UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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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California resources corporation 20192020 proxy report and notice of annual meeting
Letter to Shareholders from the Chairman of the Board
Dear Shareholders,
Strong execution, financial discipline and sustained community engagement are compelling hallmarks of California Resources Corporation (“CRC”), reflecting celebrated its fifth anniversary in late 2019, and the Board of Directors (the “Board”) applauds the progress CRC has made in developing a stronger company through improved governance, consistent performance and a culture built on its entrepreneurial spirit. Our experienced management team has instilled the Company’s core values of Character, Responsibility and Commitment to drive performance. The Board plays an active role in fostering CRC’s governance policies, aligning compensation with performance and promoting the high expectations set by the Boardrobustness of Directors (the “Board”). In 2018, CRC achieved strong results through the exceptional leadership of our management team and the dedication of our diverse workforce who operate critical infrastructure and supply essential resources to Californians 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 plan that prioritized projects to deliver value bothCRC’s strategy amidst volatility in the immediate and longer term, while continuing to meaningfully strengthen our financial position. We believe thiscommodity markets. The value-driven approach of CRC’s executive leadership continues to managing our business truly sets CRC apart. It enablesenable us to capture the full value ofthrough our robustbroad portfolio of assets throughout the commodity cycle and ensurescreate effective capital allocation through the commodity cycle.
As we reflect on the accomplishments of our first five years as an independent company, the Board remains committed to leading governance policies. When CRC was spun off from its former parent in 2014, our governance reflected that delivers positive resultsof a new public company in a cyclical sector. Certain criteria were put in place at the outset, like separation of Chairman and CEO roles, an independent lead director and a majority of the Board being independent, while other key governance items were allowed to mature with the Company. During my tenure and consistent with feedback from our shareholders, we have enhanced our governance profile, including moving away from a classified Board to an annual election of directors, introducing a majority voting standard for our shareholders. Coupled withdirectors and instituting a more rigorous overboarding policy.
When we have had an unwavering focus on operational excellence that unifiesopportunity for Board refreshment as a result of a director’s departure, we have thoughtfully sought replacements to broaden the organization, it is a powerful strategic approach that sustains CRC’s high levels of safety, environmental stewardship, reliabilityBoard’s knowledge and quality.
In 2018, an engaged Board aligned with shareholder priorities brought to bear a wealth of experience and varied perspectives from within the energy industry,expertise as well as from financial services, accounting, real estate, human resources and organizational disciplines. To ensure that CRC continueswe continue to attract and maintain the most effective mix of Board talent, wetalent. We regularly engage in a review process to evaluate desired skill sets that strengthen governance, promote diversity of thought 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 strengthensToday, we believe our Board’s diversity of relevant skillsexperience 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 proposing to eliminate CRC’s supermajority thresholds in its certificate of incorporation. While these efforts failed to reach the requisite vote last year, many shareholders regarded the action favorably and encouraged CRC to provide shareholders with another opportunity to vote 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 withenergy industry, practices and rewards executives appropriately based on specific quantitative annual and multi-year performance metrics, as well as progress toward longer-termin financial services, accounting, real estate, human resources and organizational objectives,disciplines, is well-suited for the many challenges that face CRC beyond challenges typically faced in the energy sector. Every year, we aim to improve shareholder outreach to obtain feedback on our governance and compensation practices. The Board has utilized this feedback from shareholders to align a greater portion of executive compensation to shareholder returns, focus annual incentives on key measurable quantitative metrics and provide more detailed disclosure on the annual incentive payouts. We continue to focus management’s compensation on the actions that we feel will create long-term value, including our 2030 Sustainability Goals.further balance sheet strengthening, using a VCI metric for disciplined capital allocation, healthy EBITDAX generation, delivering excellent health, safety and environmental (HSE) performance and advancing sustainability projects that align with the State of California.
As a responsibleAlthough we’ve enhanced our governance and shareholder outreach in many ways, we have not been successful in obtaining shareholder approval on all the governance items that we have recommended to shareholders for adoption. For the past two years, we have recommended replacing our super majority voting provisions with majority vote requirements. Following two years of these shareholder proposals failing to garner the support of anywhere near the 75% of the outstanding shares required for approval, we have removed the proposals from the ballot this year. This decision was made by the Board after garnering
shareholder feedback on this and other governance issues. We expect to revisit this proposal again in the relatively near term, particularly if we see shifts in our shareholder base to more institutional ownership that we believe would increase the likelihood of our obtaining the approval of the requisite 75% of the outstanding shares.
We proudly operate critical energy infrastructure in California, oil and natural gas company operating in the world’s fifth largest economy, under the most comprehensive and stringent oil and gas regulations. Hence our executive compensation metrics reflect the importance of this responsibility to address Californians’ energy needs and challenges in a manner that aims to meet community expectations. One of our most important achievements in 2019 was our health and safety record: CRC promoteshad zero recordable employee workplace injuries. On a combined basis, including contractors, we had an impressive injury and illness incidence rate (IIR) of 0.34 per 200,000 hours worked, which is better than safety first, with the protection of people, our communities and the environment as our top prioritystatistics in the design, construction, maintenanceinsurance and operationfinance sectors according to the latest data available from the U.S. Bureau 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 reflectedStatistics. For comparison, the average IIR for all employers 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. The Board holds the management team and our entireU.S. in 2018 was 3.1, an injury rate nine times higher than what CRC’s workforce achieved.
accountable 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 ourManagement has also been effectively progressing towards the Board’s four 2030 Sustainability Goals, which include specific quantitative targets for water recycling, reduction of methane emissions, integrating renewable power in our operations and carbon capture and storage. We have already implemented several projects that have increased our volumesequestration. These goals align directly with those 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 and are measured against a 2013 baseline, the year before CRC launched. CRC has surpassed its methane target with a 60-percent reduction in methane emissions since 2013 and is almost halfway to fulfillits water target of a 30-percent increase in its water recycling volume. In 2019, CRC designed two 2-MW solar projects, and initiated solar projects that would provide up to an additional 40 MW at multiple CRC fields. CRC commenced a front-end engineering and design study on carbon capture at Elk Hills, one of nine such projects in the U.S. that received financial support from the U.S. Department of Energy in 2019. We were also quite pleased to receive validation of our sharedsustainability efforts by receiving an A- from CDP (formerly known as the Carbon Disclosure Project) for our 2019 climate disclosure, scoring at CDP’s Leadership Level. CRC received the highest ranking among all U.S. oil and gas companies, tying for first with one other U.S.-based E&P company. This recognition highlights CRC’s differentiated value as a California E&P and the company’s ongoing commitment to conserve natural resourcesprovide sustainable, safe and protect our environment.reliable energy solutions for Californians.
While stakeholders often think about sustainabilityWe are focused on fostering diversity across the organization, including 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 growingas well as in recruiting and developing oura workforce to reflectthat reflects the diversity of the communities where we operate. CRC’s employee-led Women’s Interest Network provides professional development and support to women throughout our operations with strong 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, weWe believe that CRC succeeds when Californians thrive.
HelpingCRC’s culture has progressed significantly in the past five years, from that of its former multi-national parent, to an engaged and entrepreneurial culture grounded in the company’s core values and focused on delivering local solutions to meet the needs of Californians positions CRCCalifornians. CRC’s strong culture of service empowers employees to createchampion the communities they live and sustain value forwork in and supports them in leading our shareholders for years to come. Our confidencecommunity outreach. CRC’s work with community groups focuses on supporting diverse members of the community including working families of all ethnic groups, with an emphasis on veterans and women, as well as public health and safety and fostering science, technology, engineering and mathematics (STEM) education and workforce development. The Board frequently receives company-wide employee feedback that aids in providing insight into the future is due in no small part to CRC’s extraordinary workforce.company’s culture, managerial effectiveness and diversity. Our employees embrace anthe entrepreneurial “OneCRC”“One CRC” mindset that promotes innovative thinking, increased collaboration and accountability and a focus on process improvements in everything we do. We expectare proud of our track record in pursuing opportunities to improve the lives of Californians and managing the risks of the business with a keen focus on Environmental, Social and Governance attributes that align well with the State of California, our employees and our investors. The Board will carry this active oversight forward in 2020 and beyond as we guide management as they continue to translate into continued growthstrengthen the balance sheet, capture the full value of our robust portfolio and promote effective capital allocation.
The Board and I are pleased with the tremendous progress CRC has made over the past five years as we’ve worked to become a stronger independent company. As we enter a new decade, we are focused on delivering value for shareholders as we manageby strengthening our assets for margin expansionbalance sheet, effectively allocating human and cash-on-cash returns usingfinancial capital and continuously improving our value-driven approach in 2019already strong operational and beyond.HSE performance.
Regards,
William “Bill”E. Albrecht
Chairman 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. Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation 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 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 20192020 Annual Meeting of Stockholders
Meeting Date: | May |
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Meeting Time: | 11:00 a.m., local time |
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Location: | Bakersfield Marriott at the Convention Center, 801 Truxtun Avenue, Bakersfield, California 93301 |
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Record Date: | March |
Purposes of the 20192020 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 |
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Information relevant to these matters is set forth in the accompanying proxy statement.
The close of business on March 11, 20199, 2020 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 or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.
We intend to hold the annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our annual meeting website at http://www.astproxyportal.com/ast/20758/ for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.
Beginning on March 26, 2019,24, 2020, 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
Senior Executive Vice President, Chief Administrative Officer and General Counsel and
Corporate Secretary
If you owned shares of our common stock at the close of business on March 11, 2019,9, 2020, you are entitled to one vote per share upon each matter presented at our 20192020 annual meeting of stockholders to be held on May 8, 2019.6, 2020. 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, 20199, 2020 to attend the 20192020 annual meeting, they will need to obtain a 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 2020, 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, 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 Services 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. 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) 661-6010 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, 20199, 2020 or our invited guests may attend the annual meeting in person. If you plan 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. 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 in person at the annual meeting.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF
PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON MAY 8, 20196, 2020
The Notice of the 20192020 Annual Meeting of Stockholders, the Proxy Statement for the 20192020 Annual Meeting of Stockholders and the 20182019 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2018)2019) of California Resources Corporation are available at http://www.astproxyportal.com/ast/20758/.
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Security Ownership of Directors, Management and Certain Beneficial Holders |
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Delinquent Section 16(a) |
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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–Reconciliation of Non-GAAP | A-1 |
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CALIFORNIA RESOURCES CORPORATION i
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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 20192020 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”
20192020 Annual Meeting of Stockholders
Date: | May |
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Time: | 11:00 a.m., local time |
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Place: | Bakersfield Marriott at the Convention Center |
| 801 Truxtun Avenue, Bakersfield, California 93301 |
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Record Date: | March |
We intend to hold the Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our Annual Meeting website at http://www.astproxyportal.com/ast/20758/ for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting.
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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| 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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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.
DirectorsCALIFORNIA RESOURCES CORPORATION 1
2020 PROXY STATEMENT |
Proxy Statement Summary
The Board of Directors is comprised of eightnine independent directors, including our Chairman, andplus 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 uncontested election of directors to the Board of Directors. See “Required Vote and Method of Counting–Majority Voting for Directors” below.
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| Health, Safety | Nominating | |||||||||
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Director | Positions | Age | Independent | Since | Audit | Compensation | Environmental | Governance | Positions | Age | Independent | Since | Audit | Compensation | Sustainability | Governance |
William E. Albrecht | Chairman | 67 | No | 2014 |
| Chairman | 68 | Yes | 2014 |
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Justin A. Gannon |
| 69 | Yes | 2014 | Chair | ● |
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| 70 | Yes | 2014 | Chair | ● |
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Harold M. Korell | Lead Independent Director | 74 | Yes | 2014 |
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Harold M. Korell * | Lead Independent Director | 75 | Yes | 2014 |
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Harry T. McMahon |
| 65 | Yes | 2017 | ● | Chair |
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| 66 | Yes | 2017 | ● | Chair |
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Richard W. Moncrief |
| 76 | Yes | 2014 | ● |
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| 77 | Yes | 2014 | ● |
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Avedick B. Poladian |
| 67 | Yes | 2014 |
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| 68 | Yes | 2014 |
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Anita M. Powers |
| 63 | Yes | 2017 |
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| 64 | Yes | 2017 |
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Laurie A. Siegel |
| 63 | Yes | 2018 | ● |
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| 64 | Yes | 2018 | ● |
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Robert V. Sinnott |
| 69 | Yes | 2014 |
| Chair |
| 70 | Yes | 2014 |
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Todd A. Stevens | President & CEO | 52 | No | 2014 |
| President & CEO | 53 | No | 2014 |
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* Mr. Korell is not standing for reelection, and his term will expire at the 2020 Annual Meeting.
Corporate Governance Highlights
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✓ | Anti-Hedging and Anti-Pledging Policy. |
| ✓ | Overboarding Policy. The Board implemented 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. |
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| Clawback Policy.The Board adopted a comprehensive, standalone policy that covers cash, equity, equity-based and other awards under our incentive compensation programs. |
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| Board is not classified.Our directors are elected on an annual basis. |
| ✓ | Separate Chairman of the Board and CEO. |
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| ✓ | Independent Board committees. Each standing committee is 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. |
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. |
CALIFORNIA RESOURCES CORPORATION 2
2020 PROXY STATEMENT |
Proxy Statement Summary
Business Performance Highlights
In 2018,2019, 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.
Performance on Strategic Priorities | |
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Use our Value Creation Index (“VCI”)(1) metric to | > > Replaced over > |
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Optimize | >
> > Consolidated Bakersfield area employees into CRC Plaza in |
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| > > Opportunistically repurchased $252 million in face value of Second Lien debt in 2019, at an average discount of 38 percent, bringing total Second Lien debt repurchases to approximately $435 million of face value, as of December 31, 2019. > Monetized a 50% working interest in portions of our > Secured a credit agreement amendment to provide additional future flexibility in |
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CALIFORNIA RESOURCES CORPORATION 3
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Proxy Statement Summary
Performance on Strategic Priorities | |
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| > > Attained CDP’s highest 2019 climate disclosure ranking among all U.S. oil and gas companies with > Supplied a CRC record 5.35 billion gallons of reclaimed water to agricultural water districts, upholding our > Achieved > Launched CRC’s Intrepid Women’s Leadership Program to promote women’s professional development and leadership. Sponsored a variety of scholarship, internship and training programs and developed
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(1) | We use a VCI metric for project selection and capital allocation across our portfolio of opportunities. We calculate VCI for each of our projects by dividing the net present value of the project’s expected pre-tax cash flow over its life by the present value of the investments, each using a 10% discount rate. |
(2) | See Annex A for |
(3) | See Annex A for how CRC calculates the non-GAAP measure of free cash flow, after internally funded capital. |
(4) | See Annex A for CRC’s calculation of the non-GAAP |
| CRC calculated the leverage ratio by dividing the face value of its total long-term debt by the last twelve months adjusted EBITDAX. |
Compensation Program Highlights
CRC’s stock price performance in 2018 was2019 continued to be very volatile, ending the highest of our peer companies. However, our stock price generally remainedyear 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 the performance continued to impact the realizable compensation for our named executive officers. For 2018,2019, our Compensation Committee realignedcontinued the alignment of the long-term compensation to stockholder returns by returning togranting entirely share-based long-term incentive awards.
2018CALIFORNIA RESOURCES CORPORATION 4
2020 PROXY STATEMENT |
Proxy Statement Summary
In the first quarter of 2018,2019, based on feedback received from stockholder outreach, the Compensation Committee took the following actions:
Reduced the individual portionnumber of metrics under the annual incentive awards to 20%.provide greater focus on key objectives.
RedesignedSet the performance-based long-termperformance targets under the annual incentive awards to be entirely stock-based, further aligningat more rigorous levels than the most significant executive compensation opportunity with stockholders.prior year.
ReducedChanged the portion of time-vested restricted stock unit awards from 50% to 40% of the grant date value ofperformance criteria under the long-term incentive awardsperformance-based award to be based 50% on the three-year average VCI and instead granted premium priced stock options, shifting the long-term incentive program to 60% performance-based.50% on three-year relative total shareholder return (“TSR”).
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, incorporating best practices, and is governed by an engaged Compensation Committee. Our short-termannual incentive awards and long-term incentive plans are performance-based and are intended to align with the long-term best interests of stockholders and retain our highly experienced, high-performing management team.
The 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. A majority 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 require our named executive officers and directors to have 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.
CALIFORNIA RESOURCES CORPORATION 5
2020 PROXY STATEMENT |
Proxy Statement Summary
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. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do no 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 no encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives or inappropriate risk for the Company.
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. 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 excessive or inappropriate risk for the Company.
CALIFORNIA RESOURCES CORPORATION 56
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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 20192020 Annual Meeting. All of our nominees currently serve as CRC directors. Each nominee has agreed to serve another term, if elected.
After serving on our Board since our Spin-off, Mr. Korell will not be standing for reelection to the Board of Directors this year. This decision is not due to any disagreement with the Company on any matters relating to the Company’s operations, policies or practices. As a result, Mr. Korell’s term will expire at the 2020 Annual Meeting, at which time the size of the Board of Directors will be reduced from ten to nine directors.
Our Board exhibits an effective mix of diversity, perspective, skills and experience.
INDEPENDENCE 20% 80%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
Set forth below is a chart that summarizes the core competencies of our Board, 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. There are no family relationships between any of our directors and executive officers. In addition, there are no arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person was 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. Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation 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 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 2020 Annual Meeting of Stockholders
Meeting Date: | May 6, 2020 | |||||||||
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Location: | Bakersfield Marriott at the Convention Center, 801 Truxtun Avenue, Bakersfield, California 93301 | |||||||||
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Record Date: | March 9, 2020 |
Purposes of the 2020 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, 2020; and |
(3) | To hold an advisory vote to approve named executive officer compensation. |
Information relevant to these matters is set forth in the accompanying proxy statement.
The close of business on March 9, 2020 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 or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.
We intend to hold the annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our annual meeting website at http://www.astproxyportal.com/ast/20758/ for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.
Beginning on March 24, 2020, 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
Senior Executive Vice President, Chief Administrative Officer and General Counsel
Corporate Secretary
If you owned shares of our common stock at the close of business on March 9, 2020, you are entitled to one vote per share upon each matter presented at our 2020 annual meeting of stockholders to be held on May 6, 2020. 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 9, 2020 to attend the 2020 annual meeting, they will need to obtain a 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 2020, 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, 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 Services 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. 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) 661-6010 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 9, 2020 or our invited guests may attend the annual meeting in person. If you plan 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. 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 in person at the annual meeting.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF
PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON MAY 6, 2020
The Notice of the 2020 Annual Meeting of Stockholders, the Proxy Statement for the 2020 Annual Meeting of Stockholders and the 2019 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2019) of California Resources Corporation are available at http://www.astproxyportal.com/ast/20758/.
2020 PROXY STATEMENT |
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CALIFORNIA RESOURCES CORPORATION i
2020 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 2020 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”
2020 Annual Meeting of Stockholders
Date: | May 6, 2020 |
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Time: | 11:00 a.m., local time |
Place: | Bakersfield Marriott at the Convention Center |
801 Truxtun Avenue, Bakersfield, California 93301 | |
Record Date: | March 9, 2020 |
We intend to hold the Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our Annual Meeting website at http://www.astproxyportal.com/ast/20758/ for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting.
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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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 2020 | FOR | ||||
3. | Proposal 3 | Advisory vote to approve named executive officer compensation | 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
2020 PROXY STATEMENT |
Proxy Statement Summary
The Board of Directors is comprised of nine independent directors, including our Chairman, plus 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. We have adopted majority voting with respect to the uncontested election of directors to the Board of Directors. See “Required Vote and Method of Counting–Majority Voting for Directors” below.
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Director | Positions | Age | Independent | Since | Audit | Compensation | Sustainability | Governance |
William E. Albrecht | Chairman | 68 | Yes | 2014 |
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Justin A. Gannon |
| 70 | Yes | 2014 | Chair | ● |
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Harold M. Korell * | Lead Independent Director | 75 | Yes | 2014 |
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Harry T. McMahon |
| 66 | Yes | 2017 | ● | Chair |
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Richard W. Moncrief |
| 77 | Yes | 2014 | ● |
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Avedick B. Poladian |
| 68 | Yes | 2014 |
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Anita M. Powers |
| 64 | Yes | 2017 |
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Laurie A. Siegel |
| 64 | Yes | 2018 | ● | ● |
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Robert V. Sinnott |
| 70 | Yes | 2014 |
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Todd A. Stevens | President & CEO | 53 | No | 2014 |
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* Mr. Korell is not standing for reelection, and his term will expire at the 2020 Annual Meeting.
Corporate Governance Highlights
✓ | Majority vote standard. Our Bylaws provide that each director must be elected by a majority of votes cast, not a plurality, in uncontested elections. |
✓ | Anti-Hedging and Anti-Pledging Policy. The Board expanded our Insider Trading Policy to specifically address the hedging or pledging of our securities. |
✓ | Overboarding Policy. The Board implemented 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. The Board adopted 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. |
✓ | Separate Chairman of the Board and CEO. |
✓ | 9 out of 10 Board members are independent. The Board has determined 9 out of 10 Board members are independent within the meaning of NYSE listing standards. |
✓ | Independent Board committees. Each standing committee is 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 2019, the independent directors held executive sessions on the day of all regularly scheduled Board meetings. |
✓ | 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
2020 PROXY STATEMENT |
Proxy Statement Summary
Business Performance Highlights
In 2019, 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.
