was appointed as Chairman of the Board in 2016. He served as Executive Chairman of the Board of Directors from 2014 to 2016. Mr. Albrecht served as Vice President of Occidental from 2008 to 2014 and as President, Oxy Oil & Gas, Americas from 2012 to 2014. Mr. Albrecht also served as President—Oxy Oil & Gas, USA from 2008 to 2012. During his tenure with Occidental, Mr. Albrecht had managerial oversight over its upstream assets. Mr. Albrecht has more than 39 years of experience in the domestic oil and gas industry, having previously served as an executive officer for domestic energy producer EOG Resources, and as a petroleum engineer for Tenneco Oil Company. Since 2015, Mr. Albrecht has served on the board of directors of the Rowan Companies, plc, an international offshore drilling contractor providing jackups and drill ships for the offshore drilling industry. Mr. Albrecht is a member of its Compensation Committee and Nominating and Corporate Governance Committee, and was elected as chairman of the board as of the 2017 annual meeting. Since 2016, Mr. Albrecht has served on the board of directors of Halliburton Co. and is a member of its Compensation Committee and Health, Safety and Environment Committee. Mr. Albrecht holds a Master of Science degree from the University of Southern California and a Bachelor of Science degree from the United States Military Academy. Mr. Albrecht is a National Association of Corporate Directors (“NACD”) Board Leadership Fellow, and has completed NACD’s comprehensive program of study for directors and corporate governance professionals.
Skills and Qualifications
Mr. Albrecht brings extensive managerial and operational experience in the upstream domestic and international energy business to the Board of Directors. He also has a deep knowledge of our assets that gives the Board a valuable perspective on the specific strengths and challenges associated with our operations. Mr. Albrecht brings broad experience in proactively engaging with regulatory agencies, communities, and other stakeholders that makes him a valuable member of our Board of Directors.
| ✓ | 8 out of 9 Board members are independent. The Board has determined 8 out of 9 Board members are independent within the meaning of NYSE listing standards as of the date of the Annual Meeting. |
| ✓ | Anti-Hedging and Anti-Pledging Policy. In response to feedback in prior years, our Insider Trading Policy specifically addresses the hedging or pledging of our securities. |
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| ✓ | Board is not classified. Our directors are elected on an annual basis. |
✓ | Independent Board committees. Our Audit, Compensation, and Nominating and Governance committees are made up of independent directors. As of the Annual Meeting, the Sustainability Committee will also be made up of independent directors. Each standing committee operates under a written charter that has been approved by the Board and is available to stockholders. |
✓ | Each committee has the authority to retain independent advisors. |
✓ | Frequent executive sessions of independent directors. In 2021, the independent directors held executive sessions on a regular basis. |
✓ | No stockholder rights plan (“poison pill”) in effect. |
✓ | Director evaluation process. Each year, each of the Board committees and the full Board of Directors undertakes a self-assessment of its performance. |
✓ | CEO and management evaluation process. The Board of Directors conducts an annual performance review of management, including the CEO, and periodically reviews succession planning for the CEO. |
CALIFORNIA RESOURCES CORPORATION 72
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Board of Directors and Corporate GovernanceProxy Statement Summary
Mr. Gannon has served onCompensation Program Highlights
In connection with the Board of Directors of CRC since 2014. Since 2013, Mr. Gannon has acted as an independent consultantunprecedented circumstances affecting the industry and private investor. From 2003market volatility resulting from the COVID-19 pandemic, beginning in March 2020, the Former Compensation Committee (as defined below) reviewed the annual and long-term incentive programs to 2013, Mr. Gannon served in various roles at Grant Thornton LLP, an independent audit, taxdetermine whether those programs appropriately aligned compensation opportunities with the Company’s then current goals and advisory firm, including as National Leader of Merger and Acquisition Development from 2011 to 2013, Central Region Managing Partner from 2010 to 2011, Office Managing Partner in Houston, Texas from 2007 to 2011 and Office Managing Partner in Kansas City, Missouri from 2004 to 2007. From 1971 to 2002, Mr. Gannon worked at Arthur Andersen LLP, including as an Audit Partner for 21 years. Mr. Gannon is also a Director, Chairmanensured the stability of the AuditCompany’s workforce. Following this review, in May 2020, the Former Compensation Committee approved changing the incentive compensation program for the organization, including the NEOs, to an all cash program consisting of a Retention Bonus Award and Membera Quarterly Incentive Award.
Following our emergence from the bankruptcy process, our New Compensation Committee (as defined below) immediately began setting a new course for our post-emergence compensation program, reinstituting long-term performance equity awards in line with compensation best practices and good governance policies.
Compensation Program Practices
Our executive compensation program is designed to motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward. It is designed to incorporate compensation best practices, and is governed going forward from our emergence from bankruptcy by our New Compensation Committee. Prior to our restructuring in 2020, our annual incentive awards and long-term incentive plans were performance-based and intended to align with the long-term best interests of stockholders and to retain our management team. During the first half of 2020, our Former Compensation Committee changed our compensation programs to address the challenging environment and impending restructuring, including the elimination of long-term incentives for 2020 due to the diminished value of the Conflicts Committee of the general partner of CrossAmerica Partners LP, a publicly-traded master limited partnership engaged in motor fuels distribution. He also serves on the Board of Directors of Vantage Energy Acquisition Corp. for which he chairs the Audit Committee and serves on the compensation committee. He is a former chairman of the Board of Directors of American Red Cross chapters in the Tulsa, Oklahoma and San Antonio, Texas areas. Mr. Gannon received a Bachelor of Science degree in Accounting from Loyola Marymount University and is a Certified Public Accountant in Texas (active) and California (inactive).
Skills and Qualifications
Mr. Gannon’s more than four decades in financial accounting practice and his private investment experience give him deep insight into financial analysis and management. His experience is especially valuable to the Board because of the extent to which his clients were involved in oil and gas upstream exploration and production. His financial acumen enables Mr. Gannon to guide the Board in its fiscal and strategic oversight of CRC.
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• Member of the Nominating and Governance Committee
• Member of the Health, Safety and Environmental Committee
Mr. Korell has served on the Board of Directors of CRC and as Lead Independent Director since 2014. From 2002 through 2014, Mr. Korell served as the Chairman of the Board of Southwestern Energy Company, an independent energy company engaged in natural gas and oil exploration, development and production. From 2009 to 2010, he served as Southwestern’s Executive Chairman and, from 1999 to 2009, as its Chief Executive Officer. From 1997 to 2009, Mr. Korell served in various other roles at Southwestern, including President and Executive Vice President and Chief Operating Officer. Prior to his tenure at Southwestern, Mr. Korell was Senior Vice President—Operations of American Exploration Company, Executive Vice President of McCormick Resources, held various technical and managerial positions during his 17 years with Tenneco Oil Company, including Vice President of Production, and held various positions with Mobil Corporation. He is a member of the Society of Petroleum Engineers and, through 2010, served as a Board Member for the Independent Petroleum Association of America and the American Exploration & Production Council and as a Board Member and Executive Committee Member for America’s Natural Gas Alliance. He also serves on the Board of Governors at the Colorado School of Mines and the Board of Trustees at the Baylor College of Medicine. Mr. Korell holds a degree in Chemical and Petroleum Refining EngineeringCompany’s stock. After we emerged from the Colorado School of Mines.bankruptcy process, our New Compensation Committee took action to realign our executive compensation program with our stockholders’ interests and with best practices and good governance policies.
CALIFORNIA RESOURCES CORPORATION 83
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Board of Directors and Corporate GovernanceProxy Statement Summary
SkillsThe New Compensation Committee has engaged in best practices to align executive pay with Company performance and Qualificationsto ensure good governance in the following ways:
Mr. Korell’s experience over five decades
WHAT WE DO √ We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. √ We are stockholder aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. All of the outstanding long-term incentive awards for our named executives are stock-based. √ We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. √ We solicit feedback from stockholders. We regularly reach out to our largest stockholders for feedback on our governance and executive compensation. √ We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. √ We have stock ownership requirements. We maintain stock ownership guidelines for our named executive officers and stock grant delivery mechanics for our directors that require meaningful stock ownership in the oilCompany. √ We have a clawback policy. Our Compensation Recoupment and gas industry gives him a broad understandingClawback Policy allows the Company to require reimbursement of the upstream oilincentive compensation in certain circumstances. √ We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and gas business as well as the midstream and public utility businesses. Mr. Korell’s leadership during a time of dramatic expansion for his company provides valuable insights into strategic and operational, corporate and governance matters. In addition, Mr. Korell provides a deep understanding of our assets dueprovide advice to his involvement with a number of them early in his career that lend specific knowledge and understanding to Board discussions.
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• Member of the Audit Committee
• Chairman of the Compensation Committee
Mr. McMahon has served on the Board of Directors of CRC since 2017. Since 2015 he has been a Senior Advisor to the G100 Network, a Leadership Advisory Consortium focused on CEO and Board Development. From 1983 to 2015, Mr. McMahon served in various positions for Bank of America Merrill Lynch including, most recently, as Executive Vice Chairman (the firm's first following the merger of Merrill Lynch and Bank of America). His other roles included service as Vice Chairman and Co-Head of Global Corporate Finance of Merrill Lynch and over 25 years running Investment Banking for the firm's Western Region. During his career Mr. McMahon advised on more than 400 transactions. Mr. McMahon also serves as a trustee of Claremont McKenna College, and is a director of Cottage Health Systems and Parsons Corporation. Mr. McMahon received a Master of Business Administration degree from the University of Chicago Booth School of Business and a Bachelor of Arts degree in Economics from Claremont McKenna College.
Skills and QualificationsCommittee.
Mr. McMahon's over three decades of investment banking experience provides the Board with deep insight into financial structuring matters and fashioning innovative strategic solutions. His senior managerial roles, including as Executive Vice Chairman of one of the nation's largest banks and as Senior Advisor to the G100 Network, also give him valuable perspectives on maintaining ties between boards and management.
WHAT WE DON’T DO. X We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. X We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. X We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for our executives. X We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create excessive or inappropriate risk for the Company. | |||
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• Chairman of the Health, Safety and Environmental Committee
• Member of the Audit Committee
CALIFORNIA RESOURCES CORPORATION 94
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Board of Directors and Corporate Governance
Mr. Moncrief has served on the Board of Directors of CRC since 2014. Mr. Moncrief has been a principal in Moncrief Oil International, Inc., an oil and gas exploration and production company with headquarters in Fort Worth, Texas, since founding the company in 1970. He currently serves as its Chief Executive Officer. Moncrief Oil participates in U.S. and international oil and gas exploration and production. Mr. Moncrief also serves on the boards of trustees for the Amon Carter Museum and the University of Texas Development Board. He holds a Bachelor of Science degree in Petroleum Engineering and is a Distinguished Graduate of the School of Engineering of the University of Texas.
Skills and Qualifications
Mr. Moncrief’s extensive experience as the head of a large private upstream oil and gas exploration company allows him to bring an in-depth understanding of key industry issues to the Board of Directors. His leadership experience at Moncrief Oil provides him with strategic and management insights from which CRC benefits. Mr. Moncrief offers entrepreneurial expertise forged over years in the business of oil and gas exploration.
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• Member of the Compensation Committee
• Member of the Nominating and Governance Committee
Mr. Poladian has served on the Board of Directors of CRC since 2014. From 2006 to 2016, Mr. Poladian served as Executive Vice President and Chief Operating Officer of Lowe Enterprises, Inc., a diversified national real estate company active in commercial, residential and hospitality property investment, management and development. Mr. Poladian previously served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer for Lowe from 2003 to 2006. Mr. Poladian was with Arthur Andersen LLP from 1974 to 2002, most recently as a Partner, and is a Certified Public Accountant (inactive). He is a past member of the Young Presidents Organization, the Chief Executive Organization, the California Society of CPAs and the American Institute of CPAs. Mr. Poladian is a director emeritus of the YMCA of Metropolitan Los Angeles, a member of the Board of Councilors of the USC Sol Price School of Policy, a member of the Board of Advisors of the Ronald Reagan UCLA Medical Center, and a former Trustee of Loyola Marymount University. He serves as a director and on the Audit Committees of funds managed by Western Asset Management Funds. He is also a member of the Board of Trustees of Public Storage where he is the Chair of the Audit Committee and the Chair of the Nominating and Corporate Governance Committee. Mr. Poladian also serves as a director of Occidental Petroleum Corporation where he is a member of the Nominating, Corporate Governance and Social Responsibility Committee and chair of the Audit Committee. He previously served as a director of California Pizza Kitchen.
CALIFORNIA RESOURCES CORPORATION 10
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Board of Directors and Corporate Governance
Mr. Poladian’s service in a senior management position at one of the world’s largest accounting firms, combined with his experience as Chief Operating Officer and Chief Financial Officer of a diversified real estate company, gives Mr. Poladian deep knowledge of key business issues, including personnel and asset utilization. He also provides insight into all aspects of fiscal management. Through his work on the boards of various entities, Mr. Poladian has garnered valuable insight into our business and corporate governance generally.
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• Member of the Health, Safety and Environmental Committee
Ms. Powers was appointed to the Board of Directors in 2017. Ms. Powers retired from Occidental Petroleum Corporation in January 2017 after more than 30 years of service at Occidental. Prior to her retirement, Ms. Powers served since 2009 as Executive Vice President of Worldwide Exploration for Occidental Oil and Gas Corporation and as Vice President of parent Occidental Petroleum Corporation. From 2006 to 2009, Ms. Powers served as Vice President of Worldwide Exploration. Prior to 2006, Ms. Powers served as Director of Worldwide Geoscience, Vice President of Exploration in Colombia and Chief Exploration Geologist for Worldwide Exploration. Since October 2018, Ms. Powers has served as a director of EQT Corporation. Ms. Powers holds a Bachelor of Science degree in Geology with high honors from Texas A&M University.
Skills and Qualifications
Ms. Powers brings over 36 years of experience in the oil and gas industry to CRC’s Board. Her expertise as a senior geoscientist working in hydrocarbon provinces around the world and, in particular, her knowledge of California’s geology greatly benefits CRC’s Board. The Board also benefits from her perspective gained from many years of executive management in the industry.
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• Member of the Audit Committee
• Member of the Compensation Committee
CALIFORNIA RESOURCES CORPORATION 11
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Board of Directors and Corporate Governance
The Board of Directors appointed Ms. Siegel as a director effective as of August 21, 2018. Ms. Siegel is the President of LAS Advisory Services, a firm providing advice to organizations on issues related to talent management, succession planning, organizational capability and culture. From 2003 to 2012, Ms. Siegel served as Senior Vice President of Human Resources and Internal Communications of Tyco International Ltd., a diversified manufacturing and service company. Ms. Siegel had responsibility for rebuilding the leadership team, executing a strategy to restore the confidence of the company's employees and building an HR function with deep expertise in global human resource practices. From 1994 to 2002, she held various positions with Honeywell International Inc., including Vice President of Human Resources — Specialty Materials and was a principal at Strategic Compensation Associates. Ms. Siegel is currently Program Chair of the G100 Talent Consortium. Ms. Siegel is a director and compensation committee chair of the board of directors of CenturyLink, Inc., a broadband, telecommunications and data hosting company, FactSet Research Systems Inc., a multinational financial data and software company, and Volt Information Services, a provider of global infrastructure solutions in technology, information services and staffing acquisition. Ms. Siegel has an MBA and a Master’s degree in City and Regional Planning, both from Harvard University, and a Bachelor’s degree from the University of Michigan.
Skills and Qualifications
Ms. Siegel brings to our Board substantial experience as a human resources executive with large global
enterprises as well as substantial public company board experience. Her background will provide the
Board with unique insight into various issues including talent management, succession planning and
culture.
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• Chairman of the Nominating and Governance Committee
Mr. Sinnott was appointed to the Board of Directors of CRC in 2014. Mr. Sinnott is co-chairman of Kayne Anderson Capital Advisors, L.P., an investment management firm. From 2010 until 2016, he served there as President, Chief Executive Officer and Chief Investment Officer. He also served as a Managing Director there from 1992 to 1996 and as its Senior Managing Director from 1996 until assuming the role of Chief Executive Officer in 2010. He is also President of Kayne Anderson Investment Management, Inc., the general partner of Kayne Anderson Capital Advisors, L.P. Mr. Sinnott served as a director of Kayne Anderson Energy Development Company from 2006 through 2013. He was Vice President and Senior Securities Officer of the Investment Banking Division of Citibank from 1986 to 1992 and previously held positions with United Energy Resources, a pipeline company, and Bank of America in its oil and gas finance department. Since 1998, Mr. Sinnott has served on the board of PAA GP Holdings LLC and its predecessor entities and currently serves as chairman of its compensation committee. Mr. Sinnott received a Bachelor of Arts degree from the University of Virginia and a Masters of Business Administration from Harvard University.
CALIFORNIA RESOURCES CORPORATION 12
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Board of Directors and Corporate Governance
As President of a California-based investment company investing in energy and other areas, Mr. Sinnott brings extensive insight into the oil and gas and financial industries to the CRC Board of Directors. His responsibility for analyzing industry players and managing a multi-billion dollar investment enterprise allow him to provide insight on a broad variety of matters affecting the oil and gas industry generally and the company specifically. He brings deep understanding of and insight into strategic alternatives, industry trends, deal structures and finance.
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Mr. Stevens was appointed President, Chief Executive Officer and a Director of CRC in 2014. Mr. Stevens served as Vice President—Corporate Development of Occidental from 2012 to 2014, as Vice President—California Operations, Oxy Oil & Gas from 2008 to 2012, and as Vice President—Acquisitions and Corporate Finance of Occidental from 2004 to 2012. He also serves on the board of directors of the Western States Petroleum Association. Mr. Stevens holds a Master of Business Administration degree from the University of Southern California and a Bachelor of Science degree from the United States Military Academy.
Skills and Qualifications
Our Board of Directors benefits from Mr. Stevens’ deep knowledge of the oil and gas industry and his expertise in strategically evaluating and valuing oil and gas assets that is derived from years of buying and integrating exploration and production assets, many of which we currently own. Mr. Stevens also brings specific insight into the Company’s operations from his significant managerial experience as an executive at Occidental, including his strong experience in allocating capital and managing Occidental’s and our assets. Mr. Stevens’ extensive experience dealing with California’s regulatory environment, agencies and political landscape and his ability to forge strong ties within the state have proven a valuable asset to the Company.
Board Refreshment and Evaluation
Identifying and Evaluating Nominees for Directors
Our Nominating and Governance Committee is responsible for leading the search for individuals qualified to serve as directors and for recommending to the Board nominees as directors to be presented for election at meetings of the stockholders or of the Board of Directors. Our Nominating and Governance Committee evaluates candidates for nomination to the Board of Directors, including those recommended by stockholders, and conducts appropriate inquiries into the backgrounds and qualifications of possible candidates. The Nominating and Governance Committee may retain outside consultants to assist in identifying director candidates in its sole discretion, but it did not engage any outside consultants in connection with selecting the nominees for election at the Annual Meeting.
CALIFORNIA RESOURCES CORPORATION 13
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Board of Directors and Corporate Governance
Director Criteria, Qualifications and Experience
Our Corporate Governance Guidelines contain qualifications that apply to director nominees recommended by our Nominating and Governance Committee. In the event that a vacancy on the Board of Directors arises, the Nominating and Governance Committee will consider and review the candidate’s following qualifications, relevant skills, qualifications and experience:
independence under applicable standards;
business judgment;
service on boards of directors of other companies;
personal and professional integrity, including commitment to the Company’s core values;
willingness to commit the required time to serve as a Board of Directors member;
familiarity with the Company and its industry; and
such other matters as the committee deems appropriate.
The Board recognizes the value of having directors from a wide variety of backgrounds who bring diverse opinions, perspectives, skills, experiences, backgrounds and orientations to its discussions and its decision-making processes. A diverse board enables a more balanced, wide-ranging discussion in the boardroom, and is also important to the Company’s stockholders, its management and employees. For these reasons, the Nominating and Governance Committee also will consider the diversity of, and the optimal enhancement of the current mix of talent and experience on, the Board of Directors. In 2018, the Board of Directors appointed Ms. Siegel as a director, which further diversified the board.
Board Evaluations and Incumbent Directors
Our Board believes that a robust annual evaluation process is an important part of its governance practices. For this reason, the Nominating and Governance Committee oversees an annual evaluation of the performance of the Board. The committee distributes written evaluation surveys to each director, and the Chairman of the Board discusses the results of these written surveys with the individual directors. In addition, the Chairman shares the results of the surveys and interviews with the full Board for consideration with respect to director nominees, and Board and committee structure, composition and effectiveness.
With respect to the reelection of an existing director, the Nominating and Governance Committee will consider the results of the evaluation process and review the director’s:
past Board and committee meeting attendance and performance;
length of Board service;
personal and professional integrity, including commitment to the Company’s core values;
relevant experience, skills, qualifications and contributions that the existing director brings to the Board;
independence under applicable standards; and
such other matters as the committee deems appropriate.
CALIFORNIA RESOURCES CORPORATION 14
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Board of Directors and Corporate Governance
The Board of Directors engages in various activities to obtain additional insight into our business and industry, beneficial perspectives on the performance of the Company, the Board and our management, and on the Company’s strategic direction. From time to time, the full Board receives presentations from its committees, and internal and external advisors, regarding current topics of interest. The Company also makes resources available to individual directors, including access to director education from third party providers.
Director Independence Determinations
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Majority independent directors 20% non-independent 80% independent
The Board of Directors has reviewed all direct or indirect business relationships of which it is aware between each director (including his or her immediate family) and us, including those relationships described under “Related Party Transactions” below, as well as each director’s relationships with charitable organizations, to assess director independence as defined in the listing standards of the NYSE. Based on this evaluation, the Board of Directors has determined that Messrs. Gannon, Korell, McMahon, Moncrief, Poladian and Sinnott and Mses. Powers and Siegel are independent directors as that term is defined in the listing standards of the NYSE. Neither Mr. Albrecht, the Chairman of the Board, nor Mr. Stevens, the President and Chief Executive Officer, is considered by the Board of Directors to be an independent director because of his prior or current employment with CRC.
CALIFORNIA RESOURCES CORPORATION 15
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Board of Directors and Corporate Governance
Board Leadership Structure and Committees
The Board of Directors’ leadership structure separates the CEO and Chairman of the Board positions. Mr. Stevens currently serves as our President and CEO, and Mr. Albrecht serves as our non-executive Chairman.
The Board of Directors believes that there is no single, generally accepted approach to providing board leadership and that each of the possible leadership structures for a board must be considered in the context of the individuals involved and the specific circumstances facing a company, as the right leadership structure may vary as circumstances change. The Board of Directors believes it is in the best interest of the Company and its stockholders at this time to have separate CEO and Chairman positions, and have an independent director serve as Lead Independent Director working in conjunction with the Chairman. The Board of Directors has found that this structure enables the CEO to focus on operation of the Company’s business, while the Chairman and Lead Independent Director focus on leading the Board of Directors in its oversight role.
The Board of Directors has created the position of Lead Independent Director, selected annually by the Board from among the independent directors. Mr. Korell has served as Lead Independent Director since December 2014, and the Board selected him to continue in this position at the meeting in February 2019. The Board of Directors believes that the Lead Independent Director position provides additional independent oversight for the Board and management. The responsibilities of the Lead Independent Director include acting as chair at meetings of the Board of Directors when the Chairman is not present, and preparing the agenda and presiding over executive sessions of the non-management directors of the Board of Directors.
During 2018, the Board of Directors held six meetings, and each of the standing committees held the number of meetings included in the description of the committees set forth below. Each director attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served that occurred during such directors’ terms in 2018.
Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meetings of stockholders. Nine then-incumbent directors attended the annual meeting in May 2018.
Executive Sessions of the Board
The Board of Directors intends to hold regularly scheduled meetings of independent directors in executive session without management present in conjunction with each regular board meeting. In addition to these regularly scheduled meetings, executive sessions may be called upon the request of any independent director. In 2018, the Board of Directors held executive sessions on the day of all of the regularly scheduled board meetings.
CALIFORNIA RESOURCES CORPORATION 16
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Board of Directors and Corporate Governance
As of the date of this proxy statement, our Board of Directors has four separately designated standing committees. The membership and purposes of each of the committees are described below. Each of the standing committees operates under a written charter adopted by the Board. The Board of Directors and each committee has the power to hire independent legal, financial or other experts and advisors as it may deem necessary, without consulting or obtaining the approval of any officers of the Company in advance.
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CALIFORNIA RESOURCES CORPORATION 17
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Board of Directors and Corporate Governance
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INDEPENDENCE 11% non-independent 89% independent GENDER 33% female 67% male AGE 11.1% 30s 22.3% 40s 33.3% 50s 33.3% 60s
Note: Independence statistics as of the date of the Annual Meeting.
INDEPENDENCE 10% 90% independent non-independent GENDER 20% 80% male female AGE 10% 40% 50% 50s 60s 70s
Independence 10% non-independent 90% independent Gender 20% female 80% male AGE 10% 50s 50% 60s 40% 70s
CALIFORNIA RESOURCES CORPORATION 185
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Board of Directors and Corporate Governance
The Board’s Role in Risk Oversight
Our Company’s managementSet forth below is responsible fora chart that summarizes the day-to-day management of risks to the Company. The Board of Directors has broad oversight responsibility for our risk management programs.
Compensation Committee Interlocksspecific experience, qualifications, attributes and Insider Participation
No memberskills of our Compensation Committee is now, or at any time since the beginningdirectors and biographical information regarding each of 2018 has been, employed by or served as an officer of CRC orour directors. There are no family relationships between any of its subsidiariesour directors and executive officers. There are no ongoing arrangements or hadunderstandings between any business relationship requiring disclosure with CRC or any of its subsidiaries. None of our executive officers is now, or atdirectors and any time has been, since the beginning of 2018,other person pursuant to which any person will be selected as a member of the compensation committeedirector or board of directors of another entity one of whosean executive officers has been a member of our Board of Directors or Compensation Committee.officer.
CALIFORNIA RESOURCES CORPORATION 19
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Board of Directors and Corporate Governance
Our Board of Directors welcomes communications from our stockholders and other interested parties. Communications to our Board of Directors, to any committee of our board, to the Lead Independent Director (who presides over the executive sessions of our independent and non-management directors), or to any director in particular, should be sent to:
Board of Directors, committee name or director’s name, as appropriate
California Resources Corporation
PLEASE NOTE: This letter and the Proxy Statement contain forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects. For a discussion of these risks and uncertainties, please refer to the “Risk Factors” and “Forward-Looking Statements” described in our Annual Report on Form 10-K. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will” or “would” and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Such statements are based on management's expectations as of the date of this filing, unless an earlier date is specified, and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in our Form 10-K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation and expressly disclaim any duty to correct or update any forward-looking statement, except as required by applicable law.
We have included in this letter and the Proxy Statement certain voluntary disclosures regarding our Sustainability Goals, Sustainability Reports and related matters because we believe these matters are of interest to our investors; however, we do not believe these disclosures are “material” as that concept is defined by or construed in accordance with the securities laws or any other laws of the U.S. or any other jurisdiction, or as that concept is used in the context of financial statements and financial reporting. These disclosures speak only as of the date on which they are made, and we undertake no obligation and expressly disclaim any duty to correct or update such disclosures, whether as a result of new information, future events or otherwise, except as required by applicable law.
Notice of the 2022 Annual Meeting of Stockholders
Meeting Date: | May 4, 2022 |
Meeting Time: | 11:00 a.m., Pacific Time |
Location: | Virtual meeting at https://www.virtualshareholdermeeting.com/CRC2022 |
Record Date: | March 7, 2022 |
Purposes of the 2022 annual meeting of stockholders:
(1) | To elect the nine director nominees named in this proxy statement, each to a one-year term; |
(2) | To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022; |
(3) | To hold an advisory vote to approve named executive officer compensation; |
(4) | To approve the Employee Stock Purchase Plan; |
(5a) | To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement; and |
(5b) | To approve amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend certain provisions of the Certificate of Incorporation to a majority vote requirement. |
Information relevant to these matters is set forth in the accompanying proxy statement.
The close of business on March 7, 2022 was fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof. Only our stockholders of record or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.
The annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the annual meeting physically. If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 67 of the proxy statement. We have also provided information regarding how stockholders can engage during the Annual Meeting, including how they can vote, ask questions, request technical support and access information following the Annual Meeting within this proxy statement.
Beginning on March 22, 2022, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders containing instructions on how to access the proxy statement and vote online and made our proxy materials available to our stockholders over the Internet.
By Order of the Board of Directors,
Michael L. Preston
Executive Vice President, Chief Administrative Officer and General Counsel
Corporate Secretary
IMPORTANT VOTING INFORMATION
If you owned shares of our common stock at the close of business on March 7, 2022, you are entitled to one vote per share upon each matter presented at our 2022 annual meeting of stockholders to be held on May 4, 2022. In order for stockholders whose shares were held in an account at a brokerage firm, bank or other nominee (i.e., in “street name”) as of March 7, 2022 to vote their shares at the 2022 annual meeting, they will need to obtain a legal proxy from the broker, bank or other nominee that holds their shares authorizing them to vote in person at the annual meeting.
If you hold shares in “street name,” unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your shares via telephone or the Internet, your broker is only permitted to vote on your behalf on ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2022, and may not vote on the election of directors and other matters to be considered at the annual meeting. For your vote to be recognized, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the annual meeting.
YOUR VOTE IS IMPORTANT
Your vote is important. Our Board of Directors strongly encourages you to exercise your right to vote. Voting early helps ensure that we receive a quorum of shares necessary to hold the annual meeting.
QUESTIONS
If you have any questions about the proxy voting process, please contact Broadridge at (800) 579-1639. The Securities and Exchange Commission also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. You also may contact our Investor Relations Department by phone at (818) 661-3731 or by e-mail at IR@crc.com.
ATTENDING THE ANNUAL MEETING
The annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the annual meeting physically. If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 67 of the proxy statement.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF
PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON MAY 4, 2022
The Notice of the 2022 Annual Meeting of Stockholders, the Proxy Statement for the 2022 Annual Meeting of Stockholders and the 2021 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2021) of California Resources Corporation are available at http://www.proxyvote.com. You will need the 16-digit control number included on the Notice that was mailed to you, on your proxy card or on the instructions that accompanied your proxy materials.
2022 PROXY STATEMENT |
TABLE OF CONTENTS
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table | 45 |
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Security Ownership of Directors, Management and Certain Beneficial Holders | 54 |
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Proposal 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm | 56 |
Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation | 57 |
Proposal 4: Approval of California Resources Corporation Employee Stock Purchase Plan | 58 |
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Annex A – Reconciliation of Non-GAAP Measures | A-1 |
Annex B – California Resources Employee Stock Purchase Plan | B-1 |
C-1 |
CALIFORNIA RESOURCES CORPORATION i
2022 PROXY STATEMENT |
Proxy Statement Summary
This summary highlights information contained in the proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting. California Resources Corporation, together with its subsidiaries, is referred to herein as “we,” “our,” “us,” the “Company” or “CRC.” The 2022 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”
2022 Annual Meeting of Stockholders
Date: | May 4, 2022 |
Time: | 11:00 a.m., Pacific Time |
Place: | Virtual meeting at https://www.virtualshareholdermeeting.com/CRC2022 |
Record Date: | March 7, 2022 |
The Annual Meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2022. You will not be able to attend the Annual Meeting physically. If you wish to attend the Annual Meeting, you must follow the instructions under “Attending the Annual Meeting” below.
Agenda and the Board’s Recommendation on Voting Matters
The following table summarizes the items that will be brought for a vote of our stockholders at the annual meeting, along with the recommendation of our Board of Directors as to how stockholders should vote on each item.
Agenda Item | Description | Board’s | |||||
1. | Proposal 1 | Election of the nine director nominees named in this proxy statement each for a one-year term | FOR | ||||
2. | Proposal 2 | Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2022 | FOR | ||||
3. | Proposal 3 | Advisory vote to approve named executive officer compensation | FOR | ||||
4. | Proposal 4 | Approval of the Employee Stock Purchase Plan | FOR | ||||
5. | Proposal 5(a) | Approval of amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement | FOR | ||||
Proposal 5(b) | Approval of amendments to the Certificate of Incorporation to change the supermajority vote requirement for stockholders to amend certain provisions of the Certificate of Incorporation to a majority vote requirement | FOR | |||||
Voting: Stockholders as of the record date are entitled to vote. Each share of common stock entitles its holder to one vote for each director nominee and one vote for each of the proposals to be voted on.
CALIFORNIA RESOURCES CORPORATION 1
2022 PROXY STATEMENT |
Proxy Statement Summary
Directors
As of the Annual Meeting, the Board of Directors will be comprised of eight independent directors, plus Mr. McFarland, our President and Chief Executive Officer (“CEO”). The following table provides summary information about each director and whether the Board of Directors considers each director to be independent under the New York Stock Exchange’s (“NYSE”) independence standards. Although he is not currently independent, the Board has determined that Mr. Bremner will be independent as of the date of the Annual Meeting. Each director is elected by a plurality of votes cast.
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Director | Positions | Age | Independent | Since | Audit | Compensation | Governance | Sustainability |
Andrew B. Bremner |
| 31 | No | 2021 |
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Douglas E. Brooks |
| 63 | Yes | 2020 |
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Tiffany (TJ) Thom Cepak | Chair | 49 | Yes | 2020 | ● | ● |
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James N. Chapman |
| 59 | Yes | 2020 |
| Chair | ● |
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Mark A. (Mac) McFarland | President & CEO | 52 | No | 2020 |
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Nicole Neeman Brady |
| 41 | Yes | 2021 |
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Julio M. Quintana |
| 62 | Yes | 2020 | ● |
| Chair |
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William B. Roby |
| 62 | Yes | 2020 | ● | ● |
| Chair |
Alejandra (Ale) Veltmann |
| 53 | Yes | 2021 | Chair |
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Corporate Governance Highlights
✓ | Supermajority votes. As part of our emergence from bankruptcy, our Bylaws were revised to reduce the prior supermajority voting threshold to amend the Bylaws to a majority vote. The Board is resubmitting for approval proposals to amend the Company’s Certificate of Incorporation to reduce the current supermajority voting thresholds to majority thresholds. |
✓ | 8 out of 9 Board members are independent. The Board has determined 8 out of 9 Board members are independent within the meaning of NYSE listing standards as of the date of the Annual Meeting. |
✓ | Anti-Hedging and Anti-Pledging Policy. In response to feedback in prior years, our Insider Trading Policy specifically addresses the hedging or pledging of our securities. |
✓ | Overboarding Policy. We maintain a policy to restrict directors who are currently sitting CEOs of public companies from serving on more than two other public company boards without approval, subject to a related company analysis, as applicable. |
✓ | Clawback Policy. We maintain a comprehensive, standalone policy that covers cash, equity, equity-based and other awards under our incentive compensation programs. |
✓ | Board is not classified. Our directors are elected on an annual basis. |
✓ | Independent Board committees. Our Audit, Compensation, and Nominating and Governance committees are made up of independent directors. As of the Annual Meeting, the Sustainability Committee will also be made up of independent directors. Each standing committee operates under a written charter that has been approved by the Board and is available to stockholders. |
✓ | Each committee has the authority to retain independent advisors. |
✓ | Frequent executive sessions of independent directors. In 2021, the independent directors held executive sessions on a regular basis. |
✓ | No stockholder rights plan (“poison pill”) in effect. |
✓ | Director evaluation process. Each year, each of the Board committees and the full Board of Directors undertakes a self-assessment of its performance. |
✓ | CEO and management evaluation process. The Board of Directors conducts an annual performance review of management, including the CEO, and periodically reviews succession planning for the CEO. |
CALIFORNIA RESOURCES CORPORATION 2
2022 PROXY STATEMENT |
Proxy Statement Summary
Compensation Program Highlights
In connection with the unprecedented circumstances affecting the industry and market volatility resulting from the COVID-19 pandemic, beginning in March 2020, the Former Compensation Committee (as defined below) reviewed the annual and long-term incentive programs to determine whether those programs appropriately aligned compensation opportunities with the Company’s then current goals and ensured the stability of the Company’s workforce. Following this review, in May 2020, the Former Compensation Committee approved changing the incentive compensation program for the organization, including the NEOs, to an all cash program consisting of a Retention Bonus Award and a Quarterly Incentive Award.
Following our emergence from the bankruptcy process, our New Compensation Committee (as defined below) immediately began setting a new course for our post-emergence compensation program, reinstituting long-term performance equity awards in line with compensation best practices and good governance policies.
Compensation Program Practices
Our executive compensation program is designed to motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward. It is designed to incorporate compensation best practices, and is governed going forward from our emergence from bankruptcy by our New Compensation Committee. Prior to our restructuring in 2020, our annual incentive awards and long-term incentive plans were performance-based and intended to align with the long-term best interests of stockholders and to retain our management team. During the first half of 2020, our Former Compensation Committee changed our compensation programs to address the challenging environment and impending restructuring, including the elimination of long-term incentives for 2020 due to the diminished value of the Company’s stock. After we emerged from the bankruptcy process, our New Compensation Committee took action to realign our executive compensation program with our stockholders’ interests and with best practices and good governance policies.
CALIFORNIA RESOURCES CORPORATION 3
2022 PROXY STATEMENT |
Proxy Statement Summary
The New Compensation Committee has engaged in best practices to align executive pay with Company performance and to ensure good governance in the following ways:
WHAT WE DO √ We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. √ We are stockholder aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. All of the outstanding long-term incentive awards for our named executives are stock-based. √ We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. √ We solicit feedback from stockholders. We regularly reach out to our largest stockholders for feedback on our governance and executive compensation. √ We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. √ We have stock ownership requirements. We maintain stock ownership guidelines for our named executive officers and stock grant delivery mechanics for our directors that require meaningful stock ownership in the Company. √ We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. √ We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.
WHAT WE DON’T DO. X We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. X We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. X We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for our executives. X We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create excessive or inappropriate risk for the Company.
CALIFORNIA RESOURCES CORPORATION 4
2022 PROXY STATEMENT |
Board of Directors and Corporate Governance
Board of Directors and Corporate Governance
Our Board of Directors has nominated nine directors for election at the 2022 Annual Meeting. All of our nominees currently serve as CRC directors. Each nominee has agreed to serve another term, if elected.
Our Board values and exhibits an effective mix of diversity, perspective, skills and experience. Currently one-third of the Board are women and one-third of the Board are members of underrepresented communities as defined under California law.
INDEPENDENCE 11% non-independent 89% independent GENDER 33% female 67% male AGE 11.1% 30s 22.3% 40s 33.3% 50s 33.3% 60s
Note: Independence statistics as of the date of the Annual Meeting.
INDEPENDENCE 10% 90% independent non-independent GENDER 20% 80% male female AGE 10% 40% 50% 50s 60s 70s
Independence 10% non-independent 90% independent Gender 20% female 80% male AGE 10% 50s 50% 60s 40% 70s
CALIFORNIA RESOURCES CORPORATION 5
2022 PROXY STATEMENT |
Board of Directors and Corporate Governance
Set forth below is a chart that summarizes the specific experience, qualifications, attributes and skills of our directors and biographical information regarding each of our directors. There are no family relationships between any of our directors and executive officers. There are no ongoing arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person will be selected as a director or an executive officer.
Director Skills and Qualifications
Summary of Director Qualifications and Experience | Andrew B. Bremner | Douglas E. Brooks | Tiffany (TJ) Thom Cepak | James N. Chapman | Mark A. (Mac) McFarland | Nicole Neeman Brady | Julio M. Quintana | William B. Roby | Alejandra (Ale) Veltmann |
SKILLS & EXPERIENCE | |||||||||
Board of Directors Experience | X | X | X | X | X | X | X | ||
CEO Experience | X | X | X | ||||||
Senior Executive Experience | X | X | X | X | X | X | X | X | |
Oil and Gas Industry Experience | X | X | X | X | X | X | X | ||
Financial/Capital Markets Expertise | X | X | X | X | X | X | X | ||
Mergers & Acquisitions Experience | X | X | X | X | X | X | X | X | |
Engineering/Technology Expertise | X | X | X | X | X | X | |||
Compensation Expertise | X | X | X | X | |||||
Health & Safety Experience | X | X | X | X | X | ||||
Environmental/Sustainability Experience | X | X | X | X | X | X | X | ||
Risk Management Experience | X | X | X | X | X | ||||
Government/Regulatory Affairs Experience | X | X | X | X | X | ||||
CALIFORNIA RESOURCES CORPORATION 6
2022 PROXY STATEMENT |
Board of Directors and Corporate Governance
| Andrew B. Bremner Director since: 2021 Age: 31 | • Partner of JB Energy Partners, LP • VP, Oil & Gas of Jaco Oil Company • Formerly Portfolio Management & Strategic Planning for California Resources Corporation |
• Member of the Sustainability Committee
Mr. Bremner, 31, has served as a member of California Resources Corporation's Board of Directors since May 2021. Since 2019, Mr. Bremner, has served as a partner of JB Energy Partners, LP (JBEP) and is the Vice President of Oil & Gas for Jaco Oil Company. In these roles Mr. Bremner led the acquisition and management of a substantial portfolio of California energy and alternative assets. Mr. Bremner also launched JBEP’s carbon capture & storage (CCS) arm and currently manages a portfolio of CCS projects for the firm. From 2013 to 2019, Mr. Bremner worked for California Resources Corporation in various engineering roles, and most recently in Portfolio Management & Strategic Planning. Mr. Bremner earned his M.B.A. from University of California, Los Angeles, and has a Bachelor of Science degree in Mechanical Engineering from California Polytechnic State University San Luis Obispo.
| Douglas E. Brooks Director since: 2020 Age: 63 | • Board Chair and Former CEO of Oasis Petroleum, Inc. • Former Board Chair of OMP GP LLC • Former Director of Chaparral Energy, Inc. and Madalena Energy Inc. • Former CEO and Director of Energy XXI Gulf Coast, Inc., Yates Petroleum Corporation and Aurora Oil & Gas Limited |
• Member of the Nominating and Governance Committee
Mr. Brooks, 63, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Brooks is a private investor. He currently serves as the Board Chair of Oasis Petroleum Inc., an oil and natural gas company, and served as its Chief Executive Officer from December 2020 to April 2021. Mr. Brooks also previously served as the Board Chair of OMP GP LLC, the general partner of Oasis Midstream Partners LP. He previously served on the Board of Directors of Chaparral Energy, Inc. from 2017 to October 2020 and also served on the Board of Directors of Madalena Energy Inc. (now Centaurus Energy, Inc.) in Canada. From April 2017 he served as President and Chief Executive Officer as well as a member of the Board of Directors of Energy XXI Gulf Coast, Inc., an offshore Gulf of Mexico exploration and production company, until it was acquired by an affiliate of Cox Oil LLC in October 2018. From 2015 to 2016, he served as President and Chief Executive Officer and a member of the Board of Directors of Yates Petroleum Corporation, a privately owned exploration and production company, which merged with EOG Resources. From 2012 to 2014, he served as Chief Executive Officer as well as a member of the Board of Directors of Aurora Oil & Gas Limited until it merged with Baytex Energy Corp. In 2012, he served as a Senior Vice President at Forest Oil Corporation. From 2006 to 2012, Mr. Brooks also built two private equity sponsored firms focused on unconventional resource projects in the western U.S. In addition, he spent 24 years with Marathon Oil Company in roles of increasing responsibility, lastly as the Director of Upstream Mergers and
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Acquisitions and Business Development for the Americas. He holds a Bachelor of Science degree in business management from the University of Wyoming – Casper and a Master of Business Administration, Finance from Our Lady of the Lake University in Texas.
| Tiffany (TJ) Board Chair Age: 49 | • Director of Patterson-UTI and Ranger Oil Corporation • Former CFO of Energy XXI Gulf Coast Inc., KLR Energy and EPL Oil & Gas, Inc. • Former Director of Yates Petroleum Corporation |
• Member of the Audit Committee
• Member of the Compensation Committee
Ms. Cepak, 49, is the Chair of California Resources Corporation’s Board of Directors and has served as a member since October 2020. Ms. Cepak has 28 years of energy industry experience, including both financial and operational appointments. She has served as a director of Patterson-UTI, a company that provides land drilling and pressure pumping services, directional drilling, rental equipment and technology, since August 2014 and as a director of Ranger Oil Corporation, an independent oil and gas company, since September 2019. Most recently, Ms. Cepak joined the Board of Directors of EnLink Midstream, LLC, in December, 2021. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast Inc. from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc.) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak originally joined EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and an M.B.A. in Management with a concentration in Finance from Tulane University.
CALIFORNIA RESOURCES CORPORATION 8
2022 PROXY STATEMENT |
Board of Directors and Corporate Governance
| James N. Chapman Director since: 2020 Age: 59 | • Advisory Director of SkyWorks Capital, LLC • Director of Denbury, Inc. and Arch Resources, Inc. • Over 35 years of investment banking experience |
• Chair of the Compensation Committee
• Member of the Nominating and Governance Committee
Mr. Chapman, 59, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Chapman serves as a non-executive Advisory Director of SkyWorks Capital, LLC, an aviation and aerospace management consulting services company based in Greenwich, Connecticut, which he joined in December 2004. Prior to SkyWorks, he was associated with Regiment Capital Advisors, LP, an investment advisor based in Boston specializing in high yield investments, which he joined in January 2003. Prior to Regiment, Mr. Chapman acted as a capital markets and strategic planning consultant with private and public companies, as well as investment advisers and hedge funds (including Regiment), across a range of industries. Prior to establishing an independent consulting practice, Mr. Chapman worked for The Renco Group, Inc. (a multi-billion dollar private corporation with diverse investment holdings located throughout the world) from December 1996 to December 2001. Prior to Renco, he was a founding principal of Fieldstone Private Capital Group, Inc. in August 1990 where he headed the Corporate Finance and High Yield Finance Groups. Prior to joining Fieldstone, Mr. Chapman worked for Bankers Trust Company from July 1985 to August 1990, most recently in the BT Securities capital markets area. Mr. Chapman has over 35 years of investment banking experience in a wide range of industries including aviation/airlines, metals/mining, natural resources/energy, automotive/general manufacturing, financial services, real estate and healthcare. Mr. Chapman has served on the Board of Directors of Denbury, Inc. since September 2020, and on the Board of Directors of Arch Resources, Inc. since 2016. Mr. Chapman received an M.B.A. degree with distinction from Dartmouth College in 1985 and was elected an Edward Tuck Scholar. He received his BA degree, with distinction, magna cum laude, at Dartmouth College in 1984 and was elected to Phi Beta Kappa, in addition to being a Rufus Choate Scholar.
| Mark A. (Mac) McFarland President and CEO Age: 52 | • Director of GenOn Energy, Inc. • Prior Director of Bruin E&P Partners, LLC, TerraForm Power, Inc. and Chaparral Energy, Inc. • Prior CEO of GenOn Energy, Inc. and Luminant Holding Company LLC |
Mr. McFarland, 52, is the President and Chief Executive Officer of California Resources Corporation and has served on its Board of Directors since October 2020. Mr. McFarland is the former Executive Chairman of GenOn Energy, Inc., an independent power producer and continues to serve on its Board. From April 2017 to December 2018, he was the President and Chief Executive Officer of GenOn and served on its Board of Managers. From 2013 to 2016, he served as Chief Executive Officer of Luminant Holding Company LLC, a subsidiary of Energy Future Holdings Corporation, and a large independent power producer. From 2008 to 2013, he served as both Chief Commercial Officer of Luminant and Executive Vice President, Corporate Development and Strategy of Energy Future Holdings. From 1999 to 2008, Mr. McFarland served in various roles at Exelon Corporation, including as Senior Vice President, Corporate Development. He previously
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served on the Boards of Bruin E&P Partners (an independent company), TerraForm Power, and Chaparral Energy. Mr. McFarland earned his Masters of Business Administration from the University of Delaware and a Bachelor of Science degree in Civil Engineering (Environmental Concentration) from Virginia Polytechnic Institute and State University. He received his professional engineer license in 1995.
| Nicole Neeman Brady Director since: 2021 Age: 41 | • CEO and Director of Sustainable Development Acquisition Corp. • Leadership roles at Renewable Resources Group • Prior President of Edison Water Resources • Prior Officer of Edison International |
• Member of the Compensation Committee
• Member of the Sustainability Committee
Ms. Neeman Brady, 41, has served as a member of California Resources Corporation’s Board of Directors since August 2021. Nicole Neeman Brady currently serves as the Chief Executive Officer and a director of Sustainable Development Acquisition Corp. and since 2017 has been in various leadership roles at Renewable Resources Group. From 2015 to 2017 she was the President of Edison Water Resources and an officer of Edison International. In 2015, she was the Director, Strategic Planning of Edison International. From 2008 until 2015, Ms. Neeman Brady served in several roles at Southern California Edison, including Director, Energy Procurement, Power Supply from 2014 to 2015; Director, Asset Optimization and Trading, Power Supply from 2013 to 2014; Director, Contracts, Renewable and Alternative Power from 2011 to 2013. Prior to that, Ms. Neeman Brady held various finance and strategic planning positions for McKinsey and Company (2007), Twentieth Century Fox (2005-2006) and Goldman Sachs (2001-2004). Ms. Neeman Brady holds a Bachelor’s degree in Economics and History of Architecture from Brown University and an MBA from Harvard University. Ms. Neeman Brady currently serves on the Boards of Directors of Sustainable Development Acquisition Corp, Blue Ocean Mariculture and the Library Foundation of Los Angeles, is an independent board member of Mitigation Investment Holdings, and is a Commissioner of the Los Angeles Department of Water and Power. She previously served as Chairwoman of the Board of Fishpeople, a Board Alternate for CalBio Energy, a Board Observer of Enbala Networks, and a Board Member of Emrgy and the Colorado River Board of California.
