UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
(Rule 14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Filed
by
the Registrant [X]
Filed
by
a Party other than the Registrant [ ]
Check
the
appropriate box:
[
] Preliminary Proxy Statement
[
] Confidential, For Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X]
Definitive Proxy Statement
[
] Definitive Additional Materials
[
] Soliciting Material Pursuant to §240.14a-12
CADIZ
INC.
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X]
No
fee required.
[
] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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[
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paid previously with preliminary materials.
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box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
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CADIZ
INC.
__________________________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 15, 2007
To
our
Stockholders:
The
annual meeting of stockholders of Cadiz Inc., a Delaware corporation, will
be
held at the law offices of Theodora Oringher Miller & Richman PC, located at
2029 Century Park East, 6th
Floor,
Los Angeles, California 90067, on Friday, June 15, 2007, at 11 a.m., local
time,
and any adjournments thereof, to consider and act upon the following
matters:
(1) The
election of six members of the Board of Directors, each to serve until the
next
annual meeting of stockholders or until their respective successors shall have
been elected and qualified;
(2) Ratification
of the selection by the Audit Committee of our Board of Directors of
PricewaterhouseCoopers LLP as Cadiz' independent certified public accountants
for fiscal year 2007;
(3) The
approval of Cadiz' 2007 Management Equity Incentive Plan;
(4) The
transaction of such other business as may properly come before the meeting
and
any adjournments thereof.
The
accompanying proxy statement contains a more complete description of these
proposals.
Only
stockholders of record at the close of business on April 20, 2007 are entitled
to notice of and to vote at the annual meeting. In order to constitute a quorum
for the conduct of business at the annual meeting, holders of a majority of
all
outstanding voting shares of our common stock and preferred stock must be
present in person or be represented by proxy.
Whether
or not you expect to attend the annual meeting in person, please either vote
your shares via Internet, by phone (detailed instructions are included on the
proxy card) or date, sign and mail the enclosed proxy in the postage paid return
envelope provided as promptly as possible. The proxy is revocable and will
not
affect your right to vote in person if you attend the meeting.
By
Order
of the Board of Directors
O'Donnell
Iselin II
Secretary
Los
Angeles, California
April
27,
2007
CADIZ
INC.
Annual
Meeting of Stockholders
TABLE
OF CONTENTS
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1
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Record
Date, Voting Securities and Quorum
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1
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Revocability
of Proxies
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1
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Cost
of Solicitation
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2
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3
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3
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6
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Meetings
and Committees of the Board of Directors
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8
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8
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9
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12
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13
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Compensation
Philosophy
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Elements
of Compensation
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Severance
and Change in Control Provisions
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Tax
and Accounting Considerations
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17
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Summary
Compensation Table
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Grants
of Plan-Based Awards
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Outstanding
Equity Awards at Fiscal Year-End
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Option
Exercises and Stock Vested
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2003
Management Equity Incentive Plan
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2004
Management Bonus Plan
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1996
Stock Option Plan, 1998 Stock Option Plan and 2000 Stock Option
Plan
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CADIZ
INC.
777
S.
Figueroa Street, Suite 4250
Los
Angeles, California 90017
PROXY
STATEMENT
For
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 15, 2007
The
Board
of Directors of Cadiz Inc. is soliciting proxies to be voted at the annual
meeting of our stockholders to be held on Friday, June 15, 2007, at the time
and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. This proxy statement contains information that may
help
you decide how to vote. These proxy materials were mailed on or about April
27,
2007 to all stockholders of record.
Cadiz'
Annual Report on Form 10-K for the year ended December 31, 2006, including
audited financial statements, is being mailed to you with this proxy
statement.
RECORD
DATE, VOTING SECURITIES AND QUORUM
The
Board
of Directors has fixed the close of business on April 20, 2007 as the record
date for determination of stockholders entitled to notice of, and to vote at,
the annual meeting.
On
the
record date, 11,886,322 shares of our common stock were outstanding and 1,000
shares of our convertible preferred stock were outstanding. Holders of common
stock are entitled to one vote per share. Holders of preferred stock are
entitled to that number of votes equal to the number of shares of common stock
issuable upon conversion of the preferred stock at the time the shares are
voted, which is approximately 17.29 votes for each share of preferred stock.
Only stockholders of record at the close of business on the record date will
be
entitled to vote.
The
candidates for director receiving a plurality of the votes of the shares present
in person or represented by proxy will be elected (Proposal 1). An affirmative
vote of a majority of the shares present or represented by proxy and voting
at
the meeting is required for ratification of Cadiz' independent registered public
accounting firm (Proposal 2) and approval of the 2007 Management Equity
Incentive Plan (Proposal 3). If you complete, sign, and date the enclosed proxy
and return it before the meeting, the persons named will vote your shares as
you
specify in the proxy. If you sign, date, and return your proxy but do not
indicate how you wish your shares voted, they will be voted for the proposals.
If you do not return a signed proxy, or submit your vote via Internet or by
phone, then your shares will not be voted unless you attend the meeting and
vote
in person.
To
have a
quorum, holders of a majority of all shares of voting stock outstanding on
the
record date must be present at the meeting, either in person or by proxy.
Abstentions and "broker non-votes" - shares held by brokerage firms for their
clients as to which the firms have not received voting instructions from their
clients and therefore do not have the authority to vote - will be counted for
purposes of determining a quorum, but will be treated as neither a vote "for"
nor a vote "against" the proposals.
REVOCABILITY
OF PROXIES
You
may
revoke a proxy any time before the voting begins in any of the following
ways:
*
By
giving written notice to our corporate secretary;
*
By
signing and delivering a later dated proxy; or
*
By
attending and voting in person at the meeting.
1
COST
OF
SOLICITATION
We
are
paying the expenses of this solicitation. If requested, we will also reimburse
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses in sending proxy material to principals and obtaining their
instructions. In addition to solicitation by mail, our directors, officers,
and
employees may solicit proxies, without extra compensation, in person or by
telephone, fax, e-mail, or similar means.
2
ELECTION
OF DIRECTORS
The
Board
of Directors has nominated the six persons listed below for election at the
annual meeting to serve as directors for a term expiring at the 2008 annual
meeting of stockholders or until their respective successors are elected and
qualified.
Keith Brackpool
Murray H. Hutchison
Timothy J. Shaheen
Stephen J. Duffy
Winston H. Hickox
Geoffrey Grant
Each
of
the nominees currently serves as a director and has agreed to serve as such
for
another term if elected. Under the terms of our credit facility with Peloton
Multi-Strategy Master Fund and Milfam II L.P., as lenders, and Peloton Partners,
LLP, as administrative agent (collectively, "Peloton"), Peloton has the right
to
designate one independent director to serve on the Board and its committees.
Peloton has selected Raymond J. Pacini as its designee. Mr. Pacini will serve
as
a director along with the other persons who are elected as directors from the
six nominees named above.
Proxies
will be voted for the election of the nominees named above unless instructions
are given to the contrary. Proxies cannot be voted for a greater number of
persons than the number of nominees named. Should any nominee become unable
to
serve as a director, the persons named in the enclosed form of proxy will,
unless otherwise directed, vote for the election of such other person as the
present Board of Directors may designate to fill that position.
The
following sets forth certain biographical information, the present occupation
and the business experience for the past five years or more of each director
and
executive officer:
Nominees
for Director:
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Name
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Age
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Position
with Cadiz
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Keith
Brackpool
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49
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Chairman
of the Board,
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President
and
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Chief
Executive Officer
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Murray
H. Hutchison
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68
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Director
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Timothy
J. Shaheen
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47
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Director
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Stephen
J. Duffy
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53
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Director
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Winston
H. Hickox
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64
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Director
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Geoffrey
Grant
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46
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Director
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3
Director
designated by the
Peloton
Credit Agreement:
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Name
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Age
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Position
with Cadiz
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Raymond
J. Pacini
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51
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Director
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Executive
Officers who are not Directors:
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Name
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Age
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Position
with Cadiz
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O'Donnell Iselin
II
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53
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Chief
Financial Officer and Secretary
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Richard
E. Stoddard
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56
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Assistant
Secretary, Chairman of the Board of
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Managers
and CEO of Cadiz Real Estate LLC
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Keith
Brackpool is a founder of Cadiz, has served as a member of Cadiz' Board of
Directors since September 1986, and has served as President and Chief Executive
Officer of Cadiz since December 1991. Mr. Brackpool assumed the role of Chairman
of the Board of Cadiz on May 14, 2001, and was the Chief Financial Officer
from
May 19, 2003 until the appointment of Mr. Iselin to that position in October
2005. Mr. Brackpool has also been a principal of 1334 Partners L.P., a
partnership that owns commercial real estate from 1989 to present.
Murray
H.
Hutchison was appointed a director of Cadiz in June 1997. He is also a member
of
the Board of Managers (an LLC's functional equivalent of a Board of Directors)
of Cadiz' subsidiary, Cadiz Real Estate LLC. In his capacity as a manager of
the
LLC, he performs essentially the same duties on behalf of the LLC as he would
as
an outside director for a corporation. Since his retirement in 1996 from
International Technology Corporation, a publicly traded diversified
environmental management company, Mr. Hutchison has been self-employed with
his
business activities involving primarily the management of an investment
portfolio. From 1976 to 1996, Mr. Hutchison served as Chief Executive Officer
and Chairman of International Technology. Mr. Hutchison currently serves as
Chairman of the Board of Texas Eastern Product Pipelines Company (TEPPCO),
a
publicly traded company operating in refined
petroleum products, liquefied petroleum gases and petrochemical transportation
and storage. Mr. Hutchison serves as lead
director on the board of Jack in the Box, Inc., a publicly traded fast food
restaurant chain; and as a director on the board of Cardium Therapeutics, Inc.,
a publicly traded medical technology company. Additionally, Mr. Hutchison serves
as Chairman of the Huntington Hotel Corporation, owner of a privately owned
hotel and office building, and as a director of several other non-publicly
traded U.S. companies.
Timothy
J. Shaheen was appointed a director of Cadiz in March 1999. Mr. Shaheen is
a
private investor and principal of Difinity Capital Partners LLP. From September
1996 to April 2005, Mr. Shaheen served as the President, Chief Executive Officer
and a director of Sun World International. Prior to joining Sun World, Mr.
Shaheen served as a senior executive with Albert Fisher North America, a
publicly traded domestic and international produce company from 1989 to 1996.
While with Albert Fisher, Mr. Shaheen also served as director of its Canadian
produce operations and as a director of Fresh Western Marketing, one of the
largest growers and shippers of fresh vegetables in the Salinas Valley of
California. Prior to his employment with Albert Fisher, Mr. Shaheen has seven
years of experience with the accounting firm of Ernst & Young LLP. Mr.
Shaheen is a certified public accountant.
Raymond
J. Pacini was appointed a director of Cadiz effective June 16, 2005. Mr. Pacini
is the designee of Peloton pursuant to the right of Peloton to designate a
single director under the terms of Cadiz' credit facility with Peloton. Mr.
Pacini was originally appointed to the Board as a nominee of ING pursuant to
the
rights of ING, our prior lender, as holder of Cadiz' Series F preferred stock.
As of June 29, 2006, Cadiz' loan with ING was paid in full and ING's right
to
designate members of our Board of Directors was terminated. Since May 1998,
Mr.
Pacini has been the President, Chief Executive Officer and a Director of
California Coastal Communities, Inc. (CALC),
4
a
publicly traded (NASDAQ:CALC) residential land development and homebuilding
company operating in Southern California. From June 1990 until May 1998, Mr.
Pacini was the Chief Financial Officer of CALC (formerly known as Koll Real
Estate Group, Inc. and Henley Properties, Inc.).
Stephen
J. Duffy was appointed a director of Cadiz effective July 3, 2006 to replace
outgoing director Gregory Preston, who resigned on June 30, 2006. As of January
2007, Mr. Duffy serves as a Managing Principal for IHP-Arnel Investment
Partners, a real estate investment company, operating nationally. From 2004
-
2006 Mr. Duffy served as Chief Operating Officer for Western National Realty
Advisors. Prior to joining Western National Realty Advisors, Mr. Duffy was
the
Partner-in-Charge of Real Estate Capital Markets for the Western U.S. with
Ernst
& Young, LLP. Ernst & Young, LLP merged with Kenneth Leventhal &
Company in 1995, and Mr. Duffy was the Managing Partner of Kenneth Leventhal
& Company's Real Estate Consulting Practice in Newport Beach, California at
that time. Mr. Duffy has over 25 years of management consulting and finance
experience, specializing in capital markets and strategic planning.
Winston
Hickox was appointed a director of Cadiz effective October 2, 2006. Mr. Hickox
is currently a partner at California Strategies, a public policy consulting
firm. From 2004 - 2006 Mr. Hickox completed a two-year assignment as Sr.
Portfolio Manager with the California Public Employees’ Retirement System
(CalPERS) where he assisted with the design and implementation of a series
of
environmentally oriented investment initiatives in the Private Equity, Real
Estate, Global Public Equities, and Corporate Governance segments of the fund’s
$211 billion investment portfolio. Prior to his assignment at
CalPers, from 1999 - 2003, Mr. Hickox served as Secretary of the
California Environmental Protection Agency (CalEPA) and a member of the
Governor’s cabinet. Mr. Hickox’s environmental policy experience also includes
two years as an alternate member of the California Coastal Commission
(1997-1999); seven years as Special Assistant of Environmental Affairs for
California Governor Edmund G. Brown, Jr. (1975 - 1983); twelve years on
the board of the California League of Conservation Voters (CLCV), including
a
four-year term as Board President (1994 - 2006); and two years on the
boards of Audubon California and Sustainable Conservation (2004 -
present). Additionally, Mr. Hickox is currently serving as a member of the
board
of Thomas Properties Group, a publicly traded full service real estate
investment firm and as a member of the Sacramento County Employees’ Retirement
System board. Earlier in his professional career, Mr. Hickox was a partner
and
Managing Director with LaSalle Advisors, Ltd., a major force in the world's
real
estate capital markets, and a Managing Director with Alex Brown Kleinwort Benson
Realty Advisors Corp., where he served as head of the firm’s Portfolio
Management Group.
Geoffrey
Grant was appointed a director of Cadiz effective January 22, 2007. Mr. Grant
is
presently a Managing Partner and the Chief Investment Officer of Peloton
Partners LLP, a global asset management firm launched in 2005 (“Peloton
Partners”), which is the administrative agent under our credit facility with
Peloton, and which is an affiliate of one of the lenders under this facility.