2019 Strategic Priorities | Performance on Strategic Priorities | |||||||||
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> Replaced over 111%(2) of reserves with an organic finding and development (“F&D”) cost of $8.75(2) per BOE. > Following our acquisition of the remaining interests in our flagship Elk Hills asset in 2018, CRC entered into a development JV with Alpine Energy Capital, LLC (“Alpine”) to bring reserves and cash flow forward which allowed us to strategically manage our internal capital allocation while supporting the delivery of $269 million of free cash flow, after internally funded capital.(3) | |||
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Optimize operations to further enhance margins through efficiencies, technology and organizational synergies | > Annual adjusted EBITDAX margin(4) increased for the third year in a row while production costs decreased from 2018. > Transitioned to a new organizational structure lowering overhead costs and reducing headcount, leading to lower cash costs and improved operating margins. > Consolidated Bakersfield area employees into CRC Plaza in line with our “One CRC” approach, increasing employee communication and cross functional synergies while lowering our overall lease and maintenance costs. | |||||||||
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Strengthen our balance sheet | > Reduced leverage ratio(5) from 4.7x at year-end 2018 to 4.3x at year-end 2019. > Opportunistically repurchased $252 million in face value of Second Lien debt in 2019, at an average discount of 38 percent, bringing total Second Lien debt repurchases to approximately $435 million of face value, as of December 31, 2019. > Monetized a 50% working interest in portions of our Lost Hills field to reduce debt and improve our credit position. > Secured a credit agreement amendment to provide additional future flexibility in connection with potential royalty transactions. | |||||||||
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CALIFORNIA RESOURCES CORPORATION 3
2020 PROXY STATEMENT |
Proxy Statement Summary
2019 Strategic Priorities | Performance on Strategic Priorities |
Promote workplace diversity and maintain exceptional global sector leading safety, environmental and sustainability practices | > Achieved record safety performance in our operations with zero recordable employee workplace injuries and received 22 National Safety Council awards. Our 2019 injury and illness incidence rate (IIR) of 0.34 per 200,000 employee and contractor hours set a new CRC record and was 62% better than the crude oil and natural gas extraction sector’s average of 0.9 for 2018. > Attained CDP’s highest 2019 climate disclosure ranking among all U.S. oil and gas companies with an A-, tying for first with one other U.S.-based E&P. > Supplied a CRC record 5.35 billion gallons of reclaimed water to agricultural water districts, upholding our important role as a net water supplier in California. > Achieved our 2019 quantitative health, safety and environmental (“HSE”) metrics and continued to advance specific projects that position us to meet our 2030 Sustainability Goals, including surpassing our 2030 methane emission reduction goal and making significant progress on water recycling, renewables integration and carbon capture and sequestration goals. > Launched CRC’s Intrepid Women’s Leadership Program to promote women’s professional development and leadership. Sponsored a variety of scholarship, internship and training programs and developed targeted programs to diversify and expand our current workforce and future candidates, including students from disadvantaged communities. |
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(1) | We use a VCI metric for project selection and capital allocation across our portfolio of opportunities. We calculate VCI for each of our projects by dividing the net present value of the project’s expected pre-tax cash flow over its life by the present value of the investments, each using a 10% discount rate. |
(2) | See Annex A for CRC’s calculation of the non-GAAP measures of reserve replacement ratio and F&D costs. |
(3) | See Annex A for how CRC calculates the non-GAAP measure of free cash flow, after internally funded capital. |
(4) | See Annex A for CRC’s calculation of the non-GAAP measure of adjusted EBITDAX and adjusted EBITDAX margin. |
(5) | CRC calculated the leverage ratio by dividing the face value of its total long-term debt by the last twelve months adjusted EBITDAX. |
Compensation Program Highlights
CRC’s stock price performance in 2019 continued to be very volatile, ending the year 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 the performance continued to impact the realizable compensation for our named executive officers. For 2019, our Compensation Committee continued the alignment of the long-term compensation to stockholder returns by granting entirely share-based long-term incentive awards.
CALIFORNIA RESOURCES CORPORATION 4
2020 PROXY STATEMENT |
Proxy Statement Summary
In the first quarter of 2019, based on feedback received from stockholder outreach, the Compensation Committee took the following actions:
Reduced the number of metrics under the annual incentive awards to provide greater focus on key objectives.
Set the performance targets under the annual incentive awards at more rigorous levels than the prior year.
Changed the performance criteria under the long-term performance-based award to be based 50% on the three-year average VCI and 50% on three-year relative total shareholder return (“TSR”).
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, incorporating best practices, and is governed by an engaged Compensation Committee. Our annual incentive awards and long-term incentive plans are performance-based and are intended to align with the long-term best interests of stockholders and retain our highly experienced, high-performing management team.
The 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. A majority 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 require our named executive officers and directors to have 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.
CALIFORNIA RESOURCES CORPORATION 5
2020 PROXY STATEMENT |
Proxy Statement Summary
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. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do no 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 no encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives or inappropriate risk for the Company.
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. 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 excessive or inappropriate risk for the Company.
CALIFORNIA RESOURCES CORPORATION 6
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Board of Directors and Corporate Governance
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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.
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• Chairman of the Audit Committee
• Member of the Compensation Committee
Mr. Gannon has served on the Board of Directors of CRC since 2014. Since 2013, Mr. Gannon has acted as an independent consultant and private investor. From 2003 to 2013, Mr. Gannon served in various roles at Grant Thornton LLP, an independent audit, tax 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
CALIFORNIA RESOURCES CORPORATION 7
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Board of Directors and Corporate Governance
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, Chairman of the Audit Committee and Member 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 Engineering from the Colorado School of Mines.
Skills and Qualifications
Mr. Korell’s experience over five decades in the oil and gas industry gives him a broad understanding of the upstream oil 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 due 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 Qualifications
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.
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• Chairman of the Health, Safety and Environmental Committee
• Member of the Audit Committee
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.
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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 theOur 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.
Skills and Qualifications
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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Our Board of Directors and Corporate Governance has nominated nine directors for election at the 2020 Annual Meeting. All of our nominees currently serve as CRC directors. Each nominee has agreed to serve another term, if elected.
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• Member of the Health, Safety and Environmental Committee
Ms. Powers was appointedAfter serving on our Board since our Spin-off, Mr. Korell will not be standing for reelection 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. Priorthis year. This decision is not due 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 2006any disagreement with the Company on any matters relating 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
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
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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.
Skills and Qualifications
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.policies or practices. As a result, 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 electionKorell’s term will expire at the 2020 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;
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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,Meeting, at 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.
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.
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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.
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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 meetingssize of the Board of Directors when the Chairman is not present,will be reduced from ten to nine directors.
Our Board exhibits an effective mix of diversity, perspective, skills and preparing the agenda and presiding over executive sessions of the non-management directors of the Board of Directors.experience.
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
During 2018,Set forth below is a chart that summarizes the core competencies of our Board, of Directors held six meetings, and biographical information regarding each of our directors as well as the standing committees heldspecific experience, qualifications, attributes and skills that led to the numberconclusion that such individual should serve as director. There are no family relationships between any 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 Directorsour 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.officers. In addition, to these regularly scheduled meetings, executive sessions may be called upon the request ofthere are no arrangements or understandings between any independent director. In 2018, the Board of Directors held executive sessions on the day of all of the regularly scheduled board meetings.
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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The Board’s Role in Risk Oversight
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 2018 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 atdirectors and any time has been, since the beginning of 2018,other person pursuant to which any person was 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.
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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, 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. Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation 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 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 2020 Annual Meeting of Stockholders
Meeting Date: | May 6, 2020 |
Meeting Time: | 11:00 a.m., local time |
Location: | Bakersfield Marriott at the Convention Center, 801 Truxtun Avenue, Bakersfield, California 93301 |
Record Date: | March 9, 2020 |
Purposes of the 2020 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, 2020; and |
(3) | To hold an advisory vote to approve named executive officer compensation. |
Information relevant to these matters is set forth in the accompanying proxy statement.
The close of business on March 9, 2020 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 or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.
We intend to hold the annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our annual meeting website at http://www.astproxyportal.com/ast/20758/ for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.
Beginning on March 24, 2020, 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
Senior Executive Vice President, Chief Administrative Officer and General Counsel
Corporate Secretary
If you owned shares of our common stock at the close of business on March 9, 2020, you are entitled to one vote per share upon each matter presented at our 2020 annual meeting of stockholders to be held on May 6, 2020. 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 9, 2020 to attend the 2020 annual meeting, they will need to obtain a 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 2020, 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, 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 Services 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. 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) 661-6010 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 9, 2020 or our invited guests may attend the annual meeting in person. If you plan 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. 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 in person at the annual meeting.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF
PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON MAY 6, 2020
The Notice of the 2020 Annual Meeting of Stockholders, the Proxy Statement for the 2020 Annual Meeting of Stockholders and the 2019 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2019) of California Resources Corporation are available at http://www.astproxyportal.com/ast/20758/.
2020 PROXY STATEMENT |
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CALIFORNIA RESOURCES CORPORATION i
2020 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 2020 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”
2020 Annual Meeting of Stockholders
Date: | May 6, 2020 |
Time: | 11:00 a.m., local time |
Place: | Bakersfield Marriott at the Convention Center |
801 Truxtun Avenue, Bakersfield, California 93301 | |
Record Date: | March 9, 2020 |
We intend to hold the Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting partially or solely by means of remote communication. Please monitor our Annual Meeting website at http://www.astproxyportal.com/ast/20758/ for updated information. If you are planning to attend our meeting, please check the website ten days prior to the meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting.
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 2020 | FOR | ||||
3. | Proposal 3 | Advisory vote to approve named executive officer compensation | 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
2020 PROXY STATEMENT |
Proxy Statement Summary
The Board of Directors is comprised of nine independent directors, including our Chairman, plus 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. We have adopted majority voting with respect to the uncontested election of directors to the Board of Directors. See “Required Vote and Method of Counting–Majority Voting for Directors” below.
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Director | Positions | Age | Independent | Since | Audit | Compensation | Sustainability | Governance |
William E. Albrecht | Chairman | 68 | Yes | 2014 |
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Justin A. Gannon |
| 70 | Yes | 2014 | Chair | ● |
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Harold M. Korell * | Lead Independent Director | 75 | Yes | 2014 |
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Harry T. McMahon |
| 66 | Yes | 2017 | ● | Chair |
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Richard W. Moncrief |
| 77 | Yes | 2014 | ● |
| Chair |
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Avedick B. Poladian |
| 68 | Yes | 2014 |
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Anita M. Powers |
| 64 | Yes | 2017 |
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Laurie A. Siegel |
| 64 | Yes | 2018 | ● | ● |
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Robert V. Sinnott |
| 70 | Yes | 2014 |
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|
| Chair |
Todd A. Stevens | President & CEO | 53 | No | 2014 |
|
|
|
|
* Mr. Korell is not standing for reelection, and his term will expire at the 2020 Annual Meeting.
Corporate Governance Highlights
✓ | Majority vote standard. Our Bylaws provide that each director must be elected by a majority of votes cast, not a plurality, in uncontested elections. |
✓ | Anti-Hedging and Anti-Pledging Policy. The Board expanded our Insider Trading Policy to specifically address the hedging or pledging of our securities. |
✓ | Overboarding Policy. The Board implemented 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. The Board adopted 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. |
✓ | Separate Chairman of the Board and CEO. |
✓ | 9 out of 10 Board members are independent. The Board has determined 9 out of 10 Board members are independent within the meaning of NYSE listing standards. |
✓ | Independent Board committees. Each standing committee is 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 2019, the independent directors held executive sessions on the day of all regularly scheduled Board meetings. |
✓ | 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
2020 PROXY STATEMENT |
Proxy Statement Summary
Business Performance Highlights
In 2019, 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.
2019 Strategic Priorities | Performance on Strategic Priorities |
Use our Value Creation Index (“VCI”)(1) metric to maintain disciplined, consistent and effective capital allocation | > Invested $612 million, including over $200 million of development joint venture (“JV”) capital, to strategically maximize future resource expansion and enhance free cash flow generation. Our 2019 capital program provided VCIs(1) above our 1.3 threshold. > Replaced over 111%(2) of reserves with an organic finding and development (“F&D”) cost of $8.75(2) per BOE. > Following our acquisition of the remaining interests in our flagship Elk Hills asset in 2018, CRC entered into a development JV with Alpine Energy Capital, LLC (“Alpine”) to bring reserves and cash flow forward which allowed us to strategically manage our internal capital allocation while supporting the delivery of $269 million of free cash flow, after internally funded capital.(3) |
Optimize operations to further enhance margins through efficiencies, technology and organizational synergies | > Annual adjusted EBITDAX margin(4) increased for the third year in a row while production costs decreased from 2018. > Transitioned to a new organizational structure lowering overhead costs and reducing headcount, leading to lower cash costs and improved operating margins. > Consolidated Bakersfield area employees into CRC Plaza in line with our “One CRC” approach, increasing employee communication and cross functional synergies while lowering our overall lease and maintenance costs. |
Strengthen our balance sheet | > Reduced leverage ratio(5) from 4.7x at year-end 2018 to 4.3x at year-end 2019. > Opportunistically repurchased $252 million in face value of Second Lien debt in 2019, at an average discount of 38 percent, bringing total Second Lien debt repurchases to approximately $435 million of face value, as of December 31, 2019. > Monetized a 50% working interest in portions of our Lost Hills field to reduce debt and improve our credit position. > Secured a credit agreement amendment to provide additional future flexibility in connection with potential royalty transactions. |
CALIFORNIA RESOURCES CORPORATION 3
2020 PROXY STATEMENT |
Proxy Statement Summary
2019 Strategic Priorities | Performance on Strategic Priorities |
Promote workplace diversity and maintain exceptional global sector leading safety, environmental and sustainability practices | > Achieved record safety performance in our operations with zero recordable employee workplace injuries and received 22 National Safety Council awards. Our 2019 injury and illness incidence rate (IIR) of 0.34 per 200,000 employee and contractor hours set a new CRC record and was 62% better than the crude oil and natural gas extraction sector’s average of 0.9 for 2018. > Attained CDP’s highest 2019 climate disclosure ranking among all U.S. oil and gas companies with an A-, tying for first with one other U.S.-based E&P. > Supplied a CRC record 5.35 billion gallons of reclaimed water to agricultural water districts, upholding our important role as a net water supplier in California. > Achieved our 2019 quantitative health, safety and environmental (“HSE”) metrics and continued to advance specific projects that position us to meet our 2030 Sustainability Goals, including surpassing our 2030 methane emission reduction goal and making significant progress on water recycling, renewables integration and carbon capture and sequestration goals. > Launched CRC’s Intrepid Women’s Leadership Program to promote women’s professional development and leadership. Sponsored a variety of scholarship, internship and training programs and developed targeted programs to diversify and expand our current workforce and future candidates, including students from disadvantaged communities. |
(1) | We use a VCI metric for project selection and capital allocation across our portfolio of opportunities. We calculate VCI for each of our projects by dividing the net present value of the project’s expected pre-tax cash flow over its life by the present value of the investments, each using a 10% discount rate. |
(2) | See Annex A for CRC’s calculation of the non-GAAP measures of reserve replacement ratio and F&D costs. |
(3) | See Annex A for how CRC calculates the non-GAAP measure of free cash flow, after internally funded capital. |
(4) | See Annex A for CRC’s calculation of the non-GAAP measure of adjusted EBITDAX and adjusted EBITDAX margin. |
(5) | CRC calculated the leverage ratio by dividing the face value of its total long-term debt by the last twelve months adjusted EBITDAX. |
Compensation Program Highlights
CRC’s stock price performance in 2019 continued to be very volatile, ending the year 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 the performance continued to impact the realizable compensation for our named executive officers. For 2019, our Compensation Committee continued the alignment of the long-term compensation to stockholder returns by granting entirely share-based long-term incentive awards.
CALIFORNIA RESOURCES CORPORATION 4
2020 PROXY STATEMENT |
Proxy Statement Summary
In the first quarter of 2019, based on feedback received from stockholder outreach, the Compensation Committee took the following actions:
Reduced the number of metrics under the annual incentive awards to provide greater focus on key objectives.
Set the performance targets under the annual incentive awards at more rigorous levels than the prior year.
Changed the performance criteria under the long-term performance-based award to be based 50% on the three-year average VCI and 50% on three-year relative total shareholder return (“TSR”).
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, incorporating best practices, and is governed by an engaged Compensation Committee. Our annual incentive awards and long-term incentive plans are performance-based and are intended to align with the long-term best interests of stockholders and retain our highly experienced, high-performing management team.
The 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. A majority 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 require our named executive officers and directors to have 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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Proxy Statement Summary
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. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do no 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 no encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives or inappropriate risk for the Company.
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. 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 excessive or inappropriate risk for the Company.
CALIFORNIA RESOURCES CORPORATION 6
2020 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 2020 Annual Meeting. All of our nominees currently serve as CRC directors. Each nominee has agreed to serve another term, if elected.
After serving on our Board since our Spin-off, Mr. Korell will not be standing for reelection to the Board of Directors this year. This decision is not due to any disagreement with the Company on any matters relating to the Company’s operations, policies or practices. As a result, Mr. Korell’s term will expire at the 2020 Annual Meeting, at which time the size of the Board of Directors will be reduced from ten to nine directors.
Our Board exhibits an effective mix of diversity, perspective, skills and experience.
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
Set forth below is a chart that summarizes the core competencies of our Board, 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. There are no family relationships between any of our directors and executive officers. In addition, there are no arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person was selected as a director or an executive officer.
Director Skills and Qualifications
CEO Experience | ● | ● | ● | ● | 4 of 10 | |||||
Corporate Governance Expertise | ● | ● | ● | ● | ● | ● | ● | 7 of 10 | ||
Engineering/Geological Background | ● | ● | ● | ● | ● | 5 of 10 | ||||
Financial/Capital Markets Expertise | ● | ● | ● | ● | ● | 5 of 10 | ||||
Oil and Gas Industry Experience | ● | ● | ● | ● | ● | ● | ● | 7 of 10 | ||
Risk Management Expertise | ● | ● | ● | ● | ● | 5 of 10 | ||||
CALIFORNIA RESOURCES CORPORATION 7
2020 PROXY STATEMENT |
Board of Directors and Corporate Governance
William E. Albrecht Chairman Director since: 2014 Age: 68 | • Former VP at Occidental • 39+ years’ experience in domestic oil and gas • Director of Halliburton Co., Valaris plc and |
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 40 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 Valaris plc (formerly 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, Governance and Sustainability Committee, and is its Lead Independent Director. 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. Since February 2020, Mr. Albrecht has served on the board of directors of Laredo Petroleum, Inc. and is a member of its Compensation Committee and its Nominating and Corporate Governance 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.
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Board of Directors and Corporate Governance
Justin A. Gannon Director since: 2014 Age: 70 | • Former executive at Grant Thornton • Audit Partner at Arthur Andersen for 21 years • Director of CrossAmerica Partners |
• Chairman of the Audit Committee
• Member of the Compensation Committee
Mr. Gannon has served on the Board of Directors of CRC since 2014. Since 2013, Mr. Gannon has acted as an independent consultant and private investor. From 2003 to 2013, Mr. Gannon served in various roles at Grant Thornton LLP, an independent audit, tax 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, Chairman of the Audit Committee and Member of the Conflicts Committee of the general partner of CrossAmerica Partners LP, a publicly-traded master limited partnership engaged in motor fuels distribution. He served as a member of the board of directors and as audit committee chairman for Vantage Energy Acquisition Company from April 2017 until its liquidation in April 2019. Mr. Gannon is a former chairman of the Board of Directors of American Red Cross chapters in the Tulsa, Oklahoma and San Antonio, Texas areas. He 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.
Harold M. Korell Lead Independent Director Director since: 2014 Age: 75 Not Standing for Reelection | • Former Chairman of Southwestern Energy Company • Former CEO of Southwestern Energy Company |
• Member of the Nominating and Governance Committee
• Member of the Sustainability 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
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Board of Directors and Corporate Governance
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 is a Trustee Emeritus at the Baylor College of Medicine. Mr. Korell holds a degree in Chemical and Petroleum Refining Engineering from the Colorado School of Mines.
Skills and Qualifications
Mr. Korell’s experience over five decades in the oil and gas industry gives him a broad understanding of the upstream oil 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 due to his involvement with a number of them early in his career that lend specific knowledge and understanding to Board discussions.
Harry T. McMahon Director since: 2017 Age: 66 | • Former Executive Vice Chairman for Bank of • Senior Advisor to G100 Network • Director of Parsons Corporation |
• 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 is a director of Parsons Corporation, a digitally enabled solutions provider and a global leader in many diversified markets with a focus on security, defense and infrastructure, and is a member of its Audit and Compensation committees. Mr. McMahon also serves as a trustee of Claremont McKenna College. 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 Qualifications
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.
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2020 PROXY STATEMENT |
Board of Directors and Corporate Governance
Richard W. Moncrief Director since: 2014 Age: 77 | • CEO of Moncrief Oil International • Extensive experience in the upstream oil and gas industry |
• Chairman of the Sustainability Committee
• Member of the Audit Committee
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.
Avedick B. Poladian Director since: 2014 Age: 68 | • Former COO and EVP of Lowe Enterprises • Former Partner at Arthur Andersen • Director of Occidental and Public Storage |
• 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
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Board of Directors and Corporate Governance
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 a member 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 Corporate Governance and Nominating Committee and Chair of the Audit Committee. He previously served as a director of California Pizza Kitchen.
Skills and Qualifications
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.
Anita M. Powers Director since: 2017 Age: 64 | • Former EVP Worldwide Exploration of Occidental • Director of EQT Corporation • Senior Geoscientist |
• Member of the Sustainability 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. Ms. Powers serves 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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Board of Directors and Corporate Governance
Laurie A. Siegel Director since: 2018 Age: 64 | • President of LAS Advisory Services • Former Senior VP of Tyco International Ltd. • Program Chair of the G100 Talent Consortium |
• Member of the Audit Committee
• Member of the Compensation Committee
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, and FactSet Research Systems Inc., a multinational financial data and software company. She is also a director of private company Scoop Technologies. From 2015 to 2019, she served as a director and compensation committee chair of Volt Information Sciences, 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 provides the
Board with unique insight into various issues including talent management, succession planning, executive compensation and culture.
Robert V. Sinnott Director since: 2014 Age: 70 | • Co-Chairman of Kayne Anderson Capital • Director of PAA GP Holdings |
• 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
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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.
