CADIZ INC.
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 10, 1999
To the Stockholders of
Cadiz Inc.:
The Annual Meeting of Stockholders of Cadiz Inc., a Delaware
corporation (the "Company"), will be held at the Sheraton Miramar
Hotel located at 101 Wilshire Boulevard, Conference Bungalow
Room, Santa Monica, California, on Monday, May 10, 1999, at
9:00 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 are elected and qualified;
(2) To consider and vote upon a proposal to increase the number
of shares subject to the Company's 1996 Stock Option Plan;
(3) Ratification of the selection of PricewaterhouseCoopers LLP
as the Company's independent certified public accountants for
fiscal year 1999; and
(4) The transaction of such other business as may properly come
before the meeting and any adjournments thereof.
The subject matter of each of the above proposals is described
within the Proxy Statement.
The Board of Directors has fixed the close of business on
March 22, 1999 as the record date for the determination of
stockholders 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
shares of the Company's Common Stock must be present in person or
be represented by proxy.
Whether or not you expect to attend the Annual Meeting in
person, please 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
Stanley E. Speer
Secretary
Santa Monica, California
April 5, 1999
CADIZ INC.
Annual Meeting of Stockholders
TABLE OF CONTENTS
Page
PROXY STATEMENT INTRODUCTION.................................. 1
BENEFICIAL OWNERSHIP OF SECURITIES.............................2
PROPOSAL 1:
Election of Directors.......................................4
PROPOSAL 2:
Proposal to increase the number of shares
subject to the 1996 Stock Option Plan..................... 14
PROPOSAL 3:
Approval of Independent Auditors...........................17
OTHER MATTERS.................................................18
STOCKHOLDER PROPOSALS.........................................18
ADDITIONAL INFORMATION........................................18
CADIZ INC.
100 Wilshire Boulevard, Suite 1600
Santa Monica, California 90401
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 10, 1999
To Our Stockholders:
Your Board of Directors furnishes this Proxy Statement in
connection with its solicitation of your proxy in the form
enclosed to be used at the Company's Annual Meeting of
Stockholders to be held on Monday, May 10, 1999, at the time and
place and for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders.
The Company's Annual Report on Form 10-K for the year ended
December 31, 1998, including audited financial statements, is
being mailed to you with this Proxy Statement on or about April
5, 1999.
We cordially invite you to attend the Annual Meeting. Whether
or not you plan to attend, please date, sign and return your
proxy promptly in the postage paid return envelope provided. You
may revoke your proxy at any time prior to its exercise at the
meeting by notice to the Company's Secretary, and, if you attend
the meeting, you may vote your shares in person. You may also
revoke your proxy by returning a duly executed proxy reflecting a
later date. Your proxy, if not revoked, will be voted at the
Annual Meeting in accordance with the instructions specified
therein.
Only holders of record of the Company's Common Stock at the
close of business on March 22, 1999 will be entitled to vote at
the meeting. At the close of business on March 22, 1999, there
were 34,383,411 shares of Common Stock of the Company
outstanding, with each share of Common Stock being entitled to
one vote on each matter to be voted upon. There is no right to
cumulate votes as to any matter.
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 approval of Proposal 2 and Proposal 3. For
purposes of determining whether a matter has received a majority
vote either of all outstanding shares or shares present or
represented by proxy, abstentions will be included in the vote
totals, with the result that an abstention has the same effect as
a negative vote. In instances where brokers are prohibited from
exercising discretionary authority for beneficial owners who have
not returned a proxy (so-called "broker non-votes"), those shares
will not be included in the vote totals and, therefore, will have
no effect on the vote on Proposals 1, 2 and 3.
Stockholders of the Company will not have appraisal rights
with respect to any of the Proposals to be voted upon at the
Annual Meeting.
The Company has been advised by its directors and officers
that they intend to vote the 1,137,643 outstanding shares of
Common Stock which they hold or control, representing 3.31% of
the total shares outstanding as of the record date, in favor of
the Proposals presented in this Proxy Statement. See "Beneficial
Ownership of Securities."
The entire cost of soliciting proxies will be borne by the
Company, including expenses in connection with preparing and
mailing proxy solicitation materials. In addition to use of the
mails, proxies may be solicited by officers, directors and
regular employees of the Company, without extra compensation, by
telephone, telegraph or personal solicitation, and no additional
compensation will be paid to such persons. If requested, the
Company will reimburse brokerage houses and other custodians,
nominees and fiduciaries for their reasonable expenses incurred
in mailing proxy material to their principals.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth, as of March 22, 1999, the
ownership of Common Stock of the Company by each stockholder who
is known by the Company to own beneficially more than five
percent of the outstanding Common Stock, by each director, by
each executive officer listed in the Summary Compensation Table
below, and by all directors and officers as a group.
Amount and Nature of Percent
Name and Address Beneficial Ownership of Class
- ------------------------- ---------------------- ------------
Fidelity International
Limited, et. al. 3,584,667(1) 10.43%
Pembroke Hall
42 Crow Lane
Hamilton, Bermuda
Morgan Stanley Dean Witter
& Co. 2,581,146(2) 7.51%
1585 Broadway
New York, NY 10036
Capital Research &
Management Company 2,122,000(3) 6.17%
333 South Hope Street
Los Angeles, CA 90071
Lone Star Securities
Fund, L.L.C. 1,830,420(4) 5.32%
540 Madison Avenue,
32nd Floor
New York, NY 10022
Dwight W. Makins 425,000(5) 1.22%
c/o 100 Wilshire Boulevard,
Suite 1600
Santa Monica, CA 90401
Keith Brackpool 1,295,143(6) 3.74%
100 Wilshire Boulevard,
Suite 1600
Santa Monica, CA 90401
Anthony L. Coelho -0-(7) *
c/o 100 Wilshire Boulevard,
Suite 1600
Santa Monica, CA 90401
Murray H. Hutchison 25,000(8) *
c/o 100 Wilshire Boulevard,
Suite 1600
Santa Monica, CA 90401
Mitt Parker 50,000(9) *
c/o 100 Wilshire Boulevard,
Suite 1600
Santa Monica, CA 90401
Timothy J. Shaheen 361,250(10) 1.04%
100 Wilshire Boulevard,
Suite 1600
Santa Monica, CA 90401
Stanley E. Speer 181,250(11) *
100 Wilshire Boulevard,
Suite 1600
Santa Monica, CA 90401
All Directors and Officers
as a Group 2,337,643(5)(6)(7)
(8)(9)(10)(11) 6.57%
(7 individuals)
- ---------------------------------
* Less than 1%
(1) Based upon a Schedule 13D filed with the Securities and
Exchange Commission and, in addition, information obtained
from Fidelity International Limited ("FIL"), FIL
beneficially owns, as an investment adviser which provides
investment advisory and management services to a number of
non-U.S. investment companies or investment trusts and
certain institutional investors, 3,584,667 shares of
Common Stock and such funds and accounts and FIL, as
investment adviser to the funds and accounts, have sole
voting and dispositive power as to all such shares. A
partnership controlled by Mr. Edward C. Johnson 3d and
members of his family owns shares of FIL voting stock with
the right to cast approximately 47.22 percent of the total
votes which may be cast by all holders of FIL voting
stock. Mr. Johnson 3d is Chairman of FIL. The Schedule
13D indicates that FIL was a subsidiary of Fidelity
Management & Research Company ("Fidelity") prior to June
30, 1980, at which time the shares of FIL held by Fidelity
were distributed as a dividend to the shareholders of FMR
Corp. ("FMR"), and that FIL currently operates as an
entity independent of FMR and Fidelity with certain common
shareholders. The principal office of FIL is located at
Pembroke Hall, 42 Crow Lane, Hamilton, Bermuda. The
principal offices of FMR, Fidelity and Mr. Johnson 3d are
located at 82 Devonshire Street, Boston, Massachusetts
02109.
(2) Morgan Stanley Dean Witter & Co. ("Morgan Stanley")
filed a Schedule 13G with the Securities and Exchange
Commission indicating that they are the indirect
beneficial owner of 2,581,146 shares of Common Stock,
arising from the indirect beneficial ownership of such
shares by Morgan Stanley Dean Witter Investment Management
Limited ("MSDWIM"), a subsidiary of Morgan Stanley. The
address of Morgan Stanley is 1585 Broadway, New York, New
York 10036. The address of MSDWIM is 25 Cabot Square, Canary
Wharf, London E14 4QA, England. According to the Schedule
13G, accounts managed on a discretionary basis by MSDWIM
hold 2,579,246 shares and are known to have the right to
receive or the power to direct the receipt of dividends or
proceeds from the sale of such securities. The Schedule
13G indicates that no such account holds more than 5% of
the class.
(3) Capital Research and Management Company ("Capital
Research") filed a Schedule 13G with the Securities and
Exchange Commission indicating that it is the beneficial
owner of 2,122,000 shares of Common Stock, arising from
the beneficial ownership of such shares by SMALLCAP World
Fund, Inc. ("SmallCap"), an investment company registered
under the Investment Company Act of 1940, which is advised
by Capital Research, an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940.
