Item 5.02 Departures of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 22, 2021, the Board of Directors (the "Board") of California Resources
Corporation (the "Company") named Mark A. McFarland President and Chief
Executive Officer, removing his previous interim title.
Mr. McFarland, 51, has served on the Board since the Company's emergence from
bankruptcy in October 2020, serving as the Executive Chairman of the Board from
November 2020 to December 31, 2020 and Chairman of the Board and Interim Chief
Executive Officer of the Company since December 31, 2020. Mr. McFarland has
served as the Executive Chairman of GenOn Energy, Inc. since December 2018, but
stepped back from his Executive Chairman role in connection with his appointment
as President and Chief Executive Officer of the Company (he will remain on the
board of GenOn Energy). From April 2017 to December 2018, he was the President
and Chief Executive Officer of GenOn and served on its Board of Managers. From
2013 to 2016, he served as Chief Executive Officer of Luminant Holding Company
LLC, a subsidiary of Energy Future Holdings Corporation. From 2008 to 2013, he
served as both Chief Commercial Officer of Luminant and Executive Vice
President, Corporate Development and Strategy of Energy Future Holdings. From
1999 to 2008, Mr. McFarland served in various roles at Exelon Corporation,
including as Senior Vice President, Corporate Development from 2005 to 2008 and
Vice President, Exelon Generation from 2003 to 2005. He served on the Board of
Managers of Bruin E&P Partners, LLC from March 2020 to August 2020. He served on
the Board of Directors of TerraForm Power, Inc. from October 2017 to July 2020.
He served on the Board of Directors of Chaparral Energy, Inc. from December 2019
to October 2020. Mr. McFarland earned his Masters of Business Administration
from the University of Delaware and a Bachelor of Science degree in Civil
Engineering (Environmental Concentration) from Virginia Polytechnic Institute
and State University. He received his professional engineer license in 1995.
There are no arrangements or understandings between Mr. McFarland and any other
persons pursuant to which he was selected to serve as the Company's President
and Chief Executive Officer. There are no family relationships between Mr.
McFarland and any director or executive officer of the Company, and Mr.
McFarland has no direct or indirect material interest in any transaction
required to be disclosed pursuant to Item 404(a) of Regulation S-K.
In connection with Mr. McFarland's appointment, on March 22, 2021 (the
"Effective Date"), the Company and Mr. McFarland entered into an Employment
Agreement (the "Employment Agreement"). The Employment Agreement provides for a
two-year term beginning on the Effective Date, during which either the Company
or Mr. McFarland may terminate the employment relationship for any or no reason
(such two-year or earlier period, the "Term"). The parties may mutually agree to
extend the Term for additional one-year periods. Pursuant to the Employment
Agreement, during the Term, Mr. McFarland will receive an annualized base salary
of $850,000, will be covered under the Company's directors and officers
liability insurance and will be eligible (i) to receive an annual cash bonus
with a target value of 120% of his base salary (reduced for 2021 by the
difference, if any, between the amount of fees earned by Mr. McFarland from
January 1, 2021 to March 21, 2021 for his service during such period as Interim
Chief Executive Officer and the amount of base salary that would have been paid
to Mr. McFarland during such period pursuant to the Employment Agreement had
such agreement been in effect January 1, 2021), (ii) to participate in those
benefit plans and programs of the Company available to similarly situated
executives and (iii) commencing in 2023, to receive annual long-term incentive
awards (expected to be comprised 70% of performance stock units ("PSUs") and 30%
of restricted stock units ("RSUs")) under the Company's 2021 Long Term Incentive
Plan (the "LTIP") with a target grant date value of not less than 588% of his
base salary as in effect on the applicable grant date. Mr. McFarland also
received an initial long-term incentive award consisting of PSUs with a grant
date target value of $7,993,870 (the "Initial PSUs") and RSUs with a grant date
value of $6,291,692 (the "Initial RSUs"), in each case, under the LTIP in
connection with his appointment as President and Chief Executive Officer of the
Company. The Initial PSUs are earned during a three-year performance period only
if the volume weighted average per share price of the Company's common stock
over a sixty trading day period ("VWAP") equals or exceeds certain thresholds,
such that 25% of the Initial PSUs are earned if the VWAP equals 115% of the
closing price of a share of the Company's stock as of the trading day preceding
the date of grant, 50% of the Initial PSUs are earned if the VWAP equals 132.25%
of such closing price, 75% of the Initial PSUs are earned if the VWAP equals
152.0875% of such closing price, and 100% of the Initial PSUs are earned if the
VWAP equals or exceeds 174.9% of such closing price (with linear interpolation
between such levels).