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Board of Directors and Corporate Governance
| Julio M. Quintana Director since: 2020 Age: 62 | • Former Chairman of Basic Energy Services • Director of SM Energy, Newmont Mining • Prior Director and CEO of Tesco Corporation • Extensive experience in the oil and gas industry |
• Chair of the Nominating and Governance Committee
• Member of the Audit Committee
Mr. Quintana, 62, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Quintana served as the President and Chief Executive Officer of Tesco Corporation, an oilfield services company, from 2005 until his retirement in January 2015, and was a member of Tesco’s Board of Directors from September 2004 to May 2015. Prior to his appointment as President and Chief Executive Officer, Mr. Quintana served as Executive Vice President and Chief Operating Officer at Tesco beginning in September 2004. Prior to his tenure at Tesco, Mr. Quintana worked for Schlumberger Corporation as Vice President of Integrated Project Management and Vice President of Marketing for the Americas from November 1999 to September 2004. Prior to Schlumberger, Mr. Quintana worked from June 1980 to November 1999 for Unocal Corporation, an integrated E&P company. Mr. Quintana held various operational and managerial roles in production, drilling and asset management. His last roles at Unocal were Asset Manager for the MidContinent Region and Asset Manager for Deepwater Gulf of Mexico. Mr. Quintana brings 41 years of experience in various aspects of the oil and gas exploration and production industry, including strong experience in upstream operations, a deep understanding of drilling and asset management technologies, and broad human resources management skills and experience. He is a member of the Board of Directors of SM Energy since July 2006, a member of the Board of Directors of Newmont Mining since October 2015, Chairman of the Board of Basic Energy Services and member of its Board of Directors from December 2016 until October 2021. Mr. Quintana has a degree in Mechanical Engineering from The University of Southern California and is a Licensed Petroleum Engineer in California.
| William B. Roby Director since: 2020 Age: 62 | • CEO of Shepherd Energy, LLC • Director of Vermilion Energy Inc. • Extensive experience in the oil and gas industry |
• Chair of the Sustainability Committee
• Member of the Audit Committee
• Member of the Compensation Committee
Mr. Roby, 62, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Since 2015, Mr. Roby has served as the Chief Executive Officer of Shepherd Energy, LLC, Mr. Roby’s consulting company. From 2013 to 2014, he acted as Chief Operating Officer of Sheridan Production Company, LLC. From 2000 to 2013, he held a number of U.S. and international management positions with Occidental Petroleum Corporation, most recently as Senior Vice President, Worldwide Operations and
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Production/Facility Engineering. Prior to his work at Occidental, he was Vice President of Operations of Altura Energy Ltd., a joint venture between Shell Oil Company and Amoco Corporation in the Permian Basin, following 15 years of various managerial and engineering roles with Shell Oil. Mr. Roby has served as a member of the Board of Directors of the international E&P firm Vermilion Energy Inc. since 2017. He has a bachelor’s degree in mechanical engineering from Louisiana State University.
| Alejandra (Ale) Veltmann Director since: 2021 Age: 53 | • Founder, CEO and Director of ESG Lynk • Former VP and Chief Accounting Officer of Paragon Offshore Plc • Former Controller, VP and Chief Accounting Officer • Formerly with KPMG LLP and Arthur Andersen LLP |
• Chair of the Audit Committee
Ms. Veltmann, 53, has served as a member of California Resources Corporation's Board of Directors since December 2021. Ms. Veltmann has 30 years of experience that includes global financial leader of publicly-listed entities, private entrepreneurial companies and global auditing firms. Since 2018, she has served as founder, CEO and sole director of ESG Lynk, a leading sustainability reporting company. From 2015 to 2018, she was the Vice President and Chief Accounting Officer of Paragon Offshore Plc., an offshore drilling company. From 2010 to 2015, she worked in various roles including Corporate Controller and Vice President and Chief Accounting Officer at Geokinetics, Inc., formerly one of the world’s largest independent land and seafloor geophysical companies. She also worked in various auditor capacities at KPMG LLP from 1995 to 2002 and before that at Arthur Andersen LLP from 1992 to 1995. Since 2021, she has served as a director and chair of the Audit Committee for Structural Integrity Associates, a private company that provides life cycle engineering solutions. She has served as a Board member of The University of New Mexico Robert O. Anderson School of Management since 2018, and as an Advisory Council member of the K.B. Hutchison Center for Energy, Law & Business at The University of Texas at Austin since 2019. Ms. Veltmann is a certified public accountant and holds the FSA Credential from the Sustainability Accounting Standards Board (SASB). She has a BBA degree in Accounting from The University of New Mexico, and is an alumna of the Advanced Management Program at Harvard Business School.
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Board of Directors and Corporate Governance
Board Refreshment and Evaluation
Identifying and Evaluating Nominees for Directors
Our Nominating and Governance Committee is responsible for leading the search for individuals qualified to serve as directors and for recommending to the Board nominees as directors to be presented for election at meetings of the stockholders or of the Board of Directors. Our Nominating and Governance Committee evaluates candidates for nomination to the Board of Directors, including those recommended by stockholders, and conducts appropriate inquiries into the backgrounds and qualifications of possible candidates. The Nominating and Governance Committee may retain outside consultants to assist in identifying director candidates in its sole discretion, but it did not engage any outside consultants in connection with selecting the nominees for election at the Annual Meeting.
Director Criteria, Qualifications and Experience
Our Corporate Governance Guidelines contain qualifications that apply to director nominees recommended by our Nominating and Governance Committee. In the event that a vacancy on the Board of Directors arises, the Nominating and Governance Committee will consider and review the candidate’s following qualifications, relevant skills, qualifications and experience:
independence under applicable standards;
business judgment;
service on boards of directors of other companies;
personal and professional integrity, including commitment to the Company’s core values;
willingness to commit the required time to serve as a Board of Directors member;
familiarity with the Company and its industry; and
such other matters as the committee deems appropriate.
The Board recognizes the value of having directors from a wide variety of backgrounds who bring diverse opinions, perspectives, skills, experiences, backgrounds and orientations to its discussions and its decision-making processes. A diverse board enables a more balanced, wide-ranging discussion in the boardroom, and is also important to the Company’s stockholders, its management and employees. For these reasons, the Nominating and Governance Committee also will consider the diversity of, and the optimal enhancement of the current mix of talent and experience on, the Board of Directors. Currently, one-third of the Board are women and one-third of the Board are members of underrepresented communities as defined under California law.
Board Evaluations and Incumbent Directors
Our Board believes that a robust annual evaluation process is an important part of its governance practices. For this reason, the Nominating and Governance Committee oversees an annual evaluation of the performance of the Board. The committee distributes written evaluation surveys to each director, and the Chair of the Board discusses the results of these written surveys with the individual directors. In addition, the Chair shares the results of the surveys and interviews with the full Board for consideration with respect to director nominees, and Board and committee structure, composition and effectiveness.
With respect to the reelection of an existing director, the Nominating and Governance Committee will consider the results of the evaluation process and review the director’s:
past Board and committee meeting attendance and performance;
length of Board service;
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Board of Directors and Corporate Governance
personal and professional integrity, including commitment to the Company’s core values;
relevant experience, skills, qualifications and contributions that the existing director brings to the Board;
independence under applicable standards; and
such other matters as the committee deems appropriate.
The Board of Directors engages in various activities to obtain additional insight into our business and industry, beneficial perspectives on the performance of the Company, the Board and our management, and on the Company’s strategic direction. From time to time, the full Board receives presentations from its committees, and internal and external advisors, regarding current topics of interest. The Company also makes resources available to individual directors, including access to director education from third party providers.
Director Independence Determinations
Majority independent directors 11% non-independent 89% independent
The Board of Directors has reviewed all direct or indirect business relationships of which it is aware between each director (including his or her immediate family) and us, including those relationships described under “Related Party Transactions” below, as well as each director’s relationships with charitable organizations, to assess director independence as defined in the listing standards of the NYSE. Based on this evaluation, the Board of Directors has determined that Messrs. Brooks, Chapman, Quintana and Roby and Mses. Cepak, Neeman Brady and Veltmann are independent directors as that term is defined in the listing standards of the NYSE. Mr. McFarland, our President and Chief Executive Officer, is not considered by the Board of Directors to be an independent director because of his current employment with CRC. Mr. Bremner is not currently considered by the Board to be an independent director under the NYSE’s standards because his prior employment with CRC ended just less than three years prior to the date of this proxy; however, the Board has determined that Mr. Bremner will be independent as of the date of the Annual Meeting.
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Board Leadership Structure and Committees
The Board of Directors’ leadership structure separates the CEO and Chair of the Board positions. Mr. McFarland currently serves as our President and CEO, and Ms. Cepak serves as our non-executive Chair. Our Chair of the Board presides over all meetings of the Board, including executive sessions.
The Board of Directors believes that there is no single, generally accepted approach to providing board leadership and that each of the possible leadership structures for a board must be considered in the context of the individuals involved and the specific circumstances facing a company, as the right leadership structure may vary as circumstances change. The Board of Directors believes it is in the best interest of the Company and its stockholders at this time to have separate CEO and Chair positions. The Board of Directors has found that this structure enables the CEO to focus on operation of the Company’s business, while the Chair focuses on leading the Board of Directors in its oversight role.
During 2021, the Board of Directors held 18 meetings. Each of the standing and special committees held the number of meetings included in the description of the committees set forth below in 2021. Each director attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served that occurred during such directors’ terms in 2021.
Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meetings of stockholders. All of the directors of our Board attended the virtual annual meeting in May 2021.
Executive Sessions of the Board
The Board of Directors intends to hold meetings of independent directors in executive session without management present on a regular basis. In addition to regularly scheduled Board meetings, executive sessions may be called upon the request of any independent director. In 2021, the Board held six executive sessions.
As of the date of this proxy statement, our Board of Directors has four separately designated standing committees. On November 9, 2020, after the Company’s emergence from bankruptcy, the Board also established two temporary special committees, Finance and Operations. The formation of the special committees was undertaken to enhance the Board’s ability to quickly develop an in-depth understanding of the Company, including its operations and assets, particularly in light of the fact that all non-management members of the Board became directors in connection with the Company’s emergence from bankruptcy. On March 9, 2021, the Board dissolved the Operations special committee after it completed its mandate.
The membership and purposes of each of the standing and special committees are described below. Each of the standing committees operates under a written charter adopted by the Board. The Board of Directors and each committee has the power to hire independent legal, financial or other experts and advisors as it may deem necessary, without consulting or obtaining the approval of any officers of the Company in advance.
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Standing Committees of the Board
Audit Committee | ||||
Alejandra (Ale) Veltmann, Chair Tiffany (TJ) Thom Cepak Julio M. Quintana William B. Roby | Our Audit Committee is composed entirely of independent directors pursuant to the applicable standards, including the heightened standards applicable to audit committee members. In addition to regularly scheduled meetings, the committee meets separately in executive sessions with representatives of our independent auditor, our independent reserves audit firms and our internal audit personnel. The Audit Committee approves the appointment and services of the independent auditor and reviews the general scope of audit and audit-related services, matters relating to internal controls and other matters related to accounting and reporting functions. The Audit Committee monitors the integrity of the financial statements of CRC. The committee oversees the Company’s compliance with ethical standards, and reviews material related party transactions. The Board of Directors determined that all of the members of the Audit Committee are financially literate and have accounting or financial management expertise, each as required by the applicable NYSE listing standards. The Board of Directors also determined that Ms. Cepak and Ms. Veltmann qualify as audit committee financial experts under the applicable rules of the Securities Exchange Act of 1934, as amended. | |||
5 Meetings Held in 2021 | ||||
Compensation Committee | ||||
James N. Chapman, Chair Tiffany (TJ) Thom Cepak Nicole Neeman Brady William B. Roby | Our Compensation Committee is composed entirely of independent directors pursuant to the applicable standards, including the heightened standards applicable to compensation committee members. The committee is responsible for (i) determining compensation for our Chief Executive Officer and other executive officers, (ii) overseeing and approving compensation and employee benefit policies, (iii) reviewing and discussing with our management the Compensation Discussion and Analysis and related disclosure included in our annual proxy statement, and (iv) overseeing the evaluation of the performance of our executives. The Compensation Committee may delegate to its Chairperson or any subcommittee it may form some or all of its responsibility and authority for any particular matter as it deems appropriate from time to time under the circumstances. The Compensation Committee also has the authority to retain, compensate, direct, oversee and terminate legal counsel, compensation consultants and other experts and advisors hired to assist the Compensation Committee. | |||
9 Meetings Held in 2021 | ||||
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Nominating and Governance Committee | ||||
Julio M. Quintana, Chair Douglas E. Brooks James N. Chapman | The Nominating and Governance Committee is composed entirely of independent directors. The committee makes proposals to the Board of Directors for candidates to be nominated by the Board of Directors to fill vacancies or for new directorship positions, if any, which may be created from time to time. The Nominating and Governance Committee develops and recommends a set of corporate governance guidelines to our Board of Directors and oversees the evaluation of our Board and its committees. Each year, the Nominating and Governance Committee determines which directors, if any, qualify as independent, disinterested or non-employee directors under applicable standards. The Nominating and Governance Committee periodically reviews the advisability or need for any changes in the Board committee structure, and recommends to the Board the composition of each Board committee. | |||
7 Meetings Held in 2021 | ||||
Sustainability Committee | |||
William B. Roby, Chair Andrew B. Bremner Nicole Neeman Brady | Our Sustainability Committee will be composed entirely of independent directors as of the date of the Annual Meeting. The committee assists the Board in fulfilling its oversight responsibilities relating to sustainability for matters pertaining to the Company’s business, strategy, operations, performance or reputation. The committee reviews and discusses with management the status of strategies, objectives, issues, laws and regulations regarding matters relating to the Company’s operations; sustainability; and health, safety and environment (“HSE”). The committee reviews and discusses with management the Company’s programs on community engagement, diversity, inclusion, workplace culture, talent development and social responsibility. It also reviews our policies and programs designed to ensure (i) compliance with applicable laws and regulations, (ii) consistency with Company strategy, (iii) promotion of safe operations, sustainability and conservation of natural resources, and (iv) that timing requirements are set and achieved. The committee periodically reports to the Board of Directors with respect to operations, sustainability and HSE pertaining to the Company. | ||
7 Meetings Held in 2021 | |||
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Special Committees of the Board
Special Committee on Finance | ||||
James N. Chapman, Chair Andrew B. Bremner Douglas E. Brooks | The Special Committee on Finance assisted the Board in fulfilling its oversight responsibilities for matters relating to the Company’s financial strategy, capital allocation, liquidity position and financial policies and activities. | |||
4 Meetings Held in 2021 | ||||
Special Committee on Operations | ||||
William B. Roby, Chair Douglas E. Brooks Tiffany (TJ) Thom Cepak Julio M. Quintana | The Special Committee on Operations assisted the Board in fulfilling its oversight responsibilities for matters relating to the Company’s operations, including related capital expenditures. The Special Committee on Operations was a temporary committee of the Board and was discontinued as of March 9, 2021. | |||
1 Meeting Held in 2021; Dissolved on March 9, 2021 | ||||
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The Board’s Role in Risk Oversight
BOARD OF DIRECTORS Informed through committee reports and by the President and CEO about known risks to the Company’s strategy and business. Regularly reviews information regarding the Company’s credit, liquidity and operations, including the risks associated with each. COMPENSATION COMMITTEE Oversees the management of risks relating to the Company’s executive compensation plans and arrangements. AUDIT COMMITTEE Oversees financial risks and the ethical conduct of the Company’s business, including the steps the Company has taken to monitor and mitigate these risks, and reviews material related party transactions. NOMINATING AND GOVERNANCE COMMITTEE Manages risks associated with the independence of the Board of Directors and potential conflicts of interest. SUSTAINABILITY COMMITTEE Responsible for overseeing the management of risks relating to sustainability and health, safety and environment.
Our Company’s management is responsible for the day to day management of risks to the Company. The Board of Directors has broad oversight responsibility for our risk management programs.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee is now, or at any time since the beginning of 2021 has been, employed by or served as an officer of CRC or any of its subsidiaries or had any business relationship requiring disclosure with CRC or any of its subsidiaries. None of our executive officers is now, or at any time has been, since the beginning of 2021, a member of the compensation committee or board of directors of another entity one of whose executive officers has been a member of our Board of Directors or Compensation Committee.
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Our Board of Directors welcomes communications from our stockholders and other interested parties. Communications to our Board of Directors, to any committee of our Board, or to any director in particular, should be sent to:
Board of Directors, committee name or director’s name, as appropriate
California Resources Corporation
Attention: Corporate Secretary
27200 Tourney Road,1 World Trade Center, Suite 3151500
Santa Clarita,Long Beach, California 9135590831
We will forward all correspondence directly to the committee or individual director, as appropriate. Our independent directors approved our process for collecting and organizing stockholder communications to the Board of Directors.
If any stockholder or third party has a complaint or concern regarding accounting, internal accounting controls over financial reporting or auditingaudit matters at CRC, they should send their complaint in writing to Mr. Gannon,Ms. Veltmann, the ChairmanChair of the Audit Committee, at the address listed above.
Availability of Corporate Governance Documents
We are committed to good corporate governance. In furtherance thereof, the Board of Directors has adopted governance documents to guide the operation and direction of the Board and its committees, which include Corporate Governance Guidelines, a Business Ethics Policy (which applies to all directors and employees, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer) and charters for the Audit, Compensation, Nominating and Governance and Health, Safety and EnvironmentalSustainability Committees. Each of these documents is available on our website (www.crc.com), and stockholders may obtain a printed copy, free of charge, by sending a written request to California Resources Corporation, Attention: Corporate Secretary, 27200 Tourney Road,1 World Trade Center, Suite 315, Santa Clarita,1500, Long Beach, California 91355.90831. We will also promptly post on our website any material amendments to these documents and any waivers from the Business Ethics Policy for our directors and principal executive, financial and accounting officers.
Certain Relationships and Related Transactions
Our Board of Directors adopted written policies regarding related party transactions. We review all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Our Corporate Secretary’s office implements procedures to obtain information from the directors and executive officers with respect to related party transactions. The Audit Committee reviews and discusses with management and the independent registered public accounting firm any material related party transactions as defined by, and required to be disclosed under, the rules of the Securities and Exchange Commission (“SEC”) and the NYSE. Agreements that embody transactions that are material in amount or significance are filed with the SEC as required.
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Board of Directors and Corporate Governance
Our business ethics and corporate policies prohibit significant conflicts of interest. Any waivers of these policies require approval by the compliance officer, or in the case of conflicts of our executive officers or directors, the Board of Directors. Under our Business Ethics and Corporate Policies, conflicts of interest generally are deemed to occur when private or family interests do not appear impartial, interfere or compete with the interests of our Company.
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2022 PROXY STATEMENT |
Board of Directors and Corporate Governance
We have multiple processes for reporting conflicts of interests and related party transactions. Under our Business Ethics and Corporate Policies, all of our directors and employees are required to report any known or apparent conflict of interest, or potential conflict of interest, to their supervisors, the compliance officer, a member of the corporate compliance committee, our legal counsel, human resources, or the Board of Directors, as appropriate. As part of any review of any conflict of interest, potential conflict of interest or related party transaction, the following factors are generally considered:
the nature of the related person’s interest in the transaction;
the material terms of the transaction;
the importance of the transaction to the related person;
the importance of the transaction to us;
whether the transaction would impair the judgment of a director or executive officer to act or their ability to act in our best interest;
whether the transaction might affect a director’s independence under NYSE standards; and
any other matters deemed appropriate with respect to the particular transaction.
We also have other policies and procedures to prevent conflicts of interest and related person transactions. For example, the charter of our Nominating and Governance Committee requires that the committee members assess the independence of the non-management directors at least annually, including a requirement that it determine whether any such directors have a material relationship with us, either directly or indirectly, as defined therein and as further described above under “Director Independence Determinations.”
This section discussesThere are no transactions andor relationships with related persons since the beginning of our most recently completed fiscal year.
Marketing Transactionsyear that are required to be disclosed.
We sell and purchase products with subsidiaries of Plains All American Pipeline, L.P. (“Plains”). Funds managed by Kayne Anderson Capital Advisors L.P., of which Mr. Sinnott serves as co-chairman, and affiliates (“Kayne Anderson”) own approximately 10% of the general partner of Plains, approximately 1.41% of the limited partner units of Plains and an additional approximately 5.04% general partner interest in Plains GP Holdings, L.P. (the public portion of the general partner). Mr. Sinnott serves as a director for the general partner of Plains. For the year ended December 31, 2018, transactions with Plains accounted for approximately $181 million of our net sales.
Transactions with Related Persons, Promoters and Certain Control Persons
Certain funds controlled by Kayne Anderson Investment Management, Inc. (“Kayne Anderson Investment”), of which Mr. Sinnott serves as President, purchased in 2016, and as of December 31, 2018 continued to hold, approximately $12.5 million in aggregate principal amount of our 8% secured second lien notes due 2022. Mr. Sinnott did not participate in Kayne Anderson’s decision-making process with respect to these transactions.
CALIFORNIA RESOURCES CORPORATION 21
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OtherEnvironment, Social and Governance MattersGoals
Other Governance MattersEnvironment, Social and Governance Goals
Shareholder EngagementENVIRONMENT
Carbon Management
CRC is committed to the transition in the energy sector. Building upon the Company’s carbon management strategy, in November 2021, CRC adopted a 2045 Full-Scope Net Zero goal for Scope 1, 2 and 3 emissions. This goal places CRC among a select few industry peers to include scope 3 emissions in their Net Zero goal. In addition, CRC’s 2045 goal targets a timeframe five years sooner than most other companies’ Net Zero goals and aligns CRC with the State of California’s 2045 net zero ambitions.
In 2018,2022 we reached outhave adopted specific objectives to advance our 2045 goal. The details of these objectives will be outlined in our annual Sustainability Report later this year but they are broadly geared towards putting us on a sustainable path to achieve our 2045 goal.
Sustainability Goals
In addition to our largest shareholders, including those who heldcarbon management goal, CRC continues to advance our previously announced 2030 goals relating to water sustainability, methane reductions, and integrating renewables in aggregateour operations in order to reduce scope 1 and 2 emissions. Updates on these goals and next targets will also be announced in our annual Sustainability Report later this year. Finally, in addition to our carbon management goal and sustainability goals, CRC has adopted 2022 targets for oil spill prevention rate and asset retirement obligation reductions.
SOCIAL
We view our workforce as an asset and the Board provides oversight over one-thirdsignificant aspects of our total outstanding shares, for meetings on corporate governance issues. In the meetings that were arranged, we discussed recent governance changes, board refreshment and diversity practices, and compensation philosophy. We also asked about broader trends and practices on corporate governance for Board feedback and consideration.
At the 2018 annual meeting, the Board submitted proposals to amend the Company’s certificate of incorporation to reduce the current supermajority vote thresholds to majority votes. These proposals only received votes for approval from approximately 42% of the total outstanding shares, which were short of the 75% required approval threshold. However, we received feedback from our shareholder engagement meetings that we should resubmit these proposals for considerationhuman capital. Safety is a key value at the 2019 Annual Meeting, so the Board has included these proposals in this proxy statement.
Sustainability and Stewardship
In 2017, CRC consulted with its workforce, state and community leaders, sustainability professionals and labor and non-profit groups about ways to expand our annual HSE metrics and enhance our life-of-field planning process.CRC. As a result, of this dialogue, CRC has adopted four 2030 Sustainability Goals –a 2022 Incident and Injury Rate target and a specific Diversity, Equity and Inclusion objective.
GOVERNANCE
The Board is responsible for water recycling, renewables, methaneoverseeing our sustainability strategy, risk management and goals, including those related to carbon – in 2017 which advance California’s 2030 goalsmanagement, environmental stewardship, worker safety, and aiddiversity, equity and inclusion in our life-of-field planning process. CRC issued a Sustainability Report describing the goals that year, in addition to its annual water management summary. The report noted that the Sustainability Goals are subject to liquidity, funding and permitting and are measured against a 2013 baseline, the year before CRC launched as an independent company and also a baseline year for certain state goals.
In 2018, CRC adopted specific quantitative targets for the Sustainability Goals, and its 2018 Sustainability Report described those targets, the specific projects and teams assigned to each goal and the Company’s progress toward meeting the goals. CRC has committed to report annually on its progress, which is specifically tied to the review of individual performance of Company executives, since our executives have an ability to advance the successful attainment of the Sustainability Goals. The specific 2030 targets against a 2013 baseline and our progress through 2018 are detailed on our website Sustainability page (www.crc.com/sustainability) and the 2018 Sustainability Report which is hosted on the Sustainability page. Our 2030 targets against a 2013 baseline are summarized below:
Water Goal -- Increase volume of recycled produced water by 30%.
Renewables Goal -- Integrate renewables into oil and gas operations as well as our carbon management business.
Compensation
We are proud to note that CRC’s ESG goals continue to be directly tied to the performance-based compensation of our employees, including executives and senior managers, further highlighting our standing commitment and dedication to a cleaner and more sustainable future for California. In fact, in 2022, the Board has further emphasized the importance of achieving ESG goals by adding 10 MW from renewable sources.tying 30% of our management team’s annual incentive related to company performance to ESG related metrics.
Methane Goal -- Reduce methane emissions by 50%.
CALIFORNIA RESOURCES CORPORATION 22
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Other Governance Matters
Carbon Goal -- Design and permit a carbon capture and sequestration system at Elk Hills by 2030 that would, if permitted, funded and installed, reduce GHG emissions by 30%.
CRC’s 2030 Sustainability Goals underscore the Company’s commitment to serve as a responsible steward of California’s natural resources and to advance California’s long-term goals. Importantly, by helping to increase local production of oil, natural gas and electricity, CRC also:
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CALIFORNIA RESOURCES CORPORATION 23
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Audit Committee Report
The Audit Committee of the Board of Directors of California Resources Corporation approves the appointment and services of the independent registered public accounting firm, and monitors (1) the integrity of the financial statements of CRC; (2) the independent registered public accounting firm’s qualifications, independence and performance; (3) the effectiveness and performance of CRC’s internal audit function; (4) CRC’s system of disclosure controls and procedures, internal control structure over financial reporting and compliance with ethical standards; and (5) the compliance by CRC with legal and regulatory requirements related to financial statements.
The Board of Directors has determined that each of the members of the Audit Committee satisfies the standards of independence established under the SEC’s rules and regulations and listing standards of the NYSE. The Board of Directors has further determined that each of the members of the Audit Committee is financially literate and that Mr. Gannon is anMs. Cepak and Ms. Veltmann are “audit committee financial expert”experts” as defined by the rules and regulations of the SEC.
In connection with our financial statements for the year ended December 31, 2018,2021, the Audit Committee has:
reviewed and discussed with management the audited financial statements contained in CRC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018;2021;
discussed with CRC’s independent registered public accounting firm, KPMG LLP, the matters required to be discussed by applicable auditing standards;requirements of the Public Company Accounting Oversight Board and the Securities Exchange Commission;
received the written disclosures from KPMG LLP as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence;
discussed with KPMG LLP its independence from CRC and members of its management;
considered any non-audit services in assessing auditor independence;
had an executive session with KPMG LLP to provide them with the opportunity to discuss any other matters that they desired to raise without management present; and
had an executive sessionsessions with Ryder Scott Company and Netherland, Sewell & Associates, Inc., CRC’s independent reserves audit firm,firms, to discuss the oil and gas reserves determination process and related public disclosures, and to provide them with the opportunity to discuss any other matters that they desired to raise without management present.
Based on the review and discussions with CRC’s management, independent registered public accounting firm and independent reserves audit firm,firms, as set forth above, the Audit Committee recommended to CRC’s Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2021, for filing with the SEC.
Audit Committee,
Justin A. Gannon
Harry T. McMahonAlejandra (Ale) Veltmann, Chair
Richard W. MoncriefTiffany (TJ) Thom Cepak
Laurie A. SiegelJulio M. Quintana
William B. Roby
February 19, 201922, 2022
CALIFORNIA RESOURCES CORPORATION 2423
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Compensation Committee Report Discussion and Analysis
Compensation DiscuDiscusssion and AnalysisAnalysis
This Compensation Discussion and Analysis (“CD&A”&A”) provides a description of the elements and key features of our compensation program, as well as context and rationale for decisions made with respect to the compensation for our “named“named executive officers”officers” or “NEOs”“NEOs” for the year ended December 31, 2018,2021, who are identified below:
Name |
| Position as of December 31, 2021 |
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| President and Chief Executive Officer(1) |
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| Executive Vice |
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Shawn M. Kerns |
| Executive Vice |
Michael L. Preston | Executive Vice President, Chief Administrative Officer and General Counsel |
(1) | On December 31, 2020, our prior Chief Executive Officer departed the Company and Board, and the Board appointed our then-current Chair, Mr. McFarland, to serve as Interim Chief Executive Officer and initiated a search process for the Company’s next chief executive officer. On March 22, 2021, the Company announced that Mr. McFarland was selected to serve as President and Chief Executive Officer, removing his previous interim title. On April 15, 2021, the Company announced that Ms. Tiffany (TJ) Thom Cepak was appointed to serve as independent Chair of the Board, replacing Mr. McFarland, who continues to serve as a director. See page 8 for Mr. McFarland’s prior experience. |
(2) | Mr. Bys’ experience prior to joining CRC includes Private Energy Advisor 2019 to 2020 and 2015 to 2016; GenOn Energy and affiliate companies Chief Commercial Officer 2017 to 2018; Luminant Energy Vice President Origination and Capital Management 2007 to 2014; TXU, Enserch Energy various positions 1997 to 2007. |
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2021 Compensation Program Actions
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2022 Compensation Program Actions
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Other Compensation and Benefits
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Compensation Objectives and Process
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Executive Compensation Objectives
36
Compensation Program Best Practices
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Role of Compensation Committee
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Role of Independent Compensation Consultants
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Stockholder Approval of Executive Compensation
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Anti-Hedging and Anti-Pledging Policy
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
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Outstanding Equity Awards at December 31, 2021
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Option Exercises and Stock Vested in 2021
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2021 Nonqualified Deferred Compensation Table
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Potential Payments Upon Termination or Change in Control
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2021 Compensation of Directors
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Table of ContentsCALIFORNIA RESOURCES CORPORATION 24
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2022 PROXY STATEMENT |
Compensation Discussion and Analysis
On July 15, 2020, to address our unsustainable debt burden given the prevailing commodity markets at the time, the Company filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.
On October 27, 2020, the Company emerged from the bankruptcy process with a new Board of Directors, new equity owners and a strong balance sheet. CRC’s Joint Plan of Reorganization (the “Plan”) in its Chapter 11 case cancelled all equity interests of the Company, including outstanding shares of the Company’s common stock issued and outstanding immediately prior to the emergence date. As a result, all outstanding stock-based compensation awards under our pre-emergence Long-Term Incentive Plan were also cancelled upon our emergence from bankruptcy, eliminating our NEOs’ prior equity interests in the Company.
Pursuant to the Plan, as of the emergence date, the pre-emergence Compensation Committee members (the “Former Compensation Committee”) ceased to serve on the Board and a new Compensation Committee was designated from the new Board members (the “New Compensation Committee”).
The Plan also provided for issuance of new common stock to certain of the Company’s creditors and a joint venture partner and reservation of common stock for issuance under a new employee incentive plan. In January 2021, our new Board of Directors adopted a new Long Term Incentive Plan.
As illustrated below, compensation decisions before, during and after our bankruptcy in 2020 were made by our Former Compensation Committee, the bankruptcy court, and our New Compensation Committee. Compensation decisions that were made during the 2021 year were made solely by the New Compensation Committee.
Elements of Compensation Program Approved by Former Compensation Committee Bankruptcy Court New Compensation Committee Pre-Chapter 11 Former Compensation Committee January 1 – July 14 2020 • Original 2020 Compensation Program • Revised 2020 Compensation Program Chapter 11 Bankruptcy Court July 15 – October 26 2020 • Quarterly Incentive Plan • Prior equity award cancellation • Creation of new equity incentive plan Emergence Bankruptcy Court October 27, 2020 Setting a New Course New CompensationCommittee October 28, 2020 and forward • One-time emergence equity grants • 2021 base salary • 2021 annual incentive plan
Our 2020 executive compensation program was driven by unprecedented circumstances that our Former Compensation Committee believed required extraordinary changes to the original 2020 compensation program the Former Compensation Committee had previously approved in order to retain and motivate our executive management team and broader organization through our financial restructuring.
Following our emergence from bankruptcy, our New Compensation Committee went right to work with the assistance of Lyons Benenson & Company Inc.(“LB&Co”), independent compensation consultant to the New Compensation Committee, designing a new compensation program for 2021 which returned to a mix of short- and long-term incentives that are primarily performance-based, with a significant majority provided as equity awards, immediately aligning our NEO compensation with our shareholders’ interests.
CALIFORNIA RESOURCES CORPORATION 25
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Compensation Committee Report Discussion and Analysis
2021 Compensation Program Actions
Execution on Our Strategic Priorities in 2018Peer Group Selection
In 2018, our management team continued to deliver significant accomplishments against our strategic priorities whichThe first action taken by the New Compensation Committee consideredwas to develop a new compensation peer group. With consultation from LB&Co, in November 2020, the New Compensation Committee adopted a new compensation peer group consisting of 20 companies in the same Global Industry Classification Standard (GICS) Sub-Industry classification of similar size and/or having similar geographic operating locations as partthe Company. This new compensation peer group was utilized by the New Compensation Committee in making decisions regarding the 2021 executive compensation program.
Recent Financial Measures as of its review of management’s performance for compensation purposes.11/24/2020 ($ Millions) Company Reported 12 Months Revenues Market Cap Total Assets Total Economic Value Antero Resources Corporation $3,255.0 $1,179.5 $13,349.7 $7,315.1 Berry Corporation $468.7 $344.5 $1,446.5 $690.1 Cabot Oil & Gas Corporation $1,455.6 $7,186.4 $4,419.3 $8,382.6 Callon Petroleum Company $891.8 $402.7 $4,937.3 $3,631.7 Cimarex Energy Co. $1,817.0 $3,865.8 $4,606.0 $5,866.0 CNX Resources Corporation $1,121.9 $2,243.0 $8,129.2 $4,837.7 Continental Resources, Inc. $2,750.8 $6,307.1 $14,728.2 $12,298.8 Denbury Inc. $864.3 $1,012.5 $1,677.9 $1,167.8 Devon Energy Corporation $4,335.0 $5,852.5 $10,326.0 $8,820.5 Diamondback Energy, Inc. $2,992.0 $7,446.8 $18,760.0 $14,331.8 Marathon Oil Corporation $3,532.0 $5,091.6 $18,663.0 $10,039.6 Matador Resources Company $841.2 $1,362.3 $3,786.2 $3,443.0 Murphy Oil Corporation $2,081.2 $1,755.6 $10,469.4 $5,480.3 PDC Energy, Inc. $1,091.0 $1,876.2 $5,332.5 $3,610.3 QEP Resources, Inc. $846.1 $428.7 $5,236.7 $2,067.6 Range Resources Corporation $1,854.7 $1,885.5 $6,012.9 $5,004.7SM Energy Company $1,205.3 $527.0 $5,122.3 $2,906.8 Southwestern Energy Company $2,274.0 $2,256.9 $4,157.0 $4,751.9 Whiting Petroleum Corporation $900.7 $822.7 $2,098.5 $1,227.0 WPX Energy, Inc. $2,096.0 $4,409.8 $9,501.0 $7,439.8 Peer Companies 20 Prior Peers 14 Median $1,636.3 $1,880.8 $5,284.6 $4,921.2 Mean $1,832.0 $2,812.9 $7,638.0 $5,665.7 Minimum $468.7 $344.5 $1,446.5 $690.1 Maximum $4,335.0 $7,446.8 $18,760.0 $14,331.9 California Resources Corporation $1,821.0 $1,527.3 $4,856.0 $2,940.3 Percentile 53.1% 39.0% 35.5% 21.3% Percent to Median 111.3% 81.2% 91.9% 59.7%
2021 Peer Group
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CALIFORNIA RESOURCES CORPORATION 26
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Compensation Discussion and Analysis
Base Salaries
The New Compensation Committee Report reviewed the base salaries of the NEOs to determine if they remained appropriately positioned against the market data and internally aligned and set base salaries as shown below based on the similar scope of job responsibilities (other than the CEO), internal alignment and position relative to peer group compensation data.
Name | New Annual Base Salary | Prior Annual Base Salary |
Effective Date |
Mark A. (Mac) McFarland | $850,000 | n/a | March 22, 2021* |
Francisco J. Leon | $500,000 | $385,000 | January 25, 2021 |
Jay A. Bys | $500,000 | n/a | May 1, 2021* |
Shawn M. Kerns | $500,000 | $425,000 | January 25, 2021 |
Michael L. Preston | $500,000 | $440,000 | January 25, 2021 |
* Hire date as employee |
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Annual Incentive Program (AIP)
AnnuaI Incentive Targets
The New Compensation Committee reviewed the annual incentive targets for each of our NEOs against the 2021 Peer Group market data, and with consideration to internal alignment, set the annual incentive targets for the NEOs as shown below.
Name |
(as a % of New Annual Base salary) |
Mark A. (Mac) McFarland | 120% |
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Jay A. Bys | 100% |
Shawn M. Kerns | 100% |
Michael L. Preston | 100% |
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Historical Perspective – Drivers of Strategic Priorities
CRC was spun offPayouts under the AIP can range from Occidental Petroleum Corporation on November 30, 2014. Occidental burdened CRC with a substantial debt load of $6.3 billion, which peaked at $6.765 billion including the effect0% to 200% of the annual incentive target for an individual. Payout of 80% of the annual incentive target amount is based on the AIP Scorecard metrics and 20% is based on the Committee’s assessment of an NEO’s individual performance.
AIP Scorecard Metrics
In March 2021, the New Compensation Committee established the scorecard for the 2021 AIP to incentivize the AIP participants to undertake actions and invest capital program being implemented by Oxy immediately prior to achieve sustainable long-term value for CRC. The construct of the spin-off, and implementednew AIP recognized the spin-off just as a severe and extended downturnmaterial impact that fluctuations in commodity prices began.
Our highly leveraged balance sheet, resulting from decisions made by Occidental priorhave on CRC’s financial measures including adjusted EBITDAX, free cash flow and others. As such, while any AIP program cannot eliminate the impact of such fluctuations, the new AIP added metrics related to capital efficiency and cost reductions, as well as the spin-off,Company’s asset retirement obligations. Further, there was continued incentive for health, safety and environment (“HSE”) performance. CRC has always been committed to HSE standards and related policies, and continues the focus on the HSE metrics as well as forming a significant factor disproportionately affecting our stock price performance in a negative manner compared to our industry peers during the recent downturn. For perspective, despite achieving total shareholder returns that were the best of our peer group for 2018 and top quartile for the two-year period 2017-2018, CRC’s equity market capitalization decreased almost 70%, from $2.8 billionnew Sustainability Committee serving at the spin-offdiscretion of the Board.
The New Compensation Committee also adopted a policy whereby management’s ability to $0.8 billion at December 31, 2018.
To address stockholder concerns regarding CRC’s leverage, our management team focused onachieve a maximum payout under the difficult taskAIP should be due to extraordinary results, whether via financial performance or the other non-financial metrics incorporated into the AIP. The goal was to lessen the impact of reducing our debt in the low commodity price environment. Since the second quarter following the spin-off, when our debt level reached its peak, management has significantly reduced our debt without unduly increasing our interest costs or significantly diluting our equity.volatility on AIP payouts.
As a result of these priorities, CRC has had very limited capital available to invest and production has declined compared to CRC’s peers who had greater access to capital because of their lower leverage.
CALIFORNIA RESOURCES CORPORATION 27
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Compensation Committee Report Discussion and Analysis
The charts below outline the swift, decisive actions management has taken through the commodity downturn that have positioned CRC for growth as commodity prices recover, as well as the different mechanisms our management team employed to reduce CRC’s outstanding debt. During this period our management team worked constructively with our bank lenders to negotiate eight amendments to our credit facility, including an amendment in 2018.
2021 Annual Incentive Program Scorecard Actual 2021 Results Performance Measure (1) Weight Threshold (50% Payout) Target (100% Payout) Maximum (200% Payout) Measure Outcome Unweighted Measure Payout Weighted Bonus Payout Cost Savings 25% $50 MM $75 MM $100 MM $53 MM 56% 14.0% Adjusted EBITDAX 25% 488 MM $528 MM $750 MM $880 MM 200% 50.0% Free Cash Flow 25% $115 MM $165 MM $370 MM $458 MM 200% 50.0% Capital Efficiency 10% $22,670 $19,269 $14,918 $14,851 200% 20.0% ARO Strategy Approval 7.5% ByQ4 ByQ3 by!3 (with PV savings identified of >$50 MM) Completed Q3 (with PV savings) 200% 15.0% HSE/ESG: Combined IIR 2.5% 0.60 0.50 0.40 0.43 170% 4.25% Spill Prevention Rate 2.5% 99.9994% 99.9996% 99.9998% 99.9997% 150% 3.75% Strategic ESG Initiative Milestones 2.5% 2 of 4 3 of 4 4 of 4 4 of 4 200% 5.0% Total Scorecard Result 162.00%
(1) | Descriptions of the performance measures are as follows: |
HISTORY OF PROACTIVE DECISIONS
ACTIONS TO REDUCE DEBT
Performance Measure | Description |
Cost Savings
| Reflects reduction of 2021 general and administrative, operating and capital expenditures as compared to the baseline established in the 2021 business plan. The $1,066 million baseline was comprised of $222 million of general and administrative (which already reflected a $30 million decrease from 2020 results), $615 million of operating and $229 million of capital expenditures. Performance measured excludes costs to achieve (e.g., severance costs, AIP payouts other than target, one-time costs of asset sales, etc.). The cost savings target level was set at $75 million of cost savings and threshold and maximum were set at $25 million below and above target, respectively. |
Adjusted EBITDAX | Adjusted EBITDAX is based on earnings before interest, taxes, depreciation and amortization and exploration based on GAAP and excludes one-time items, costs to achieve and non-cash gains/losses related to the mark to market of our hedging contracts. Target level was set based on the approved 2021 management plan, which assumed $75 million of cost savings. The maximum level was set at 142% of the budget amount under the management plan. |
Free Cash Flow | Free Cash Flow is calculated as Adjusted EBITDAX minus distributions to Benefit Street Partners, Asset Retirement Obligations, cash interest, cash taxes, working capital and capital expenditures. Excludes costs to achieve. Target level was set based on the approved 2021 management plan. The maximum level was set at 255% of the budget amount under the management plan. |
Capital Efficiency | The Capital Efficiency metric is a ratio of total 2021 capital divided by 30-day Peak initial production (“IP”) of new wells added during the year from drilling, workover, exploration well investment activities. Project substitutions are permitted at management’s discretion if they are within the approved budget. Operations projects (maintenance rigs) to reduce the production backlog are acceptable substitutions for purposes of this metric. |
ARO Strategy | California’s Idle Well Program accelerates the abandonment and retirement obligation related to all idle and not productive wells. This metric will incentivize management to create a project office that will be tasked to develop detailed multi-year plans to reduce the well backlog in a manner that satisfies the regulatory requirements and optimizes the company’s available resources. ARO Strategy is a qualitative measure as follows •Threshold: Creation of project office with dedicated staff. Project office to develop optimization strategy and present for Audit Committee approval in Q4 2021. •Target: Creation of project office with dedicated staff. Project office to develop optimization strategy and present for Audit Committee approval in Q3 2021. •Maximum: Creation of project office with dedicated staff. Project office to develop optimization strategy, present for Board approval in Q3 2021 and identify >$50 MM of savings or a reduction of~8% as compared to 2020 YE book ARO |
Combined IIR | Health and Safety - Combined Injury and Illness Incident Rate of employees and contractors. |
CALIFORNIA RESOURCES CORPORATION 28
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Compensation Committee Report
The table below compares CRC’s stock performance to peers.Discussion and Analysis
Performance Measure |
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Spill Prevention Rate | Environmental Stewardship – Difference between barrels of oil equivalent produced and net unrecovered volume of reportable spill of crude oil or condensate, as a percent of barrels of oil equivalent produced. |
Strategic ESG Initiatives | Completion of project milestones on progress toward our 2030 Sustainability Goals: 1)Carbon Capture and Sequestration - Deliver Market Analysis summary and field-by-field analysis of cost ranges in terms of $/bbl including ranking of operations/fields with the highest carbon credit price exposure. Evaluate impacts of CCS and/or LCFS credit generation through innovative crude provisions. Present result to Board. 2)Water Recycling Volume - Complete the engineering evaluation and propose a plan to executive management with alternatives to increase water recycling at 27R. 3)Methane Emission Reduction - Written evaluation of methane reduction strategies (e.g., lower LDAR repair thresholds) and costs to provide a cost curve of possible methane emission reduction strategies. Present report to Board. 4)Renewable Power Generation - Written report of strategy to finance and develop 10+ MW of behind the meter solar power by 2025, including CRC costs and benefits and potential financing partners including criteria for close of financing. Make recommendations to Board. |
Individual NEO Payout Considerations
The New Compensation Committee considered the contributions of the new management team that was formed post-bankruptcy and assessed the overall performance to be exceptional. The committee considered the contributions of each of the NEOs and determined that a payout at 150% of target for the individual portion of the AIP was appropriate for each of the NEOs based on the significant individual contributions to the strong Company performance achieved in the first full year since emergence from bankruptcy. Highlights of the performance achieved include:
Executed a re-alignment of the organization and balance sheet improvements consistent with the new Company strategy
Repositioned the Company as a lower-cost, capital disciplined, free cash flow-focused upstream oil and gas company and a leader in carbon management and ESG
| o | Actively engaged with investors and analysts to communicate the new strategic direction |
o | Developed a carbon management business strategy and launched Carbon TerraVault |
o | Developed an ESG strategy and set goals for full-scope Net Zero by 2045 |
In summary, ourDelivered on shareholder return initiatives through the stock price performance during the industry downturn has been disproportionately affected by the highly leveraged balance sheet that we inherited from Occidental. Our management team has made significant accomplishments in deleveragingrepurchase program and initiation of a quarterly dividend
Realigned the balance sheet and improving CRC’s strategic positionwith the offering of $600 million of senior unsecured notes along with amendments to take advantage of potential future commodity price increases.the reserve based lending facility
CALIFORNIA RESOURCES CORPORATION 29
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Compensation Committee Report Discussion and Analysis
AIP Payouts
The following table shows the calculation of the 2021 AIP payouts, based on the AIP scorecard result of 162% and the individual portion result of 150%:
(1) | Per the terms of his employment agreement, the actual payout for Mr. McFarland was reduced by the difference ($278,878) between the monthly fee he would have received under his interim CEO agreement and the monthly salary he received under his employment agreement had it been in effect for the period from the beginning of 2021 until he was appointed President and CEO on March 22, 2021. |
Approved Payouts 162% Payout 150% Payout Total Payout Name Base Salary Target Bonus% Target Bonus $ 80% Scorecard Portion 20% Individual Portion Approved Payout Mark A. (Mac) McFarland (1) $850,000 120% $1,020,000 $1,321,920 $306,000 $1,627,920 Francisco J. Leon $500,000 100% $500,000 $648,000 $150,000 $798,000 Jay A. Bys $500,000 100% $500,000 $648,000 $150,000 $798,000 Shawn M. Kerns $500,000 100% $500,000 $648,000 $150,000 $798,000 Michael L. Preston $500,000 100% $500,000 $648,000 $150,000 $798,000
Aligning PayLong-Term Incentive Grants
Working with Stockholder Interests
Since our spin-off in 2014,LB&Co, the New Compensation Committee has taken several actionsdetermined that the long-term incentive program for 2021 should consist of multi-year sized emergence grants to ensureimmediately realign the NEOs with shareholder interests and to reestablish the retention value of multi-year equity grants, since all of the NEOs’ prior Company stock holdings and equity awards were cancelled upon our executive compensation program is aligned with stockholder interests.emergence from bankruptcy.