Since Mr. Grant co-founded Peloton, the firm has grown to manage a $2 billion
macro-oriented hedge fund. Prior to founding Peloton, Mr. Grant was with Goldman
Sachs for 15 years, from 1989 to 2004. Mr. Grant’s last responsibility at
Goldman Sachs was as Head of Global Foreign Exchange and Co-head of the
Proprietary Trading Group in London. Mr. Grant began his career at Morgan
Stanley, working in New York and Tokyo from 1981 to 1989.
Richard
E. Stoddard serves as Chairman and CEO of the Board of Managers of Cadiz Real
Estate LLC, a wholly-owned subsidiary of Cadiz, as a consultant, directing
the
development of the Cadiz Valley water project and the other Cadiz real estate
assets. Mr. Stoddard also serves as the Assistant Secretary of Cadiz. In
addition, since 1988, Mr. Stoddard has served as the Chairman and CEO of Kaiser
Ventures LLC, an unrelated company involved in real estate development and
waste
management projects in southern California.
O'Donnell
Iselin
II
joined Cadiz as its Chief Financial Officer in October 2005. From October 2004
until his appointment as Cadiz' Chief Financial Officer, Mr. Iselin
served
as Treasurer of Southwest Water Company, a NASDAQ listed water utility and
services company. From 1989 to 2004, Mr. Iselin
was
employed in various capacities by Hughes Electronics Corporation, now The
DIRECTV Group, Inc., serving since 2000 as Director of Treasury.
5
Directors
of Cadiz hold office until the next annual meeting of stockholders or until
their successors are elected and qualified. There are no family relationships
between any directors or current officers of Cadiz. Officers serve at the
discretion of the Board of Directors.
The
Board
is elected annually. Presently the Board is comprised of seven directors, of
whom two are current or former executive officers of Cadiz or a former
subsidiary of Cadiz. Mr. Brackpool is the Company's Chief Executive Officer,
and
Mr. Shaheen served as President, Chief Executive Officer and a director of
Sun
World International, the Company's former subsidiary, until April 2005. Mr.
Grant, the Chief Investment Officer and a Managing Partner of Peloton Partners,
has been determined by the Board to be precluded from a designation of
independence under the current rules and regulations of the Securities and
Exchange Commission and the pertinent listing standards of the NASDAQ Global
Market (formerly NASDAQ National Market). Mr. Pacini, a designee of Peloton
pursuant to the right of Peloton to designate a single director under the terms
of Peloton's credit facility, and the three remaining directors, Messrs.
Hutchison, Duffy and Hickox, have all been affirmatively determined by the
Board
to be "independent" under all relevant securities and other laws and
regulations, including those set forth in SEC and regulations and pertinent
listing standards of the NASDAQ Global Market, as in effect from time to time.
The
Board
maintains three committees, whose functions are described below. The Board
has
determined that all members of its committees are independent. Each committee
maintains a written charter detailing its authority and responsibilities. These
charters are reviewed periodically as legislative and regulatory developments
and business circumstances warrant and are available in their entirety on the
Company's website at http://www.cadizinc.com
and to
any stockholder otherwise requesting a copy.
The
Company's independent directors meet routinely in executive session without
the
presence of management.
Stockholders
wishing to communicate with the Board, or with a specific Board member, may
do
so by writing to the Board, or to the particular Board member, and delivering
the communication in person or mailing it to: Board of Directors c/o O'Donnell
Iselin II, Corporate Secretary, Cadiz Inc., 777 S. Figueroa Street, Suite 4250,
Los Angeles, California 90017.
MEETINGS
AND COMMITTEES OF THE BOARD OF DIRECTORS
During
the year ended December 31, 2006, the Board of Directors held three formal
meetings, conferred on a number of occasions through telephone conferences,
and
took action, when appropriate, by unanimous written consent. Each current
director attended all the meetings of the Board and all the meetings of the
Board committees of which each was a member during his term.
The
Board
of Directors has three standing committees, the Audit Committee, the
Compensation Committee and the Corporate Governance and Nominating Committee,
each of which is comprised entirely of directors whom the Board has
affirmatively determined to be independent, as they meet the objective
requirements set forth by the NASDAQ Global Market and the SEC, and have no
relationship, direct or indirect, to the Company other than as stockholders
or
through their service on the Board.
The
Audit
Committee is responsible for (i) considering the adequacy of the Company's
internal accounting control procedures, (ii) overseeing the Company's compliance
with legal and regulatory requirements, (iii) reviewing the independent
auditor's qualifications and independence, (iv) the appointment, compensation
and oversight of all work performed by the independent registered public
accounting firm and (v) overseeing the accounting and financial reporting
processes of the Company and the audits of the financial statements of the
Company. The Committee advises and makes recommendations to the Board of
Directors regarding the financial, investment and accounting procedures and
practices followed by the Company. The Committee operates under a written
charter adopted by the Board of Directors, which is available on the Company's
website at http://www.cadizinc.com
and to
any stockholder otherwise requesting a copy. The Audit Committee is currently
composed of Raymond J. Pacini, Stephen J. Duffy and Winston H. Hickox. For
the
year ended December 31, 2006, the Audit Committee originally consisted of
Geoffrey Arens, Mr. Pacini and Mr. Hutchison. Mr. Arens resigned from the Board
of Directors and the Audit Committee on January 6, 2006
6
and
was
replaced by Gregory Preston. On June 30, 2006, Mr. Preston resigned from the
Company's Board of Directors, and from all committees of the Board, including
the Audit Committee, as a result of the Company's repayment in full of its
loan
facility with ING and the accompanying termination of ING's rights to designate
members of the Company's Board of Directors and committees of the Board.
Effective July 3, 2006, Mr. Duffy replaced Mr. Preston on the Audit Committee.
Additionally, effective July 31, 2006, Mr. Hutchison resigned from the Audit
Committee solely due to his service on the audit committee of a New York Stock
Exchange listed company which prohibits members of its audit committee from
serving on more than two other audit committees. Effective October 2, 2006,
the
Board of Directors appointed Mr. Hickox to the Audit Committee to replace Mr.
Hutchison. The Audit Committee met six times during the year ended December
31,
2006.
The
Compensation Committee oversees compensation of the Chief Executive Officer
and
key executives and oversees regulatory compliance with respect to the Company's
compensation matters. The Committee also oversees the Company's compensation
policy applicable to senior management of the Company and advises and makes
recommendations to the Board of Directors regarding the compensation of
directors and executive officers. The Committee operates under a written charter
adopted by the Board of Directors, which is available on the Company's website
at http://www.cadizinc.com
and to
any stockholder otherwise requesting a copy. The Compensation Committee is
currently composed of Mr. Hutchison, Mr. Pacini, Mr. Duffy, and Mr. Hickox.
For
the year ended December 31, 2006, the members of the Committee originally
consisted of Messrs. Pacini, Hutchison, and Arens. Mr. Arens resigned from
the
Board of Directors and the Compensation Committee on January 6, 2006 and was
replaced by Gregory Preston. On June 30, 2006, Mr. Preston resigned from the
Company's Board of Directors, and from all committees of the Board, including
the Compensation Committee, as a result of the Company's repayment in full
of
its loan facility with ING and the accompanying termination of ING's rights
to
designate members of the Company's Board of Directors and committees of the
Board. Effective July 3, 2006, Mr. Duffy replaced Mr. Preston on the
Compensation Committee. Mr. Hickox was appointed to the Compensation Committee
effective October 2, 2006. The Compensation Committee met twice during the
year
ended December 31, 2006.
The
Corporate Governance and Nominating Committee is responsible for the
establishment of procedures for the Committee's oversight of the evaluation
of
the Board and management. The Committee makes recommendations to the Board
of
corporate guidelines principles applicable to the Company. The Committee is
also
responsible for the identification and recommendation to the Board of qualified
candidates for nomination to the Company's Board of Directors. The Committee
will consider director candidates recommended by stockholders provided the
nominations are received on a timely basis and contain all information relating
to such nominee as is required to be disclosed in solicitations of proxies
for
elections of directors pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, including such person's written consent to being named
in the Proxy Statement as a nominee and to serve as a director if elected,
the
name and address of such stockholder or beneficial owner on whose behalf the
proposed nomination is being made, and the class and number of shares of the
Company owned beneficially and of record by such stockholder or beneficial
owner. The Corporate Governance and Nominating Committee will consider nominees
suggested by stockholders on the same terms as nominees selected by the
Corporate Governance and Nominating Committee. The Corporate Governance and
Nominating Committee believes that nominees for election to the Board of
Directors must possess certain minimum qualifications. The Committee will
consider a candidate's judgment, skill, diversity, experience with businesses
and other organizations of comparable size, financial background, beneficial
ownership of the Company, and the interplay of the candidate's experience with
the experience of other Board members, among other factors, in assessing a
candidate. Except as set forth above, the Corporate Governance and Nominating
Committee does not currently have a formal policy regarding the handling or
consideration of director candidate recommendations received from a stockholder,
or a formal process for identifying and evaluating nominees for directors
(including nominees recommended by stockholder). These issues will be considered
by the Corporate Governance and Nominating Committee, which will then make
a
recommendation to the Board. The Corporate Governance and Nominating Committee
operates under a written charter adopted by the Board of Directors, which is
available on the Company's website at http://www.cadizinc.com
and to
any stockholder otherwise requesting a copy. The Corporate Governance and
Nominating Committee is currently composed of Mr. Hutchison, Mr. Pacini, Mr.
Duffy, and Mr. Hickox. For the year ended December 31, 2006, the members of
the
Committee originally consisted of Messrs. Pacini, Hutchison, and Arens. Mr.
Arens resigned from the Board of Directors and the Corporate Governance and
Nominating Committee on January 6, 2006 and was replaced by Gregory Preston.
On
June 30, 2006, Mr. Preston resigned from the
7
Company's
Board of Directors and from all committees of the Board, including the Corporate
Governance and Nominating Committee, as a result of the Company's repayment
in
full of its loan facility with ING and the accompanying termination of ING's
rights to designate members of the Company's Board of Directors and committees
of the Board. Effective July 3, 2006, Mr. Duffy replaced Mr. Preston on the
Corporate Governance and Nominating Committee. Mr. Hickox was appointed to
the
Corporate Governance and Nominating Committee effective October 2, 2006. The
Corporate Governance and Nominating Committee met once during the year ended
December 31, 2006.
Geoffrey
Arens served on the Board of Directors of Cadiz, the Audit Committee, the
Compensation Committee and the Corporate Governance and Nominating Committee
as
one of the two Series F directors during 2006 serving as a designee of ING
until
his resignation from the Board of Directors and all of its committees on January
6, 2006. Upon Mr. Arens' retirement, Mr. Preston replaced him on the Board
of
Directors and all three committees. Mr. Pacini served as the second Series
F
director appointed by ING during 2006. Upon repayment of Cadiz' loan with ING,
Mr. Pacini was appointed by Peloton to serve as Peloton's designee on Cadiz's
Board of Directors pursuant to Peloton's right to designate a single director
under the terms of Cadiz' credit facility with Peloton. Mr. Pacini serves on
the
Audit Committee, the Compensation Committee and the Corporate Governance and
Nominating Committee.
The
Board
of Directors has determined that Mr. Pacini, a member of the Company's Audit
Committee, is an "audit committee financial expert" as that term is defined
in
Item 401(h) of Regulation S-K under the Securities Act.
Cadiz
has
adopted a code of ethics that applies to all of its employees, including its
chief executive officer and chief financial officer. A copy of the code of
ethics may be found on Cadiz' website at http://www.cadizinc.com.
Any
employee who becomes aware of any existing or potential violation of the code
of
ethics is required to report it. Any waivers from the code of ethics granted
to
directors or executive officers will be promptly disclosed on the Company's
website at http://www.cadizinc.com.
Section
16(a) of the Securities Exchange Act of 1934 (the "1934 Act") requires Cadiz'
directors and executive officers, and persons who beneficially own more than
10%
of a registered class of Cadiz' equity securities ("reporting persons"), to
file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities
of
Cadiz. Reporting persons are required by Commission regulations to furnish
Cadiz
with copies of all Section 16(a) forms they file.
To
Cadiz'
knowledge, based solely on a review of the copies of reports and amendments
thereto on Forms 3, 4 and 5 furnished to us by reporting persons and forms
that
we filed on behalf of certain directors and officers, during, and with respect
to, Cadiz' fiscal year ended December 31, 2006, and on a review of written
representations from reporting persons to Cadiz that no other reports were
required to be filed for such fiscal year, the Form 3 filed on August 10,
2006 by Stephen Duffy, which reported his appointment as a director on
July 3, 2006, was inadvertently filed late, the Form 4 filed by Keith Brackpool
on March 24, 2006, which reported the transfer of 12,128 shares by Mr.
Brackpool pursuant to a divorce decree entered on March 20, 2006, was filed
late
because Mr. Brackpool did not receive notice from the court of the entry of
this
decree until March 23, 2006, and all other Section 16(a) filing requirements
applicable to Cadiz' directors, executive officers and greater than 10%
beneficial owners during such period were satisfied in a timely
manner.
The
following table sets forth the beneficial ownership of Cadiz voting securities,
as of the record date for the annual meeting unless otherwise stated, including
our class of common stock and our class of preferred stock, by each stockholder
who we know to own beneficially more than five percent of each class, and by
each director, each named executive officer and all directors and executive
officers as a group, excluding, in each case, rights under options or warrants
not exercisable within 60 days. All persons named have sole voting power and
investment power over their shares except as otherwise noted.
CLASS
OF
COMMON STOCK
|
Name
and Address
|
Amount
and Nature of
Beneficial
Ownership
|
Percent
of
Class
|
|
Peloton
Partners, LLP
Peloton
Master Fund
17
Broadwick Street
London
X0 W1F 0DJ
ING
Groep N.V.
ING
Capital LLC
Amstelveenseweg
500
1081
KL Amsterdam
|
2,716,658(1)
1,381,072
(2)
|
20.2%
11.6%
|
|
FMR
Corp.
82
Devonshire Street
Boston
MA 02109
|
1,140,226(3)
|
9.6%
|
|
Pictet
Asset Management SA
60
Route Des Acacias
Geneva
73
Switzerland
CH-12 11
|
836,359(4)
|
7.0%
|
|
Bedford
Oak Partners, L.P.