Skills and Qualifications
As the Co-Chairman 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 experience analyzing industry players and managing a multi-billion dollar investment enterprise allows 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.
Todd A. Stevens President & CEO Director since: 2014 Age: 53 | • Former VP Corporate Development at Occidental • Former VP California Operations and VP of Acquisitions and Finance at Occidental |
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.
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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. For its last vacancy, 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.
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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.
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 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. Albrecht, 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. Mr. Stevens, the 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.
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2020 PROXY STATEMENT |
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. The Board of Directors has found that this structure enables the CEO to focus on operation of the Company’s business, while the Chairman focuses on leading the Board of Directors in its oversight role.
Mr. Korell has served as Lead Independent Director since December 2014. 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 2019, the Board of Directors held five 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 2019.
Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meetings of stockholders. All of our directors attended the annual meeting in May 2019.
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 2019, the Board of Directors held executive sessions on the day of all of the regularly scheduled board meetings.
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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Board of Directors and Corporate Governance
Audit Committee | ||||
Justin A. Gannon, Harry T. McMahon Richard W. Moncrief Laurie A. Siegel | 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 Mr. Gannon qualifies as an audit committee financial expert under the applicable rules of the Securities Exchange Act of 1934, as amended. | |||
5 Meetings Held in 2019 | ||||
Compensation Committee | ||||
Justin A. Gannon Harry T. McMahon, Avedick B. Poladian Laurie A. Siegel | 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. | |||
4 Meetings Held in 2019 | ||||
CALIFORNIA RESOURCES CORPORATION 18
2020 PROXY STATEMENT |
Board of Directors and Corporate Governance
Nominating and Governance Committee | ||||
Harold M. Korell Avedick B. Poladian Robert V. Sinnott, | 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, non-employee or outside 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. | |||
4 Meetings Held in 2019 | ||||
Sustainability – Health, Safety, Environment and Community Committee | |||
Harold M. Korell Richard W. Moncrief, Anita M. Powers | Our Sustainability – Health, Safety, Environment and Community Committee (“Sustainability Committee”) is composed entirely of independent directors. The committee reviews and discusses with management the status of strategies, objectives, issues, laws and regulations regarding sustainability; health, safety and environment (“HSE”); and community engagement. It also reviews our policies and programs designed to (i) ensure compliance with applicable HSE laws and regulations, (ii) promote sustainability and conservation of natural resources and (iii) engage proactively with communities. The committee periodically reports to the Board of Directors with respect to sustainability, HSE and community engagement pertaining to the Company. | ||
4 Meetings Held in 2019 | |||
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2020 PROXY STATEMENT |
Board of Directors and Corporate Governance
The Board’s Role in Risk Oversight
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.
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 Overseas 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 in our Company’s operations relating to health, safety and the environment.
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 risk 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 in the Company’s operations relating to health, safety, the environment, community engagement and sustainable development.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee is now, or at any time since the beginning of 2019 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 2019, 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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2020 PROXY STATEMENT |
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, 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, Suite 315200
Santa Clarita, California 91355
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, the Chairman 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 Environmental 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, Suite 315,200, Santa Clarita, California 91355. 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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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 discusses transactions and relationships with related persons since the beginning of our most recently completed fiscal year.
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%7.35% of the general partner of Plains, approximately 1.41%1.36% of the limited partner units of Plains and an additional approximately 5.04%3.59% 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, 2018,2019, transactions with Plains accounted for approximately $181$241 million of our netoil and gas 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, 2018during 2019 continued to hold up to approximately $12.5$18.5 million in aggregate principal amount of our 8% secured second lien notes due 2022.2022, but sold its remaining interest in May 2019 and did not reacquire an interest in the notes thereafter. Mr. Sinnott did not participate in Kayne Anderson’s decision-making process with respect to these transactions.
CALIFORNIA RESOURCES CORPORATION 2122
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Other Governance Matters
In 2018,2019, we reached out to our largest shareholders, including those who held in aggregate over one-thirdhalf 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 and 2019 annual meeting,meetings, 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% in 2018 and 43% in 2019 of the total outstanding shares, which were short of the 75% required approval threshold. However, weWe received feedback from our shareholder engagement meetings that we should resubmitit is reasonable to suspend our efforts to pass these proposals for consideration at the 2019 Annual Meeting,until our shareholder composition changes to more institutional ownership to make such passage more likely, so the Board has not included these proposals in this proxy statement.
Sustainability and Stewardship
In 2017, CRCwe consulted with itsour 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. As a result of this dialogue, CRCin 2017 we adopted four 2030 Sustainability Goals – for water recycling, renewables,integration of renewable energy into our operations, methane emission reduction and carbon capture and sequestration – in 2017 which advance the State of California’s 2030 goals and aid in our life-of-field planning process. CRCplanning. We issued a Sustainability Report describing the goals that year, in addition to itsour 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 launchedour launch as an independent company and also a baseline year for certain state goals.
In 2018, CRCwe adopted specific quantitative targets for the Sustainability Goals, and itsour 2018 Sustainability Report described those targets, the specific projects and teams assigned to each goal and the Company’sour progress toward meetingattaining the goals. CRC has committed to reportWe provide updates at least annually on itsour progress, which isin 2018 and 2019 was 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.executives. 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 2018latest 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 by adding 10 MW from renewable sources.
Methane Goal -- Reduce methane emissions by 50%.
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%.
CALIFORNIA RESOURCES CORPORATION 2223
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Other Governance Matters
CRC’s 2030In 2019, the Board updated the name and scope of the Sustainability GoalsCommittee to underscore the Company’s commitmentour commitments to serve as a responsible steward of California’s natural resources, to integrate sustainability, HSE and community engagement into our life-of-field planning and to advance California’s long-term goals. Importantly, by helping to safely and responsibly increase local production of oil, natural gas and electricity, CRCwe also:
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We view our workforce as an asset and the Board provides oversight over significant aspects of our human capital. Management provides regular updates to and receives guidance from the Board with respect to employee engagement, diversity and career development initiatives.
CALIFORNIA RESOURCES CORPORATION 2324
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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 an “audit committee financial expert” as defined by the rules and regulations of the SEC.
In connection with our financial statements for the year ended December 31, 2018,2019, 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;2019;
discussed with CRC’s independent registered public accounting firm, KPMG LLP, the matters required to be discussed by applicable auditing standards;
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, 2018,2019, for filing with the SEC.
Audit Committee,
Justin A. Gannon
Harry T. McMahon
Richard W. Moncrief
Laurie A. Siegel
February 19, 201926, 2020
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Compensation Discussion and Analysis
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&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 executive officers” or “NEOs” for the year ended December 31, 2018,2019, who are identified below:
Name |
| Position |
Todd A. Stevens |
| President and Chief Executive Officer |
Marshall D. Smith |
| Senior Executive Vice President and Chief Financial Officer |
Darren Williams |
| Executive Vice President–Operations and Geoscience |
Charles F. Weiss |
| Executive Vice President–Public Affairs |
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| Senior Executive Vice |
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Conversion of Occidental Long-Term Incentive Awards in Connection with Spin-off in 2014 | 53 |
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Compensation Discussion and Analysis
Execution on Our Strategic Priorities in 20182019
In 2018,2019, our management team continued to deliver 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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Use our Value Creation Index | > > Replaced over > |
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Strengthen our balance sheet | > > Opportunistically repurchased $252 million in face value of Second Lien debt in 2019, at > Monetized a > |
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Compensation Discussion and Analysis
| Performance on Strategic Priorities |
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| > > Attained CDP’s highest 2019 climate disclosure ranking among all U.S. oil and gas companies with > Supplied a CRC record 5.35 billion gallons of reclaimed water to agricultural water districts, upholding our > Achieved > Launched CRC’s Intrepid Women’s Leadership Program to promote women’s professional development and leadership. Sponsored a variety of scholarship, internship and training programs and developed
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(1) | We use a VCI metric for project selection and capital allocation across our portfolio of opportunities. We calculate VCI for each of our projects by dividing the net present value of the project’s expected pre-tax cash flow over its life by the present value of the investments, each using a 10% discount rate. |
(2) | See Annex A for |
(3) | See Annex A for how CRC calculates the non-GAAP measure of free cash flow, after internally funded capital. |
(4) | See Annex A for CRC’s calculation of the non-GAAP |
| CRC calculated the leverage ratio by dividing the face value of its total long-term debt by the last twelve months adjusted EBITDAX. |
Historical Perspective – Drivers of Strategic Priorities
CRC was spun off from Occidental Petroleum Corporation (“Occidental”) on November 30, 2014. Occidental burdened CRC with a substantial debt load of $6.3 billion, which peaked at $6.765$6.8 billion including the effect of the capital program being implemented by OxyOccidental immediately prior to the spin-off,Spin-off, and implemented the spin-offSpin-off just as a severe and extended downturn in commodity prices began.
Our highly leveraged balance sheet, resulting from decisions made by Occidental prior to the spin-off,Spin-off, has been 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%86%, from $2.8 billion at the spin-offSpin-off to $0.8$0.4 billion at December 31, 2018.2019.
To address stockholder concerns regarding CRC’s leverage, our management team focused on the difficult task of reducing our debt in the low commodity price environment. Since the second quarter
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2020 PROXY STATEMENT |
Compensation Discussion and Analysis
following the spin-off,Spin-off, when our debt level reached its peak, management has significantly reduced our debt without unduly increasing our interest costs or significantly diluting our equity.
As a result of these priorities, CRC has had very limited capital available to invest and production has declined compared to CRC’s peers, who had greater access to capital because of their lower leverage.
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Compensation Discussion and Analysis
The charts below outline the swift, decisive actions management has taken through the commodity downturn that have positioned CRC for growth as commodity prices recover, as well as the different mechanisms our management team employedutilized to reduce CRC’s outstanding debt. During this period our management team worked constructively with our bank lenders to negotiate eightmultiple amendments to our credit facility, including an amendment in 2018.2019.
HISTORY OF PROACTIVE DECISIONS
Brent Crude Oil Price ($/BBL) $20 $50 $80 $110 07/14 07/15 07/16 07/17 07/18 07/19 5 10 15 20 25 30 Brent Crude Price CRC + JV Rig Count CRC Rig Count VALUE PRESERVATION SEPARATION ANNOUNCEMENT Spin Date Cut rigs Began Hedging Managed liabilities Utilized existing facilities Protected base production TRANSITION TO OFFENSE Increased activity Engaged in JVs Locked in hedges Increased liquidity Extended maturities QUICK RESPONSE TO PRICE CHANGE Invest for value preservation Drill high-graded portfolio Invest in exploration and facilities Strengthen balance sheet Entered into JV with Alpine
HISTORY OF PROACTIVE DECISIONS Brent Crude Oil Prices ($/BBL) $20 $50 $80 $110 Rig Count 5 10 15 20 25 30 07/14 01/15 07/15 01/16 07/16 01/17 07/17 01/18 07/18 01/19 07/19 01/20 Brent Crude Price CRC + JV Rig Count CRC Rig Count SEPARATION ANNOUNCEMENT VALUE PRESERVATION TRANSITION TO OFFENSE QUICK RESPONSE TO PRICE CHANGE Spin Date Cut rigs Began hedging Managed liabilities Utilized existing facilities Protected base production Increased activity Engaged in JVs Locked in hedges Increased liquidity Extended maturities Invest for value preservation Drill high-graded portfolio Invest in exploration and facilities Strengthen balance sheet Entered into JV with Alpine
ACTIONS TO REDUCE DEBT
Net Debt ($MM) 4,000 5,000 6,000 7,000 2Q 2015 Net Debt Reduction 6,765 3Q and 4Q 2015 $634 Million During 2016 $875 million During 2017 $(35) Million During 2018 $56 million During 2019 $272 million YE 2019 Total $1,802 million 4,963 Represents mid-second quarter 2015 peak net debt.
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Compensation Discussion and Analysis
The table below compares CRC’s stock performance to peers.our 2019 Peer Group identified on page 36.
EQUITY PERFORMANCE 0% 20% 40% 60% 80% 100% 120% Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 –CRC –2019 Peer Group
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In summary, our 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 deleveraging the balance sheet and improving CRC’s strategic position to take advantage of potential future commodity price increases.
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Compensation Discussion and Analysis
Aligning Pay with StockholderStockholder Interests
Since our spin-offSpin-off in 2014, the Compensation Committee has taken several actions to ensure our executive compensation program is aligned with stockholder interests.
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
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Compensation Discussion and Analysis
Linkage Between PayPay and PerformancePerformance
Our compensation program is well 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.
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Compensation Discussion and Analysis
The pay mix at target grant date values for our chief executive officer and other named executive officersNEOs for 20182019 was primarily long-term and performance-based.
PAY MIX OF CEO 12% 13% 45% 30% 88% At Risk salary annual incentive performance-based long-term incentive time-vested long-term incentive at risk AVERAGE PAY MIX OF NEOs OTHER THAN CEO 21% 19% 36% 24% 79% At Risk
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Compensation Discussion and Analysis
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.
Stock Price 12/31/2019 vs. Grant Date 22% 59% 48% 49% 42% Realizable Pay 38% of Target 110% of Target 85% of Target 62% of Target 58% of Target millions $6.7 $2.5 $5.0 $5.5 $6.5 $5.5 $7.0 $4.4 $7.2 $4.2 Target Realizable 2015 2016 2017 2018 2019 Base Salary Annual Incentive Long Term Incentives
Notes regarding the CEO Realizable Pay:
Realizable Pay is defined as: (i) base salary paid each year; (ii) actual 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;2019; (iv) for restricted stock grants, the value of each year’s grant based on the December 31, 20182019 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;2019; 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 target 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 year at the CRC Base Salary, which was not increased over the initial Base Salary at the time of the Spin-off.2019.
2015 realizable Annual Incentiveannual 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.
2015 realizable Long-Termlong-term Incentives were all stock-based and reflect 20% of the target long-term incentive value in the form of stock options that are significantly underwater with an exercise price of $42.00 compared to the stock price of $17.04$9.03 as of December 31, 2018.2019. The performance-based portion reflects actual payout at 116.55% of target.
CALIFORNIA RESOURCES CORPORATION 322016 realizable base salary reflects a 10% reduction from March 2016 to October 2016 implemented to conserve cash during the most severe period of the downturn in oil prices.
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Compensation Discussion and Analysis
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2016 target Long-Termlong-term Incentives reflect a total grant date value that was 30% lower than the prior year to be consistent with anticipated changes in peer company grant values due to the sustained downturn in oil prices.
2016 realizable Long-Termlong-term Incentives reflect the effect on the RSU portion (50% of the target value) of the increasedecrease in the stock price from the May 27, 2016 grant date ($15.40) to December 31, 20182019 ($17.04)9.03). The performance-based portion reflects actual payout at 140.3% of target under the cash-based Performance Incentive Award which was not linked to the stock price.
2017 realizable Long-Termlong-term Incentives reflect the effect on the RSU portion (50% of the target value) of the decrease in the stock price from the February 13, 2017 grant date ($18.81) to December 31, 20182019 ($17.04)9.03).
2018 realizable Long-Termlong-term Incentives reflect the effect of the decrease in the stock price from the February 21, 2018 grant date ($18.34) to December 31, 20182019 ($17.04)9.03).
2019 realizable long-term Incentives reflect the effect of the decrease in the stock price from the February 19, 2019 grant date ($21.71) to December 31, 2019 ($9.03).
CALIFORNIA RESOURCES CORPORATION 32
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
Stockholder OutreachStockholder Outreach
We regularly request meetings with several of our stockholders to discuss our governance and executive compensation practices. Overall, weWe received positive feedback on our corporate governance and compensation practices as part of our 20182019 stockholder outreach initiative, in particular with regards to the changes we made to our compensation program in 2018:2019:
WHAT WE HEARD | WHAT WE DID |
✓ Stockholders | ✓ |
✓ Stockholders would like to see greater proportion of annual incentive based on quantitative measures | ✓ Reduced |
✓ Stockholders | ✓ Provided more detailed disclosure regarding payouts under the strategic and individual portion of our annual incentive beginning with the 2018 proxy statement |
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 20182019 on the compensation paid to our named executive officersNEOs in 2017,2018, resulted in a 96.5%97.5% 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, Meridian Compensation Partners, LLC (“Meridian”), feedback from our ongoing stockholder outreach initiative and review of data relating to pay practices of our compensation peer group.
CALIFORNIA RESOURCES CORPORATION 33
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Compensation Discussion and Analysis
Elements of Our Compensation ProgramCompensation Program
The following core principles form the foundation of our compensation program:
Compensation programs should motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, and appropriately balance risk versus potential reward.
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 offer an opportunity for 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 focus our executives on the long-term performance of the Company, thereby more closely aligning our executives’ interests with those of our stockholders.
CALIFORNIA RESOURCES CORPORATION 33
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
Compensation ProgramProgram Best PracticesPractices
Our executive compensation program is well-designed, incorporates best practices and is governed 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 Compensation Committee has engaged in best practices to further 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. A majority 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 require our named executive officers and directors to have 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.
CALIFORNIA RESOURCES CORPORATION 34
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Compensation Discussion and Analysis
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 ssiveexcessive 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.
Characteristic |
Rationale
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| • Indicator of size, situational factor and financial strategy
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• Indicator of geographic footprint, business model, operational complexity and competition for talent • The Compensation Committee does not believe executives at smaller companies face comparable responsibilities and challenges |
Enterprise Value | •Indicator of size •Due to our highly leveraged balance sheet, the Compensation Committee focused on Enterprise Value statistics |
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.
CALIFORNIA RESOURCES CORPORATION 35
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Compensation Discussion and Analysis
Prior to making 20182019 compensation program design decisions in February 2018,2019, the Compensation Committee reviewed our 20172018 compensation peer companies and decided an increasedetermined that no changes were needed, other than removal of RSP Permian, Inc. and Energen Corporation, due their acquisitions by other companies. The following companies reflect our “2019 Peer Group”.
Company | Asset Value (September 2018) |
(October 2018) |
Range Resources Corporation | $11,826 | $8,481 |
Murphy Oil Corporation | $9,945 | $7,955 |
Whiting Petroleum Corporation | $7,562 | $7,619 |
Parsley Energy, Inc. | $9,139 | $11,119 |
WPX Energy, Inc. | $7,770 | $10,906 |
QEP Resources, Inc. | $7,390 | $5,462 |
Southwestern Energy Company | $7,042 | $6,641 |
Diamondback Energy, Inc. | $8,954 | $16,033 |
Oasis Petroleum Inc. | $7,465 | $7,400 |
SM Energy Company | $6,736 | $6,053 |
Gulfport Energy Corporation | $6,054 | $3,955 |
Cabot Oil & Gas Corporation | $4,397 | $10,968 |
EP Energy Corporation | $5,174 | $4,847 |
PDC Energy, Inc. | $4,443 | $4,515 |
Newfield Exploration Company | $5,461 | $7,977 |
Cimarex Energy Co. | $5,531 | $10,471 |
Denbury Resources Inc. | $4,534 | $5,781 |
Callon Petroleum Company | $3,507 | $3,383 |
Carrizo Oil & Gas, Inc. | $2,722 | $3,981 |
Laredo Petroleum, Inc. | $2,209 | $2,677 |
Matador Resources Company | $2,556 | $4,589 |
25th Percentile | $4,442 | $4,589 |
50th Percentile | $6,054 | $6,641 |
75th Percentile | $7,562 | $8,481 |
California Resources Corporation | $6,940 | $8,328 |
Percentile Rank | 58% | 73% |
Following this determination, but prior to making 2019 compensation program design decisions in February 2019, the numberCompensation Committee removed EP Energy Corporation from the Peer Group compensation analysis in light of peer companies from 15its management turnover which led 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 groupcompensation irregularities.
*
CALIFORNIA RESOURCES CORPORATION 36
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Compensation Discussion and Analysis
In July 2018,October 2019, the Compensation Committee reviewed the compensation peer companies and determined that no changes were needed for 20192020 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 EnergenNewfield Exploration Company and EP Energy Corporation, in light of its pending acquisition.their acquisition and distressed condition, respectively.
Company | Asset Value (September 2019) | Enterprise Value (October 2019) |
Diamondback Energy, Inc. | $ 23,171 | $ 19,167 |
Murphy Oil Corporation | $ 13,536 | $ 8,786 |
Parsley Energy, Inc. | $ 9,838 | $ 7,567 |
Range Resources Corporation | $ 9,728 | $ 4,686 |
WPX Energy, Inc. | $ 8,553 | $ 6,349 |
Whiting Petroleum Corporation | $ 7,776 | $ 3,526 |
Oasis Petroleum Corporation | $ 7,710 | $ 4,123 |
Cimarex Energy Co. | $ 7,596 | $ 6,882 |
Southwestern Energy Company | $ 6,545 | $ 3,288 |
Gulfport Energy Corporation | $ 6,465 | $ 2,644 |
SM Energy Company | $ 6,392 | $ 3,756 |
QEP Resources, Inc. | $ 5,504 | $ 2,787 |
Denbury Resources Inc. | $ 4,732 | $ 3,096 |
PDC Energy, Inc. | $ 4,595 | $ 2,840 |
Cabot Oil & Gas Corporation | $ 4,564 | $ 8,005 |
Callon Petroleum Company | $ 3,915 | $ 2,006 |
Matador Resources Company | $ 3,751 | $ 3,434 |
Carrizo Oil & Gas, Inc. | $ 3,635 | $ 2,676 |
Laredo Petroleum, Inc. | $ 2,620 | $ 1,491 |
25th Percentile | $ 4,579 | $ 2,813 |
50th Percentile | $ 6,465 | $ 3,526 |
75th Percentile | $ 8,164 | $ 6,616 |
California Resources Corporation | $ 7,032 | $ 6,540 |
Percentile Rank | 58% | 74% |
CALIFORNIA RESOURCES CORPORATION 37
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Compensation Discussion and Analysis
In February 2018,2019, the Compensation Committee made 20182019 compensation program design decisions focused on paying for performance, motivating and retaining the current management team and managing dilution and the remaining shares available for grants with the continued low stock price.