Capital Group filed a Schedule 13G with the Securities and
Exchange Commission indicating they will no longer be
required to report beneficial ownership under SEC Rule 13d-
1. The principal offices of Capital Research and SmallCap
are located at 333 South Hope Street, Los Angeles,
California 90071. According to the Schedule 13G, all such
shares are held by SmallCap in its capacity as an
investment company, and beneficially held by Capital
Research in its capacity as an investment advisor. The
Schedule 13G indicates that Capital Research does not have
investment power or voting power over any of the shares
and beneficial ownership is disclaimed pursuant to Rule
13d-4.
4) Based upon a Schedule 13D filed with the Securities and
Exchange Commission, Lone Star Securities Fund, L.L.C.,
a Delaware limited liability company ("LS Securities"),
Lone Star Opportunity Fund, L.P., a Delaware limited
partnership ("LS Opportunity") and LSS Management, Inc.,
a Delaware corporation ("LSS Management"), beneficially
own an aggregate of 1,830,420 shares of Common Stock and
share voting power as to all such shares. LS Securities
is principally engaged in the business of investment in
public and private debt, equity and derivative securities.
LSS Management is the investment manager of LS Securities.
LS Securities has granted to LSS Management, as investment
manager, the power to manage LS Securities' investments,
subject to the requirement that LS Opportunity, as the
managing member of LS Securities, approve all purchases
and sales of securities by LS Management for LS Securities.
LS Opportunity is the sole stockholder of LLS Management.
LS Opportunity is principally engaged in the business of
investment in real estate, debt securities secured by real
estate and other real estate-related investments. The sole
general partner of LS Opportunity is Lone Star Partners,
L.P. ("LS Partners"), a Delaware limited partnership which
is principally engaged in the business of serving as
general partner of LS Opportunity. The sole general
partner of LS Partners is Lone Star Management Co., Ltd.
("LS Management"), a Delaware corporation, which
principally is engaged in the business of serving as
general partner of LS Partners. The principal office of
LS Securities, LS Opportunity, LS Partners and LS
Management is 600 North Pearl Street, Suite 1550, Dallas,
Texas 75201. The address of LSS Management's principal
office is 540 Madison Avenue, 32nd Floor, New York, New
York 10022.
(5) Includes 350,000 shares underlying presently exercisable
options.
(6) Includes 250,000 shares underlying presently exercisable
options. Does not include 25,000 shares issuable upon the
satisfaction of certain conditions established by the
Board of Directors, none of which have yet been met. Does
not include 500,000 shares underlying options that are
not vested.
(7) Does not include 25,000 shares underlying options that
are not vested.
(8) Includes 25,000 shares underlying presently exercisable
options.
(9) Includes 50,000 shares underlying presently exercisable
options.
(10) Includes 350,000 shares underlying presently
exercisable options. Does not include 125,000 shares
underlying options that are not vested.
(11) Includes 175,000 shares underlying presently
exercisable options. Does not include 150,000 shares
underlying options that are not vested.
PROPOSAL 1
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 2000 Annual Meeting of Stockholders or
until their respective successors are elected and qualified.
Each nominee currently serves as a director and has agreed to
serve as such for another term if elected.
Proxies will be voted for the election of the six nominees
named below 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.
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information,
the present occupation and the business experience for the past
five years of each director and executive officer, including
Board nominees:
Nominees for Director:
Name Age Position with the Company
---------------- --- -------------------------
Dwight W. Makins 48 Chairman of the Board
Keith Brackpool 41 President, Chief Executive
Officer and Director
Anthony L. Coelho 56 Director
Murray H. Hutchison 60 Director
Mitt Parker 49 Director
Timothy J. Shaheen 39 Director of the Company and
President, Chief Executive Officer
of Sun World International, Inc.
Executive Officer:
Name Age Position with the Company
------------------ --- --------------------------
Stanley E. Speer 38 Chief Financial Officer and
Corporate Secretary of
the Company and Sun World
International, Inc.
Dwight W. Makins was elected as Chairman of the Board in
December 1991. Mr. Makins currently serves as Chairman of
Greenway Holdings plc, a British waste oil recycling company and
as a director of several other British companies. Prior to a
change in ownership, which occurred in January 1997, Mr. Makins
was a director of King and Shaxson (Holdings) plc, a British bank
and discount house. Prior to July 1988, he was managing director
of John Govett & Co. Ltd. Mr. Makins is Chairman of the Audit
Committee and a member of the Compensation Committee of the Board
of Directors.
Keith Brackpool is a founder of the Company, has served as a
member of the Company's Board of Directors since September 1986,
and has served as President and Chief Executive Officer of the
Company since December 1991.
Anthony L. Coelho was appointed a director of the Company in
March 1999. Mr. Coelho was first elected to the U.S. House of
Representatives in 1978 and served as the first-ever elected
Majority Whip from 1987 to 1989. Representing California's
Central Valley, Mr. Coelho served in senior positions on the
Agriculture, Interior and Administration Committees with his
legislative focus on agriculture and water issues. After leaving
Congress, Mr. Coelho served as Managing Director of Wertheim
Schroder & Company, an investment banking firm from 1989 to 1995
and from 1990 to 1995 he served as President and Chief Executive
Officer of Wertheim Schroder Investment Services. In 1994,
President Clinton appointed him Chairman of the President's
Committee on Employment of People with Disabilities. Mr. Coelho
currently serves as a director of AutoLend Group, Inc.,
Cyberonics, Inc., ICF Kaiser International, Inc., ITT Educational
Services, Inc., TEI, Inc. and Service Corporation International, and
as a director of several other non-publicly traded and not-for-profit
companies.
Murray H. Hutchison was appointed a director of the Company
in June 1997. Since his retirement in 1996 from International
Technology Corporation ("ITC"), 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 ITC,
a diversified environmental management company traded on the New
York Stock Exchange. Mr. Hutchison also serves as a director of
Foodmaker, Inc. and Sunrise Medical, Inc., which are both traded
on the New York Stock Exchange and as a director of several other
non-publicly traded U.S. companies. Mr. Hutchison serves as
Chairman of the Compensation Committee and is a member of the
Audit Committee of the Board of Directors.
Mitt Parker was appointed a director of the Company in
February 1998. Mr. Parker, who has been involved in the produce
industry for over 27 years, is currently President and Chief
Executive Officer of FreshPoint, Inc. FreshPoint owns 28
individual produce companies operating in major markets
throughout the U.S. and in the Canadian Provinces of British
Columbia and Alberta. From 1994 until its acquisition by
FreshPoint, Mr. Parker served as South Atlantic Regional Vice
President of Albert Fisher Group, PLC. Prior to 1994, Mr. Parker
served as President and Chief Executive Officer of Mitt Parker
Company, Inc., a wholesale produce distribution company which was
acquired by Albert Fisher Group, PLC. Mr. Parker is a member of
the Compensation Committee of the Board of Directors.
Timothy J. Shaheen was appointed a director of the Company
in March 1999. Mr. Shaheen has served as the Chief Executive
Officer and director of the Company's Sun World International,
Inc. ("Sun World") subsidiary since September 1996. Mr. Shaheen
also serves as a director of The United Fresh Fruit and Vegetable
Association, a national trade organization, which represents
interests of fruit and vegetable producers and distributors. He
is also active on several industry advisory committees. Mr.
Shaheen has ten years of experience in the produce industry, most
recently serving as a senior executive with Albert Fisher North
America. 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/shippers of
fresh vegetables in the Salinas Valley of California. Mr.
Shaheen has also served as a past director of the Los Angeles
Association of Produce Wholesalers and Dealers. Prior to his
employment with Albert Fisher, Mr. Shaheen was a senior manager
with the accounting firm of Ernst & Young LLP. Mr. Shaheen is a
Certified Public Accountant.
Stanley E. Speer joined the Company in September 1996,
following completion of the acquisition by the Company of Sun
World, as Senior Vice President, Chief Financial Officer and
Secretary of Sun World. In July 1997, Mr. Speer was appointed
Chief Financial Officer of the Company and relinquished his
position as Secretary of Sun World. In April 1998, Mr. Speer
became Secretary of both the Company and Sun World. Prior to
joining Sun World, Mr. Speer had fifteen years of experience in
public accounting with the accounting firm of Coopers & Lybrand LLP.
From 1992 until September 1996, Mr. Speer served as a partner in
their financial advisory services group specializing in business
reorganizations and mergers and acquisitions consulting. Mr. Speer
is a Certified Public Accountant and a Certified Insolvency and
Reorganization Accountant.