Bedford
Oak Advisors, L.L.C.
100
South Bedford Road
Mt.
Kisco, NY 10549
|
821,400(5)
|
6.9%
|
|
Keith
Brackpool
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
217,426
(6)
|
1.8%
|
|
Richard
E. Stoddard
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
178,191(7)
|
1.5%
|
|
O’Donnell
Iselin
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
26,667
(8)
|
*
|
|
Timothy
J. Shaheen
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
10,859
|
*
|
9
|
Murray
Hutchison
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
10,209
|
*
|
|
Raymond
J. Pacini
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
1,510
|
*
|
|
Stephen
J. Duffy
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
0
|
0
|
|
Winston
H. Hickox
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
0
|
0
|
|
Geoffrey
Grant
c/o
777 S. Figueroa St., Suite 4250
Los
Angeles, CA 90017
|
0
(9)
|
0
|
|
All
Directors and officers as a group
(nine
individuals)
|
444,862(6)(7)(8)(9)
|
3.7%
|
______________________________________________________________
|
*
|
Represents
less than one percent of the 11,886,322 outstanding shares of common
stock
of Cadiz as of April 20, 2007.
|
10
CLASS
OF
SERIES F PREFERRED STOCK
|
Name
and Address
|
Amount
and Nature of
Beneficial
Ownership
|
Percent
of
Class
|
|
ING
Groep N.V.
ING
Capital LLC
Amstelveenseweg
500
1081
KL Amsterdam
|
1,000
|
100%
|
| (1) |
Based
upon correspondence with Peloton Partners LLP and Cadiz corporate
records,
Peloton Partners LLP, in its capacity as the investment advisor of
Peloton
Master Fund, beneficially owns an aggregate of 2,716,658 shares of
Cadiz
common stock as of March 30, 2007. This includes the right to purchase
1,582,180 shares of common stock of Cadiz upon the conversion of
the
Convertible Term Loan Agreement between Peloton Partners LLP, Cadiz
and
Cadiz Real Estate LLC.
|
| (2) |
Based
upon Schedule 13D filed with the SEC on October 27, 2006 by ING Groep
N.V.
on behalf of its wholly-owned subsidiary ING Capital LLC, and Cadiz
corporate records, ING entities beneficially own 1,000 shares of
Cadiz
Series F Preferred Stock and have sole voting and dispositive power
as to
all of the shares. The preferred stock held by ING is initially
convertible into 17,289 shares of Cadiz common stock. In addition
to the
preferred stock, ING holds 1,363,783 shares of Cadiz common stock,
and ING
has sole voting and dispositive power as to the common stock. The
principal office of ING Capital LLC is located at 1325 Avenue of
the
Americas, New York, NY 10019.
|
| (3) |
Based
upon Form 13G/A filed with the SEC on February 14, 2007 by FMR Corp,
Cadiz
corporate records of stock issuances and correspondence with Fidelity
Investments and its parent FMR Corp., FMR Corp. and its affiliated
entities beneficially own an aggregate of 1,140,226 shares of Cadiz
common
stock, and have sole voting and dispositive power of the stock.
|
| (4) |
Based
upon a Form 13G/A filed on February 14, 2007 with the SEC, Cadiz
corporate
records of stock issuances and correspondence with Pictet Asset Management
SA, Pictet Asset Management SA beneficially owns an aggregate of
836,359
shares of Cadiz common stock.
|
| (5) |
Based
upon Form 13G filed with the SEC in on February 14, 2007, Cadiz corporate
records of stock issuances and correspondence with Bedford Oak Advisors,
the listed related funds beneficially own an aggregate of 821,400
shares
of Cadiz common stock.
|
| (6) |
Includes
100,000 shares underlying presently exercisable options.
|
| (7) |
Includes
100,000 shares underlying presently exercisable
options.
|
| (8) |
Includes
26,667 shares underlying presently exercisable
options.
|
| (9) |
According
to correspondence with Peloton Partners LLP, Mr. Grant is Chief Investment
Officer of Peloton Partners LLP and conducts the investment activities
of
Peloton Partners LLP, Peloton Partners LP & Peloton Multi-Strategy
Master Fund, which held an aggregate of 2,716,658 shares of Cadiz
common
stock on March 30, 2007. This includes the right to purchase 1,582,180
shares of common stock of Cadiz under the Convertible Term Loan Agreement
between Peloton Partners, Cadiz and Cadiz Real Estate LLC. Mr. Grant
does
not directly own any shares of Cadiz common stock and disclaims any
beneficial ownership of Cadiz common stock to the extent that such
beneficial ownership exceeds such person’s pecuniary interest.
|
11
The
stock
price performance graph below compares the cumulative total return of Cadiz
common stock against the cumulative total return of the Standard & Poor’s
Small Cap 600 NASDAQ U.S. index and the Russell 2000®
index
for the past five fiscal years. The graph indicates a measurement point of
December 31, 2001 and assumes a $100 investment on such date in Cadiz common
stock, the Standard & Poor’s Small Cap 600 and the Russell 2000®
indices.
With respect to the payment of dividends, Cadiz has not paid any dividends
on
its common stock, but the Standard & Poor’s Small Cap 600 and the Russell
2000®
indices
assume that all dividends were reinvested. The stock price performance graph
shall not be deemed incorporated by reference by any general statement
incorporating by reference this annual report on Form 10-K into any filing
under
the Securities Act of 1933, as amended, except to the extent that Cadiz
specifically incorporates this graph by reference, and shall not otherwise
be
deemed filed under such acts.
12
COMPENSATION
PHILOSOPHY
Our
executive compensation programs are designed to enhance operating performance
and to maximize the long-term value of our assets and stockholder value by
aligning the financial interests of the executive officers and management with
those of our stockholders. Such a compensation program helps to achieve Cadiz'
business and financial objectives and provide incentives needed to attract
and
retain well-qualified executives in a highly competitive marketplace.
Our
development activities are inherently long-term in nature. Our quarterly and
annual results of operations have not, and in the near term are not expected
to,
bear a direct relationship to the progress made by us in the development of
our
land and water resources. Accordingly, in order to achieve our basic goal of
matching the financial interest of our executive officers and management with
those of our stockholders, our compensation program emphasizes long-term
incentives. In this respect, our compensation program is weighted more heavily
towards long-term incentives than is typical of other companies with similarly
sized asset portfolios. Through the programs described below, a very significant
portion of our executive compensation is linked to share price appreciation
and
corporate performance.
Our
Board
of Directors has formed a Compensation Committee which is responsible for
reviewing and establishing the compensation payable to our executive officers,
including our Chief Executive Officer. For executive officers other than the
Chief Executive Officer, the Committee establishes compensation levels based,
in
part, upon the recommendations of our Chief Executive Officer. Currently, we
have only three executive officers, including our Chief Executive Officer.
The
Compensation Committee is therefore able to consider the performance of each
officer on an individual basis in adjusting base salary levels and in
determining additional incentive compensation, such as the cash awards and
long
term incentives discussed below.
ELEMENTS
OF COMPENSATION
Our
compensation program has three primary components: base salary,
performance-based cash awards and long-term incentives through stock
awards.
BASE
SALARY. In light of our emphasis on long-term incentives, the base salary
component of our compensation program is lower than that typically provided
by
similarly sized companies. No specific or set formula has been used to tie
base
salary levels to precise measurable factors; rather, current base salaries
have
been established by agreements negotiated directly with our key
executives.
Our
Chief
Executive Officer, Mr. Keith Brackpool, is charged with the overall
responsibility for our company's performance. Mr. Brackpool is compensated
pursuant to a written agreement effective as of February 1, 2003, which
established a base salary of $250,000 per year. This base salary was increased
to $400,000 per year effective as of January 1, 2007. In 2003 there was
significant uncertainty concerning the company's ability to continue with the
development of its resource development programs. This uncertainty was due
to,
among other things, the Metropolitan Water District of Southern California's
decision in October 2002 to not accept the right of way grant offered by the
U.S. Department of the Interior to our water storage and supply program and
refusal to consider whether or not to certify the program's final environmental
impact report. In light of then existing circumstances, the written agreement
entered into with Mr. Brackpool in 2003 reduced his base salary to 50% of its
previous amount but also allowed Mr. Brackpool to provide services to Cadiz
on a
non-exclusive basis.
Under
Mr.
Brackpool's leadership during the subsequent four years, our company has made
significant progress towards resolving the uncertainties concerning our ability
to continue developing our assets and in the development process. The
Compensation Committee has taken Mr. Brackpool's role in advancing the company's
interests during this period, as well as the importance of his ongoing role
in
the development of our properties, into consideration in approving the increase
in his base salary to its current level. Mr. Brackpool's base salary remains
lower than he was entitled to receive prior to February 2003.
13
Mr.
Richard Stoddard serves as Chairman and Chief Executive Officer of the Board
of
Managers of Cadiz Real Estate LLC, our subsidiary holding title to our land
and
water assets, pursuant to a consulting agreement with us. Effective January
1,
2007, Mr. Stoddard received an increase in his monthly consulting fee to
$25,000. He had been receiving a monthly consulting fee of $20,833 since the
commencement of his consulting agreement in 2002. Given Mr. Stoddard's role
in
advancing the company's interests during the last several years, as well as
the
importance of his ongoing role in the development of our properties, the
Compensation Committee believed an increase in his consulting fee to be
appropriate.
Mr.
O'Donnell Iselin II serves as our Chief Financial Officer pursuant to an
employment agreement negotiated and entered into when he joined us in September,
2005, at which time his annual base salary was established at its current rate
of $165,000.
PERFORMANCE-BASED
CASH AWARDS. The Compensation Committee believes that it is important to offer
cash incentives to executives for the achievement of specified objectives that
yield increased value for stockholders. Although the Compensation Committee
relies primarily upon the grant of equity based awards to reward executive
performance (see "Long-Term Incentives" below), the Compensation Committee
will
utilize performance-based cash awards from time to time to provide additional
incentives. The Compensation Committee awarded Mr. Iselin a $41,250 cash bonus
in 2006, an amount equivalent to 25% of his base salary.
LONG-TERM
INCENTIVES. The primary form of incentive compensation that we offer to our
executives consists of long-term incentives in the form of equity based awards.
This form of compensation is intended to help retain executives and motivate
them to improve our long-term performance and hence long-term stock market
performance. The value of these equity based awards will increase as our stock
price increases.
The
Compensation Committee views the grant of equity based awards as both a reward
for past performance and an incentive for future performance. Equity based
awards may vest immediately upon grant, with the passage of time, at the
discretion of the Board, and/or upon the achievement of certain specific
performance goals.
Due
to
the difficult circumstances which Cadiz and its subsidiaries faced subsequent
to
Metropolitan's actions in 2002 with respect to the Cadiz water program, all
stock options granted under the three stock option plans created by Cadiz prior
to 2002 became virtually worthless, and a majority subsequently expired without
exercise. These three plans were terminated in 2005. At the time these three
pre-2002 plans were terminated in 2005, Cadiz was relying primarily upon the
2003 Incentive Plan (described below), which was adopted in December 2003,
as a
means of providing long-term compensation incentives to management.
In
December 2003, the Compensation Committee, the Board of Directors and our senior
secured lender agreed to
implement a Management
Equity Incentive Plan (the "2003 Incentive Plan"), under which, as supplemented
by further board action in December 2004, a total of 1,472,051 shares were
authorized for issuance to key personnel at the direction of the Company's
allocation committee. Under the terms of the 2003 Incentive Plan, 1,094,712
shares were authorized for issuance by direct grant and 377,339 shares were
authorized for issuance by way of the grant of stock options. Both the direct
grants and option grants are subject to vesting schedules. All awards are
subject to continued employment or immediate vesting upon termination without
cause.
The
Company's allocation committee has to date allocated all 1,094,712 shares and
377,339 options available for issuance under the 2003 Incentive Plan. 354,191
shares and 100,000 options were allocated to each of Mr. Brackpool and Mr.
Stoddard. 107,605 shares were allocated to Timothy Shaheen, a director of the
Company, 40,000 options were allocated to Mr. Iselin upon his appointment as
our
Chief Financial Officer, and the remaining 278,725 shares and 137,339 options
were allocated to other employees of the Company.
All
shares and options authorized for issuance under the 2003 Incentive Plan have
been allocated. Therefore, in order for us to be able to continue to utilize
equity based awards as our primary form of incentive compensation, it has become
necessary for us to implement a new equity incentive program. To this end,
in
March 2007 our Board approved the adoption of a new incentive plan named the
Cadiz Inc. 2007 Management Equity Incentive Plan (the "2007 Incentive Plan").
The 2007 Incentive Plan remains subject to approval
14
by
our
stockholders, and a proposal to this effect (as well as a summary of the
provisions of the Plan) is included as Proposal 3 within this Proxy
Statement.
Of
the
1,050,000 shares of our common stock proposed to be issued under the 2007
Incentive Plan, 600,000 and 200,000 shares have been authorized for issuance
to
Mr. Brackpool and Mr. Stoddard, respectively, upon the satisfaction of certain
conditions relating to the trading price of our common stock. As discussed
in
further detail in Proposal 3 within this Proxy Statement, one-half of these
shares becomes issuable to each of Mr. Brackpool and Mr. Stoddard when our
common stock achieves a $28 trading price, and the remaining one-half of these
shares becomes issuable to each of Mr. Brackpool and Mr. Stoddard when our
common stock achieves a $35 trading price. If the trading price conditions
are
satisfied, these shares will vest in installments over time and will generally
be subject to the further condition that Mr. Brackpool or Mr. Stoddard, as
applicable, be an employee, consultant or independent contractor for us on
the
respective vesting dates.
In
approving the adoption of the 2007 Incentive Plan, the Board believed that,
given the nature of our company's business, increases over time in our company's
trading price are the most reliable indicator of the company's progress in
meeting its overall business goals. In particular, the Board believed that
the
increase over our stock's then current trading price which would be necessary
for these trading price conditions to be met would be evidence both of progress
towards the satisfaction of our development goals and of the contribution made
to such progress by the efforts of Mr. Brackpool and Mr. Stoddard.
An
additional 150,000 shares have been allocated to Mr. Stoddard as deferred stock,
vesting over a three year period subject to Mr. Stoddard's continued
relationship with us as an employee, consultant or independent
contractor.