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The Employment Agreement also provides for certain severance payments and
benefits to be provided to Mr. McFarland upon his termination of employment by
the Company without "Cause" or his resignation for "Good Reason," death or
"Disability" (each quoted term as defined in the Employment Agreement). Upon Mr.
McFarland's termination of employment for any reason, the Employment Agreement
provides that the Company shall pay him all unpaid base salary, any unreimbursed
business, relocation or legal expenses incurred prior to the date on which his
employment terminates (as applicable, the "Termination Date") and all benefits
to which he is entitled under the terms of any applicable benefit plan.
Upon Mr. McFarland's termination of employment by the Company without Cause, or
by Mr. McFarland for Good Reason, in each case, prior to the expiration of the
Term, then Mr. McFarland will receive payment of any earned but unpaid annual
bonus for the calendar year preceding the calendar year in which the Termination
Date occurs and, so long as Mr. McFarland executes a release of claims in favor
of the Company and its affiliates and abides by the restrictive covenants within
the Employment Agreement, he shall receive (i) severance payments in a total
amount equal to 24 months of his base salary as of the Termination Date,
generally payable in 24 substantially equal monthly installments following the
Termination Date, (ii) payment of one times (or two times if such termination of
employment occurs within the one-year period following a qualifying "Change in
Control" (such quoted term as defined in the LTIP)) the target annual bonus for
the calendar year in which the Termination Date occurs, (iii) reimbursement for
the difference between the amount he pays to effect continued coverage
(including coverage for his spouse and eligible dependents) under the Company's
group health plans pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and the executive contribution amount that similarly
situated executives of the Company pay for the same or similar coverage under
such group health plans, during the portion, if any, of the 18-month period
following the Termination Date that he elects to continue coverage, and (iv)
full vesting of the Initial RSUs and the Initial PSUs and the Initial PSUs may
become earned based on the level of achievement of the applicable performance
goal.
If Mr. McFarland's employment is terminated due to his death or Disability, he
shall receive (i) payment of any earned but unpaid annual bonus for the calendar
year preceding the calendar year in which the termination of employment occurs
and (ii) a pro-rata portion of the annual bonus for the calendar year in which
the Termination Date occurs, based on actual performance for such calendar year
and payable at the time such bonuses are paid to similarly situated executives
of the Company.
The foregoing description of the Employment Agreement is qualified in its
entirety by reference to the full and complete text of the Employment Agreement,
which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
On March 22, 2021, the Company issued a press release announcing Mr. McFarland's
appointment as President and Chief Executive Officer. A copy of the press
release is furnished as Exhibit 99.1 hereto.
The information furnished in this Item 7.01, including Exhibit 99.1, shall not
be deemed to be "filed" for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the
liabilities of that section, nor shall it be deemed to be incorporated by
reference into any other filing under the Securities Act of 1933, as amended or
the Exchange Act, except as expressly set forth by specific reference in such a
filing.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
10.1 Employment Agreement by and between Mark A. McFarland and California
Resources Corporation, dated March 22, 2021.
99.1 Press release dated March 22, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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CALIFORNIA RESOURCES CORPORATION 