Compensation Program Changes Made for 20182019
The Compensation Committee considered feedback received through stockholder outreach and made the following changes to the compensation program for 2018:2019:
Reduced the strategic and individual objective portionnumber of metrics under the annual incentive from 40%awards 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 awardsprovide greater focus on key objectives
Changed the performance criteria under the long-term performance-based award to be equity-basedbased 50% on the three-year average VCI and 50% on three-year relative total shareholder return
20182019 Compensation Program Elements
Our 20182019 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:
20182019 COMPENSATION PROGRAM ELEMENTS
Restricted Stock ( 40%(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 -Total Shareholder Return – CRC change in costs vs. 2019 Peer Companies' changeCompanies > 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 > vciVCI (current year) > productionEBITDAX > production costsDebt > ebitdax > debt > hseHSE – combined injury and illness rate (IIR) > hseHSE – spill prevention rate > hseHSE – net water supplied to agriculture > individualIndividual goals
CALIFORNIA RESOURCES CORPORATION 38
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Compensation Discussion and Analysis
The Compensation Committee reviewed the base salaries of the NEOs to determine if they remained appropriately positioned against the market data and internally aligned. Thealigned, and as a result the Compensation Committee adjusted base salariesdecided to make no changes for some of the NEOs2019 based on the individual’s performance, scope of job responsibilities, internal alignment and position relative to peer group compensation data.Mr. Preston was not an NEO in 2018, so his 2018 annual base salary is not disclosed.
Name | 2018 Annual Base Salary | 2017 Annual Base Salary |
Rationale for Action | 2019 Annual Base Salary | 2018 Annual Base Salary |
Rationale for Action | |
Todd A. Stevens | $875,000 | $825,000 | Performance and alignment with peer group median | $875,000 | $875,000 | Well positioned internally and against peer group | |
Marshall D. Smith | $600,000 | $600,000 | Well positioned internally and against peer group | $600,000 | $600,000 | Well positioned internally and against peer group | |
Darren Williams | $450,000 | $450,000 | Well positioned internally and against peer group | $450,000 | $450,000 | Well positioned internally and against peer group | |
Charles F. Weiss | $440,000 | $425,000 | Performance and internal alignment | $440,000 | $440,000 | Well positioned internally and against peer group | |
Shawn M. Kerns | $400,000 | - | Scope of responsibilities and internal alignment | ||||
Michael L. Preston | $440,000 | - | Scope of responsibilities and internal alignment |
20182019 Annual Incentive Design
The annual incentive component of our 20182019 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 2018.2019. Target performance criteria were set at levels that would represent successful execution of the 20182019 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 20182019 business plan. Performance targets were set at more rigorous levels than prior years for VCI, EBITDAX and Debt.
CALIFORNIA RESOURCES CORPORATION 39
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Compensation Discussion and Analysis
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 20182019 results under each quantitative performance measure and the resulting percentage of target bonus payout.
Performance Measure (1) |
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 |
Performance Measure (1) |
Component Weighting (a) |
Threshold (50% Payout) |
Target (100% Payout) |
Maximum (200% Payout) |
2019 Results |
Component Payout as Percent of Target (b) | Resulting % of Target Bonus Payout | ||||||
Investment
Value Creation Index (VCI) |
Investment
Value Creation Index (VCI) |
20% |
1.10 |
1.30 |
1.50 |
1.59 |
200% |
40.00% |
Investment
Value Creation Index (VCI) |
25% |
1.20 |
1.40 |
1.60 |
1.57 |
185% |
46.25% | ||||||
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) |
Health, Safety & Environmental (HSE) |
10% |
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Health, Safety & Environmental (HSE) |
10% |
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- Combined IIR (33%) |
- Combined IIR (33%) |
|
0.60 |
0.50 |
0.40 |
0.50 |
100% |
3.33% |
- Combined IIR (33%) |
|
0.60 |
0.50 |
0.40 |
0.34 |
200% |
6.67% | ||||||
- Spill prevention rate (33%) | - Spill prevention rate (33%) |
|
99.9991% |
99.9995% |
99.9998% |
99.9996% |
133% |
4.44% | - Spill prevention rate (33%) |
|
99.9992% |
99.9995% |
99.9998% |
99.9997% |
167% |
5.56% | ||||||
- Net water supplied to Ag (34%) | - Net water supplied to Ag (34%) |
| 180% | 209% | 238% | 276% | 200% | 6.67% | - Net water supplied to Ag (34%) |
| 180% | 209% | 238% | 307% | 200% | 6.67% | ||||||
Liquidity
- EBITDAX - Debt |
Liquidity
- EBITDAX - Debt |
20% 20% |
$762 $5.0 |
$800 $4.5 |
$880 $4.0 |
$1,047 $5.3 |
200% 0% |
40.00% 0.00% |
Liquidity
- EBITDAX - Debt |
25% 20% |
$933 $4.9 |
$980 $4.4 |
$1,078 $3.9 |
$1,142 $4.98 |
200% 0% |
50.00% 0.00% | ||||||
Total Quantitative Measures |
Total Quantitative Measures |
80% |
|
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130.56% |
104.45% |
Total Quantitative Measures |
80% |
|
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143.94% |
115.15% | ||||||||||
Strategic and Individual Objectives |
Strategic and Individual Objectives | 20% | Multiple Individual Measures |
| 0% - 200% | 0% - 40% |
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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| Range of Potential Payouts | 115.15% - 155.15% | ||||||||||
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| Negative Discretion Applied by Compensation Committee | - |
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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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Final Payout Range
| 115.15% - 155.15% |
(1) | Descriptions of the performance measures: |
Performance Measure | Description |
Value Creation Index (VCI) | We use a Value Creation Index (VCI) for project selection and capital allocation across our portfolio of opportunities. VCI is a ratio that measures the present value of the future cash flows from all development (new drills and capital workovers) in each plan year per discounted dollar of investment, calculated The discounted expected future cash flows of the 2019 investments were calculated by taking our share of future revenues minus production |
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HSE – Combined IIR | Injury and illness incidence rate of employees and |
HSE – Spill | (Boe produced minus net reportable oil spill volume) divided by Boe |
HSE – Net water supplied to Ag | Volume of water supplied to agriculture divided by volume of fresh water |
EBITDAX | Adjusted EBITDAX (millions) |
Debt | Face value of outstanding debt less |
CALIFORNIA RESOURCES CORPORATION 40
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Compensation Discussion and Analysis
All executives were subject to the same Investment, Operations, Health, Safety and Environmental, and Liquidity quantitative measures. The actual 20182019 results against these goals yielded a payout of 130.56%143.94% of target for the quantitative measures portion of the annual incentive.
20182019 Annual Incentive Targets
The Compensation Committee reviewed the annual incentive targets for each of our NEOs against Peer Group market data, and with consideration to internal equity.alignment. In February 2018,2019, the Compensation Committee determined that the 20182019 annual incentive targets for the NEOs, other than Mr. Kerns,Weiss, remained appropriate at the 20172018 levels and no changes were made for 2018.2019. For Mr. Kerns,Weiss, the Compensation Committee determined his target should be increased from 75% to 80% based on the scope of his job Peer Group market data and internal equity.alignment. Mr. Preston was not an NEO in 2018, so his 2018 annual incentive target is not disclosed.
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Name | 2019 Annual Incentive Target (as a % of base salary) | 2018 Annual Incentive Target (as a percent of base salary) |
Todd A. Stevens | 110% | 110% |
Marshall D. Smith | 100% | 100% |
Darren Williams | 90% | 90% |
Charles F. Weiss | 80% | 75% |
Michael L. Preston | 85% | - |
20182019 Individual Annual Incentive Results
For each of our NEOs, the executive’s performance in 20182019 was considered against his strategic and individual objectives in determination of the payout amounts under the 2018 Annual Incentive2019 annual incentive as described below. Each of the NEOs had individual objectives covering some of the following areas:
| - | Execution of strategic plan and initiatives |
| - | Debt management |
| - | Quality and consistency of risk management efforts |
| - | Results of ongoing and planned regulatory approval processes |
| - | Outreach and dialogue with stakeholders on key community and public policy issues |
| - | Succession planning and leadership development |
| - | Stockholder relations |
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 Discussion and Analysis
Todd A. Stevens – President and Chief Executive Officer
Objective Area | Accomplishments and Actions |
Execution of strategic plan and initiatives
|
Executed a large
Maintained focus on controllable costs as activity ramped up through the year and then
Continued execution of opportunistic hedging strategy targeting, |
Debt Management | Divested a 50% working interest and transferred operatorship in portions of the Lost Hills field, which garnered more than $200 million in value consisting of $168 million in cash, in addition to a 100% carry on a 200-well development program worth at least $35 million. This transaction provided cash to fund debt reduction, while retaining significant upside in the future development by the new operator.
Obtained reaffirmation of the borrowing base twice under our credit agreements, while removing more assets from the borrowing base, Secured a credit agreement amendment to provide future flexibility in connection with potential royalty transactions.
|
Outreach and dialogue with stakeholders on key community and public policy issues
| Engaged on industry specific and business-related issues by maintaining and developing working relationships with key policy and decision makers in local and state governments so that they know what CRC and the industry bring to California, helping to ensure that CRC has a seat at the table on important issues.
Championed community involvement through company support for employee engagement in the communities where we live and work.
|
Stockholder relations | Participated in
Met with over
Continued to receive positive feedback from our largest holders.
|
Quality and consistency of risk management efforts
| Constantly reinforced safety culture and importance of environmental protection, resulting in achievement of best safety year on record, with zero recordable employee workplace injuries, and record or near record environmental performance with respect to spills, air emissions, and water delivered to agriculture.
|
Succession planning and leadership development |
Supported formal external leadership training program for future
Identified key personnel risks and
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CALIFORNIA RESOURCES CORPORATION 42
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
Marshall D. Smith – Senior Executive Vice President and Chief Financial Officer
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Objective Area | Accomplishments and Actions |
CALIFORNIA RESOURCES CORPORATION 42
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Compensation Discussion and Analysis
Darren Williams – Executive Vice President – Operations and Geoscience
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Objective Area | Accomplishments and Actions |
Execution of strategic plan and initiatives |
Further streamlined operations organization to provide consistent and efficient execution across all of CRC’s assets.
Delivered
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approximately 250 MMBoe increase in net, unrisked prospective resources. |
Charles F. Weiss – Executive Vice President – Public Affairs
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Objective Area | Accomplishments and Actions |
Quality and consistency of risk management efforts |
Delivered effective risk evaluation, mechanical integrity and HSE assessment programs for significant pipelines and facilities.
Championed
Successfully completed multiple pipeline audits, major emergency drills and
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Outreach and dialogue with stakeholders on key community and public policy issues
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communities where we operate. |
CALIFORNIA RESOURCES CORPORATION 43
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Compensation Discussion and Analysis
Michael L. Preston – Senior Executive Vice President, – OperationsChief Administrative Officer and EngineeringGeneral Counsel
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Objective Area | Accomplishments and Actions |
Execution of strategic plan and initiatives
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•Execute significant joint ventures and divestitures to underpin capital programs and reduce debt. •Collaborate with •Implement office consolidation initiatives to increase collaboration and efficiency and reduce costs. •Execute on hedging strategy, delivering robust realized product prices and substantial natural gas trading revenue.
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The Compensation Committee assessed the CEO’s performance against his Strategic and Individual objectives to be above target,as exceptional, 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,exceeded expectations, but were similarly limited, other than Mr. Kerns. Thelimited. As a result, the Compensation Committee approved the following 20182019 annual incentive payouts:
Name |
| Base Salary |
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| Target (% of Salary) |
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| (a) Target in $ |
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| (b) Quantitative Component $ [80% * (a) * 130.56%] |
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| (c) Individual Component Result (% of target) |
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| (d) Individual Component $ [20% * (a) * (c)] |
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| (e) Total Payout $ [(b) + (d)] |
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| Total % of Target [(e) / (a)] |
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| Base Salary |
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| Target (% of Salary) |
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| (a) Target in $ |
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| (b) Quantitative Component $ [80% * (a) * 143.94%] |
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| (c) Individual Component Result (% of target) |
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| (d) Individual Component $ |
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| (e) Total Payout $ [(b) + (d)] |
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| Total % of Target [(e) / (a)] |
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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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| $ | 875,000 |
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| 110% |
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| $ | 962,500 |
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| $ | 1,108,300 |
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| 100% |
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| $ | 192,700 |
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| $ | 1,301,000 |
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| 135% |
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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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| $ | 600,000 |
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| 100% |
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| $ | 600,000 |
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| $ | 690,900 |
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| 100% |
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| $ | 120,100 |
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| $ | 811,000 |
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| 135% |
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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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| $ | 450,000 |
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| 90% |
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| $ | 405,000 |
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| $ | 466,400 |
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| 101% |
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| $ | 81,600 |
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| $ | 548,000 |
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| 135% |
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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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| $ | 440,000 |
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| 80% |
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| $ | 352,000 |
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| $ | 405,300 |
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| 106% |
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| $ | 74,700 |
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| $ | 480,000 |
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| 136% |
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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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Michael L. Preston |
| $ | 440,000 |
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| 85% |
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| $ | 374,000 |
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| $ | 430,700 |
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| 101% |
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| $ | 75,300 |
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| $ | 506,000 |
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| 135% |
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CALIFORNIA RESOURCES CORPORATION 44
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Compensation Discussion and Analysis
20182019 Long-Term Incentives
For 2018,2019, 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.
20182019 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Premium-Priced Stock Options (10%) Performance Stock Units (PSU) 50%
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
CALIFORNIA RESOURCES CORPORATION 45
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Compensation Discussion and Analysis
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.
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 46
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Compensation Discussion and Analysis
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 47
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Compensation Discussion and Analysis
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 48
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Compensation Discussion and Analysis
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 49
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Compensation Discussion and Analysis
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-thirdpayouts. One-third of the units vestingRSU Award vests 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.payout, in order to manage the remaining shares available for awards under the Long-Term Incentive Plan (LTIP).
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 subject to the PSU Award, the payout of units insuch excess of targetunits will be settled in cash. Required tax withholding on payoutssettlements 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 costtotal shareholder return performance measuresmeasure under these awards are the same as those selected by the Compensation Committee for the 2018 PSU Award2019 Peer Group as shown on page 46.36.
CALIFORNIA RESOURCES CORPORATION 45
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
The PSU Award will vest at the end of three years from the grant date basedcontingent on achievedthe Compensation Committee’s certification of achievement of the performance against pre-determined performance criteria.measures shown below:
Key Features of the 2019 Performance Stock Unit Award
Award Feature | Relative Total Shareholder Return Component | Value Creation Index | |
Component Weight | 50% | 50% | |
Performance Period | January 1, 2019 – | January 1, 2019 – | |
Performance Measure | Relative total shareholder return (TSR) based on 30-day average prices at the beginning and end of the Performance Period. | Cumulative VCI calculated as the weighted average of the VCI results for 2019, 2020, and 2021, 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 | Relative TSR 25th percentile | Cumulative VCI of 1.2 | |
Target Payout | 100% of Target | 100% of Target | |
Performance Resulting in Target Payout | Relative TSR 50th percentile | Cumulative VCI of 1.4 | |
Maximum Payout | 200% of Target (2) | 200% of Target | |
Performance Resulting in Maximum Payout | Relative TSR 90th or higher percentile | Cumulative VCI of 1.6 or higher |
(1) | Payouts interpolated for performance results between threshold and target or target and maximum, with no payout for performance results below threshold. |
(2) | Payout limited to 100% of Target if absolute TSR is negative, regardless of relative TSR performance. |
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 premium-priced, granted with an exercise price that was 10% above stock price on the grant date. The options will vest one-third
CALIFORNIA RESOURCES CORPORATION 50
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Compensation Discussion and Analysis
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 data and internally aligned. The Compensation Committee increased the long-term incentive grant date values for the CEO and other NEOs based on the individual’s performance and position relative to peer group compensation data. Mr. Preston was not an NEO in 2018, so his 2018 value is not disclosed.
Name | 2019 LTI Grant Date Target Value | 2018 LTI Grant Date Target Value |
Rationale for Action |
Todd A. Stevens | $5,400,000 | $5,200,000 | Performance and position relative to peer group |
Marshall D. Smith | $2,000,000 | $1,900,000 | Performance and position relative to peer group |
Darren Williams | $1,100,000 | $1,050,000 | Performance and position relative to peer group |
Charles F. Weiss | $1,150,000 | $1,100,000 | Performance and position relative to peer group |
Michael L. Preston | $1,075,000 | - | Scope of responsibilities and internal alignment |
CALIFORNIA RESOURCES CORPORATION 46
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
Payouts Under 2016 Performance Incentive Award – In August, 2019, the 2016 cash-based Performance Incentive Awards vested and were paid in cash. Performance under the award was based 50% on a relative Cost per Boe measure and 50% on a weighted-average VCI metric during the three-year performance period. The Compensation Committee certified the following performance under the award:
Cost per Boe Portion: This portion was based on the change in CRC’s Cost per Boe of production compared to the change in Cost per Boe of production for the peer group. Cost per Boe is the sum of the production costs and general and administrative expenses, both measured on a per Boe basis for the applicable period. CRC’s three-year weighted average Cost per Boe increased by 0.2%, while the peer groups’ three-year average weighted Cost per Boe decreased by 7.5%, resulting in a net 7.7% increase. Under the terms of the award, this performance resulted in the following payout factor of 80.66% of target for the Cost per Boe portion of the award as shown below:
Change in CRC Cost per BOE Minus Change in Peer Group Cost per BOE |
Payout as % of Target | |
Less than or equal to -10% | 200% | |
0% | 100% | |
Actual Result: 7.7% | 80.66% | |
10% | 75% | |
Greater than 10% | 0% |
Cumulative VCI Portion: This portion was based on the weighted-average VCI results for 2016, 2017 and 2018. The weighted-average VCI result of 1.53 produced a payout of 200% of target for the cumulative VCI portion of the award, as shown below:
Cumulative VCI Result | Payout as % of Target | |
1.5 or greater | 200% | |
1.3 | 100% | |
1.1 | 75% | |
Less than 1.1 | 0% |
Payout Calculation: The resulting payout was 140.3% of target incentive amounts, calculated as follows:
[50% * 80.66% (Cost per Barrel)] + [50% * 200% (Cumulative VCI)]
The following amounts were certified and paid in 2019 to the NEOs under the terms of these 2016 Performance Incentive Awards:
Name | Target Incentive Amount | Earned Incentive Amount Paid |
Todd A. Stevens | $1,750,000 | $2,455,250 |
Marshall D. Smith | $900,000 | $1,262,700 |
Darren Williams | $525,000 | $736,575 |
Charles F. Weiss | $481,250 | $675,194 |
Michael L. Preston | $415,000 | $582,245 |
CALIFORNIA RESOURCES CORPORATION 47
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
Other Compensation and Benefits
In addition to the components of the executive compensation program described above, we provided the following programs to our NEOs.
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.
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 all of our NEOs. 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 7% (which is immediately vested) and 12% (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.
CALIFORNIA RESOURCES CORPORATION 48
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
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. We also provided executives, including the NEOs, with excess liability insurance coverage.
Severance Benefits – We maintained a notice and severance pay plan that, in connection with a qualifying termination of employment, provided for up to 12 months of base salary and other insurance coverage, depending on years of service, for non-bargained employees, including the NEOs.
Employee Stock Purchase Plan – We adopted the California Resources Corporation 2014 Employee Stock Purchase Plan (the “ESPP”), effective January 1, 2015, which provided 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 authorized to 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 were subject to certain limits on the number of shares that could be purchased in any given year and during any given offering period (a calendar quarter) under the ESPP.
Corporate Aircraft Use – Executives and directors could use the Company’s fractional interest in aircraft for personal travel, if space was available. The executives and directors reimbursed 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 annually by the IRS), or income was imputed and the executive or director was reimbursed for related taxes.
CALIFORNIA RESOURCES CORPORATION 49
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
In February 2020, the Compensation Committee made 2020 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 2020
The Compensation Committee considered the favorable feedback received through stockholder outreach regarding the changes to the compensation program made in 2019 and determined that the structure of the program remained appropriate for 2020 with the following changes to the performance metrics under the program’s annual incentive awards:
Reduced weighting of EBITDAX component from 25% to 20%
Added a Sustainability Project Milestone component with a weighting of 5% to drive progress on our 2030 Sustainability Goals
2020 Compensation Program Elements
Our 2020 compensation program for our CEO and other NEOs is comprised of the following elements, which are discussed in more detail below:
2020 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. 2020 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 Sustainability Safety (combined injury and illness rate (IIR)) Spill prevention rate Net water supplied to agriculture Project milestones relating to water recycling renewable energy methane capture carbon capture workforce diversity and development community partnerships individual goals
CALIFORNIA RESOURCES CORPORATION 50
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
The annual incentive component of our 2020 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 emphasize the quantitative 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 the criteria were established in February 2020. Target performance criteria were set at levels that would represent successful execution of the 2020 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2020 business plan.
Project milestones relating to water recycling, renewable energy, methane capture, carbon capture, workforce diversity and development and community partnerships were added for 2020 to drive progress toward our 2030 Sustainability Goals. Many of our 2030 Sustainability Goals are multi-year efforts, so the project milestone approach allows us to track interim progress during the current year against multi-year goals.
The table below provides the weightings for each performance measure as established by the Compensation Committee.