The
number of shares allocated to Mr. Brackpool and Mr. Stoddard under the 2007
Incentive Plan were, as with their base salary, determined largely by
negotiations between the parties. In determining these amounts, weight was
given
to our general philosophy of making equity based awards our primary form of
incentive compensation, to the passage of time subsequent to the adoption of
our
2003 Incentive Plan, and to the long range nature of the plan. Consistent with
our past practice, we do not expect to implement equity incentive programs
on an
annual basis.
The
remaining 100,000 shares under the 2007 Incentive Plan are available for
issuance at the discretion of the Committee to our employees, consultants or
independent contractors in the form of deferred stock and/or stock
options.
The
2007
Incentive Plan is needed to continue our program of long-term incentive based
compensation. In particular, implementation of the 2007 Incentive Plan is the
vehicle by which the compensation of Messrs. Brackpool and Stoddard will be
linked to the value of our common stock over the longer term, consistent with
our overall compensation philosophy. In addition, given the vesting provisions
of the 2007 Incentive Plan, grants made to Messrs. Brackpool and Stoddard under
this plan will provide additional assurance of the continued availability to
us
of the services of Messrs. Brackpool and Stoddard.
SEVERANCE
AND CHANGE IN CONTROL PROVISIONS
Our
compensation arrangements with Messrs. Brackpool, Stoddard and Iselin provide
for certain severance provisions and benefits associated with various
termination scenarios, as well as certain vesting acceleration for equity-based
compensation in the event of a change-in-control. The severance and change
in
control provisions are designed to be competitive in the marketplace and provide
security for these executives in the event that the Company is acquired and
their position is impacted. This will allow our executives to consider and
implement transformative transactions of significant benefit to our stockholders
without undue concern over their own financial situations.
A
summary
of the severance and change-in-control provisions applicable to compensation
arrangements with our executive officers named in the Summary Compensation
Table, along with a quantification of the benefits available to each named
officer, can be found in the section of this proxy statement captioned
"Potential Payments upon Termination or Change in Control".
15
TAX
AND
ACCOUNTING CONSIDERATIONS
Impact
of Code Section 162(m)
The
Compensation Committee has considered the impact of provisions of the Internal
Revenue Code of 1986, specifically Code Section 162(m). Section 162(m) limits
to
$1 million our deduction for compensation paid to each of our executive
officers, which does not qualify as "performance based".
The
shares of stock issued to executives under the 2003 Incentive Plan did not
qualify as performance-based compensation and, therefore, the portion of the
compensation expense related to the 2003 Plan that exceeded the $1 million
limit
($15.1 million in 2006) was not deductible. Should the 2007 Incentive Plan
be
approved by our stockholders, the shares of stock issued to executives under
the
2007 Incentive Plan will not qualify as performance-based compensation and,
therefore, the portion of the compensation expense related to the 2007 Incentive
Plan that exceeds the $1 million limit will not be deductible.
In
light
of our federal and state net operating loss carryforwards (approximately $69.7
million and $20.3 million as of December 31, 2006, respectively), we do not
believe that the amount of any tax deductions lost as a result of the
application of Section 162(m) would have a material impact upon our financial
results.
The
Compensation Committee has reviewed and discussed the foregoing Compensation
Discussion and Analysis with management of the Company. Based on this review
and
discussion, we recommend to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
THE
COMPENSATION COMMITTEE
Murray
H.
Hutchison, Chairman
Raymond J. Pacini
Stephen J. Duffy
Winston H. Hickox
Raymond J. Pacini
Stephen J. Duffy
Winston H. Hickox
The
foregoing report shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that we specifically incorporate this information by reference,
and shall not otherwise be deemed filed under such Acts.
SUMMARY
COMPENSATION TABLE
The
following table shows the compensation awarded to, earned by, or paid during
the
year ended December 31, 2006 to our chief executive officer and our
chief financial officer and to the chief executive of our subsidiary, Cadiz
Real
Estate LLC.
|
Name
and Principal Position(1)
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards(2)
($)
|
Option
Awards(3)
($)
|
All Other
Compensation(4)
($)
|
Total
($)
|
|
Keith
Brackpool
Chairman, Principal Executive Officer and President |
2006
|
250,000
|
__
|
451,475
|
203,917
|
14,991
|
920,383
|
|
O'Donnell
Iselin II
Principal Financial Officer and Secretary |
2006
|
165,000
|
41,250
|
__
|
218,990
|
6,599
|
431,839
|
|
Richard
E. Stoddard
Chairman, Cadiz Real Estate LLC |
2006
|
250,000
|
__
|
451,475
|
203,917
|
__
|
905,392
|
_______________________
|
(1)
|
The
executive officers listed in the Summary Compensation Table above
are our
only executive officers.
|
|
(2)
|
This
column discloses the dollar amount of compensation cost recognized
in 2006
in accordance with FAS 123R. These awards were valued at the market
value
of the underlying stock on the date of grant in accordance with FAS
123R.
|
|
(3)
|
This
column discloses the dollar amount of compensation cost recognized
in 2006
in accordance with FAS 123R. The assumptions used to value the stock
options are disclosed in note 10 to the Company’s consolidated financial
statements contained in its Annual Report on Form 10-K for the year
ended
December 31, 2006 and are incorporated herein by reference.
|
|
(4)
|
All
Other Compensation includes a 401k match that is generally available
to
all employees. Messrs. Brackpool and Iselin received $2,692 and $6,599,
respectively, in 401k matching contributions. In addition, the Company
paid $1,520 in premiums on life insurance for Mr. Brackpool and
funded $10,779 of withholding taxes due upon receipt of a stock grant.
The
value of perquisites for each of the executive officers was less
than
$10,000, and thus no amount relating to perquisites is included in
the
Summary Compensation Table.
|
GRANTS
OF
PLAN-BASED AWARDS
The
Company did not make any grants of equity plan awards or non-equity incentive
plan awards in 2006 to any of the named executive officers.
17
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table sets forth certain information concerning outstanding stock
and
option awards as of December 31, 2006 for each named executive officer.
|
|
|
Option
Awards
|
|
Stock
Awards
|
||||||||
|
Name
|
|
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Securities
Underlying
Unexercised
Options
(#)
Unexercisable (1)(2)
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Shares of
Stock That
Have
Not
Vested
(#)
|
|
Market
Value
of
Shares
That
Have
Not
Vested ($)
|
|
Keith
Brackpool
|
|
100,000
|
|
—
|
|
12.00
|
|
5/4/2015
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
||||||
|
O'Donnell
Iselin II
|
|
26,667
|
|
13,333
|
|
17.25
|
|
10/3/2015
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
||||||
|
Richard
E. Stoddard
|
|
100,000
|
|
—
|
|
12.00
|
|
5/4/2015
|
|
—
|
|
—
|
_______________
|
(1)
|
Shares
of $0.01 par value Cadiz Inc. common stock.
|
|
(2)
|
Unvested
options held by Mr. Iselin will all vest on October 3,
2007.
|
OPTION
EXERCISES AND STOCK VESTED
The
following table sets forth certain information concerning stock option exercises
and restricted stock vesting during 2006 for each named executive officer.
|
Option
Awards
|
Stock
Awards
|
|||||||
|
Name
|
|
Shares Acquired
on
Exercise (#)
|
|
Value Realized
on Exercise ($)
|
|
Shares Acquired
on
Vesting (#)
|
|
Value Realized
on Vesting ($)(1)
|
|
Keith
Brackpool
|
|
—
|
|
—
|
|
50,311
|
|
991,127
|
|
O'Donnell
Iselin II
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Richard
E. Stoddard
|
|
—
|
|
—
|
|
50,311
|
|
991,127
|
__________
|
(1)
|
Value
realized equals the price per share of Cadiz common stock measured
as the
closing price of the stock on the vesting date multiplied by the
number of
shares received on vesting.
|
PENSION
BENEFITS
We
do not
have any qualified or non-qualified defined benefits plans.
NONQUALIFIED
DEFERRED COMPENSATION
We
do not
have any non-qualified defined contribution plans or other deferred compensation
plans.
For
the
fiscal year ended December 31, 2006, Mr. Brackpool was compensated under an
Agreement Regarding Employment pursuant to which Mr. Brackpool received base
compensation of $250,000 per year, plus certain fringe benefits including the
use of a leased automobile and life and disability insurance benefits funded
by
us. While this Agreement requires Mr. Brackpool to perform his services in
a
satisfactory manner, it does not require that his services be provided on a
full-time basis. Although the initial term of the Agreement Regarding Employment
ended September 30, 2003, Mr. Brackpool continues to provide services to us
upon
the terms and conditions set forth in this Agreement. Effective January 1,
2007,
Mr. Brackpool's base salary was increased to $400,000 per year.
For
the
fiscal year ended December 31, 2006, Mr. Stoddard was compensated in accordance
with a Consulting Agreement dated August 1, 2002, and extended on January 1,
2004, pursuant to which he received $20,833.00 per month and which continues
on
a month to month basis until terminated by either party. Under this agreement
Mr. Stoddard serves as the Chairman and CEO of the Board of Managers of Cadiz
Real Estate LLC, the subsidiary of Cadiz. The agreement also provides that
Mr.
Stoddard will participate in the Management Equity Incentive Plan and as a
member of the key management team in any further equity grants considered by
the
compensation committee of the Board of Directors of Cadiz. Effective January
1,
2007, Mr. Stoddard's monthly consulting fee was increased to
$25,000.
Mr.
Iselin is compensated under an Employment Agreement pursuant to which he
receives an annual base salary of $165,000. Mr. Iselin is entitled to receive
additional compensation in the form of bonuses at the sole discretion of the
Board of Directors based on Mr. Iselin's performance. Mr. Iselin also received
options from Cadiz' 2003 Management Equity Incentive Plan to purchase 40,000
shares of Cadiz' common stock at
an
exercise price of $17.25 per share, representing the fair market value of the
Company's common stock as of the date of the Employment Agreement. 13,334 of
the
stock options vested upon commencement of employment, 13,333 vested upon the
first anniversary of Mr. Iselin's employment with the Company and 13,333 shall
vest upon the second anniversary of his employment.
Mr.
Iselin's Employment Agreement further provides for certain payments in the
event
of a termination of employment. Additionally, the Company's Stock Option
Agreement with all recipients of options under its 2003 Management Equity
Incentive Plan, including Mr. Iselin, provides for the immediate vesting of
all
outstanding unvested options held by such recipient upon a termination of such
recipient without cause. See "Potential Payments Upon Termination or Change
in
Control", below.
The
following table and summary set forth estimated potential payments we would
be
required to make to our named executive officers upon termination of employment
or change in control of the Company, pursuant to each executive’s employment
agreement in effect at year end. The table assumes that the triggering event
occurred on December 31, 2006.
|
Name
|
|
Benefit
|
|
Termination without
Cause or
Resignation upon
Company Material Breach ($)
|
|
Death
or
Disability ($)
|
|
Termination Following
Change
of Control ($)
|
|
|
Keith
Brackpool
|
|
Salary
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Bonus
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Equity Acceleration
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Benefits Continuation
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Total
Value
|
|
—
|
|
—
|
|
—
|
|
|
O'Donnell
Iselin II
|
|
Salary
|
|
82,500
|
|
41,250
|
|
165,000
|
|
|
|
|
Bonus
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Equity Acceleration
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Benefits Continuation
|
|
14,563
|
|
—
|
|
29,127
|
|
|
|
|
Total
Value
|
|
97,063
|
|
41,250
|
|
194,127
|
|
|
Richard
E. Stoddard
|
|
Salary
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Bonus
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Equity Acceleration
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Benefits Continuation
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Total
Value
|
|
—
|
|
—
|
|
—
|
|
Termination
without Cause or Resignation upon Company Material Breach
If
Mr.
Iselin is terminated by us without cause or he resigns due to a breach of his
Employment Agreement by us, the Company is obligated to pay severance and
continuation of benefits (to the extent such benefits can then be lawfully
be
made available by the Company) for one hundred eighty days following the
effective date of the termination, as though Mr. Iselin were continuing to
provide services to the Company under his Employment Agreement. Mr. Iselin's
severance would consist of a continuation of his base compensation and his
fringe benefits, to the extent such benefits can then be lawfully be made
available by the Company. In addition, Mr. Iselin's Stock Option Agreement
with
the Company for his options under the 2003 Management Equity Incentive Plan,
provides for the immediate vesting of his unvested options, 13,333 as of
December 31, 2006, upon a termination of Mr. Iselin without cause.
Termination
of Employment Due to Death or Disability
If
Mr.
Iselin dies or becomes disabled, he or his estate is entitled to receive
severance for ninety days consisting of his base compensation.
20
Termination
Following Change of Control
Mr.
Iselin's Employment Agreement provides Mr. Iselin with change of control
severance benefits if his employment is terminated following a change of control
which occurs on or before September 12, 2007. If a change of control occurs
on
or before September 12, 2007, Mr. Iselin is entitled to, as though he were
continuing to provide services to the Company, his base compensation and his
fringe benefits, to the extent such benefits can then be lawfully be made
available by the Company, for twelve months following the effective date of
the
termination.
The
following table summarizes the compensation earned by each of the non-employee
directors in 2006. Directors who are also officers or employees of the Company
receive no compensation for duties performed as a director.
|
Name
|
|
Fees Earned
or Paid in Cash ($)
|
|
Stock
Awards ($)(1)
|
|
Option
Awards ($)(2)
|
|
Total ($)
|
|
Stephen
J. Duffy
|
|
15,000
|
|
—
|
|
—
|
|
15,000
|
|
Geoffrey
Grant(3)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Winston
H. Hickox
|
|
7,500
|
|
—
|
|
—
|
|
7,500
|
|
Murray
H. Hutchison(4)
|
|
30,000
|
|
188,179
|
|
—
|
|
218,179
|
|
Raymond
J. Pacini(5)
|
|
30,000
|
|
21,158
|
|
—
|
|
51,158
|
|
Gregory
W. Preston(6)
|
|
15,000
|
|
7,846
|
|
—
|
|
22,846
|
|
Timothy
J. Shaheen(7)
|
|
30,000
|
|
37,651
|
|
—
|
|
67,651
|
__________
|
(1)
|
This
column discloses the dollar amount of compensation cost recognized
in 2006
in accordance with Financial Accounting Standards Board Statement
of
Financial Accounting Standards No. 123 (revised 2004) (“FAS 123R”).
These awards were valued at the market value of the underlying stock
on
the date of grant in accordance with FAS 123R.
|
|
(2)
|
Directors
of the Company do not receive awards of options.
|
|
(3)
|
Mr.