Directors of the Company 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 the Company. Officers serve at
the discretion of the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and
persons who beneficially own more than ten percent of a
registered class of the Company's equity securities ("reporting
persons"), to file with the Securities and Exchange Commission
(the "Commission") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities
of the Company. Reporting persons are required by Commission
regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the
copies of reports and amendments thereto on Forms 3, 4 and 5
furnished to the Company by reporting persons during, and with
respect to, its fiscal year ended December 31, 1998, and on a
review of written representations from reporting persons to the
Company that no other reports were required to be filed for such
fiscal year, all Section 16(a) filing requirements applicable to
the Company's directors, executive officers and greater than ten
percent beneficial owners during such period were satisfied in a
timely manner except for Russ Hammond (a former director of the
Company), who was late in filing eight reports regarding thirteen
transactions covering 150,000 shares.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1998, the Board of
Directors held four 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 two standing committees, the
Audit Committee and the Compensation Committee. The Board does
not have a Nominating Committee. Messrs. Makins, as Chairman,
and Hutchison serve on the Audit Committee, the purpose of which
is to oversee preparation of the Company's financial statements.
Prior to his resignation in December 1998, Mr. Hammond served as
Chairman of the Audit Committee. The Audit Committee met twice
during the year ended December 31, 1998. Messrs. Hutchison, as
Chairman, and Makins and Parker serve on the Compensation
Committee, the purpose of which is to establish salary and bonus
compensation levels for the Company's executive officers. The
Compensation Committee met four times during the year ended
December 31, 1998.
EMPLOYMENT ARRANGEMENTS
Mr. Brackpool is compensated pursuant to an Employment
Agreement effective as of February 1, 1998. Under the terms of
this Agreement, which has an initial term of three years, Mr.
Brackpool receives base compensation of $500,000 per annum. Mr.
Brackpool may also receive an annual incentive based bonus, not
to exceed 120% of his base compensation, subject to the
satisfaction of certain performance criteria which are either
tied to the performance of the Company or are subject to the
discretion of the Board of Directors. Under the Employment
Agreement, Mr. Brackpool also serves as the Chairman of Sun
World. A portion of Mr. Brackpool's compensation may be paid by
Sun World or other subsidiaries of the Company as determined
periodically by the Company. Mr. Brackpool also receives the use
of an automobile leased by the Company and life and disability
insurance benefits funded by the Company. The Agreement provides
that, in the event of a change in control of the Company, any
theretofore unsatisfied conditions to the vesting of any stock
options held by Mr. Brackpool or to the issuance of shares of the
Company's stock pursuant to stock bonus plans to which Mr.
Brackpool is a party, shall be deemed immediately satisfied. In
the event of a material change or reduction in Mr. Brackpool's
responsibilities, he will be entitled to terminate the Agreement
and continue to receive base compensation for the remainder of
the term of the Agreement. Mr. Brackpool will also be entitled
to continue to receive base salary and a deemed bonus equal to
60% of base salary in the event of any other termination of the
Agreement by the Company other than for cause. In January 1999,
the Board of Directors approved a grant to Mr. Brackpool of an
aggregate of 500,000 incentive stock options, vesting six months
from issue, for the purchase of Common Stock of the Company at an
exercise price of $7.3125 per share.
Mr. Shaheen has been engaged by the Company to act as the
Chief Executive Officer of Sun World. In this capacity, Mr.
Shaheen receives compensation from Sun World at an annual rate of
$270,000. In consideration of Mr. Shaheen's agreement to provide
services under his employment agreement, the Board of Directors
approved the grant to Mr. Shaheen of an aggregate of 400,000
incentive stock options for the purchase of Common Stock of the
Company at an exercise price of $4.50 per share. Of such
options, 350,000 have vested; the remainder are to vest in
September 1999. Further, pursuant to the Company's 1996 Stock
Option Plan (under which such options were issued), all options
under the Plan become fully vested upon a change in control of
the Company. Mr. Shaheen is entitled to receive an annual
incentive based bonus, not to exceed 100% of his base
compensation, subject to the satisfaction of certain performance
criteria which are tied to the performance of Sun World. Mr.
Shaheen may receive additional compensation in the form of
bonuses at the sole discretion of the Board of Directors. Mr.
Shaheen also receives the use of an automobile leased by Sun
World.
Mr. Speer has been engaged by the Company to act as the
Chief Financial Officer of both the Company and Sun World. In
this capacity, Mr. Speer receives compensation at an annual rate
of $240,000. A portion of Mr. Speer's compensation may be paid by
Sun World or other subsidiaries of the Company as determined
periodically by the Company. In consideration of Mr. Speer's
agreement to provide services to Sun World under his employment
agreement, the Board of Directors approved the grant to Mr. Speer
of an aggregate of 200,000 incentive stock options for the
purchase of Common Stock of the Company at an exercise price of
$4.50 per share. Of the 200,000 incentive stock options granted,
175,000 have vested, and the remainder will vest in September
1999. Further, pursuant to the Company's 1996 Stock Option Plan
(under which such options were issued), all options under the
Plan become fully vested upon a change in control of the Company.
Mr. Speer is entitled to receive an annual incentive based bonus,
not to exceed 50% of his base compensation, subject to the
satisfaction of certain performance criteria which are tied to
the performance of Sun World. Mr. Speer may receive additional
compensation in the form of bonuses at the sole discretion of the
Board of Directors. Mr. Speer also receives the use of an
automobile leased by Sun World.
COMPENSATION OF DIRECTORS
Mr. Makins receives cash compensation for his services as
Chairman pursuant to a Compensation Agreement effective April 2,
1993, which provides for base compensation of $75,000 per year,
payable quarterly in advance, plus payment for certain additional
services which may be performed on behalf of the Company,
consisting primarily of financial advisory and general business
consulting services. During the year ended December 31, 1998,
Mr. Makins received total cash compensation of $78,000 pursuant
to this Compensation Agreement. In addition, Mr. Makins receives
cash compensation for his services as a director of the Company's
Sun World subsidiary in the amount of $25,000 per year, payable
quarterly in advance.
Mr. Brackpool and Mr. Shaheen do not receive any additional
compensation for serving as directors of the Company or of Sun
World.
Mr. Coelho will receive cash compensation for his services
as director of the Company in the amount of $25,000 per year,
payable quarterly in advance. He was appointed as a director of
the Company in March 1999. Upon appointment, Mr. Coelho also
received options to purchase 25,000 shares of the Company's
Common Stock, which shall vest in September 1999.
Mr. Hutchison receives cash compensation for his services as
a director of the Company in the amount of $25,000 per year,
payable quarterly in advance.
Mr. Parker receives cash compensation for his services as a
director of the Company and the Company's Sun World subsidiary in
the amount of $25,000 per year, payable quarterly in advance.
During the year ended December 31, 1998, Mr. Parker, who was
appointed as a director of the Company in February 1998, received
$25,000, plus $1,000 for the first quarter meeting attended.
EXECUTIVE COMPENSATION
The tables and discussion below set forth information about
the compensation awarded to, earned by, or paid to the Company's
executive officers during the year ended December 31, 1998, the
year ended December 31, 1997 and the nine months ended December
31, 1996.
SUMMARY COMPENSATION TABLE
Other
Long-Term
Compensation
Name and Annual Awards
Principal Compensation(2) --------------- All
Fiscal --------------- Stock Stock Other
Position Year(1) Salary Bonus Awards Options Compensation
- --------------- -------- -------- -------- -------- --------- ------------
Keith Brackpool 12/31/98 $500,000 $300,000 $ -0- -0- $50,000(3)
President and 12/31/97 500,000 217,500 -0- -0- 82,500(4)
Chief
Executive
Officer 12/31/96 306,250 625,000 656,250(5) 250,000(6)
Timothy J.
Shaheen (7) 12/31/98 270,000 35,000 -0- 75,000(8) 50,000(3)
Chief Executive
Officer 12/31/97 250,000 62,500 -0- -0-
of Sun World 12/31/96 181,891 125,000 -0- 400,000(9)
Stanley E.
Speer(10) 12/31/98 240,000 35,000 -0- 125,000(11) 50,000(3)
Chief
Financial
Officer 12/31/97 225,000 56,250 -0- -0-
12/31/96 79,607 56,250 -0- 200,000(12)
- -------------------------
(1) In December 1996, the Company changed its fiscal year end
from March 31 to December 31. Consequently, information is
presented in this table for the year ended December 31, 1998,
December 31, 1997, and the nine months ended December 31,
1996. The executive officers for whom compensation has been
disclosed for the year ended December 31, 1998, constituted
all of the Company's executive officers as of December 31,
1998.
(2) No column for "Other Annual Compensation" has been included
to show compensation not properly categorized as salary or
bonus, which consisted entirely during each fiscal year of
perquisites and other personal benefits, the aggregate
amount of which did not exceed the lesser of either $50,000
or ten percent of the total of annual salary and bonus
reported for each of the above named executive officers for
each fiscal year. See "Employment Arrangements."
(3) In February 1999, the Company awarded 6,250 shares of
stock each to Messrs. Brackpool, Shaheen and Speer, totaling
18,750 shares, as part of a performance based bonus with
respect to the year ended December 31, 1998. The value of
the shares is calculated based on the fair market value of
$8.00 on the date the shares were awarded.
(4) The Company awarded Mr. Brackpool a total of 10,000 shares of
stock, which value is calculated based on the fair market
value of $8.25 on the date stock was awarded, as part of a
performance based bonus with respect to the year ended
December 31, 1997. However, such shares were not issued until
March 1998.