Performance Measure (1) | Component Weighting | |
Investment Value Creation Index (VCI) – current year | 25% | |
Sustainability | ||
- Safety - combined IIR | 3.33% | |
- Spill prevention rate | 3.33% | |
- Net water supplied to Ag | 3.33% | |
- Project milestones relating to: | 5% | |
Water recycling | ||
Renewable energy | ||
Methane capture | ||
Carbon capture | ||
Workforce diversity and development | ||
Community partnerships | ||
Liquidity Adjusted EBITDAX Net Debt | 20% 20% | |
Total Quantitative Performance Measures | 80% | |
Strategic and Individual Objectives | 20% | |
Total | 100% |
(1) | Descriptions of the quantitative performance measures are as follows: |
Performance Measure | Description |
Value Creation Index (VCI) | We use a Value Creation Index (VCI) for project selection and capital allocation across our portfolio of opportunities. VCI is a ratio that measures the present value of the future cash flows from all development (new drills and capital workovers) in each plan year per discounted dollar of investment, calculated as A divided by B where “A” is the discounted expected future cash flows and “B” is the discounted capital invested for the plan year, excluding JV partner funding. |
CALIFORNIA RESOURCES CORPORATION 51
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
Performance Measure | Description |
The discounted expected future cash flows of the 2020 investments will be calculated by taking our share of future revenues minus production costs and production taxes but before any general and administrative charges, interest expense, income taxes and other corporate payments. The future cash flow calculations will be based on the SEC price for each respective year and include impacts of hedges placed within the calendar year. Discounting will be at 10% (consistent with SEC requirements). Except as otherwise stated, all values will be determined consistently with SEC regulations. | |
Safety – Combined IIR | Injury and illness incidence rate of employees and contractors. |
Spill prevention rate | (Boe produced minus net reportable oil spill volume) divided by Boe produced. |
Net water supplied to agriculture | Water supplied to agriculture divided by fresh water purchased. |
Project milestones relating to Water recycling Renewable energy Methane capture Carbon capture Workforce diversity and development Community partnerships | In order to advance our 2030 Sustainability Goals, which are multi-year endeavors, attainment of these metrics will be based on specific project milestones achieved during 2020 for each area. See www.crc.com/sustainability for more information regarding our 2030 Sustainability Goals. |
Adjusted EBITDAX | See Annex A for an example of CRC’s calculation of adjusted EBITDAX. |
Net Debt | Face value of outstanding debt less unrestricted cash. |
All executives are subject to the same Investment, Operations, and Liquidity quantitative measures.
2020 Long-Term Incentives
For 2020, 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.
2020 LONG-TERM INCENTIVE MIX (percent of grant date value) Restricted Stock Units (RSU) 40% Premium-Priced Stock Options (10%) Performance Stock Units (PSU) 50%
2019 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Performance Stock Units (PSU) 50%
CALIFORNIA RESOURCES CORPORATION 52
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
2020 Restricted Stock Unit Award –The 2020 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. One-third of the RSU Awards vest 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.
2020 Performance Stock Unit Award –The 2020 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 such excess units 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 2020 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 total shareholder return performance measures under these awards are the same as those selected by the Compensation Committee for the 2020 Compensation Peer Group, as shown on page 37, excluding Carrizo Oil & Gas, Inc., due to its acquisition by Callon Petroleum Company.
The PSU Award will vest at the end of three years from the grant date based on achieved performance against pre-established performance criteria.
2020 Stock Options – The Compensation Committee granted stock options as part of the 2020 long-term incentive awards to further align executives with stockholders. The 2020 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 53
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
Our Executive CompensationCompensation 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”). In its oversight role, the committee is responsible for making compensation decisions involving our CEO and other executive officers and evaluating performance for compensatory purposes.
Our CEO, Chairman and 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 2018,2019, the Compensation Committee held twoone executive sessions.session.
Role of Independent Compensation Consultants
The Compensation Committee retained Meridian as its independent compensation consultant in January 2015, after considering all factors relevant to Meridian’s independence from our management and members of our 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, the compensation consultant2019, Meridian was responsible for reviewing 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 consultantMeridian participated in all meetings of the committee during 2018,2019, including executive sessions without management. The compensation consultantMeridian provided no other services to CRC.
Over the course of the year, our Compensation Committee analyzed the comparative total compensation of our executive officers. To facilitate this analysis, the compensation consultantMeridian 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.
Other Compensation and Benefits
In addition to the components of the executive compensation program described above, we provide the following programs to our named executive officers.
Qualified Defined Contribution Plan–All of our employees, including our named executive officers, are eligible to participate in a tax-qualified, defined contribution plan. The defined contribution plan provides for periodic cash contributions by us based on annual cash compensation and employee deferrals. Employees are permitted to contribute into the plan a percentage of their annual salary and bonus up to
CALIFORNIA RESOURCES CORPORATION 51
|
Compensation Discussion and Analysis
the annual limit set by IRS regulations. Employees are able to direct their account balances to a variety of investments.
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, 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.
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%
CALIFORNIA RESOURCES CORPORATION 52
|
Compensation Discussion and Analysis
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 Practices
We have minimum stock ownership guidelines for senior executives. The target direct and indirect ownership level for the Chief Executive Officer 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. As of December 31, 2019, all of the Spin-off occurredNEOs were in compliance with the stock ownership guidelines, based on November 30, 2014, the named executive officers have until November 30, 2019 or later to meet the target ownership levels.grant/purchase date stock values.
CALIFORNIA RESOURCES CORPORATION 54
2020 PROXY STATEMENT |
Compensation Discussion and Analysis
Under the Company’s Compensation Recoupment and Clawback Policy, in the event the Company is required to restate its financial statements, the Company has the right to require in certain circumstances, and to the extent permitted by applicable law, the reimbursement of incentive compensation by a named executive officer whose fraud or misconduct either caused or contributed to the need for such restatement. Such incentive compensation generally includes any cash, equity, equity-based or other award under the LTIP, or an annual bonus or annual incentive plan of the Company.
Anti-Hedging and Anti-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.
CALIFORNIA RESOURCES CORPORATION 53
|
Compensation Discussion and Analysis
Compensation Risk ManagementRisk Management
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,total shareholder return, 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 Ethics
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”), Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limited 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. 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 when it was in the best interest of the Company and our stockholders. To the extent compensatory awards are 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 be deductible.
CALIFORNIA RESOURCES CORPORATION 5455
|
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 20192020 Annual Meeting of Stockholders.
Compensation Committee,
Justin A. Gannon
Harry T. McMahon
Avedick B. Poladian
Laurie A. Siegel
February 19, 201918, 2020
CALIFORNIA RESOURCES CORPORATION 5556
|
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.
Summary Compensation Table (SCT)
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| Non-Equity | Deferred |
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| Non-Equity | Deferred |
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| Stock | Option |
| Incentive Plan | Compensation |
| All Other |
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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) |
|
| Year | Salary | Bonus | Awards (2) | Awards (2) |
| Compensation (3) | Earnings (4) |
| Compensation (5) | Total (1) |
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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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| 2019 |
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| $ | 875,000 |
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| $ | 0 |
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| $ | 4,860,022 |
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| $ | 540,002 |
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| $ | 3,756,250 |
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| $ | 34,615 |
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| $ | 431,188 |
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| $ | 10,497,077 |
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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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| 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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Executive Officer |
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| 2016 |
| $ | 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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| 2017 |
| $ | 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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Marshall D. Smith |
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| 2018 |
| $ | 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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| 2019 |
| $ | 600,000 |
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| $ | 0 |
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| $ | 1,800,020 |
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| $ | 200,013 |
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| $ | 2,073,700 |
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| $ | 9,699 |
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| $ | 271,941 |
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| $ | 4,955,373 |
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Senior Executive Vice |
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| 2017 |
| $ | 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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| 2018 |
| $ | 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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President and |
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| 2016 |
| $ | 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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| 2017 |
| $ | 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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Chief Financial Officer |
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Darren Williams |
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| 2018 |
| $ | 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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| 2019 |
| $ | 450,000 |
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| $ | 0 |
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| $ | 990,019 |
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| $ | 110,010 |
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| $ | 1,223,194 |
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| $ | 5,958 |
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| $ | 184,374 |
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| $ | 2,963,555 |
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Executive Vice President– |
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| 2017 |
| $ | 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 |
|
| $ | 202,424 |
|
| $ | 1,704,159 |
|
|
| 2018 |
| $ | 450,000 |
|
| $ | 0 |
|
| $ | 945,005 |
|
| $ | 105,010 |
|
| $ | 510,000 |
|
| $ | 4,666 |
|
| $ | 200,368 |
|
| $ | 2,215,049 |
| ||||||||||||||||||||
Operations and Geoscience |
|
| 2016 |
| $ | 421,615 |
|
| $ | 0 |
|
| $ | 463,217 |
|
| $ | 0 |
|
| $ | 540,000 |
|
| $ | 845 |
|
| $ | 164,445 |
|
| $ | 1,590,122 |
|
|
| 2017 |
| $ | 450,000 |
|
| $ | 0 |
|
| $ | 500,000 |
|
| $ | 0 |
|
| $ | 550,000 |
|
| $ | 1,735 |
|
| $ | 202,424 |
|
| $ | 1,704,159 |
| ||||||||||||||||||||
Charles F. Weiss |
|
| 2018 |
| $ | 437,692 |
|
| $ | 0 |
|
| $ | 990,030 |
|
| $ | 110,010 |
|
| $ | 425,000 |
|
| $ | 16,982 |
|
| $ | 188,979 |
|
| $ | 2,168,693 |
|
|
| 2019 |
| $ | 440,000 |
|
| $ | 0 |
|
| $ | 1,035,024 |
|
| $ | 115,009 |
|
| $ | 1,216,575 |
|
| $ | 15,159 |
|
| $ | 181,850 |
|
| $ | 3,003,617 |
| ||||||||||||||||||||
Executive Vice President– |
|
| 2017 |
| $ | 425,000 |
|
| $ | 0 |
|
| $ | 550,000 |
|
| $ | 0 |
|
| $ | 470,000 |
|
| $ | 9,126 |
|
| $ | 181,450 |
|
| $ | 1,635,576 |
|
|
| 2018 |
| $ | 437,692 |
|
| $ | 0 |
|
| $ | 990,030 |
|
| $ | 110,010 |
|
| $ | 425,000 |
|
| $ | 16,982 |
|
| $ | 188,979 |
|
| $ | 2,168,693 |
| ||||||||||||||||||||
Public Affairs |
|
| 2016 |
| $ | 398,192 |
|
|
| $ | 0 |
|
| $ | 505,320 |
|
| $ | 0 |
|
| $ | 475,000 |
|
| $ | 7,613 |
|
| $ | 125,269 |
|
| $ | 1,511,394 |
|
|
| 2017 |
| $ | 425,000 |
|
| $ | 0 |
|
| $ | 550,000 |
|
| $ | 0 |
|
| $ | 470,000 |
|
| $ | 9,126 |
|
| $ | 181,450 |
|
| $ | 1,635,576 |
| |||||||||||||||||||
Shawn M. Kerns(6) |
|
| 2018 |
| $ | 393,077 |
|
| $ | 0 |
|
| $ | 1,035,018 |
|
| $ | 115,010 |
|
| $ | 450,000 |
|
| $ | 12,679 |
|
| $ | 152,817 |
|
| $ | 2,158,601 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President– |
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Operations and Engineering |
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Michael L. Preston(6) |
|
| 2019 |
| $ | 439,231 |
|
| $ | 0 |
|
| $ | 967,528 |
|
| $ | 107,511 |
|
| $ | 1,088,245 |
|
| $ | 14,198 |
|
| $ | 175,530 |
|
| $ | 2,792,243 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Executive Vice President, Chief |
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Administrative Officer |
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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 |
CALIFORNIA RESOURCES CORPORATION 56
|
Executive Compensation Tables
criteria. At the maximum performance payout level, the 2019 amounts would be |
(3) | The amounts shown include the annual incentive award, which was paid in the first quarter of the year following the year in which it was earned. Also, for 2019, the amounts include the payout under the 2016 Performance Incentive Awards, based on performance during the period 2016 – 2019, as shown in the table below. See the Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table on page 60. |
Name | Year | Annual Incentive Award | 2016 PIA Award Payout | ||||
2019 | $ | 1,301,000 |
| $ | 2,455,250 |
| |
| 2018 | $ | 1,200,000 |
| $ | 0 |
|
| 2017 | $ | 1,170,000 |
| $ | 0 |
|
Marshall D. Smith | 2019 | $ | 811,000 |
| $ | 1,262,700 |
|
| 2018 | $ | 750,000 |
| $ | 0 |
|
| 2017 | $ | 850,000 |
| $ | 0 |
|
Darren Williams | 2019 | $ | 548,000 |
| $ | 675,194 |
|
| 2018 | $ | 510,000 |
| $ | 0 |
|
| 2017 | $ | 550,000 |
| $ | 0 |
|
Charles F. Weiss | 2019 | $ | 480,000 |
| $ | 736,575 |
|
| 2018 | $ | 425,000 |
| $ | 0 |
|
| 2017 | $ | 470,000 |
| $ | 0 |
|
Michael L. Preston | 2019 | $ | 506,000 |
| $ | 582,245 |
|
(4) | 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. |
CALIFORNIA RESOURCES CORPORATION 57
2020 PROXY STATEMENT |
Executive Compensation Tables
| Todd A. | Marshall D. | Darren | Charles F. |
|
| Shawn M. | Todd A. | Marshall D. | Darren | Charles F. |
|
| Michael L. | ||||||||||||||||||||||||||||||||||||||
| Stevens | Smith | Williams | Weiss |
|
| Kerns |
| Stevens | Smith | Williams | Weiss |
|
| Preston |
| ||||||||||||||||||||||||||||||||||||
Qualified Plan(a) |
| $ | 36,500 |
|
|
| $ | 36,500 |
|
|
| $ | 36,500 |
|
|
| $ | 36,500 |
|
|
| $ | 36,500 |
|
|
|
| $ | 37,000 |
|
|
| $ | 37,000 |
|
|
| $ | 37,000 |
|
|
| $ | 37,000 |
|
|
| $ | 17,400 |
|
|
|
Supplemental Plan(b) |
| $ | 360,766 |
|
|
| $ | 243,742 |
|
|
| $ | 153,967 |
|
|
| $ | 135,552 |
|
|
| $ | 112,686 |
|
|
|
| $ | 367,658 |
|
|
| $ | 223,020 |
|
|
| $ | 145,215 |
|
|
| $ | 126,262 |
|
|
| $ | 155,684 |
|
|
|
Dividend Equivalents(c) |
| $ | 6,938 |
|
|
| $ | 2,775 |
|
|
| $ | 1,908 |
|
|
| $ | 2,081 |
|
|
| $ | 1,249 |
|
|
| ||||||||||||||||||||||||||
Personal Benefits |
| $ | 26,164 |
| (d) |
| $ | 5,804 |
| (e) |
| $ | 1,993 |
| (f) |
| $ | 14,846 |
| (g) |
| $ | 2,382 |
| (h) |
|
| $ | 26,530 |
| (c) |
| $ | 5,921 |
| (d) |
| $ | 2,159 |
| (e) |
| $ | 18,588 |
| (f) |
| $ | 2,446 |
| (g) |
|
Relocation Benefits |
| $ | 0 |
|
|
| $ | 12,000 |
|
|
| $ | 6,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
| $ | 6,000 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
|
Total |
| $ | 430,368 |
|
|
| $ | 300,821 |
|
|
| $ | 200,368 |
|
|
| $ | 188,979 |
|
|
| $ | 152,817 |
|
|
|
| $ | 431,188 |
|
|
| $ | 271,941 |
|
|
| $ | 184,374 |
|
|
| $ | 181,850 |
|
|
| $ | 175,530 |
|
|
|
| (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 tax preparation and financial counseling |
| (e) | Includes tax preparation and financial counseling and excess liability insurance. |
| (f) | Includes tax preparation and financial counseling ($17,917) and excess liability insurance. |
| (g) |
|
| Includes tax preparation and financial counseling and excess liability insurance. |
(6) | Mr. |
CALIFORNIA RESOURCES CORPORATION 5758
|
Executive Compensation Tables
The table below summarizes the following plan-based awards granted in 20182019 to our NEOs: Annual Incentive Awards, Restricted Stock Unit Awards (RSU), Performance Stock Unit Awards (PSU), and Stock Option Awards (Options).
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| Exercise |
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| Grant Date |
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| Exercise |
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| Grant Date |
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| All Other |
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| or Base |
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| Fair Value |
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| All Other |
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| or Base |
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| Fair Value |
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| Estimated Future Payouts |
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| Estimated Future Payouts |
|
| Stock Awards: |
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| Price of |
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| of Stock and |
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|
| Estimated Future Payouts |
|
| Estimated Future Payouts |
|
| Stock Awards: |
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| Price of |
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| of Stock and |
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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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| Option |
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|
| Under Non-Equity Incentive |
|
| Under Equity Incentive |
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| Number of |
|
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| Option |
|
|
| Option |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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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| Plan Awards |
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| Plan Awards |
|
| Shares or Units |
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| Awards |
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| Awards |
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| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Name / Type of |
| Grant |
|
| Threshold |
|
| 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 |
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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 |
|
| ($) |
|
|
| ($) |
|
| ($) |
|
| (# Shares) |
|
| (# Shares) |
|
|
| (# Shares) |
|
|
| (# Shares) |
|
|
| ($) |
|
|
|
| ($) |
|
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| Date |
|
| ($) |
|
|
| ($) |
|
|
|
| ($) |
|
| (# Shares) |
|
| (# Shares) |
|
|
| (# Shares) |
|
| (# Shares) |
|
|
| ($) |
|
|
| ($) |
|
| ||||||||||||||||||||||||||||||||
Todd A. Stevens |
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| ||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 16,074 |
|
| $ | 962,500 |
|
| $ | 1,925,000 |
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| $ | 16,074 |
|
| $ | 962,500 |
|
|
|
| $ | 1,925,000 |
|
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| ||||||||||||||||||||||
RSU(2) |
| 2/21/2018 |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 113,414 |
|
|
|
|
|
|
|
|
| $ | 2,080,013 |
|
|
| 2/19/2019 |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 99,494 |
|
|
|
|
|
|
| $ | 2,160,015 |
|
| ||||||||||||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 35,442 |
|
|
| 141,767 |
|
|
| 283,534 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,600,007 |
|
|
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31,092 |
|
|
| 124,367 |
|
|
| 248,734 |
|
|
|
|
|
|
|
|
|
|
| $ | 2,700,008 |
|
| ||||||||||||||||||||||
Options(4) |
| 2/21/2018 |
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
| 51,897 |
|
|
| $ | 20.17 |
|
|
|
| $ | 520,008 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options (4) |
| 2/19/2019 |
|
|
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|
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|
|
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|
| 41,699 |
|
|
| $ | 23.88 |
|
|
| $ | 540,002 |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marshall D. Smith |
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| ||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 10,020 |
|
| $ | 600,000 |
|
| $ | 1,200,000 |
|
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|
| $ | 10,020 |
|
| $ | 600,000 |
|
|
|
| $ | 1,200,000 |
|
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| ||||||||||||||||||||||
RSU(2) |
| 2/21/2018 |
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| 41,440 |
|
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|
| $ | 760,010 |
|
|
| 2/19/2019 |
|
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| 36,850 |
|
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|
| $ | 800,014 |
|
| ||||||||||||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,950 |
|
|
| 51,800 |
|
|
| 103,600 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 950,012 |
|
|
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,516 |
|
|
| 46,062 |
|
|
| 92,124 |
|
|
|
|
|
|
|
|
|
|
| $ | 1,000,006 |
|
| ||||||||||||||||||||||
Options(4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,963 |
|
|
| $ | 20.17 |
|
|
|
| $ | 190,009 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options (4) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,445 |
|
|
| $ | 23.88 |
|
|
| $ | 200,013 |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Darren Williams |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 6,764 |
|
| $ | 405,000 |
|
| $ | 810,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 6,764 |
|
| $ | 405,000 |
|
|
|
| $ | 810,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,901 |
|
|
|
|
|
|
|
|
| $ | 420,004 |
|
|
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,268 |
|
|
|
|
|
|
| $ | 440,018 |
|
| ||||||||||||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,157 |
|
|
| 28,626 |
|
|
| 57,252 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 525,001 |
|
|
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,334 |
|
|
| 25,334 |
|
|
| 50,668 |
|
|
|
|
|
|
|
|
|
|
| $ | 550,001 |
|
| ||||||||||||||||||||||
Options(4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,480 |
|
|
| $ | 20.17 |
|
|
|
| $ | 105,010 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options (4) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,495 |
|
|
| $ | 23.88 |
|
|
| $ | 110,010 |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles F. Weiss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 5,511 |
|
| $ | 330,000 |
|
| $ | 660,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5,878 |
|
| $ | 352,000 |
|
|
|
| $ | 704,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 23,992 |
|
|
|
|
|
|
|
|
| $ | 440,013 |
|
|
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21,189 |
|
|
|
|
|
|
| $ | 460,013 |
|
| ||||||||||||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,498 |
|
|
| 29,990 |
|
|
| 59,980 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 550,017 |
|
|
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,622 |
|
|
| 26,486 |
|
|
| 52,972 |
|
|
|
|
|
|
|
|
|
|
| $ | 575,011 |
|
| ||||||||||||||||||||||
Options(4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,979 |
|
|
| $ | 20.17 |
|
|
|
| $ | 110,010 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options (4) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,881 |
|
|
| $ | 23.88 |
|
|
| $ | 115,009 |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael L. Preston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive(1) |
|
|
| $ | 5,344 |
|
| $ | 320,000 |
|
| $ | 640,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 6,246 |
|
| $ | 374,000 |
|
|
|
| $ | 748,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
RSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,082 |
|
|
|
|
|
|
|
|
| $ | 460,004 |
|
|
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19,807 |
|
|
|
|
|
|
| $ | 430,010 |
|
| ||||||||||||||||||||||
PSU(3) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,839 |
|
|
| 31,353 |
|
|
| 62,706 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 575,014 |
|
|
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,190 |
|
|
| 24,759 |
|
|
| 49,518 |
|
|
|
|
|
|
|
|
|
|
| $ | 537,518 |
|
| ||||||||||||||||||||||
Options(4) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,478 |
|
|
| $ | 20.17 |
|
|
|
| $ | 115,010 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options (4) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,302 |
|
|
| $ | 23.88 |
|
|
| $ | 107,511 |
|
|
(1) | Payout of annual incentive ranges from 0% to 200% of target. Threshold amounts shown at 1.67% of target, calculated based on threshold payout of the lowest weighted performance metric under the award. |
(2) | The amounts shown represent the estimated grant date fair value of the full number of units granted as computed in accordance with FASB ASC Topic 718, as more fully described in Note 11 to Consolidated |
(3) | Payout under the PSU Awards ranges from 0% to 200% of target based on performance during the three-year period from January 1, |
(4) | The Option Awards have an exercise price that is 10% higher than the price on the grant date. The amounts shown represent the estimated grant date fair value of the full number of options granted as computed in accordance with FASB ASC Topic 718, as more fully described in Note 11 to Consolidated |
CALIFORNIA RESOURCES CORPORATION 5859
2020 PROXY STATEMENT |
Executive Compensation Tables
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
The SCT Totals shown for 2019 and 2017 do not reflect the timing of compensation decisions made for those years, since cash-based Performance Incentive Awards (PIA awards) granted in February 2017 and August 2016 are reported in the year paid instead of the year granted.