Grant was appointed a director in 2007 and thus did not receive any
compensation in 2006.
|
|
|
|
|
(4)
|
Mr.
Hutchison's stock awards includes the following awards made in fiscal
year
ended December 31, 2006, but pertaining to prior fiscal years (i)
5,495
shares for his services for the 12 month period ended June 30, 2003,
(ii)
2,345 shares for his services for the period ended June 30, 2004
and (iii)
1,145 shares for his services for the period ended June 30, 2005.
1,224
shares were awarded for his services for the period ended June 30,
2006.
|
|
|
|
|
(5)
|
Mr.
Pacini's stock awards includes an award of 286 shares made in fiscal
year
ended December 31, 2006 but pertaining to his services for the 12
month
period ended June 30, 2005. 1,224 shares were awarded for his services
for
the period ended June 30, 2006.
|
|
(6)
|
Mr.
Preston served as a director until June 30, 2006. Mr. Preston's received
an award of 613 shares for his services for the 12 month period ended
June
30, 2006.
|
|
|
|
|
(7)
|
Mr.
Shaheen's stock awards includes an award of 1,145 shares made in
fiscal
year ended December 31, 2006 but pertaining to his services for the
12
month period ended June 30, 2005. 1,224 shares were awarded for his
services for the period ended June 30,
2006.
|
22
Under
the
Company's current compensation structure, all non-employee directors are
entitled to receive, for each 12 month period ending June 30 of each year,
the
amount of $30,000, prorated for directors serving less than the full 12 months.
Payments are made in 4 quarterly installments of $7,500. A director is entitled
to a $7,500 fee for any quarter in which services are rendered. Each June 30,
non-employee directors are also entitled to receive a deferred stock award
consisting of shares of the Company’s common stock with a value equal to $20,000
(calculated with reference to the average closing price of the Company’s common
stock during the month preceding the annual award date), prorated for directors
serving less than the full 12 months.
The
following table provides information as of December 31, 2006 with respect to
shares of our common stock that may be issued under our existing compensation
plans:
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
||
|
Equity
compensation plans approved by stockholders
|
0
|
$
0
|
0
|
||
|
Equity
compensation plans not approved by stockholders
|
377,339(1)
|
$12.95
|
0
|
||
|
Total
|
377,339
|
$12.95
|
0
|
| (1) |
Represents
377,339 options outstanding as of 12/31/06 under Cadiz' 2003 Management
Equity Incentive Plan.
|
23
The
purpose of Cadiz' stock option and award plans is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of Cadiz and its subsidiaries and
affiliates, by offering them an opportunity to participate in Cadiz future
performance through awards of options, restricted stock grants and other similar
stock awards. The following is a description of the stock option plans and
awards not approved by stockholders.
2003
MANAGEMENT EQUITY INCENTIVE PLAN
In
December 2003 the Company's Board of Directors authorized the adoption of a
Management Equity Incentive Plan (the "Incentive Plan"), under which a total
of
1,472,051 shares were authorized for issuance to key personnel at the direction
of the Company's allocation committee. Under the terms of the Incentive Plan,
1,094,712 shares were authorized for issuance by direct grant and 377,339 shares
were authorized for issuance by way of the grant of stock options. Both the
direct grants and option grants were subject to vesting schedules. All awards
were subject to continued employment or immediate vesting upon termination
without cause. The Board formed allocation committees made up of Messrs.
Brackpool, Hutchison, and Stoddard, to direct the allocation of these
shares.
The
Company's allocation committee has to date allocated all shares and all options
under the Incentive Plan. 354,191 shares and 100,000 options were allocated
to
each of Keith Brackpool, the Chief Executive Officer of the Company, and Richard
Stoddard, the Chief Executive Officer of the Company's subsidiary, Cadiz Real
Estate LLC. 107,605 shares were allocated to Timothy Shaheen, a director of
the
Company, 40,000 options were allocated to O'Donnell Iselin II, the Company's
Chief Financial Officer upon his appointment as Chief Financial Officer, and
278,725 shares and 137,339 options were allocated to other employees of the
Company. As of December 31, 2006, there were no further shares or options
available for grant under the 2003 Management Equity Incentive Plan.
On
May 4,
2005, the Company filed a Registration Statement on Form S-8 pursuant to which
it registered for issuance all of the shares and options authorized under the
Incentive Plan. The issuances of the shares and options allocated under the
Incentive Plan as described above followed the effectiveness of this
Registration Statement on Form S-8.
In
the
Form S-8, the Company also registered for issuance 10,000 shares of common
stock
issuable under the Cadiz Inc. 2004 Management Bonus Plan. These shares were
immediately thereafter issued to Keith Brackpool as a performance
bonus.
2004
MANAGEMENT BONUS PLAN
In
December 2004, our Compensation Committee, with board approval, adopted the
Cadiz Inc. 2004 Management Bonus Plan (the "Bonus Plan") pursuant to which
a
total of 10,000 shares of our common stock, valued at $12 per share, were
authorized for issuance to Mr. Brackpool as a performance bonus along with
a
cash bonus of $120,000. As described above, these shares were issued in 2005
immediately following the effectiveness of our S-8 Registration Statement.
1996
STOCK OPTION PLAN, 1998 STOCK OPTION PLAN AND 2000 STOCK OPTION
PLAN
The
Board
previously approved a 1996 Stock Option Plan (the "1996 Plan"), a 1998 Stock
Option Plan (the "1998 Plan") and a 2000 Stock Option Plan (the "2000 Plan)
to
provide grants of stock options and stock awards to certain employees,
consultants, independent contractors, advisors of Cadiz or its subsidiaries
and
affiliates, and directors of Cadiz.
The
Board
terminated the 1996 Plan, the 1998 Plan and the 2000 Plan in 2005. Immediately
prior to termination of the Plans, there were 26,750 options issued and
outstanding under the Plans, all held by one holder, at an exercise price
determined by the Board to be substantially above fair market value and
therefore with no reasonable prospect of being exercised. The holder and the
Company entered into an agreement to terminate such holder's options effective
immediately. The Plans were terminated concurrent with the termination of such
holder's options.
24
In
fiscal
2006, there were no Compensation Committee interlocks and no insider
participation in Compensation Committee decisions that were required to be
reported under the rules and regulations of the 1934 Act.
25
As
of
December 31, 2006, the Audit Committee is composed of Raymond J. Pacini, Stephen
J. Duffy and Winston H. Hickox. The Audit Committee for the fiscal year ended
December 31, 2006 originally consisted of Geoffrey Arens, Mr. Pacini, and Mr.
Hutchinson. Effective January 6, 2006 Mr. Arens resigned from the Company's
Board of Directors and was replaced on the Board of Directors and the Audit
Committee by Gregory Preston. On June 30, 2006 Mr. Preston resigned from the
Company's Board of Directors and was replaced, effective July 3, 2006, on the
Board of Directors and the Audit Committee by Mr. Duffy. Mr. Hickox was
appointed to the Audit Committee effective October 2, 2006 to replace Mr.
Hutchison who resigned from the Audit Committee solely due to his service on
the
audit committee of a New York Stock Exchange listed company which prohibits
members of its audit committee from serving on more than two other audit
committees.
Each
member of the Committee is an independent director as defined under the listing
standards of the NASDAQ Global Market. The Committee operates under a written
charter that is reviewed on an annual basis. During fiscal 2006, the Audit
Committee performed all of its duties and responsibilities under its charter.
The purpose of the Audit Committee is to assist the Board of Directors in its
oversight of management's control of Cadiz financial reporting processes.
Management
is responsible for the preparation, presentation, and integrity of Cadiz'
financial statement, accounting and financial reporting principles, internal
controls, and procedures designed to ensure compliance with accounting
standards, applicable laws and regulations. The Audit Committee reviews Cadiz'
accounting and financial reporting process on behalf of the Board of Directors.
In that regard, of the six times the Committee met in 2006, four of these six
times, as well as once in 2007, were to exercise the Committee's
responsibilities related to the Company's quarterly and annual financial
statements for fiscal 2006 and management's assessment of the effectiveness
of
Cadiz' internal controls over financial reporting as of December 31, 2006.
During these meetings, the Committee reviewed and discussed with management
and
PricewaterhouseCoopers LLP, Cadiz' independent registered public accounting
firm, Cadiz' consolidated financial statements, including its audited
consolidated financial statements for the year ended December 31, 2006, and
financial reporting process, including the system of internal controls over
financial reporting and significant accounting policies applied by Cadiz.
The
Audit
Committee also reviewed the report of management contained in Cadiz' Annual
Report on Form 10-K for the fiscal year ended December 31, 2006, filed with
the
Securities and Exchange Commission, as well as PricewaterhouseCoopers LLP's
Report of Independent Registered Public Accounting Firm included in Cadiz'
2006
Annual Report on Form 10K related to its audit of: (i) the consolidated
financial statements, (ii) management's assessment of the effectiveness of
internal control over financial reporting and (iii) the effectiveness of
internal control over financial reporting. The Audit Committee continues to
oversee Cadiz' efforts related to its internal control over financial reporting
and management's preparations for the evaluation of its internal controls for
fiscal 2007.
The
Committee is directly responsible for the appointment, compensation, retention
and oversight of the work of PricewaterhouseCoopers LLP. The Committee regularly
meets in executive session with PricewaterhouseCoopers LLP, without management
present, to discuss the results of their examinations, evaluations of Cadiz'
internal controls and the overall quality of Cadiz' financial
reporting.
Cadiz'
independent registered public accounting firm is responsible for performing
an
independent audit of the consolidated financial statements of Cadiz and
expressing an opinion on the conformity of Cadiz' financial statements with
U.S.
generally accepted accounting principles. The Committee discussed with Cadiz'
independent registered public accounting firm the scope and plan for its audits
including the review of internal controls prescribed in Section 404 of the
Sarbanes-Oxley Act of 2002. The Committee has discussed with
PricewaterhouseCoopers LLP the matters that are required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit
Committees). PricewaterhouseCoopers LLP has provided the Committee with the
written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed with PricewaterhouseCoopers LLP its independence from Cadiz.
The Committee also considered the nature and
26
scope
of
the non-audit services provided by PricewaterhouseCoopers LLP to Cadiz and
the
compatibility of these services with PricewaterhouseCoopers LLP's independence.
The Committee pre-approves all audit and permitted non-audit services to be
performed by Cadiz' independent registered public accounting firm pursuant
to
the terms of the Committee's written charter.
In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board of Directors has approved,
that the audited financial statements be included in Cadiz' Annual Report on
Form 10-K for the year ended December 31, 2006. The Committee also
appointed PricewaterhouseCoopers LLP as Cadiz' independent registered public
accounting firm for 2007, and has recommended that such appointment be submitted
to Cadiz' stockholders for ratification at the 2007 Annual Meeting of
Stockholders.
|
|
THE
AUDIT COMMITTEE
|
|
|
Raymond
J. Pacini, Chairman
|
|
|
Stephen
J. Duffy
|
|
Winston
H. Hickox
|
For
the
fiscal years ended December 31, 2006 and 2005, professional services were
performed by PricewaterhouseCoopers LLP. Cadiz' audit committee annually
approves the engagement of outside auditors for audit services in advance.
The
audit committee has also established complementary procedures to require
pre-approval of all audit-related, tax and permitted non-audit services provided
by PricewaterhouseCoopers LLP, and to consider whether the outside auditors'
provision of non-audit services to Cadiz is compatible with maintaining the
independence of the outside auditors. The audit committee may delegate
pre-approval authority to one or more of its members. Any such fees pre-approved
in this manner shall be reported to the audit committee at its next scheduled
meeting. All services described below were pre-approved
by
the
audit committee.
All
fees
for services rendered by PricewaterhouseCoopers LLP aggregated $318,965 and
$242,900 during the fiscal years ended December 31, 2006 and 2005, respectively,
and were composed of the following:
Audit
Fees. The aggregate fees billed for the audit of the annual financial statements
during the fiscal years ended December 31, 2006 and 2005, for reviews of the
financial statements included in the Company's Quarterly Reports on Form 10Q,
and for assistance with and review of documents filed with the SEC were $268,365
for 2006 and $232,900 for 2005.
Audit
Related Fees. No audit-related fees were billed by PricewaterhouseCoopers LLP
to
Cadiz during the fiscal years ended December 31, 2006 and 2005.
Tax
Fees.
Fees billed for tax services during the fiscal years ended December 31, 2006
and
2005 were $50,600 and $10,000, respectively.
All
Other
Fees. No other fees were billed by PricewaterhouseCoopers LLP to Cadiz for
services other than as discussed above during the fiscal years ended December
31, 2006 and 2005.
27
There
have been no transactions during our last fiscal year with our directors and
officers and beneficial owners of more than five percent of our voting
securities and their affiliates requiring disclosure, except
for our loan with Peloton, which was the holder of approximately 9% of our
voting securities at the time of the closing of the loan, as previously reported
in the Company's 8-K filed June 30, 2006, and, except for those
transactions commencing in fiscal year 2005 and ending in fiscal year 2006
by Morgan Stanley, which was the holder of more than 10% of our voting
securities at the time of the transactions, as previously reported in the Proxy
Statement for the fiscal year ended December 31, 2005.
The
Audit
Committee, pursuant to the Audit Committee Charter, reviews and approves
transactions between the Company on the one hand and a related party, such
as
our directors, officers, employees, consultants and their family members, on
the
other hand.
28
APPROVAL
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit
Committee has selected PricewaterhouseCoopers LLP as Cadiz' independent
certified public accountants to audit the financial statements of Cadiz for
the
2007 fiscal year. Stockholder ratification of this appointment is not required
by our bylaws or other applicable legal requirements. However, consistent with
our past practice, the appointment of PricewaterhouseCoopers LLP is being
submitted to our stockholders for ratification. In the event stockholders do
not
ratify PricewaterhouseCoopers LLP as Cadiz' independent certified public
accountants for the 2007 fiscal year, the Audit Committee will reconsider its
selection of PricewaterhouseCoopers LLP, but will not be required to select
another firm to audit Cadiz' financial statements. Even if the stockholders
do
ratify the appointment, the Audit Committee, in its discretion, may appoint
a
different firm at any time during the year if it believes that such a change
would be in the best interests of Cadiz and our stockholders.