(5) On March 24, 1997, the Company awarded Mr. Brackpool a total
of 125,000 shares of restricted stock in consideration of
extraordinary services performed during 1996 in connection
with the Company's acquisition of Sun World, subject to the
satisfaction of certain conditions, namely, that (i) 50,000
of the shares would vest upon completion of a refinancing of
Sun World's secured debt (which refinancing was completed on
April 16, 1997), and (ii) 25,000 of the shares would vest
each year on September 12, 1997, 1998 and 1999, if Mr.
Brackpool is then employed by the Company as its President
and Chief Executive Officer. If Mr. Brackpool's employment
is terminated without cause prior to the vesting of any of
these shares, all of such shares will immediately vest.
100,000 shares of the 125,000 shares were outstanding at
December 31, 1998. Dividends will be paid on such shares
(when issued and outstanding) only to the same extent, if
any, that dividends are paid on all other outstanding shares
of Common Stock.
(6) The 250,000 options granted to Mr. Brackpool during the
fiscal year ended December 31, 1996 were conditional options,
all of which have since vested.
(7) Mr. Shaheen joined the Company in January 1996 and on
September 14, 1996 was appointed Chief Executive Officer of
Sun World.
(8) In February 1999, Mr. Shaheen was granted 75,000 options,
vesting in August 1999, as part of a performance based bonus
with respect to the year ended December 31, 1998.
(9) The 400,000 options granted to Mr. Shaheen during the
fiscal year ended December 31, 1996 were conditional options,
of which 350,000 such options have since vested.
(10) Mr. Speer joined the Company in August 1996 and on
September 14, 1996 was appointed Chief Financial Officer and
Secretary of Sun World. In July 1997, Mr. Speer was
appointed Chief Financial Officer of the Company and
relinquished his position as Secretary of Sun World. In
April 1998, Mr. Speer resumed his duties as the Secretary of
the Company and Sun World.
(11) 50,000 options were granted to Mr. Speer during the
fiscal year ended December 31, 1998 and shall vest in
February 2001. In addition, in February 1999, Mr. Speer was
granted 75,000 options, vesting in August 1999, as part of a
performance based bonus with respect to the year ended
December 31, 1998.
(12) The 200,000 options granted to Mr. Speer during the
fiscal year ended December 31, 1996 were conditional options,
of which 175,000 such options have since vested.
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable
Percent Value
of at
Total Assumed
Options Annual
Granted Rates of
to Stock Price
Employees Exercise Appreciation
in Price for
Options Fiscal Per Share Expiration Option Term(4)
Name Granted(1) Year ($/Sh)(2) Date(3) 5% 10%
- ---------------- ------------ ----- ----------- --------- -------- --------
Stanley E. Speer 50,000(5) 9.5% $8.25 02-13-03 $113,966 $251,835
- -----------------
(1) All options granted to the named officer were incentive
options.
(2) All options were granted at market value (average of
closing bid and asked prices for the Company's Common Stock
as reported on the Nasdaq Stock Market(R)) at date of grant.
(3) All options have a fixed term of five years.
(4) Potential gains are reported net of the option exercise
price, but before taxes associated with exercise. These
amounts represent certain assumed rates of appreciation
only. Actual gains on stock option exercises are dependent
on the future performance of the Common Stock and overall
stock market conditions. The amounts reflected in this
table may not necessarily be achieved.
(5) The options will vest on February 13, 2001.
FISCAL YEAR END OPTION VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year Fiscal
End (#) Year End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable(1)
- ----------------------- -------------- -------------------
Keith Brackpool(2) 1,000,000/-0- $3,124,999/$-0-
Timothy J. Shaheen 350,000/50,000 $1,093,749/$156,249
Stanley E. Speer 175,000/75,000 $ 546,874/$78,124
(1) Based upon the Nasdaq Stock Market(R)
closing sales price per share at December 31, 1998.
No options were exercised by the named executive
officers during the last fiscal year.
(2) In January 1999, Mr. Brackpool exercised 750,000 of
these options, which are included in his shareholdings of the
Company as of March 22, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Company's year ended December 31, 1998, all
decisions concerning executive officer compensation were made
by the Compensation Committee of the Board of Directors. The
members of the Compensation Committee were Messrs. Hutchison
(Chairman), Makins and Parker all of whom are non-employee
directors. Mr. Makins serves as Chairman of the Board. See
"Directors and Executive Officers."
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors has formed a Compensation Committee
(the "Committee") which is responsible for reviewing and
establishing the compensation payable to the Company's
executive officers, including the President and Chief Executive
Officer. For executive officers other than the President and
Chief Executive Officer, the Committee establishes compensation
levels based, in part, upon the recommendations of the
President and Chief Executive Officer.
The Committee has furnished the following report on
executive compensation:(1)
Prior to the Sun World acquisition, the
Company's business plan was designed to
promote the maximization of the long-term
value of the Company's properties which was
primarily focused on the development of its
existing properties in addition to expansion
of its property portfolio. Therefore, for
compensation purposes, the Committee did not
believe that overall Company performance was
able to be measured as a function of profits
or losses, as the Company held its assets for
long-term maximization of values and was not
receiving significant revenues from
operations. Rather, the Company's overall
performance during any period was more
appropriately measured through a subjective
evaluation of the progress made by the
Company during such period toward the
achievement of its long range business goals,
taking into account the general economic
climate. As such, the Committee established
that compensation to the Company's executive
officers was designed to encourage and reward
management's efforts which promoted the
fulfillment of the Company's business plan
and positioned the Company for long-term
growth. While the Company will continue to
seek to pursue opportunities synergistic with
its water and agricultural resources, the
Company with its acquisition of Sun World on
September 13, 1996, has implemented a
business strategy which is currently more
aligned with meeting specific operating
performance objectives. Therefore, the
Committee has formulated compensation
programs for its executive officers that not
only seek to maximize the long-term value of
the Company's properties, but also to enhance
corporate performance and thus shareholder
value, by aligning the financial interest of
its executive officers with those of its
shareholders. Such a compensation program
will help to achieve the Company's business
and financial objectives and will also
provide incentives needed to attract and
retain well-qualified executives in a highly
competitive marketplace. To this end, the
Company has developed a compensation program
with three primary components: base salary,
performance based cash awards and long-term
incentives.<F1>
[FN] (1) This 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 the
Company specifically incorporates this report by
reference, and shall not otherwise be deemed filed
under such acts.
</FN>
BASE SALARY. An effort is made to
establish base salary levels for all
executive officers so as to be competitive
with the salaries of executives of
other companies with similarly sized asset
portfolios and to ensure the continued
services of key individuals. See "Employment
Arrangements" for terms of all agreements
regarding executive compensation. No
specific or set formula has been used to tie
base salary levels to precise measurable
factors. Adjustments to an executive
officer's base salary, once established, can
be made at the discretion of the Compensation
Committee, based upon such factors as
position and responsibility, salary history
and cost of living increases.
Where applicable, the Committee may also
consider the past performance of the officer,
both in adjusting base salary levels and in
determining additional incentive
compensation, such as the cash awards and
long term incentives discussed below.
PERFORMANCE BASED CASH AWARDS. The
Committee believes that incentives should be
offered to executives which are related to
improvements in Company performance that
yield increased value for stockholders.
Although the Committee relies primarily upon
the grant of incentive stock options to
reward executive performance (see "Long-Term
Incentives," below), under certain
circumstances, the Committee will utilize
performance based cash awards from time to
time to provide additional incentives.
As President and Chief Executive Officer
of the Company, Mr. Brackpool is charged with
the overall responsibility for the
performance of the Company, as well as Sun
World. In 1997, the Committee retained the
services of Towers Perrin, a prominent
independent compensation consulting firm, to
assist in designing an overall compensation
program for Mr. Brackpool. This compensation
program, which is reflected in a written
employment agreement effective as of February
1, 1998 (see "Employment Arrangements,"
above), includes, in addition to base salary,
an incentive bonus compensation component.
The incentive compensation component, which
may not exceed 120% of Mr. Brackpool's base
salary in any year, is determined on the
basis of three sets of criteria, including,
first, the meeting of yearly operating
objectives (such as earnings before interest,
taxes, depreciation and amortization
(EBITDA)); second, the meeting of yearly
goals regarding the fulfillment of the
Company's water resource business plan; and
third, the subjective evaluation by the
Committee of Mr. Brackpool's performance
during the year. Up to 50% of any year's
incentive compensation is payable, at the
discretion of the Board, in the form of
Common Stock. With respect to the year ended
December 31, 1998, the application of these
criteria resulted in a grant to Mr.
Brackpool, in February 1999, of a performance
based bonus equal to 70% of Mr. Brackpool's
base salary or $350,000. $300,000 of this
bonus is payable in cash and the remainder in
the form of 6,250 shares of the Company's
common stock.