The PIA awards were granted only in 2017 and 2016 and are not equity-based and, therefore, will instead be reported, to the extent earned, in the SCT for 2020 and 2019, respectively, which will result in higher totals for those payout years. The significant increases in the SCT totals for 2018 compared to 2017 and 2019 compared to 2018 are primarily due to this SCT reporting requirement, not due to significant changes in the compensation packages approved by the Compensation Committee for those years.
The table below shows alternative totals which remove for 2019 the payout amounts received for the 2016 PIA awards and add the amounts for 2017 for the PIA awards granted in 2017. Mr. Preston’s 2018 and 2017 values are omitted from the table since he was not an NEO in 2018 or 2017 and compensation for those years has not been reported.
Name |
Year | Combined Incentive |
| Add Long-Term Incentive PIA Award Target Value Not Included in Year of Grant in SCT Above |
| Subtract PIA Award Payout Value Included in Year of Payout as Non-Equity Incentive Compensation in SCT Above |
| Alternative Combined Incentive Awards Reflecting Timing of Grant Decisions |
| Alternative Total with PIA Awards Reflected in Year of Grant | |||||
Todd A. Stevens | 2019 | $ | 9,156,274 |
| $ | 0 |
| $ | (2,455,250 | ) | $ | 6,701,024 |
| $ | 8,041,827 |
| 2018 | $ | 6,400,028 |
| $ | 0 |
| $ | 0 |
| $ | 6,400,028 |
| $ | 7,734,657 |
| 2017 | $ | 3,570,000 |
| $ | 2,400,000 |
| $ | 0 |
| $ | 5,970,000 |
| $ | 7,254,661 |
Marshall D. Smith | 2019 | $ | 4,073,733 |
| $ | 0 |
| $ | (1,262,700 | ) | $ | 2,811,033 |
| $ | 3,692,673 |
| 2018 | $ | 2,650,031 |
| $ | 0 |
| $ | 0 |
| $ | 2,650,031 |
| $ | 3,558,500 |
| 2017 | $ | 1,800,000 |
| $ | 950,000 |
| $ | 0 |
| $ | 2,750,000 |
| $ | 3,675,132 |
Darren Williams | 2019 | $ | 2,323,223 |
| $ | 0 |
| $ | (675,194 | ) | $ | 1,648,029 |
| $ | 2,288,361 |
| 2018 | $ | 1,560,015 |
| $ | 0 |
| $ | 0 |
| $ | 1,560,015 |
| $ | 2,215,049 |
| 2017 | $ | 1,050,000 |
| $ | 500,000 |
| $ | 0 |
| $ | 1,550,000 |
| $ | 2,204,159 |
Charles F. Weiss | 2019 | $ | 2,366,608 |
| $ | 0 |
| $ | (736,575 | ) | $ | 1,630,033 |
| $ | 2,267,042 |
| 2018 | $ | 1,525,040 |
| $ | 0 |
| $ | 0 |
| $ | 1,525,040 |
| $ | 2,168,693 |
| 2017 | $ | 1,020,000 |
| $ | 550,000 |
| $ | 0 |
| $ | 1,570,000 |
| $ | 2,185,576 |
Michael L. Preston | 2019 | $ | 2,163,284 |
| $ | 0 |
| $ | (582,245 | ) | $ | 1,581.039 |
| $ | 2,209,998 |
CALIFORNIA RESOURCES CORPORATION 60
2020 PROXY STATEMENT |
Executive Compensation Tables
Outstanding Equity Awards at December 31, 20189
The table below sets forth the outstanding equity awards held as of December 31, 20182019 by our named executive officers,NEOs, including Performance Stock Unit Awards (PSU), Restricted Stock Unit Awards (RSU) and Stock Option Awards (Options).
|
|
|
| Option Awards | Stock Awards |
| ||||||||||||||||||||||||||||||||||
|
|
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|
|
|
|
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|
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|
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|
|
| Equity |
| ||
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
| Incentive |
| ||
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
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| Plan |
| ||
|
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|
|
|
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|
|
|
|
|
|
| Equity | Awards: |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive | Market or |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Number |
|
|
|
|
| Plan | Payout |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
| $ | 1,280,156 |
|
PSU(3) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 124,367 |
|
|
| $ | 1,123,034 |
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 42,530 |
|
|
| $ | 384,046 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 75,609 |
|
|
| $ | 682,749 |
|
|
|
|
|
|
|
|
|
|
|
RSU(6) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 99,494 |
|
|
| $ | 898,431 |
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 12/1/2014 |
|
|
| 151,516 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 8/5/2015 |
|
|
| 66,667 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(9) |
| 2/21/2018 |
|
|
| 17,299 |
|
|
|
| 34,598 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(10) |
| 2/19/2019 |
|
|
| 0 |
|
|
|
| 41,699 |
|
|
| $ | 23.88 |
|
|
| 2/18/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marshall D. Smith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 51,800 |
|
|
| $ | 467,754 |
|
PSU(3) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 46,062 |
|
|
| $ | 415,940 |
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16,835 |
|
|
| $ | 152,020 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,626 |
|
|
| $ | 249,463 |
|
|
|
|
|
|
|
|
|
|
|
RSU(6) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 36,850 |
|
|
| $ | 332,756 |
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 12/1/2014 |
|
|
| 90,910 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 8/5/2015 |
|
|
| 26,667 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(9) |
| 2/21/2018 |
|
|
| 6,321 |
|
|
|
| 12,642 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(10) |
| 2/19/2019 |
|
|
| 0 |
|
|
|
| 15,445 |
|
|
| $ | 23.88 |
|
|
| 2/18/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darren Williams |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 28,626 |
|
|
| $ | 258,493 |
|
PSU(3) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,334 |
|
|
| $ | 228,766 |
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,860 |
|
|
| $ | 80,006 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,266 |
|
|
| $ | 137,852 |
|
|
|
|
|
|
|
|
|
|
|
RSU(6) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,268 |
|
|
| $ | 183,020 |
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 12/1/2014 |
|
|
| 60,607 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 8/5/2015 |
|
|
| 18,334 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(9) |
| 2/21/2018 |
|
|
| 3,494 |
|
|
|
| 6,986 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(10) |
| 2/19/2019 |
|
|
| 0 |
|
|
|
| 8,495 |
|
|
| $ | 23.88 |
|
|
| 2/18/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles F. Weiss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 29,990 |
|
|
| $ | 270,810 |
|
PSU(3) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 26,486 |
|
|
| $ | 239,169 |
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,746 |
|
|
| $ | 88,006 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,994 |
|
|
| $ | 144,426 |
|
|
|
|
|
|
|
|
|
|
|
RSU(6) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21,189 |
|
|
| $ | 191,337 |
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 12/1/2014 |
|
|
| 51,516 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 8/5/2015 |
|
|
| 20,000 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(9) |
| 2/21/2018 |
|
|
| 3,660 |
|
|
|
| 7,319 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(10) |
| 2/19/2019 |
|
|
| 0 |
|
|
|
| 8,881 |
|
|
| $ | 23.88 |
|
|
| 2/18/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Preston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU(2) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 28,626 |
|
|
| $ | 258,493 |
|
PSU(3) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 24,759 |
|
|
| $ | 223,574 |
|
RSU(4) |
| 2/13/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,088 |
|
|
| $ | 64,005 |
|
|
|
|
|
|
|
|
|
|
|
RSU(5) |
| 2/21/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15,266 |
|
|
| $ | 137,852 |
|
|
|
|
|
|
|
|
|
|
|
RSU(6) |
| 2/19/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19,807 |
|
|
| $ | 178,857 |
|
|
|
|
|
|
|
|
|
|
|
Options(7) |
| 12/1/2014 |
|
|
| 30,304 |
|
|
|
| 0 |
|
|
| $ | 81.10 |
|
|
| 11/30/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(8) |
| 8/5/2015 |
|
|
| 12,000 |
|
|
|
| 0 |
|
|
| $ | 42.00 |
|
|
| 8/4/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(9) |
| 2/21/2018 |
|
|
| 3,494 |
|
|
|
| 6,986 |
|
|
| $ | 20.17 |
|
|
| 2/20/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options(10) |
| 2/19/2019 |
|
|
| 0 |
|
|
|
| 8,302 |
|
|
| $ | 23.88 |
|
|
| 2/18/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALIFORNIA RESOURCES CORPORATION 61
|
|
|
| Option Awards | Stock Awards |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Plan |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity | Awards: |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive | Market or |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number |
|
|
|
|
| Plan | Payout |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 PROXY STATEMENT |
Executive Compensation Tables
(1) | The amounts shown represent the product of the number of shares or units shown in the column immediately to the left and the closing price on December 31, |
(2) | These PSU awards are subject to the achievement of performance goals over a three-year period from January 1, 2018 to December 31, 2020. The units are forfeitable until the later of February 20, 2021 and the certification by our Compensation Committee that the achievement of the performance threshold was met. |
(3) | These PSU awards are subject to the achievement of performance goals over a three-year period from January 1, 2019 to December 31, 2021. The units |
(4) | The units vest on February 12, 2020. |
(5) | One-half of the units vest on each of the following dates: February |
CALIFORNIA RESOURCES CORPORATION 59
|
Executive Compensation Tables
| One-third of the units vest on each of the following dates: February |
| The exercise price was set at 10% above the closing market price of CRC stock on the grant date, as adjusted for our 1-for-10 reverse stock split on May 31, 2016. Unexercised options expire on November 30, 2021. |
| The exercise price is equal to the closing market price of CRC stock on the grant date, as adjusted for our 1-for-10 reverse stock split on May 31, 2016. Unexercised options expire on August 4, 2022. |
| The exercise price is 10% above the closing market price of CRC stock on the grant date. The unexercisable options become exercisable one-half each on February 20, 2020 and February 20, 2021. Unexercised options expire on February 20, 2025. |
(10) | The exercise price is 10% above the closing market price of CRC stock on the grant date. The unexercisable options become exercisable one-third each on February |
Option Exercises and Stock Vested in 20182019
The following table summarizes, for our named executive officers,NEOs, the CRC option and stock awards exercised or vested during 2018.2019.
| Option Awards | Stock Awards | 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) | 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 |
|
|
|
| 0 |
|
| $ | 0 |
|
|
| 101,852 |
|
|
| $ | 2,228,294 |
|
| ||||
Marshall D. Smith |
|
| 0 |
|
| $ | 0 |
|
|
| 80,979 |
|
|
| $ | 2,530,228 |
|
|
|
| 0 |
|
| $ | 0 |
|
|
| 39,706 |
|
|
| $ | 859,065 |
|
| ||||
Darren Williams |
|
| 0 |
|
| $ | 0 |
|
|
| 60,004 |
|
|
| $ | 1,918,019 |
|
|
|
| 0 |
|
| $ | 0 |
|
|
| 23,468 |
|
|
| $ | 499,795 |
|
| ||||
Charles F. Weiss |
|
| 0 |
|
| $ | 0 |
|
|
| 53,342 |
|
|
| $ | 1,653,225 |
|
|
|
| 0 |
|
| $ | 0 |
|
|
| 25,483 |
|
|
| $ | 539,348 |
|
| ||||
Shawn M. Kerns |
|
| 0 |
|
| $ | 0 |
|
|
| 33,569 |
|
|
| $ | 1,046,091 |
|
| ||||||||||||||||||||||
Michael L. Preston |
|
| 0 |
|
| $ | 0 |
|
|
| 18,232 |
|
|
| $ | 409,157 |
|
|
(1) | The amounts shown represent the product of the number of shares acquired on vesting and the closing price on the vesting date. |
CALIFORNIA RESOURCES CORPORATION 62
2020 PROXY STATEMENT |
Executive Compensation Tables
20182019 Nonqualified Deferred Compensation TableTable
The following table sets forth for 20182019 the contributions, earnings, withdrawals and balances under the SSP, SRP II and the DCP in which the named executive officersNEOs participated. The named executive officersNEOs were fully vested in their respective aggregate balances shown below, which include amounts CRC assumed from Occidental plans in connection with the Spin-off. For additional information relating to these plans, see “Nonqualified Defined Contribution Plans” and “Nonqualified Deferred Compensation Plan,” above.
|
|
|
|
|
|
|
|
|
|
|
|
| Aggregate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aggregate |
|
|
| ||||||||||||||||||||||||
|
|
|
| Executive | Company | Aggregate | Withdrawals/ | Aggregate |
|
|
| Executive | Company | Aggregate | Withdrawals/ | Aggregate | ||||||||||||||||||||||||||||||||||||||||
|
|
|
| Contributions | Contributions | Earnings | Distributions | Balance |
|
|
| Contributions | Contributions | Earnings | Distributions | Balance | ||||||||||||||||||||||||||||||||||||||||
|
|
|
| in 2018 | in 2018 | in 2018 | in 2018 | at 12/31/2018 |
|
|
| in 2019 | in 2019 | in 2019 | in 2019 | at 12/31/2019 | ||||||||||||||||||||||||||||||||||||||||
Name |
| Plan |
| ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) |
| Plan |
| ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ||||||||||||||||||||||||||||||||||||||||
Todd A. Stevens |
| SSP |
| $ | 0 |
|
| $ | 357,878 |
|
| $ | 41,325 |
|
| $ | 0 |
|
| $ | 1,313,218 |
|
|
| SSP |
| $ | 0 |
|
| $ | 367,658 |
|
| $ | 51,464 |
|
| $ | 0 |
|
| $ | 1,732,340 |
|
| ||||||||||
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 57,518 |
|
| $ | 0 |
|
| $ | 1,252,083 |
|
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 51,558 |
|
| $ | 0 |
|
| $ | 1,303,641 |
|
| ||||||||||
|
| DCP |
| $ | 15,200 |
|
| $ | 2,888 |
|
| $ | 46,004 |
|
| $ | 19,887 |
|
| $ | 1,003,765 |
|
|
| DCP |
| $ | 0 |
|
| $ | 0 |
|
| $ | 40,637 |
|
| $ | 20,855 |
|
| $ | 1,023,547 |
|
| ||||||||||
Marshall D. Smith |
| SSP |
| $ | 0 |
|
| $ | 243,742 |
|
| $ | 29,580 |
|
| $ | 0 |
|
| $ | 927,520 |
|
|
| SSP |
| $ | 0 |
|
| $ | 223,020 |
|
| $ | 36,415 |
|
| $ | 0 |
|
| $ | 1,186,955 |
|
| ||||||||||
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 876 |
|
| $ | 0 |
|
| $ | 19,072 |
|
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 785 |
|
| $ | 0 |
|
| $ | 19,858 |
|
| ||||||||||
Darren Williams |
| SSP |
| $ | 0 |
|
| $ | 153,967 |
|
| $ | 18,244 |
|
| $ | 0 |
|
| $ | 574,294 |
|
|
| SSP |
| $ | 0 |
|
| $ | 145,215 |
|
| $ | 22,525 |
|
| $ | 0 |
|
| $ | 742,034 |
|
| ||||||||||
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 333 |
|
| $ | 0 |
|
| $ | 7,250 |
|
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 299 |
|
| $ | 0 |
|
| $ | 7,548 |
|
| ||||||||||
Charles F. Weiss |
| SSP |
| $ | 0 |
|
| $ | 135,552 |
|
| $ | 15,731 |
|
| $ | 0 |
|
| $ | 498,444 |
|
|
| SSP |
| $ | 0 |
|
| $ | 126,262 |
|
| $ | 19,536 |
|
| $ | 0 |
|
| $ | 644,242 |
|
| ||||||||||
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 51,274 |
|
| $ | 0 |
|
| $ | 1,116,173 |
|
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 45,961 |
|
| $ | 0 |
|
| $ | 1,162,134 |
|
| ||||||||||
Shawn M. Kerns |
| SSP |
| $ | 0 |
|
| $ | 112,686 |
|
| $ | 11,684 |
|
| $ | 0 |
|
| $ | 381,547 |
|
| |||||||||||||||||||||||||||||||||
Michael L. Preston |
| SSP |
| $ | 0 |
|
| $ | 155,684 |
|
| $ | 19,065 |
|
| $ | 0 |
|
| $ | 665,849 |
|
| |||||||||||||||||||||||||||||||||
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 17,941 |
|
| $ | 0 |
|
| $ | 390,544 |
|
|
| SRP II |
| $ | 0 |
|
| $ | 0 |
|
| $ | 40,102 |
|
| $ | 0 |
|
| $ | 1,013,989 |
|
| ||||||||||
|
| DCP |
| $ | 0 |
|
| $ | 0 |
|
| $ | 20,400 |
|
| $ | 0 |
|
| $ | 444,083 |
|
|
(1) | No employee contributions are permitted in the SSP or SRP II. The amounts reported in this column were deferred at the election of the executive and are also included in the amounts reported in the “Salary” column of the Summary Compensation Table for |
(2) | Amounts represent Company |
(3) | The amounts reported in this column represent aggregate interest as provided in the plans that accrued during |
(4) | Distribution made in March |
(5) | The amounts reported in this column reflect the total balance of the NEO’s accounts in the plans as of December 31, |
CALIFORNIA RESOURCES CORPORATION 60
|
Executive Compensation Tables
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 2018,2019, 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.$154,051.
The annual total compensation of our CEO, as reported in the Summary Compensation Table on page 56,57, was $7,734,657.$10,497,077.
Based on this information, for 20182019 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 5368 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:
CALIFORNIA RESOURCES CORPORATION 63
2020 PROXY STATEMENT |
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. Executive Compensation Tables
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 20182019 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 2018.2019. 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 2018.2019.
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 20182019 year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $145,578.$154,051.
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 20182019 Summary Compensation Table included on page 5657 and incorporated by reference under Item 11 of Part III of our Annual Report.
CALIFORNIA RESOURCES CORPORATION 6164
|
Executive Compensation Tables
Potential Payments upon Termination or Change in Control
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 agreements. Following is a summary of the material terms of these arrangements.
Under our Notice and Severance Pay Plan, employees terminated due to job elimination or relocation who are not offered continued employment by CRC arewere eligible for up to 12 months of base salary depending on years of service, two months of contributions pursuant to CRC’s qualified and nonqualified savings plans with immediate vesting of any unvested balances, and continued medical and dental coverage for the applicable notice and severance period at the active employee rate.
OurAwards under our Long-Term Incentive AwardsPlan have provisions that, in the event of a change in control withfollowed by a termination, in connection with the change in control, provide for the outstandingfull acceleration of 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.
Except as described in this summary and below under “Potential Payments,” we dodid not have any other agreements or plans 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.