PricewaterhouseCoopers LLP has advised Cadiz that neither it nor any of its
partners or associates has any direct or indirect financial interest in or
any
connection with Cadiz other than as accountants and auditors. A representative
of PricewaterhouseCoopers LLP is expected to be present and available to answer
appropriate questions at the annual meeting, and will be given the opportunity
to make a statement if desired.
THE
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.
29
ADOPTION
OF THE 2007 MANAGEMENT EQUITY INCENTIVE PLAN
On
March
13, 2007 our Board of Directors adopted the 2007 Management Equity Incentive
Plan (the "Plan"), subject to approval by our stockholders at the Annual
Meeting.
Given
the
nature of the Company's water resource and real estate development activities,
we believe it best that our compensation arrangements emphasize long-term
incentives. Furthermore, we feel that it is important to align management and
shareholder interest. We have historically used equity incentive plans for
these
reasons. No shares remain available for issuance under our previously adopted
equity incentive plans, including the 2003 Management Equity Incentive Plan.
The
purpose of this Plan is to continue the Company’s past practice of providing
long-term incentives to attract, retain and motivate key personnel.
The
Plan
reserves a total of 1,050,000 shares for grant and issuance pursuant to the
Plan. Of these 1,050,000 shares, an aggregate of 800,000 shares have been
authorized for issuance to Keith Brackpool and to Richard E. Stoddard, subject
to both time-based and share price-based vesting conditions. An additional
150,000 shares have been authorized for issuance to Mr. Stoddard subject to
time-based vesting conditions. See "Specific Awards under the Plan", below.
The
remaining 100,000 shares authorized under the Plan are reserved and available
for future grant and issuance in the form of common stock subject to vesting
conditions, stock options, or both. See "Future Awards under the Plan",
below.
Mr.
Brackpool is our Chief Executive Officer, and Mr. Stoddard is Chairman of the
Board of Managers and Chief Executive Officer of our Cadiz Real Estate LLC
subsidiary.
SUMMARY
DESCRIPTION OF THE PLAN
The
following summary of the Plan, as adopted by the Board of Directors subject
to
stockholder approval, is qualified by reference to the full text of the Plan,
which is attached as Appendix A to this Proxy Statement.
Administration.
The
Plan will be administered by the Plan's Committee (the "Committee"), which
will
be either our Compensation Committee or our Board of Directors acting as the
Committee. The Committee designates the persons to be granted awards from among
those eligible and the type and amount of awards to be granted and has authority
to interpret and administer the Plan and to determine and amend the terms of
awards.
Eligibility.
Awards
under the Plan may be made to any employees, consultants, or independent
contractors of the Company, or of any of our subsidiaries or affiliates. Awards
may be made to consultants or contractors only for bona fide services rendered,
other than services provided to us in connection with capital raising
transactions.
Amendments.
The
Board of Directors may amend the Plan without stockholder approval, unless
such
approval is required by law or other regulatory requirements. Amendment or
discontinuation of the Plan cannot adversely affect any award previously granted
without the award holder's written consent.
Transfer
Restrictions.
Awards
under the Plan generally are not transferable by the participant other than
by
will or the laws of descent and distribution and are generally exercisable,
during the participant’s lifetime, only by the participant.
Adjustments.
As is
customary in incentive plans of this nature, the number and kind of shares
available, any outstanding awards, the exercise prices of awards, and trading
price targets under milestone-based awards, are subject to adjustment in the
event of certain reorganizations, mergers, combinations, recapitalizations,
stock splits, stock dividends, or other similar events in respect of the shares
outstanding, and extraordinary dividends or distributions to the stockholders.
Nonexclusivity
of the Plan.
The Plan
does not limit the authority of our Board of Directors or any committee to
adopt
such additional compensation arrangements as it may deem desirable.
30
SPECIFIC
AWARDS UNDER THE PLAN
Milestone-Based
Deferred Stock Grants
The
Plan
provides for the grant of 600,000 and 200,000 shares of common stock to Keith
Brackpool and Richard E. Stoddard, respectively, subject to milestone-based
vesting conditions, on the following terms.
Trading
Price Conditions.
The
issuance of Milestone-Based Deferred Stock shall be subject to conditions based
upon the trading price of our common stock during the period commencing March
13, 2007 and ending March 12, 2009 (the "Milestone Period"). 300,000 shares
will
be issuable to Mr. Brackpool and 100,000 shares will be issuable to Mr. Stoddard
if the trading price of our common stock is greater than or equal to $28 per
share for any ten trading days (whether or not consecutive) falling within
any
period of thirty consecutive trading days which, in turn, fall within the
Milestone Period. An additional 300,000 and 100,000 shares will be issuable
to
Mr. Brackpool and to Mr. Stoddard, respectively, if the trading price of our
common stock is greater than or equal to $35 per share for any ten trading
days
(whether or not consecutive) falling within any period of thirty consecutive
trading days which, in turn, fall within the Milestone Period.
Vesting
of Deferred Stock.
If the
applicable trading price conditions are satisfied, then the Milestone-Based
Deferred Stock will vest and be issuable in four equal installments on January
1, 2008, January 1, 2009, January 1, 2010, and January 1, 2011 (or with respect
to the January 1, 2008 and 2009 dates, such later date(s) as the applicable
trading price issuance condition is satisfied).
The
vesting and issuance of the Milestone-Based Deferred Stock will generally be
subject to the further condition that the participant be an employee, consultant
or independence contractor for us at the time of vesting. However, if the
participant is terminated by us without cause, then the issuance of
Milestone-Based Deferred Stock may be accelerated in whole or in
part.
Further,
in the event a change in control of the Company occurs prior to the end of
the
Milestone Period at a time when the trading price of our common stock is at
least $28 per share, then all of the Milestone-Based Deferred Stock shall vest
and be immediately issuable. If the trading price of our common stock is less
than $28 per share at the time of the change of control, any Milestone-Based
Deferred Stock, which had previously satisfied the $28 and/or $35 per share
trading conditions, but had not been issued pending the passage of one or more
vesting dates, shall vest and be immediately issuable.
Time-Based
Deferred Stock Grants
The
Plan
provides for the grant of 150,000 shares of common stock to Richard E. Stoddard,
subject to time-based vesting conditions. The Time-Based Deferred Stock to
be
issued to Mr. Stoddard under the Plan will vest and be issuable in three equal
installments on January 1, 2008, January 1, 2009 and January 1,
2010.
The
vesting and issuance of any installment of the Milestone-Based Deferred Stock
will generally be subject to the further condition that Mr. Stoddard be an
employee, consultant or independence contractor for us on the relevant vesting
date. However, in the event Mr. Stoddard is terminated by us without cause,
or
in the event of a change of control of the Company, then all as yet unvested
Time-Based Deferred Stock shall immediately vest and be issuable in
full.
FUTURE
AWARDS UNDER THE PLAN
Additional
Option and/or Deferred Stock Grants
The
Plan
provides that the 100,000 shares of common stock not reserved for issuance
as
Milestone-Based Deferred Stock or Time-Based Deferred Stock may be issuable
in
the form of shares of common stock subject to vesting conditions or as stock
options. The Committee is authorized to establish all of the terms and
conditions applicable to each grant. These terms and conditions will include
the
form of grant, the number of shares issuable under each grant, the recipient
of
each grant, and the vesting conditions applicable to each grant.
31
No
grants
have yet been made under the Plan with respect to these 100,000
shares.
FEDERAL
INCOME TAX CONSEQUENCES OF AWARDS UNDER THE PLAN
The
U.S.
federal income tax consequences of the Plan under federal law, which is subject
to change, are summarized in the following discussion of the general tax
principles applicable to the Plan. This summary is not intended to be exhaustive
and, among other considerations, does not describe the deferred compensation
provisions of Section 409A of the Internal Revenue Code to the extent an
award is subject to and does not satisfy those rules, nor does it describe
state, local, or international tax consequences.
With
respect to nonqualified stock options, the Company is generally entitled to
deduct and the participant recognizes taxable income in an amount equal to
the
difference between the option exercise price and the fair market value of the
shares at the time of exercise. With respect to incentive stock options, the
Company is generally not entitled to a deduction nor does the participant
recognize income at the time of exercise, although the participant may be
subject to the federal alternative minimum tax.
The
federal income tax consequences of other awards authorized under the Plan
generally follow certain basic patterns: nontransferable restricted stock
subject to a substantial risk of forfeiture results in income recognition equal
to the excess of the fair market value over the price paid (if any) only at
the
time the restrictions lapse (unless the recipient elects to accelerate
recognition as of the date of grant); bonuses, stock appreciation rights, cash
and stock-based performance awards, dividend equivalents, stock units, and
other
types of awards are generally subject to tax at the time of payment; and
compensation otherwise effectively deferred is taxed when paid. In each of
the
foregoing cases, the Companies will generally have a corresponding deduction
at
the time the participant recognizes income.
If
an
award is accelerated under the Plan in connection with a “change in control” (as
this term is used under the Internal Revenue Code), the Company is may not
be
permitted to deduct the portion of the compensation attributable to the
acceleration if it exceeds certain threshold limits under the U.S. Internal
Revenue Code (and certain related excise taxes may be triggered). Furthermore,
the aggregate compensation in excess of $1,000,000 attributable to awards that
are not “performance-based” within the meaning of Section 162(m) of the
Internal Revenue Code (“Section 162(m)”) may not be permitted to be deducted by
the Company in certain circumstances.
32
STOCKHOLDER
APPROVAL OF COMPENSATION PORTION OF THE PLAN
The
NASDAQ Global Market rules require prior stockholder approval of the Plan,
and
we are seeking that approval. If the stockholders do not approve the Plan,
no
awards will be issued under the Plan, and the Board and Compensation Committee
will then consider the use of other means to provide appropriate levels of
compensation to our key employees. Such means may include additional payments
of
cash compensation, which would not require the approval of our
stockholders.
THE
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 3.
33
The
Board
of Directors does not know of any other matters that may come before the annual
meeting. However, if any other matter shall properly come before the annual
meeting, the proxy holders named in the proxy accompanying this statement will
have discretionary authority to vote all proxies in accordance with their best
judgment.
Any
stockholder who wishes to present resolutions to be included in the proxy
statement for Cadiz' next annual meeting (for the fiscal year ending December
31, 2007) must file such resolutions with Cadiz no later than November 30,
2007.
This
proxy statement is accompanied by Cadiz' Annual Report on Form 10-K for the
year
ended December 31, 2006. Exhibits to the Form 10-K will be made available to
stockholders for a reasonable charge upon their written request to Cadiz,
Attention: Corporate Communications, 777 S. Figueroa Street, Suite 4250 Los
Angeles, California 90017.
By
Order
of the Board of Directors
Los
Angeles, California
April
27,
2007
34
CADIZ
INC.
2007
MANAGEMENT EQUITY INCENTIVE PLAN
1. PURPOSE
Cadiz
Inc. (the "Company") believes it is in the best interest of the Company to
adequately compensate key personnel (including both employees and consultants)
for their services to the Company and further believes that, in light of the
nature of the Company's resource development activities, it is best that such
compensation emphasize long-term incentives. The purpose of the Cadiz Inc.
2007
Management Equity Incentive Plan (the "Plan") is to provide a program where
additional incentives to retain and motivate key personnel are provided in
the
form of equity securities of the Company.
Capitalized
terms not defined in the text are defined in Section 19.
2. SHARES
SUBJECT TO THE PLAN
2.1 NUMBER
OF
SHARES AVAILABLE. Subject to Sections 2.2 and 14, the total number of Shares
reserved and available for grant and issuance pursuant to the Plan shall be
1,050,000 Shares. Subject to Sections 2.2 and 14, Shares reserved for issuance
pursuant to Grants, if any, made under Section 7 of this Plan shall again be
available for grant and issuance, in connection with future Grants under Section
7 of this Plan, that: (a) are subject to issuance upon exercise of an Option,
but cease to be subject to such Option for any reason other than exercise of
such Option, or (b) are subject to an Option that otherwise terminates without
such Shares being issued and for which the participant did not receive any
benefits of ownership; or (c) that consist of Deferred Stock as to which all
vesting conditions are not satisfied and which, as a result, terminate without
such Shares being issued and for which the participant did not receive any
benefits of ownership.
2.2 ADJUSTMENT
OF SHARES AND TRADING PRICE. In the event that the number of outstanding shares
of the Company's Common Stock is changed by a stock dividend, recapitalization,
stock split, reverse stock split, subdivision, combination, reclassification
or
similar change in the capital structure of the Company without consideration,
then: (a) the number of Shares reserved for issuance under the Plan, (b) the
number of Shares subject to outstanding Grants and the Exercise Prices of
Options, if any, and (c) any specifically enumerated Trading Price set forth
in
Section 6 of this Plan shall be proportionately adjusted, subject to any
required action by the Board or the stockholders of the Company and compliance
with applicable securities laws; provided, however, that fractions of a Share
shall not be issued, but shall either be paid in cash at Fair Market Value
or
shall be rounded up to the nearest Share, as determined by the Committee; and
provided, further, that the Exercise Price of any Option may not be decreased
to
below the par value of the Shares.
3. ELIGIBILITY
OF EMPLOYEES, CONSULTANTS AND INDEPENDENT CONTRACTORS
Grants
under the Plan may be granted to employees, consultants, or independent
contractors of the Company or any Subsidiary or Affiliate of the Company;
provided, however, that such consultants and contractors render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction.
4. ADMINISTRATION
4.1 COMMITTEE
AUTHORITY. The Plan shall be administered by the Committee. Subject to the
purposes, terms and conditions of the Plan, and to the direction of the Board,
the Committee shall have full power to implement and carry out the Plan. The
Committee shall have the authority to:
(a) construe
and interpret the Plan, any Grants and any other agreement or document executed
pursuant to the Plan;
(b) prescribe,
amend and rescind rules and regulations relating to the Plan;
(c) select
persons to receive Grants under the Plan;
(d) determine
the form and terms of Grants made under the Plan;
(e) determine
the number of Shares or other consideration subject to Grants made under the
Plan;
(f) determine
whether Grants under the Plan will be made singly, in combination or in tandem
with, in replacement of, or as alternatives to, other Grants under the Plan
or
any other incentive or compensation plan of the Company or any Subsidiary or
Affiliate of the Company;
(g) grant
waivers of Plan or Grant conditions;
(h) determine
the vesting, exercisability and payment of Grants under the Plan and to
accelerate the vesting and/or exercisability of Grants under the Plan, as
provided herein;
(i) correct,
any defect, supply any omission, or reconcile any inconsistency in the Plan,
any
Grant under the Plan or any agreement evidencing any Grant under the
Plan;
(j) determine
whether any Grant under the Plan has been earned; and
(k) make
all
other determinations necessary or advisable for the administration of the
Plan.