The Committee has designed a
compensation program for Messrs. Shaheen and
Speer and other Sun World senior management
which provides for incentives based upon
meeting specific operating objectives such as
EBITDA. In addition, executives may receive
cash awards purely at the discretion of the
Committee (see "Employment Arrangements"
above.) With respect to the year ended
December 31, 1998, Messrs. Shaheen and Speer
each received a discretionary cash bonus of
$35,000 and 6,250 shares of the Company's
common stock.
LONG-TERM INCENTIVES. The primary form
of incentive compensation offered by the
Company to executives consists of long-term
incentives in the form of stock options.
This form of compensation is intended to help
retain executives and motivate them to
improve the Company's long-term performance
and hence long-term stock market performance.
Stock options are granted at the prevailing
market value and will only have added value
if the Company's stock price increases.
The Committee views the grant of stock
options as both a reward for past performance
and an incentive for future performance.
Stock options granted by the Company 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. Where performance is not
readily measurable, the vesting of
performance based options may be dependent
upon the satisfaction of subjective
performance criteria. With respect to the
year ended December 31, 1998, Messrs. Shaheen
and Speer each received a stock grant in
February 1999, vesting in six months, to
purchase 75,000 shares of the Company's
Common Stock at $8.00 per share. In
addition, in consideration of the additional
duties being performed by Mr. Speer as Chief
Financial Officer, Mr. Speer received a stock
option grant of 50,000 shares in February
1998 to purchase the Company's Common Stock
at $8.25 per share, which vests three years
from the date of grant.
Options granted by the Company during
the last three fiscal years, whether vesting
immediately or contingently, are exercisable
for a period of five to seven years from
grant. The Committee anticipates that
options may again be granted in the future in
order to provide executives with additional
long-term incentives. Such options may be
granted pursuant to the Company's 1996 Stock
Option Plan.
DEDUCTIBILITY OF CERTAIN EXECUTIVE
COMPENSATION EXPENSE UNDER FEDERAL TAX LAWS
The 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 the
Company's deduction for compensation paid to
each executive officer of the Company which
does not qualify as "performance based."
While the Company expects that this
provision will not limit its tax deductions
for executive compensation in the near term,
the Company's 1996 Stock Option Plan (the
"Plan") enables the Company to comply, to the
extent deemed advisable, with the
requirements of Section 162(m) for
performance based compensation to insure that
the Company will be able to avail itself of
all deductions otherwise available with
respect to awards made under the Plan.
CONCLUSION
Through the programs described above, a
very significant portion of the Company's
executive compensation is linked directly to
corporate performance. The Committee intends
to continue the policy of linking executive
compensation to corporate performance in
order to continue to align the interest of
executives with those of Company
stockholders.
THE COMPENSATION COMMITTEE
Murray H. Hutchison, Chairman
Dwight W. Makins
Mitt Parker
STOCK PRICE PERFORMANCE
The stock price performance graph below compares the
cumulative total return of the Company's Common Stock against the
cumulative total return of the Nasdaq U.S. index and the Russell
2000(R) index for the past five fiscal years. The graph indicates
a measurement point of March 31, 1994, and assumes a $100
investment on such date in the Company's Common Stock, the Nasdaq
U.S. and the Russell 2000(R) indices. With respect to the payment
of dividends, the Company has not paid any dividends on its Common
Stock, but the Nasdaq U. S. and the Russell 2000(R) 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 proxy
statement into any filing under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates this graph by
reference, and shall not otherwise be deemed filed under such
acts.
STOCK PRICE PERFORMANCE
[Performance Graph Appears Here]
Company and
Indices 3/31/94 3/31/95 3/29/96 12/31/96 12/31/97 12/31/98
- ---------------- ------- ------- ------- -------- ------- --------
CLCI Stock Price 100.000 98.778 138.889 115.289 190.289 169.444
Nasdaq U.S. 100.000 111.254 151.047 177.474 217.030 306.072
Russell 2000(R) 100.000 103.868 131.749 144.435 174.070 168.071
In prior years, the Company compared itself to the
Nasdaq Non-Financial index. The Company believes comparison to
the Russell 2000(R) index (in which the Company is a member)
currently provides an appropriate additional comparison to companies
with similar market capitalizations. Total return for a $100
investment made on March 31, 1994 as of December 31, 1998, was
$294 under the Nasdaq Non-Financial index.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions required to be reported pursuant
to this section.
PROPOSAL 2
APPROVAL OF AN INCREASE IN THE NUMBER OF
SHARES SUBJECT TO THE 1996 STOCK OPTION PLAN
On November 8, 1996, the shareholders of the Company
approved the Company's 1996 Stock Option Plan (the "Plan") which
permits the Company to grant options to acquire up to 3,000,000
shares of Common Stock. The Board has authorized an increase in
the aggregate number of shares available for grants of options
under the Plan from 3,000,000 to 4,000,000, subject to
shareholder approval.
The Board believes that additional shares of Common Stock
are needed for issuance under the Plan so that sufficient awards
can continue to be made to attract, retain and motivate employees
and other eligible persons of the Company and its subsidiaries.
As of March 22, 1999, not taking into account this proposal to
increase the number of shares available for grants, there were
169,000 remaining shares available for future option grants under
the Plan. The closing price of the Company's Common Stock on the
Nasdaq Stock Market(R) as of that date was $7.84 per share.
The following table sets forth information with respect to
the options granted pursuant to the Plan through March 22, 1999:
1996 STOCK OPTION PLAN
OPTION GRANT SUMMARY Weighted
Average
Options Exercise
Name Granted Price
- --------------- --------- ---------
Dwight W. Makins Chairman of the Board 100,000 $ 4.5000
Keith Brackpool President, Chief Executive
Officer and Director 750,000 $ 6.3750
Anthony L. Coelho Director 25,000 $ 8.0000
Murray H. Hutchison Director 25,000 $ 5.0000
Mitt Parker Director 50,000 $ 4.7500
Timothy J. Shaheen Director of the Company and Chief
Executive Officer of Sun World 475,000 $ 5.0526
Stanley E. Speer Chief Financial Officer
and Secretary 325,000 $ 5.8846
All Current
Executive
Officers as a
Group 1,550,000 $ 5.7700
All Current
Directors who
are not Executive
Officers
as a Group 200,000 $ 5.5625
Each Nominee for
Director 1,425,000 $ 5.6130
All Employees as
a Group
(not including
Executive Officers
and Directors) 1,081,000 $ 5.0812
As the Company's executive officers and directors are eligible
to participate in the Plan, they may have an interest in the
proposed amendment to increase the number of shares authorized for
issuance thereunder.
Below is a summary of the principal provisions of the Plan,
assuming approval of the above amendment. The summary is not
necessarily complete, and reference is made to the full text of
the Plan, as amended, attached as an Appendix to this Proxy Statement.
Aside from the proposed amendment, the Plan, as amended, will contain
no differences from the Plan as currently in existence.
DESCRIPTION OF THE PLAN
The following summary of the Plan is qualified in its
entirety by reference to the complete text of the Plan, as amended,
which is attached hereto as Appendix A. Capitalized terms used, but
not defined herein, shall have the same meaning as set forth in the
Plan.
GENERAL. The purpose of the Plan is to provide incentives
to attract, retain and motivate eligible persons whose present
and potential contributions are important to the success of the
Company and its subsidiaries and affiliates, by offering them an
opportunity to participate in the Company's future performance
through awards of options. Under the Plan, stock options ("Plan
Options") may be granted to certain directors, officers,
employees, consultants, independent contractors and advisors of
the Company or its subsidiaries or affiliates. By encouraging
stock ownership, the Company seeks to attract, retain and
motivate such persons and to encourage such employees and persons
to devote their best efforts to the business and financial
success of the Company. The Company also believes that stock
incentive programs, such as the Plan, are commonly employed by
companies as an important element of a total compensation
program. It is intended that the Plan will comply with the
requirements of Section 16(b) of the Securities Exchange Act of
1934, as amended (the "1934 Act") and Rule 16b-3 promulgated
thereunder. The Company believes that compliance with these
rules is beneficial to recipients of options under the Plan
because of the favorable treatment of such options under the
"short-swing" profit rules of Section 16 of the 1934 Act.
Subject to adjustment in certain circumstances as discussed
below, the Plan will authorize up to 4,000,000 shares of Common
Stock for issuance pursuant to Plan Options granted under the
terms of the Plan. If and to the extent Plan Options expire or
are terminated for any reason without being exercised, the shares
of Common Stock subject to such Plan Options again will be
available for purposes of the Plan.
ADMINISTRATION OF THE PLAN. The Plan will be administered
by a committee of the Board (the "Committee") or the Board acting
as the Committee. The Committee will have the sole discretion,
subject to certain limitations, to interpret the Plan; to select
Plan participants; to determine the type, size, terms and
conditions of awards under the Plan; to authorize the grant of
such awards; and to adopt, amend and rescind rules relating to
the Plan. While the Committee will have full power to implement
and carry out the Plan, grants of Plan Options to directors must
be carried out in accordance with the terms of the Plan, as
discussed below. All determinations of the Committee will be
conclusive. All expenses of administering the Plan will be borne
by the Company.