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, 2018,2019, and reflect the terms of applicable plans and long-term incentive award agreements then in effect. None of our NEOs havehad employment agreements. 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 iswas either eliminated or relocated and the employee iswas 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 6265
|
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, 2018.2019.
|
|
| Retirement with |
|
| Termination by | Change in |
|
|
| Retirement with |
|
| Termination by | Change in |
| ||||||||||
| CRC Consent, Death, | Executive or | Control with |
| CRC Consent, Death, | Executive or | Control with |
| ||||||||||||||||||
| Disability, Termination | Termination | Termination |
| Disability, Termination | Termination | Termination |
| ||||||||||||||||||
Benefits and Payments Upon Termination | without Cause | for Cause | as Result |
| without Cause | for Cause | as Result |
| ||||||||||||||||||
Todd A. Stevens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 1,200,000 |
|
|
| $0 |
|
| $ | 1,200,000 |
|
|
| $ | 1,301,000 |
|
|
| $0 |
|
| $ | 1,301,000 |
|
RSU Awards(2) |
|
| $ | 1,564,505 |
|
|
| $0 |
|
| $ | 4,003,258 |
|
|
| $ | 891,113 |
|
|
| $0 |
|
| $ | 1,965,226 |
|
PSU Awards(3) |
|
| $ | 690,518 |
|
|
| $0 |
|
| $ | 2,415,710 |
|
|
| $ | 1,116,884 |
|
|
| $0 |
|
| $ | 2,403,190 |
|
PIA Awards(4) |
|
| $ | 2,915,342 |
|
|
| $0 |
|
| $ | 4,150,000 |
|
|
| $ | 2,305,753 |
|
|
| $0 |
|
| $ | 2,400,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
Total |
|
| $ | 6,370,365 |
|
|
| $0 |
|
| $ | 11,768,968 |
|
|
| $ | 5,614,750 |
|
|
| $0 |
|
| $ | 8,069,416 |
|
Marshall D. Smith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 750,000 |
|
|
| $0 |
|
| $ | 750,000 |
|
|
| $ | 811,000 |
|
|
| $0 |
|
| $ | 811,000 |
|
RSU Awards(2) |
|
| $ | 604,016 |
|
|
| $0 |
|
| $ | 1,528,369 |
|
|
| $ | 337,208 |
|
|
| $0 |
|
| $ | 734,238 |
|
PSU Awards(3) |
|
| $ | 252,307 |
|
|
| $0 |
|
| $ | 882,672 |
|
|
| $ | 409,710 |
|
|
| $0 |
|
| $ | 883,694 |
|
PIA Awards(4) |
|
| $ | 1,320,959 |
|
|
| $0 |
|
| $ | 1,850,000 |
|
|
| $ | 912,694 |
|
|
| $0 |
|
| $ | 950,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
Total |
|
| $ | 2,927,282 |
|
|
| $0 |
|
| $ | 5,011,041 |
|
|
| $ | 2,470,611 |
|
|
| $0 |
|
| $ | 3,378,932 |
|
Darren Williams |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 510,000 |
|
|
| $0 |
|
| $ | 510,000 |
|
|
| $ | 547,000 |
|
|
| $0 |
|
| $ | 547,000 |
|
RSU Awards(2) |
|
| $ | 347,248 |
|
|
| $0 |
|
| $ | 863,042 |
|
|
| $ | 182,563 |
|
|
| $0 |
|
| $ | 400,878 |
|
PSU Awards(3) |
|
| $ | 139,431 |
|
|
| $0 |
|
| $ | 487,787 |
|
|
| $ | 226,101 |
|
|
| $0 |
|
| $ | 487,259 |
|
PIA Awards(4) |
|
| $ | 701,336 |
|
|
| $0 |
|
| $ | 981,250 |
|
|
| $ | 480,365 |
|
|
| $0 |
|
| $ | 500,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
Total |
|
| $ | 1,698,015 |
|
|
| $0 |
|
| $ | 2,842,079 |
|
|
| $ | 1,436,029 |
|
|
| $0 |
|
| $ | 1,935,136 |
|
Charles F. Weiss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive Award(1) |
|
| $ | 425,000 |
|
|
| $0 |
|
| $ | 425,000 |
|
|
| $ | 480,000 |
|
|
| $0 |
|
| $ | 480,000 |
|
RSU Awards(2) |
|
| $ | 375,195 |
|
|
| $0 |
|
| $ | 927,351 |
|
|
| $ | 194,843 |
|
|
| $0 |
|
| $ | 423,769 |
|
PSU Awards(3) |
|
| $ | 146,075 |
|
|
| $0 |
|
| $ | 511,030 |
|
|
| $ | 236,731 |
|
|
| $0 |
|
| $ | 509,978 |
|
PIA Awards(4) |
|
| $ | 767,945 |
|
|
| $0 |
|
| $ | 1,075,000 |
|
|
| $ | 528,402 |
|
|
| $0 |
|
| $ | 550,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
Total |
|
| $ | 1,714,215 |
|
|
| $0 |
|
| $ | 2,938,381 |
|
|
| $ | 1,439,976 |
|
|
| $0 |
|
| $ | 1,963,747 |
|
Shawn M. Kerns |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Michael L. Preston |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Annual Incentive Award(1) |
|
| $ | 450,000 |
|
|
| $0 |
|
| $ | 450,000 |
|
|
| $ | 506,000 |
|
|
| $0 |
|
| $ | 506,000 |
|
RSU Awards(2) |
|
| $ | 282,498 |
|
|
| $0 |
|
| $ | 750,594 |
|
|
| $ | 167,247 |
|
|
| $0 |
|
| $ | 380,714 |
|
PSU Awards(3) |
|
| $ | 152,714 |
|
|
| $0 |
|
| $ | 534,255 |
|
|
| $ | 224,604 |
|
|
| $0 |
|
| $ | 482,067 |
|
PIA Awards(4) |
|
| $ | 473,315 |
|
|
| $0 |
|
| $ | 665,000 |
|
|
| $ | 384,292 |
|
|
| $0 |
|
| $ | 400,000 |
|
Option Awards(5) |
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
|
| $ | 0 |
|
|
| $0 |
|
| $ | 0 |
|
Total |
|
| $ | 1,358,527 |
|
|
| $0 |
|
| $ | 2,399,849 |
|
|
| $ | 1,282,143 |
|
|
| $0 |
|
| $ | 1,768,780 |
|
(1) | The annual incentive award |
(2) | In the event of retirement with consent, termination without cause, death or disability, a pro rata portion of the RSU awards would |
(3) | In the event of retirement with consent or termination without cause, a pro rata portion of the PSU Awards would |
(4) | In the event of retirement with consent or termination without cause, a pro rata portion of the PIA target incentive amount would |
(5) | Under the terms of the option awards, options would have become (i) vested fully or prorated based upon the earlier of the executive’s termination of employment for retirement, disability, death, or involuntary termination or (ii) fully vested upon termination of employment as a result of a change in control. Option award values are $0 because in each case the option exercise price was greater than |
CALIFORNIA RESOURCES CORPORATION 6366
|
Director Compensation
Our director compensation program is designed to be consistent with the programs of our peer companies. Peer Group.
The following matters were considered important to development of our director compensation program:
Market practices of our peer companies targeting a compensation package that is at or below the median of this group.
The need to recruit and retain independent directors.
For 2018,2019, the cash retainer was reduced and equity award was increased, as described below,changed to more closely align withbe vested on the mediangrant date, instead of our peer companies, while providing a greater portion ofone year after the director compensationgrant date in shares.prior years. The elements of our 20182019 outside director compensation program were as follows:
An annual cash board retainer of $90,000, paid in equal monthly installments, reduced from $100,000 in prior years.installments.
An additional annual cash retainer of $100,000 for our Chairman.
An additional annual cash retainer of $25,000 for the Lead Independent Director.
An additional annual cash retainer of $20,000 for the audit and compensation committee chairpersons and $15,000 for the other committee chairpersons.
An annual equity award relating toof our common stock equivalent to $175,000 on the grant date, which generally vests one year following the grant date, increased from $150,000 in prior years.date.
A stock ownership guideline of five times the annual cash board retainer applies to outside directors and must be attainedwho are expected to attain this target ownership level within five years of election to our Board of Directors. Since the Spin-off occurred on November 30, 2014, theAs of December 31, 2019, all of our outside directors have until November 30, 2019 or later to meetwere in compliance with the targetstock ownership levels.guideline, based on the grant/purchase date stock values.
20182019 Compensation of Directors
The following table sets forth the total compensation for 20182019 for each of the non-employee directors who served in 2018:2019:
|
| Fees Earned or Paid in |
|
|
|
|
|
|
| Change in Pension Value and Nonqualified Deferred |
|
|
| All Other |
|
|
|
|
|
|
| Fees Earned or Paid in |
|
|
|
|
|
|
| Change in Pension Value and Nonqualified Deferred |
|
|
| All Other |
|
|
|
|
|
| ||||||||||||||||||
Name |
| Cash |
| Stock Awards(1) |
| Compensation |
|
|
| Compensation |
| Total |
| Cash |
| Stock Awards(1) |
| Compensation |
|
|
| Compensation |
| Total | ||||||||||||||||||||||||||||||||||
William E. Albrecht |
| $ | 193,333 |
|
|
| $ | 175,020 |
|
|
| $ | 2,433 |
| (2) |
|
| $ | 47,775 |
| (3) |
|
| $ | 418,561 |
|
|
| $ | 190,000 |
|
|
| $ | 175,004 |
|
|
| $ | 1,535 |
| (2) |
|
| $ | 12,000 |
| (3) |
|
| $ | 378,539 |
|
| ||||
Justin A. Gannon |
| $ | 113,333 |
|
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 288,353 |
|
|
| $ | 110,000 |
|
|
|
| $ | 175,004 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 285,004 |
|
| ||
Ronald L. Havner, Jr. |
| $ | 33,333 |
|
|
| $ | 0 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 33,333 |
|
| |||||||||||||||||||||||||||||||
Harold M. Korell |
| $ | 119,583 |
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 294,603 |
|
|
| $ | 115,000 |
|
|
| $ | 175,004 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 290,004 |
|
| ||||
Harry T. McMahon |
| $ | 113,333 |
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 5,000 |
| (3) |
|
| $ | 293,353 |
|
|
| $ | 110,000 |
|
|
| $ | 175,004 |
|
|
| $ | 0 |
|
|
|
| $ | 15,000 |
| (3) |
|
| $ | 300,004 |
|
| ||||
Richard W. Moncrief |
| $ | 108,333 |
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 283,353 |
|
|
| $ | 105,000 |
|
|
| $ | 175,004 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 280,004 |
|
| ||||
Avedick B. Poladian |
| $ | 93,333 |
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 15,000 |
| (3) |
|
| $ | 283,353 |
|
|
| $ | 90,000 |
|
|
| $ | 175,004 |
|
|
| $ | 0 |
|
|
|
| $ | 15,000 |
| (3) |
|
| $ | 280,004 |
|
| ||||
Anita M. Powers |
| $ | 86,667 |
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 261,687 |
|
|
| $ | 90,000 |
|
|
| $ | 175,004 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 265,004 |
|
| ||||
Laurie A. Siegel |
| $ | 27,000 |
|
|
| $ | 105,003 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 132,003 |
|
|
| $ | 87,000 |
|
|
| $ | 175,004 |
|
|
| $ | 0 |
|
|
|
| $ | 5,000 |
| (3) |
|
| $ | 267,004 |
|
| ||||
Robert V. Sinnott |
| $ | 108,333 |
|
|
| $ | 175,020 |
|
|
| $ | 0 |
|
|
|
| $ | 0 |
|
|
|
| $ | 283,353 |
|
|
| $ | 105,000 |
|
|
| $ | 175,004 |
|
|
| $ | 0 |
|
|
|
| $ | 26,500 |
| (3) |
|
| $ | 306,504 |
|
|
CALIFORNIA RESOURCES CORPORATION 64
|
Director Compensation
(1) | Stock Awards represent the aggregate grant date fair value attributable to |
(2) | Amount shown is the portion of interest credited in |
(3) |
|
CALIFORNIA RESOURCES CORPORATION 6567
|
Stock Ownership Information
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, 20199, 2020 (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) |
|
| ||||
State Street Corporation (4) |
|
| 4,347,530 |
|
| 8.81% |
|
|
The Vanguard Group (5) |
|
| 4,169,984 |
|
| 8.45% |
|
|
BlackRock, Inc. (6) |
|
| 3,419,493 |
|
| 6.93% |
|
|
William E. Albrecht |
|
| 220,561 |
|
| * |
|
|
Justin A. Gannon |
|
| 37,400 |
|
| * |
|
|
Harold M. Korell |
|
| 63,166 |
|
| * |
|
|
Harry T. McMahon (7) |
|
| 78,008 |
|
| * |
|
|
Richard W. Moncrief |
|
| 36,681 |
|
| * |
|
|
Avedick B. Poladian |
|
| 48,439 |
|
| * |
|
|
Anita M. Powers |
|
| 13,231 |
|
| * |
|
|
Laurie A. Siegel |
|
| 15,196 |
|
| * |
|
|
Robert V. Sinnott |
|
| 29,965 |
|
| * |
|
|
Todd A. Stevens |
|
| 543,417 |
|
| * |
|
|
Michael L. Preston |
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| 112,568 |
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| * |
|
|
Marshall D. Smith |
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| 261,502 |
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| * |
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|
Charles F. Weiss (8) |
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| 156,017 |
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| * |
|
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Darren Williams |
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| 157,011 |
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| * |
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Executive officers and directors as a group (consisting of 17 persons) |
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| 2,018,606 |
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| 4.09% |
|
|
* | Less than 1%. |
(1) | Unless otherwise noted below, the address for each beneficial owner is c/o California Resources Corporation, 27200 Tourney Road, Suite |
(2) | Includes the following number of options which are exercisable within 60 days: Albrecht – 127,678; Stevens – |
(3) | Except as otherwise noted below, based on total shares outstanding of |
(4) | Based on a Schedule 13G filed with the SEC on February |
(5) | Based on a Schedule |
(6) | Based on a Schedule |
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Stock Ownership Information; Proposals Requiring Your Vote
(7) | All 78,008 shares of common stock are held in the McMahon Trust. |
(8) | Includes |
CALIFORNIA RESOURCES CORPORATION 68
2020 PROXY STATEMENT |
Stock Ownership Information
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
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, 2018,2019, our Section 16 officers, directors and greater than 10% beneficial owners timely complied with all applicable filing requirements of Section 16(a)., except that one Form 4 regarding a sale of 10,000 shares of common stock by Mr. Albrecht was filed late.
CALIFORNIA RESOURCES CORPORATION 69
2020 PROXY STATEMENT |
Proposals Requiring Your Vote
Proposals Requiring Your VoteVote
Proposal 1: Election of Directors
In 2019, all ten2020, nine incumbent directors have been nominated by the Board of Directors for reelection through the 20202021 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, 2019.2020. 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.
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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, 20182019 and 2017:2018:
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| 2018 |
| 2017 |
| 2019 |
| 2018 | ||||||||||||||
Audit Fees (1) |
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| $ | 2,135,000 |
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| $ | 2,090,000 |
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| $ | 2,193,000 |
| $ | 2,135,000 |
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Audit-Related Fees (2) |
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| 737,480 |
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| 501,750 |
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| 967,200 |
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| 737,480 |
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| ||||
Tax Fees |
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| — |
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| — |
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| — |
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| — |
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All Other Fees |
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| — |
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| — |
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| — |
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| — |
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| ||||
Total |
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| $ | 2,872,480 |
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| $ | 2,591,750 |
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| $ | 3,160,200 |
| $ | 2,872,480 |
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| 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 the reviews of our quarterly financial statements. |
(2) | Audit-Related Fees are primarily for the audits of our benefit plans, other audits, consents, comfort letters and |
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2020 PROXY STATEMENT |
Proposals Requiring Your Vote
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 20182019 and 2017.2018.
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 2019.2020.
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.
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Proposals Requiring Your Vote The Company last held a “say-on-frequency” vote in 2015, at which point our stockholders voted for, and the Board determined to hold, annual say-on-pay votes. The Company plans to hold its next “say-on-frequency” vote at the 2021 annual meeting.
As described above in detail under the “Compensation Discussion and Analysis” section of this proxy statement, our compensation program is designed to attract and retain talented executives and also to motivate our executives to achieve our designated goals and thereby create a successful company enhancing shareholder value. 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.
Proposal 4: Approval of the Amended and Restated California Resources Corporation Long-Term Incentive Plan
The Board 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. 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 that the current number of shares available for grants under the existing California Resources Corporation Long-Term Incentive Plan (the “Existing LTIP”) is not sufficient to meet the objectives of our compensation program going forward. Accordingly, the Board of Directors has adopted and proposes that the stockholders approve an amendment and restatement of the plan 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 4,700,000 shares of our common stock, as adjusted to reflect the 1:10 reverse split that occurred on May 31, 2016, and subject to further adjustment in accordance with the terms of the Existing LTIP upon certain changes in capitalization and similar events. As of February 28, 2019, there were approximately 22,922 shares of common stock available for new awards under 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 awards 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; (iv) eliminate certain provisions that were included in the Existing LTIP for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), but which are no longer needed following the amendment of Section 162(m) of the Code in 2017; and (v) extend the term of the plan to 10 years from the date of approval by stockholders. The proposed increase in the number of shares authorized for issuance under the plan is expected to provide flexibility to enable the continued use of the Amended LTIP 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.
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Set forth in the table below is information regarding awards outstanding and shares of common stock available for grant under the Existing LTIP as of February 28, 2019.
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For additional information regarding stock-based awards previously granted, please see Note 11 to Consolidated and Combined Financial Statements disclosed in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018. As of February 28, 2019, there were 48,799,261 shares of our common stock outstanding. The closing price per share of our common stock on the New York Stock Exchange as of March [●], 2019 was $[●].
The effective date of the Amended LTIP will be the date of the Annual Meeting if the plan is approved by the stockholders of the Company on such date. If the proposed Amended LTIP is not so approved by our stockholders, then the Existing LTIP will remain in effect in its present form.
Summary of Features of the Amended LTIP
The following is a summary of the principal features of 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 total number of shares of common stock authorized for grant or award under the Existing LTIP is 4,700,000. As of February 28, 2019, the number of shares of common stock available for future grants or awards is 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 awards 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 person during any calendar year is 1,000,000. No individual may be granted other awards under the Amended LTIP (other than options and SARs) during any 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 all
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Performance-Based Awards that are not denominated in shares of common stock (including the Fair Market Value 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 to such a Performance-Based Award shall be paid no later than 10 years after 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 vest will be available for subsequent awards under 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 as of the date of grant in accordance with applicable financial accounting rules) of all awards granted under the plan to any individual, non-employee director during any single calendar year cannot exceed $750,000, determined without regard to grants 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, employees 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 consultants 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 will be exercisable in whole or in such installments and at such times as, specified 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.
Subject 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 time the option is granted, such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock 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
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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.
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 Bonuses
The Compensation Committee may grant a stock bonus to any eligible person to reward exceptional or special services, contributions or achievements in the manner and on such terms and conditions (including any restrictions on such shares) as determined from time to time by the Compensation Committee. The number of shares so awarded will be determined 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 shares 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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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
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substitution or exchange of outstanding awards or the cash, securities or property deliverable to the holder of the award.
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) the Compensation Committee will 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 will 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 Compensation Committee will 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 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.
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 following is a summary of the U.S. federal income tax consequences arising from grants and awards under the Amended LTIP. The tax consequences vary depending upon particular circumstances. The income tax laws, regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local, and foreign tax laws.
Status of Options
Options granted under the Amended LTIP may be either incentive options or nonstatutory options. The tax consequences both to the participant and 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 on the participant upon the grant of a nonstatutory option, and the Company is not entitled to a tax deduction by reason of such grant. Generally, upon the exercise of a nonstatutory option, the participant will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the excess of the fair market value of the shares of common stock at the time of exercise over the option price paid for such shares. There is no item of tax preference upon such exercise. Upon a subsequent disposition of the shares received upon exercise of a nonstatutory option, any difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition would be treated as capital gain 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 imposed on the participant upon the grant or exercise of an incentive option, except as described below under the caption “Alternative Minimum Tax.” If the Participant does not dispose of shares acquired pursuant to the exercise of 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
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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.
Stock Appreciation Rights
A participant who has been granted an SAR will not realize taxable income upon the grant of such award. Upon the exercise 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 for 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 forfeiture with respect to the common stock subject to such award lapses, the participant will realize ordinary income in an amount equal to 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 allowed under the terms of the award, the holder of a restricted 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 be 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, subject to the application of Section 162(m) of the Code, the Company will have a corresponding deduction. The measure of such income 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
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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.
Section 162(m) of the Code
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 provisions in the Amended LTIP or included in an agreement incident to the plan may afford a participant special protections or payments that 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 would 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 provisions of the Internal Revenue Code as currently in effect and the Treasury Regulations and proposed Treasury Regulations and Internal Revenue Service rulings thereunder, which are subject to change (possibly retroactively). The tax treatment of a participant in the plan may vary depending on his or her particular situation and may, therefore, be subject to special rules not discussed above. In addition, Section 409A of 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 intends for awards issued 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, or 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 any 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
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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.
New Plan Benefits
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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Securities Authorized for Issuance Under Equity Compensation Plans
The table below sets forth information relating to the number of shares authorized for issuance with respect to the equity compensation plans available to directors, officers, employees, and consultants of the Company at February 28, 2019.
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“FOR” PROPOSAL 4 TO APPROVE THE AMENDED AND RESTATED CALIFORNIA RESOURCES CORPORATION LONG-TERM INCENTIVE PLAN.
Proposal 5(a), Proposal 5(b) and Proposal 5(c): 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, 2016 (the “Charter”), provides in part that:
(1) Following the date when CRC’s classified board structure expires pursuant to the terms of the Charter, directors may only be removed at any time (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 CRC entitled to vote generally for the election of directors and (b) without Cause 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;
(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 Thirteenth 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. 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.
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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 Cause by the stockholders following the date when CRC’s classified board structure expires pursuant to the terms of the Charter. 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 Cause upon the affirmative vote of the holders of at least a majority in voting power of the outstanding shares 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 vote
“for” Proposal 5(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.
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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 Amended and Restated 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));
The Eleventh Article, which selects the forum for certain disputes;
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.
If the stockholders approve this Proposal 5(c), then the Tenth Article of the Charter will allow stockholders to amend the provisions of the Charter described above by an affirmative vote of the outstanding shares of stock of CRC entitled to vote thereon. Appendix C-3 shows the proposed changes to the Tenth Article of the Charter.
The Board recommends that the STOCKholders vote
“for” Proposal 5(c) to Change the Supermajority
Vote Requirement for STOCKholders to Amend
Certain Provisions of the Amended and
Restated Certificate of Incorporation
to a Majority Vote Requirement.
Therefore, if Proposal 5(a), 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.
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General Information
General InformationInformation
At the close of business on March 11, 2019,9, 2020, the “Record Date” for the determination of stockholders entitled to receive notice of and to vote at the Annual Meeting, there were [__________]49,358,891 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 Todd A. Stevens and William E. Albrecht as your proxy holders (“Proxy Holders”) 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 Chairman of the Annual Meeting or, if directed by the Chairman 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 Holders will vote the proxies they have 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 Chairman of the meeting or the Proxy Holders 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 Holders with the authority to vote on those matters and nominees in accordance with such persons’ discretion. Where a stockholder has appropriately specified how a proxy is to be voted, it will be voted by the Proxy Holders in accordance with the specification.
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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 | IN PERSON | 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 | You may vote in person at the Annual Meeting by completing a ballot, which will be available at the Annual Meeting. Please note that attending the Annual Meeting without completing a ballot will not count as a vote. | 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 8373
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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;5, 2020;
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; 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, Suite 315,200, Santa Clarita, California 91355 that is received no later than May 7, 2019.5, 2020.
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 respect to the uncontested election of directors to 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.”
Proposal 3. Advisory Vote to Approve Named Executive Officer Compensation; andCompensation
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
CALIFORNIA RESOURCES CORPORATION 8474
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General Information
the outcome of Proposals 3 and 4.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.