4.2 COMMITTEE
DISCRETION. Any determination permitted to be made by the Committee under the
Plan with respect to any Grant shall be made in its sole discretion at the
time
of grant or, unless in contravention of any express term of the Plan or any
Grant, at any later time, and such determination shall be final and binding
on
the Company and all persons having an interest in any Grant under the
Plan.
5. TIME-BASED
DEFERRED STOCK GRANTS. Of the 1,050,000 Shares reserved and available for grant
and issuance pursuant to the Plan, 150,000 Shares shall be issued in the form
of
shares of Common Stock subject to time-based vesting conditions (the "Time-Based
Deferred Stock") as follows:
5.1 GRANT
OF
TIME-BASED DEFERRED STOCK. 150,000 Shares of Time-Based Deferred Stock shall
be
issued to Richard E. Stoddard, the Chairman of the Board of Managers and Chief
Executive Officer of the Company's Subsidiary, Cadiz Real Estate LLC, subject
to
the vesting and other conditions set forth in this Plan.
Vesting
Date No.
of
Shares Vested
January
1, 2008 50,000
January
1, 2009 50,000
January
1, 2010 50,000
5.2.2 It
shall
be a condition to the vesting and issuance of the Time-Based Deferred Stock
as
of any specific Vesting Date that the recipient thereof be an employee,
consultant, or independent contractor of the Company or any Subsidiary or
Affiliate of the Company as of such Vesting Date.
5.2.3 Notwithstanding
anything herein to the contrary, in the event of an occurrence of an
Acceleration Event, then all Time-Based Deferred Stock not theretofore vested
and issued shall become fully vested and immediately issuable as of the date
of
such Acceleration Event.
6. MILESTONE-BASED
DEFERRED STOCK GRANTS. Of the 1,050,000 Shares reserved and available for grant
and issuance pursuant to the Plan, 800,000 Shares shall be issued in the form
of
shares of Common Stock subject to milestone-based vesting conditions (the
"Milestone-Based Deferred Stock") as follows:
6.1 GRANT
OF
MILESTONE-BASED DEFERRED STOCK. 600,000 Shares of Milestone-Based Deferred
Stock
shall be issued to Keith Brackpool, the Company's Chief Executive Officer,
and
200,000 Shares of Milestone-Based Deferred Stock shall be issued to Richard
E.
Stoddard, the Chairman of the Board of Managers and Chief Executive Officer
of
the Company's Subsidiary, Cadiz Real Estate LLC, all subject to the vesting
and
other conditions set forth in this Plan.
6.2 CONDITIONS
TO ISSUANCE OF MILESTONE-BASED DEFERRED STOCK. The issuance of Milestone-Based
Deferred Stock shall be subject to the following conditions (the "Trading Price
Conditions"):
6.2.1 One-half
of the Shares of Milestone-Based Deferred Stock (i.e. 300,000 of the Shares
of
Milestone-Based Deferred Stock issuable to Keith Brackpool and 100,000 of the
Shares of Milestone-Based Deferred Stock issuable to Richard E. Stoddard) shall
be issuable only if the Trading Price of the Company's Common Stock is at least
$28 per share for any ten trading days (whether or not consecutive) falling
within any period of thirty consecutive trading days which, in turn, fall within
a period of two (2) years commencing March 13, 2007 and ending March 12, 2009
(the "Milestone Period").
6.2.2 The
remaining one-half of the Shares of Milestone-Based Deferred Stock (i.e. 300,000
of the Shares of Milestone-Based Deferred Stock issuable to Keith Brackpool
and
100,000 of the Shares of Milestone-Based Deferred Stock issuable to Richard
E.
Stoddard) shall be issuable only if the Trading Price of the Company's Common
Stock is at least $35 per share for any ten trading days (whether or not
consecutive) falling within any period of thirty consecutive trading days which,
in turn, fall within the Milestone Period.
6.3 VESTING
OF MILESTONE-BASED DEFERRED STOCK.
6.3.1 Any
Milestone-Based Deferred Stock as to which the Trading Price Conditions set
forth in Sections 6.2.1 and/or 6.2.2 above have been satisfied shall vest and
be
issuable in four equal installments on:
6.3.1.1 January
1, 2008, or, if later, the date upon which the applicable Trading Price
Conditions have been satisfied;
6.3.1.2 January
1, 2009, or, if later, the date upon which the applicable Trading Price
Conditions have been satisfied;
6.3.1.3 January
1, 2010; and
6.3.1.4 January
1, 2011.
By
way of
example only, if the Trading Price Conditions set forth in Section 6.2.1 are
satisfied on November 1, 2007 and the Trading Price Conditions set forth in
Section 6.2.2 are satisfied on November 1, 2009, then the 600,000 shares
issuable to Keith Brackpool would vest and be issuable as follows: (1) 75,000
shares on January 1, 2008 (representing the first installment with respect
to
Section 6.2.1), (2) 75,000 shares on January 1, 2009 (representing the second
installment with respect to Section 6.2.1); (3) 150,000 shares on November
1,
2009 (representing the first and second installments with respect to Section
6.2.2); (4) 150,000 shares on January 1, 2010 (representing the third
installment with respect to Sections 6.2.1 and 6.2.2); and (5) 150,000 shares
on
January 1, 2011 (representing the fourth installment with respect to Sections
6.2.1 and 6.2.2).
6.3.2 The
vesting and issuance of the Milestone-Based Deferred Stock shall, in addition
to
the Trading Price Conditions described in Sections 6.2.1 and 6.2.2 (but subject
to the provisions of Sections 6.3.3 and 6.3.4 below), be subject to the
continued status of the recipient of the Milestone-Based Deferred Stock as
an
employee, consultant, or independent contractor of the Company or any Subsidiary
or Affiliate of the Company as of the respective vesting date set forth in
this
Section 6.3.
6.3.3 Notwithstanding
any other provision of this Section 6, in the event of a Termination without
cause of a recipient of Milestone-Based Deferred Stock, then
6.3.3.1 Any
shares of Milestone-Based Deferred Stock as to which the Trading Price
Conditions set forth in Section 6.2.1 and/or 6.2.2 above have been satisfied
but
which have not yet been issued pursuant to Section 6.3.1, plus (in the event
the
Termination occurs prior to the end of the Milestone Period) one half of any
shares of Milestone-Based Deferred Stock as to which the Trading Price
Conditions set forth in Section 6.2.1 and/or 6.2.2 above have not yet been
satisfied, shall vest and be immediately issuable to the recipient in full
upon
such Termination without cause; and
6.3.3.2 Any
shares of Milestone-Based Deferred Stock which are not immediately issued upon
Termination without cause pursuant to Section 6.3.3.1 above shall vest and
be
immediately issuable to the recipient upon the satisfaction of the Trading
Price
Conditions set forth in Sections 6.2.1 and/or 6.2.2 and all other applicable
vesting conditions (subject to Section 6.3.4 below), irrespective of the status
of the recipient as an employee, consultant, or independent contractor of the
Company or any Subsidiary or Affiliate of the Company as of the vesting date
set
forth in this Section 6.3.
6.3.4 Notwithstanding
any other provision of this Section 6, in the event of a Change in Control
prior
to the end of the Milestone Period, then
6.3.4.1 In
the
event that the Trading Price is $28 or higher at the time of the Change in
Control then all shares of Milestone-Based Deferred Stock shall vest and be
immediately issuable to the recipient in full upon such Change in Control;
and
6.3.4.2 In
the
event that the Trading Price is less than $28 at the time of the Change in
Control then those shares of Milestone-Based Deferred Stock, if any, as to
which
the Trading Price Conditions set forth in Sections 6.2.1 and/or 6.2.2 were
satisfied prior to the Change in Control
but which have not yet been issued shall vest and be immediately issuable to
the
recipient in full upon such Change in Control.
7. ADDITIONAL
OPTION AND/OR DEFERRED STOCK GRANTS
Of
the
1,050,000 Shares reserved and available for grant and issuance pursuant to
the
Plan, 100,000 Shares (i.e. all Shares not otherwise reserved and available
for
grant and issuance as Time-Based Deferred Stock pursuant to Section 5 above
or
as Milestone-Based Deferred Stock pursuant to Section 6 above) shall be issuable
in the form of shares of Common Stock subject to vesting conditions ("Deferred
Stock") and/or in the form of Options, all as the Committee may determine from
time to time in its sole discretion, as follows:
7.1 GRANT
OF
OPTIONS AND DEFERRED STOCK. Except as otherwise limited herein, the Committee
may grant Deferred Stock and/or Options pursuant to this Section 7 to eligible
persons as described in Section 3.
7.2 DEFERRED
STOCK. The Committee shall, as to Deferred Stock, determine the number of shares
issuable in the form of Deferred Stock as well as all vesting conditions
applicable to such Deferred Stock (which need not be the same for each
Participant receiving Deferred Stock).
7.3 OPTIONS.
The Committee shall, as to any Option, determine the number of Shares subject
to
the Option, the Exercise Price of the Option, the period during which the Option
may be exercised, and all other terms and conditions of the Option, subject
to
the following:
7.3.1 FORM
OF
OPTION GRANT. Each Option granted shall be evidenced by an Option Agreement
("Stock Option Agreement"), and be in such form and contain such provisions
(which need not be the same for each Participant receiving an Option) as the
Committee shall from time to time approve, and which shall comply with and
be
subject to the terms and conditions of the Plan. The Committee may in its
discretion include in any Option granted under the Plan a condition that the
Participant shall agree to remain in the employ of, and to render services
to,
the Company or any of its Affiliates or Subsidiaries for a period of time
(specified in the agreement) following the date the Option is
granted.
7.3.2 DATE
OF
GRANT. The date of grant of an Option shall be the date on which the Committee
makes the determination to grant such Option. The Stock Option Agreement and
a
copy of the Plan will be delivered to the Participant within a reasonable time
after the granting of such Option.
7.3.3 EXERCISE
PERIOD. Options shall be exercisable within the times or upon the events
determined by the Committee as set forth in the Stock Option Agreement;
provided, however that no Option shall be exercisable after the expiration
of
ten (10) years from the date the Option is granted.
7.3.4 EXERCISE
PRICE. The Exercise Price shall be determined by the Committee when an Option
is
granted and may be not less than the greater of (i) 100% of the Fair Market
Value of the Shares on the date of Grant, or (ii) the par value of the Shares.
Payment for the Shares purchased may be made in accordance with Section 7.3.10
hereof.
7.3.5 METHOD
OF
EXERCISE. Options may be exercised only by delivery to the Company of a written
stock option exercise agreement (the "Exercise Agreement") in a form approved
by
the Committee (which need not be the same for each Participant receiving an
Option pursuant to the Plan), stating the number of Shares being purchased,
the
restrictions imposed on the Shares, if any, and such representations and
agreements regarding Participant's investment intent, access to information
and
other matters, if any, as may be required or desirable by the Company to comply
with applicable securities laws, together with payment in full of the Exercise
Price for the number of Shares being purchased.
7.3.6 TERMINATION.
Notwithstanding the exercise periods set forth in the Stock Option Agreement,
exercise of an Option shall always be subject to the following:
7.3.6.1 If
the Participant is Terminated for any reason except death or Disability, then
the Participant may exercise such Participant's Options, only to the extent
that
such Options would have been exercisable upon the Termination Date, no later
than ninety (90) days after the Termination Date, but in any event, no later
than the expiration date of the Options.
7.3.6.2
If the Participant is terminated because of death or Disability,
then the Participant's Options may be exercised, only to the extent that such
Options would have been exercisable by Participant on the Termination Date
(whether through prior vesting or accelerated vesting pursuant to Section 7.3.9
hereof), and must be exercised by Participant (or Participant's legal
representative or authorized assignee) no later than one hundred eighty (180)
days after the Termination Date, but in any event no later than the expiration
date of the Option.
7.3.7 LIMITATIONS
ON EXERCISE. The Committee may specify a reasonable minimum number of Shares
that may be purchased on any exercise of an Option, provided that such minimum
number will not prevent Participant from exercising the Option for the full
number of Shares for which it is then exercisable.
7.3.8 MODIFICATION,
EXTENSION OR RENEWAL. The Committee may modify, extend or renew outstanding
Options and authorize the grant of new Options in substitution therefor,
provided that any such action may not, without the written consent of a
Participant, impair any of such Participant's rights under any Option previously
granted.
7.3.9 ACCELERATED
VESTING. Notwithstanding anything herein to the contrary, if an Acceleration
Event has occurred, then all Options shall become fully exercisable as of the
date the Committee determines that an Acceleration Event has occurred. Further,
notwithstanding anything herein to the contrary, any Options granted under
the
Plan, the vesting of which are conditioned solely upon the passage of time
and
continued employment of the Participant, shall be accelerated and shall be
immediately exercisable upon the death or Disability of such Participant
(subject only to the limitations on exercise set forth in Section 7.3.6
hereof).
7.3.10. PAYMENT
FOR OPTION EXERCISES. Payment for Shares purchased pursuant to the exercise
of
Options under the Plan may be made in cash (by check or equivalent) or, where
expressly approved by the Committee and permitted by law:
7.3.10.1 by
cancellation of indebtedness of the Company to the Participant;
7.3.10.2 by
surrender of shares of the Company's Common Stock that either: (1) have been
owned by Participant for more than six (6) months and have been paid for within
the meaning of Rule 144 of the Securities Act; or were obtained by Participant
in the public market; and, (2) are clear of all liens, claims, encumbrances
or
security interests;
7.3.10.3 by
waiver
of compensation due or accrued to Participant for services
rendered;
7.3.10.4 provided
that a public market for the Company's stock exists and subject to the ability
of the Participant to sell Shares in compliance with applicable securities
laws:
7.3.10.4.1
through a "same day sale" commitment from the Participant and a broker-dealer
that is a member of the National Association of Securities Dealers (an "NASD
Dealer") whereby the Participant irrevocably elects to exercise the Option
and
to sell a portion of the Shares so purchased in order to pay the Exercise Price,
and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise Price directly
to
the Company; or
7.3.10.4.2
through a "margin" commitment from the Participant and an NASD Dealer whereby
Participant irrevocably elects to exercise the Option and to pledge the Shares
so purchased to the NASD Dealer in a margin account as security for a loan
from
the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the Exercise Price
directly to the Company; or
7.3.10.5 by
any
combination of the foregoing.