GRANTS. Grants under the Plan may consist of: (i) options
intended to qualify as incentive stock options ("ISOs") within
the meaning of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) so-called "non-qualified stock options" that are
not intended to so qualify ("NQSOs"), or (iii) a combination
thereof.
UNITED STATES FEDERAL INCOME TAX INFORMATION. The following
is a brief summary of the U.S. federal income tax consequences of
transactions under the Plan based on federal income tax laws in
effect on the date of this Proxy Statement. This summary is not
intended to be exhaustive and does not address all matters that
may be relevant to a particular participant based on his or her
specific circumstances. The summary addresses only current U.S.
federal income tax law and expressly does not discuss the income
tax laws of any state, municipality, non-U.S. taxing jurisdiction
or gift, estate or other tax laws other than federal income tax
law. The Company advises all participants to consult their own
tax advisor concerning the tax implications of option grants and
exercises and the disposition of stock acquired upon such
exercises, under the Plan.
Options granted under the Plan may be either ISO, which are
intended to qualify for the special tax treatment provided by
Section 422 of the Code, or NQSO, which will not qualify. If an
option granted under the Plan is an ISO, the participant will
recognize no income upon grant of the ISO and will incur no tax
liability due to the exercise, except to the extent that such
exercise causes the participant to incur alternative minimum tax
(See discussion below.) The Company will not be allowed a
deduction for federal income tax purposes as a result of the
exercise of an ISO regardless of the applicability of the
alternative minimum tax. Upon the sale or exchange of the shares
more than two years after grant of the option and one year after
exercise of the option by the participant, any gain will be
treated as a long-term capital gain. If both of these holding
periods are not satisfied, the participant will recognize
ordinary income equal to the difference between the exercise
price and the lower of the fair market value of the Common Stock
on the date of the option exercise or the sale price of the
Common Stock. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the
participant. Any gain or loss recognized on a disposition of the
shares prior to completion of both of the above holding periods
in excess of the amount treated as ordinary income will be
characterized as long-term capital gain if the sale occurs more
than one year after exercise of the option or as short-term
capital gain if the sale is made earlier. For individual
taxpayers, the current U.S. federal income tax rate on long-term
capital gains is 20% whereas the maximum rate on other income is
39.6%. Capital losses for individual taxpayers are allowed in
full against capital gains plus $3,000 of other income.
All other options which do not qualify as an ISO are
referred to as a NQSO. A participant will not recognize any
taxable income at the time he or she is granted a NQSO. However,
upon its exercise, the participant will recognize ordinary income
for tax purposes measured by the excess of the fair market value
of the shares over the exercise price. In certain circumstances,
where the shares are subject to a substantial risk of forfeiture
when acquired, the date of taxation may be deferred unless the
participant files an election with the Internal Revenue Service
under Section 83(b) of the Code. The income recognized by a
participant who is also an employee of the Company will be
subject to income and employment tax withholding by the Company
by payment in cash by the participant or out of the participant's
current earnings. Upon the sale of such shares by the
participant, any difference between the sale price and the fair
market value of the shares as of the date of exercise of the
option will be treated as capital gain or loss, and will qualify
for long-term capital gain or loss treatment if the shares have
been held for more than one year from date of exercise.
ALTERNATIVE MINIMUM TAX. The exercise of an ISO may subject
the participant to the alternative minimum tax under Section 55
of the Code. The alternative minimum tax is calculated by
applying a tax rate of 26% to alternative minimum taxable income
of joint filers up to $175,000 ($87,500 for married taxpayers
filing separately) and 28% to alternative minimum taxable income
above that amount. Alternative minimum taxable income is equal
to (i) taxable income adjusted for certain items, plus (ii) items
of tax preference less (iii) an exemption amount of $45,000 for
joint returns, $33,750 for unmarried individual returns and
$22,500 in the case of married taxpayers filing separately (which
exemption amounts are phased out for upper income taxpayers).
Alternative minimum tax will be due if the tax determined under
the foregoing formula exceeds the regular tax of the taxpayer for
the year.
In computing alternative minimum taxable income, shares
purchased upon exercise of an ISO are treated as if they had been
acquired by the participant pursuant to exercise of a NQSO. As a
result, the participant recognizes alternative minimum taxable
income equal to the excess of the fair market value of the Common
Stock on the date of exercise over the option exercise price.
Because the alternative minimum tax calculation may be complex,
participants should consult their own tax advisors prior to
exercising an ISO.
If a participant pays alternative minimum tax, the amount of
such tax may be carried forward as a credit against any
subsequent year's regular tax in excess of the alternative
minimum tax for such year.
The foregoing does not purport to be a complete summary of
the effect of federal income taxation upon holders of options or
upon the Company and does not address the federal income tax
consequences to taxpayers with special tax status. It also does
not reflect provisions of the income tax laws of any
municipality, state or foreign country in which a participant may
reside, and does not discuss estate, gift or other tax
consequences other than income tax consequences.
ELIGIBILITY. Employees, officers, consultants, and certain
directors and advisors of the Company and its subsidiaries and
affiliates whom the Board deems to have contributed significantly
to the Company or who have the potential to contribute to the
future success of the Company will be eligible to receive any of
the different types of awards under the Plan. Directors who are
not employees of the Company will be entitled to receive only
NQSOs under the Plan.
OPTIONS TO NON-DIRECTOR PARTICIPANTS. The Plan permits the
Committee to grant Plan Options either as ISOs or as NQSOs, and
allows the Committee to establish, as to any participant, the
number of Plan Options, exercise price, exercise term (subject to
a maximum of ten years), and other terms and conditions. Subject
to the foregoing, the option exercise price for each share
covered by a Plan Option may not be less than 100% of the fair
market value of a share of Common Stock on the date of grant of
such Plan Option; and in the case of an ISO granted to a ten
percent stockholder, the exercise price will be no less than 110%
of the fair market value of the Common Stock on the date of
grant. The recipient may pay the exercise price by (i) cash,
(ii) cancellation of indebtedness of the Company to the
participant, (iii) by surrender of shares of the Company's Common
Stock that have been owned by the participant for more than six
months and have been paid for within the meaning of Rule 144
promulgated under the Securities Act of 1933, as amended, or were
obtained by the participant in the public market and are clear of
all liens, claims, encumbrances and security interests; (iv) by
waiver of compensation due to the participant for services
rendered; (v) provided a public market exists for the Company's
stock, through a same day sale of the shares acquired upon
exercise of a Plan Option, subject to applicable securities laws;
and (vi) by any combination of the foregoing.
AMENDMENT AND TERMINATION OF THE 1996 PLAN. The Board may
amend or terminate the Plan at any time; provided, however, that
the Board may not, without the approval of stockholders, amend
the Plan in any manner that requires such stockholder approval
pursuant to the Code or pursuant to the 1934 Act or Rule 16b-3
thereunder, and the terms and conditions of any awards to
directors shall not be amended more than once every six months,
other than to comply with changes in the Code or ERISA.
According to its terms, the Plan will terminate 10 years from the
effective date.
ADJUSTMENT PROVISIONS. In the event of a stock split, stock
dividend, combination or exchange of shares, merger,
consolidation, reorganization, recapitalization or similar
transaction, an appropriate adjustment shall be made to the
number of shares of Common Stock (and the exercise price per
share) subject to the unexercised portion of any outstanding Plan
Option; provided, however, that in the event of a merger,
consolidation, liquidation or sale of the Company in a
transaction in which the Company is not to be the surviving
entity, the Board has the right to accelerate vesting of all
options so that they become exercisable within the 30-day period
preceding the merger, consolidation, liquidation or sale.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
PROPOSAL 2, WHICH WILL INCREASE THE NUMBER OF SHARES SUBJECT TO
THE 1996 STOCK OPTION PLAN FROM 3,000,000 TO 4,000,000.
PROPOSAL 3
APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors is recommending the ratification of
its selection of PricewaterhouseCoopers LLP as the Company's
independent certified public accountants to audit the financial
statements of the Company for the 1999 fiscal year. Although
ratification of the choice of auditors is not required, the Board
believes such ratification to be in the best interests of the
Company. In the event such approval of stockholders is not
received, the Board will select another firm to audit the
Company's financial statements. PricewaterhouseCoopers LLP has
advised the Company that neither it nor any of its partners or
associates has any direct or indirect financial interest in or
any connection with the Company 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 3.
OTHER MATTERS
The Board of Directors does not know of any other matters
which 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.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to present resolutions to be
included in the proxy statement for the Company's next Annual
Meeting (for the fiscal year ending December 31, 1999) must file
such resolutions with the Company not later than November 30,
1999.
ADDITIONAL INFORMATION
This Proxy Statement is accompanied by the Company's Annual
Report on Form 10-K for the year ended December 31, 1998 (the
"Form 10-K"). Exhibits to the Form 10-K will be made available
to stockholders for a reasonable charge upon their written
request to the Company, Attention: Mr. Stanley E. Speer, 100
Wilshire Boulevard, Suite 1600, Santa Monica, California 90401.