Proposals 5(a), 5(b) and 5(c). 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) Stockholders to Amend Certain Provisions of the Amended and Restated Certificate of Incorporation
Stockholders will vote on Proposals 5(a), 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), 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 uncontested 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 policyMajority voting 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,provision, which areis included in our Bylaws.
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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 20192020 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 of the Record Date or our invited guests may attend the Annual Meeting in person. If you plan 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 to enter the Annual Meeting. 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.
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General Information
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.
Notice of Internet Availability of Proxy Materials
On March 26, 2019,24, 2020, 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, 2019.9, 2020. 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.
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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 20202021 annual meeting of stockholders may do so by following the procedures set forth in Rule 14a-8 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, 2019.24, 2020.
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 20202021 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, 20206, 2021 and not later than the close of business on February 8, 2020.5, 2021. 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, Suite 315200
Santa Clarita, California 91355
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.
CALIFORNIA RESOURCES CORPORATION 76
2020 PROXY STATEMENT |
General Information
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 calling (866) 659-2647 or (718) 921-8124 (for international callers) or you may 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 87
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General Information
Our 20182019 Annual Report to Stockholders, including our Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 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 20182019 Annual Report to Stockholders does not constitute a part of the proxy soliciting material.
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, including the financial statements and the financial statement schedules, if any, but not including exhibits, is also available at http://www.astproxyportal.com/ast/20758 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: | 888-Proxy-NA (888-776-9962) or 718-921-8562 (for international callers) |
EMAIL: | help@astfinancial.com |
WEBSITE: | https://us.astfinancial.com/OnlineProxyVoting/ProxyVoting/RequestMaterials |
CALIFORNIA RESOURCES CORPORATION 8877
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Annex A Reconciliation of Non-GAAP Measures and Other Information
Reconciliation of Non-GAAP Measures and Other Information
Adjusted EBITDAX
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 |
|
|
| 2019 |
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| |||
Net income |
| $ | 429 |
|
|
| $ | 99 |
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| |
Interest and debt expense, net |
|
| 379 |
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|
|
| 383 |
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| |
Depreciation, depletion and amortization |
|
| 502 |
|
|
|
| 471 |
|
| |
Exploration expense |
|
| 34 |
|
|
|
| 29 |
|
| |
Unusual, infrequent and other items |
|
| (267 | ) |
|
|
| 98 |
|
| |
Other non-cash items |
|
| 40 |
|
|
|
| 62 |
|
| |
Adjusted EBITDAX (A) |
| $ | 1,117 |
|
|
| $ | 1,142 |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
Net cash provided by operating activities |
| $ | 461 |
|
|
| $ | 676 |
|
| |
Cash interest |
|
| 441 |
|
|
|
| 439 |
|
| |
Exploration expenditures |
|
| 17 |
|
|
|
| 18 |
|
| |
Working capital changes |
|
| 199 |
|
|
|
| 8 |
|
| |
Other, net |
|
| (1 | ) |
|
|
| 1 |
|
| |
Adjusted EBITDAX (A) |
| $ | 1,117 |
|
|
| $ | 1,142 |
|
| |
Adjusted EBITDAX margin ($ in millions) |
| 2018 |
|
|
| 2019 |
|
| |||
Total revenues and other |
| $ | 3,064 |
|
| ||||||
Non-cash derivative (gain) loss |
|
| (229 | ) |
| ||||||
Total revenues |
| $ | 2,634 |
|
| ||||||
Non-cash derivative loss |
|
| 170 |
|
| ||||||
Adjusted revenues (B) |
| $ | 2,835 |
|
|
| $ | 2,804 |
|
| |
Adjusted EBITDAX Margin (A)/(B) |
|
| 39 | % |
|
|
| 41% |
|
|
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.
Reserve Replacement Ratio
The all-inorganic reserve replacement ratio is calculated for a specified period using the proved oil-equivalent additions from extensions and discoveries, improved recovery, revisions and purchases,net performance related revisions, divided by oil-oil-equivalent production. There is no guarantee that historical sources of reserves additions
CALIFORNIA RESOURCES CORPORATION A-1
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Annex A Reconciliation of Non-GAAP Measures and Other Information
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 of 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.
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| |
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Extensions and discoveries |
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Improved recovery |
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Revisions related to performance |
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| ||
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Total (A) |
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Production in |
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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 20182019 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 20182019 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-inorganic finding and development costs by dividing the costs incurred for the year including acquisitions,from the capital program, excluding the increase in asset retirement costs substantially due to new idle well regulations issued in the first quarter of 2019 by the amount of oil-equivalent proved reserves added in the same year from improved recovery, extensions and discoveries, and net performance-related revisions, price-related revisions and purchases.revisions.
|
| 2018 |
|
| |
Total costs incurred – in millions (A) |
| $ | 1,244 |
|
|
Total reserve replacements – MMBoe (B) |
|
| 142 |
|
|
All-in finding and development costs $/Boe (A)/(B) |
| $ | 8.76 |
|
|
|
| 2019 |
|
| |
Organic finding and development costs – in millions (A) |
| $ | 455 |
|
|
Organic proved reserves added – MMBoe (B) |
|
| 52 |
|
|
Organic finding and development costs $/Boe (A)/(B) |
| $ | 8.75 |
|
|
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 following table presents a reconciliation of our net cash provided by operating activities to free cash flow.
($ in millions) |
| 2019 |
|
| |
Net cash provided by operating activities |
| $ | 676 |
|
|
Capital investments |
|
| (455 | ) |
|
Free cash flow |
| $ | 221 |
|
|
BSP funded capital |
|
| 48 |
|
|
Free cash flow, after internally funded capital |
| $ | 269 |
|
|
CALIFORNIA RESOURCES CORPORATION A-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)
PURPOSE; PRIOR PLAN
The purposes of this Plan are (i) to furnish a significant incentive to the employees, consultants and non-employee Directors of the Company and its Affiliates by making available to them the benefits 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 restatement of the Company’s Long-Term Incentive Plan as in effect immediately prior to the Effective Date (the “Prior Plan”). This Plan shall supersede and replace in its entirety the Prior Plan; provided, however, that, notwithstanding any provisions herein to the contrary, except for the provisions of Section 3.1 and for the required composition 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.
DEFINITIONS
“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, the Company. For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect 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.
“Board” means the Board of Directors of the Company.
“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:
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;
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
CALIFORNIA RESOURCES CORPORATION B-1
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Annex B Amended and Restated LTIP
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;
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
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.
“Committee” means the committee appointed by the Board to administer this Plan, which shall be composed of not less than two members 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).
“Company” means California Resources Corporation a Delaware corporation.
“Director” means a member of the Board who is not an employee of the Company or an Affiliate.
“Disability” means permanent and total disability as defined in Section 22(e)(3) of the Code.
“Effective Date” means May 8, 2019, which is the date on which this amendment and restatement was approved by the stockholders of the Company.
“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
CALIFORNIA RESOURCES CORPORATION B-2
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Annex B Amended and Restated LTIP
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.
“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” means, as of any specified date, the closing price of a Share, if the Shares are listed on a national stock exchange registered under Section 6(a) of the Exchange Act, 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 reported on that date, on the last preceding date on which such closing price of the Share is so reported. If the Shares are 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 to the average between the reported high and low or closing bid and asked prices of a Share on the most recent date on which Shares were publicly traded. In the event Shares are not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its fair market value shall be made by the Committee in such manner as it deems appropriate and as is consistent with the requirements of Section 409A of the Code.
“Five Percent Basket” has the meaning set forth in Section 5.5.
“ISO” means an incentive stock option qualified under Section 422 of the Code.
“Nonqualified Deferred Compensation Rules” means the limitations or requirements of Section 409A of the Code and the guidance and regulations promulgated thereunder.
“Performance-Based Award” means any Qualifying Option or award granted pursuant to Section 5.2.
“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 Incentive Plan, as amended from time to time.
“Prior Plan” has the meaning set forth in Section 1.
“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 under Section 16 of the Exchange Act.
“Section 162(m)” means Section 162(m) of the Code and the applicable regulations and interpretations thereunder.
“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.
CALIFORNIA RESOURCES CORPORATION B-3
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Annex B Amended and Restated LTIP
“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.
SHARES SUBJECT TO PLAN
AGGREGATE 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).
INDIVIDUAL 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, 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).
REISSUE 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.
SOURCE 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 treasury of the Company, or (c) previously issued Shares reacquired by the Company, including shares purchased on the open market.
PLAN ADMINISTRATION
This Plan shall be administered by the Committee.
CALIFORNIA RESOURCES CORPORATION B-4
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Annex B Amended and Restated LTIP
POWERS OF THE COMMITTEE - Subject to the express provisions of this Plan, the Committee shall be authorized and empowered to do all things necessary 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:
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;
determine who is an Eligible Person and to which Eligible Persons, if any, awards will be granted under this Plan;
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;
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;
determine whether (subject to Section 7.2), and the extent to which, adjustments are required pursuant to Section 7 hereof;
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;
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
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, the Company’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of this Plan. Members of the Committee and any officer or employee of the Company or any Affiliate 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 this 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.
SPECIFIC 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 the Committee may from time to time impose, among other things, provisions that:
permit the recipient of such award to pay the purchase price of the Shares or other property issuable pursuant to such award, 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:
cash, cash equivalent, or electronic funds transfer,
the delivery of previously owned shares of capital stock of the Company (including shares acquired as or pursuant to awards) or other property,
CALIFORNIA RESOURCES CORPORATION B-5
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Annex B Amended and Restated LTIP
a reduction in the amount of Shares or other property otherwise issuable pursuant to such award,
a cashless exercise, or
any other legal consideration the Committee deems appropriate;
are intended to qualify such award as an ISO;
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 to a termination of employment or an event referenced 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;
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
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.
DELEGATION - 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 on 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.
CALIFORNIA RESOURCES CORPORATION B-6
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Annex B Amended and Restated LTIP
BIFURCATION - 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.
AWARDS 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.
AWARDS
TYPE 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.
PERFORMANCE-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).
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
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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.
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.
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.
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 increase the amount of a settlement otherwise to be made in connection with such Performance-Based Awards, but may not exercise discretion to increase any such amount payable with respect to an award 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 which such Performance-Based Awards shall be paid or forfeited in the event of termination of employment by the participant prior to the end of a performance period or settlement of Performance-Based Awards.
Written Determinations. All determinations by the Committee as to the establishment of Performance Goals, the amount of any Performance-Based Award pool or potential individual Performance-Based Awards and as 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 award under the Prior Plan that was intended to constitute “performance-based compensation” under Section 162(m) (prior to its amendment in 2017). The Committee may not delegate any responsibility relating to such Performance-Based Awards.
CONSIDERATION FOR SHARES - Shares 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.
LIMITED 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.
OPTION/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
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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 may 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, any option, stock appreciation right or other non-full value award granted under this Plan may vest in full or in part upon death or disability of the participant, or upon a Change in Control, and such vesting shall not count against the Five Percent Basket.
SPECIAL LIMITATIONS RELATING TO ISOS - 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. To the extent that the aggregate fair market value (determined at the time the respective ISO is granted) of stock with respect 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 amount 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 notify the participant of such determination as soon as practicable after such determination. No ISO shall be granted to an individual if, at the time the option is granted, such individual owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation, within the meaning of Section 422(b)(6) of the Code, unless (i) at the time such option is granted, the option price is at least 110 percent of the Fair Market Value of a Share and (ii) such option by its terms is not exercisable after the expiration of five years from the date of grant. Except as otherwise provided in Sections 421 or 422 of the Code, an ISO shall not be transferable otherwise than by will or the laws of descent and distribution and shall be exercisable during the participant’s lifetime only by such participant or the participant’s guardian or legal representative.
TRANSFER RESTRICTIONS - Unless otherwise expressly provided in or permitted by this Section 5.7, by applicable law or 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 issuable pursuant to an award shall be delivered only to (or for the account of) the holder. No award may be transferred for consideration to a financial institution.
Exceptions by Committee Action - The Committee, in its sole discretion, may permit an award to be transferred for estate and/or tax planning purposes and on a basis consistent with the Company’s lawful issue of securities and the incentive purposes of the award and this Plan. Notwithstanding the foregoing, awards intended as ISOs or restricted stock awards for purposes of the Code shall be subject to any and all additional transfer restrictions necessary to preserve their status as ISOs or restricted shares, as the case may be, under the Code.
Exclusions - The exercise and transfer restrictions in this Section 5.7 shall not apply to:
transfers to the Company,
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,
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transfers pursuant to a domestic relations order (if approved or ratified by the Committee), if (in the case of ISOs) permitted by the Code,
if the participant has suffered a Disability, permitted transfers to or exercises on behalf of the holder by his or her legal representative, or
the authorization by the Committee of “cashless exercise” procedures with third parties who finance or who otherwise facilitate the exercise of awards consistent with applicable laws and the express authorization of the Committee.
TAX 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 issuable to the participant pursuant to an award (or allow the surrender of Shares by the participant to the Company or its Affiliate). The number of Shares that may be so withheld or surrendered shall be limited to the number of Shares that have a Fair Market Value on the date of withholding 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. income 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 respect 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.
CASH 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.
TERMINATION 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.
DIVIDENDS 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
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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.
TERM OF PLAN
This amended and restated Plan was adopted by the Board on February 19, 2019, and 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, and the Prior Plan shall continue in effect as if this amendment and restatement had not occurred, and any awards previously granted under the Prior Plan shall continue in effect under the terms of the grant and the Prior Plan; provided, further, that thereafter awards may continue to be granted pursuant to the terms of the Prior Plan, as in effect prior to this amendment and restatement and as may be otherwise amended thereafter. This amended and restated 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 event may an award be granted under this Plan on or after the tenth anniversary of the Effective Date. After this Plan is terminated, no future awards may be granted pursuant to this Plan, but awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan’s terms and conditions. In addition, any then outstanding award may be amended thereafter in any manner that would have been permitted earlier, except that no such amendment shall increase the number of Shares subject 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).
ADJUSTMENTS; CHANGE IN CONTROL
CHANGE IN CONTROL; ACCELERATION AND TERMINATION OF AWARDS - Unless otherwise provided in an award agreement, upon the occurrence of a Change in Control:
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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 dissolution of the Company, or (ii) an event described in this Section 7.1 that the Company does not survive, or (iii) the consummation of a Change in Control approved by the Board, such option or right will terminate, subject to any provision that has been expressly made by the Committee or the Board through a plan of reorganization approved by the Board or otherwise for the survival, substitution, assumption, exchange or other settlement of such option or right.
ADJUSTMENTS –
ADJUSTMENTS GENERALLY. The following provisions will apply if any extraordinary dividend or other extraordinary distribution occurs in respect of the Shares (whether in the form of cash, Shares, other securities, or other property), 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 securities of the Company, or any similar, unusual, infrequent or extraordinary corporate transaction (or event in respect of the Shares) or a sale of substantially all the assets of the Company as an entirety occurs. The Committee will, in such manner and to such extent (if any) as it deems appropriate and equitable:
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
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.
EQUITY 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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Annex B Amended and Restated LTIP
PLAN AMENDMENT AND TERMINATION
AUTHORITY 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).
RESTRICTIONS - 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 7 shall not be deemed to constitute a change requiring such consent.
LEGAL MATTERS
COMPLIANCE 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 approvals by any listing, regulatory or governmental authority as may, 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.
NO RIGHT TO AN AWARD - Neither the adoption of this Plan nor any action of the Board or of the Committee shall be deemed to give any individual any right to be granted an award or any other rights hereunder except 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.
NON-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.
NO EMPLOYMENT RIGHTS CONFERRED - Nothing contained in this Plan (or in any other documents relating to this Plan or to any award) shall confer upon any Eligible Person or other participant any right to continue in the employ or other service of the Company or any Affiliate or constitute any contract or agreement of employment or other service, nor shall interfere in any way with the right of the Company or any Affiliate to change such person’s compensation or other benefits or to terminate the employment of such person, with or without cause.
MISCELLANEOUS
UNFUNDED 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. This Plan shall not establish any fiduciary relationship between the Company or 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 creditor of the Company.
AWARDS NOT COMPENSATION - Unless otherwise determined by the Committee, settlements of awards received by participants under this 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.
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FRACTIONAL SHARES - The Company shall not be required to issue any fractional Shares pursuant to this Plan. The Committee may provide for the elimination of fractions or for the settlement thereof in cash.
COMPLIANCE WITH SECURITIES LAWS - Nothing herein or in any award granted hereunder shall require the Company to issue any shares with respect to any award if that issuance would, in the opinion of counsel for the Company, constitute a violation of the Securities Act of 1933, as amended, or any similar or superseding statute or statutes, any other applicable statute or regulation, or the rules of any applicable securities exchange or securities association, as then in effect.
CLAWBACK - To the extent required by applicable law or any applicable securities exchange listing standards, or as otherwise determined by the Board or Committee, awards and amounts paid or payable pursuant to or with respect to awards shall be subject to the provisions of any applicable clawback policies or procedures adopted by the Company, which clawback policies or procedures may provide for forfeiture, repurchase and/or recoupment of awards and amounts paid or payable pursuant to or with respect to awards. Notwithstanding any provision of this Plan or any award agreement 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.
SECTION 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, it is the general intention, but not the obligation, of the Company to design such award to comply with the Nonqualified Deferred Compensation Rules and such award should be interpreted accordingly. Notwithstanding anything in this Plan to the contrary, to the extent that the Committee determines that any award under this Plan may be subject to the Nonqualified Deferred Compensation Rules, the Committee may, without a participant’s consent, adopt such amendments to this Plan and the applicable award agreement 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 treatment 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; provided, however, that nothing in this Section 10.6 shall create any obligation on the part of the Company or any Affiliate to adopt any such amendment or take any other such action or any liability for any failure to do so. Notwithstanding anything herein to the contrary, in no event shall the Company or any Affiliate have any obligation to indemnify or otherwise compensate any participant for any taxes or interest imposed under the Nonqualified Deferred Compensation Rules or similar provisions of state or foreign law.
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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 Restated Certificate of
Incorporation of California Resources Corporation (Proposal 5(a))
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(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, any director may be removed only 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, 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 and (b) without Cause 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), 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. “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.
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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 Restated Certificate of
Incorporation of California Resources Corporation (Proposal 5(b))
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(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 Corporation (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), 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 the 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 Thirteenth 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 the Certificate of Incorporation, in addition to the approval by a majority of the directors then in office.
CALIFORNIA RESOURCES CORPORATION C-3-1
crc.com PoweringCalifornia.com This Proxy Statement is printed on Forest Stewardship Council®-Certified paper that contains wood from well-managed forests and other responsible sources.® MIX Paper from responsible sources FCS C132107 FSC www.fac.org® UFCW888CALUFCW888IFORNIA RESOURCES CORPORATION crc.com
ANNUAL MEETING OF STOCKHOLDERS OF CALIFORNIA RESOURCES CORPORATION May 8, 2019 PROXYVOTINGINSTRUCTIONSINTERNET -Access “www.voteproxy.com”6, 2020 PROXY VOTING INSTRUCTIONS INTERNET – Access www.voteproxy.com and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. TELEPHONE -Call– 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 telephone and follow the instructions. Have your proxy card available when you call. Vote online/phone until 11:59 p.m. Eastern Time the day before the meeting. MAIL -Sign,– Sign, date and mail your proxy card in the envelope provided as soon as possible. IN PERSON -You– You may vote your shares in person by attending the Annual Meeting. See Admission Ticket on reverse side. GO GREEN -e-Consent– e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. COMPANYNUMBERACCOUNTNUMBERNOTICEOFINTERNETAVAILABILITYOFPROXYMATERIALS:TheNoticeofMeeting,proxystatementandproxycardareavailableathttp:NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS: The Notice of Meeting, proxy statement and proxy card are available at http://www.astproxyportal.com/www.astproxyportal.co/ast/20758Please20758 Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. THEBOARDOFDIRECTORSRECOMMENDSAVOTE"FOR"THEELECTIONOFALLNOMINEESFORDIRECTOR,AND"FOR"PROPOSALS2,3,4,5(a),5(b)and5(c).PLEASESIGN,DATEANDRETURNPROMPTLYINTHEENCLOSEDENVELOPE.PLEASEMARKYOURVOTEINBLUEORBLACKINKASSHOWNHEREx1.050620 THE BOARD OF DIRECTORS REOMMENDS A VOTE “FOR” THE ELECTION OF ALL NOMINEES FOR DIRECTOR, AND “FOR” PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE. X 1. Election of tennine director nominees: FOR AGAINST ABSTAIN 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. Stevens To change the address on your account, please check the box at right andindicateand indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted viathisvia this method. Signature of Stockholder Date: 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, 2019.2020. 3. Advisory vote to approve named executive officer compensation. 4. Approval of the Amended and Restated California Resources Corporation Long-Term Incentive Plan. 5(a).Change the supermajority vote requirement for stockholders to remove directors without cause to a majority vote requirement. 5(b).Change the supermajority vote requirement for stockholders to amend the Bylaws to a majority vote requirement. 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. 6. To transact any other business that may properly come before the annual meeting or any adjournmentsadjournments 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).3. 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. When signing as executor, administrator, attorney, trustee or guardian, please give fulltitlefull title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
ADMISSIONTICKETIfADMISSION TICKET If 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, 2019,9, 2020, the record date. 0 CALIFORNIA RESOURCES CORPORATION Proxy for Annual Meeting of Stockholders on May 8, 20196, 2020 Solicited on Behalf of the Board of Directors The undersigned hereby appoints Todd A. Stevens and William E. Albrecht as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and vote, as designated on the reverse side hereof, all the shares of common stock of California Resources Corporation held of record by the undersigned at the close of business on March 11, 20199, 2020 at the Annual Meeting of Stockholders to be held Wednesday, May 8, 20196, 2020 at 11:00 a.m. Pacific Time at the Bakersfield Marriott at the Convention Center, 801 Truxtun Avenue, Bakersfield, California 93301, and at any adjournment thereof. (Continued and to be signed on the reverse side.) 1.1 14475