8. WITHHOLDING
TAXES
8.1 TAX
WITHHOLDING. The Company may withhold, at the election of the Participant,
from
Common Stock to be issued or cash to be paid under the Plan, the number of
shares of Common Stock having a Fair Market Value equal to, or cash in the
amount of, or a combination of shares and cash equal to, the amount of tax
required by any governmental authority to be withheld to cover any applicable
withholding and employment taxes; provided, however, that in the event a
deferral election is in effect with respect to the shares of Common Stock
deliverable upon exercise of an Option, then the Participant may elect to have
any such withholding made from the Common Stock tendered to exercise such
Option. Alternatively, a Participant may pay to the Company the amount of cash
required to be withheld in lieu of any withholding of distribution under the
Plan.
9. PRIVILEGES
OF STOCK OWNERSHIP
No
Participant shall have any of the rights of a stockholder with respect to any
Shares until the Shares are issued to the Participant. After Shares are issued
to the Participant, the Participant shall be a stockholder and have all the
rights of a stockholder with respect to such Shares, including the right to
vote
and receive all dividends or other distributions made or paid with respect
to
such Shares.
10. TRANSFERABILITY
Grants
made under the Plan, and any interest therein, shall not be transferable or
assignable by Participant, and may not be made subject to execution, attachment
or similar process, otherwise than by will or by the laws of descent and
distribution or as consistent with the specific Plan and, if applicable, Option
Agreement provisions relating thereto. During the lifetime of the Participant,
an Option shall be exercisable only by the Participant, and any elections with
respect to an Option or other Grant, may be made only by the
Participant.
11. CERTIFICATES
All
certificates for Shares or other securities delivered under the Plan shall
be
subject to such stock transfer orders, legends and other restrictions as the
Committee may deem necessary or advisable, including restrictions under any
applicable federal, state or foreign securities law, or any rules, regulations
and other requirements of the SEC or any stock exchange or automated quotation
system upon which the Shares may be listed.
12. SECURITIES
LAW AND OTHER REGULATORY COMPLIANCE
No
Grant
shall not be effective unless such Grant is in compliance with all applicable
federal and state securities laws, rules and regulations of any governmental
body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed, as they are in effect on the date
of
grant and also on the date of exercise or other issuance. Notwithstanding any
other provision in the Plan, the Company shall have no obligation to issue
or
deliver certificates for Shares under the Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental
body
that the Company determines to be necessary or advisable. The Company shall
be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
shall have no liability for any inability or failure to do so.
13. NO
OBLIGATION TO EMPLOY
Nothing
in the Plan or any Grant made under the Plan shall confer or be deemed to confer
on any Participant any right to continue in the employ of, or to continue any
other relationship with, the Company, or any Subsidiary or Affiliate of the
Company or limit in any way the right of the Company or any Subsidiary or
Affiliate of the Company to terminate Participant's employment or other
relationship at any time, with or without cause.
14. CHANGES
IN THE COMPANY'S CAPITAL STRUCTURE
The
existence of outstanding Grants shall not affect in any way the right or power
of the Company or its stockholders to make or authorize all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any other corporate act or proceeding, whether
of
a similar character or otherwise.
After
a
merger of one or more corporations into the Company, or after a consolidation
of
the Company and one or more corporations in which the Company shall be the
surviving corporation, each holder of an outstanding Grant shall, at no
additional cost, be entitled to receive upon vesting or exercise, as applicable
(subject to any required action by stockholders of the Company) the number
and
class of shares of stock or other securities to which such holder would have
been entitled pursuant to the terms of the agreement of merger or consolidation
if, immediately prior to such merger or consolidation, such holder had been
the
holder of record of a number of shares of Common Stock equal to the number
of
shares issuable pursuant to such Grant.
If
the
Company is merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation, or if the
Company is liquidated, or sells or otherwise disposes of substantially all
its
assets to another corporation while Grants remain outstanding under the Plan,
(i) subject to the provisions of clause (ii) below, after the effective date
of
such merger, consolidation or sale, as the case may be, each holder of an
outstanding Grant shall be entitled to receive upon vesting or exercise, as
applicable, of such Grant in lieu of shares of Common Stock, shares of such
stock or other securities, cash or property as the holders of shares of Common
Stock received pursuant to the terms of the merger, consolidation or sale;
or,
in the case of Options (ii) all outstanding Options may be canceled by the
Board
as of the effective date of any such merger, consolidation, liquidation or
sale
provided that: (x) notice of such cancellation shall be given to each holder
of
an Option, and (y) each holder of an Option shall have the right to exercise
such Option to the extent that the same is then exercisable or, if the Board
shall have accelerated the time for exercise of all unexercised and unexpired
Options, in full during the 30-day period preceding the effective date of such
merger, consolidation, liquidation or sale.
Except
as
expressly provided above, the issue by the Company of shares of stock of any
class, securities convertible into shares of stock of any class, for cash,
property or services, either upon direct sale or upon the exercise of rights
or
warrants to subscribe therefor, or upon conversion of shares or obligations
of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or
price of Shares then subject to outstanding Grants.
15.1 The
Plan shall have been approved by any secured lender to the Company, the consent
of which is required pursuant to the contractual arrangements between the
Company and such secured lender;
15.2
The
Plan shall have been approved by the stockholders of the Company;
and
15.3
All
Shares authorized for issuance under the Plan shall have been registered by
the
Company by the filing with the Securities and Exchange Commission of a
Registration Statement on Form S-8.
16. TERM
OF
PLAN
The
Plan
will terminate ten (10) years from the Effective Date.
17. AMENDMENT
OR TERMINATION OF PLAN
The
Board
may at any time terminate or amend the Plan in any respect, including without
limitation the modification, extension or renewal of outstanding Grants and
the
authorization of new Grants in substitution therefor, and the amendment of
any
form of Grant (including the terms and conditions pertaining thereto), agreement
or instrument to be executed pursuant to the Plan; provided, however, that
no
modification to an outstanding Grant or termination or amendment to this Plan
or
any such agreement or instrument may, without the consent of the Participant,
terminate such Grant, delay the vesting of a Grant or materially adversely
affect the rights of the Participant. Amendments may be made without stockholder
approval without stockholder approval except as required to satisfy Section
422
of the Code, Section 162(m) of the Code, or other NASDAQ, stock exchange, or
regulatory requirements.
18. NONEXCLUSIVITY
OF THE PLAN
Neither
the adoption of the Plan by the Board nor any provision of the Plan shall be
construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including,
without limitation, the granting of stock options and bonuses otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
19. GOVERNING
LAW
The
Plan
and all agreements, documents and instruments entered into pursuant to the
Plan
shall be governed by and construed in accordance with the internal laws of
the
State of California, excluding that body of law pertaining to conflict of
laws.
20. DEFINITIONS
As
used
in the Plan, the following terms shall have the following meanings:
"ACCELERATION
EVENT" means (i) any Change of Control of the Company, provided that the
Participant is an employee, consultant, or independent contractor of the Company
or any Subsidiary or Affiliate of the Company as of the date of such Change
of
Control, (ii) the Termination of a Participant without cause, or (iii) any
other
event determined in the discretion of the Committee to be an Acceleration
Event.
"BOARD"
means the Board of Directors of the Company.
"CHANGE
IN CONTROL" means the occurrence of any of the following events:
(a) when
the
Company acquires actual knowledge that any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial
owner
(as defined in Rule 13d-3 of the Exchange Act) directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then-outstanding securities;
(b) upon
the
first purchase of Common Stock pursuant to a tender or exchange offer (other
than a tender or exchange offer made by the Company);
(c) upon
the
approval by the Company's shareholders of: (i) a merger or consolidation of
the
Company with or into another corporation (other than an Affiliate of the
Company), which does not result in any capital reorganization or
reclassification or other change in the Company's then-outstanding shares of
Common Stock, (ii) a sale or disposition of all or substantially all of the
Company's assets, or (iii) a plan of liquidation or dissolution of the Company;
or
(d) if
during
any period of two consecutive years, the individuals who at the beginning of
such period constitute the Board of Directors of the Company cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's shareholders, of each new director
is
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
"CODE"
means the Internal Revenue Code of 1986, as amended.
"COMMITTEE"
means the Compensation Committee of the Board, or the Board acting as the
Committee.
"COMMON
STOCK" means the Company's Common Stock, $0.01 par value.
"COMPANY"
means Cadiz Inc., a corporation organized under the laws of the State of
Delaware, or any successor corporation.
"DISABILITY"
means a disability, whether temporary or permanent, partial or total, within
the
meaning of Section 22(e)(3) of the Code, as determined by the
Committee.
"EXCHANGE
ACT" means the Securities Exchange Act of 1934, as amended.
"EXERCISE
PRICE" means the price at which a holder of an Option may purchase the Shares
issuable upon exercise of the Option, but in no event shall such price be less
than the par value of the Common Stock.
"FAIR
MARKET VALUE" means the Trading Price, as defined below.
"GRANTS"
shall mean Time-Based Deferred Stock granted pursuant to Section 5 hereof,
Milestone-Based Deferred Stock granted pursuant to Section 6 hereof, and Options
and Deferred Stock granted pursuant to Section 7 hereof.
"OPTION"
means an option to purchase Shares of Common Stock of the Company pursuant
to
Section 7.
"OPTION
AGREEMENT" means, with respect to each Option, the signed written agreement
between the Company and the Participant setting forth the terms and conditions
of the Option.
"PARTICIPANT"
means a person who receives a Grant under the Plan.
"PLAN"
means this Cadiz Inc., 2007 Management Equity Incentive Plan, as amended from
time to time.
"SECURITIES
ACT" means the Securities Act of 1933, as amended.
"SHARES"
means shares of the Company's Common Stock, $0.01 par value, reserved for
issuance under the Plan, as adjusted pursuant to Sections 2 and 14, and any
security issued in respect thereto or in replacement therefor.
"SUBSIDIARY"
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of granting of any
Grant
pursuant to the Plan, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"TERMINATION"
or "TERMINATED" means, for purposes of the Plan with respect to a Participant,
that the Participant has ceased to provide services as an employee, director,
consultant, independent contractor or adviser, to the Company or a Subsidiary
or
Affiliate of the Company, except in the case of sick leave, military leave,
or
any other leave of absence approved by the Committee, provided, that such leave
is for a period of not more than ninety (90) days, or reinstatement upon the
expiration of such leave is guaranteed by contract or statute. The Committee
shall have sole discretion to determine whether a Participant has ceased to
provide services and the effective date on which the Participant ceased to
provide services (the "Termination Date").
"TRADING
PRICE" means, as of any date, the value of a share of the Company's Common
Stock
determined as follows:
(a) the
closing price or last reported sale price of the Company's Common Stock on
the
stock exchange or quotation system on which the Company's Common Stock is then
traded; or
(b) if
the
Company's Common Stock is not then traded on a stock exchange or quotation
system, then by the Board of Directors of the Company in good faith;
or.
(c) in
the
event of a Change in Control transaction pursuant to which some or all of the
Company's Common Stock is purchased, the price per share paid for such Common
Stock.
PROXY
CADIZ
INC.
SOLICITED
ON BEHALF OF THE COMPANY AND APPROVED BY THE BOARD OF
DIRECTORS
The
undersigned hereby constitutes and appoints Keith Brackpool and O'Donnell Iselin
II, and each of them, as attorneys and proxies of the undersigned, with full
power of substitution, for and in the name, place, and stead of the undersigned,
to appear at the fiscal 2007 Annual Meeting of Stockholders of Cadiz Inc. to
be
held on the 15th day of June 2007 at 11 a.m., local time, at the law
offices of Theodora Oringher Miller & Richman located at 2029 Century Park
East, 6th Floor, Los Angeles, California 90067 (pursuant to the Notice of Annual
Meeting dated April 27, 2007 and accompanying proxy statement), and at any
postponement or adjournment thereof, and to vote all of the shares of Cadiz
Inc.
that the undersigned is entitled to vote with all the powers and authority
the
undersigned would possess if personally present in accordance with the following
instructions.
(Continued
on reverse side)
CADIZ
INC.
Voting
by telephone or Internet is quick, easy and immediate.
As
a
Cadiz Inc. stockholder, you have the option of voting your shares electronically
through the Internet or on the telephone, eliminating the need to return the
proxy card. Your electronic vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed, dated and returned the
proxy
card. Votes submitted electronically over the Internet or by telephone must
be
received by 7:00 p.m., Eastern Standard Time, on June 14, 2007.
Vote
Your Proxy on the Internet:
www.continentalstock.com.
Have
your
proxy card available when you access the website. Follow the prompts to vote
your shares.
Vote
Your Proxy by Phone:
Call
1 (866) 894-0537.
Use
any
touch-tone telephone to vote your proxy. Have your proxy card available when
you
call. Follow the voting instructions to vote your shares.
PLEASE
DO NOT RETURN THE PROXY CARD IF YOU ARE
VOTING
ELECTRONICALLY OR BY PHONE
Vote
Your Proxy by Mail:
Mark,
sign and date your proxy card and return it in the postage-paid envelope
provided.
FOLD
AND DETACH HERE AND READ THE REVERSE SIDE
THIS
PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED
"FOR" PROPOSALS 1, 2, AND 3. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF
DIRECTORS, WHICH RECOMMENDS A VOTE FOR THE PROPOSALS.
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1.
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ELECTION
OF DIRECTORS
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FOR
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WITHHOLD
AUTHORITY
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(To
withhold authority to vote for any individual nominee, strike a line
through that nominee's name in the list below)
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01.
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Keith
Brackpool
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02.
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Murray
H. Hutchison
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03.
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Timothy
J. Shaheen
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04.
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Stephen
J. Duffy
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05.
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Winston
Hickox
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06
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Geoffrey
Grant
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2.
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Ratification
of PricewaterhouseCoopers LLP as independent auditor.
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FOR
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AGAINST
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ABSTAIN
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3.
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Approval
of 2007 Management Equity Incentive Plan.
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FOR
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AGAINST
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ABSTAIN
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In
their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
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COMPANY
ID:
PROXY
NUMBER:
ACCOUNT
NUMBER:
| Signature(s)_______________________________ | Signature(s)_______________________________ | Date____________________________________ |
Please
sign exactly as name appears hereon. When shares are held by joint owners,
both
should sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
.