By Order of the Board of Directors
Santa Monica, California
April 5, 1999
APPENDIX A
CADIZ INC.
1996 STOCK OPTION PLAN
TABLE OF CONTENTS
1. PURPOSE..................................................A-1
2. SHARES SUBJECT TO THE PLAN...............................A-1
2.1 Number of Shares Available......................... A-1
2.2 Adjustment of Shares............................... A-1
3. ELIGIBILITY............................................. A-1
3.1 Eligibility of Employees, Consultants and
Independent Contractors............................ A-1
4. ADMINISTRATION.......................................... A-1
4.1 Committee Authority................................ A-1
4.2 Committee Discretion............................... A-2
4.3 Composition of Committee........................... A-2
5. GRANT AND EXERCISE OF OPTIONS........................... A-2
5.1 Grant of Options................................... A-2
5.1.1 Form of Option Grant......................... A-2
5.1.2 Date of Grant................................ A-2
5.1.3 Exercise Period...............................A-3
5.1.4 Exercise Price............................... A-3
5.1.5 Method of Exercise........................... A-3
5.1.6 Termination.................................. A-3
5.1.7 Limitations on Exercise...................... A-3
5.1.8 Limitations on ISOs.......................... A-3
5.1.9 Modification, Extension or Renewal........... A-4
5.1.10 No Disqualification.........................A-4
5.2 Accelerated Vesting................................ A-4
6. PAYMENT FOR SHARE PURCHASES............................. A-4
6.1 Payment............................................ A-4
7. WITHHOLDING TAXES....................................... A-5
7.1 Withholding Generally.............................. A-5
8. PRIVILEGES OF STOCK OWNERSHIP........................... A-5
8.1 Voting and Dividends............................... A-5
8.2 Financial Statements............................... A-5
9. TRANSFERABILITY......................................... A-5
10. CERTIFICATES............................................ A-5
11. EXCHANGE AND BUYOUT OF OPTIONS.......................... A-5
12. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.......... A-6
13. NO OBLIGATION TO EMPLOY................................. A-6
14. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.............. A-6
15. ADOPTION AND STOCKHOLDER APPROVAL....................... A-7
16. TERM OF PLAN............................................ A-7
17. AMENDMENT OR TERMINATION OF PLAN........................ A-7
18. NONEXCLUSIVITY OF THE PLAN.............................. A-7
19. GOVERNING LAW........................................... A-8
20. DEFINITIONS............................................. A-8
CADIZ INC.
1996 STOCK OPTION PLAN
1. PURPOSE
---------
The purpose of the Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company and its
Subsidiaries and Affiliates, by offering them an opportunity to
participate in the Company's future performance through awards of
Options.
Capitalized terms not defined in the text are defined in
Section 20.
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 4,000,000 Shares,
provided however, that the maximum number of Shares that may be
issued under the Plan to each Participant shall be limited to
1,000,000 Shares. Subject to Sections 2.2 and 14, Shares
reserved for issuance pursuant to Options granted under this
Plan shall again be available for grant and issuance, in
connection with future Options under the 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.
2.2 ADJUSTMENT OF SHARES. 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, and (b) the Exercise Prices of and
number of Shares subject to outstanding Options, 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
-----------
3.1 ELIGIBILITY OF EMPLOYEES, CONSULTANTS AND INDEPENDENT
CONTRACTORS. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also
employees) of the Company or of a Subsidiary of the Company.
NQSOs may be granted to employees, officers, consultants,
independent contractors and advisers of the Company or any
Subsidiary or Affiliate of the Company; provided, however, that
such consultants, contractors and advisers render bona fide
services not in connection with the offer and sale of securities
in a capital-raising transaction. A person may be granted both
ISOs and NQSOs under the Plan.
4. ADMINISTRATION.
---------------
4.1 COMMITTEE AUTHORITY. The Plan shall be
administered by the Committee or the Board acting as 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 Option
Agreement 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 Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares or other
consideration subject to Options
(f) determine whether Options will be granted singly,
in combination or in tandem with, in replacement of, or as
alternatives to, other Options 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 Option conditions;
(h) determine the vesting, exercisability and
payment of Options and to accelerate the vesting and/or
exercisability of Options, as provided herein;
(i) correct any defect, supply any omission, or
reconcile any inconsistency in the Plan, any Option or any
Option Agreement;
(j) determine whether an Option 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
Option shall be made in its sole discretion at the time of grant
of the Option or, unless in contravention of any express term of
the Plan or Option, at any later time, and such determination
shall be final and binding on the Company and all persons having
an interest in any Option under the Plan.
4.3 COMPOSITION OF COMMITTEE. The Committee shall be
comprised of either (i) at least two members of the Board, all of
whom are both Outside Directors and Nonemployee Directors; or
(ii) the Board acting as the Committee. It is the intent of the
Company that the Plan and Options hereunder satisfy and be
interpreted in a manner, that, in the case of Participants who
are or may be Insiders, satisfies the applicable requirements of
Rule 16b-3 (or its successor) of the Exchange Act. If any
provision of the Plan or of any Option would otherwise conflict
with the intent expressed in this Section 4.3, that provision, to
the extent possible, shall be interpreted and deemed amended so
as to avoid such conflict.
5. GRANT AND EXERCISE OF OPTIONS
-----------------------------
5.1 GRANT OF OPTIONS. Except as otherwise limited herein,
the Committee may grant Options to eligible persons pursuant to
this Section 5.1 and shall determine whether such Options shall
be Incentive Stock Options within the meaning of the Code
("ISOs") or Nonqualified Stock Options ("NQSOs"), 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:
5.1.1 FORM OF OPTION GRANT. Each Option granted
shall be evidenced by an Option Agreement, which shall expressly
identify the Option as an ISO or NQSO ("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 NQSO 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 Subsidiaries for a period of time (specified in the
agreement) following the date the NQSO is granted.
5.1.2 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.
5.1.3 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:
(a) no Option shall be exercisable after the
expiration of ten (10) years from the date the Option is
granted;
(b) no ISO granted to a person who directly or by
attribution owns more than Ten Percent (10%) of the total
combined voting power of all classes of stock of the Company
or any Subsidiary of the Company ("Ten Percent Stockholder")
shall be exercisable after the expiration of five (5) years
from the date the Option is granted.
5.1.4 EXERCISE PRICE. The Exercise Price shall be
determined by the Committee when an Option is granted and may be
not less than (i) 100% of the Fair Market Value of the Shares on
the date of grant, or (ii) the par value of the Shares; provided,
however, that the Exercise Price of any ISO granted to a Ten
Percent Stockholder shall not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the
Shares purchased may be made in accordance with Section 6 of the
Plan.
5.1.5 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.
5.1.6 TERMINATION. Notwithstanding the exercise
periods set forth in the Stock Option Agreement, exercise of an
Option shall always be subject to the following:
(a) 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.
(b) If the Participant is terminated because of death
or Disability, then the Participant's Options which are ISO's may
be exercised, only to the extent that such Options would have
been exercisable by Participant on the Termination Date, 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 Options.
5.1.7 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.
5.1.8 LIMITATIONS ON ISOS. The aggregate Fair
Market Value (determined as of the date of grant) of Shares with
respect to which ISOs are exercisable for the first time by a
Participant during any calendar year (under the Plan or under any
other incentive stock option plan of the Company or any Affiliate
or Subsidiary of the Company) shall not exceed $100,000. If the
Fair Market Value of Shares on the date of grant with respect to
which ISOs are exercisable for the first time by a Participant
during any calendar year exceeds $100,000, the Options for the
first $100,000 worth of Shares to become exercisable in such
calendar year shall be ISOs and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year
shall be NQSOs. In the event that the Code or the regulations
promulgated thereunder are amended after the Effective Date of
the Plan to provide for a different limit on the Fair Market
Value of Shares permitted to be subject to ISOs, such different
limit shall be automatically incorporated herein and shall apply
to any Options granted after the effective date of such
amendment.
5.1.9 MODIFICATION, EXTENSION OR RENEWAL. The
Committee may modify, extend or renew outstanding Options,
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, and provided further, that
the Committee may not reduce the Exercise Price of outstanding
Options. Any outstanding ISO that is modified, extended, renewed
or otherwise altered shall be treated in accordance with Section
424(h) of the Code.
5.1.10 NO DISQUALIFICATION. Notwithstanding any
other provision in the Plan, no term of the Plan relating to ISOs
shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so
as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify
any ISO under Section 422 of the Code.
5.2 Accelerated Vesting.
-------------------
5.2.1 Notwithstanding Sections 5.1.3(b), the
Committee shall have the authority to accelerate the
exercisability of Options granted pursuant to the terms of this
Plan, provided however, that the acceleration of exercisability
shall be conditioned upon inclusion in the Option agreements with
Participants of such provisions and restrictions as are necessary
to permit stock issued upon exercise of such Options to continue
to qualify for the exception from Section 16(b) of the Securities
Act as is provided under Rule 16(b)(3)(a),(b) and (c).