In 2021, the New Compensation Committee approved emergence grants allocated between Restricted Stock Unit Awards and Performance Stock Unit Awards. The grant target values for the awards were split approximately evenly between the two award types for each NEO.
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Compensation Committee Report Discussion and Analysis
2021 Long-Term Incentives Granted to NEOs
Name |
Grant Target Value |
Type of Award Granted (1) |
Date of Grant |
Units Granted (2) |
Mark A. (Mac) McFarland (3) | $1,217,466 | Director Emergence RSU | 1/25/2021 | 61,333 |
| $6,291,692 | Emergence RSU | 3/22/2021 | 255,760 |
| $7,993,870 | Emergence PSU | 3/22/2021 | 324,954 |
Francisco J. Leon | $1,650,000 | Emergence RSU | 1/25/2021 | 83,123 |
| $1,650,000 | Emergence PSU | 1/25/2021 | 83,124 |
Jay A. Bys | $1,512,500 | Emergence RSU | 5/12/2021 | 61,309 |
| $1,512,500 | Emergence PSU | 5/12/2021 | 61,309 |
Shawn M. Kerns | $1,650,000 | Emergence RSU | 1/25/2021 | 83,123 |
| $1,650,000 | Emergence PSU | 1/25/2021 | 83,124 |
Michael L. Preston | $1,650,000 | Emergence RSU | 1/25/2021 | 83,123 |
| $1,650,000 | Emergence PSU | 1/25/2021 | 83,124 |
(1) | The aggregate emergence awards were designed to provide approximately three times the anticipated annual future grant values. The New Compensation Committee does not contemplate granting annual long-term incentive awards to the NEOs during 2022 but expects to resume annual grants beginning in 2023 with grant target values of approximately one-third of the values granted in 2021. |
(2) | The number of units granted is determined by dividing the grant target value by the 60-day volume-weighted average price of CRC stock on the day preceding the grant date. |
(3) | Mr. McFarland was also serving as a Board member during the 2021 year and was eligible to receive a director emergence grant as the other independent directors received, described further in the Director Compensation section. The director emergence grant he received was considered in determining the grant target value of the emergence RSU grant he received upon his appointment as President and CEO. |
2021 Restricted Stock Unit Award
The 2021 Restricted Stock Unit Award (“2021 RSU Award”) is a stock-based and stock-settled long-term incentive award primarily intended to promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts. The 2021 RSU Award generally vests ratably on each of the first three anniversary dates of the grant date. The delivery of vested shares under the 2021 RSU Award is deferred until the final vesting date except under certain circumstances relating to the grantee’s death or a change in control. Dividend equivalents are accumulated and paid at the time shares are delivered.
2021 Performance Stock Unit Award
The 2021 Performance Stock Unit Award (“2021 PSU Award”) is a stock-based and stock-settled long-term incentive with performance measures based on the attainment of pre-determined 60-trading day Volume-Weighted Average Price (“VWAP”) thresholds for the Company’s shares during the three-year performance period commencing on the grant date (“Performance Period”). Utilizing VWAP thresholds for the performance criteria is intended to focus the NEOs on actions that will increase shareholder value over the Performance Period.
The 2021 PSU Award will generally cliff vest on the third anniversary of the grant date and payout up to 100% of the award units in shares based on the performance level attained during the Performance Period. Dividend equivalents will be accumulated during the vesting period and paid without interest following the vesting date based on the number of shares that are earned.
The “Performance Goal” for the 2021 PSU Award is based on the maximum “CRC Stock Value” attained during the Performance Period, as shown in the table below. The CRC Stock Value is the simple average of the VWAP of CRC common stock trading on the New York Stock Exchange during the sixty trading days immediately preceding the date upon which such value is being determined. In order for the NEOs to earn 100% of the PSU Award units, the CRC stock price must attain a 60-day VWAP in excess of 170% of the stock price on the grant date.
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2022 PROXY STATEMENT |
Compensation Discussion and Analysis
2021 PSU Award Performance Goal | ||
Maximum CRC Stock Value (60-day VWAP) Attained During Performance Period |
Percentage of PSU Award Units that Become Earned PSU Award Units (2) | |
Mr. McFarland (1) | Messrs. Leon, Bys, Kerns and Preston (1) | |
Less than $27.75 | Less than $28.70 | 0% |
$27.75 | $28.70 | 25% |
$31.91 | $33.00 | 50% |
$36.70 | $37.75 | 75% |
$42.20 or More | $43.65 or More | 100% |
(1) | Thresholds for Mr. McFarland’s award are different than other NEOs due to different CRC stock price at different grant dates. |
(2) | Linear interpolation applies between any two rows below. |
On December 1, 2021, the CRC Stock Value reached the 100% earned level for Mr. McFarland’s 2021 PSU Award. As of December 31, 2021, the maximum CRC Stock Value had attained a 96.6% earned level under the 2021 PSU Awards for Messrs. Leon, Bys, Kerns and Preston.
Linkage Between PayPay and PerformancePerformance
Our compensation program is well2021 Compensation Program was designed to link the pay realized by our executives to the performance of CRC and the returns to our stockholders, while also providing retention incentives necessary to retain our executives through this challenging period.as we emerge from bankruptcy.
The pay mix at target grant date values for our chief executive officerCEO and other named executive officers for 2018NEOs under the 2021 Compensation Program was primarily long-term and performance-based.
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Compensation Committee Report
The chart below illustrates the degree to which our CEO’s realizable pay has been impacted by changes in the stock price after the grant date, illustrating the significant alignment of CRC’s compensation program with shareholder returns.
Notes regarding thePAY MIX OF CEO Realizable Pay:
Realizable Pay is defined as: (i) base5% salary paid each year; (ii) actual6% annual incentive earned for the year; (iii) for option grants, the intrinsic (“in-the-money”) value of each year’s grant as of December 31, 2018; (iv) for restricted stock grants, the value of each year’s grant based on the December 31, 2018 stock price; (v) for performance awards that have vested, the value of the award based on the actual payout percentage and the stock price at December 31, 2018; and (vi) for performance awards that have not vested, the target payout of the award based on the stock price as of December 31, 2018.
2014 realizable Annual Incentive reflects payout at 105% of target. The Compensation Committee exercised negative discretion in the determination of the payout based on economic conditions at the time of the payout, reducing the payout from significantly above target to 105% of target.
2014 realizable Long-Term Incentives were all stock-based and reflect 60% of the target46% performance-based long-term incentive value in the form of stock options that are significantly underwater with an exercise price of $81.10 compared to the stock price of $17.04 as of December 31, 2018.
2015 Base Salary reflects the full year43% time-vested long-term incentive 95% at the CRC Base Salary, which was not increased over the initial Base Salaryrisk AVERAGE PAY MIX OF NEOs OTHER THAN CEO 12% salary 12% annual incentive 38% performance based long-term incentive 38% time-vested long-term incentive 88% at the time of the Spin-off.risk
2015 realizable Annual Incentive reflects payout at 92% of target. The Compensation Committee exercised negative discretion in the determination of the payout based on economic conditions at the time of the payout, reducing the payout from above target to 92% of target.
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Compensation Committee Report Discussion and Analysis
2016 realizable Base Salary reflects
In 2021, the Company entered into various employment agreements with the CEO and other NEOs, as summarized below. The Compensation Committee believes it is the best interests of stockholders to have agreements in place to help retain the CEO and other NEOs. Such agreements also protect Company interests and ensure they can execute their duties in the best interests of stockholders without personal bias by providing change in control protections in the event a 10% reduction fromtransaction that is in the best interests of stockholders would result in their termination of employment.
CEO
Mr. McFarland was named Interim CEO following the departure of our prior CEO on December 31, 2020. We entered an agreement with Mr. McFarland (the “Interim CEO Agreement”) that provided for a fee of $175,000 per month for his services as an independent contractor while he served as our Interim CEO. During the period he served as Interim CEO, he did not receive cash retainer fees for serving on our Board.
Effective March 201622, 2021, the Board named Mr. McFarland President and CEO, removing his previous interim title. In connection with Mr. McFarland’s appointment, the Company and Mr. McFarland entered into an Employment Agreement (the “CEO Employment Agreement”). The CEO Employment Agreement provides for a two-year term, during which either the Company or Mr. McFarland may terminate the employment relationship for any or no reason (such two-year or earlier period, the “Term”). The parties may mutually agree to October 2016 implementedextend the Term for additional one-year periods. Pursuant to conserve cashthe CEO Employment Agreement, during the most severeTerm, Mr. McFarland will receive an annualized base salary of $850,000, will be covered under the Company’s directors and officers liability insurance and will be eligible (i) to receive an annual cash bonus with a target value of 120% of his base salary (reduced for 2021 by the difference, if any, between the amount of fees earned by Mr. McFarland from January 1, 2021 to March 21, 2021 for his service during such period as Interim Chief Executive Officer and the amount of base salary that would have been paid to Mr. McFarland during such period pursuant to the CEO Employment Agreement had such agreement been in effect January 1, 2021), (ii) to participate in those benefit plans and programs of the downturnCompany available to similarly situated executives and (iii) commencing in oil prices.
20162023, to receive annual long-term incentive awards (expected to be comprised 70% of performance stock units (“PSUs”) and 30% of restricted stock units (“RSUs”)) under the Company’s 2021 Long Term Incentive Plan (the “LTIP”) with a grant target Long-Term Incentives reflectvalue of not less than 588% of his base salary as in effect on the applicable grant date. Mr. McFarland also received an initial long-term incentive award consisting of PSUs with a totalgrant target value of $7,993,870 (the “Initial PSUs”) and RSUs with a grant date value that was 30% lower thanof $6,291,692 (the “Initial RSUs”), in each case, under the prior yearLTIP in connection with his appointment as President and Chief Executive Officer of the Company.
The CEO Employment Agreement also provides for certain severance payments and benefits to be consistentprovided to Mr. McFarland upon his termination of employment by the Company under various scenarios as further detailed in the Potential Payments upon Termination or Change in Control section of the Executive Compensation Tables which follow.
Other NEOs
On June 8, 2021, the Company entered into employment agreements with anticipated changes in peer company grant values dueeach of Messrs. Leon, Bys, Kerns and Preston (each an “Employment Agreement”). Each Employment Agreement provides for an initial one-year term and will automatically renew for an additional one-year term on each anniversary unless the Company or the executive provides 90 days’ written notice to the sustained downturnother that no such automatic renewal shall occur. However, either the Company or the executive may terminate the employment relationship for any or no reason at any time during the initial one-year term or any renewal term. Pursuant to each Employment Agreement, each executive will receive an annualized base salary of $500,000, will be covered under the Company’s directors and officers liability insurance and will be eligible (i) to receive an annual cash bonus with a target value of 100% of his base salary, (ii) to participate in oil prices.
2016 realizable Long-Term Incentives reflect the effect on the RSU portion (50%those benefit plans and programs of the target value)Company available to similarly situated executives and (iii) commencing in 2023, to receive annual long-term incentive awards (expected to be comprised 70% of the increase in theperformance stock price from the May 27, 2016 grant date ($15.40) to December 31, 2018 ($17.04).
2017 realizable Long-Term Incentives reflect the effect on the RSU portion (50%units and 30% of the target value) of the decrease in therestricted stock price from the February 13, 2017 grant date ($18.81) to December 31, 2018 ($17.04).
2018 realizable Long-Term Incentives reflect the effect of the decrease in the stock price from the February 21, 2018 grant date ($18.34) to December 31, 2018 ($17.04).
We regularly request meetings with several of our stockholders to discuss our governance and executive compensation practices. Overall, we received positive feedback on our corporate governance and compensation practices as part of our 2018 stockholder outreach initiative, in particular with regards to the changes we made to our compensation program in 2018:
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We will continue to reach out to stockholders to solicit feedback to ensure that our governance and executive compensation practices align with stockholders’ expectations.
Stockholder Approval of Executive Compensation
Our stockholder advisory vote in 2018 on the compensation paid to our named executive officers in 2017, resulted in a 96.5% approval of such compensation. In adjusting our executive compensation programs, the Compensation Committee considered the results of last year’s advisory vote on executive compensation and many other factors, including the Compensation Committee's assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by the Compensation Committee's independent compensation consultant, feedback from our ongoing stockholder outreach initiative and review of data relating to pay practices of our compensation peer group.
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Compensation Discussion and Analysis
units) under the LTIP with a grant target value of not less than 220% of his base salary as in effect on the applicable grant date.
Each Employment Agreement also provides for certain severance payments and benefits to be provided to the executive upon his termination of employment by the Company under various scenarios as further detailed in the Potential Payments upon Termination or Change in Control section of the Executive Compensation Tables which follow.
2022 Compensation Program Actions
Base Salaries
The New Compensation Committee Report does not plan to provide base salary increases for the NEOs in 2022.
Annual Incentive Program
In February 2022, the New Compensation Committee approved the scorecard metrics for the 2022 Annual Incentive Program. In addition to metrics related to financial performance, capital efficiency and cost control, 30% of the 2022 scorecard weighting relates to carbon management, environmental stewardship, worker safety, and diversity, equity and inclusion.
Long-Term Incentive Grants
The 2021 Compensation Program provided multi-year sized long-term incentive grants to immediately align the NEOs compensation opportunities with our new shareholder interests and establish the retention value of multi-year equity grants. As a result, the New Compensation Committee does not plan to provide long-term incentive grants to the NEOs during 2022, instead resuming single-year sized long-term incentive grants in 2023.
Other Compensation and Benefits
In addition to the components of the executive compensation program described above, we provided the following programs to our NEOs during the 2021 year.
Qualified Defined Contribution Plan – All of our employees, including our NEOs, were eligible to participate in a tax-qualified, defined contribution plan. The defined contribution plan provided for periodic cash contributions by us based on annual employee cash compensation and employee-elected deferrals. Employees were permitted to contribute into the plan a percentage of their annual salary and bonus up to the annual limit set by the Internal Revenue Service (“IRS”). Employees were able to direct their account balances to a variety of investments.
Nonqualified Defined Contribution Plans – Substantially all employees, including our NEOs, whose participation in our qualified defined contribution plan was limited by applicable tax laws were eligible to participate in our supplemental savings plan (the “SSP”), a nonqualified defined contribution plan, which provided additional retirement benefits outside of those limitations.
Annual allocations for each participant were generally intended to restore the amounts that would have been contributed to our qualified defined contribution plan but for certain tax law limitations, and certain employer allocations were subject to a vesting schedule that required the completion of three years of service. Vested account balances will be payable following separation from service.
Interest on SSP account balances was allocated monthly to each participant’s account based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor.
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2022 PROXY STATEMENT |
Compensation Discussion and Analysis
In addition, we sponsored a supplemental retirement plan (the “SRP II”), which was established for purposes of the assumption by us of certain liabilities under the Occidental Petroleum Corporation Supplemental Retirement Plan II, including those for Messrs. Leon, Kerns and Preston. All account balances under the SRP II were fully vested at all times and are credited with interest on a monthly basis based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor. No additional allocations were made under the SRP II other than the crediting of interest.
In order to provide greater financial planning flexibility to participants while not increasing costs under the plan, the SRP II allowed in-service distribution of a participant’s account at a specified age, but not earlier than age 60, as elected by the participant when initially participating in the plan. After a participant receives a specified age distribution, future allocations under the SRP II and earnings on those allocations are to be distributed in the first 70 days of each following year.
Nonqualified Deferred Compensation Plan – Certain management and other highly compensated employees (including each of our NEOs) were eligible to participate in our nonqualified deferred compensation plan (the “DCP”). Under the DCP, participants were able to elect to defer a portion of their base salary and annual bonus for a given year. For the year of deferral, we allocated an additional amount to a participant’s account equal to the sum of 6% (which is immediately vested) and 2% (which is subject to a vesting schedule that required the completion of three years of service) of the compensation deferred by the participant under the DCP to restore amounts that were not contributed to the qualified and nonqualified defined contribution plans due to such deferral of compensation under the DCP. Deferred amounts earned interest based on the yield on five-year U.S. Treasury Constant Maturities based on a monthly frequency plus 2%, converted to a monthly allocation factor. Vested account balances will be payable following separation from service, or upon attainment of a specified age elected by the participant.
Tax Preparation and Financial Planning – Our executives, including each of the NEOs, were eligible to receive reimbursement, up to certain annual limits, for income tax preparation, financial planning and investment advice, including legal advice related to tax and financial matters.
Insurance – We offered a variety of health coverage options to all employees. NEOs participated in these plans on the same terms as other employees. In addition, for executives, including the NEOs, we paid for an annual comprehensive physical examination. We provided all employees with life insurance equal to twice the employee’s base salary.
Employee Stock Purchase Plan – We adopted a new California Resources Corporation Employee Stock Purchase Plan (the “ESPP”), effective February 22, 2022, subject to approval by shareholders at the Annual Meeting, which will provide our employees (including our NEOs) the ability to purchase shares of our common stock at a price equal to 85% of the closing price of a share of our common stock as of either the first day of each offering period or the last day of each offering period, whichever amount was less.
The maximum number of shares of our common stock to be authorized to be issued pursuant to the ESPP is 1.25 million, subject to adjustment pursuant to the terms of the ESPP. In addition, participants in the ESPP will be subject to certain limits on the number of shares that can be purchased in any given year and during any given offering period (a calendar quarter) under the ESPP.
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2022 PROXY STATEMENT |
Compensation Discussion and Analysis
ElementsCompensation Objectives and Process
The purpose of Our Compensation Programour executive compensation program is to allow us to attract, retain, motivate and reward high-performing executives to maximize returns to our stockholders.
Executive Compensation PhilosophyObjectives
The following core principles form the foundation of ourOur executive compensation program:objectives are to:
Compensation programs should motivateMotivate our executives to take actions that are aligned with our short- and long-term strategic objectives, and appropriately balancebalancing risk versus potential reward.
AProvide a high percentage of senior executives’ pay should be based on performance to ensure the highest level of accountability to stockholders.
Performance-based pay should offerOffer an opportunity for performance-based pay to provide above market compensation when our performance exceeds our goals balanced by the risk of below market compensation when it does not.
Our compensation programs should focusAlign executive and stockholder interests by focusing our executives on thebalancing short- and long-term performance of the Company, thereby more closely aligning our executives’ interests with those of our stockholders.Company.
Compensation Program Best Practices
Our executive compensation program is well-designed, incorporatesdesigned to incorporate compensation and governance best practices and is governedoverseen by a highly engaged Compensation Committee. Our short-term and long-term incentive plans are primarily performance-based and are intended to align with the short- and long-term best interests of stockholders. The New Compensation Committee has engaged in best practices to further align executive pay with Company performance and to ensure good governance in the following ways:
CALIFORNIA RESOURCES CORPORATION 36
2022 PROXY STATEMENT |
Compensation Discussion and Analysis
WHAT WE DO We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. We are stockholder-aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. A majorityAll of the outstanding long-term incentive awards for our named executive officers are stock-based. We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. We have stock ownership requirements. We maintain stock ownership guidelines which requirefor our named executive officers and stock grant delivery mechanics for our directors to havethat require meaningful stock ownership in the Company. We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.
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Compensation Committee Report
WE DON’T DO We do not have individual employment agreements. We do not have employment agreements with any of our named executive officers. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for executives. We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create ssive or inappropriate risk for the Company.
Compensation Peer Group Selection
The Compensation Committee believes that the most relevant compensation peer companies are those that could compete for our talent with similar operating complexity and financial characteristics to CRC. The Compensation Committee reviews the peer companies each year based on the criteria below and adjusts as necessary to ensure alignment with those objectives.
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Peer company selection based on equity market capitalization would generally result in companies that are much smaller in complexity and scope of operations than CRC due to our highly leveraged balance sheet and resulting depressed equity market capitalization. The Compensation Committee does not believe that companies with similar equity market capitalizations represent the competitive market for our executive team’s skills and experience and accordingly believes that setting CRC compensation levels consistent with these smaller companies would penalize our management team for factors beyond their control, causing substantial retention problems.
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Compensation Committee Report
Prior to making 2018 compensation program design decisions in February 2018, the Compensation Committee reviewed our 2017 compensation peer companies and decided an increase in the number of peer companies from 15 to 23 would provide a broader industry perspective. In addition to adding nine companies, Concho Resources Inc. was removed due to its larger size relative to CRC.
Company | Enterprise Value (July 2017) | Asset Value (June 2017) |
Cabot Oil & Gas Corporation | $ 13,376 | $ 5,219 |
Cimarex Energy Co. | $ 11,797 | $ 4,563 |
Diamondback Energy, Inc. * | $ 11,217 | $ 6,784 |
Parsley Energy, Inc. | $ 8,795 | $ 8,086 |
Range Resources Corporation | $ 8,624 | $ 11,621 |
Southwestern Energy Company * | $ 8,009 | $ 7,150 |
Newfield Exploration Company | $ 7,747 | $ 4,595 |
WPX Energy, Inc. | $ 7,400 | $ 7,962 |
RSP Permian, Inc. * | $ 6,643 | $ 5,859 |
Murphy Oil Corporation | $ 6,411 | $ 10,137 |
Energen Corporation | $ 5,990 | $ 4,747 |
Whiting Petroleum Corporation | $ 5,232 | $ 9,405 |
EP Energy Corporation | $ 4,733 | $ 4,888 |
Oasis Petroleum Inc. | $ 4,513 | $ 6,262 |
Laredo Petroleum, Inc. * | $ 4,449 | $ 1,941 |
SM Energy Company | $ 4,323 | $ 6,213 |
Gulfport Energy Corporation * | $ 4,308 | $ 5,294 |
PDC Energy, Inc. * | $ 4,054 | $ 4,657 |
QEP Resources, Inc. | $ 3,906 | $ 7,266 |
Denbury Resources Inc. | $ 3,667 | $ 4,425 |
Matador Resources Company * | $ 3,242 | $ 1,777 |
Carrizo Oil & Gas, Inc. * | $ 2,915 | $ 1,964 |
Callon Petroleum Company * | $ 2,725 | $ 2,582 |
25th Percentile | $ 4,181 | $ 4,579 |
50th Percentile | $ 5,232 | $ 5,294 |
75th Percentile | $ 7,878 | $ 7,208 |
California Resources Corporation | $ 5,655 | $ 6,154 |
Percentile Rank | 53% | 58% |
* 2018 addition to peer group
*
CALIFORNIA RESOURCES CORPORATION 36
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Compensation Committee Report
In July 2018, the Compensation Committee reviewed the compensation peer companies and determined that no changes were needed for 2019 compensation planning purposes, other than removing RSP Permian, Inc., in light of its pending acquisition.
Company | Enterprise Value (June 2018) | Asset Value (June 2018) |
Diamondback Energy, Inc. | $14,922 | $ 8,225 |
Cabot Oil & Gas Corporation | $ 11,303 | $ 4,538 |
Parsley Energy, Inc. | $ 11,076 | $ 8,941 |
Cimarex Energy Co. | $ 10,733 | $ 5,260 |
WPX Energy, Inc. | $ 9,332 | $ 8,127 |
Newfield Exploration Company | $ 8,214 | $ 5,122 |
Range Resources Corporation | $ 8,154 | $11,730 |
Energen Corporation | $ 7,850 | $ 5,206 |
Murphy Oil Corporation | $ 7,813 | $ 9,938 |
Whiting Petroleum Corporation | $ 7,630 | $ 7,533 |
Oasis Petroleum Inc. | $ 6,932 | $ 7,639 |
Southwestern Energy Company | $ 6,518 | $ 7,713 |
QEP Resources, Inc. | $ 5,365 | $ 7,609 |
SM Energy Company | $ 5,138 | $ 6,660 |
PDC Energy, Inc. | $ 5,107 | $ 4,522 |
Denbury Resources Inc. | $ 5,206 | $ 4,487 |
EP Energy Corporation | $ 4,857 | $ 4,989 |
Gulfport Energy Corporation | $ 4,304 | $ 6,028 |
Matador Resources Company | $ 4,171 | $ 2,276 |
Carrizo Oil & Gas, Inc. | $ 3,896 | $ 2,539 |
Callon Petroleum Company | $ 3,095 | $ 2,836 |
Laredo Petroleum, Inc. | $ 3,039 | $ 2,088 |
25th Percentile | $ 4,919 | $ 4,526 |
50th Percentile | $ 6,725 | $ 5,644 |
75th Percentile | $ 8,199 | $ 7,695 |
California Resources Corporation | $ 7,471 | $ 6,699 |
Percentile Rank | 56% | 57% |
Prior to making 2019 compensation program design decisions in February 2019, the Compensation Committee removed Energen Corporation in light of its pending acquisition.
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Compensation Committee Report
In February 2018, the Compensation Committee made 2018 compensation program design decisions focused on paying for performance, motivatingDiscussion and retaining the current management team and managing the remaining shares available for grants with the continued low stock price.
Compensation Program Changes Made for 2018
The Compensation Committee considered feedback received through stockholder outreach and made the following changes to the compensation program for 2018:
Reduced the strategic and individual objective portion of the annual incentive from 40% to 20%
Increased the portion of compensation that is performance-based by granting premium-priced stock options in place of 20% of the long-term incentive that was time-vested restricted stock, resulting in 60% of the long-term incentive value granted as performance-based awards
Changed the long-term performance-based award to be equity-based
2018 Compensation Program Elements
Our 2018 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:
2018 COMPENSATION PROGRAM ELEMENTS
Restricted Stock ( 40% of LTI) > Time-vested 1/3 per year > Stock- and cash- settled Long-Term Incentive (LTI) Annual incentive base salary Performance Stock (50% of LTI) > 3-year performance period > 50% VCI (three-year average) > 50% Relative unit costs - Combined production cost and G&A per BOE - CRC change in costs vs. Peer Companies' change > Stock-based, stock- and cash-settled Stock Options (10% of LTI) > Vest 1/3 per year > 7-year exercise period > Exercise price 10% above grant date price Annual incentive award > vci (current year) > production > production costs > ebitdax > debt > hse – injury and illness rate (IIR) > hse – spill prevention > hse – net water supplied to agriculture > individual goals
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Compensation Committee Report
The Compensation Committee reviewed the base salaries of the NEOs to determine if they remained appropriately positioned against the market data and internally aligned. The Compensation Committee adjusted base salaries for some of the NEOs based on the individual’s performance, scope of job responsibilities, internal alignment and position relative to peer group compensation data.
Name | 2018 Annual Base Salary | 2017 Annual Base Salary |
Rationale for Action | |
Todd A. Stevens | $875,000 | $825,000 | Performance and alignment with peer group median | |
Marshall D. Smith | $600,000 | $600,000 | Well positioned internally and against peer group | |
Darren Williams | $450,000 | $450,000 | Well positioned internally and against peer group | |
Charles F. Weiss | $440,000 | $425,000 | Performance and internal alignment | |
Shawn M. Kerns | $400,000 | - | Scope of responsibilities and internal alignment | |
2018 Annual Incentive Design
The annual incentive component of our 2018 compensation program was designed to promote the achievement of financial, operating and strategic results that are aligned with creation of stockholder value. Based on feedback from stockholders to reduce the qualitative portion of the award, the performance measures were comprised of quantitative financial and operational measures for 80% of the target annual incentive and qualitative individual objective measures for 20% of the target annual incentive.
Aligning performance criteria with our strategic areas of focus for the year, the Compensation Committee approved performance measures designed to encourage decision making that will enhance stockholder value creation. The Compensation Committee approved performance criteria based on expected results under CRC’s business plan at the time they were established in February 2018. Target performance criteria were set at levels that would represent successful execution of the 2018 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2018 business plan.
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Compensation Committee Report
The table below provides the weightings for each performance measure and the threshold, target, and maximum performance criteria as established by the Compensation Committee. Also shown in the table are the actual 2018 results under each quantitative performance measure and the resulting percentage of target bonus payout.
Performance Measure (1) |
Component Weighting (a) |
Threshold (50% Payout) |
Target (100% Payout) |
Maximum (200% Payout) |
2018 Results |
Component Payout as Percent of Target (b) | Resulting % of Target Bonus Payout | ||||
Investment
Value Creation Index (VCI) |
20% |
1.10 |
1.30 |
1.50 |
1.59 |
200% |
40.00% | ||||
Operations
Production Production Costs |
5% 5%
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124 $908 |
127 $886 |
130 $844 |
132.3 $912 |
200% 0% |
10.00% 0.00% | ||||
Health, Safety & Environmental (HSE) |
10% |
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- Combined IIR (33%) |
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0.60 |
0.50 |
0.40 |
0.50 |
100% |
3.33% | ||||
- Spill prevention rate (33%) |
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99.9991% |
99.9995% |
99.9998% |
99.9996% |
133% |
4.44% | ||||
- Net water supplied to Ag (34%) |
| 180% | 209% | 238% | 276% | 200% | 6.67% | ||||
Liquidity
- EBITDAX - Debt |
20% 20% |
$762 $5.0 |
$800 $4.5 |
$880 $4.0 |
$1,047 $5.3 |
200% 0% |
40.00% 0.00% | ||||
Total Quantitative Measures |
80% |
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130.56% |
104.45% | ||||||
Strategic and Individual Objectives | 20% | Multiple Individual Measures |
| 0% - 200% | 0% - 40% | ||||||
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| Range of Potential Payouts | 104.45% - 144.45% | |||||
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| Negative Discretion Applied by Compensation Committee | - | |||||
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Final Payout Range
| 104.45% - 144.45% | |||||
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CALIFORNIA RESOURCES CORPORATION 40
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Compensation Committee Report
All executives were subject to the same Investment, Operations, Health, Safety and Environmental, and Liquidity quantitative measures. The actual 2018 results against these goals yielded a payout of 130.56% of target for the quantitative measures portion of the annual incentive.
The Compensation Committee reviewed the annual incentive targets for each of our NEOs against Peer Group market data, and with consideration to internal equity. In February 2018, the Compensation Committee determined that the 2018 annual incentive targets for the NEOs, other than Mr. Kerns, remained appropriate at the 2017 levels and no changes were made for 2018. For Mr. Kerns, the Compensation Committee determined his target based on the scope of his job, Peer Group market data and internal equity.
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2018 Individual Annual Incentive Results
For each of our NEOs, the executive’s performance in 2018 was considered against his strategic and individual objectives in determination of the payout amounts under the 2018 Annual Incentive as described below. Each of the NEOs had individual objectives covering some of the following areas:
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The following tables present a partial list of the accomplishments the Compensation Committee reviewed in determining the payout amounts for each of the NEOs.
CALIFORNIA RESOURCES CORPORATION 41
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Compensation Committee Report
Todd A. Stevens – President and Chief Executive Officer
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CALIFORNIA RESOURCES CORPORATION 42
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Compensation Committee Report
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Marshall D. Smith – Senior Executive Vice President and Chief Financial Officer
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Darren Williams – Executive Vice President – Operations and Geoscience
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CALIFORNIA RESOURCES CORPORATION 43
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Compensation Committee Report
Charles F. Weiss – Executive Vice President – Public Affairs
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Shawn M. Kerns – Executive Vice President – Operations and Engineering
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CALIFORNIA RESOURCES CORPORATION 44
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Compensation Committee Report
The Compensation Committee assessed the CEO’s performance against his Strategic and Individual objectives to be above target, but decided to limit his individual component result to approximately target due to CRC’s negative shareholder return for the year. The CEO’s assessments of the other NEOs against their respective Strategic and Individual objectives were also above target, but were similarly limited, other than Mr. Kerns. The Compensation Committee approved the following 2018 annual incentive payouts:
Name |
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| (b) Quantitative Component $ [80% * (a) * 130.56%] |
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Todd A. Stevens |
| $ | 875,000 |
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| 110% |
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| $ | 962,500 |
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| $ | 1,005,300 |
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| 101% |
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| $ | 194,700 |
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| $ | 1,200,000 |
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| 125% |
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Marshall D. Smith |
| $ | 600,000 |
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| 100% |
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| $ | 600,000 |
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| $ | 626,700 |
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| 103% |
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| $ | 123,300 |
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| $ | 750,000 |
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| 125% |
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Darren Williams |
| $ | 450,000 |
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| 90% |
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| $ | 405,000 |
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| $ | 423,000 |
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| 107% |
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| $ | 87,000 |
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| $ | 510,000 |
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| 126% |
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Charles F. Weiss |
| $ | 440,000 |
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| 75% |
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| $ | 330,000 |
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| $ | 344,700 |
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| 122% |
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| $ | 80,300 |
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| $ | 425,000 |
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| 129% |
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Shawn M. Kerns |
| $ | 400,000 |
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| 80% |
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| $ | 320,000 |
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| $ | 334,200 |
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| 181% |
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| $ | 115,800 |
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| $ | 450,000 |
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| 141% |
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2018 Long-Term Incentives
For 2018, the long-term incentives consisted of a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant date values were allocated 40% to time-vested restricted stock unit awards and 60% to performance-based awards. The performance-based awards consisted of performance stock unit awards and premium-priced stock options.
2018 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Performance Stock Units (PSU) 50%
CALIFORNIA RESOURCES CORPORATION 45
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Compensation Committee Report
2018 Restricted Stock Unit Award–The 2018 Restricted Stock Unit Award (RSU Award) is a stock-based, stock- and cash- settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts, with one-third of the units vesting at the end of each year during the three-year period commencing at the grant date. The RSU Award will be settled 60% in shares and 40% in cash with required tax withholding taken first from the cash portion of the payout, in order to manage the remaining shares available for awards under the LTIP.
2018 Performance Stock Unit Award –The 2018 Performance Stock Unit Award (PSU Award) is a stock-based, stock- and cash-settled long-term performance award with performance measures based 50% on CRC’s unit costs per Boe relative to industry peers with similar cost structures and 50% on VCI, both measured over a three-year period. For payouts up to the target number of units, the PSU Award will be settled 60% in stock and 40% in cash. For payouts greater than the target number of units, the payout of units in excess of target will be settled in cash. Required tax withholding on payouts will be taken first from the cash portion of the payout, in order to manage the remaining shares available for awards under the LTIP.
The performance measures for the 2018 PSU Award continued to focus the management team on making decisions that will enhance shareholder value over the long term. Utilization of the VCI measure drives our capital allocation decisions to ensure that we focus spending on the highest return projects over the long term as compared to our annual incentive VCI measure that rewards spending decisions for the one-year period. The relative cost performance metrics ensure that management continues to control costs and maximize our margins over the long term relative to our peers. These factors are within management’s control.
The peer companies chosen for the relative unit cost performance measures under these awards were selected based upon companies with similar asset and operating cost characteristics to CRC, rather than similar size to CRC as used for compensation benchmarking purposes. The peer companies selected by the Compensation Committee for the 2018 PSU Award are: Anadarko Petroleum Corporation, BP p.l.c., Canadian Natural Resources Limited, Cenovus Energy Inc., Chevron Corporation, ConocoPhillips Company, Denbury Resources Inc., Exxon Mobil Corporation, Hess Corporation, Husky Energy Inc., Imperial Oil Limited, Marathon Oil Company, Occidental Petroleum Corporation, Royal Dutch Shell plc, and Suncor Energy Inc. This peer group was not used for compensation benchmarking purposes.
CALIFORNIA RESOURCES CORPORATION 46
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Compensation Committee Report
The PSU Award will vest at the end of three years from the grant date contingent on the Compensation Committee’s certification of achievement of the performance measures shown below:
Key Features of the 2018 Performance Stock Unit Award
Award Feature | Unit Cost Component | Value Creation Index | |
Component Weight | 50% | 50% | |
Performance Period | January 1, 2018 – | January 1, 2018 – | |
Performance Measure | Change in CRC Cost per Boe minus Change in Peer Group Cost per Boe where: • Change in CRC Cost per Boe is the percentage change in weighted average of CRC’s Cost per Boe for the years 2018, 2019 and 2020, weighted by CRC’s production for each year compared to CRC’s Cost per Boe for the year 2017. • Change in Peer Group Cost per Boe is the percentage change in the average of the Cost per Boe for the peer companies for 2018, 2019 and 2020 compared to the Average Cost per Boe for the peer companies for 2017 for domestic operations. • Cost per Boe is the sum of production costs and general and administrative expenses measured on a per-Boe basis. | Cumulative VCI calculated as the weighted average of the VCI results for 2018, 2019, and 2020, weighted based on discounted capital invested for each year. | |
Payout Range (1) | Threshold Payout | 50% of Target | 50% of Target |
Performance Resulting in Threshold Payout | Change in CRC cost per Boe compared to change in Peer Group cost per Boe not more than +10% | Cumulative VCI of 1.1 | |
Target Payout | 100% of Target | 100% of Target | |
Performance Resulting in Target Payout | Change in CRC cost per Boe equal to change in Peer Group cost per Boe | Cumulative VCI of 1.3 | |
Maximum Payout | 200% of Target | 200% of Target | |
Performance Resulting in Maximum Payout | Change in CRC cost per Boe compared to change in Peer Group cost per Boe at most -10% | Cumulative VCI of 1.5 or higher | |
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CALIFORNIA RESOURCES CORPORATION 47
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Compensation Committee Report
2018 Stock Options – The Compensation Committee granted stock options as part of the 2018 long-term incentive awards to further align executives with stockholders. The 2018 stock options were premium-priced, granted with an exercise price that was 10% above stock price on the grant date. The options will vest one-third at the end of each year during the three-year period commencing on the grant date and remain exercisable until the end of the seventh year following the grant date.
The Compensation Committee reviewed the long-term incentive grant date target values of the NEOs to determine if they remained appropriately positioned against the peer group compensation data and internally aligned. The Compensation Committee adjusted the long-term incentive grant date values for the CEO and some of the other NEOs based on such factors as the individual’s performance, increased job responsibility and position relative to peer group compensation data.
Name | 2018 LTI Grant Date Target Value | 2017 LTI Grant Date Target Value |
Rationale for Action | |
Todd A. Stevens | $5,200,000 | $4,800,000 | Performance and position relative to peer group | |
Marshall D. Smith | $1,900,000 | $1,900,000 | Well positioned internally and relative to peer group | |
Darren Williams | $1,050,000 | $1,000,000 | Scope of responsibilities and internal alignment | |
Charles F. Weiss | $1,100,000 | $1,100,000 | Well positioned internally and relative to peer group | |
Shawn M. Kerns | $1,150,000 | - | Scope of responsibilities and internal alignment | |
CALIFORNIA RESOURCES CORPORATION 48
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Compensation Committee Report
In February 2019, the Compensation Committee made 2019 compensation program design decisions continuing to focus on paying for performance, retention of the current management team and managing shareholder dilution with a continued low stock price.
Compensation Program Changes Made for 2019
The Compensation Committee considered the favorable feedback received through stockholder outreach regarding the changes to the compensation program made in 2018 and determined that the structure of the program remained appropriate for 2019 with the following changes to the performance metrics under the program’s performance-based awards:
Reduced the number of metrics under the Annual Incentive to provide greater focus on key objectives
Changed a performance metric under the Performance Stock Unit award to a relative total shareholder return measure
2019 Compensation Program Elements
Our 2019 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:
2019 COMPENSATION PROGRAM ELEMENTS
Restricted Stock ( 40% of LTI) > Time-vested 1/3 per year > Stock- and cash- settled Long-Term Incentive (LTI) Annual incentive base salary Performance Stock (50% of LTI) > 3-year performance period > 50% VCI (three-year average) > 50% Relative total shareholder return (TSR) – CRC vs. 2019 peer companies > Stock-based, stock- and cash-settled Stock Options (10% of LTI) > Vest 1/3 per year > 7-year exercise period > Exercise price 10% above grant date price Annual incentive award > vci (current year) > ebitdax > debt > hse – injury and illness rate (IIR) > hse – spill prevention > hse – net water supplied to agriculture > individual goals
CALIFORNIA RESOURCES CORPORATION 49
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Compensation Committee Report
The annual incentive component of our 2019 compensation program was designed to promote the achievement of financial, operating and strategic results that are aligned with creation of stockholder value. Based on feedback from stockholders to reduce the qualitative portion of the award, the performance measures are comprised of quantitative financial and operational measures for 80% of the target annual incentive and qualitative individual objective measures for 20% of the target annual incentive.
Aligning performance criteria with our strategic areas of focus for the year, the Compensation Committee approved performance measures designed to encourage decision making that will enhance stockholder value creation. The Compensation Committee approved performance criteria based on expected results under CRC’s business plan at the time they were established in February 2019. Target performance criteria were set at levels that would represent successful execution of the 2019 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2019 business plan.
The table below provides the weightings for each performance measure as established by the Compensation Committee.
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All executives are subject to the same Investment, Operations, and Liquidity quantitative measures.
CALIFORNIA RESOURCES CORPORATION 50
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Compensation Committee Report
For 2019, the long-term incentives consist of a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant date values were allocated 40% to time-vested restricted stock unit awards and 60% to performance-based awards. The performance-based awards consist of performance stock unit awards and stock options.
2019 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Performance Stock Units (PSU) 50%
2019 Restricted Stock Unit Award –The 2019 Restricted Stock Unit Award (RSU Award) is a stock-based, stock- and cash- settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts, with one-third of the units vesting at the end of each year during the three-year period commencing at the grant date. The RSU Award will be settled 50% in shares and 50% in cash with required tax withholding taken first from the cash portion of the payout.
2019 Performance Stock Unit Award –The 2019 Performance Stock Unit Award (PSU Award) is a stock-based, stock- and cash-settled long-term performance award with performance measures based 50% on relative total shareholder return and 50% on VCI, both measured over a three-year period. For payouts up to the target number of units, the PSU Award will be settled 50% in stock and 50% in cash. For payouts greater than the target number of units, the payout of units in excess of target will be settled in cash. Required tax withholding on payouts will be taken first from the cash portion of the payouts.
The performance measures for the 2019 PSU Award continue to focus the management team on making decisions that will enhance stockholder value over the long term. Utilization of the VCI measure drives our capital allocation decisions to ensure that we focus spending on the highest return projects over the long term as compared to our annual incentive VCI measure that rewards spending decisions for the one-year period. The relative total shareholder return measure directly ties compensation to shareholder returns.
The peer companies chosen for the relative unit cost performance measures under these awards are the same as those selected by the Compensation Committee for the 2018 PSU Award as shown on page 47.
The PSU Award will vest at the end of three years from the grant date based on achieved performance against pre-determined performance criteria.
2019 Stock Options – The Compensation Committee granted stock options as part of the 2019 long-term incentive awards to further align executives with stockholders. The 2019 stock options were granted with an exercise price that was 10% above stock price on the grant date. The options will vest one-third at the end of each year during the three-year period commencing on the grant date and remain exercisable until the end of the seventh year following the grant date.
CALIFORNIA RESOURCES CORPORATION 51
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Compensation Committee Report
Our Executive Compensation Process
Role of Compensation Committee
Our executive compensation program is overseen by our Compensation Committee, with input from our management and outside compensation consultant, Meridian Compensation Partners, LLC (“Meridian”).consultants. In its oversight role, the committeeCompensation Committee is responsible for making compensation decisions involving our CEO and other executive officers and evaluating performance for compensatory purposes.
Our President and CEO Chairman and our Vice President of Compensation and Benefits provided input to the Compensation Committee with respect to executive compensation, key job responsibilities, achievement of performance objectives and compensation program design. We believe these individuals provide helpful support to the Compensation Committee in these areas given their understanding of our business and personnel, compensation programs and competitive environment. The Compensation Committee is not obligated to accept management’s recommendations with respect to executive compensation matters and meets in executive session to discuss such matters outside of the presence of our management. During 2018,2021, the Compensation Committee held twoone executive sessions.session.
Role of Independent CompensationCompensation Consultants
The Compensation Committee retained Meridian as its independent compensation consultant in January 2015,Lyons Benenson & Company Inc. (“LB&Co”), after considering all factors relevant to Meridian’sLB&Co’s independence from our management and members of our New Compensation Committee and determining that it was independent and without conflicts of interest under the Securities and Exchange Commission rules and the NYSE Listed Company Manual standards.
In 2018, LB&Co advised the compensation consultant was responsible for reviewingNew Compensation Committee beginning immediately following our executive compensation program, assisting in the design of our annual and long-term incentive programs and providing comparative market data and trends on compensation practices and programs based on an analysis of our peer companies and other factors. Representatives of the compensation consultant participated in all meetings of the committee during 2018, including executive sessions without management. The compensation consultant provided no other services to CRC.emergence from bankruptcy.
Over the course of the year,Early in 2021, our Compensation Committee analyzed the comparative total compensation of our executive officers. To facilitate this analysis, the compensation consultantLB&Co provided the committeeCompensation Committee with comparative Peer Group compensation data that included base salaries, annual incentive opportunities, and long-term incentive opportunities. This information reflected recent publicly available information and other market data. We believe that it provided our Compensation Committee with a sufficient basis to analyze the comparative total compensation of our executive officers.
2014 SPIN-OFF √ Occidental determines executive compensation in effect at Spin-off 2015 √ CRC Compensation Committee selects new peer group and designs compensation program 2016 √ Compensation Committee reduces base salaries by 10% during severe downturn √ Compensation Committee applies negative discretion and reduces annual incentive payouts due to severe business conditions √ Compensation Committee reduces long-term incentive grant date values in anticipation of market movement during severe downturn 2017 √ Compensation Committee changes long-term incentive to address retention concerns and equity burn rate with cash-based performance award 2018 √ Compensation Committee selects expanded peer group for 2018 √ Compensation Committee reduces qualitative portion of annual incentive √ Compensation Committee changes long-term performance award to equity-based 2019 √ Compensation Committee reduces number of metrics under Annual Incentive to provide greater focus on key objectives √ Compensation Committee changes long-term performance award metrics to include a relative Total Shareholder Return metric
Other Compensation and BenefitsStockholder Outreach
In additionHistorically, we have regularly requested meetings with several of our stockholders to the componentsdiscuss our governance and executive compensation practices. We intend to engage with stockholders in 2022 to solicit feedback to ensure that our governance and executive compensation practices align with stockholders’ expectations.
Stockholder Approval of theExecutive Compensation
Our stockholder advisory vote in 2021 on our 2020 executive compensation program described above, we providewas negatively impacted by the following programsextraordinary changes the Former Compensation Committee made to the original 2020 compensation program it had previously approved in order to retain and motivate our named executive officers.management team and broader organization through our financial restructuring. This resulted in a 69% approval of such compensation by stockholders.
Qualified Defined Contribution Plan–AllIn developing our 2021 Compensation Program, the New Compensation Committee considered the anticipated results of last year’s advisory vote on executive compensation and many other factors, including the New Compensation Committee's assessment of the interaction of our employees, includingcompensation programs with our named executive officers, are eligiblecorporate business objectives, evaluations of our programs by LB&Co, the New Compensation Committee's independent compensation consultant, and review of data relating to participate in a tax-qualified, defined contribution plan. The defined contribution plan provides for periodic cash contributions by us based on annual cashpay practices of our compensation and employee deferrals. Employees are permitted to contribute into the plan a percentage of their annual salary and bonus up to the annual limit set by IRS regulations. Employees are able to direct their account balances to a variety of investments.peer group.
CALIFORNIA RESOURCES CORPORATION 5238
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Compensation Committee Report
Nonqualified Defined Contribution Plans–Substantially all employees, including our named executive officers, whose participation in our qualified defined contribution plan is limited by applicable tax laws are eligible to participate in our supplemental savings plan (the “SSP”), a nonqualified defined contribution plan, which provides additional retirement benefits outside of those limitations.
Annual allocations for each participant are generally intended to restore the amounts that would have been contributed to our qualified defined contribution plan but for certain tax law limitations,Discussion and certain employer allocations are subject to a vesting schedule that requires the completion of three years of service. Vested account balances will be payable following separation from service.
Interest on SSP account balances is allocated monthly to each participant’s account based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor.
In addition, we sponsor a supplemental retirement plan (the “SRP II”), which was established for purposes of the assumption by us of certain liabilities under the Occidental Petroleum Corporation Supplemental Retirement Plan II, including those for all of our named executive officers. All account balances under the SRP II are fully vested at all times and are credited with interest on a monthly basis based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor. No additional allocations are made under the SRP II other than the crediting of interest.
In order to provide greater financial planning flexibility to participants while not increasing costs under the plan, the SRP II allows in-service distribution of a participant’s account at a specified age, but not earlier than age 60, as elected by the participant when initially participating in the plan. After a participant receives a specified age distribution, future allocations under the SRP II and earnings on those allocations are to be distributed in the first 70 days of each following year.
Nonqualified Deferred Compensation Plan–Certain management and other highly compensated employees (including each of our named executive officers) are eligible to participate in our nonqualified deferred compensation plan (the “DCP”). Under the DCP, participants are able to elect to defer a portion of their base salary and annual bonus for a given year. Each year, we will allocate an additional amount to a DCP participant’s account equal to the sum of 7% (which is immediately vested) and 12% (which is subject to a vesting schedule that requires the completion of three years of service) of the compensation deferred by the participant under the DCP to restore amounts that are not contributed to the qualified and nonqualified defined contribution plans due to such deferral of compensation under the DCP. Deferred amounts will earn interest based on the yield on five-year U.S. Treasury Constant Maturities based on a monthly frequency plus 2%, converted to a monthly allocation factor. Vested account balances will be payable following separation from service, or upon attainment of a specified age elected by the participant.
Tax Preparation and Financial Planning–Our executives, including each of the named executive officers, are eligible to receive reimbursement, up to certain annual limits, for income tax preparation, financial planning and investment advice, including legal advice related to tax and financial matters.
Insurance–We offer a variety of health coverage options to all employees. Named executive officers participate in these plans on the same terms as other employees. In addition, for executives, including the named executive officers, we pay for an annual comprehensive physical examination. We provide all employees with life insurance equal to twice the employee’s base salary. We also provide executives, including the named executive officers, with excess liability insurance coverage.
Severance Benefits–We maintain a notice and severance pay plan that, in connection with a qualifying termination of employment, provides for up to 12 months of base salary and other insurance coverage, depending on years of service, for non-bargained employees, including the named executive officers.
CALIFORNIA RESOURCES CORPORATION 53
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Compensation Committee Report
Employee Stock Purchase Plan–We adopted the California Resources Corporation 2014 Employee Stock Purchase Plan (the “ESPP”), effective January 1, 2015, which provides our employees (including our named executive officers) the ability to purchase shares of our common stock at a price equal to 85% of the closing price of a share of our common stock as of the first day of each offering period or the last day of each offering period, whichever amount is less.
The maximum number of shares of our common stock which may be issued pursuant to the ESPP is 1.5 million, subject to adjustment pursuant to the terms of the ESPP. In addition, participants in the ESPP are subject to certain limits on the number of shares that can be purchased in any given year and during any given offering period (a calendar quarter) under the ESPP.
Corporate Aircraft Use–Executives and directors may use the Company’s fractional interest in aircraft for personal travel, if space is available. The named executive officers and directors reimburse CRC for personal use of the Company’s fractional interest in aircraft, including any guests accompanying them, at not less than the standard industry fare level rate (which is determined in accordance with IRS regulations), or income is imputed and the executive or director is reimbursed for related taxes.
Conversion of Occidental Long-Term Incentive Awards in Connection with Spin-off in 2014
Each long-term incentive award with respect to Occidental common stock that was held by our named executive officers was converted upon the Spin-off into an award of shares of CRC’s restricted common stock (an “RSA”), with the number of shares determined based upon the trading price of Occidental’s common stock preceding the Spin-off and our common stock following the Spin-off. Performance-based awards were converted based on target performance payout for awards with more than one year remaining in the performance period, or at actual performance payout (as determined by the Occidental Compensation Committee) for awards with less than one year remaining in the performance period. The converted RSAs are subject to time-based vesting requirements the same as the time-based vesting requirements that were applicable to the corresponding Occidental award and performance-based vesting requirements established by the CRC Compensation Committee.
The RSAs held by our named executive officers were performance-based awards with payouts that were dependent on the outcome of the performance criteria and the price of our stock on the award certification date, as applicable, with the possibility of no payout if the performance criteria were not met. These were long-term awards with two-year and three- to seven-year performance periods, as applicable, that, based on achievement of performance criteria, vested in their entirety by the end of 2018.
Key Compensation Policies and PracticesAnalysis
Stock OwnershipOwnership Guidelines
We have minimum stock ownership guidelines for senior executives. The target direct and indirect ownership level for the Chief Executive OfficerCEO is six times annual base salary, and for the other named executive officers,NEOs, is three times annual base salary. Executives have five yearsare expected to attain their required ownership levels. Sincelevels within five years of assuming their senior executive role. Due to the Spin-off occurred on November 30, 2014,cancellation of the named executive officersCompany’s stock upon emergence from bankruptcy in October 2020, executives at emergence will have until November 30, 2019 or laterfive years from the emergence date to meetattain the target ownership levels.minimum stock holdings.
Under the Company’s Compensation Recoupment and Clawback Policy, in the event the Company is required to restate its financial statements or in the event of misconduct by a named executive officer or any section 16 reporting officer, the Company has the right to require in certain circumstances, and to the extent permitted by applicable law, the reimbursement of incentive compensation received by a named executive officer whose fraud or misconduct either caused or contributed to the need for such restatement.officer. Such incentive compensation generally includes any cash, equity, equity-based or other award under the LTIP,our long-term incentive plan, or an annual bonus or annual incentive plan of the Company.
CALIFORNIA RESOURCES CORPORATION 54
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The Compensation Committee Report
amended and restated the policy during 2021 to expand the employees covered to include all section 16 reporting officers, add misconduct as a recoupment event, allow for recoupment of up to the full amount of incentive compensation received and provide for Board discretion in application of the policy.
Anti-Hedging and Anti-Pledging PolicyAnti-Pledging Policy
Under the Company’s Insider Trading Policy, all directors, officers and employees, including the named executive officers, are prohibited from hedging, buying or selling options, engaging in short sales, or trading prepaid variable forwards, equity swaps, exchange funds, forward-sale contracts, collars or other derivatives or monetizations on Company securities. In addition, all directors, officers and employees, including named executive officers, may not pledge or mortgage Company securities as collateral for a loan, or hold Company securities in a margin account.
Our compensation programs are designed to motivate and reward our employees for their performance during the current year and over the long term, and for taking appropriate business risks to enhance CRC’s business performance. The Compensation Committee has analyzed CRC’s employee compensation programs and policies and believes that they are not reasonably likely to have a material adverse effect on CRC. CRC’s compensation programs do not encourage unnecessary or excessive risk-taking and any potential risk that the executive compensation program could influence behavior that would be inconsistent with the overall interests of CRC and its stockholders is mitigated by several factors:
Target compensation mix utilizes a balance of salary, annual incentives and long-term equity compensation vesting over three years
Transparent financial and operational metrics that are readily ascertainable from publicly-filed information
External performance metrics, such as relative costs per Boe,utilizing the increase in the volume-weighted average price of the Company’s shares, for a portion of the long-term performance-based incentive awards
Forfeiture and clawback provisions for incentive award compensation in the event of a restatement of our financial statements or violation of CRC’s Code of Business Ethicsmisconduct
Tax ConsiderationsCALIFORNIA RESOURCES CORPORATION 39
2022 PROXY STATEMENT |
Compensation Discussion and Analysis
Together with the Compensation Committee, the Company carefully reviews and takes into account current tax law and regulations as they relate to the design of our compensation programs and related decisions. Prior to the enactment of tax reform legislation signed into law on December 22, 2017, which was originally known as the Tax Cuts and Jobs Act (the “TCJA”), Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”“Code”), limitedlimits a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain NEOs, unless the compensation was performance-based as defined under federal tax laws. Subject to certain transitional rules, the TCJA has repealed the exemption for performance-based compensation from the deduction limitation of Section 162(m) of the Code for taxable years beginning after 2017.NEOs. The Compensation Committee historically reviewed and considered the deductibility of our executive compensation programs; and provided compensation that was not fully deductible when necessary to retain and motivate certain executive officers and whenbelieves it wasis in the best interest of the Company and our stockholders. To the extent compensatory awards arestockholders to provide compensation that is necessary to retain and motivate our executive officers, even if that is not covered by the transitional rules, the performance-based compensation exception to the deduction limitation under Section 162(m) of the Code will no longer be available to the Company and annual compensation paid to certain executives in excess of $1 million will not befully deductible.
CALIFORNIA RESOURCES CORPORATION 5540
|
Compensation Committee Report
Compensation Committee ReportReport
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement relating to the 20192022 Annual Meeting of Stockholders.
Compensation Committee,
Justin A. GannonJames N. Chapman, Chair
Harry T. McMahonTiffany (TJ) Thom Cepak
AvedickNicole Neeman Brady
William B. PoladianRoby
Laurie A. Siegel
February 19, 2019
22, 2022
CALIFORNIA RESOURCES CORPORATION 5641
|
Executive Compensation Tables
On May 31, 2016, we completed a reverse stock split using a ratio of one share of common stock for every ten shares then outstanding. Share and per share amounts included herein have been adjusted to reflect this reverse split.Tables
Summary Compensation Table (SCT)
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| Non-Equity | Deferred |
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| Stock | Option |
| Incentive Plan | Compensation |
| All Other |
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Name |
| Year | Salary | Bonus | Awards (2) | Awards (2) |
| Compensation (3) | Earnings (4) |
| Compensation (5) | Total (1) |
| ||||||||||||||||||||||||||||||||
Todd A. Stevens |
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| 2018 |
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| $ | 867,308 |
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| $ | 0 |
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| $ | 4,680,020 |
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| $ | 520,008 |
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| $ | 1,200,000 |
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| $ | 36,953 |
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| $ | 430,368 |
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| $ | 7,734,657 |
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President and Chief |
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| 2017 |
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| $ | 825,000 |
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| $ | 0 |
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| $ | 2,400,000 |
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| $ | 0 |
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| $ | 1,170,000 |
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| $ | 19,178 |
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| $ | 440,483 |
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| $ | 4,854,661 |
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Executive Officer |
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| 2016 |
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| $ | 772,962 |
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| $ | 0 |
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| $ | 1,684,375 |
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| $ | 0 |
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| $ | 1,310,000 |
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| $ | 15,248 |
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| $ | 335,923 |
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| $ | 4,118,508 |
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Marshall D. Smith |
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| 2018 |
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| $ | 600,000 |
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| $ | 0 |
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| $ | 1,710,022 |
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| $ | 190,009 |
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| $ | 750,000 |
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| $ | 7,648 |
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| $ | 300,821 |
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| $ | 3,558,500 |
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Senior Executive Vice |
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| 2017 |
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| $ | 600,000 |
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| $ | 0 |
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| $ | 950,000 |
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| $ | 0 |
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| $ | 850,000 |
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| $ | 2,783 |
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| $ | 322,349 |
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| $ | 2,725,132 |
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President and |
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| 2016 |
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| $ | 562,154 |
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| $ | 0 |
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| $ | 673,750 |
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| $ | 0 |
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| $ | 940,000 |
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| $ | 1,415 |
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| $ | 307,763 |
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| $ | 2,485,082 |
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Chief Financial Officer |
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Darren Williams |
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| 2018 |
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| $ | 450,000 |
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| $ | 0 |
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| $ | 945,005 |
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| $ | 105,010 |
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| $ | 510,000 |
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| $ | 4,666 |
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| $ | 200,368 |
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| $ | 2,215,049 |
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Executive Vice President– |
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| 2017 |
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| $ | 450,000 |
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| $ | 0 |
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| $ | 500,000 |
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| $ | 0 |
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| $ | 550,000 |
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| $ | 1,735 |
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| $ | 202,424 |
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| $ | 1,704,159 |
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Operations and Geoscience |
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| 2016 |
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| $ | 421,615 |
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| $ | 0 |
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| $ | 463,217 |
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| $ | 0 |
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| $ | 540,000 |
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| $ | 845 |
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| $ | 164,445 |
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| $ | 1,590,122 |
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Charles F. Weiss |
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| 2018 |
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| $ | 437,692 |
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| $ | 0 |
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| $ | 990,030 |
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| $ | 110,010 |
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| $ | 425,000 |
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| $ | 16,982 |
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| $ | 188,979 |
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| $ | 2,168,693 |
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Executive Vice President– |
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| 2017 |
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| $ | 425,000 |
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| $ | 0 |
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| $ | 550,000 |
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| $ | 0 |
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| $ | 470,000 |
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| $ | 9,126 |
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| $ | 181,450 |
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| $ | 1,635,576 |
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Public Affairs |
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| 2016 |
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| $ | 398,192 |
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| $ | 0 |
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| $ | 505,320 |
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| $ | 0 |
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| $ | 475,000 |
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| $ | 7,613 |
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| $ | 125,269 |
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| $ | 1,511,394 |
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Shawn M. Kerns(6) |
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| 2018 |
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| $ | 393,077 |
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| $ | 0 |
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| $ | 1,035,018 |
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| $ | 115,010 |
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| $ | 450,000 |
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| $ | 12,679 |
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| $ | 152,817 |
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| $ | 2,158,601 |
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Executive Vice President– |
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Operations and Engineering |
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| Non-Equity | Deferred |
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Name and |
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| Stock |
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| Option |
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| Incentive Plan | Compensation | All Other |
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Principal |
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| Year |
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| Salary |
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| Bonus |
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| Awards | Awards | Compensation | Earnings | Compensation |
| Total |
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Position |
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Mark A. (Mac) McFarland (7) |
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| 2021 |
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| $ | 1,122,395 |
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| $ | 306,000 |
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| $ | 14,132,218 |
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| $ | 0 |
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| $ | 1,043,022 |
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| $ | 0 |
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| $ | 979,646 |
|
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| $ | 17,583,281 |
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President and |
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| 2020 |
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| $ | 0 |
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| $ | 0 |
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| $ | 0 |
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| $ | 0 |
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| $ | 0 |
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| $ | 0 |
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| $ | 47,529 |
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| $ | 47,529 |
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Chief Executive Officer |
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Francisco J. Leon (7) |
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| 2021 |
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| $ | 491,154 |
|
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| $ | 150,000 |
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| $ | 3,641,638 |
|
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| $ | 0 |
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| $ | 648,000 |
|
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| $ | 4,181 |
|
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| $ | 106,925 |
|
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| $ | 5,041,898 |
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Executive Vice President and |
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| 2020 |
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| $ | 362,788 |
|
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| $ | 288,750 |
|
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| $ | 900,010 |
|
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| $ | 100,002 |
|
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| $ | 1,677,300 |
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| $ | 2,673 |
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| $ | 195,898 |
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| $ | 3,527,421 |
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Chief Financial Officer |
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Jay A. Bys (7) |
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| 2021 |
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| $ | 626,923 |
|
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| $ | 150,000 |
|
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| $ | 2,684,108 |
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| $ | 0 |
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| $ | 648,000 |
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| $ | 0 |
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| $ | 77,332 |
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| $ | 4,186,363 |
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Executive Vice President and |
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Chief Commercial Officer |
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Shawn M. Kerns |
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| 2021 |
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| $ | 494,231 |
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| $ | 150,000 |
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| $ | 3,641,638 |
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| $ | 0 |
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| $ | 648,000 |
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| $ | 11,056 |
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| $ | 107,368 |
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| $ | 5,052,293 |
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Executive Vice President and |
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| 2020 |
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| $ | 400,481 |
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| $ | 382,500 |
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| $ | 1,057,509 |
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| $ | 117,502 |
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| $ | 2,004,078 |
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| $ | 13,094 |
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| $ | 253,438 |
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| $ | 4,228,602 |
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Chief Operating Officer |
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| 2019 |
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| $ | 421,154 |
|
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| $ | 0 |
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| $ | 1,057,538 |
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| $ | 117,508 |
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| $ | 958,945 |
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| $ | 13,101 |
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| $ | 165,194 |
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| $ | 2,733,440 |
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Michael L. Preston (7) |
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| 2021 |
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| $ | 495,385 |
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| $ | 150,000 |
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| $ | 3,641,638 |
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| $ | 0 |
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| $ | 648,000 |
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| $ | 13,148 |
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| $ | 107,834 |
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| $ | 5,056,005 |
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Executive Vice President, |
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| 2020 |
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| $ | 414,615 |
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| $ | 374,000 |
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| $ | 967,500 |
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| $ | 107,500 |
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| $ | 1,897,348 |
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| $ | 14,354 |
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| $ | 260,862 |
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| $ | 4,036,179 |
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Chief Administrative Officer |
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| 2019 |
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| $ | 439,231 |
|
|
| $ | 0 |
|
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| $ | 967,528 |
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| $ | 107,511 |
|
|
| $ | 1,088,245 |
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| $ | 14,198 |
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| $ | 175,530 |
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| $ | 2,792,243 |
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and General Counsel |
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| |
Name |
Year | Stock Awards as Shown in SCT Above |
| Option Awards as Shown in SCT Above |
|
PIA Award Target Values Not in SCT Above |
| Total with PIA Awards Included | ||||
Todd A. Stevens | 2018 | $ | 4,680,020 |
| $ | 520,008 |
| $ | 0 |
| $ | 7,734,657 |
| 2017 | $ | 2,400,000 |
| $ | 0 |
| $ | 2,400,000 |
| $ | 7,254,661 |
| 2016 | $ | 1,684,375 |
| $ | 0 |
| $ | 1,750,000 |
| $ | 5,868,508 |
Marshall D. Smith | 2018 | $ | 1,710,022 |
| $ | 190,009 |
| $ | 0 |
| $ | 3,558,500 |
| 2017 | $ | 950,000 |
| $ | 0 |
| $ | 950,000 |
| $ | 3,675,132 |
| 2016 | $ | 673,750 |
| $ | 0 |
| $ | 900,000 |
| $ | 3,385,082 |
Darren Williams | 2018 | $ | 945,005 |
| $ | 105,010 |
| $ | 0 |
| $ | 2,215,049 |
| 2017 | $ | 500,000 |
| $ | 0 |
| $ | 500,000 |
| $ | 2,204,159 |
| 2016 | $ | 463,217 |
| $ | 0 |
| $ | 481,250 |
| $ | 2,071,372 |
Charles F. Weiss | 2018 | $ | 990,030 |
| $ | 110,010 |
| $ | 0 |
| $ | 2,168,693 |
| 2017 | $ | 550,000 |
| $ | 0 |
| $ | 550,000 |
| $ | 2,185,576 |
| 2016 | $ | 505,320 |
| $ | 0 |
| $ | 525,000 |
| $ | 2,036,394 |
Mr. McFarland had an Interim CEO Agreement with the Company under which the Company paid a fee of $175,000 per month, beginning in January 2021 and ending March 21, 2021, for his services as Interim CEO. Under the terms of the agreement, he received no cash compensation for his role as Chair of the Board while he was serving as Interim CEO but remained eligible to receive a director emergence equity grant. On March 22, 2021, the Company announced that Mr. McFarland had been named President and CEO, dropping the interim title, in addition to his role as Chair of the Board. On April 15, 2021, the Company announced that Ms. Tiffany (TJ) Thom Cepak had been named Chair of the Board, replacing Mr. McFarland in that role following his permanent appointment as President and CEO. Mr. McFarland continues to serve as a director.
Mr. Bys had a consulting agreement with the Company under which the Company paid a fee of $75,000 per month, beginning January 1, 2021, for his consulting services. The agreement was terminated upon his appointment as an officer of the Company, effective May 1, 2021.
Amounts shown for 2020 reflect a 37.5% reduction in base salary for a two-month period in April-May for Messrs. Leon, Kerns and Preston due to the extreme adverse economic conditions created by the COVID-19 pandemic.
(3) | See the Grants of Plan-Based Awards Table below for detail regarding the 2021 awards. As required by the SEC rules, the amounts shown represent the grant date fair value of the awards granted in that year as computed in accordance with U.S. generally accepted accounting principles (GAAP) |
CALIFORNIA RESOURCES CORPORATION 57
|
Executive Compensation Tables
performance stock units, |
| The amounts shown for 2020 reflect awards granted in 2020 that were forfeited by the NEOs in May 2020 upon acceptance of a Quarterly Incentive Award reflected in the Non-Equity Incentive Plan Compensation amount and the Retention Bonus Award reflected in the Bonus amount during 2020. All outstanding stock and option awards from 2019 were cancelled upon the Company’s emergence from bankruptcy in October 2020. |
CALIFORNIA RESOURCES CORPORATION 42
2022 PROXY STATEMENT |
Executive Compensation Tables
(4) | The amounts shown for 2021 are the scorecard portion of the payouts under the AIP. The 2021 amount for Mr. McFarland reflects a reduction of $278,898 from the amount approved by the Compensation Committee to reflect the difference between his interim CEO agreement monthly fee and his employment agreement salary for the period from January 1, 2021 through March 21, 2021, per the terms of his employment agreement. The amounts shown for 2020 include the |
| The amounts shown are the portion of each executive’s interest credited on nonqualified deferred compensation plan balances that was in excess of 120% of the long-term applicable federal rate, compounded monthly, as prescribed under Section 1274(d) of the Code. |
| The following table shows “All Other Compensation” amounts for |
| Todd A. | Marshall D. | Darren | Charles F. |
|
| Shawn M. | Mr. | Mr. | Mr. | |||||||||||||||||||||||||||||||||||||||||
| Stevens | Smith | Williams | Weiss |
|
| Kerns |
| McFarland | Leon | Bys | Kerns | Preston | ||||||||||||||||||||||||||||||||||||||
Qualified Plan(a) |
| $ | 36,500 |
|
|
| $ | 36,500 |
|
|
| $ | 36,500 |
|
|
| $ | 36,500 |
|
|
| $ | 36,500 |
|
|
| |||||||||||||||||||||||||
Supplemental Plan(b) |
| $ | 360,766 |
|
|
| $ | 243,742 |
|
|
| $ | 153,967 |
|
|
| $ | 135,552 |
|
|
| $ | 112,686 |
|
|
| |||||||||||||||||||||||||
Dividend Equivalents(c) |
| $ | 6,938 |
|
|
| $ | 2,775 |
|
|
| $ | 1,908 |
|
|
| $ | 2,081 |
|
|
| $ | 1,249 |
|
|
| |||||||||||||||||||||||||
Qualified Plan (a) |
| $ | 25,162 |
|
|
| $ | 28,396 |
|
|
| $ | 22,239 |
|
|
| $ | 30,931 |
|
|
| $ | 25,723 |
|
| ||||||||||||||||||||||||||
Supplemental Plan (b) |
| $ | 94,823 |
|
|
| $ | 50,747 |
|
|
| $ | 34,602 |
|
|
| $ | 48,655 |
|
|
| $ | 54,329 |
|
| ||||||||||||||||||||||||||
Personal Benefits |
| $ | 26,164 |
| (d) |
| $ | 5,804 |
| (e) |
| $ | 1,993 |
| (f) |
| $ | 14,846 |
| (g) |
| $ | 2,382 |
| (h) |
|
| $ | - |
|
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| |||
Dividend Equivalents (c) |
| $ | 109,148 |
|
|
| $ | 27,782 |
|
|
| $ | 20,491 |
|
|
| $ | 27,782 |
|
|
| $ | 27,782 |
|
| ||||||||||||||||||||||||||
Relocation Benefits |
| $ | 0 |
|
|
| $ | 12,000 |
|
|
| $ | 6,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
|
| $ | 750,513 |
|
|
| $ | - |
|
|
| $ | - |
|
|
| $ | - |
|
|
| $ | - |
|
|
Total |
| $ | 430,368 |
|
|
| $ | 300,821 |
|
|
| $ | 200,368 |
|
|
| $ | 188,979 |
|
|
| $ | 152,817 |
|
|
|
| $ | 979,646 |
|
|
| $ | 106,925 |
|
|
| $ | 77,332 |
|
|
| $ | 107,368 |
|
|
| $ | 107,834 |
|
|
| (a) | The amount shown reflects the Company matching and retirement contributions to the qualified defined contribution savings plan–the California Resources Corporation Savings Plan (the “Qualified Plan”). |
| (b) | The amount shown is the Company contributions to the nonqualified defined contribution plan–the California Resources Corporation Supplemental Savings Plan (the “Supplemental Plan”), which restores amounts limited by IRS limits on the Qualified Plan. |
| (c) |
|
| (d) | Includes relocation benefits ($397,029) and tax |
(7) |
|
|
|
|
|
|
|
|
|
|
CALIFORNIA RESOURCES CORPORATION 5843
|
Executive Compensation Tables
The table below summarizes the following plan-based awards granted in 20182021 to our NEOs: Annual Incentive Awards, Restricted Stock Unit Awards (RSU)(“RSU”), Performance Stock Unit Awards (PSU), and Stock Option Awards (Options)(“PSU”).
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| Stock Awards: |
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| Exercise |
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| Under Non-Equity Incentive |
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| Under Equity Incentive |
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| Number of |
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| Option |
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| Number of |
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| or Base |
| Fair Value |
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| Plan Awards |
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| Plan Awards |
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| Shares or Units |
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| Awards |
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| Awards |
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| Estimated Future Payouts |
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| Estimated Future Payouts |
| Shares of |
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| Securities |
| Price of |
| of Stock and |
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Name / Type of |
| Grant |
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| Threshold |
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| Target |
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| Maximum |
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| Threshold |
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| Target |
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| Maximum |
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Grant |
| Date |
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| ($) |
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| ($) |
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| ($) |
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| (# Shares) |
|
| (# Shares) |
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| (# Shares) |
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| (# Shares) |
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| ($) |
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| ($) |
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Todd A. Stevens |
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| Under Non-Equity Incentive |
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| Under Equity Incentive |
| Stock |
|
| Underlying |
| Option |
| Option |
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Plan Awards |
|
| Plan Awards |
| or Units |
|
| Options |
| Awards |
| Awards |
|
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Name / |
| Grant |
| Threshold |
|
| Target |
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| Maximum |
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| Threshold |
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| Target |
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Type of Grant |
| Date |
| ($) |
|
| ($) |
|
| ($) |
|
| (# Shares) |
|
| (# Shares) |
|
|
| (# Shares) |
|
| (# Shares) |
| ($) |
| ($) |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark A. (Mac) McFarland | Mark A. (Mac) McFarland |
|
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 10,200 |
|
| $ | 1,020,000 |
|
| $ | 2,040,000 |
|
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(2) |
| 1/25/2021 |
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 61,333 |
|
|
|
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|
| $ | 1,502,659 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(2) |
| 3/22/2021 |
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|
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|
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|
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|
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|
|
| 255,760 |
|
|
|
|
|
| $ | 6,214,968 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU(3) |
| 3/22/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 81,239 |
|
|
| 324,954 |
|
|
|
|
|
|
|
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|
|
| $ | 6,414,592 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Francisco J. Leon | Francisco J. Leon |
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Annual Incentive(1) |
|
|
| $ | 16,074 |
|
| $ | 962,500 |
|
| $ | 1,925,000 |
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| $ | 5,000 |
|
| $ | 500,000 |
|
| $ | 1,000,000 |
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| ||||||||||||
RSU(2) |
| 2/21/2018 |
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|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
| 113,414 |
|
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|
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| $ | 2,080,013 |
|
|
| 1/25/2021 |
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| 83,123 |
|
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|
|
| $ | 2,036,514 |
|
| ||||||||||||
PSU(3) |
| 2/21/2018 |
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|
|
|
|
|
|
|
|
|
|
|
|
| 35,442 |
|
|
| 141,767 |
|
|
| 283,534 |
|
|
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|
|
|
|
|
|
| $ | 2,600,007 |
|
|
| 1/25/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,781 |
|
|
| 83,124 |
|
|
|
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|
|
| $ | 1,605,124 |
|
| ||||||||||||
Options (4) |
| 2/21/2018 |
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| 51,897 |
|
|
| $ | 20.17 |
|
|
| $ | 520,008 |
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| |||||||||||||||||||||||||||||||||||||||||||||||
Marshall D. Smith |
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Jay A. Bys |
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Annual Incentive(1) |
|
|
| $ | 10,020 |
|
| $ | 600,000 |
|
| $ | 1,200,000 |
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| $ | 5,000 |
|
| $ | 500,000 |
|
| $ | 1,000,000 |
|
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| ||||||||||||
RSU(2) |
| 2/21/2018 |
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|
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|
|
| 41,440 |
|
|
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|
| $ | 760,010 |
|
|
| 5/12/2021 |
|
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|
|
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|
|
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|
|
|
| 61,309 |
|
|
|
|
|
| $ | 1,500,231 |
|
| ||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,950 |
|
|
| 51,800 |
|
|
| 103,600 |
|
|
|
|
|
|
|
|
|
|
| $ | 950,012 |
|
|
| 5/12/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,327 |
|
|
| 61,309 |
|
|
|
|
|
|
|
|
|
|
| $ | 1,183,877 |
|
| ||||||||||||
Options (4) |
| 2/21/2018 |
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,963 |
|
|
| $ | 20.17 |
|
|
| $ | 190,009 |
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Darren Williams |
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|
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|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 6,764 |
|
| $ | 405,000 |
|
| $ | 810,000 |
|
|
|
|
|
|
|
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|
|
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|
|
|
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|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,901 |
|
|
|
|
|
|
| $ | 420,004 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,157 |
|
|
| 28,626 |
|
|
| 57,252 |
|
|
|
|
|
|
|
|
|
|
| $ | 525,001 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
Options (4) |
| 2/21/2018 |
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,480 |
|
|
| $ | 20.17 |
|
|
| $ | 105,010 |
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Charles F. Weiss |
|
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| ||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 5,511 |
|
| $ | 330,000 |
|
| $ | 660,000 |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23,992 |
|
|
|
|
|
|
| $ | 440,013 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,498 |
|
|
| 29,990 |
|
|
| 59,980 |
|
|
|
|
|
|
|
|
|
|
| $ | 550,017 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
Options (4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,979 |
|
|
| $ | 20.17 |
|
|
| $ | 110,010 |
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Annual Incentive(1) |
|
|
| $ | 5,344 |
|
| $ | 320,000 |
|
| $ | 640,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5,000 |
|
| $ | 500,000 |
|
| $ | 1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,082 |
|
|
|
|
|
|
| $ | 460,004 |
|
|
| 1/25/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 83,123 |
|
|
|
|
|
| $ | 2,036,514 |
|
| ||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,839 |
|
|
| 31,353 |
|
|
| 62,706 |
|
|
|
|
|
|
|
|
|
|
| $ | 575,014 |
|
|
| 1/25/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,781 |
|
|
| 83,124 |
|
|
|
|
|
|
|
|
|
|
| $ | 1,605,124 |
|
| ||||||||||||
Options (4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,478 |
|
|
| $ | 20.17 |
|
|
| $ | 115,010 |
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Michael L. Preston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 5,000 |
|
| $ | 500,000 |
|
| $ | 1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(2) |
| 1/25/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 83,123 |
|
|
|
|
|
| $ | 2,036,514 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
PSU(3) |
| 1/25/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,781 |
|
|
| 83,124 |
|
|
|
|
|
|
|
|
|
|
| $ | 1,605,124 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | Payout of |
(2) | The amounts shown represent the estimated grant date fair value of the |
(3) |
|
|
|
CALIFORNIA RESOURCES CORPORATION 5944
|
Executive Compensation Tables
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements
We have entered into an employment agreement with each of our NEOs. For more information, see the “Employment Agreements” section beginning on page 32 of the “Compensation Discussion and Analysis.”
Long-Term Incentives
During 2021, our NEOs received emergence grants allocated between RSUs and PSUs. The RSUs and PSUs awarded to our NEOs in 2021 consisted of multi-year sized emergence grants to immediately realign the NEOs with shareholder interests and to reestablish the retention of multi-year grants, since all of the NEOs’ prior Company stock holdings and equity awards were cancelled upon our emergence from bankruptcy. The target value, date of grant and general terms of the RSUs and PSUs awarded to our NEOs during 2021 are described in the “Long-Term Incentive Grants” section beginning on page 29 of the “Compensation Discussion and Analysis” and in the footnotes to the “Grants of Plan-Based Awards” table above. While RSUs and PSUs generally vest (and performance under the PSUs is measured) over a three-year period and payment is made at the end of such period, please see the description of each NEO’s employment agreement in the “Employment Agreements” section beginning on page 32 of the “Compensation Discussion and Analysis” and the “Potential Payments on Termination or Change in Control” below for a description of certain circumstances pursuant to which vesting and payout can occur earlier.
Annual Incentives
Our NEOs were eligible to participate in the AIP for the 2021 calendar year. Payouts under the AIP are based on a combination of company performance against goals for pre-established performance metrics, and our Compensation Committee’s assessment of each NEO’s individual performance, as described in the Compensation Discussion and Analysis.
Salary and Annual Incentive in Proportion to Total Compensation
Assuming target performance with respect to the long-term incentive awards, our CEO, Mr. McFarland, received approximately 11% of his total compensation in the form of base salary and cash-based annual incentive award, and our NEOs (other than our CEO) generally received an average of approximately 24% of their total compensation in the form of base salary and cash-based annual incentive award. Please see the “Compensation Discussion and Analysis” section of this proxy statement for a description of the philosophy and objectives of our 2021 Compensation Program.
CALIFORNIA RESOURCES CORPORATION 45
2022 PROXY STATEMENT |
Executive Compensation Tables
Outstanding Equity Awards at December 31, 20182021
The following table below sets forthsummarizes the outstanding equity awards heldfor our NEOs as of December 31, 2018 by our named executive officers, including Performance Stock Unit Awards (PSU), Restricted Stock Unit Awards (RSU) and Stock Option Awards (Options).2021.
|
|
|
| Option Awards | Stock Awards |
| ||||||||||||||||||||||||||||||||||
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| Equity |
| ||
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| Incentive |
| ||
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| Plan |
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| Equity | Awards: |
| ||||||
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| Incentive | Market or |
| ||||||
|
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| Number |
|
|
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| Plan | Payout |
| ||||||||||
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
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| of |
|
|
|
|
| Awards: | Value of |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares | Market | Number of | Unearned |
| ||||||||||||||
|
|
|
| Number of | Number of |
|
|
|
|
|
|
|
| or Units | Value of | Unearned | Shares, |
| ||||||||||||||||||||||
|
|
|
| Securities | Securities |
|
|
|
|
|
|
|
| of Stock | Shares or | Shares, Units | Units or |
| ||||||||||||||||||||||
|
|
|
| Underlying | Underlying |
|
|
|
|
|
|
|
| That | Units That | or Other | Other Rights |
| ||||||||||||||||||||||
|
|
|
| Unexercised | Unexercised | Option | Option | Have Not | Have Not | Rights That | That Have |
| ||||||||||||||||||||||||||||
Name / Type | Grant | Options (#) | Options (#) | Exercise | Expiration | Vested | Vested | Have Not | Not Vested |
| ||||||||||||||||||||||||||||||
of Grant | Date | Exercisable | Unexercisable | Price ($) | Date | (#) | ($)(1) | Vested (#) | ($)(1) |
| ||||||||||||||||||||||||||||||
Todd A. Stevens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 141,767 |
|
|
| $ | 2,415,710 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 36,458 |
|
|
| $ | 621,244 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 85,061 |
|
|
| $ | 1,449,439 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 113,414 |
|
|
| $ | 1,932,575 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 151,516 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 66,667 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 51,897 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marshall D. Smith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 51,800 |
|
|
| $ | 882,672 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 14,583 |
|
|
| $ | 248,494 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 33,670 |
|
|
| $ | 573,737 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 41,440 |
|
|
| $ | 706,138 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 90,910 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 26,667 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 18,963 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darren Williams |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 28,626 |
|
|
| $ | 487,787 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,026 |
|
|
| $ | 170,843 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17,721 |
|
|
| $ | 301,966 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,901 |
|
|
| $ | 390,233 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 60,607 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 18,334 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 10,480 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Weiss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 29,990 |
|
|
| $ | 511,030 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,937 |
|
|
| $ | 186,366 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19,493 |
|
|
| $ | 332,161 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23,992 |
|
|
| $ | 408,824 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 51,516 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 20,000 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 10,979 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31,353 |
|
|
| $ | 534,255 |
|
RSU(3) |
| 5/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,562 |
|
|
| $ | 111,816 |
|
|
|
|
|
|
|
|
|
|
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,405 |
|
|
| $ | 211,381 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,082 |
|
|
| $ | 427,397 |
|
|
|
|
|
|
|
|
|
|
|
Options(6) |
| 12/1/2014 |
|
|
| 36,364 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 8/5/2015 |
|
|
| 12,000 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 2/21/2018 |
|
|
| 0 |
|
|
|
| 11,478 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock Awards |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Plan |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity | Awards: |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive | Market or |
| ||||||
|
|
|
|
| Number |
|
|
|
|
| Plan | Payout |
| ||||||||||
|
|
|
|
| of |
|
|
|
|
| Awards: | Value of |
| ||||||||||
|
|
|
|
| Shares | Market | Number of | Unearned |
| ||||||||||||||
|
|
|
|
| or Units | Value of | Unearned | Shares, |
| ||||||||||||||
|
|
|
|
| of Stock | Shares or | Shares, Units | Units or |
| ||||||||||||||
|
|
|
|
| That | Units That | or Other | Other Rights |
| ||||||||||||||
|
|
|
|
| Have Not | Have Not | Rights That | That Have |
| ||||||||||||||
Name / Type | Grant |
| Vested | Vested | Have Not | Not Vested |
| ||||||||||||||||
of Grant | Date |
| (#) | ($)(1) | Vested (#) | ($)(1) |
| ||||||||||||||||
Mark A. (Mac) McFarland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 1/25/2021 |
|
|
|
| 61,333 |
|
|
| $ | 2,619,532 |
|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 3/22/2021 |
|
|
|
| 255,760 |
|
|
| $ | 10,923,510 |
|
|
|
|
|
|
|
|
|
|
|
PSU(3) |
| 3/22/2021 |
|
|
|
| 324,954 |
|
|
| $ | 13,878,785 |
|
|
|
|
|
|
|
|
|
|
|
Francisco J. Leon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 1/25/2021 |
|
|
|
| 83,123 |
|
|
| $ | 3,550,183 |
|
|
|
|
|
|
|
|
|
|
|
PSU(4) |
| 1/25/2021 |
|
|
|
| 80,298 |
|
|
| $ | 3,429,528 |
|
|
|
| 2,826 |
|
|
| $ | 120,698 |
|
Jay A. Bys |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 5/12/2021 |
|
|
|
| 61,309 |
|
|
| $ | 2,618,507 |
|
|
|
|
|
|
|
|
|
|
|
PSU(4) |
| 5/12/2021 |
|
|
|
| 59,224 |
|
|
| $ | 2,529,457 |
|
|
|
| 2,085 |
|
|
| $ | 89,050 |
|
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 1/25/2021 |
|
|
|
| 83,123 |
|
|
| $ | 3,550,183 |
|
|
|
|
|
|
|
|
|
|
|
PSU(4) |
| 1/25/2021 |
|
|
|
| 80,298 |
|
|
| $ | 3,429,528 |
|
|
|
| 2,826 |
|
|
| $ | 120,698 |
|
Michael L. Preston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU(2) |
| 1/25/2021 |
|
|
|
| 83,123 |
|
|
| $ | 3,550,183 |
|
|
|
|
|
|
|
|
|
|
|
PSU(4) |
| 1/25/2021 |
|
|
|
| 80,298 |
|
|
| $ | 3,429,528 |
|
|
|
| 2,826 |
|
|
| $ | 120,698 |
|
(1) | The |
|
|
CALIFORNIA RESOURCES CORPORATION 60
|
Executive Compensation Tables
|
|
| One-third of the units vest on each of the |
| (3) | Payout of this PSU award is subject to the achievement of specified 60-day VWAP thresholds over a three-year period from March 22, 2021 to March 21, 2024. The |
|
| 16,721 of |
CALIFORNIA RESOURCES CORPORATION 46
2022 PROXY STATEMENT |
Executive Compensation Tables
Option Exercises and Stock Vested in 20182021
The following table summarizes,There were no option exercises or stock vested for our named executive officers, the CRC option and stock awards exercised or vestedNEOs during 2018.2021.
| Option Awards | Stock Awards | ||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||
Todd A. Stevens |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 184,042 |
|
|
| $ | 5,560,397 |
|
|
Marshall D. Smith |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 80,979 |
|
|
| $ | 2,530,228 |
|
|
Darren Williams |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 60,004 |
|
|
| $ | 1,918,019 |
|
|
Charles F. Weiss |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 53,342 |
|
|
| $ | 1,653,225 |
|
|
Shawn M. Kerns |
|
| 0 |
|
|
| $ | 0 |
|
|
|
| 33,569 |
|
|
| $ | 1,046,091 |
|
|
|
|
20182021 Nonqualified Deferred Compensation Table
The following table sets forth for 20182021 the contributions, earnings, withdrawals and balances under the SSP, SRP II and the DCP in which the named executive officersNEOs participated. The named executive officersMessrs. Leon, Kerns and Preston were fully vested in their respective aggregate balances shown below, which include amounts CRC assumed from our former parent Occidental plansPetroleum Corporation’s plans. Messrs. McFarland and Bys will be fully vested in connection with the Spin-off.their SSP balances following their third anniversary of employment in 2024. For additional information relating to these plans, see “Nonqualified Defined Contribution Plans” and “Nonqualified Deferred Compensation Plan,” above.
|
|
|
|
|
|
|
|
|
|
|
|
| Aggregate |
|
|
| ||||||||||||
|
|
|
| Executive | Company | Aggregate | Withdrawals/ | Aggregate | ||||||||||||||||||||
|
|
|
| Contributions | Contributions | Earnings | Distributions | Balance | ||||||||||||||||||||
|
|
|
| in 2018 | in 2018 | in 2018 | in 2018 | at 12/31/2018 | ||||||||||||||||||||
Name |
| Plan |
| ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ||||||||||||||||||||
Todd A. Stevens |
| SSP |
|
| $ | 0 |
|
|
| $ | 357,878 |
|
|
| $ | 41,325 |
|
|
| $ | 0 |
|
|
| $ | 1,313,218 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 57,518 |
|
|
| $ | 0 |
|
|
| $ | 1,252,083 |
|
|
|
| DCP |
|
| $ | 15,200 |
|
|
| $ | 2,888 |
|
|
| $ | 46,004 |
|
|
| $ | 19,887 |
|
|
| $ | 1,003,765 |
|
|
Marshall D. Smith |
| SSP |
|
| $ | 0 |
|
|
| $ | 243,742 |
|
|
| $ | 29,580 |
|
|
| $ | 0 |
|
|
| $ | 927,520 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 876 |
|
|
| $ | 0 |
|
|
| $ | 19,072 |
|
|
Darren Williams |
| SSP |
|
| $ | 0 |
|
|
| $ | 153,967 |
|
|
| $ | 18,244 |
|
|
| $ | 0 |
|
|
| $ | 574,294 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 333 |
|
|
| $ | 0 |
|
|
| $ | 7,250 |
|
|
Charles F. Weiss |
| SSP |
|
| $ | 0 |
|
|
| $ | 135,552 |
|
|
| $ | 15,731 |
|
|
| $ | 0 |
|
|
| $ | 498,444 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 51,274 |
|
|
| $ | 0 |
|
|
| $ | 1,116,173 |
|
|
Shawn M. Kerns |
| SSP |
|
| $ | 0 |
|
|
| $ | 112,686 |
|
|
| $ | 11,684 |
|
|
| $ | 0 |
|
|
| $ | 381,547 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 17,941 |
|
|
| $ | 0 |
|
|
| $ | 390,544 |
|
|
|
| DCP |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 20,400 |
|
|
| $ | 0 |
|
|
| $ | 444,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aggregate |
|
|
| ||||||||||||
|
|
|
| Executive | Company | Aggregate | Withdrawals/ | Aggregate | ||||||||||||||||||||
|
|
|
| Contributions | Contributions | Earnings | Distributions | Balance | ||||||||||||||||||||
|
|
|
| 2021 | in 2021 | in 2021 | in 2021 | at 12/31/2021 | ||||||||||||||||||||
Name |
| Plan |
| ($)(1) |
| ($)(3) | ($) | ($)(4) | ||||||||||||||||||||
Mark A. (Mac) McFarland |
| SSP |
|
| $ | 0 |
|
|
| $ | 94,823 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 94,823 |
|
|
Francisco J. Leon |
| SSP |
|
| $ | 0 |
|
|
| $ | 50,747 |
|
|
| $ | 13,747 |
|
|
| $ | 0 |
|
|
| $ | 549,824 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 4,707 |
|
|
| $ | 0 |
|
|
| $ | 159,939 |
|
|
Jay A. Bys |
| SSP |
|
| $ | 0 |
|
|
| $ | 34,602 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 34,602 |
|
|
Shawn M. Kerns |
| SSP |
|
| $ | 0 |
|
|
| $ | 48,655 |
|
|
| $ | 21,478 |
|
|
| $ | 0 |
|
|
| $ | 818,569 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 12,636 |
|
|
| $ | 0 |
|
|
| $ | 429,339 |
|
|
|
| DCP |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 14,368 |
|
|
| $ | 0 |
|
|
| $ | 488,196 |
|
|
Michael L. Preston |
| SSP |
|
| $ | 0 |
|
|
| $ | 54,329 |
|
|
| $ | 26,172 |
|
|
| $ | 0 |
|
|
| $ | 985,957 |
|
|
|
| SRP II |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 31,510 |
|
|
| $ | 0 |
|
|
| $ | 1,070,628 |
|
|
(1) | No employee contributions are permitted in the SSP or SRP II. |
(2) | Amounts represent Company |
CALIFORNIA RESOURCES CORPORATION 61
|
Executive Compensation Tables
(4) |
|
| The amounts reported in this column reflect the total balance of the NEO’s accounts in the plans as of December 31, |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO.