5.2.2 Notwithstanding anything herein to the
contrary, if a Change in Control of the Company occurs or if the
Committee determines in its sole discretion that an Acceleration
Event has occurred, then all Options shall become fully
exercisable as of the date such Change in Control occurred or the
Committee determines that an Acceleration Event has occurred,
provided however, that the acceleration of exercisability shall
be subject to the imposition of such restrictions on
transferability of shares of Common Stock subject to such
Options, as are necessary to permit stock issued upon exercise of
such Options to continue to qualify for the exception from
Section 16(b) of the Securities Act as is provided under Rule
16(b)(3)(a),(b) and (c).
6. PAYMENT FOR SHARE PURCHASES
---------------------------
6.1 PAYMENT. Payment for Shares purchased pursuant to the
Plan may be made in cash (by check or equivalent) or, where
expressly approved by the Committee and permitted by law by:
(a) by cancellation of indebtedness of the
Company to the Participant;
(b) 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;
(c) by waiver of compensation due or accrued to
Participant for services rendered;
(d) 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:
(i) 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
(ii) 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
(e) by any combination of the foregoing.
Notwithstanding the foregoing, the Exercise Price of an
Option held by a director who is not an employee shall be paid
either (i) in cash; or (ii) pursuant to subsection (a) of this
Section 6.1, or (iii) by any combination of the foregoing (i) and
(ii).
7. WITHHOLDING TAXES
-----------------
7.1 WITHHOLDING GENERALLY. Whenever Shares are to be
issued in satisfaction of Options granted under the Plan, the
Company may require the Participant to remit to the Company an
amount sufficient to satisfy federal, state and local withholding
tax requirements prior to the delivery of any certificate or
certificates for such Shares.
8. PRIVILEGES OF STOCK OWNERSHIP
-----------------------------
8.1 VOTING AND DIVIDENDS. 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.
8.2 FINANCIAL STATEMENTS. The Company shall provide
financial statements to each Participant annually during the
period such Participant has Options outstanding, provided,
however, that the Company shall not be required to provide such
financial statements to Participants whose services in connection
with the Company assure them access to equivalent information.
9. TRANSFERABILITY
----------------
Options granted 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 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, may be
made only by the Participant.
10. 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.
11. EXCHANGE AND BUYOUT OF OPTIONS
------------------------------
The Committee may, at any time or from time to time,
authorize the Company, with the consent of the respective
Participants, to issue new Options in exchange for the surrender
and cancellation of any or all outstanding Options. The Committee
may at any time buy from a Participant an Option previously
granted with payment in cash, Shares or other consideration,
based on such terms and conditions as the Committee and the
Participant shall agree.
12. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE
----------------------------------------------
An Option shall not be effective unless such Option 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 of the Option 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 Option granted 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 Options 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.
If the Company shall effect a subdivision or consolidation
of shares or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares
of its Common Stock outstanding, without receiving compensation
therefor in money, services or property, then (i) the number,
class, and per share price of Shares subject to outstanding
Options hereunder shall be appropriately adjusted in such a
manner as to entitle a Participant to receive upon exercise
thereof (and, if relevant, for the same aggregate cash
consideration), the same total number and class of shares as such
Participant would have received had such Participant exercised
such Option in full immediately prior to such event; and (ii) the
number and class of shares with respect to which Options may be
granted under the Plan shall be adjusted by substituting for the
total number of shares of Common Stock then reserved that number
and class of shares of stock that would have been received by the
owner of an equal number of outstanding shares of Common Stock as
the result of the event requiring the adjustment.
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 Option shall, at no
additional cost, be entitled to receive upon exercise of such
Option (subject to any required action by stockholders of the
Company) in, lieu of the number of Shares as to which such Option
shall then be so exercisable, 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 as
to which such Option shall be so exercised.
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 unexercised Options 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 Option shall be
entitled to receive upon exercise of such Option 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 (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 Options.
15. ADOPTION AND STOCKHOLDER APPROVAL
---------------------------------
The Plan shall become effective on the date that it is
adopted by the Board (the "Effective Date"). The Company shall
submit the Plan for approval by the stockholders of the Company
at the next annual meeting of stockholders of the Company to
obtain the advantages under NASD, IRS, Securities and Exchange
Commission and other regulations that approval of stockholders
may bestow, provided however, that Options granted under the Plan
shall be conditioned upon stockholder approval of the Plan within
one year of adoption by the Board.
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 amendment of any form of
Option Agreement or instrument to be executed pursuant to the
Plan; provided, however, that:
(a) the Board shall not, without the approval of the
stockholders of the Company, amend the Plan in any manner that
requires such stockholder approval pursuant to the Code or the
regulations promulgated thereunder as such provisions apply to
ISO plans or pursuant to the Exchange Act or Rule 16b-3 (or its
successor), as amended, thereunder; and
(b) the terms and conditions of any awards of Options to
Directors and the category of persons eligible to be awarded such
shares under the Plan shall not be amended more than once every
six months, other than to comply with changes in the Code or
ERISA, or the rules and regulations thereunder.
18. NONEXCLUSIVITY OF THE PLAN
---------------------------
Neither the adoption of the Plan by the Board, the
submission of the Plan to the stockholders of the Company for
approval, 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
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As used in the Plan, the following terms shall have the
following meanings:
"ACCELERATION EVENT" means but is not limited to, any Change
of Control of the Company or other event determined in the
discretion of the Committee.
"AFFILIATE" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, another
corporation, where "control" (including the terms "controlled by"
and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management
and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
"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 25% 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, 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;
(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; or
(e) if the Board of Directors or any designated
committee determines, in its sole discretion, that any person
(such as that term is used in Sections 13(d) and 14(d) of the
Exchange Act) directly or indirectly exercises a controlling
influence over the management or policies of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"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, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market System, its last reported sale price on the
Nasdaq National Market or, if no such reported sale takes
place on such date, the average of the closing bid and asked
prices;
(b) if such Common Stock is publicly traded and is
then listed on a national securities exchange, the last
reported sale price or, if no such reported sale takes place
on such date, the average of the closing bid and asked
prices on the principal national securities exchange on
which the Common Stock is listed or admitted to trading;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or admitted
to trading on a national securities exchange, the average of
the closing bid and asked prices on such date, as reported
by the Wall Street Journal, for the over-the-counter market;
or
(d) if none of the foregoing is applicable, by the
Board of Directors of the Company in good faith.
"INSIDER" means an officer or director of the Company or
other person whose transactions in the Company's Common Stock are
subject to Section 16 of the Exchange Act.
"NONEMPLOYEE DIRECTOR" means an director of the Company
defined in Rule 16b-3(b)(i) of the Exchange Act.
"OPTION" means an option to purchase Shares of Common Stock
of the Company pursuant to Section 5.
"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.
"OUTSIDE DIRECTOR" means any outside director as defined in
Section 162(m) of the Code and the regulations issued thereunder.
"PARTICIPANT" means a person who receives an Option under
the Plan.
"PLAN" means this Cadiz Inc., 1996 Stock Option 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 the Option, 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").
CADIZ INC.
100 Wilshire Boulevard, Suite 1600, Santa Monica, California 90401
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, as owner of shares of Common Stock of Cadiz
Inc., a Delaware corporation (the "Company"), hereby acknowledges
receipt of the Proxy Statement and the Notice of the Annual Meeting
of Stockholders' to be held on May 10, 1999, at 9:00 a.m. local
time, at the Sheraton Miramar Hotel located at 101 Wilshire Boulevard,
Santa Monica, California, and hereby further revokes all previous
proxies and appoints Keith Brackpool and/or Stanley E. Speer as
proxy of the undersigned at said meeting and any adjournments
thereof with the same effect as if the undersigned were present and
voting the shares.
(1) For the election of the following persons as directors of the
Company to serve until the next Annual Meeting of Stockholders or
until their respective successors shall have been elected and
qualified.
Dwight W. Makins, Keith Brackpool, Anthony L. Coelho, Murray H.
Hutchison, Mitt Parker, Timothy J. Shaheen
[ ] AUTHORITY GRANTED to vote [ ] AUTHORITY WITHHELD to vote
for all nominees listed for all nominees listed above.
except as indicated to
the contrary below.
(Instruction: To vote against any nominee, write that nominee's
name in the space provided below.)
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(2) To consider and vote upon a proposal to increase the number of
shares subject to the Company's 1996 Stock Option Plan as
described in Proposal 2.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent certified public accountants for fiscal
year 1999; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on the reverse side)
(Continued from other side)
(4) The transaction of such other business as may properly come
before the meeting and any adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE
INDICATED ABOVE. IF NO INDICATION HAS BEEN MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ABOVE NOMINEES AND
IN FAVOR OF SUCH PROPOSALS AND AS SAID PROXY DEEMS ADVISABLE ON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated:____________________, 1999
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(Sign exactly as your name appears on your share certificate.)
When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If more than one trustee, all
should sign. All joint owners should sign. If a corporation, sign
in full corporation name by President or other authorized officer.
If a partnership, sign in partnership name by authorized person.
Persons signing in a fiduciary capacity should indicate their full
title in such capacity.