For 2018, our last completed fiscal year:
The median of the annual total compensation of all employees of our company (other than our CEO) was $145,578.
The annual total compensation of our CEO, as reported in the Summary Compensation Table on page 57, was $7,734,657.
Based on this information, for 2018 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was reasonably estimated to be 53 to 1.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO, we took the following steps:
We determined that, as of December 31, 2018 (which is the date we chose to identify our median employee), our employee population consisted of approximately 1,500 individuals with all of these individuals located in the United States (as reported in Item 1, Business, in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2019 (our “Annual Report”)). This population consisted of our full-time, part-time, and temporary employees, as we do not have seasonal workers.
We used the total compensation reflected in our payroll records as reported to the Internal Revenue Service on Form W-2 for 2018 as a consistently applied compensation measure to identify our median employee. We did not make any assumptions, adjustments, or estimates with respect to the W-2 wages, and we did not annualize the compensation for any employees that were not employed by us for all of 2018. We believe the use of W-2 wages, as applicable, is the most appropriate compensation measure since it includes the total taxable compensation received by our employees in 2018.
We identified our median employee by consistently applying this compensation measure to all of our employees included in our analysis. Since all of our employees, including our CEO, are located in the United States, we did not make any cost of living adjustments in identifying the median employee.
After we identified our median employee, we combined all of the elements of such employee’s compensation for the 2018 year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $145,578.
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2018 Summary Compensation Table included on page 57 and incorporated by reference under Item 11 of Part III of our Annual Report.
CALIFORNIA RESOURCES CORPORATION 62
|
Executive Compensation Tables
Potential Payments upon Termination or Change in ControlControl
Summary
Payments and other benefits payable to named executive officersNEOs in various termination circumstances and a change in control arewere subject to certain policies, plans and employment agreements. Following is a summary of the material terms of these arrangements.
Under our Notice and Severance Pay Plan, employeesthe terms of the employment agreements, executives terminated due to job eliminationby the Company without cause or relocation who are not offered continuedby the executive with good reason, as defined in the employment by CRC areagreement, were eligible for up to 1218 – 24 months of base salary and one- to two- times the target annual incentive continuation, depending on yearsthe employee’s position and the nature of service, twothe termination, and reimbursement for the difference between the amount paid for Company-provided continued health care coverage for up to 18 months and the employee contribution amount paid by similarly situated active employees, plus, in the case of contributions pursuantMr. McFarland, if such continued coverage is in effect at the end of such 18-month period, a lump sum amount of up to CRC’s qualified and nonqualified savings plans with immediate vesting of any unvested balances, and continued medical and dentalsix times the premium he paid for such coverage for the applicable notice and severance period at the active employee rate.
Our Long-Term Incentive Awards have provisions that, in the eventlast month of a change in controlsuch 18-month period. In connection with a termination under such circumstances, the employment agreements also provide for full vesting of 100% of the RSU awards granted during 2021 (other than the RSU award granted to Mr. McFarland in January of 2021 as a non-employee director emergence award (the “Director RSU Award”)) and (i) in the case of Mr. McFarland, 100% of the PSU awards granted during 2021 will vest and remain outstanding during the remainder of the performance period, and (ii) in the case of each of the other NEOs, 100% of the PSU awards granted during 2021 will vest and remain outstanding and may become earned until the earlier of the date that is six months after the date of termination of employment or the last day of the applicable performance period. If a NEO’s
CALIFORNIA RESOURCES CORPORATION 47
2022 PROXY STATEMENT |
Executive Compensation Tables
employment is terminated due to his death or disability, then he will receive under the terms of his employment agreement (i) payment of any earned but unpaid annual bonus for the calendar year preceding the calendar year in which the termination of employment occurs and (ii) a pro-rata portion of the annual bonus for the calendar year in which the termination of employment occurs, based on actual performance for such calendar year and payable at the time such bonuses are paid to similarly situated executives of the Company.
Under the terms of the agreements evidencing the RSUs granted to the NEOs in 2021 (other than the Director RSU Award granted to Mr. McFarland), (a) if the NEO’s employment is terminated after the first anniversary of the date of grant of the award due to disability, then a prorated portion of the number of units scheduled to vest as of the next anniversary of the date of grant will immediately vest as of the date of termination, (b) if the NEO’s employment is terminated after the first anniversary of the date of grant of the award due to the NEO’s death, then 100% of the unvested units will immediately vest as of the date of death, and (c) if the NEO’s employment is terminated on or within 12 months after a qualifying “Change in Control” (such quoted term as defined in the LTIP, but excluding any event that would otherwise constitute a Change in Control and that relates to any acquisition of securities of the Company by a stockholder that owns 20% or more of our outstanding stock or outstanding voting securities as of the date of grant of the award) due to disability or death, then 100% of the unvested units will immediately vest as of the date of such termination. Under the terms of the agreement evidencing the Director RSU Award granted to Mr. McFarland, 100% of the unvested RSUs subject to such award will immediately vest upon the earlier of (i) a qualifying Change in Control (as defined above) if such event occurs prior to Mr. McFarland’s separation from service as a member of the Board or (ii) the date of his separation from service as a member of the Board by reason of death or disability.
Under the terms of the agreements evidencing the PSUs granted to the NEOs in 2021, (a) if the NEO’s employment is terminated after the first anniversary of the date of grant of the award due to disability, then a prorated portion of the number of units subject to such award will become vested (but not less than the number of units earned based on satisfaction of the performance metric) and shall remain outstanding and eligible to become earned based on satisfaction of the applicable performance goal, (b) if the NEO’s employment is terminated after the first anniversary of the date of grant of the award due to the NEO’s death or voluntary termination of employment without “Good Reason” (such quoted term as defined in the award agreement), then 100% of the unvested units that have become earned units based on satisfaction of the performance metric will immediately vest as of the date of such termination of employment, and (c) if the NEO’s employment is terminated on or within 12 months after a qualifying “Change in Control” (as described in the preceding paragraph) due to disability or death, then a prorated portion of the number of units subject to such award will become vested (but not less than the number of units earned based on satisfaction of the performance metric) and shall remain outstanding and eligible to become earned based on satisfaction of the applicable performance goal (as such performance goal may be adjusted in connection with the changesuch qualifying Change in control, provide for the outstanding awards granted under such plan to become fully vested and exercisable unless the plan administrator determines, prior to the occurrence of the event, that benefits will not accelerate.Control).
Except as described in this summary and below under “Potential Payments,” we dodid not have any other agreements or plans in effect at the end of 2021 that would have required us to provide compensation to our named executive officersNEOs in the event of a termination of employment or a change in control.
CALIFORNIA RESOURCES CORPORATION 48
2022 PROXY STATEMENT |
Executive Compensation Tables
Potential Payments
In the discussion that follows, payments and other benefits that would have been payable upon various terminations and change in control situations are set out as if the conditions for payments had occurred and the terminations took place on December 31, 2018,2021, and reflect the terms of applicable plans and long-term incentive award agreements then in effect. NoneAll of our NEOs havehad employment agreements.agreements which provide for certain payments in the event of termination. The amounts set forth below are estimates of the amounts that would have been paid to each named executive officerNEO upon his termination. The actual amounts to be paid out can be determined only at the time of separation. The disclosures below do not take into consideration any requirements under Section 409A of the Code, which could affect,have affected, among other things, the timing of payments and distributions.
The following payments and benefits, which are potentially available on a non-discriminatory basis to all full-time salaried employees when their employment terminates, are not included in the amounts shown below:
Notice and Severance Pay Plan payments and benefits, payable if the employee’s job is either eliminated or relocated and the employee is not offered continued employment.
Life insurance proceeds equal to two times base salary, payable on death as was available to all eligible employees.
Amounts vested under our plans that are qualified under Section 401(a) of the Code.
Amounts vested under the Nonqualified Deferred Compensation arrangements.
Payout of unused accrued vacation.
CALIFORNIA RESOURCES CORPORATION 63
|
Executive Compensation Tables
The following is a summary of the payments and benefits each of our NEOs would have been entitled to receive if the event specified occurred as of December 31, 2018.2021.
|
|
| Retirement with |
|
| Termination by |
| Change in |
| ||||
| CRC Consent, Death, | Executive or |
| Control with |
| ||||||||
| Disability, Termination | Termination |
| Termination |
| ||||||||
Benefits and Payments Upon Termination | without Cause | for Cause |
| as Result |
| ||||||||
Todd A. Stevens |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 1,200,000 |
|
| $ | 0 |
|
| $ | 1,200,000 |
|
RSU Awards(2) |
|
| $ | 1,564,505 |
|
| $ | 0 |
|
| $ | 4,003,258 |
|
PSU Awards(3) |
|
| $ | 690,518 |
|
| $ | 0 |
|
| $ | 2,415,710 |
|
PIA Awards(4) |
|
| $ | 2,915,342 |
|
| $ | 0 |
|
| $ | 4,150,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Total |
|
| $ | 6,370,365 |
|
| $ | 0 |
|
| $ | 11,768,968 |
|
Marshall D. Smith |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 750,000 |
|
| $ | 0 |
|
| $ | 750,000 |
|
RSU Awards(2) |
|
| $ | 604,016 |
|
| $ | 0 |
|
| $ | 1,528,369 |
|
PSU Awards(3) |
|
| $ | 252,307 |
|
| $ | 0 |
|
| $ | 882,672 |
|
PIA Awards(4) |
|
| $ | 1,320,959 |
|
| $ | 0 |
|
| $ | 1,850,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Total |
|
| $ | 2,927,282 |
|
| $ | 0 |
|
| $ | 5,011,041 |
|
Darren Williams |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 510,000 |
|
| $ | 0 |
|
| $ | 510,000 |
|
RSU Awards(2) |
|
| $ | 347,248 |
|
| $ | 0 |
|
| $ | 863,042 |
|
PSU Awards(3) |
|
| $ | 139,431 |
|
| $ | 0 |
|
| $ | 487,787 |
|
PIA Awards(4) |
|
| $ | 701,336 |
|
| $ | 0 |
|
| $ | 981,250 |
|
Option Awards(5) |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Total |
|
| $ | 1,698,015 |
|
| $ | 0 |
|
| $ | 2,842,079 |
|
Charles F. Weiss |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 425,000 |
|
| $ | 0 |
|
| $ | 425,000 |
|
RSU Awards(2) |
|
| $ | 375,195 |
|
| $ | 0 |
|
| $ | 927,351 |
|
PSU Awards(3) |
|
| $ | 146,075 |
|
| $ | 0 |
|
| $ | 511,030 |
|
PIA Awards(4) |
|
| $ | 767,945 |
|
| $ | 0 |
|
| $ | 1,075,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Total |
|
| $ | 1,714,215 |
|
| $ | 0 |
|
| $ | 2,938,381 |
|
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 450,000 |
|
| $ | 0 |
|
| $ | 450,000 |
|
RSU Awards(2) |
|
| $ | 282,498 |
|
| $ | 0 |
|
| $ | 750,594 |
|
PSU Awards(3) |
|
| $ | 152,714 |
|
| $ | 0 |
|
| $ | 534,255 |
|
PIA Awards(4) |
|
| $ | 473,315 |
|
| $ | 0 |
|
| $ | 665,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Total |
|
| $ | 1,358,527 |
|
| $ | 0 |
|
| $ | 2,399,849 |
|
|
| Termination by |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Termination | Executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Without Cause or | Without | Termination |
| Change in |
|
| Change in | |||||||||||||||||
| Termination by | Good Reason |
| Due to |
|
|
| Control |
|
| Control with | ||||||||||||||
Benefits and Payments | Executive with | or Termination |
| Death or |
|
|
| without |
|
| Termination | ||||||||||||||
Upon Termination | Good Reason | for Cause |
| Disability |
|
|
| Termination |
|
| as Result | ||||||||||||||
Mark A. (Mac) McFarland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus(1) |
| $ | 1,020,000 |
|
|
| $ | 0 |
|
|
| $ | 1,349,022 |
|
|
| $ | 0 |
|
|
| $ | 2,040,000 |
|
|
Severance(2) |
| $ | 1,700,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 1,700,000 |
|
|
Equity Awards(3) |
| $ | 24,802,295 |
|
|
| $ | 0 |
|
|
| $ | 2,619,532 |
|
|
| $ | 2,619,532 |
|
|
| $ | 27,421,827 |
|
|
Medical Benefits(4) |
| $ | 63,774 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 63,774 |
|
|
Francisco J. Leon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus(1) |
| $ | 500,000 |
|
|
| $ | 0 |
|
|
| $ | 798,000 |
|
|
| $ | 0 |
|
|
| $ | 750,000 |
|
|
Severance(2) |
| $ | 750,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 750,000 |
|
|
Equity Awards(3) |
| $ | 6,979,711 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 6,979,711 |
|
|
Medical Benefits(4) |
| $ | 47,831 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 47,831 |
|
|
Jay A. Bys |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus(1) |
| $ | 500,000 |
|
|
| $ | 0 |
|
|
| $ | 798,000 |
|
|
| $ | 0 |
|
|
| $ | 750,000 |
|
|
Severance(2) |
| $ | 750,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 750,000 |
|
|
Equity Awards(3) |
| $ | 5,147,964 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 5,147,964 |
|
|
Medical Benefits(4) |
| $ | 47,831 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 47,831 |
|
|
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus(1) |
| $ | 500,000 |
|
|
| $ | 0 |
|
|
| $ | 798,000 |
|
|
| $ | 0 |
|
|
| $ | 750,000 |
|
|
Severance(2) |
| $ | 750,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 750,000 |
|
|
Equity Awards(3) |
| $ | 6,979,711 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 6,979,711 |
|
|
Medical Benefits(4) |
| $ | 47,831 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 47,831 |
|
|
Michael L. Preston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Bonus(1) |
| $ | 500,000 |
|
|
| $ | 0 |
|
|
| $ | 798,000 |
|
|
| $ | 0 |
|
|
| $ | 750,000 |
|
|
Severance(2) |
| $ | 750,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 750,000 |
|
|
Equity Awards(3) |
| $ | 6,979,711 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 6,979,711 |
|
|
Medical Benefits(4) |
| $ | 47,831 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 47,831 |
|
|
(1) |
|
(2) |
|
CALIFORNIA RESOURCES CORPORATION 49
2022 PROXY STATEMENT |
Executive Compensation Tables
(3) | Under the terms of their employment agreements, the NEOs will receive full immediate vesting of their emergence RSUs and PSUs in the events of termination without cause or termination by the executive with good reason, including such a termination after a change in control, and the vested PSUs shall remain eligible to be earned for up to six months following such a termination (or through the remaining performance period for Mr. McFarland); provided, however, that Mr. McFarland’s employment agreement does not apply to his Director RSU Award, but the agreement evidencing the Director RSU Award does provide for full vesting upon death, disability or a qualifying change in control that, in any such case, occurs while Mr. McFarland is a member of the Board. No amount is included with respect to a termination due to death or disability or termination by the executive without good reason with respect to the Equity Awards (other than the Director RSU Award in connection with a |
(4) | Under the terms of their employment agreements, the NEOs will be eligible to continue coverage under the Company’s group health plans for up to 18 months in the events of termination without cause or termination by the executive with good reason, including such a termination after or a change in control with termination as a |
|
|
|
|
|
|
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the median of the annual total compensation of our employees and the annual total compensation of our CEO.
For 2021, our last completed fiscal year:
The median of the annual total compensation of all employees of our company (other than our CEO) was $148,345.
The annual total compensation of our CEO, as reported in the Summary Compensation Table above, was $17,583,281.
Based on this information, for 2021 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was reasonably estimated to be 119 to 1.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO, we took the following steps:
We determined that, as of December 31, 2021 (which is the date we chose to identify our median employee), our employee population consisted of approximately 970 individuals with all of these individuals located in the United States (as reported in Part I, Items 1 & 2 Business and Properties, in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2022 (our “Annual Report”)). This population consisted of our full-time, part-time, and temporary employees, as we do not have seasonal workers.
We used the total compensation reflected in our payroll records as reported to the Internal Revenue Service on Form W-2 for 2021 as a consistently applied compensation measure to identify our median employee. We did not make any assumptions, adjustments, or estimates with respect to the W-2 wages, and we did not annualize the compensation for any employees that were not employed by us for all of 2021. We believe the use of W-2 wages, as applicable, is the most appropriate compensation measure since it includes the total taxable compensation received by our employees in 2021.
CALIFORNIA RESOURCES CORPORATION 6450
|
Executive Compensation Tables
We identified our median employee by consistently applying this compensation measure to all of our employees included in our analysis. Since all of our employees, including our CEO, are located in the United States, we did not make any cost of living adjustments in identifying the median employee.
After we identified our median employee, we combined all of the elements of such employee’s compensation for the 2021 year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $148,345.
With respect to the annual total compensation of our CEO, we used the aggregate amount reported in the “Total” column of our 2021 Summary Compensation Table for Mr. McFarland, who served as our CEO throughout 2021, included on page 41 and incorporated by reference under Item 11 of Part III of our Annual Report. The total 2021 compensation for Mr. McFarland includes unusual items – contract pay for the period before he was named permanent President and CEO and emergence equity grants that provided approximately three times the regular expected annual grant value – both of which we would not anticipate to be included in CEO total compensation in future years.
This pay ratio is calculated in a manner consistent with SEC rules. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies – including companies in our peer group – may not be comparable to the pay ratio reported above. Other companies may have different employment and compensation practices, different geographic breadth, perform different types of work, and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
This information is being provided for compliance purposes. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions.
CALIFORNIA RESOURCES CORPORATION 51
2022 PROXY STATEMENT |
Director Compensation
Our director compensation program is designed to be consistent with the programs of our peer companies. The following matters were considered important to development of our director compensation program:
Marketmarket practices of our peer companies targeting a compensation package that is at or below the median of this group.
The needin order to be able to recruit and retain independent directors.
For 2018,In December 2020, the cash retainer was reduced and equity award was increased, as described below,Board adopted a new outside director compensation program effective retroactive to more closely align with the median of our peer companies, while providingemergence date, based on a greater portionreview of the director compensation in shares.programs of our 2021 Peer Companies provided by LB&Co and recommendation of the Compensation Committee. The elements of our 2018 outside director compensationthe new program wereare as follows:
• | An annual cash retainer of $125,000 ($250,000 for the Chairperson) paid on a quarterly basis in advance. |
• | An annual equity grant of restricted stock units (“RSUs”) granted at the Annual Meeting of Shareholders each year with a grant value of $200,000 ($375,000 for the Chairperson), which vest on the first anniversary of the grant date. Vested shares are not delivered to the director until six months after the end of Board service. Directors who received the following emergence equity grant did not receive an annual equity grant for 2021 and will not receive an annual equity grant until 2023. |
• | An emergence equity grant of restricted stock units that was made in 2021 to the directors who joined the Board at our emergence from bankruptcy. The emergence grant had a grant value of three times the annual equity grant value plus a prorated amount for the period in 2020 starting at the emergence date. The emergence equity grants vest ratably over three years, but vested shares are not delivered to the director until six months after the end of Board service. |
• | Board Leadership annual fees as follows, paid on a quarterly basis in advance: |
An annual cash board retainer of $90,000, paid in equal monthly installments, reduced from $100,000 in prior years.Committee chairperson (Audit, Sustainability, Special Committees) – $31,000
An additional annual cash retainer of $100,000 for our Chairman.Committee chairperson (Compensation and Nominating & Governance) – $22,000
An additional annual cash retainer of $25,000 for the Lead Independent Director.Committee member (Audit, Sustainability, Special Committees) – $16,000
An additional annual cash retainer of $20,000 for the auditCommittee member (Compensation and compensation committee chairpersons and $15,000 for the other committee chairpersons.Nominating & Governance) – $11,000
An annual equity award relating to our common stock equivalent to $175,000Lead independent director – $50,000 (Discontinued upon appointment of independent Chair of the Board on the grant date, which generally vests one year following the grant date, increased from $150,000 in prior years.
A stock ownership guideline of five times the annual cash board retainer applies to outside directors and must be attained within five years of election to our Board of Directors. Since the Spin-off occurred on November 30, 2014, the outside directors have until November 30, 2019 or later to meet the target ownership levels.April 15, 2021)
20182021 Compensation of Directors
The following table sets forth the total compensation for 20182021 for each of the non-employee directors who served in 2018:2021, other than Mr. McFarland, who is included in the Summary Compensation Table due to his concurrent role as President and CEO:
|
| Fees Earned or Paid in |
|
|
|
|
|
|
| Change in Pension Value and Nonqualified Deferred |
|
|
| All Other |
|
|
|
|
|
| |||||||||
Name |
| Cash |
| Stock Awards(1) |
| Compensation |
|
|
| Compensation |
| Total | |||||||||||||||||
William E. Albrecht |
|
| $ | 193,333 |
|
|
|
| $ | 175,020 |
|
|
| $ | 2,433 |
| (2) |
|
| $ | 47,775 |
| (3) |
|
| $ | 418,561 |
|
|
Justin A. Gannon |
|
| $ | 113,333 |
|
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 288,353 |
|
|
Ronald L. Havner, Jr. |
|
| $ | 33,333 |
|
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 33,333 |
|
|
Harold M. Korell |
|
| $ | 119,583 |
|
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 294,603 |
|
|
Harry T. McMahon |
|
| $ | 113,333 |
|
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 5,000 |
| (3) |
|
| $ | 293,353 |
|
|
Richard W. Moncrief |
|
| $ | 108,333 |
|
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 283,353 |
|
|
Avedick B. Poladian |
|
| $ | 93,333 |
|
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 15,000 |
| (3) |
|
| $ | 283,353 |
|
|
Anita M. Powers |
|
| $ | 86,667 |
|
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 261,687 |
|
|
Laurie A. Siegel |
|
| $ | 27,000 |
|
|
|
| $ | 105,003 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 132,003 |
|
|
Robert V. Sinnott |
|
| $ | 108,333 |
|
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 283,353 |
|
|
CALIFORNIA RESOURCES CORPORATION 6552
|
Director Compensation
|
| Fees Earned or Paid in |
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
| |||||
Name |
| Cash |
| Stock Awards (1) |
| Compensation (2) |
|
| Total | |||||||||||||
Andrew B. Bremner |
|
| $ | 100,066 |
|
|
|
| $ | 198,868 |
|
|
| $ | 1,382 |
|
|
| $ | 300,316 |
|
|
Douglas E. Brooks |
|
| $ | 155,780 |
|
|
|
| $ | 801,420 |
|
|
| $ | 5,561 |
|
|
| $ | 962,761 |
|
|
Tiffany (TJ) Thom Cepak |
|
| $ | 221,438 |
|
|
|
| $ | 1,174,596 |
|
|
| $ | 8,135 |
|
|
| $ | 1,404,169 |
|
|
James N. Chapman |
|
| $ | 214,000 |
|
|
|
| $ | 801,420 |
|
|
| $ | 5,561 |
|
|
| $ | 1,020,981 |
|
|
Nicole Neeman Brady |
|
| $ | 61,543 |
|
|
|
| $ | 135,894 |
|
|
| $ | 843 |
|
|
| $ | 198,280 |
|
|
Julio M. Quintana |
|
| $ | 164,000 |
|
|
|
| $ | 801,420 |
|
|
| $ | 5,561 |
|
|
| $ | 970,981 |
|
|
William B. Roby |
|
| $ | 183,000 |
|
|
|
| $ | 801,420 |
|
|
| $ | 5,561 |
|
|
| $ | 989,981 |
|
|
Brian Steck (3) |
|
| $ | 83,000 |
|
|
|
| $ | 801,420 |
|
|
| $ | — |
|
|
| $ | 884,420 |
|
|
Alejandra (Ale) Veltmann |
|
| $ | 7,266 |
|
|
|
| $ | 81,164 |
|
|
| $ | — |
|
|
| $ | 88,430 |
|
|
| In January 2021, the Board approved emergence grants of |
The Stock Awards amounts represent the aggregate grant date fair value attributable to restricted stock unit awards granted in 2021. The award values shown are based on the closing price of CRC common stock on the dates of the grants multiplied by the number of restricted stock units granted. The number of restricted stock units granted was calculated based on the grant value of the award divided by the 60-day volume-weighted average price of CRC common stock from the day preceding the date of the grant. The emergence grants for Messrs. Brooks, Chapman, Quintana, and Roby and Ms. Cepak vest ratably over three years from the grant date. The prorated annual grants for Mr. Bremner and Mss. Neeman Brady and Veltmann vest on May 12, 2022. Mr. Steck’s emergence grant was vested and forfeited as described in (3) below. The following table provides the grant date fair values of the RSU grants made during 2021:
|
| Grant |
|
| RSUs |
|
|
| Stock Price |
|
|
| Grant Date |
| |||||
Name |
| Date |
| Granted |
| on Grant Date |
|
|
| Fair Value |
| ||||||||
Andrew B. Bremner |
|
| 5/12/2021 |
|
|
|
| 8,127 |
|
|
| $ | 24.47 |
|
|
| $ | 198,868 |
|
Douglas E. Brooks |
|
| 1/25/2021 |
|
|
|
| 32,711 |
|
|
| $ | 24.50 |
|
|
| $ | 801,420 |
|
Tiffany (TJ) Thom Cepak |
|
| 1/25/2021 |
|
|
|
| 32,711 |
|
|
| $ | 24.50 |
|
|
| $ | 801,420 |
|
|
|
| 4/15/2021 |
|
|
|
| 15,139 |
|
|
| $ | 24.65 |
|
|
| $ | 373,176 |
|
James N. Chapman |
|
| 1/25/2021 |
|
|
|
| 32,711 |
|
|
| $ | 24.50 |
|
|
| $ | 801,420 |
|
Nicole Neeman Brady |
|
| 8/5/2021 |
|
|
|
| 4,956 |
|
|
| $ | 27.42 |
|
|
| $ | 135,894 |
|
Julio M. Quintana |
|
| 1/25/2021 |
|
|
|
| 32,711 |
|
|
| $ | 24.50 |
|
|
| $ | 801,420 |
|
William B. Roby |
|
| 1/25/2021 |
|
|
|
| 32,711 |
|
|
| $ | 24.50 |
|
|
| $ | 801,420 |
|
Brian Steck |
|
| 1/25/2021 |
|
|
|
| 32,711 |
|
|
| $ | 24.50 |
|
|
| $ | 801,420 |
|
Alejandra (Ale) Veltmann |
|
| 12/17/2021 |
|
|
|
| 1,912 |
|
|
| $ | 42.45 |
|
|
| $ | 81,164 |
|
The outstanding unvested RSUs as of December 31, 2021, for each of the directors is equal to the amounts shown above in the “RSUs Granted” column, except for Mr. Steck who has no unvested RSUs.
(2) | The amounts shown as Other Compensation represent dividend equivalents accrued on unvested restricted stock units |
|
|
(3) |
|
CALIFORNIA RESOURCES CORPORATION 6653
|
Stock Ownership Information
Stock Ownership InformationInformation
Security Ownership of Directors, Management and Certain Beneficial Holders
The following table sets forth certain information regarding beneficial ownership of common stock as of March 11, 20197, 2022 (unless otherwise indicated) of (1) each person known by us to own beneficially more than 5% of our outstanding common stock (based on Schedule 13G or Schedule 13D filings with the SEC), (2) our named executive officersNEOs (as defined herein), (3) each of our directors and director nominees, and (4) all of our executive officers and directors as a group. Unless otherwise indicated, each of the persons below has sole voting and investment power with respect to the shares beneficially owned by such person.
|
| Amount of |
|
| Percent of |
| |
Name and Address of Beneficial Owner(1) | Beneficial Ownership(2) | Class(3) |
| ||||
Masters Capital Management, LLC (4) |
|
| 3,800,000 |
|
| 7.79% |
|
The Vanguard Group (5) |
|
| 3,689,441 |
|
| 7.56% |
|
State Street Corporation (6) |
|
| 3,289,035 |
|
| 6.74% |
|
BlackRock, Inc. (7) |
|
| 3,263,108 |
|
| 6.69% |
|
William E. Albrecht |
|
| 243,172 |
|
| * |
|
Justin A. Gannon |
|
| 28,577 |
|
| * |
|
Harold M. Korell |
|
| 39,161 |
|
| * |
|
Harry T. McMahon |
|
| 48,773 |
|
| * |
|
Richard W. Moncrief |
|
| 22,676 |
|
| * |
|
Avedick B. Poladian |
|
| 24,434 |
|
| * |
|
Anita M. Powers |
|
| 5,842 |
|
| * |
|
Laurie A. Siegel |
|
| — |
|
| * |
|
Robert V. Sinnott |
|
| 22,576 |
|
| * |
|
Todd A. Stevens |
|
| 434,548 |
|
| * |
|
Shawn M. Kerns |
|
| 99,143 |
|
| * |
|
Marshall D. Smith |
|
| 217,264 |
|
| * |
|
Charles F. Weiss (8) |
|
| 131,219 |
|
| * |
|
Darren Williams |
|
| 133,490 |
|
| * |
|
Executive officers and directors as a group (consisting of 17 persons) |
|
| 1,704,598 |
|
| 3.49% |
|
|
| Amount of |
|
| Percent of |
| |
Name and Address of Beneficial Owner (1) | Beneficial Ownership | Class (2) |
| ||||
FMR LLC (3) |
|
| 9,489,166 |
|
| 11.757% |
|
GoldenTree Asset Management LP (4) |
|
| 9,385,089 |
|
| 11.6% |
|
Ares Management LLC (5) |
|
| 9,256,063 |
|
| 11.5% |
|
BlackRock, Inc. (6) |
|
| 9,029,365 |
|
| 11.2% |
|
The Vanguard Group (7) |
|
| 7,409,053 |
|
| 9.22% |
|
JB Investors, LLC (8) |
|
| 6,244,565 |
|
| 7.77% |
|
Andrew B. Bremner |
|
| 745 |
|
| * |
|
Douglas E. Brooks |
|
| — |
|
| * |
|
Tiffany (TJ) Thom Cepak |
|
| 10,000 |
|
| * |
|
James N. Chapman |
|
| — |
|
| * |
|
Mark A. (Mac) McFarland |
|
| — |
|
| * |
|
Nicole Neeman Brady |
|
| — |
|
| * |
|
Julio M. Quintana |
|
| 3,000 |
|
| * |
|
William B. Roby |
|
| 9,078 |
|
| * |
|
Alejandra (Ale) Veltmann |
|
| — |
|
| * |
|
Jay A. Bys |
|
| — |
|
| * |
|
Francisco L. Leon |
|
| — |
|
| * |
|
Shawn M. Kerns |
|
| — |
|
| * |
|
Michael L. Preston |
|
| — |
|
| * |
|
Executive officers and directors as a group (consisting of 14 persons) |
|
| 22,823 |
|
| * |
|
* | Less than 1%. |
(1) | Unless otherwise noted below, the address for each beneficial owner is c/o California Resources Corporation, |
(2) |
|
| Except as otherwise noted below, based on total shares outstanding of |
| Based on |
(4) | Based on Amendment No. 9 to Schedule 13D filed with the SEC on January 5, 2022 by GoldenTree Asset Management LP (“GoldenTree”). GoldenTree has shared voting power and shared dispositive power with respect to 9,385,089 shares of common stock, which included 188,937 shares of common stock that would be issued upon the exercise of outstanding warrants. In this amendment to Schedule 13D, GoldenTree states that its managing member, Steven A. Tananbaum, has an aggregate beneficial ownership of 9,385,089 shares of common stock or 11.6% of the class, and shared voting power with respect to |
CALIFORNIA RESOURCES CORPORATION 54
2022 PROXY STATEMENT |
Stock Ownership Information
dispositive power with respect to 3,698,461 shares of common stock. GoldenTree’s address is |
(6) | Based on Amendment No. 1 to Schedule 13G filed with the SEC on February |
|
|
CALIFORNIA RESOURCES CORPORATION 67
|
Stock Ownership Information; Proposals Requiring Your Vote
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act and related regulations require our Section 16 officers and directors and persons who beneficially own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC and the NYSE. Section 16 officers, directors and greater than 10% beneficial owners are also required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of copies of such forms we received, we believe that, during the fiscal year ended December 31, 2018, our Section 16 officers, directors and greater than 10% beneficial owners timely complied with all applicable filing requirements of Section 16(a).
CALIFORNIA RESOURCES CORPORATION 55
2022 PROXY STATEMENT |
Proposals Requiring Your Vote
Proposal 1: Election of Directors
In 2019, all ten2022, nine incumbent directors have been nominated by the Board of Directors for reelection through the 20202023 annual meeting.
A brief statement about the background and qualifications of each nominee is given above under “Our Board of Directors.” If any nominee for whom you have voted becomes unable to serve, your proxy may be voted for another person designated by our Board, or our Board of Directors may determine to reduce the size of the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE
“FOR” EACH OF THE DIRECTOR NOMINEES IDENTIFIED ABOVE.
Proposal 2: Ratification of the Appointment of the Independent Registered Public Accounting Firm
The Audit Committee appointed, and the Board of Directors ratified the appointment of, KPMG LLP, independent registered public accounting firm, to audit our financial statements as of and for the year ending December 31, 2019.2022. The Board of Directors recommends that stockholders vote for the ratification of this appointment. Notwithstanding the selection, the Board of Directors, in its discretion, may direct the appointment of a new independent registered public accounting firm at any time during the year if the boardBoard believes that the change would be in the best interests of CRC and its stockholders. If the stockholders vote against ratification, the Board of Directors will reconsider its selection.
KPMG LLP has served as our independent registered public accounting firm and audited our financial statements beginning with the fiscal year ended December 31, 2014.
CALIFORNIA RESOURCES CORPORATION 68
|
Proposals Requiring Your Vote
Set forth below are the aggregate fees incurred by us for professional services rendered by KPMG LLP, the independent registered public accounting firm, for the years ended December 31, 20182021 and 2017:2020:
|
| 2018 |
| 2017 |
| 2021 |
| 2020 | ||||||||||||||||
Audit Fees (1) |
|
| $ | 2,135,000 |
|
| $ | 2,090,000 |
|
|
|
| $ | 2,065,000 |
|
| $ | 3,714,807 |
|
| ||||
Audit-Related Fees (2) |
|
|
| 737,480 |
|
|
| 501,750 |
|
|
|
|
| 100,000 |
|
|
| 165,660 |
|
| ||||
Tax Fees |
|
|
| — |
|
|
| — |
|
|
|
|
| — |
|
|
| — |
|
| ||||
All Other Fees |
|
|
| — |
|
|
| — |
|
|
|
|
| — |
|
|
| — |
|
| ||||
Total |
|
| $ | 2,872,480 |
|
| $ | 2,591,750 |
|
|
|
| $ | 2,165,000 |
|
| $ | 3,880,467 |
|
| ||||
| Audit Fees represent the aggregate fees for professional services provided in connection with the annual audit of our financial statements included in the Form 10-K and |
(2) | Audit-Related Fees are primarily for |
The Audit Committee must give prior approval to any management request for any amount or type of service (audit, audit-related and tax services or, to the extent permitted by law, non-audit services) our independent registered accounting firm provides to us. The Audit Committee has established policies and procedures regarding pre-approval of all services provided by the independent registered public accounting firm. The Audit Committee approved or pre-approved all such services forprovided to CRC by our independent registered accounting firm in 20182021 and 2017.2020.
CALIFORNIA RESOURCES CORPORATION 56
2022 PROXY STATEMENT |
Proposals Requiring Your Vote
A representative of KPMG LLP is expected to be present at the Annual Meeting and will be offered the opportunity to make a statement if such representative desires to do so and will be available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” PROPOSAL 2 TO RATIFY THE APPOINTMENT
OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM, KPMG LLP, FOR FISCAL 2019.2021.
Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation
Section 14A of the Securities Exchange Act of 1934, as amended, requires us to provide our stockholders with an advisory (nonbinding) vote on the compensation paid to our named executive officers (sometimes referred to as the “say-on-pay” proposal) as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, accompanying compensation tables and narrative discussion set forth in this proxy statement. Accordingly, you may vote on the following resolution at our Annual Meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, accompanying compensation tables and narrative discussion, is hereby approved.”
This vote is nonbinding. The Board of Directors and the Compensation Committee, which is comprised of independent directors, expect to take into account the outcome of the vote when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results.
CALIFORNIA RESOURCES CORPORATION 69
|
Proposals Requiring Your Vote
The Company last held a “say-on-frequency” vote in 2021, at which point our stockholders voted for, and the Board determined to hold, annual say-on-pay votes.
As described above in detail under the “Compensation Discussion and Analysis” section of this proxy statement, our compensation program is2021 Compensation Program was designed to attractimmediately align our NEO compensation with our new shareholder interests and retain talented executivesestablish the retention value of multi-year equity grants following the cancellation of prior Company stock holdings and also to motivateequity grants upon our executives to achieve our designated goalsemergence from bankruptcy in 2020 by providing one-time multi-year sized emergence equity grants in 2021. The 2021 Compensation Program included a mix of short- and thereby create a successful company enhancing shareholder value.long-term awards that were primarily performance-based, with the significant majority provided as time- and performance-based equity awards. This advisory, nonbinding say-on-pay vote does not cover director compensation, which is also disclosed in the accompanying compensation tables.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“FOR” PROPOSAL 3 ON THE ADVISORY VOTE TO APPROVE
NAMED EXECUTIVE OFFICER COMPENSATION.
CALIFORNIA RESOURCES CORPORATION 57
2022 PROXY STATEMENT |
Proposals Requiring Your Vote
Proposal 4: Approval of the Amended and Restated California Resources Corporation Long-Term IncentiveEmployee Stock Purchase Plan
The BoardBackground of Directors believes that long-term incentive awards are a critical component of our compensation programs to be able to attract, retain and incentivize our employees, executives, and non-employee directors and to align their interests with those of stockholders through increased stock ownership. the ESPP
Our compensation program emphasizes performance-based long-term incentive awards to promote executive and employee behaviors that drive value creation that leads to long-term growth in shareholder value. The Board of Directors has determined thatapproved and adopted, subject to the current numberapproval of shares available for grants underour stockholders, the existing California Resources Corporation Long-Term IncentiveEmployee Stock Purchase Plan (the “Existing LTIP”“ESPP”). If the ESPP is not sufficient to meet the objectives of our compensation program going forward. Accordingly, the Board of Directors has adopted and proposes thatapproved by the stockholders, approvethe Company will be authorized to provide eligible employees with an amendment and restatement of the planopportunity to increase the number of shares of common stock available for grant by 2,575,000 and to make other changes to the plan as described below.
Background and Purpose
Pursuant to the terms of the Existing LTIP, stock, stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock-based awards, cash awards and similar securities with a value derived from the value of our common stock or other Company securities may be awarded to officers, employees, consultants and directors selected for participation.
The Existing LTIP authorizes awards to be granted covering up to 4,700,000purchase shares of our common stock as adjustedat a discount to reflect the 1:10 reverse split that occurred on May 31, 2016,market price and subject to further adjustmentpay for such purchases through payroll deductions in accordance with the termsESPP’s terms. A copy of the Existing LTIP upon certain changesESPP is attached to this proxy statement as Annex B.
Purpose of the ESPP
The ESPP is intended to provide an incentive for our eligible employees to acquire or increase a proprietary interest in capitalization and similar events. As of February 28, 2019, there were approximately 22,922 shares ofthe Company by permitting them to acquire our common stock available for new awards underat a reduced price through payroll withholding. We believe that the Existing LTIP.
On February 19, 2019, the Board of Directors determined that it is in the best interest of CRC to amend and restate the Existing LTIP (the “Amended LTIP”), subject to stockholder approval, to implement the following primary revisions: (i) increase the number of authorized shares of common stock to 7,275,000; (ii) prohibit the award of dividend equivalents in connection with stock options, stock appreciation rights, and other non-full value appreciation awards; (iii) provide that dividends on restricted stock and any dividend equivalents on other full-value awardsESPP will be subjectimportant in helping to restrictionsattract and riskretain employees.
Reasons for the Approval of forfeiturethe ESPP
The ESPP, and the right of participants to make purchases thereunder, is intended to meet the same extentrequirements of an employee stock purchase plan as the underlying award with respect to which the dividend or dividend equivalent relates; (iv) eliminate certain provisions that were includeddefined in the Existing LTIP for purposes of Section 162(m)423 of the Internal Revenue Code of 1986, as amended (the “Code”), but which are no longer needed following the amendment of Section 162(m). Stockholder approval of the ESPP is necessary in order to satisfy the requirements under Code in 2017;Section 423.
Consequences if the ESPP is Not Approved
If the ESPP is not approved by our stockholders, then the ESPP will terminate and (v) extendwe will not be able to provide employees with an opportunity to purchase our common stock at a discount. We believe our ability to recruit, retain and incentivize top talent may be adversely affected if the termESPP is not approved.
Summary of Features of the planESPP
The following is a summary of the material terms and conditions of the ESPP. This summary does not purport to 10 years frombe complete and is qualified in its entirety by reference to the datefull text of approvalthe ESPP, a copy of which is attached to this proxy statement as Annex B and incorporated herein by stockholders. reference. To the extent there is a conflict between this summary and the ESPP, the terms of the ESPP will govern.
General
The proposed increase inESPP is intended to qualify as an “employee stock purchase plan” under Code Section 423. During regularly scheduled quarterly “Options Periods” (defined below) under the ESPP, participants will be able to request payroll deductions which will be applied periodically to purchase a number of shares authorized for issuanceof our common stock at a discount to the market price and in an amount determined in accordance with the ESPP’s terms.
Effective Date and Term
The ESPP was adopted by our Board of Directors, subject to approval of our stockholders, on and effective as of February 22, 2022. No options granted under the plan is expectedESPP will be exercisable prior to provide flexibility to enablesuch stockholder approval, and if our stockholders do not approve the continued useESPP by September 30, 2022, then the ESPP will automatically terminate. No options may be granted under the ESPP on and after the tenth anniversary of the Amended LTIPeffective date of the ESPP, which is February 22, 2032. The ESPP can also be terminated by our Board of Directors at any time with respect to shares of common stock for stock-based grants and awards consistent with the objectives of our compensation program for three or more years while attempting to minimize dilution to stockholders.which options have not been granted.
CALIFORNIA RESOURCES CORPORATION 7058
|
Proposals Requiring Your Vote
Set forthEligible Participants
The ESPP provides that employees (including officers and employee directors) will be eligible to participate with respect to an Option Period if they are employed on the first day of such period by the Company, our subsidiary Tidelands Oil Production Company or any other present or future parent or subsidiary corporation of the Company that the Compensation Committee designates as a participating company for purposes of the ESPP. As of February 22, 2022, there were approximately 1,000 eligible employees. The Compensation Committee may exclude certain categories of employees from participating in any Option Period to the extent permitted by Code Section 423, including part-time employees, seasonal employees, employees who have not completed a minimum period of service with the Company and/or highly compensated employees. No employee who is a citizen or resident of a foreign country will be allowed to participate in the table belowESPP if his or her participation in the ESPP is information regarding awardsprohibited by local law or if complying with local law would cause the ESPP to violate the requirements of Code Section 423. Also, in accordance with Code Section 423, no employee may be granted an option under the ESPP if immediately after the grant such employee would own stock and/or hold outstanding options to purchase stock possessing more than 5% of the total combined voting power or value of all classes of the stock of the Company or any parent or subsidiary.
Securities Offered and Terms of Participation
The maximum number of shares of common stock available for grantwhich may be purchased by all employees under the Existing LTIP asESPP is 1,250,000, subject to adjustments for stock splits, stock dividends and similar transactions. Such shares may be authorized but unissued shares of February 28, 2019.
| |
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|
|
|
|
|
|
|
|
|
For additional information regarding stock-based awards previouslycommon stock or shares of common stock reacquired by us, including shares of common stock purchased in the open market. If an option granted please see Note 11under the ESPP expires or terminates prior to Consolidated Financial Statements disclosedits exercise in Item 8 of our Annual Report on Form 10-K forfull, the year ended December 31, 2018.shares subject to such option may again be subject to an option granted under the ESPP. As of February 28, 2019, there were 48,799,261the date hereof, no rights to purchase shares of our common stock outstanding.have been granted under the ESPP. The closing price per share of our common stock on the New York Stock Exchange (“NYSE”) as of March 11, 20192, 2022 was $21.26.$42.62.
Eligible employees who elect to participate in the ESPP must give instruction to the Company, or a designated broker as permitted, to withhold a specified dollar amount or percentage from their base pay during the following three-month period (periods run from July 1, 2022 through September 30, 2022, and, thereafter, from October 1 to December 31, from January 1 to March 31, from April 1 to June 30, and from July 1 to September 30, and each is referred to as an “Option Period”). The effective date of the Amended LTIPexercise price for each Option Period will be the datelesser of (i) eighty-five percent (85%) of the Annual Meetingclosing price per share of the common stock on the first day of the Option Period (or the next regular business date on which shares are traded if the plan is approvedno shares have been traded on such first day), as reported by the stockholdersNYSE, and (ii) eighty-five percent (85%) of the Companyclosing price per share of the common stock on the last day of the Option Period (or the next regular business date on which shares are traded if no shares have been traded on such date. Iflast day), as reported by the proposed Amended LTIP is not so approved by our stockholders, thenNYSE (such lesser price, the Existing LTIP will remain in effect in its present form.
Summary of Features“Option Price”). Under the ESPP, we would grant to each participant, on the first day of the Amended LTIP
The following is a summaryOption Period, an option to purchase on the last day of the principal features ofOption Period, at the Amended LTIP and is qualified in its entirety by reference to the full text of the Amended LTIP, which is attached to this Proxy Statement as Annex B. Capitalized terms not otherwise defined below have the meanings ascribed to them in the Amended LTIP.
Administration
Our Amended LTIP is administered by a subcommittee of the Compensation Committee of the Board of Directors (the “Compensation Committee” for purposes of this Proposal), which is and will be composed of at least two of our independent directors. Subject to the provisions of the Amended LTIP, the Compensation Committee has the authority to select the participants who will receive the grants and awards, to determine the type and terms of the grants and awards, and to interpret and administer the Amended LTIP. The Compensation Committee may delegate to our CEO the authority with respect to grants of awards to any eligible person who is not then subject to Section 16 of the Securities Exchange Act of 1934, as amended, to the extent not inconsistent with applicable laws or regulations.
Shares Available for Grant or Award; Award Limits
The totalOption Price, that number of shares of common stock authorizedthat his or her accumulated payroll deductions on the last day of the Option Period will pay for grantat such price. The option will automatically be deemed to be exercised if the employee is still a participant on the last day of the Option Period. Participation ends automatically upon termination of employment, other than termination due to retirement, death or award underdisability.
A participating employee may authorize a payroll deduction of any whole percentage up to but not more than fifteen percent (15%) (or such greater percentage as the Existing LTIP is 4,700,000. AsCompensation Committee may designate) of February 28, 2019,his or her base pay received during each Option Period. Deductions from any employee’s compensation may not be changed during an Option Period. Under the ESPP, the number of shares purchased at the end of any Option Period by any individual participant may not be more than 250 shares, subject to adjustment for stock splits, stock dividends and similar transactions. Further, no employee will be granted an option which permits the employee’s right to purchase common stock available for future grants or awards was approximately 22,922.
The Amended LTIP will increase the number of shares of common stock authorized for awards under the plan by 2,575,000 shares, bringing the aggregate maximum number of shares of common stock authorized for grants or awardsESPP to 7,275,000.
Under the Amended LTIP, no more than 7,275,000 shares of common stock may be issued after October 6, 2014 (the original effective date of the Existing LTIP), pursuant to incentive options (which amount is included within the aggregate limit described in the preceding paragraph). The maximum number of shares of common stock for which options and stock appreciation rights (“SARs”) may be granted to any one personaccrue at a rate that exceeds, during any calendar year, is 1,000,000. No individual may$25,000 of the fair market value of such stock (to be granted other awards undercalculated based on the Amended LTIP (other than options and SARs) during anyfair market value of the stock on the first business day of the Option Period) for each calendar year that are denominated in shares of common stock with respect to more than 1,000,000 shares. In addition, the maximum amount of compensation that may be paid under allwhich such option is outstanding at any time.
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Performance-Based Awards that are not denominated in shares of common stock (includingAn employee may withdraw from participation prior to the Fair Market Valueend of any shares of common stock paid in satisfaction of such Performance-Based Awards) granted to any one individual during any calendar year may not exceed $20,000,000 (and any payment due with respect toOption Period. Upon such a Performance-Based Award shall be paid no later than 10 years afterwithdrawal, the date of grant of such Performance-Based Award).
Shares of common stock covered by an award that expire or are forfeited, cancelled, or for any reason are terminated or fail to vestCompany will be available for subsequent awards underrefund, without interest, the Amended LTIP. Shares covered by an option or SAR that expires or terminates prior to exercise and shares of restricted stock returned to us upon forfeiture will be available for subsequent awards. Shares of common stock tendered or withheld to satisfy an exercise price or tax withholding obligation for an award and shares of common stock we repurchase using option proceeds will not again be available for issuance under the Amended LTIP. Shares subject to options or SARs that are exercised will not again be available for issuance under the plan.
In addition to the limits described above, the Amended LTIP includes a limit on the awards that can be made under the plan to each non-employee director. Under the Amended LTIP, the aggregate grant date fair value (computed asentire remaining balance of the date of grant in accordance with applicable financial accounting rules) of all awardsemployee’s payroll deductions.
An option granted under the plan to any individual, non-employee director during any single calendar year cannot exceed $750,000, determined without regard to grantsESPP is not transferable except by will or the laws of awards made under the plan to a non-employee director during any period in which such individual was employee or contractor.
Eligibility
Our officers, employeesdescent and consultants, as well as our non-employee directors, are eligible to receive awards in the Amended LTIP. As of February 28, 2019, we had 8 executive officers, approximately 1,500 other current employees, approximately 25 consultantsdistribution and 9 non-employee directors who were eligible to participate in the Amended LTIP.
Types of Awards
Options and Stock Appreciation Rights
An option is the right to purchase shares of common stock at a future date at a specified price. The Amended LTIP provides for two types of options: incentive options and nonstatutory options. An SAR is the right to receive payment of an amount equal to the excess of the fair market value of a share of common stock on the date of exercise of the SAR over the base price of the SAR. Each option and SAR will have the term, and willshall be exercisable in whole or in such installments and at such times as, specifiedonly by the Compensation Committee at the time of grant, but in no event will an option or SAR be exercisable after the expiration of 10 years from the date of grant.
Subjecteligible employee to the special limitations on incentive options described below, the option price per share of common stock subject to an option and the base price of any SAR will be determined by the Compensation Committee at the time of grant, but, subject to certain adjustments, such option price and base price will not be less than the fair market value of a share of common stock on the date of grant of such award.
No options, SARs or other non-full value appreciation awards granted under the Amended LTIP may vest less than one year from the date of grant; provided, however, that up to 5% of the available shares under the Amended LTIP as of the date it is approved by our stockholders may be subject to options, SARs or other non-full value appreciation awards that vest (in full or in part) in less than one year from their date of grant. In addition, any option SAR or other non-full value appreciation award granted under the Amended LTIP may vest in full or in part upon death or disability of the participant, or upon a change in control, and such vesting will not count against the 5% exception described in the preceding sentence.
No incentive option may be granted to an individual if, at the timewhom the option is granted, such individual owns stock possessing more than 10%except in the case of the total combined voting power of all classes of stockdeath of the Company or of its parent or any subsidiary corporation unless (a) at the time such option is granted the option price is at least 110% of the fair market value of the common stock subject to the option and (b) such option by its terms is not exercisable after the expiration of five years from the date of grant.
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To the extent that the aggregate fair market value (determined at the time each relevant incentive option is granted) of common stock subject to incentive options are exercisable for the first time by an employee during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds $100,000, such incentive options will be treated as nonstatutory options. The Compensation Committee will determine, in accordance with applicable provisions of the Code, Treasury regulations and other administrative pronouncements, which of a participant’s incentive options will no longer constitute incentive options because of such limitation and will notify the participant of such determination as soon as practicable after such determination.
Restricted Stock Awards
Typically, a restricted stock award is an award of a fixed number of shares of common stock subject to certain restrictions and other terms and conditions. A restricted stock award will be subject to restrictions on disposition by a participant and may include an obligation of the participant to forfeit and surrender the shares to the Company under certain circumstances (the “Restrictions”). The Restrictions will be determined by the Compensation Committee, and each restricted stock award may have different Restrictions. The Compensation Committee may provide that the Restrictions will lapse upon (a) the attainment of one or more performance measures, (b) the participant’s continued employment with the Company or continued service as a consultant or director for a specified period of time, (c) the occurrence of any event or the satisfaction of any other condition specified by the Compensation Committee in its sole discretion or (d) a combination of any of the foregoing. The Compensation Committee will determine the amount and form of any payment for common stock received pursuant to a restricted stock award, provided that in the absence of such a determination, a participant will not be required to make any payment for common stock received pursuant to a restricted stock award, except to the extent otherwise required by law.
Stock Bonuseseligible participant.
The Compensation Committee may grantspecify with respect to the shares purchased under a particular Option Period a period of time during which the purchased shares of common stock bonus to any eligible person to reward exceptionalmay not be sold or special services, contributions or achievementsotherwise transferred, except in the mannerlimited circumstances.
Administration and on such terms and conditions (including any restrictions on such shares) as determined from time to time by the Compensation Committee. Amendment
The number of shares so awardedESPP will be determinedadministered by the Compensation Committee and may be granted independently or in lieu of a cash bonus.
Stock Units
Stock units (or phantom share units) are not actual sharesour Board of common stock but, rather, represent a right to receive shares of common stock (or the value thereof) upon the satisfaction of certain specified terms and conditions. Stock units are generally credited to a recordkeeping account, and the value of a stock unit is typically based upon the value of an actual share of common stock.
Dividend Rights or Equivalents
Dividend rights or equivalents are amounts payable in cash or shares of common stock (or additional stock units that may be paid in shares of common stock or cash) equal to the amount of dividends that would have been paid on shares had the shares been outstanding from the date the stock-based award was granted.
No dividend equivalents will be granted in connection with stock options, stock appreciation rights or other non-full value appreciation awards granted under the Amended LTIP from and after it becomes effective. In addition, the Amended LTIP provides that dividends on restricted stock and any dividend equivalents on other full-value awards granted from and after the Amended LTIP becomes effective will be subject to restrictions and risk of forfeiture to the same extent as the underlying award with respect to which the dividend or dividend equivalent relates.
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Directors. Subject to the terms of the Amended LTIP and applicable legal requirements, the Compensation Committee may grant other awards that are valued, denominated, paid or otherwise based on or related to common stock. The Compensation Committee will determine all of the terms and conditions of all such awards, including, without limitation, method of delivery, consideration to be paid, the timing and methods of payment, and any performance criteria associated with an award. Cash awards may also be granted as separate awards, or as supplements to any other awards under the Amended LTIP.
Performance-Based Awards
A “Performance-Based Award” is an award whose grant, vesting, exercisability or payment depends upon the satisfaction of any one or more “Performance Goals.” Performance-Based Awards may be stock-based (payable in common stock only or in cash or common stock) or may be cash-only awards. A Performance-Based Award also includes an option or SAR granted with an exercise or base price not less than fair market value of a share of common stock on the date of grant. The performance period applicable to a Performance-Based Award may be up to 10 years.
Performance Goals are established by the Compensation Committee and may consist of one or more business criteria or individual performance criteria and a targeted level or levels of performance with respect to each of such criteria. The Performance Goals may be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Compensation Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable companies. In addition, subject to any limitations under Section 162(m) of the Code (prior to its amendment in 2017) with respect to awards granted under the Existing LTIP that are intended to constitute “performance-based compensation,” such performance measures may be subject to adjustment by the Compensation Committee for changes in accounting principles, to satisfy regulatory requirements and other specified extraordinary, unusual or infrequent items or events.
Each agreement for a performance award will explain (i) the maximum amount that may be earned in the form of cash or shares of common stock, as applicable, (ii) the performance goal or goals and level of achievement that will apply to the award, (iii) the performance period over which performance is measured, and (iv) other terms that the Compensation Committee may determine that are not inconsistent with the Amended LTIP.
Prior to the payment of any compensation pursuant to a Performance-Based Award, the Compensation Committee must determine that the applicable performance goal or goals and other material terms of the award have been satisfied. The Compensation Committee also has the authority to reduce or increase the amount payable in cash and the number of shares of common stock to be issued, retained or vested pursuant to a performance award, except no such increase is permitted in the case of awards made under the Existing LTIP that were intended to constitute “performance-based compensation” under Section 162(m) of the Code (prior to its amendment in 2017).
Adjustments
The Compensation Committee is authorized under the Amended LTIP to make adjustments to awards and their terms and conditions in the event of extraordinary dividends or other extraordinary distributions, reclassifications, recapitalizations, stock splits (including a stock split in the form of a stock dividend), reverse stock splits, reorganizations, mergers, combinations, consolidations, split-ups, spin-offs, repurchases or exchanges, the sale of substantially all of the assets of the Company or any other similar, unusual, infrequent or extraordinary corporate transaction (or event in respect of the common stock). These adjustments may include, among other things: (a) changes to (i) the number and type of shares (or other securities) that thereafter may be made subject to awards (including the specific maxima and numbers of shares and individual award limitations included in the Amended LTIP), (ii) the number, amount and type of shares (or other securities or property) subject to outstanding awards, (iii) the grant, purchase or exercise price of outstanding awards, (iv) the securities, cash or other property deliverable under outstanding awards or (v) the performance goals appropriate to outstanding awards; or (b) making provision for a cash payment or for the substitution or exchange of outstanding awards or the cash, securities or property deliverable to the holder of the award.
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If the Company recapitalizes, reclassifies its capital stock or otherwise changes its capital structure or another change or event occurs that constitutes an “equity restructuring” pursuant to certain accounting standards (a “recapitalization”), (a)ESPP, the Compensation Committee will equitably adjusthave the numbercomplete discretion to interpret the ESPP and classall options granted under the plan, make such rules as it deems necessary for the proper administration of shares (orthe ESPP, and to make all other securitiesdeterminations necessary or property) covered by each outstanding award andadvisable for the terms and conditions, includingadministration of the exercise price and performance criteria (if any), of such award to equitably reflect such recapitalization and will adjust the number and class of shares (or other securities or property) with respect to which awardsESPP.
The ESPP may be granted after such recapitalizationamended by our Board of Directors from time to time in any respect; provided, however, that no amendment which would materially and (b)adversely affect the Compensation Committee will make a corresponding and proportionate adjustmentrights of an eligible participant with respect to the maximum number of shares (or other securities) thatcurrent Option Period may be delivered with respect to awards under the Amended LTIP, the individual award limitations and the class of shares (or other securities) available for grant.
Vesting of Grants and Awards Following Change in Control
With respect to grants and awards made on or after May 4, 2016, in the event of a change in control while the holder of the grant or award is employed by or otherwise providing services to CRC or an affiliate followed by the termination of employment or such services as a result of the change in control, unless otherwise overridden by the Compensation Committee, each such grant or award will become immediately vested and fully exercisable upon such termination and any restrictions applicable to the grant or award will lapse on that date, provided that any performance award with performance-based vesting will vest upon such termination based on the level of achievement of the applicable performance goal as determined by the Compensation Committee.
Amendment and Duration of the Amended LTIP
Our Board of Directors may at any time amend, suspend or terminate the Amended LTIP but may not, without the approval of our stockholders:
•increase the maximum number of shares subject to the Amended LTIP;
•reduce the exercise price per share covered by options below the price specified in the Amended LTIP;
•permit the “re-pricing” of options or SARs, or permit the cancellation of “underwater” options or SARs in return for cash or other consideration; or
•amend the Amended LTIP in any other manner if such amendment requires stockholder approval by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the shares may then be listed or quoted.
Additionally, our Board of Directors may not, without the consent of the recipient, amend or cancel any outstanding award in a manner that adversely affects the recipient in a material way.eligible participant.
No award may be granted under the Amended LTIP on or after the tenth anniversary of the date upon which the plan is approved by our stockholders.
United States Federal Income Tax Consequences
The followingESPP is a summaryintended to qualify as an “employee stock purchase plan” under Section 423 of the U.S. federal income tax consequences arising from grants and awardsCode, but is not intended to be a “qualified plan” under Code Section 401(a). Unlike a “qualified plan” under Code Section 401(a), payroll deductions to purchase common stock under the Amended LTIP. The tax consequences vary depending upon particular circumstances. TheESPP are not excluded from an employee’s gross income. Rather, the employee is taxed on the amount of the payroll deduction when it is earned.
As noted above, each participating employee will be granted an option on the first day of the Option Period, which will be automatically exercised if the employee is still a participant on the last day of the Option Period. An employee will not recognize income tax laws, regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerningon the specific tax consequences applicable to them, including the applicability and effectgrant or exercise of state, local, and foreign tax laws.
Status of Options
Options grantedan option under the Amended LTIP may be either incentive optionsESPP. Instead, an employee is subject to tax when the shares are sold or nonstatutory options. The tax consequences both tootherwise disposed of (as described in the participant andnext two paragraphs).
If the Company will differ depending on whether an option is an incentive option or a nonstatutory option.
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As a general rule, no federal income tax is imposed onemployee does not dispose of the participant uponshares of common stock for at least two years from the grant of a nonstatutoryan option under the ESPP and the Company is not entitled to a tax deduction by reason of such grant. Generally, uponfor at least one year from the exercise of a nonstatutorythe option, the participantemployee will realize ordinary income upon disposition (including by sale, gift or death) in an amount equal to the lesser of: (i) the excess of the fair market value of the common stock at the time of disposition or death over the Option Price, or (ii) fifteen percent (15%) of the fair market value of the common stock on the first day of the Option Period. In the case of a disposition by sale or gift, the sum of the ordinary income plus the Option Price will be treated as receiving compensation taxable asthe employee’s tax basis in the common stock. In the case of death, the basis of the common stock in the hands of the decedent’s estate is subject to special valuation rules. An employee will recognize long-term capital gain (or loss) to the extent the sale proceeds exceed (or are exceeded by) the tax basis. If the sale proceeds are less than the Option Price, the employee will not recognize any ordinary income upon disposition, and any loss that the employee incurs on the sale will be a capital loss.
If shares of common stock purchased under the ESPP are sold by an employee within two years after the option is granted or within one year after the option is exercised, then the employee will realize ordinary income in the year of exercisedisposition in an amount equal to the excess of the fair market value of the shares of common stock aton the timedate of exercise over the option price paid for such shares. There is no item ofOption Price. This amount plus the Option Price will be the employee’s tax preference upon such exercise. Upon a subsequent disposition ofbasis in the shares received upon exercise of a nonstatutory option, anycommon stock. The difference between the fair market value of the shares at the time of exercisesale proceeds and the amount realized on the disposition wouldtax basis will be treated as capital gain (or loss), which may be long or loss. Upon a participant’s exercise of a nonstatutory option, and subject to the application of Section 162(m) of the Code, the Company may claim a deduction for compensation paid at the same time and in the same amount as compensation income is recognized to the participant assuming the Company timely satisfies any federal income tax reporting requirements.
Incentive Options
No federal income tax is imposedshort-term, depending on the participant upontime that the grant or exerciseshares are held. If an employee does recognize ordinary income as a result of an incentive option, except as described below under the caption “Alternative Minimum Tax.” If the Participant does not dispose of shares acquired pursuantearly disposition, a compensation deduction is allowed to the exercise ofus in an incentive option within two years after the date the option was granted or within one year after exercise, the difference between the option price and the amount realized on a subsequent disposition of the shares would be treated as capital gain or loss. In such event, the Company would not be entitled to any deduction in connection with the grant or exercise of the option or the disposition of the shares so acquired.
If, however, a participant disposes of shares acquired pursuant to his exercise of an incentive option prior to the end of the two-year or one-year holding period noted above, the disposition would be treated as a disqualifying disposition. The participant would be treated as having received, at the time of disposition, compensation taxable as ordinary income equal to the excess of the fair market value of the shares at the time of exercise (or, in the case of a sale in which a loss would be recognized, the amount realized on such sale) over the option price, and any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as capital gain. In such event, and subject to the application of Section 162(m) of the Code, the Company may claim a deduction for compensation paid at the same time and in the same amount as compensation is treated as received by the participant.
Payment of Option Price in Stock
In the case of a nonstatutory option, if the option price is paid by the delivery of shares of common stock previously acquired by the participant having a fair market value equal to the option price (“Previously Acquired Stock”), gain or loss would not be recognized on the exchange of the Previously Acquired Stock for a like number of shares pursuant to such exercise of the option. The participant’s basis in the number of shares of common stock received equal to the Previously Acquired Stock would be the same as his basis in the Previously Acquired Stock. The participant would, however, be treated as receiving compensation taxable as ordinary income equal to the fair market value on the date of exercise of the shares of common stock received in excess of the number of shares of Previously Acquired Stock, and the participant’s basis in such excess shares would be equal to their fair market value at the time of exercise.
In the case of an incentive option, the federal income tax consequences to the participant of the payment of the option price with Previously Acquired Stock will depend on the nature of the Previously Acquired Stock. If the Previously Acquired Stock was acquired through the exercise of a qualified stock option, an incentive option or an option granted under an employee stock purchase plan (a “Statutory Option”) and if such Previously Acquired Stock is being transferred prior to the expiration of the applicable minimum statutory holding period, the transfer would be treated as a disqualifying disposition of the Previously Acquired Stock. If the Previously Acquired Stock was acquired other than pursuant to the exercise of a statutory option, or was acquired pursuant to the exercise of a statutory option but has been held for the applicable minimum statutory holding period, no gain or loss would be recognized on the exchange. In either case, (a) the participant’s basis in the number of shares received equal to the number of shares of Previously Acquired Stock exchanged is the same as his basis in the Previously Acquired Stock, increased by any income recognized upon the disqualifying disposition of the Previously Acquired Stock, (b) the participant’s basis in the shares received in excess of the number of Previously Acquired Stock is zero, and (c) the other incentive option rules would apply.amount.
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A participant who has been granted an SAR will not realize taxable income uponThe final Treasury Regulations under Code Section 409A provide that the grant of such award. Uponan option under an employee stock purchase plan (described in Code section 423) does not constitute a deferral of compensation. Accordingly, the exerciseinterest and penalty provisions of Code Section 409A should not apply to the ESPP, so long as the ESPP satisfies the requirements of Code Section 423.
The foregoing summary of the SAR, a participant will generally recognize ordinary compensation income (subject to withholding) in an amount equal to the excess of (a) the amount of cash and the fair market value of the shares of common stock received, over (b) the base price of the SAR. A participant will generally have a tax basis in any shares of common stock received pursuant to the exercise of an SAR that equals the fair market value of such shares on the date of exercise. Subject to Section 162(m) of the Code, the Company will be entitled to a deduction forU.S. federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the foregoing rules.
Restricted Stock
A participant who has been granted a restricted stock award will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time, assuming that the applicable restrictions constitute a substantial risk of forfeiture for federal income tax purposes. When the risk of forfeituretaxation with respect to the grant, purchase and disposal of common stock subjectshares under the ESPP does not purport to such award lapses,be complete, and reference should be made to the applicable provisions of the Code. In addition, this summary does not discuss the provisions of the income tax laws of any municipality, state, or foreign country in which the participant will realize ordinarymay reside. The applicable tax rules are complex and may change, and income tax consequences may vary depending on a participating employee’s particular circumstance. Therefore, each participating employee should consult with his or her tax advisor concerning his or her participation in an amount equalthe ESPP.
New Plan Benefits
The benefits to be received by our executive officers and employees under the fair market value of the shares of common stock at such time over the amount, if any, paid for the shares, and, subject to Section 162(m) of the Code, the Company will be entitled to a corresponding deduction. All dividends and distributions (or the cash equivalent thereof) with respect to a restricted stock award paid to the participant before the risk of forfeiture lapses will also be compensation income to the participant when paid and, subject to Section 162(m) of the Code, deductible as such by the Company. Notwithstanding the foregoing, if allowedESPP are not determinable because, under the terms of the award,ESPP, the holderamounts of a restrictedfuture stock award may elect under Section 83(b) of the Code to be taxed at the time of grant of the restricted stock award on the fair market value of the shares of common stock on the date of the award over the amount, if any, paid for such shares, in which case the Company, subject to Section 162(m) of the Code, will be entitled to a deduction at the same time and in the same amount, and there will be no further federal income tax consequences with respect to the restricted stock award when the risk of forfeiture lapses. Such election must bepurchases are based upon elections made not later than 30 days after the grant of the restricted stock award to the participant and is irrevocable. All dividends or distributions with respect to a restricted stock award for which such an election has been made and which are paid to the participant before the risk of forfeiture lapses will be taxable as dividend income to the participant when paid and not deductible by the Company.
Stock Units
A participant who has been granted a stock unit (or phantom share unit) generally will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time. At the time of payment, whether a stock unit is paid in cash or shares of common stock, the Participant will have taxable compensation and,eligible employees subject to the application of Section 162(m)terms and limits of the Code, the Company will have a corresponding deduction. The measure of such incomeESPP. Directors who are not employees do not qualify as eligible employees and deduction, if any, will be the amount of any cash paid and the fair market value of the shares either at the time the stock unit is paid or at the time any restrictions (including restrictions under Section 16(b) of the Exchange Act) subsequently lapse, depending on the nature, if any, of the restrictions imposed on the shares and whether the participant elects to be taxed without regard to any such restrictions.
Other Awards
The tax treatment of other awards will depend on the particular terms and conditions of the award. As a general rule, at the time the award vests (or, if the award is not subject to a vesting requirement, at the time the award is granted) the participant will recognize taxable income and, subject to the application of Section 162(m) of the Code, the Company will be entitled to a corresponding deduction. A participant will recognize ordinary compensation income upon receipt of cash pursuant to a cash award or, if earlier, at the time the cash is otherwise made available for the participant to draw upon.
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Section 162(m) of the Code precludes a public corporation from taking a deduction for compensation in excess of $1 million paid in a taxable year with respect to each of certain of the corporation’s current and former executive officers, including any compensation relating to an award granted under a plan similar to the Amended LTIP. However, certain awards under the Existing LTIP may qualify for an exception to this limitation as compensation intended to constitute “performance-based compensation” prior to the amendment of Section 162(m) of the Code in 2017.
Parachute Payment Sanctions
Certain provisionsthus cannot participate in the Amended LTIP or included in an agreement incident to the plan may afford a participant special protections or payments thatESPP. Future purchase prices are contingent on a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the Company’s assets. To the extent triggered by the occurrence of any such event, these special protections or payments may constitute “parachute payments” which, when aggregated with other parachute payments received by the participant, if any, could result in the participant’s receiving “excess parachute payments” (a portion of which wouldnot determinable because they will be allocated to those protections or payments derived from the plan). The Company would not be allowed a deduction for any such excess parachute payments and the participant would be subject to a nondeductible 20% excise tax upon such payments in addition to income tax otherwise owed with respect to such payments.
General
The Amended LTIP is not qualified under Section 401(a) of the Code.
The foregoing summary is for general information only and is intended to summarize the United States federal income tax consequences to participants arising from common transactions under the Amended LTIP. This description is based upon the applicable provisionsclosing market price per share of the Internal Revenue Codecommon stock, as currently in effect andreported by the Treasury Regulations and proposed Treasury Regulations and Internal Revenue Service rulings thereunder, which are subject to change (possibly retroactively). The tax treatmentNYSE, on either the first day of a participant in the plan may varyapplicable Option Period (or next regular business day if no shares have been traded on such first day) or the last day of the applicable Option Period (or next regular business day if no shares have been traded on such last day), depending on his or her particular situation and may, therefore, be subjectwhich closing market price is lower.
Registration with the SEC
If the ESPP is approved by our stockholders, we intend to special rules not discussed above. In addition, Section 409A offile a registration statement on Form S-8 registering the Code provides that deferred compensation, as defined therein, will be subject to an additional 20% tax unless it meets certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder. Although the Company intendsshares reserved for awards issuedissuance under the Amended LTIP to comply with Section 409A of the Code, no assurance can be given that they will. Each participant should consult his or her own tax advisor regarding the specific tax consequences of participation in the plan, including the application of any state, local and foreign tax laws which may differ from the United States federal tax treatment and the effect of other state, local and foreign laws, including community property laws.
Clawback
To the extent required by applicable law or any applicable securities exchange listing standards, orESPP as otherwise determined by the Board of Directors or the Compensation Committee, awards and amounts paid or payable with respect to awards will be subject to the provisions of any applicable clawback policies or procedures adopted by the Company. The clawback policies or procedures may provide for forfeiture, repurchase and/or recoupment of awards and amounts paid or payable with respect to awards. In addition, the Company reserves the right, without the consent of any participant or beneficiary, to adopt anysoon as reasonably practicable after such clawback policies and procedures, including such policies and procedures that have retroactive effect.
Effective November 4, 2015, the Board of Directors adopted the Compensation Recoupment and Clawback Policy, which provides that in the event the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under applicable securities laws, the Company will have the right, as to any “Covered Employee,” to cause the Company to require the reimbursement by the Covered Employee, to the extent permitted by applicable law, of all or a portion of any incentive compensation. The full text of the policy can be found on the Company’s website at www.crc.com.
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The future awards, if any, that will be made to eligible individuals under the Amended LTIP are subject to the discretion of the Compensation Committee and the Board of Directors, and thus we cannot currently determine the benefits or number of shares subject to awards that may be granted to eligible individuals in the future under the Amended LTIP. Therefore, the New Plan Benefits Table is not provided.
Existing Plan Benefits
The following table sets forth, for each of our named executive officers and certain groups, the number of shares of our common stock that are subject to outstanding stock option grants under the Existing LTIP as of February 28, 2019. No stock option awards have been granted under the Existing LTIP to any associate of a non-employee director, nominee or executive officer, and no other person has been granted five percent or more of the total amount of awards granted under the Existing LTIP.
Existing LTIP Stock Options
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approval.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table below sets forthprovides certain information relating toabout the number of shares authorized for issuance with respect to theCompany’s equity compensation plans available to directors, officers, employees, and consultantsas of the Company at February 28, 2019.December 31, 2021:
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
| Weighted-average exercise price of outstanding options, warrants and rights |
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a)) |
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| (a) |
| (b) |
| (c) |
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Equity compensation plans approved by security holders | — |
| — |
| — |
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Equity compensation plan not approved by security holders | 2,074,145 | (1) | — |
| 7,165,422 | (2) |
Total | 2,074,145 |
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| 7,165,422 |
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upon
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CALIFORNIA RESOURCES CORPORATION 7961
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Proposals Requiring Your Vote
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“FOR” PROPOSAL 4 TO APPROVE THE AMENDED AND RESTATED CALIFORNIA RESOURCES CORPORATION LONG-TERM INCENTIVE PLAN.EMPLOYEE STOCK PURCHASE PLAN
Proposal 5(a), Proposal 5(b) and Proposal 5(c)5(b): Approval of Amendments to the Certificate of Incorporation to Change Each Supermajority Stockholder Vote Requirement to a Majority Vote Requirement
The Company’s Amended and Restated Certificate of Incorporation, as amended most recently as of May 31, 2016October 27, 2020 (the “Charter”), provides in part that:
(1) Following the date when CRC’s classified board structure expires pursuant to the terms of the Charter, directorsAny director may only be removed at any time (a) for Causecause upon the affirmative vote of the holders of at least a majority in voting power of the outstanding shares of stock of CRC entitled to vote generally for the election of directors andor (b) without Causecause upon the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC entitled to vote generally for the election of directors, in the case of each of (a) and (b), acting at a meeting of the stockholders; and
(2) CRC’s Amended and Restated Bylaws (the “Bylaws”) may not be altered, amended, restated or repealed by the stockholders except by the vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC entitled to vote thereon; and
(3) Any alteration, amendment, repeal or restatement of the Fifth Article, the Sixth Article, the Seventh Article, the Eighth Article, the Tenth Article, the Eleventh Article the Twelfth Article or the ThirteenthTwelfth Article of the Charter will require the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC entitled to vote thereon.
Our Board of Directors reviews corporate governance practices on a continuing basis. In light of evolving practices, and stockholder input, our Board of Directors has determined that it is in the best interests of the Company and its investors to seek to amend the Charter to change each of the supermajority voting requirements to a requirement for an affirmative vote of a majority of outstanding shares. The majority voting requirements will give stockholders enhanced flexibility to change the Company’s governing documents, while ensuring that fundamental changes made by stockholders will be acceptable to the holders of a majority of stockholders. Our Board of Directors will retain the ability to amend the Bylaws.
The proposed amendments may, if adopted, make it easier for one or more stockholders to change the Company’s corporate governance and, therefore, make it more difficult for our Board of Directors to protect other stockholders’ interests. Nevertheless, there are other actions that our Board of Directors can take to protect stockholders’ interests on such occasions.
Our Board of Directors is proposing these amendments for the reasons described above. It does not otherwise have any current plans to amend the Bylaws or any of the Charter provisions described below that currently require a supermajority vote, or to take or propose to take any action contemplated by such provisions, except that if Proposal 5(b) passes, then effective at the same time the Charter changes, the Bylaws will be immediately amended to conform the Bylaws to the Charter and to provide that the Bylaws may be amended by stockholders by the affirmative vote of a majority of outstanding shares.provisions. The general description of provisions of our Charter and Bylaws and the proposed amendments set forth here and below are qualified in their entirety by reference to the text of Appendices C-1 C-2 and C-3.C-2.
CALIFORNIA RESOURCES CORPORATION 80
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Proposals Requiring Your Vote
The Board recommends that the STOCKholders vote
to approve each of the three proposals.
Proposal 5(a): Change the Supermajority Vote Requirement for Stockholders to Remove Directors Without Cause to a Majority Vote Requirement
The Fifth Article (Section 3) of the Charter currently requires the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC entitled to vote for the election of directors in order for directors to be removed without Causecause by the stockholders following the date when CRC’s classified board structure expires pursuant to the terms of the Charter.stockholders. If the stockholders approve this Proposal 5(a), then the Fifth Article (Section 3) of the Charter will allow stockholders to remove directors with or without Causecause upon the affirmative vote of the holders of at least a majority in voting power of the outstanding shares
CALIFORNIA RESOURCES CORPORATION 62
2022 PROXY STATEMENT |
Proposals Requiring Your Vote
of stock of CRC generally entitled to vote for the election of directors. Appendix C-1 shows the proposed changes to the Fifth Article (Section 3) of the Charter.
The Board recommends that the STOCKholders voteTHE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“for”FOR” Proposal 5(PROPOSAL 5(a) TO CHANGE THE SUPERMAJORITY VOTE REQUIREMENT FOR STOCKHOLDERS TO REMOVE DIRECTORS WITHOUT CAUSE TO A MAJORITY VOTE REQUIREMENT.a) to Change the Supermajority
Vote Requirement for STOCKholders to Remove
Directors Without Cause to a Majority Vote Requirement.
Proposal 5(b): Change the Supermajority Vote Requirement for Stockholders to Amend the Bylaws to a Majority Vote Requirement
The Eighth Article of the Charter currently provides that the stockholders can amend the Bylaws only by the affirmative vote of the holders of at least 75% of voting power of the outstanding shares of stock of CRC entitled to vote thereon. If the stockholders approve this Proposal 5(b), then the Eighth Article of the Charter will allow stockholders to amend the Bylaws by an affirmative vote of the holders of at least a majority in voting power of the outstanding shares of stock of CRC entitled to vote thereon.
In addition, if the stockholders approve this Proposal 5(b), then effective at the same time the Charter changes, the Bylaws will be immediately amended to conform the Bylaws to the Charter and provide that the Bylaws may be amended by stockholders by the affirmative vote of a majority of outstanding shares. Currently, Section 8.1 of the Bylaws provides that the stockholders can amend the Bylaws only by the affirmative vote of at least 75% in voting power of the outstanding shares of CRC entitled to vote thereon. The Board has amended the Bylaws, contingent and effective upon a filing of a certificate of amendment of the Eighth Article of the Charter with the Secretary of the State of Delaware in accordance with this Proposal 5(b). If the Board’s amendment becomes effective upon the effectiveness of the Charter amendment following stockholder approval of this Proposal 5(b), the Bylaws will allow stockholders to amend the Bylaws by the affirmative vote of a majority of outstanding shares of stock of CRC entitled to vote thereon.
Therefore, if this Proposal 5(b) is approved by the stockholders, all of the supermajority voting requirements in the Charter and Bylaws regarding the amendment of the Bylaws will be replaced with an affirmative vote of a majority of outstanding shares of stock standard. Appendix C-2 shows the proposed changes to the Eighth Article of the Charter.
CALIFORNIA RESOURCES CORPORATION 81
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Proposals Requiring Your Vote
The Board recommends that the STOCKholders vote
“for” Proposal 5(b) to Change the Supermajority
Vote Requirement for STOCKholders to Amend
the Bylaws to a Majority Vote Requirement.
Proposal 5(c): Change the Supermajority Vote Requirement for Stockholders to Amend Certain Provisions of the Certificate of Incorporation to a Majority Vote Requirement
The Tenth Article of the Charter currently requires the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of CRC in order for stockholders to amend certain Charter provisions. These are:
The Fifth Article, which addresses various provisions regarding the Board, including with respect to the removal of directors (as set forth in Proposal 5(a));
The Sixth Article, which requires stockholders to act by meeting;
The Seventh Article, which provides that special meetings of stockholders may only be called by the Chief Executive Officer, the Chairman of the Board or the Board of Directors;
The Eighth Article, which addresses amendments to the Bylaws (as set forth in Proposal 5(b));
The Tenth Article, which addresses amendments to the Charter (as set forth in this Proposal 5(c)5(b));
The Eleventh Article, which selects the forum for certain disputes; and
The Twelfth Article, which addresses director interests in certain business opportunities; and
The Thirteenth Article, which states that Section 203 of the Delaware General Corporation Law applies to CRC.opportunities.
If the stockholders approve this Proposal 5(c)5(b), then the Tenth Article of the Charter will allow stockholders to amend the provisions of the Charter described above by an affirmative vote of a majority of the outstanding shares of stock of CRC entitled to vote thereon. Appendix C-3C-2 shows the proposed changes to the Tenth Article of the Charter.
The Board recommends that the STOCKholders voteTHE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“for”FOR” Proposal 5(PROPOSAL 5(b) TO CHANGE THE SUPERMAJORITY VOTE REQUIREMENT FOR STOCKHOLDERS TO AMEND CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION TO A MAJORITY VOTE REQUIREMENT.c) to Change the Supermajority
Vote Requirement for STOCKholders to Amend
Certain Provisions of the
Certificate of Incorporation
to a Majority Vote Requirement.
Therefore, if Proposal 5(a), and 5(b) and 5(c) are approved by the stockholders, all of the supermajority voting requirements in the Charter and Bylaws will be replaced with an affirmative vote of a majority of outstanding shares of stock standard.
CALIFORNIA RESOURCES CORPORATION 8263
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General Information
General InformationInformation
At the close of business on March 11, 2019,7, 2022, the “Record Date” for the determination of stockholders entitled to receive notice of and to vote at the Annual Meeting, there were 48,799,261[78,166,166] shares of common stock outstanding, each share of which is entitled to one vote. Common stock is the only class of our outstanding securities entitled to receive notice of and to vote at the Annual Meeting.
Our Board of Directors asks you to appoint ToddMark A. Stevens(Mac) McFarland and William E. AlbrechtTiffany (TJ) Thom Cepak as your proxy holdersholder (“Proxy HoldersHolder”) to vote your shares at the Annual Meeting. You make this appointment by using one of the voting methods described below.
Quorum and Discretionary Authority
The presence at the Annual Meeting of a majority of shares of our common stock issued and outstanding and entitled to vote, present in person or by proxy, is necessary to constitute a quorum in order to transact business at the Annual Meeting. Your shares are counted as present at the Annual Meeting if you attend the Annual Meeting and vote in person or if you properly return a proxy by Internet, telephone or mail. Abstentions will be counted as present for purposes of determining whether a quorum is present at the Annual Meeting.
The ChairmanChair of the Annual Meeting or, if directed by the ChairmanChair of the Annual Meeting, a majority of the shares so represented, may adjourn the Annual Meeting from time to time, whether or not there is a quorum represented, and the Proxy HoldersHolder will vote the proxies they havehe has been authorized to vote at the Annual Meeting in favor of such an adjournment. In the event a quorum is present at the Annual Meeting but sufficient votes to approve any of the items proposed by our Board of Directors have not been received, the ChairmanChair of the meeting or the Proxy HoldersHolder may propose one or more adjournments of the Annual Meeting to permit further solicitation of proxies. A stockholder vote may be taken on one or more of the proposals in this proxy statement prior to such adjournment if sufficient proxies have been received and it is otherwise appropriate.
Our Board of Directors does not know of any other matters that are to be presented for action at the Annual Meeting. However, if other matters properly come before the Annual Meeting, the proxies solicited by the Board of Directors will provide the Proxy HoldersHolder with the authority to vote on those matters and nominees in accordance with such persons’person’s discretion. Where a stockholder has appropriately specified how a proxy is to be voted, it will be voted by the Proxy HoldersHolder in accordance with the specification.
CALIFORNIA RESOURCES CORPORATION 8364
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General Information
How to Vote Shares Registered in Your Name
If you own shares that are registered in your own name, you are a “registered stockholder” and you may attend the Annual Meeting and vote in person. You also may vote by proxy without attending the Annual Meeting in any of the following ways:
| BY INTERNET |
| BY TELEPHONE |
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| BY MAIL |
You may submit a proxy electronically on the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials. Please have the Notice of Internet Availability of Proxy Materials in hand when you log onto the website. Internet voting facilities will be available 24 hours a day, 7 days a week, and will close at 11:59 p.m., Eastern Time, on May | If you request paper copies of the proxy materials by mail, you may submit a proxy by telephone using the toll-free number listed on the proxy card. Please have your proxy card in hand when you call. Telephone voting facilities will close and no longer be available after 11:59 p.m., Eastern Time, on May |
| If you request paper copies of the proxy materials by mail, you may indicate your vote by completing, signing and dating your proxy card and returning it in the reply envelope provided. | ||||
For stockholders who have their shares voted by duly submitting a proxy by Internet, telephone or mail, the Proxy Holders will vote all shares represented by such valid proxies in accordance with the stockholders’ instructions. If a stockholder signs and mails a proxy card, but does not indicate how the Proxy Holders should vote, the Proxy Holders will vote in accordance with the Board of Directors’ recommendations as set forth above.
If you received more than one Notice of Internet Availability of Proxy Materials, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately vote the shares shown on each Notice of Internet Availability of Proxy Materials that you receive in order for all of your shares to be voted at the Annual Meeting.
How to Vote Shares Held in “Street Name”
If you hold shares through a brokerage firm, trustee, bank, other financial intermediary or nominee (known as shares held in “street name”), you will receive from that broker, trustee, bank, financial intermediary or other nominee (the “intermediary”) a voting instruction form that will explain how to direct the voting of your shares through the intermediary, which may include the ability to provide voting instructions via the Internet or by telephone.
If your shares are held in street name through a brokerage firm that is a member of the NYSE and you want to vote on any of the proposals to be submitted to a vote at the Annual Meeting (except as to Proposal 2), you MUST indicate how you wish your shares to be voted. The broker will vote shares held by you in street name in accordance with your voting instructions, as indicated on your signed voting instruction form or by the instructions you provide via the Internet or by telephone. Absent such instructions, the proxy submitted by the broker with respect to your shares will indicate that the broker is not able to cast a vote with respect to the matter, which is commonly referred to as a “broker non-vote.” Accordingly, if your shares are held in street name, it is important that you provide voting instructions to the broker or other intermediary so that your vote will be counted. Under NYSE rules, Proposal 2 is considered a “routine matter,” and thus a broker is permitted in its discretion to cast a vote on this proposal as to your shares in the event that you do not provide the broker with voting instructions.
CALIFORNIA RESOURCES CORPORATION 8465
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General Information
If you hold shares in street name and wish to vote your shares in person at the Annual Meeting, you must first obtain a valid proxy from the intermediary. To attend the Annual Meeting in person (regardless of whether you intend to vote your shares in person at the Annual Meeting), you should follow the instructions under “Attending the Annual Meeting in Person” below.
If you received more than one voting instruction form, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately follow the foregoing voting procedures for each voting instruction form that you receive in order for all of your shares to be voted at the Annual Meeting.
If you are a registered stockholder, you may revoke your proxy at any time before your shares are voted at the Annual Meeting by:
voting again through the Internet or by telephone prior to 11:59 p.m., Eastern Time on May 7, 2019;3, 2022;
requesting, completing and mailing in a new paper proxy card, as outlined in the Notice of Internet Availability of Proxy Materials;
voting in person at the Annual Meeting by completing a ballot;Meeting; however, attending the Annual Meeting without completing a ballot will not revoke any previously submitted proxy; or
submitting a written notice of revocation to the Corporate Secretary of California Resources Corporation at 27200 Tourney Road,1 World Trade Center, Suite 315, Santa Clarita,1500, Long Beach, California 9135590831 that is received no later than May 7, 2019.3, 2022.
If you are a street-name stockholder and you vote by proxy, you may change your vote by submitting new voting instructions to your broker, bank or other nominee in accordance with that entity’s procedures.
Required Vote and Method of Counting
Proposal 1. Election of Directors
We have adopted a majority voting policy with respectPursuant to the election of directorsCompany's Bylaws, a nominee will be elected to the Board of Directors if such nominee receives the highest number of votes cast "FOR" a particular position on the Board of Directors. See “Majority Voting for Directors” below. The election of directors involves a matter on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to this item, your broker may not vote your shares with respect to this proposal. In such case, a broker non-vote will occur. Abstentions and broker non-votes are not considered votes cast and will have no effect on the outcome of the election of directors.
Proposal 2. Ratification of the Appointment of the Independent Registered Public Accounting Firm
The affirmative vote of a majority of the shares present in person, or represented by proxy at the Annual Meeting, and entitled to vote on the matter at the Annual Meeting, is required to approve Proposal 2. Proposal 2 involves a matter on which a broker (or other nominee) does have “discretionary” authority to vote. Even if you do not instruct your broker how to vote with respect to this item, your broker may vote your shares with respect to this proposal in its discretion. With respect to Proposal 2, a vote of “ABSTAIN” will have the same effect as a vote “AGAINST.”
CALIFORNIA RESOURCES CORPORATION 85
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General Information
Proposal 3. Advisory Vote to Approve Named Executive Officer Compensation; and
Proposal 4. Approve the Amended LTIP
The affirmative vote of a majority of the shares present in person, or represented by proxy at the Annual Meeting, and entitled to vote on the matter at the Annual Meeting, is required to approve the recommendations in Proposals 3 and 4.Proposal 3. Such proposals involveproposal involves matters on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to these items,this item, your broker may not vote your shares with respect to these proposals.this proposal. In such case, a broker non-vote will occur. Broker non-votes are not considered and will have no effect on the outcome of Proposals 3 and 4.
CALIFORNIA RESOURCES CORPORATION 66
2022 PROXY STATEMENT |
General Information
Proposal 3. Abstentions are treated as present or represented and voting and will have the same effect as a vote “AGAINST.”
With respect to Proposal 3, while this vote is required by law, it will neither be binding on the Company or the Board of Directors nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, the Company or the Board of Directors. However, the views of our stockholders are important to us, and our Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. We urge you to read the section entitled “Compensation Discussion and Analysis,” including the compensation tables that follow, which discusses in detail how our executive compensation program implements our compensation philosophy.
ProposalsProposal 4. Approval of California Resources Corporation Employee Stock Purchase Plan
Approval of the ESPP requires the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the annual meeting and entitled to vote on the matter. As a result, abstentions will have the same effect as a vote “against” this proposal and broker non-votes will have no effect on the vote outcome.
Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is given, then FOR the approval of the ESPP.
Proposal 5(a), 5(b) and 5(c)(b). Change the Supermajority Vote Requirements to a Majority Vote Requirement for (a) Stockholders to Remove Directors Without Cause; (b) Stockholders to Amend the Bylaws; and (c)(b) Stockholders to Amend Certain Provisions of the Certificate of Incorporation
Stockholders will vote on Proposals 5(a), and 5(b) and 5(c) separately, and the approval of each proposal is not conditioned on the approval of the other proposals. The affirmative vote of the holders of at least 75% in voting power of the outstanding shares of our stock entitled to vote at the Annual Meeting is required to approve each of Proposals 5(a), and 5(b) and 5(c). Such proposals involve matters on which a broker (or other nominee) does not have “discretionary” authority to vote. If you do not instruct your broker how to vote with respect to these items, your broker may not vote your shares with respect to these proposals. In such case, a broker non-vote will occur. Abstentions and broker non-votes will have the same effect as votes cast “AGAINST” the approval of these proposals. These charter amendments, if approved, will not be effective until we file certificates of amendment with the Secretary of State of Delaware following the Annual Meeting.
We have adopted a majority voting policy with respect to the election of directors to the Board of Directors. In accordance with our Bylaws, in order to be elected as a director, a director nominee must receive more votes cast “FOR” than “AGAINST” his or her election. This policy does not apply if the number of nominees for director exceeds the number of directors to be elected on or after the tenth day preceding the date we first mail the Notice of Annual Meeting, in which case directors shall be elected by a plurality of shares present in person or represented by proxy at the Annual Meeting.
Unless the election is by plurality vote as set forth above, if an incumbent nominee for director receives an equal or greater number of votes cast “AGAINST” than votes cast “FOR” his or her election, the nominee shall promptly tender his or her resignation to the Board of Directors. Such director resignation will become effective upon acceptance by the Board of Directors of such resignation based on any factors deemed relevant by the Board of Directors. The foregoing summary is qualified by the terms of our majority voting policy, which are included in our Bylaws.
CALIFORNIA RESOURCES CORPORATION 86
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General Information
Method and Cost of SolicitingSoliciting and Tabulating Votes
The Board of Directors is providing these proxy materials to you in connection with the solicitation by the Board of Directors of proxies to be voted at the Annual Meeting. In addition to solicitation by mail, our officers, directors and employees may solicit proxies personally or by telephone, facsimile or electronic means. These officers, directors and employees will not receive any extra compensation for these services. In addition, we will make arrangements with brokerage houses, custodians, nominees and other fiduciaries to send proxy materials to the beneficial owners of our stock, and we will reimburse them for postage and clerical expenses. We will bear the costs of the solicitation, including the cost of the preparation, assembly, printing and, where applicable, mailing of the Notice of Internet Availability of Proxy Materials, the Notice of the 20192022 Annual Meeting of Stockholders, this proxy statement, the proxy card and any additional information furnished by us to our stockholders. In addition, we have hired D.F. King & Co., Inc.Okapi Partners, LLC to assist us in soliciting proxies, which it may do by telephone or in person. We will pay D.F. King & Co.Okapi Partners, LLC a fee of $7,500, plus expenses.
Attending the Annual Meeting in Person
Only stockholders of record or their legal proxy holders as ofHow can I vote my shares in person and participate at the Record Date or our invited guestsAnnual Meeting?
This year’s Annual Meeting will be held entirely online to allow greater participation. Shareholders may attendparticipate in the Annual Meeting by visiting the following website: https://www.virtualshareholdermeeting.com/CRC2022. To participate in person. the Annual Meeting, you will need
CALIFORNIA RESOURCES CORPORATION 67
2022 PROXY STATEMENT |
General Information
Ifthe 16‐digit control number included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials. Shares held in your name as the shareholder of record may be voted electronically during the Annual Meeting. Shares for which you are the beneficial owner but not the shareholder of record also may be voted electronically during the Annual Meeting; however, in order for stockholders whose shares were held in an account at a brokerage firm, bank or other nominee (i.e., in “street name”) as of March 7, 2022 to vote their shares at the meeting, they will need to obtain a legal proxy from the broker, bank or other nominee that holds their shares authorizing them to vote in person at the annual meeting. However, even if you plan to attend the Annual Meeting, the Company recommends that you vote your shares in person,advance, so that your vote will be counted if you later decide not to attend the Annual Meeting.must present
What will I need in order to attend the Annual Meeting?
You are entitled to attend the virtual Annual Meeting only if you were a stockholder of record as of the record date for the Annual Meeting, or March 7, 2022, or you hold a valid formproxy for the Annual Meeting. You may attend the Annual Meeting, vote, and submit a question during the Annual Meeting by visiting https://www.virtualshareholdermeeting.com/CRC2022 and using your 16‐digit control number to enter the meeting. If you are not a stockholder of government-issued photo identification,record but hold shares as a beneficial owner in street name, you may be required to provide proof of beneficial ownership, such as your most recent account statement as of the Record Date, a driver’s licensecopy of the voting instruction form provided by your broker, bank, trustee, or passport. In addition to such personal identification,nominee, or other similar evidence of ownership. If you do not comply with the procedures outlined above, you will neednot be admitted to the virtual Annual Meeting.
Stockholders may submit questions live during the meeting on our Annual Meeting website, https://www.virtualshareholdermeeting.com/CRC2022. We plan to provide adequate time for stockholder questions to be read and answered by Company personnel during the meeting. Following the Annual Meeting, we will publish an admission ticketanswer to each appropriate question we received on our Investor Relations website at http://investors.crc.com as soon as practical. In submitting questions, please note that we will only address questions that are germane to the matters being voted on at our Annual Meeting.
During the Annual Meeting, we will offer live technical support for all stockholders attending the meeting. We encourage you to access the meeting prior to the start time. Please allow ample time for online check-in, which will begin at 10:45 a.m. Pacific Time. We will have technicians ready to assist if you have difficulties accessing the virtual meeting during the check-in time or proof of ownership of CRC stock to enterduring the Annual Meeting. If your shares are registered in your name, you will find an admission ticket attached toencounter any difficulties accessing the notice regardingvirtual meeting during the internet availability of proxy materialscheck-in or the proxy card sent to you. If your shares are held in street name with a broker, bank or other nominee, you will need to bring a copy of your brokerage statement or other documentation reflecting your stock ownership ascourse of the Record Date.
No cameras, telephones, recording equipment, electronic devices, large bags, briefcases or packages will be permitted at the Annual Meeting. No banners, signs, firearms or weapons will be allowed in the meeting room. We reserve the right to inspect all items entering the meeting room.
The Annual Meeting, will be held at the Bakersfield Marriott at the Convention Center, located at 801 Truxtun Avenue, Bakersfield, California 93301.please call (844) 976-0738 (U.S.) or (303) 562-9301 (international).
Notice of Internet Availability of Proxy Materials
On March 26, 2019,22, 2022, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders of record and beneficial owners who owned shares of our common stock at the close of business on March 11, 2019.7, 2022. The Notice of Internet Availability of Proxy Materials contained instructions on how to access the proxy materials and vote online. We have made these proxy materials available to you over the Internet or, upon your request, have delivered paper versions of these materials to you by mail, in connection with the solicitation of proxies by our Board of Directors for the Annual Meeting.
Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.
CALIFORNIA RESOURCES CORPORATION 87
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General Information
Stockholder Proposals and Director Nominations
Any stockholder who wishes to submit a proposal for inclusion in the proxy materialmaterials and for presentation at our 20202023 annual meeting of stockholders may do so by following the procedures set forth in Rule 14a-8
CALIFORNIA RESOURCES CORPORATION 68
2022 PROXY STATEMENT |
General Information
under the Exchange Act. In accordance with Rule 14a-8, stockholder proposals should be received by our Corporate Secretary at the address below not later than November 27, 2019.22, 2022.
For proposals that are not submitted for inclusion in our proxy statement under Rule 14a-8, as more specifically provided in our Bylaws, in order for nominations of persons for election to the Board of Directors or a proposal of any other business to be properly brought before the 20202023 annual meeting of stockholders, it must be submitted in accordance with our Bylaws and must be received at our principal executive offices no earlier than the close of business on January 9, 20204, 2023 and not later than the close of business on February 8, 2020.3, 2023. Any such proposal must be an appropriate subject for stockholder action under applicable law and must comply with the notice requirements set forth in Section 2.9 of our Bylaws and should be sent in writing to:
California Resources Corporation
Attention: Corporate Secretary
27200 Tourney Road,1 World Trade Center, Suite 3151500
Santa Clarita,Long Beach, California 9135590831
Detailed information for submitting recommendations for director nominees is available upon written request to our Corporate Secretary at the address listed above.
Householding of Proxy Materials
The SEC’s proxy rules permit companies and intermediaries, such as brokers, banks and other nominees, to satisfy delivery requirements for proxy materials with respect to two or more stockholders sharing the same address by delivering a single set of proxy materials to those stockholders. This method of delivery, often referred to as “householding,” helps to reduce the amount of duplicative information that stockholders receive and lowers printing and mailing costs for companies.
We are householding proxy materials for stockholders of record in connection with the Annual Meeting unless otherwise notified. We have been notified that certain intermediaries may household proxy materials as well. If you hold your shares of common stock through a broker, bank or other nominee that has determined to household proxy materials, only one set of proxy materials will be delivered to multiple stockholders sharing an address unless you notify your broker, bank or other nominee to the contrary.
We will promptly deliver you a separate copy of the proxy materials for the Annual Meeting if you so request by (1) visiting http://www.proxyvote.com, (2) calling (866) 659-2647(800) 579-1639 or (718) 921-8124 (for international callers) or you(3) sending an email to sendmaterial@proxyvote.com. If sending any email, please include your 16-digit control number in the subject line. You may also contact your broker, bank or other nominee to make a similar request.
Please contact us or your broker, bank or other nominee directly if you have questions or wish to receive separate copies of our proxy materials in the future. You should also contact us or your broker, bank or other nominee if you wish to request delivery of a single copy if you are currently receiving multiple copies. These options are available to you at any time.
CALIFORNIA RESOURCES CORPORATION 88
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General Information
Our 20182021 Annual Report to Stockholders, including our Annual Report on Form 10-K for the fiscal year ended December 31, 20182021 as filed with the SEC, is being furnished to our stockholders primarily via the Internet and mailed to all stockholders who have requested to receive paper copies of the proxy materials. The 20182021 Annual Report to Stockholders does not constitute a part of the proxy soliciting material.
CALIFORNIA RESOURCES CORPORATION 69
2022 PROXY STATEMENT |
General Information
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2021, including the financial statements and the financial statement schedules, if any, but not including exhibits, is also available at http://www.astproxyportal.com/ast/20758www.proxyvote.com and a copy will be furnished at no charge to each person to whom a Notice of Internet Availability of Proxy Materials is delivered upon the request of such person to the following:
TELEPHONE: |
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EMAIL: |
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WEBSITE: |
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If sending an email, please include your 16-digit control number in the subject line.
CALIFORNIA RESOURCES CORPORATION 8970
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Annex A Reconciliation of Non-GAAP Measures and Other Information
Reconciliation of Non-GAAP Measures and Other Information
Adjusted EBITDAX
We define Adjusted EBITDAX as earnings before interest expense; income taxes; depreciation, depletion and amortization; exploration expense; other unusual, infrequent and out-of-period items; and other non-cash items. We believe this measure provides useful information in assessing our financial condition, results of operations and cash flows and is widely used by the industry, the investment community and our lenders. Although this is a non-GAAP measure, the amounts included in the calculation were computed in accordance with GAAP. Certain items excluded from this non-GAAP measure are significant components in understanding and assessing our financial performance, such as our cost of capital and tax structure, as well as depreciation, depletion and amortization of our assets. This measure should be read in conjunction with the information contained in our financial statements prepared in accordance with GAAP. A version of Adjusted EBITDAX is a material component of certain of our financial covenants under our Revolving Credit Facility and is provided in addition to, and not as an alternative for, income and liquidity measures calculated in accordance with GAAP.
The following tables present a reconciliation of the GAAP financial measures of net income and net cash provided by operating activities to the non-GAAP financial measure of adjusted EBITDAX and the calculation of adjusted EBITDAX margin:
($ in millions) |
| 2018 |
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| 2021 |
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Net income |
| $ | 429 |
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|
| $ | 625 |
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Interest and debt expense, net |
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| 379 |
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| 54 |
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Depreciation, depletion and amortization |
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| 502 |
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| 213 |
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Income taxes |
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| (396 | ) |
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Exploration expense |
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| 34 |
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| 7 |
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Unusual, infrequent and other items |
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| (267 | ) |
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| 290 |
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Non-cash items |
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|
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Accretion expenses |
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| 50 |
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Stock-based compensation |
|
| 14 |
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Post-retirement medical and pension |
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| 3 |
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Other non-cash items |
|
| 40 |
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|
|
| - |
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Adjusted EBITDAX (A) |
| $ | 1,117 |
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Adjusted EBITDAX |
|
| 860 |
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Costs to achieve |
|
| 16 |
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One-time costs |
|
| 4 |
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Adjusted EBITDAX, excluding one-time costs and costs to achieve |
| $ | 880 |
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Net cash provided by operating activities |
| $ | 461 |
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| 660 |
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Cash interest |
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| 441 |
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| 31 |
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Exploration expenditures |
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| 17 |
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| 7 |
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Working capital changes |
|
| 199 |
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|
|
| 162 |
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Other, net |
|
| (1 | ) |
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Adjusted EBITDAX (A) |
| $ | 1,117 |
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Adjusted EBITDAX margin ($ in millions) |
| 2018 |
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Total revenues and other |
| $ | 3,064 |
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Non-cash derivative (gain) loss |
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| (229 | ) |
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Adjusted revenues (B) |
| $ | 2,835 |
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Adjusted EBITDAX Margin (A)/(B) |
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| 39% |
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Adjusted EBITDAX |
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| 860 |
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Costs to achieve |
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| 16 |
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One-time costs |
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| 4 |
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Adjusted EBITDAX, excluding one-time costs and costs to achieve |
| $ | 880 |
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We define adjusted EBITDAX as earnings before interest expense; income taxes; depreciation, depletion and amortization; exploration expense; and other unusual, out-of-period and infrequent items; and other non-cash items. Our management believes adjusted EBITDAX provides useful information in assessing our financial condition, results of operations and cash flows and is widely used by the industry, the investment community and our lenders. While adjusted EBITDAX is a non-GAAP measure, the amounts included in the calculation of adjusted EBITDAX were computed in accordance with GAAP. Certain items excluded from adjusted EBITDAX are significant components in understanding and assessing our financial performance, such as our cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted EBITDAX should be read in conjunction with the information contained in our financial statements prepared in accordance with GAAP. A version of this measure is a material component of certain of our financial covenants under our 2014 revolving credit facility and is provided in addition to, and not as an alternative for, income and liquidity measures calculated in accordance with GAAP.
CALIFORNIA RESOURCES CORPORATION A-1A - 1
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Annex A Reconciliation of Non-GAAP Measures and Other Information
Free Cash Flow
Management uses free cash flow, which is defined by us as net cash provided by operating activities less capital investments, as a measure of liquidity.
The all-in reserve replacement ratiofollowing table presents a reconciliation of free cash flow used as a performance metric used in our AIP which is calculateddefined for a specified period using the proved oil-equivalent additions from extensionsthis purpose as adjusted EBITDAX, excluding costs to achieve and discoveries, improved recovery, revisions and purchases, divided by oil-equivalent production. There is no guarantee that historical sources of reserves additions will continue as many factors that are fully or partially outside management’s control, including commodity prices, availability ofone-time costs, minus distributions to Benefit Street Partners, asset retirement obligations, cash interest, cash taxes, working capital and the underlying geology, affect reserves additions. Management uses this measure to gauge the results of its capital program. Other oil and gas producers may use different methods to calculate replacement ratios, which may affect comparability.expenditures.
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Finding and Development Costs
We believe that reporting our finding and development costs can aid investors in their evaluation of our ability to add proved reserves at a reasonable cost but is not a substitute for required GAAP disclosures. Various factors, primarily timing differences and effects of commodity price changes, can cause finding and development costs associated with a particular period’s reserves additions to be imprecise. For example, we will need to make more investments in order to develop the proved undeveloped reserves added during the year and any future revisions may change the actual measure from that presented above. In addition, part of the 2018 costs were incurred to convert proved undeveloped reserves from prior years to proved developed reserves. In our calculations, we have not estimated future costs to develop proved undeveloped reserves added in 2018 or removed costs related to proved undeveloped reserves added in prior periods. Our calculations of finding and development costs may not be comparable to similar measures provided by other companies.
We calculate all-in finding and development costs by dividing the costs incurred for the year, including acquisitions, by the amount of oil-equivalent proved reserves added in the same year from improved recovery, extensions and discoveries, performance-related revisions, price-related revisions and purchases.
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| 2018 |
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Total costs incurred – in millions (A) |
| $ | 1,244 |
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Total reserve replacements – MMBoe (B) |
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| 142 |
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All-in finding and development costs $/Boe (A)/(B) |
| $ | 8.76 |
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($ in millions) |
| 2021 |
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Adjusted EBITDAX, excluding one-time costs and costs to achieve |
| $ | 880 |
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Distributions to Benefit Street Partners |
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| (50 | ) |
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Asset retirement obligations settled |
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| (42 | ) |
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Cash interest |
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| (31 | ) |
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Working capital |
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| (105 | ) |
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Capital expenditures |
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| (194 | ) |
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Free Cash Flow, AIP |
| $ | 458 |
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CALIFORNIA RESOURCES CORPORATION A-2A - 2
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Annex B Amended and Restated LTIP
Amended and Restated LTIP
CALIFORNIA RESOURCES CORPORATION LONG-TERM INCENTIVE PLAN
(As Amended and Restated Effective as of May 8, 2019)California Resources Corporation
Employee Stock Purchase Plan
Section 1. |
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The purposesCalifornia Resources Corporation Employee Stock Purchase Plan is intended to provide an incentive for employees of this Plan are (i)California Resources Corporation and certain of its subsidiaries to furnishacquire or increase a significant incentive to the employees, consultants and non-employee Directors ofproprietary interest in the Company and its Affiliates by making available to themthrough the benefitspurchase of increased ownership of Shares, (ii) to promote the alignment of the interests of employees, consultants and non-employee Directors of the Company and its Affiliates on the one hand and stockholders on the other hand and (iii) to assist in the recruitment and retention of employees, consultants and non-employee Directors of the Company and its Affiliates.
The Plan as set forth herein constitutes an amendment and restatementshares of the Company’s Long-Term Incentivecommon stock. The Plan is intended to qualify as in effect immediately prior toan “employee stock purchase plan” under Section 423 of the Effective Date (the “Prior Plan”). ThisCode. The provisions of the Plan shall supersede and replacebe construed in its entiretya manner consistent with the Prior Plan; provided, however, that, notwithstanding any provisions herein to the contrary, except for the provisionsrequirements of Section 3.1 and for the required composition423 of the Committee, each award granted under the Prior Plan prior to the Effective Date shall be subject to the terms and provisions applicable to such award under the Prior Plan as in effect immediately prior to the Effective Date.Code.
Section 2. |
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“Affiliate” means any corporation, partnership, limited liability company or partnership, association, trust, or other organization which, directly or indirectly, controls, is controlled by, or is under common control with,Where the Company. For purposes offollowing words and phrases are used in the preceding sentence, “control” (including, with correlativePlan, they shall have the respective meanings set forth below, unless the terms “controlled by” and “under common control with”), as used with respectcontext clearly indicates to any entity or organization, shall mean the possession, directly or indirectly, of the power (i) to vote more than 50 percent of the securities having ordinary voting power for the election of directors of the controlled entity or organization or (ii) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.contrary:
(a)“Board” means the Board of Directors of the Company.
(b)“Business Combination” means a merger, consolidation, or other reorganization, with or into, or the sale of all or substantially all of the Company’s business and/or assets as an entirety to, one or more entities that are not Affiliates.
“Change in Control” means, unless provided otherwise in an award agreement, the occurrence of any of the following events:
(a)Approval by the stockholders of the Company of the dissolution or liquidation of the Company, other than in the context of a transaction that does not constitute a Change in Control under clause (b) below;
CALIFORNIA RESOURCES CORPORATION B-1
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Annex B Amended and Restated LTIP
(b)Consummation of a Business Combination, unless (1) as a result of the Business Combination, more than 50 percent of the outstanding voting power of the Successor Entity immediately after the reorganization is, or will be, owned, directly or indirectly, by persons who were holders of the Company’s voting securities immediately before the Business Combination; (2) no “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), excluding the Successor Entity or an Excluded Person, beneficially owns, directly or indirectly, more than 30 percent of the outstanding shares or the combined voting power of the outstanding voting securities of the Successor Entity, after giving effect to the Business Combination, except to the extent that such ownership existed prior to the Business Combination; and (3) at least 50 percent of the members of the board of directors of the entity resulting from the Business Combination were Directors at the time of the execution of the initial agreement or of the action of the Board approving the Business Combination;
(c)Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any Excluded Person) is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30 percent or more of the combined voting power of the Company’s then outstanding voting securities, other than as a result of (1) an acquisition directly from the Company; (2) an acquisition by the Company; or (3) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or a Successor Entity; or
(d)During any period not longer than two consecutive years and beginning no earlier than October 6, 2014, individuals who at the beginning of such period constituted the Board cease to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each new Director was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who were Directors at the beginning of such period (including for these purposes, new members whose election or nomination was so approved), but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of 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.
Notwithstanding the foregoing, (i) if a Change in Control constitutes a payment event with respect to any award that provides for the deferral of compensation and is subject to the Nonqualified Deferred Compensation Rules, then the transaction or event described in subsection (a), (b), (c) or (d) above with respect to such award must also constitute a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), and as relates to the holder of such award, to the extent required to comply with the Nonqualified Deferred Compensation Rules and (ii) in no event shall the separation of the Company from Occidental Petroleum Corporation and its Affiliates be a Change in Control.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto.
(c)“Committee” means the committee appointed by the Board to administer this Plan, which shall be composed of not less than two membersCompensation Committee of the Board, each of whom shall be (i) a “non-employee director” within the meaning of Rule 16b-3 and (ii) for so long as any award remains outstanding under the Prior Plan that could qualify for the written binding contract exception set forth in Section 13601(e)(2) of Public Law 115-97 (commonly referred to as the Tax Cuts and Jobs Act), an “outside director” within the meaning of Section 162(m).Board.
(d)“Company” means California Resources Corporation, a Delaware corporation.
(e)“DirectorDate of Exercise“ means the last day of each Option Period.
(f)“Date of Grant” means July 1, 2022, and thereafter, the first day of each successive October, January, April and July.
(g)“Effective Date” means February 22, 2022.
(h)“Eligible Compensation” means regular straight-time earnings or base salary, determined before giving effect to any salary reduction agreement pursuant to (i) a memberqualified cash or deferred arrangement (within the meaning of Section 401(k) of the Board who isCode) or (ii) a cafeteria plan (within the meaning of Section 125 of the Code). Eligible Compensation shall not aninclude overtime, bonuses, commissions, severance pay, incentive pay, equity-based compensation, shift premium differentials, pay in lieu of vacation, reimbursements, or any other special or incentive payments excluded by the Committee in its discretion (applied in a uniform basis).
(i)“Eligible Employee” means, with respect to each Date of Grant, each employee of the Company or an Affiliate.
“Disability” means permanent and total disabilitya Participating Company as defined in Section 22(e)(3)of such Date of Grant; provided, however, that the Committee may from time to time prior to a Date of Grant elect to exclude employees of the Code.Company and the Participating Companies who would otherwise be “Eligible Employees” pursuant to the preceding provisions of this Section 2(i) with respect to the Option Period beginning on such Date of Grant (and any subsequent Option Periods as determined by the Committee), so long as such exclusion is permitted under Section 423 of the Code; provided, further, however, that employees of the Company or a Participating Company who are citizens or residents of a foreign jurisdiction shall not be “Eligible Employees” if (A) the grant of an option under the Plan to a citizen or resident of such foreign jurisdiction is prohibited under the laws of such jurisdiction or (B) compliance with the laws of the foreign jurisdiction
CALIFORNIA RESOURCES CORPORATION B-2B - 1
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Annex B Amended and Restated LTIP
“Effective Date” means May 8, 2019, which iswould cause the date on which this amendment and restatement was approved byPlan to violate the stockholdersrequirements of Section 423 of the Company.Code.
(j)“Eligible Person” means any person who is an officer, employee or consultant of the Company or any Affiliate and any person who is a non-employee Director; provided, however that an ISO may be granted only to an individual who is employed by the Company or any “parent corporation” or “subsidiary corporation” (as such terms are defined in Section 424 of the Code) of the Company at the time the ISO is granted.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto.
(k)“Excluded Person” means any employee benefit plan of the Company and any trustee or other fiduciary holding securities under a Company employee benefit plan or any person described in and satisfying the conditions of Rule 13d-1(b)(i) of the Exchange Act.
“Fair Market Value” of a share of Stock means, as of any specified date, the closing price of a Share,(i) if the Shares areStock is listed on a national stocksecurities exchange, registered under Section 6(a)the closing sales price of the Exchange Act,Stock, as reported on the stock exchange composite tape on that date (or such other reporting service approved by the Committee); or, if no closing price is reportedsales occur on thatsuch date, on the last precedingnext regular business date on which such closing pricesales of the ShareStock are so reported); (ii) if the Stock is so reported. If the Shares arenot traded on a national securities exchange but is traded over the counter at the time a determination of its fair market value is required to be made hereunder, its fair market value shall be deemed to be equal toon such date, the average between the reported high and low or closing bid and asked prices of a ShareStock on that date (or if no such prices are reported on such date, on the most recentnext regular business date on which Shares were publicly traded. Insuch prices are so reported); or (iii) in the event Shares areStock is not publicly traded at the time a determination of its value is required to be made hereunder,under the determination of its fair market value shall be madePlan, the amount determined by the Committee in its discretion in such manner as it deems appropriate, and as is consistent withtaking into account all factors the requirementsCommittee deems appropriate, including applicable law.
(l)“Option Period” means the three-month period beginning on each Date of Section 409AGrant.
(m)“Option Price” means the per share price of Stock to be paid by each Participant on each exercise of such Participant’s option, which price shall be equal to 85% of the Code.Fair Market Value of the Stock on the Date of Exercise or on the Date of Grant, whichever amount is less.
(n)“Five Percent BasketParticipant” has the meaning set forth in Section 5.5.
“ISO” means an incentive stockEligible Employee who has elected to participate in the Plan and has been granted an option qualified under Section 422 of the Code.Plan.
(o)“Nonqualified Deferred Compensation RulesParticipating Company” means the limitations or requirements of Section 409A of the Code and the guidance and regulations promulgated thereunder.
“Performance-Based Award” means any Qualifying Optionpresent or award grantedfuture parent or subsidiary corporation of the Company that participates in the Plan pursuant to Section 5.2. 4.
(p)“Performance Goal” means a preestablished targeted level or levels of any one or more Performance Objectives.
“Performance Objectives” means those performance objectives established by the Committee as provided in Section 5.2.
“Plan” means this California Resources Corporation Long-Term IncentiveEmployee Stock Purchase Plan, as amended from time to time.
(q)“Prior PlanRestriction Period” hasmeans the meaning set forthperiod of time, if any, during which shares of Stock acquired by a Participant under the Plan may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of by such Participant as provided in Section 1.8(c).
(r)“Qualifying Options” mean options and stock appreciation rights granted with an exercise price not less than Fair Market Value on the date of grant. Qualifying Options are intended to be Performance-Based Awards.
“Rule 16b-3” means Rule 16b-3, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
(s)“Section 162(m)Stock” means Section 162(m)the Company’s common stock, par value $0.01 per share.
Section 3. | Administration of the Plan |
The Plan shall be administered by the Committee except to the extent the Board elects to administer the Plan, in which case references to the “Committee” shall be deemed to include references to the “Board.” Subject to the provisions of the CodePlan and applicable laws, the Committee shall interpret the Plan and all options granted under the Plan, make such rules as it deems necessary for the proper administration of the Plan, and make all other determinations necessary or advisable for the administration of the Plan. In addition, the Committee shall correct any defect or supply any omission or reconcile any inconsistency in the Plan, or in any option granted under the Plan, in the manner and to the extent that the Committee deems desirable to carry the Plan or any option into effect. The Committee shall make such decisions or determinations and take such actions in its sole discretion, and all such decisions, determinations and actions made or taken by the Committee pursuant to this and the applicable regulationsother sections of the Plan shall be conclusive on all persons, including the Company, its affiliates, stockholders, Participants, and interpretations thereunder.beneficiaries or other persons claiming rights from or through a Participant. The Committee shall have the authority to delegate routine day-to-day administration of
CALIFORNIA RESOURCES CORPORATION B-3B - 2
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Annex B Amended and Restated LTIP
“Share Limit” means the maximum number of Shares, as adjusted, that may be delivered pursuant to all awards granted under this Plan.
“Shares” mean the Company’s Common Stock, par value $0.01 per share.
“Substitute Award” means an award granted in substitution for similar awards held by individuals who become Eligible Persons as a result of a merger, consolidation, acquisition or other transaction by the Company or an Affiliate with or of another entity or the assets of another entity.
“Successor Entity” means the surviving or resulting entity or a parent thereof of a Business Combination.
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3.1AGGREGATE SHARE LIMIT - Subject to adjustment as provided in or pursuant to this Section 3 or Section 7, from and after the original effective date of this Plan of October 6, 2014, (a) a total of 7,275,000 Shares shall be authorized for issuance pursuant to awards granted under this Plan and (b) the aggregate maximum number of Shares that may be issued under this Plan through ISOs shall not exceed 7,275,000 (which amount shall be included within the total Share limit set forth in clause (a) of this sentence).
3.2INDIVIDUAL LIMIT - Subject to adjustment as provided in or pursuant to this Section 3 or Section 7, no individual may be granted (i) options or stock appreciation rights during any calendar year with respect to more than 1,000,000 Shares and (ii) other awards under this Plan (other than options or stock appreciation rights) during any calendar year that are denominated in Shares with respect to more than 1,000,000 Shares (and the vesting or performance period applicable to such awards shall not exceed 10 years). The maximum amount of compensation that may be paid under all Performance-Based Awards that are not denominated in Shares (including the Fair Market Value of any Shares paid in satisfaction of such Performance-Based Awards) granted to any one individual during any calendar year may not exceed $20,000,000 (and any payment due with respect to such a Performance-Based Award shall be paid no later than 10 years after the date of grant of such Performance-Based Award).
In addition,officers and notwithstanding any provisions to the contrary in this Plan, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all awards granted under this Plan to any individual, non-employee Director during any single calendar year beginning on or after January 1, 2016 shall not exceed $750,000; provided, however, that such limitation shall be determined without regard to grants of awards, if any, made under this Plan to a non-employee Director during any period in which such individual was an employee or consultant (other than in the capacity of a non-employee Director).
3.3REISSUE OF AWARDS AND SHARES - Awards payable in cash or payable in cash or Shares, including restricted shares, that are forfeited, cancelled, or for any reason do not vest under this Plan, and Shares that are subject to awards that expire or for any reason are terminated, cancelled or fail to vest shall be available for subsequent awards under this Plan. If an award under this Plan is or may be settled only in cash, such award need not be counted against any of the share limits under this Section 3. Shares subject to options or stock appreciation rights that are exercised shall not be available for subsequent awards. The following transactions involving Shares will not result in additional Shares becoming available for subsequent awards under this Plan: (i) Shares tendered in payment of an option; (ii) Shares withheld for taxes; and (iii) Shares repurchased by the Company using option proceeds.
3.4SOURCE OF SHARES DELIVERED UNDER PLAN – The Shares to be offered pursuant to the grant of an award may (a) be authorized but unissued Shares, (b) Shares held in the treasuryemployees of the Company or (c) previously issued Shares reacquired by the Company, including shares purchased on the open market.
CALIFORNIA RESOURCES CORPORATION B-4
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Annex B Amended and Restated LTIP
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This Plan shall be administered by the Committee.
4.1POWERS OF THE COMMITTEE - Subject to the express provisions of this Plan,as the Committee shall be authorized and empowered to do all things necessarydeems appropriate; provided, that such delegation does not violate state or desirable in connection with the authorization of awards and the administration of this Plan within its delegated authority, including, without limitation, the authority to:corporate law.
(a)adopt, amend and rescind rules, regulations and procedures relating to this Plan and its administration or the awards granted under this Plan and determine the forms and terms of individual awards;
(b)determine who is an Eligible Person and to which Eligible Persons, if any, awards will be granted under this Plan;
(c)grant awards to Eligible Persons and determine the terms and conditions of such awards, including but not limited to the number and value of Shares issuable pursuant thereto, the times (subject to Section 5.5) at which and conditions upon which awards become exercisable or vest or shall expire or terminate, and (subject to applicable law) the consideration, if any, to be paid upon receipt, exercise or vesting of awards;
(d)determine the date of grant of an award, which may be a designated date after but not before the date of the Committee’s action;
(e)determine whether (subject to Section 7.2), and the extent to which, adjustments are required pursuant to Section 7 hereof;
(f)interpret and construe this Plan and terms and conditions of any award granted hereunder (including under any award agreement) and correct any defect therein, whether before or after the date set forth in Section 5;
(g)determine the circumstances under which, consistent with the provisions of Section 8.2, any outstanding award may be amended and make any amendments thereto that the Committee determines are necessary or appropriate; and
(h)acquire or settle rights under options, stock appreciation rights or other awards in cash, stock of equivalent value, or other consideration.
All authority granted herein shall remain in effect so long as any award remains outstanding under this Plan. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the Company or any Affiliate,of its affiliates, the Company’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of thisthe Plan. Members of the Committee and any officer or employee of the Company or any Affiliateof its affiliates acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to thisthe Plan, and shall, to the fullest extent permitted by law, be indemnified and held harmless by the Company with respect to any such action or determination.
CALIFORNIA RESOURCES CORPORATION B-5
Section 4. |
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Annex B Amended and Restated LTIP
4.2SPECIFIC COMMITTEE RESPONSIBILITY AND DISCRETION REGARDING AWARDS - Subject to the express provisions of this Plan, the Committee, in its sole and absolute discretion, shall determine all of the terms and conditions of each award granted under this Plan, which terms and conditions may include, subject to such limitations as theThe Committee may from time to time impose, among other things, provisions that:
(a)permit the recipient of such award to pay the purchase price of the Sharesdesignate any present or other property issuable pursuant to such award,future parent or any applicable tax withholding obligation upon such issuance or in respect of such award or Shares, in whole or in part, by any one or more of the following:
(i)cash, cash equivalent, or electronic funds transfer,
(ii)the delivery of previously owned shares of capital stocksubsidiary corporation of the Company (including shares acquired as or pursuantthat is eligible by law to awards) or other property,
(iii)a reductionparticipate in the amountPlan as a Participating Company by written instrument delivered to the designated Participating Company. Such written instrument shall specify the effective date of Shares or other property otherwise issuable pursuantsuch designation and shall become, as to such award,
(iv)designated Participating Company and persons in its employment, a cashless exercise, or
(v)part of the Plan. As of the Effective Date, Tidelands Oil Production Company shall be a Participating Company. The terms of the Plan may be modified as applied to a Participating Company only to the extent permitted under Section 423 of the Code. Transfer of employment among the Company and Participating Companies (and among any other legal considerationparent or subsidiary corporation of the Committee deems appropriate;
(b)are intended to qualify such award as an ISO;
(c)accelerate the receipt of benefits pursuant to an award or adjust the exercisability, term (subject to other limits) or vesting schedule of any or all outstanding awards, adjust the number of Shares subject to any award, adjust the price of any or all outstanding awards or otherwise change previously imposed terms and conditions, pursuant toCompany) shall not be considered a termination of employment hereunder. Any Participating Company may, by appropriate action of its board of directors or an event referencedother governing body, terminate its participation in Section 7 (in which case the Committee’s discretion shall be exercised in a manner consistent with Section 7) or in other circumstances or upon the occurrence of other events as deemed appropriate by the Committee, by amendment of an outstanding award, by substitution of an outstanding award, by waiver or by other legally valid means (which may result, among other changes, in a greater or lesser number of shares subject to the award, a shorter or longer vesting or exercise period, or, except as provided below, an exercise or purchase price that is higher or lower than the original or prior award), in each case subject to Sections 3, 5.5 and 8.2; provided, however, that in no case (other than an adjustment contemplated by Section 7.2) shall the exercise price of any option or stock appreciation right be reduced by an amendment to the award or a cancellation and re-grant of the award to effect a repricing of the award to a price below the Fair Market Value of the underlying Shares on the grant date of the original option or stock appreciation right unless specific stockholder consent is obtained;
(d)authorize (subject to Sections 7, 8, and 10) the conversion, succession or substitution of one or more outstanding awards upon the occurrence of an event of the type described in Section 7 or in other circumstances or upon the occurrence of other events as deemed appropriate by the Committee; and
(e)determine the value of and acquire or otherwise settle awards upon termination of employment, upon such terms as the Committee (subject to Sections 7, 8 and 10) deems appropriate.
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Annex B Amended and Restated LTIP
4.3DELEGATION - Subject to Section 4.5, the Board may delegate different levels of authority to different committees with administrative and grant authority under this Plan provided that each designated committee granting any awards hereunder shall consist exclusively of a member or members of the Board. A majority of the members of the acting committee shall constitute a quorum. The vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the Committee shall constitute action by the committee. The Committee may delegate authority to grant awards under this Plan for new employees to an officer of the Company who is also a director and may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or a subsidiary or to third parties. In addition, subject to the constraints of applicable law, the Committee may from time to time, in its sole discretion, delegate to the Chief Executive Officer of the Company the administration (or interpretation of any provision) of this Plan, and the right to grant awards under this Plan, insofar as such administration (and interpretation) and power to grant awards relates to any person who is not then subject to Section 16 of the Exchange Act (including any successor section to the same or similar effect). Any such delegation may be effective only so long as the Chief Executive Officer of the Company is a member of the Board, and the Committee may revoke such delegation at any time. The Committee may put any conditions and restrictions onMoreover, the powers that may be exercised by the Chief Executive Officer of the Company upon such delegation as the Committee determines in its sole discretion. Notwithstanding the foregoing, no delegation pursuant to this Section 4.3 shall be made to the extent that such delegation would (i) result in the loss of an exemption under Rule 16b-3(d)(1) for awards granted to Eligible Persons subject to Section 16 of the Exchange Act in respect of the Company or (ii) cause awards made under the Prior Plan that were intended to qualify as “performance-based compensation” under Section 162(m) (prior to its amendment in 2017) to fail to so qualify.
4.4BIFURCATION - Notwithstanding anything to the contrary in this Plan, the provisions of this Plan may at any time be bifurcated by the Board or the Committee in any manner so that provisions of any award agreement (or this Plan) intended or required in order to satisfy the applicable requirements of Rule 16b-3 or other applicable law, to the extent permitted thereby, are applicable only to persons subject to those provisions and to those awards to those persons intended to satisfy the requirements of the applicable legal restriction.
4.5AWARDS TO NON-EMPLOYEE DIRECTORS - Notwithstanding any provision in this Plan to the contrary and without being subject to management discretion, the Board, acting through the non-employee Directors only, shall have the authority, in its sole and absolute discretion, to select non-employee Directors to receive awards other than ISOs under this Plan subject to the limitations of Section 3.2. The Board, acting through the non-employee Directors only shall set the terms of any such awards in its sole and absolute discretion, and the Board, acting through the non-employee Directors only, shall be responsible for administering and construing such awards in substantially the same manner that the Committee administers and construes awards to other Eligible Persons.
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5.1TYPE AND FORM OF AWARDS - All awards shall be evidenced in writing (including electronic form), substantially in the form approved by the Committee or its delegate. The types of awards that the Committee may grant include, but are not limited to, any of the following, on an immediate or deferred basis, either singly, or in tandem or in combination with or in substitution for, other awards of the same or another type: (i) Shares, (ii) options (ISOs or nonqualified stock options), stock appreciation rights (including limited stock appreciation rights), restricted stock, stock units, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the Shares, upon the passage of time, the occurrence of one or more events, or the satisfaction of Performance Goals or other conditions, or any combination thereof, (iii) any similar securities with a value derived from the value of or related to the Shares or other securities of the Company and/or returns thereon, or (iv) cash. Share-based awards may include (without limitation) stock options, stock purchase rights, stock bonuses, stock units, stock appreciation rights, limited stock appreciation rights, phantom stock, dividend equivalents (independently or in tandem with any form of stock grant), dividend rights (independently or in tandem with any form of stock grant), Shares, any of which may be payable in Shares or cash, and may consist of one or more of such features in any combination, as determined by the Committee.
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5.2PERFORMANCE-BASED AWARDS -
The right of a participant to exercise or receive a grant or settlement of any type of award listed in Section 5.1, and the timing thereof, may be subject to 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, and may exercise its discretion to reduce or increase the amounts payable under any award subject to performance conditions, except as limited under the Prior Plan in the case of awards made under the Prior Plan that were intended to constitute “performance-based compensation” under Section 162(m) (prior to its amendment in 2017).
(a)Performance Goals Generally. The Performance Goals for Performance-Based Awards shall consist of one or more business criteria or individual performance criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 5.2, which level may also be expressed in terms of a specified increase or decrease in the particular criteria compared to a past period. The Committee may determine that Performance-Based Awards shall be granted, exercised and/or settled upon achievement of any one Performance Goal or that two or more of the Performance Goals must be achieved as a condition to grant, exercise and/or settlement of such Performance-Based Awards. Performance Goals may differ for Performance-Based Awards granted to any one participant or to different participants. The Performance Goals may be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable companies. In addition, subject to any limitations under Section 162(m) (prior to its amendment in 2017) with respect to awards granted under the Prior Plan that are intended to constitute “performance-based compensation,” such performance measures may be subject to adjustment by the Committee for changes in accounting principles, to satisfy regulatory requirements and other specified extraordinary, unusual or infrequent items or events.
(b)Performance Period. Achievement of Performance Goals in respect of Performance-Based Awards shall be measured over a performance period of up to ten years, as specified by the Committee.
(c)Performance-Based Award Pool. The Committee may establish a Performance-Based Award pool, which shall be an unfunded pool, for purposes of measuring performance of the Company in connection with Performance-Based Awards. The amount of such Performance-Based Award pool shall be based upon the achievement of a Performance Goal or Goals during the given performance period, as specified by the Committee in accordance with this Section 5.2. The Committee may specify the amount of the Performance-Based Award pool as a percentage of any of such criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such criteria.
(d)Settlement of Performance-Based Awards; Other Terms. After the end of each performance period, the Committee shall determine the amount, if any, of (A) the Performance-Based Award pool, and the maximum amount of the potential Performance-Based Award payable to each Participant in the Performance-Based Award pool, or (B) the amount of the potential Performance-Based Award otherwise payable to each Participant. Settlement of such Performance-Based Awards shall be in cash, Stock, other awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce or increaseterminate a Participating Company’s Plan participation at any time.
Section 5. | Eligibility |
Subject to the amountprovisions hereof, all Eligible Employees as of a settlement otherwiseDate of Grant shall be eligible to be madeparticipate in connection with such Performance-Based Awards, but may not exercise discretion to increase any such amount payablethe Plan with respect to an awardoptions granted under the Prior Plan that was intended to constitute “performance-based compensation” under Section 162(m) (prior to its amendment in 2017). The Committee shall specify the circumstances in whichas of such Performance-Based Awards shall be paid or forfeited in the eventDate of termination of employment by the participant prior to the end of a performance period or settlement of Performance-Based Awards.
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(e)Written Determinations. All determinations by the Committee asSubject to the establishmentprovisions of Performance Goals,Section 13, the amountaggregate number of any Performance-Based Award pool or potential individual Performance-Based Awards and asshares that may be sold pursuant to the achievement of Performance Goals relating to and final settlement of Performance-Based Awards under this Section 5.2 shall be certified in writing in the case of any awardoptions granted under the Prior Plan that was intended to constitute “performance-based compensation”shall not exceed 1,250,000 shares of authorized Stock, which shares may be unissued shares or reacquired shares, including shares bought on the market or otherwise for purposes of the Plan. Should any option granted under Section 162(m) (priorthe Plan expire or terminate prior to its amendmentexercise in 2017). The Committee may not delegate any responsibility relatingfull, the shares theretofore subject to such Performance-Based Awards.
5.3CONSIDERATION FOR SHARES - Sharesoption may be issued pursuant to an award for any lawful consideration as determined by the Committee, including, without limitation, services rendered by the recipient of such award, but shall not be issued for less than the minimum lawful consideration. Awards may be payable in cash, stock or other consideration or any combination thereof, as the Committee shall designate in or (except as required by Section 5.2) by amendment to the terms and conditions governing such award.
5.4LIMITED RIGHTS - Except as otherwise expressly authorized by the Committee or this Plan or in the applicable award terms and conditions, a participant will not be entitled to any privilege of stock ownership as to any Shares not actually delivered to and held of record by the participant. Except as described in Section 5.11, no adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.
5.5OPTION/STOCK APPRECIATION RIGHT PRICING, TERM LIMITS AND VESTING - The purchase price per share of the Shares covered by any option or the base price of any stock appreciation right shall be determined by the Committee at the time of the grant, but, except in the case of a Substitute Award, shall not be less than 100 percent of the Fair Market Value of a Share on the date of grant. No option or stock appreciation right shall be exercisable after the expiration of 10 years from the date of grant. An award may be converted or convertible, notwithstanding the foregoing limits, into or payable in, Shares or another award that otherwise satisfies the requirements of this Plan.
No option, stock appreciation right or other non-full value appreciation award granted under this Plan on or after the Effective Date may vest in less than one year from its date of grant. Notwithstanding the foregoing, up to five percent of the available Shares authorized for issuance under this Plan as of the Effective Date mayagain be subject to options, stock appreciation rights or other non-full value appreciation awards that vest (in full or in part) in less than one year from their date of grant (the “Five Percent Basket”). Further, anyan option stock appreciation right or other non-full value award granted under this Plan may vest in full or in partthe Plan. Any shares that are not subject to outstanding options upon death or disabilitythe termination of the participant, or upon a ChangePlan shall cease to be subject to the Plan.
Section 7. | Grant of Options |
(a)In General. Commencing on July 1, 2022, and continuing while the Plan remains in Control, and such vesting shall not count against the Five Percent Basket.
5.6SPECIAL LIMITATIONS RELATING TO ISOS - An ISO may be granted only to an individual who is employed byforce, the Company or any “parent corporation” or “subsidiary corporation” (as such terms are defined in Section 424shall, on each Date of Grant, grant an option under the Code)Plan to purchase shares of the Company at the time the ISO is granted. To the extent that the aggregate fair market value (determined at the time the respective ISO is granted) of stock with respectStock to which ISOs are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations, within the meaning of Section 424 of the Code, exceeds $100,000 or such other amounteach Eligible Employee as may be prescribed under Section 422 of the Code or applicable regulations or rulings from time to time, such ISOs shall be treated as options that do not constitute ISOs. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury regulations, and other administrative pronouncements, which of a participant’s ISOs will not constitute ISOs because of such limitation and shall notifyDate of Grant who elects to participate in the participant of such determination as soon as practicable after such determination. No ISOPlan; provided, however, that no option shall be granted to an Eligible Employee if such individual, if, at the timeimmediately after the option is granted, such individual ownswould own stock possessing five percent or more than 10 percent of the total combined voting power or value of all classes of stock of the Company or of its parent or subsidiary corporation,corporations (within the meaning of Sections 423(b)(3) and 424(d) of the Code). Except as provided in Section 13, the term of each option shall be for three months, which shall begin on a Date of Grant and end on the last day of such three-month period. Subject to Section 7(d), the number of shares of Stock subject to an option for a Participant shall be equal to the quotient of (i) the aggregate payroll deductions withheld on behalf of such Participant during the Option Period in accordance with Section 7(b), divided by (ii) the Option Price of the Stock applicable to the Option Period, rounded down to the nearest whole share; provided, however, that the maximum number of shares of Stock that may be subject to any option for a Participant may not exceed 250 (subject to adjustment as provided in Section 13), and any payroll
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deductions in excess of the amount required to purchase such maximum number of shares of Stock shall be returned to the Participant as soon as administratively practicable after the Date of Exercise relating to such option.
(b)Election to Participate; Payroll Deduction Authorization. An Eligible Employee may participate in the Plan only by means of payroll deduction. Each Eligible Employee who elects to participate in the Plan shall deliver to the Company, within the time period prescribed by the Committee and with respect to each Date of Grant, a payroll deduction authorization in a form prepared by the Company whereby such Eligible Employee gives notice of such Eligible Employee’s election to participate in the Plan as of such Date of Grant, and whereby such Eligible Employee designates an integral percentage of such Eligible Employee’s Eligible Compensation (or, in lieu of an integral percentage and if permitted by the Committee, a specified whole dollar amount) to be deducted from such Eligible Employee’s Eligible Compensation for each pay period and paid into the Plan for such Eligible Employee’s account. The designated percentage may not be less than one percent nor exceed 15 percent (or such greater percentage as the Committee may establish from time to time before a Date of Grant).
(c)Changes in Payroll Authorization. The payroll deduction authorization referred to in Section 7(b) may not be changed during the Option Period. However, a Participant may withdraw from the Plan as provided in Section 9.
(d)$25,000 Limitation. No employee shall be granted an option under the Plan which permits his rights to purchase Stock under the Plan and under all other employee stock purchase plans of the Company and its parent and subsidiary corporations to accrue at a rate which exceeds $25,000 of Fair Market Value of Stock (determined on the applicable Date of Grant) for each calendar year in which such option is outstanding at any time (within the meaning of Section 422(b)(6)423(b)(8) of the Code, unless (i)Code). Any payroll deductions in excess of the amount specified in the foregoing sentence shall be returned to the Participant as soon as administratively feasible after the next following Date of Exercise.
(e)Leaves of Absence. During a paid leave of absence approved by the Company and meeting the requirements of Treasury Regulation §1.421-1(h)(2), a Participant’s elected payroll deductions shall continue. A Participant may not contribute to the Plan during an unpaid leave of absence. If a Participant takes an unpaid leave of absence that is approved by the Company and meets the requirements of Treasury Regulation §1.421-1(h)(2), then such Participant’s payroll deductions for such Option Period that were made prior to such leave may remain in the Plan and be used to purchase Stock under the Plan on the Date of Exercise relating to such Option Period. If a Participant takes a leave of absence that is not described in the first or third sentence of this Section 7(e), then for purposes of the Plan such Participant shall be considered to have terminated such Participant’s employment and withdrawn from the Plan pursuant to the provisions of Section 9. Further, notwithstanding the preceding provisions of this Section 7(e), if a Participant takes a leave of absence that is described in the first or third sentence of this Section 7(e) and such leave of absence exceeds three months, then for purposes of the Plan such Participant shall be considered to have terminated such Participant’s employment on the first day immediately following such three-month period and withdrawn from the Plan pursuant to the provisions of Section 9.
Section 8. | Exercise of Options |
(a)General Statement. Subject to the limitation set forth in Section 7(d), each Participant in the Plan automatically and without any act on such Participant’s part shall be deemed to have exercised such Participant’s option on each Date of Exercise to the extent such Participant’s accumulated, unused payroll deductions under the Plan are sufficient to purchase at the timeapplicable Option Price whole shares of Stock and to the extent the issuance of Stock to such Participant upon such exercise is lawful, and such amount of payroll deductions as is equal to the aggregate Option Price for all such whole shares shall be deducted from the Participant’s account under the Plan and applied to the purchase of the shares and payment therefor. Any amount relating to such option is granted,that remains in a Participant’s account
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under the Plan representing a fractional share shall be applied to the purchase of shares of Stock during the next Option Period as if such Participant had contributed such amount by payroll deduction to the Plan during such Option Period for the option price is at least 110 percentthat relates thereto; provided, however, if such Participant did not affirmatively elect to participate in the Plan for such next Option Period as provided in Section 7(b), then such amount shall be returned to such Participant as soon as administratively feasible after the applicable Date of Exercise. If the total number of shares of Stock for which options are exercised on any Date of Exercise exceeds the maximum number of shares then available for sale under the Plan, then the Company shall allocate the available shares by reducing Participants’ designated payroll deduction authorization percentages in order of the Fair Market Valuehighest percentages until the excess is eliminated, and any remaining balance of payroll deductions credited to the account of a ShareParticipant under the Plan shall be refunded to such Participant promptly.
(b)Delivery of Shares. As soon as practicable after each Date of Exercise, the Company shall deliver to a custodian selected by the Committee one or more certificates representing (or shall otherwise cause to be credited to the account of such custodian) the total number of whole shares of Stock respecting options exercised on such Date of Exercise, in the aggregate, by all of the Participants. Such custodian shall keep accurate records of the beneficial interests of each Participant in such shares by means of Participant accounts under the Plan, and (ii)shall provide each Participant with quarterly or such optionother periodic statements with respect thereto as may be directed by its termsthe Committee. If the Company is required to obtain from any commission or agency (whether U.S. or foreign) authority to issue any such shares, the Company shall seek to obtain such authority. Inability of the Company to obtain from any such commission or agency authority which counsel for the Company deems necessary for the lawful issuance of any such shares shall relieve the Company from liability to any Participant except to return to such Participant the amount of such Participant’s payroll deductions under the Plan which would have otherwise been used upon exercise of the relevant option.
(c)Restrictions on Transfer. The Committee may from time to time specify with respect to a particular grant of options the Restriction Period, if any, that shall apply to the shares of Stock acquired pursuant to such options. Unless otherwise specified by the Committee, the Restriction Period applicable to shares of Stock acquired under the Plan shall be a period of 90 days after the Date of Exercise of the options pursuant to which such shares were acquired. Except as hereinafter provided, during the Restriction Period applicable to shares of Stock acquired under the Plan, such shares may not exercisable afterbe sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of by the Participant who has purchased such shares; provided, however , that such restriction shall not apply to the transfer, exchange or conversion of such shares of Stock pursuant to a merger, consolidation or other plan of reorganization of the Company, but the stock, securities or other property (other than cash) received upon any such transfer, exchange or conversion shall also become subject to the same transfer restrictions applicable to the original shares of Stock, and shall be held by the custodian, pursuant to the provisions hereof. Upon the expiration of five yearssuch Restriction Period, the transfer restrictions set forth in this Section 8(c) shall cease to apply and the Participant may, pursuant to procedures established by the Committee and the custodian, direct the sale or distribution of some or all of the whole shares of Stock in such Participant’s account under the Plan that are not then subject to transfer restrictions and, in the event of a sale, request payment of the net proceeds from such sale. The Committee may cause the Stock issued in connection with the exercise of options under the Plan to bear such legends or other appropriate restrictions, and the Committee may take such other actions, as it deems appropriate in order to reflect the transfer restrictions set forth in this Section 8(c) and to assure compliance with applicable laws.
Section 9. | Withdrawal from the Plan |
(a)General Statement. Any Participant may withdraw in whole from the Plan at any time prior to the Date of Exercise relating to a particular Option Period. Partial withdrawals shall not be permitted. A Participant who wishes to withdraw from the Plan must timely deliver to the Company a notice of withdrawal in a form prepared by the Company. The Company, promptly following the time when the notice of withdrawal is delivered, shall refund to the Participant the amount of such Participant’s payroll
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deductions under the Plan which have not yet been otherwise returned to such Participant or used upon exercise of options; and at such time, automatically and without any further act on such Participant’s part, such Participant’s payroll deduction authorization and interest in unexercised options under the Plan shall terminate.
(b)Eligibility Following Withdrawal. A Participant who withdraws from the Plan shall be eligible to participate again in the Plan upon expiration of the Option Period during which such Participant withdrew (provided that such Participant is otherwise eligible to participate in the Plan at such time).
Section 10. | Termination of Employment |
(a)General Statement. Except as provided in Section 10(b), if the employment of a Participant with the Company, the applicable Participating Company or any present or future parent or subsidiary corporation of the Company terminates for any reason whatsoever, then such Participant’s participation in the Plan and interest in unexercised options under the Plan automatically and without any act on such Participant’s part shall terminate as of the date of grant. Except asthe termination of such Participant’s employment. The Company shall promptly refund to such Participant the amount of such Participant’s payroll deductions under the Plan which have not yet been otherwise provided in Sections 421returned to such Participant or 422used upon exercise of options.
(b)Termination by Retirement, Death or Disability. If the employment of a Participant terminates after such Participant has attained age 65 or due to such Participant’s death or permanent and total disability (within the meaning of Section 22(e)(3) of the Code, an ISOCode), then such Participant, or such Participant’s personal representative, as applicable, shall have the right to elect either to:
(i)withdraw all of such Participant’s accumulated unused payroll deductions under the Plan; or
(ii)exercise such Participant’s option for the purchase of Stock on the last day of the Option Period during which termination of employment occurs for the purchase of the number of whole shares of Stock which such Participant’s accumulated, unused payroll deductions under the Plan at the date of termination of employment will purchase at the applicable Option Price (subject to Section 7(d)), and receive a payment from the Company promptly after such exercise in the amount of such Participant’s payroll deductions under the Plan which have not yet been otherwise returned to such Participant or used upon exercise of options.
The Participant or, if applicable, such personal representative, must make such election by giving notice to the Company at such time and in such manner as the Company prescribes. In the event that no such notice of election is timely received by the Company, the Participant or personal representative will automatically be deemed to have elected as set forth in clause (ii) above.
Section 11. | Limit on Transfer of Options |
An option granted under the Plan shall be exercisable only by the Participant during the Participant’s lifetime. An option granted under the Plan shall not be transferable otherwise than by will or the laws of descent and distributiondistribution. No options granted under the Plan, and no right under options granted under the Plan, may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any of its affiliates.
Section 12. | No Rights of Stockholder Until Exercise of Option |
With respect to shares of Stock subject to an option, a Participant shall not be deemed to be a stockholder, and shall be exercisable duringnot have any of the participant’s lifetime only byrights or privileges of a stockholder, until such participant oroption has been exercised and the participant’s guardian or legal representative.shares subject to such option have been delivered to the custodian pursuant to Section 8.
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5.7TRANSFER RESTRICTIONS - Unless otherwise expressly provided in or permitted by this Section 5.7, by applicable law orWith respect to a Participant’s Stock held by the award terms and conditions (i) all awards are nontransferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (ii) awards shall be exercised only by the holder; and (iii) amounts payable or shares issuablecustodian pursuant to an awardSection 8, the custodian shall, be delivered onlyas soon as practicable, pay such Participant any cash dividends attributable thereto or credit such dividends to (or forsuch individual’s account (as directed by the account of) the holder. No award may be transferred for consideration to a financial institution.
5.7.1Exceptions by Committee Action - The Committee in its sole discretion may permit an award to be transferred for estate and/applied in a uniform manner) and shall, in accordance with procedures adopted by the custodian, facilitate the Participant’s voting rights attributable thereto.
Section 13. | Changes in Stock; Adjustments |
(a)Subdivision or tax planning purposes and on a basis consistent with the Company’s lawful issueConsolidation of securitiesShares. The terms of any options outstanding and the incentive purposes ofshare limitations under the award and this Plan. Notwithstanding the foregoing, awards intended as ISOs or restricted stock awards for purposes of the CodePlan shall be subject to adjustment by the Committee from time to time, in accordance with the following provisions:
(i)If at any time, or from time to time, the Company shall subdivide as a whole (by reclassification, by a Stock split, by the issuance of a distribution on Stock payable in Stock, or otherwise) the number of shares of Stock then outstanding into a greater number of shares of Stock, then, as appropriate (A) the maximum number of shares of Stock available for delivery hereunder shall be increased proportionately, and all additional transfer restrictions necessary to preserve their status as ISOsthe kind of shares or restrictedother securities available for the Plan shall be appropriately adjusted, (B) the number of shares as the caseof Stock (or other kind of shares or securities) that may be acquired under any then outstanding option shall be increased proportionately, and (C) the Option Price for each share of Stock (or other kind of shares or securities) subject to then outstanding options shall be reduced proportionately.
(ii)If at any time, or from time to time, the Company shall consolidate as a whole (by reclassification, by reverse Stock split, or otherwise) the number of shares of Stock then outstanding into a lesser number of shares of Stock, then, as appropriate (A) the maximum number of shares of Stock available for delivery hereunder shall be decreased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (B) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any then outstanding options shall be decreased proportionately, and (C) the Option Price for each share of Stock (or other kind of shares or securities) subject to then outstanding options shall be increased proportionately.
(b)Corporate Transactions. If the Company shall not be the surviving corporation in any merger, consolidation or other business combination or reorganization (or survives only as a subsidiary of another entity), or if the Company is to be dissolved or liquidated, then, unless a surviving corporation assumes or substitutes new options (within the meaning of Section 424(a) of the Code) for all options then outstanding, (i) the Date of Exercise for all options then outstanding shall be accelerated to a date fixed by the Committee, which date shall be on or before the effective date of such merger, consolidation or other business combination or reorganization or such dissolution or liquidation, and (ii) upon such effective date all unexercised options, if any (and determined after taking into account the exercise described in the preceding clause (i)), shall expire and the Company promptly shall refund to each Participant the amount of such Participant’s payroll deductions under the Code.
5.7.2Exclusions - ThePlan which have not yet been otherwise returned to such Participant or used upon exercise and transfer restrictionsof options.
(c)Other Changes in Stock. Upon any other change in Stock not otherwise provided for in this Section 5.713, appropriate action shall not apply to:
(a)transfers to the Company,
(b)the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution,
(c)transfers pursuant to a domestic relations order (if approved or ratified by the Committee), if (in the case of ISOs) permitted by the Code,
(d)if the participant has suffered a Disability, permitted transfers to or exercises on behalf of the holder by his or her legal representative, or
(e)the authorizationbe taken by the Committee to prevent the dilution or enlargement of “cashless exercise” procedures with third parties who finance or who otherwise facilitaterights by adjusting accordingly the exercise of awards consistent with applicable laws and the express authorization of the Committee.
5.8TAX WITHHOLDING - The Company and any of its Affiliates are authorized to withhold from any award granted, or any payment relating to an award under this Plan, including from a distribution of Shares, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an award, and to take such other action as the Committee may deem advisable to enable the Company, its Affiliates and participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any award. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of a participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee. Notwithstanding the foregoing, the Company and its Affiliates may, in their sole discretion and in satisfaction of the foregoing requirement, withhold or permit the participant to elect to have the Company or its Affiliate withhold a sufficient number of Shares that are otherwise issuableshares subject to the participant pursuant to an award (or allowPlan, the surrender of Shares by the participant to the Company or its Affiliate). Themaximum number of Sharesshares that may be so withheldsubject to any option and the number and Option Price of shares subject to options outstanding under the Plan.
Section 14. | Use of Funds; No Interest Paid |
All funds received or surrenderedheld by the Company under the Plan shall be limited toincluded in the numbergeneral funds of Shares that have a Fair Market Value on the dateCompany free of withholdingany trust or repurchase equal to the aggregate amount of such liabilities based on the applicable minimum statutory withholding rates for U.S. federal, state, local or non-U.S. incomeother restriction, and social insurance taxes and payroll taxes, as determined by the Committee. Notwithstanding the preceding provisions of this Section 5.8, withholding taxes may be based on rates in excess of the minimum required tax withholding rates if the Committee (a) determines, with respectused for any corporate purpose. No interest shall be paid to an award granted to an Eligible Person who is not a non-employee Director, that such withholding would not result in adverse accounting, tax or other consequences to the Company or any Affiliate (other than immaterial administrative, reporting or similar consequences) and (b) authorizes withholding at such greater rates.Participant.
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5.9CASH AWARDS - The Committee shall have the express authority to pay awards in cash under this Plan, whether in lieu of, in addition to or as part of another award.
5.10TERMINATION OF EMPLOYMENT OR SERVICE - If an Eligible Person’s employment with or service to the Company or to any Affiliate terminates for any reason, his or her outstanding awards may thereafter be exercised (if at all) to the extent provided in the agreement evidencing such award, or as otherwise determined by the Committee.
5.11DIVIDENDS AND DIVIDEND EQUIVALENTS – No dividend equivalents shall be granted in connection with stock options, stock appreciation rights or other non-full value appreciation awards granted under this Plan on or after the Effective Date. Any cash dividend distributed with respect to a Share subject to a restricted stock award granted on or after the Effective Date shall be treated in the following manner as determined by the Committee in its sole discretion and set forth in the award agreement: (a) accrued and paid at such time, if any, as the underlying restricted stock to which it relates vests and settles; (b) reinvested in additional Shares (or restricted stock), based on the Fair Market Value on the dividend payment date, and paid at such time (or, in the case of additional shares of restricted stock, vest at such time), if any, as the underlying restricted stock to which it relates vests and settles; or (c) any combination of the foregoing. The Committee may provide that restricted stock units and other full-value awards (other than restricted stock) awarded under this Plan shall be entitled to an amount per unit equal in value to the cash dividend, if any, paid per Share on issued and outstanding Shares, on the dividend payment dates occurring during the period between the date on which the award is granted and the date on which such award is settled under this Plan (or such other period designated by the Committee). Any such paid amounts with respect to such awards granted on or after the Effective Date shall be treated in the following manner as determined by the Committee in its sole discretion and set forth in the award agreement: (i) accrued and paid at such time, if any, as the underlying award to which it relates vests and settles; (ii) reinvested in additional Shares, based on the Fair Market Value on the dividend payment date, and paid at such time, if any, as the underlying award to which it relates vests and settles; or (iii) any combination of the foregoing. Notwithstanding any preceding provision in this Section 5.11 to the contrary, any cash, stock, or other property distributed as a dividend or otherwise with respect to any restricted stock, restricted stock unit or other full-value award granted under this Plan on or after the Effective Date shall be subject to restrictions and risk of forfeiture to the same extent as the underlying restricted stock, restricted stock unit or other full-value award with respect to which such cash, stock or other property has been distributed.
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This amended and restatedThe Plan was adopted by the Board to be effective on February 19, 2019, andthe Effective Date; provided, that the Plan is subject to approval by the Company’s stockholders at the 2019 annual meeting of the Company’s stockholders. If this amendment and restatement is not so approved by the stockholders then this amendment and restatement shall be void ab initio, andof the PriorCompany within 12 months before or after the Effective Date. Notwithstanding any provision in the Plan, shall continue in effect as if this amendment and restatement had not occurred, and any awards previouslyno options granted under the Prior Plan shall continue in effectbe exercisable prior to such stockholder approval, and if the stockholders of the Company do not approve the Plan by the Date of Exercise of the first option granted hereunder, then the Plan shall automatically terminate, no options may be exercised hereunder and the Company promptly shall refund to each Participant the amount of each Participant’s payroll deductions under the termsPlan; and thereupon, automatically and without any further act on the part of the grantany Participant, each Participant’s payroll deduction authorization and the Prior Plan; provided, further, that thereafter awards may continue to be granted pursuant to the terms of the Prior Plan, aseach Participant’s interest in effect prior to this amendment and restatement and as may be otherwise amended thereafter. This amended and restatedunexercised options under the Plan shall become effective on the Effective Date if it is approved on such date by the Company’s stockholders, and this Plan shall remain in effect, subject to the right of the Board to terminate this Plan at any time pursuant to Section 8.1, until all Shares subject to it shall have been purchased or acquired according to the provisions herein. However, in no eventterminate. No options may an award be granted under thisthe Plan on orand after the tenth anniversary of the Effective Date. After this PlanDate, which is terminated, no future awards may beFebruary 22, 2032. However, any option granted prior to such termination (or any earlier termination pursuant to this Plan, but awards previously granted shall remain outstandingSection 16), and the authority of the Board or Committee to amend, alter, adjust, suspend, discontinue, or terminate any such option in accordance with theirthe terms of the Plan, shall extend beyond such termination until the final disposition of such option.
Section 16. | Amendment, Suspension or Termination of the Plan |
The Board in its discretion may terminate the Plan at any time with respect to any Stock for which options have not theretofore been granted. The Board also may suspend the operation of the Plan for any period as it may deem advisable by determining not to commence a new Option Period following any Date of Exercise; provided, that the Board may subsequently determine to end any suspension period and commence a new Option Period, subject to and to the extent permitted by the requirements of applicable laws or regulatory guidance, including Section 423 of the Code, and the terms of the Plan; provided, that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any previously granted and outstanding option. The Board shall have the right to alter or amend the Plan or any part thereof from time to time; provided, that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any previously granted and outstanding option.
Section 17. | Securities Laws |
The Company shall not be obligated to issue any Stock pursuant to any option granted under the Plan at any time when the offer, issuance or sale of shares covered by such option has not been registered under the Securities Act of 1933, as amended, or does not comply with such other federal, state, local or foreign laws, rules or regulations, or the requirements of any stock exchange or other marketplace upon which the Stock may then be listed, as the Company or the Committee deems applicable and, in the opinion of legal counsel for the Company, there is no exemption from the requirements of such laws, rules, regulations or requirements available for the offer, issuance and sale of such shares.
Any action by an Eligible Employee to commence participation or withdraw from the Plan, to change such Eligible Employee’s payroll deduction authorization, or to sell or otherwise trade any shares of Stock in such Eligible Employee’s account under the Plan, shall be subject to compliance with applicable securities laws and regulations, including laws and regulations concerning the use of material nonpublic information. Further, any such action and all Stock acquired pursuant to the Plan shall be subject to the Company’s policies concerning compliance with securities laws and regulations, as such policies may be amended from time to time.
The terms and conditions of options granted hereunder to, and this Plan’s termsthe purchase of shares by, persons subject to Section 16 of the Exchange Act shall comply with any applicable provisions of Rule 16b-3. As to such persons, the Plan shall be deemed to contain, and conditions. In addition, any then outstanding awardsuch options shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be amended thereafter in any manner that would have been permitted earlier, except that no such amendment shall increaserequired from time to time by Rule 16b-3 to qualify for the numbermaximum exemption from Section 16 of Shares subjectthe Exchange Act with respect to comprising or referenced in the award or reduce the exercise or base price of an option or stock appreciation right or permit cash payments in an amount that exceeds the limits of Section 3 (as adjusted pursuant to Section 7.2).Plan transactions.
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Annex B Amended and Restated LTIP
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7.1CHANGE IN CONTROL; ACCELERATION AND TERMINATION OF AWARDS - Unless otherwise providedNothing contained in the Plan shall be construed to prevent the Company or any subsidiary from taking any corporate action that is deemed by the Company or such subsidiary to be appropriate or in its best interest, whether or not such action would have an award agreement, uponadverse effect on the occurrence of a Change in Control:
(a)eachPlan or any option and stock appreciation rightgranted under the Plan. No employee, beneficiary or other person shall become immediately exercisable and vested uponhave any claim against the termination of the participant’s employmentCompany or service on or after the date of the Change in Control andany subsidiary as a result of any such event,action.
Section 19. | Miscellaneous Provisions |
(b)restricted stock shall immediately vest free of restrictions upon the termination(a)Parent and Subsidiary Corporations. For all purposes of the participant’s employment or service on or after the date of the Change in Control and asPlan, a result of such event,
(c)each award under Section 5.2 shall become payable to the participant upon the termination of the participant’s employment or service on or after the date of the Change in Control and as a result of such event, and the level of achievement of the applicable Performance Goalscorporation shall be determined by the Committee,
(d)the number of Shares covered by each stock unit account shallconsidered to be issued to the participant upon the termination of the participant’s employmenta parent or service on or after the date of the Change in Control and as a result of such event, and
(e)any other rights of a participant under any other award will be accelerated to give the participant the benefit intended under any such award upon the termination of the participant’s employment or service on or after the date of the Change in Control and as a result of such event.
The Committee may override the provisions regarding acceleration in this Section 7.1 and may accord any Eligible Person a right to refuse any acceleration, whether pursuant to the award agreement or otherwise, in such circumstances as the Committee may approve. Any acceleration of awards shall comply with applicable legal and regulatory requirements, including the Nonqualified Deferred Compensation Rules.
If any option or other right to acquire Shares under this Plan has been fully accelerated as required or permitted by this Plan but is not exercised prior to (i) a dissolutionsubsidiary corporation of the Company only if such corporation is a parent or (ii) an event described in this Section 7.1 thatsubsidiary corporation of the Company doeswithin the meaning of Sections 424(e) and (f) of the Code.
(b)Interpretation; Headings. Headings are for convenience only and are not survive,deemed to be part of the Plan. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in the Plan, shall refer to the Plan as a whole and not to any particular provision of the Plan. All references herein to Sections shall, unless the context requires a different construction, be deemed to be references to the Sections of this Plan. The word “or” as used herein is not exclusive and is deemed to have the meaning “and/or.” All references to “including” shall be construed as meaning “including without limitation.” Unless the context requires otherwise, all references herein to a law, agreement, instrument, policy or (iii)other document shall be deemed to refer to such law, agreement, instrument, policy or other document as amended, supplemented, modified and restated from time to time to the consummation of a Change in Control approvedextent permitted by the Board, such optionprovisions thereof. All references to “dollars” or right will terminate, subject“$” in the Plan refer to United States dollars. Whenever the context may require, any provision that has been expressly made bypronouns used herein shall include the Committeecorresponding masculine, feminine or neuter forms, and the Board throughsingular form of nouns and pronouns shall include the plural and vice versa.
(c)Limitation on Rights Conferred under Plan; No Acquired Rights. The adoption and maintenance of the Plan shall not be deemed to be a plan of reorganization approved bycontract between the BoardCompany or otherwiseany Participating Company and any person or to be consideration for the survival, substitution, assumption, exchange or other settlementemployment of such option or right.
7.2ADJUSTMENTS –
7.2.1ADJUSTMENTS GENERALLY. The following provisions will apply if any extraordinary dividend or other extraordinary distribution occurs in respect of the Shares (whetherperson. Participation in the form of cash, Shares, other securities, or other property),Plan at any given time shall not be deemed to create the right to participate in the Plan, or any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, reorganization, merger, combination, consolidation, split-up, spin-off, repurchase, or exchange of Shares or other securitiesarrangement permitting an employee of the Company or any similar, unusual, infrequent or extraordinary corporate transaction (or eventParticipating Company to purchase Stock at a discount, in respectthe future. The rights and obligations under any Participant’s terms of the Shares) or a sale of substantially all the assets ofemployment with the Company as an entirety occurs. The Committee will, in such manner and to such extent (if any) as it deems appropriate and equitable:
(a)proportionately adjust any or all of (i) the number and type of Shares (or other securities) that thereafter may be made the subject of awards (including the specific maxima and numbers of shares set forth elsewhere in this Plan and the individual award limitations set forth in Section 3), (ii) the number, amount and type of shares (or other securities or property) subject to any or all outstanding awards, (iii) the grant, purchase, or exercise price of any or all outstanding awards, (iv) the securities, cash or other property deliverable upon exercise of any outstanding awards, or (v) the Performance Goals or Performance Objectives appropriate to any outstanding awards, or
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Annex B Amended and Restated LTIP
(b)in the case of an extraordinary dividend or other distribution, recapitalization, reclassification, merger, reorganization, consolidation, combination, sale of assets, split-up, exchange, or spin-off, make provision for a cash payment or for the substitution or exchange of any or all outstanding awards or the cash, securities or property deliverable to the holder of any or all outstanding awards based upon the distribution or consideration payable to holders of the Shares of the Company upon or in respect of such event.
7.2.2EQUITY RESTRUCTURING - If the Company recapitalizes, reclassifies its capital stock or otherwise changes its capital structure or another change or event occurs that constitutes an “equity restructuring” pursuant to Accounting Standards Codification Topic 718, Compensation — Stock Compensation, or any successor accounting standard (a “recapitalization”), (a) the Committee shall equitably adjust the number and class of Shares (or other securities or property) covered by each outstanding award and the terms and conditions, including the exercise price and performance criteria (if any), of such award to equitably reflect such recapitalization and shall adjust the number and class of Shares (or other securities or property) with respect to which awards may be granted after such recapitalization and (b) the Committee shall make a corresponding and proportionate adjustment with respect to the maximum number of Shares (or other securities) that may be delivered with respect to awards under this Plan as provided in Section 3, the individual award limitations set forth in Section 3 and the class of Shares (or other securities) available for grant under this Plan.
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8.1AUTHORITY OF THE BOARD - Subject to Section 8.2, the Board may amend or terminate this Plan at any time and in any manner; provided, that, any such amendments shall be subject to the approval of the Company’s stockholders if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Shares may then be listed or quoted (and such approval shall be obtained in accordance with the requirements of such laws, regulations and rules).
8.2RESTRICTIONS - No amendment or termination of this Plan or change in or affecting any outstanding award shall deprive in any material respect the holder, without the consent of the holder, of any of his or her rights or benefits under or with respect to the award. Adjustments contemplated by Section 7Participating Company shall not be deemed to constitute a change requiring such consent.
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9.1COMPLIANCE AND CHOICE OF LAW; SEVERABILITY - This Plan, the granting and vesting of awards under this Plan and the issuance and delivery of Shares and/or the payment of money under this Plan or under awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations and to such approvalsaffected by any listing, regulatory or governmental authority as may,participation in the opinion of counsel for the Company, be necessary or advisable in connection therewith. This Plan, the awards, all documents evidencing awards and all other related documents shall be governed by, and construed in accordance with the laws of the state of Delaware. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
9.2NO RIGHT TO AN AWARD -Plan. Neither the adoption of this Plan nor any action of the Board or of the Committeetaken hereunder shall be deemed to give any individual any right to be granted an award or any other rights hereunder exceptconstrued as may be evidenced by an award agreement duly executed on behalf of the Company, and then only to the extent and on the terms and conditions expressly set forth therein.
9.3NON-EXCLUSIVITY OF PLAN - Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Shares, under any other plan or authority.
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Annex B Amended and Restated LTIP
9.4NO EMPLOYMENT RIGHTS CONFERRED - Nothing contained in this Plan (or in any other documents relating to this Plan or to any award) shall confer upon(i) giving any Eligible PersonEmployee or other participant anyParticipant the right to continue as an Eligible Employee or Participant or in the employ or other service of the Company or any Affiliateof its affiliates or constitute any contract or agreement of employment or other service, nor shall interfere(ii) interfering in any way with the right of the Company or any Affiliate to change such person’s compensation or other benefits orof its affiliates to terminate theany Eligible Employee’s or Participant’s employment of such person, with or without cause.
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10.1UNFUNDED PLAN - Unless otherwise determined by the Committee, this Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. Thisat any time. The Plan shall not establishafford any fiduciary relationship between the Company orParticipant any Affiliate and any participant or other person. To the extent any person holds any rights by virtue of awards granted under this Plan, such rights shall be no greater than the rights of an unsecured general creditoradditional right to compensation as a result of the Company.termination of such Participant’s employment for any reason whatsoever.
10.2AWARDS NOT COMPENSATION - Unless otherwise determined by(d)Compliance with Applicable Laws. The Company’s obligation to offer, issue, sell or deliver Stock under the Committee, settlementsPlan is at all times subject to all approvals of awards received by participants under thisand compliance with any governmental authorities (whether domestic or foreign) required in connection with the authorization, offer, issuance, sale or delivery of Stock as well as all federal, state, local and foreign laws. Without limiting the scope of the preceding sentence, and notwithstanding any other provision in the Plan, shall not be deemed a part of a participant’s regular, recurring compensation for purposes of calculating payments or benefits from any Company benefit plan, severance program or severance pay law of any country.
10.3FRACTIONAL SHARES - Thethe Company shall not be requiredobligated to grant options or to offer, issue, sell or deliver Stock under the Plan to any fractional Shares pursuantemployee who is a citizen or resident of a non-U.S. jurisdiction if (i) the grant of an option under the Plan to this Plan. The Committee may provide fora citizen or resident of such jurisdiction is prohibited under the eliminationlaws of fractionssuch jurisdiction or for(ii) compliance with the settlement thereof in cash.laws of such jurisdiction would cause the Plan to violate the requirements of Section 423 of the Code.
10.4COMPLIANCE WITH SECURITIES LAWS - Nothing herein(e)Severability and Reformation. If any provision of the Plan or an option is or becomes or is deemed to be invalid, illegal or unenforceable in any award granted hereunder shall require the Company to issue any shares with respectjurisdiction or as to any award if that issuanceperson or option, or would indisqualify the opinion of counsel for the Company, constitute a violation of the Securities Act of 1933, as amended,Plan or any similaroption under any law deemed applicable by the Committee, such provision
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Annex B
shall be construed or superseding statute or statutes, any other applicable statute or regulation, ordeemed amended to conform to the rules of any applicable securities exchange or securities association, as then in effect.
10.5CLAWBACK - To the extent required by applicable law or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the option, such provision shall be stricken as to such jurisdiction, person or option and the remainder of the Plan and any applicable securities exchange listing standards, or as otherwise determined by the Board or Committee, awardssuch option shall remain in full force and amounts paid or payable pursuanteffect.
(f)Governing Law; Submission to orJurisdiction. All questions arising with respect to awards shall be subject to the provisions of the Plan shall be determined by application of the laws of the State of Delaware, without giving effect to any applicable clawback policies or procedures adopted by the Company, which clawback policies or procedures may provide for forfeiture, repurchase and/or recoupmentconflict of awards and amounts paid or payable pursuant to or with respect to awards. Notwithstanding any provision of this Plan or any award agreementlaw provisions thereof, except to the contrary, the Company reserves the right, without the consent of any participant or beneficiary of any award, to adopt any such clawback policies and procedures, including such policies and procedures applicable to this Plan or any award agreement with retroactive effect.
10.6SECTION 409A - In the event that any award granted pursuant to this Plan provides for a deferral of compensation within the meaning of the Nonqualified Deferred Compensation Rules, itextent Delaware law is the general intention, but not thepreempted by federal law. The obligation of the Company to design such awardsell and deliver Stock hereunder is subject to complyapplicable federal and state laws and to the approval of any governmental authority required in connection with the Nonqualified Deferred Compensation Rulesauthorization, issuance, sale, or delivery of Stock. With respect to any claim or dispute related to or arising under the Plan, the Company and such award should be interpreted accordingly. Notwithstanding anything in this Planeach Participant consent to the contrary,exclusive jurisdiction, forum and venue of the state and federal courts located in Los Angeles, California.
(g)Electronic or Telephonic Documentation and Submission. Any of the payroll deduction authorizations, notices, forms, designations and other documents referenced in the Plan and their submission may be electronic or telephonic, as directed by the Committee.
(h)Taxes. Any income taxes, withholding taxes or other levies on income of an Eligible Employee applied by any federal, state, local or foreign government arising from the Plan or the Eligible Employee’s participation therein shall be paid by such Eligible Employee, including any such taxes payable on (i) any amount contributed by an Eligible Employee to the extentpurchase of shares of Stock, (ii) the benefit derived from acquiring shares of Stock at an Option Price that is less than the Committee determines that any award under this Plan may be subjectfair market value of such shares, and (iii) the transfer of shares of Stock to the Nonqualified Deferred Compensation Rules,Eligible Employee or a person designated by the Committee may, withoutEligible Employee, including a participant’s consent, adopt such amendments to this Plan and the applicable award agreementsale or take any other actions (including amendments and actions with retroactive effect), that the Committee, in its sole discretion, determines are necessary or appropriate to preserve the intended tax treatmentdisposition of the award, including, without limitation, actions intended to (a) exempt such award from the Nonqualified Deferred Compensation Rules, or (b) comply with the requirements of the Nonqualified Deferred Compensation Rules; shares.provided, however, that nothing in this Section 10.6 shall create any obligation on the part
Each of the Company and any Participating Company, as applicable, is authorized to deduct, or cause to be deducted, from any Affiliateamounts payable to adoptan Eligible Employee, either under the Plan or otherwise, any amounts which are required to be withheld on account of taxes, and all such amendmentamounts shall be remitted to the appropriate government authority in accordance with applicable federal, state, local or takeforeign law. Each of the Company and any Participating Company, as applicable, may also undertake any other such action reasonably necessary to permit compliance with applicable tax withholding laws, including withholding a portion of the shares of Stock otherwise deliverable to or any liability for any failure to do so. Notwithstanding anything hereinthe account of an Eligible Employee or requiring, as a condition to the contrary, in no eventtransfer of shares of Stock to the Eligible Employee or a person designated by the Eligible Employee, payment of any applicable withholding tax.
(i)Notice of Disqualifying Disposition. Each Participant shall give the Company prompt written notice of any disposition or any Affiliate have any obligationother transfer of shares of Stock acquired pursuant to indemnify or otherwise compensate any participant for any taxes or interest imposedthe exercise of an option acquired under the Nonqualified Deferred Compensation RulesPlan, if such disposition or similar provisionstransfer is made within two years after the first day of statethe Option Period or foreign law.within one year after the Date of Exercise.
(j)Designation of Beneficiary. A Participant may file, on forms provided by the Committee, a written designation of beneficiary who is to receive any shares of Stock and cash in respect of any fractional shares of Stock, if any, from the Participant’s account under the Plan in the event of such Participant’s death. In addition, a Participant may file a written designation of beneficiary who is to receive any cash withheld through payroll deductions and credited to the Participant’s account in the event of the Participant’s death prior to the Date of Exercise of an Option Period.
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Annex C-1 Proposal 5(a) Amendment to Certificate of Incorporation
Proposal 5(a) Amendment to Certificate of Incorporation
Proposed Amendment to the Amended and RestatedRestate Certificate of
The text below is the portion of the Amended and Restated Certificate of Incorporation of California Resources Corporation, as last amended May 31, 2016,October 27, 2020, as proposed to be amended by “Proposal 5(a)—Change the Supermajority Vote Requirement for Stockholders to Remove Directors Without Cause to a Majority Vote Requirement.” Proposed additions are indicated by underlining and proposed deletions are indicated by strike-outs.
FIFTH . . .
3. Removal of Directors. Prior to and through the date on which the Classified Board Expiration Time occurs, and subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, if any, anyAny director may be removed only for Cause,at any time, with or without cause, upon the affirmative vote of the holders of at least a majority in voting power of the outstanding shares of stock of the Corporation entitled to vote generally for the election of directors acting at a meeting of the stockholders in accordance with the DGCL, this Amended and Restated Certificate of Incorporation and the bylaws of the Corporation. Upon the Classified Board Expiration Time, any director may be removed at any time, with or without Cause,(a) for Cause upon the affirmative vote of the holders of at least a majority in voting power of the outstanding shares of stock of the Corporation entitled to vote generally for the election of directors andor (b) without Causecause upon the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of the Corporation entitled to vote generally for the election of directors, in the case of each of (a) and (b)bylaws of the Corporation. “Cause” shall mean the director’s (i) conviction of a serious felony involving moral turpitude or a violation of federal or state securities laws; (ii) the commission of any material act of dishonesty resulting or intended to result in material personal gain or enrichment of such director at the expense of the Corporation or any of its subsidiaries and which act, if made the subject of criminal charges, would be reasonably likely to be charged as a felony; or (iii) adjudication as legally incompetent by a court of competent jurisdiction.Bylaws.
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Annex C-2 Proposal 5(b) Amendment to Certificate of Incorporation
Proposal 5(b) Amendment to Certificate of Incorporation
Proposed Amendment to the Amended and RestatedRestate Certificate of
The text below is the portion of the Amended and Restated Certificate of Incorporation of California Resources Corporation, as last amended May 31, 2016,October 27, 2020, as proposed to be amended by “Proposal 5(b)—Change the Supermajority Vote Requirement for Stockholders to Amend the Bylaws to a Majority Vote Requirement.” Proposed additions are indicated by underlining and proposed deletions are indicated by strike-outs.
EIGHTH: In furtherance of, and not in limitation of, the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to adopt, amend, restate or repeal the bylaws of the Corporation; provided, however, that, the provisions of this Article Eighth notwithstanding, the bylaws of the Corporation shall not be altered, amended, restated or repealed by the stockholders of the Corporation except by the vote of holders of at least 75%a majority in voting power of the outstanding shares of stock entitled to vote thereon, voting together as a single class.
Change to Bylaws Adopted by the Board of Directors, Effective Upon Filing of Certificate of Amendment to the Amended and Restated Certificate of Incorporation To Reflect Amendments Set Forth Above (Proposal 5(b))
SECTION 8.1 Amendments. Subject to the provisions of the Certificate of Incorporation, these Bylaws may be amended, altered or repealed (A) by resolution adopted by a majority of the directors present at any special or regular meeting of the Board at which a quorum is present if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting or (B) at any regular or special meeting of the stockholders upon the affirmative vote of at least 75%a majority in voting power of the outstanding shares of the Corporation entitled to vote thereon if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting.
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Annex C-3 Proposal 5(c) Amendment to Certificate of Incorporation
Proposal 5(c) Amendment to Certificate of Incorporation
Proposed Amendment to the Amended and Restated Certificate of
Incorporation of California Resources Corporation (Proposal 5(c))
The text below is the portion of the Amended and Restated Certificate of Incorporation of California Resources Corporation, as last amended May 31, 2016, as proposed to be amended by “Proposal 5(c)—Change the Supermajority Vote Requirement for Stockholders to Amend Certain Provisions of the Amended and Restated Certificate of Incorporation to a Majority Vote Requirement.” Proposed additions are indicated by underlining and proposed deletions are indicated by strike-outs.
TENTH: Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation or the bylaws of the CorporationBylaws (and in addition to any other vote that may be required by law, this Amended and Restated Certificate of Incorporation or the bylaws of the Corporation)Bylaws), the approval by a majority of the directors then in office and the affirmative vote of the holders of a majority in voting power of the outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class, in addition to any vote of holders of any class or series of stock of the Corporation required by law or by thethis Amended and Restated Certificate of Incorporation, shall be required to amend, alter, restate or repeal any provision of this Amended and Restated Certificate of Incorporation; provided, further, that any alteration, amendment, repeal or restatement of Article Fifth, Article Sixth, Article Seventh, .Article Eighth, this Article Tenth, Article Eleventh Article Twelfth or Article ThirteenthTwelfth shall require the affirmative vote of the holders of at least 75% in voting power of the outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class, in addition to any vote of holders of any class or series of stock of the Corporation required by law or by thethis Amended and Restated Certificate of Incorporation in addition toand the approval by a majority of the directors then in office
CALIFORNIA RESOURCES CORPORATION C-3-1C - 1
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ANNUAL MEETING OF STOCKHOLDERS OF CALIFORNIA RESOURCES CORPORATION May 8, 2019 PROXYVOTINGINSTRUCTIONSINTERNET -Access “www.voteproxy.com” and follow the on-screen instructions1 World Trade Center, Suite 1500 Long Beach, CA 90831 SCAN TO VIEW MATERIALS & VOTE BY INTERNET Before The Meeting – Go to www.proxyvote.com or scan the QR code withBarcode above Use the Internet to transmit your smartphone. Have your proxy card available when you access the web page. TELEPHONE -Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephonevoting instructions and follow the instructions. Have your proxy card available when you call. Vote online/phonefor electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting. MAIL -Sign,cut-off date and mailor meeting date. Have your proxy card in hand when you access the envelope provided as soon as possible. IN PERSON -Youweb site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting – Go to www.virtualshareholdermeeting.com/CRC2022 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE – 1-800-690-6903 Use any touch-tone telephone to transmit your shares in person by attendingvoting instructions up until 11:59 p.m. Eastern Time the Annual Meeting. See Admission Ticket on reverse side. GO GREEN -e-Consent makes it easy to go paperless. With e-Consent, you can quickly accessday before the cut-off date or meeting date. Have your proxy material, statementscard in hand when you call and other eligible documents online, while reducing costs, clutterthen follow the instructions. VOTE BY MAIL Mark, sign and paper waste. Enroll today via www.astfinancial.com to enjoy online access. COMPANYNUMBERACCOUNTNUMBERNOTICEOFINTERNETAVAILABILITYOFPROXYMATERIALS:TheNoticeofMeeting,proxystatementandproxycardareavailableathttp://www.astproxyportal.com/ast/20758Please detach along perforated linedate your proxy card and mailreturn it in the postage-paid envelope we have provided IFor return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D71150-P68316 KEEP THIS PORTION FOR YOU RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
CALIFORNIA RESOURCES CORPORATION The Board of Directors recommends you are not voting via telephone orvote FOR the Internet. THEBOARDOFDIRECTORSRECOMMENDSAVOTE"FOR"THEELECTIONOFALLNOMINEESFORDIRECTOR,AND"FOR"PROPOSALS2,3,4,5(a),5(b)and5(c).PLEASESIGN,DATEANDRETURNPROMPTLYINTHEENCLOSEDENVELOPE.PLEASEMARKYOURVOTEINBLUEORBLACKINKASSHOWNHEREx1.following: 1. Election of ten director nominees: FOR AGAINST ABSTAINDirectors Nominees: 01) Andrew B. Bremner 02) Douglas E. Brooks 03) Tiffany (TJ) Thom Cepak 04) James N. Chapman 05) Mark A. (Mac) McFarland 06) Nicole Neeman Brady 07) Julio M. Quintana 08) William E. Albrecht Justin A. Gannon Harold M. Korell Harry T. McMahon Richard W. Moncrief Avedick B. Poladian Anita M. Powers Laurie A. Siegel Robert V. Sinnott Todd A. StevensRoby 09) Alejandra (Ale) Veltmann For All Withhold All For All Except To changewithhold authority to vote for any individual nominee(s), mark “For All Except” and write the address on your account, please checknumber(s) of the box at right andindicate your new address in the address space above. Please note that changes to the registered name(s)nominee(s) on the account may not be submitted viathis method. Signatureline below. _____
The Board of Stockholder Date:Directors recommends you vote FOR AGAINST ABSTAIN proposals 2, 3, 4, 5a and 5b: For Against Abstain
2. Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2019.2022 3. AdvisoryTo approve, by non-binding vote, to approve named executive officer compensation. 4. ApprovalTo approve the Employee Stock Purchase Plan. 5a. To approve amendments to the Certificate of the Amended and Restated California Resources Corporation Long-Term Incentive Plan. 5(a).ChangeIncorporation to change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement. 5(b).Change5b. To approve amendments to the supermajority vote requirement for stockholdersCertificate of Incorporation to amendchange the Bylaws to a majority vote requirement. 5(c).Change the supermajority votesupermajorityvote requirement for stockholders to amend certain provisions of the Amended and Restated Certificate of Incorporation to a majority vote requirement. 6. To transact any other business that may properly come before the annual meeting or any adjournments or postponements thereof. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. This proxy when properly executed will be voted as directed herein by the undersigned Stockholder. If no direction is made, this proxy will be voted “FOR” the election of all nominees for director in Proposal 1, and “FOR” Proposals 2, 3, 4, 5(a), 5(b), and 5(c). Signature of Stockholder Date: Note:
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.name(s) appear(s) hereon. When signing as attorney, executor, administrator, attorney, trustee or guardian,any other fiduciary, please give fulltitle as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. Joint owners should each sign personally. All holders must sign. If signer is a corporation or partnership, please sign in full corporate or partnership name by authorized person.officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and 10K Wrap are available at www.proxyvote.com. D71151-P68316
ADMISSIONTICKETIf you plan to attend the annual meeting of stockholders, you will not be admitted to the meeting without valid government-issued photo identification (such as a driver’s license or passport) and this admission ticket or other proof of stock ownership as of March 11, 2019, the record date. 0 CALIFORNIA RESOURCES CORPORATION Proxy for Annual Meeting of Stockholders onShareholders May 8, 2019 Solicited on Behalf of4, 2022 11:00 a.m. This proxy is solicited by the Board of Directors The undersignedshareholder(s) hereby appoints Toddappoint(s) Mark A. Stevens(Mac) McFarland and William E. AlbrechtTiffany (TJ) Thom Cepak, as proxies, each with the power to appoint his or her substitute, and hereby authorizes themauthorize(s) him or her to represent and to vote, as designated on the reverse side hereof,of this ballot, all of the shares of common stockCommon Stock of California Resources Corporation held of record bythat the undersigned at the close of business on March 11, 2019shareholder(s) is/are entitled to vote at the Annual Meeting of StockholdersShareholders to be held Wednesday, May 8, 2019 at 11:00 a.m., Pacific Time on Wednesday, May 4, 2022, virtually at the Bakersfield Marriott at the Convention Center, 801 Truxtun Avenue, Bakersfield, California 93301,www.virtualshareholdermeeting.com/CRC2022, and at any adjournment or postponement thereof. (Continued and to be signed on the reverse side.) 1.1 14475
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS, FOR PROPOSALS 2, 3 , 4, 5a AND 5b. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE. CONTINUE AND TO BE SIGNED ON REVERSE SIDE
MAJORITY INDEPENDENT DIRECTORS 10% Non-Independent 90% Independent
