The Board of Directors has nominated the eleven persons listed below for election at the annual meeting to serve as directors for a term expiring at the 2019 Annual Meeting of Stockholders or until their respective successors are elected and qualified.
John A. Bohn
Jeffrey J. Brown
Winston H. Hickox
Murray H. Hutchison
Timothy J. Shaheen
Scott S. Slater
Each of the nominees currently serves as a director and has agreed to serve as such for another term if elected. The Board has reviewed the background of the nominees, as set out on the following page, and has determined to nominate each of the current Directors for re-election. Proxies may not be voted for a greater number of persons than eleven, representing the number of nominees named in this proxy statement.
The Board believes that each nominee has valuable individual skills and experience that, taken together, provides it with the variety and depth of knowledge, judgment and vision necessary to provide effective oversight of a resource development enterprise like ours. As indicated in the following biographies, the nominees have extensive and diverse experience in a variety of fields, including water policy (Mr. Bohn, Mr. Brackpool, Mr. Slater and Mr. Shaheen), real estate development (Mr. Hutchison, Mr. Pacini, and Mr. Hickox), environmental stewardship (Mr. Hutchison and Mr. Hickox), agricultural development (Mr. Brackpool and Mr. Shaheen), capital raising (Mr. Brown, Mr. Brackpool, Mr. Pacini, Mr. Grant, Mr. Hickox, Mr. Shaheen and Mr. Nevins), public accounting (Mr. Pacini, Mr. Shaheen and Mr. Courter), and academia (Mr. Courter and Mr. Slater).
The Board also believes that, as indicated in the biographies, the nominees have demonstrated significant leadership skills as a chief executive officer (Mr. Bohn, Mr. Brown, Mr. Brackpool, Mr. Hutchison, Mr. Shaheen, Mr. Pacini, Mr. Grant, Mr. Hickox, Mr. Courter and Mr. Nevins) or in government through Cabinet service (Mr. Bohn and Mr. Hickox). All of the nominees have significant experience in the oversight of public companies due to their service as the Company's directors and directors of other companies. The Board believes that these skills and experiences qualify each nominee to serve as a director of the Company.
The Board believes the Company would be best served by increased diversity in Board membership. To this end, the Company has formed a sub-committee of the Company's Corporate Governance and Nominating Committee for the purpose of identifying and nominating qualified candidates whose membership on the Board will expand the diversity of the Board.
Proxies will be voted for the election of the nominees named above unless instructions are given to the contrary. Proxies cannot be voted for a greater number of persons than the number of nominees named. Should any nominee become unable to serve as a director, the persons named in the enclosed form of proxy will, unless otherwise directed, vote for the election of such other person as the present Board of Directors may designate to fill that position.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE AS A DIRECTOR.
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information, the present occupation and the business experience for the past five years or more of each director who will stand for re-election at our 2018 Annual Meeting of Stockholders. We have no executive officer who is not also a director.
Nominees for Director:
Name
|
Age
|
Position with Cadiz
|
|
|
|
Keith Brackpool
|
61
|
Chairman of the Board
|
|
|
|
John A. Bohn
|
80
|
Director
|
|
|
|
Jeffrey J. Brown
|
61
|
Director
|
|
|
|
Stephen E. Courter
|
63
|
Director
|
|
|
|
Geoffrey Grant
|
58
|
Director
|
|
|
|
Winston H. Hickox
|
75
|
Director
|
|
|
|
Murray H. Hutchison
|
79
|
Director
|
|
|
|
Raymond J. Pacini
|
63
|
Director
|
|
|
|
Richard Nevins
|
71
|
Director
|
|
|
|
Timothy J. Shaheen
|
58
|
Director, Chief Financial Officer and Secretary
|
|
|
|
Scott S. Slater
|
60
|
Director, President and Chief Executive Officer
|
Keith Brackpool is a co-founder of the Company and Chairman of the Company's Board of Directors, a position he has held since 2001. Mr. Brackpool was appointed to the Board of Directors in 1986. Mr. Brackpool served as President of the Company from December 1991 until April 2011. Mr. Brackpool also served as Chief Executive Officer of the Company from December 1991 until January 2013. Mr. Brackpool is also currently a principal of 1334 Partners L.P., a partnership that owns commercial real estate in California. Mr. Brackpool has extensive experience in California public policy and, most recently, served on the California Horse Racing Board (CHRB) from September 2009 – January 2013, including a term as Chairman from 2010 – 2013. Previously, Mr. Brackpool was co-chair of California Governor Gray Davis' Agriculture and Water Transition Task Force and the Commission on Building for the 21st Century, a diverse panel that developed long-term policy proposals to meet the state's future water, housing, technology and transportation needs. Earlier in his career, Mr. Brackpool served as director and chief executive officer of North American Operations for Albert Fisher Group, a multi-billion dollar food company.
John A. Bohn was appointed a director effective May 30, 2018. Mr. Bohn was appointed pursuant to the terms of a Cooperation Agreement dated May 1, 2018 between the Company and Water Asset Management, LLC.
Mr. Bohn
is presently a partner and Chief Strategist at Deepwater Desal, LLC, a California company developing a desalination facility in Monterey, a partner at Water Property Investors, LLC, an advisory board member for Water Asset Management, LLC and a Director of the Center for Capital Markets Competitiveness, a division of the U.S. Chamber of Commerce, chartered to advise on the reform of the capital markets for the 21st century. Mr. Bohn most recently completed a three-year term as Chairman and CEO of Renewable Energy Trust Capital, a renewables investment company which he co-founded in 2013. In 2010, he completed a six-year term as Commissioner of the California Public Utilities Commission, where he was the lead Commissioner over investor-owned water utility regulation and was also instrumental in crafting incentive programs for renewable energy initiatives. Mr. Bohn also previously served as President and Chief Executive Officer of Moody's Investors Service. Earlier in his career, Mr. Bohn joined the President Reagan Administration in 1981 and served in a variety of capacities including as U.S. Ambassador and Executive Director of the Asian Development Bank and later as Chairman and CEO of the Export Import Bank of the United States. Mr. Bohn began his career practicing law in California. He received his undergraduate degree with honors from Stanford University, attended the London School of Economics as a Fulbright scholar, and received his JD from Harvard Law School.
Jeffrey J. Brown was appointed a director effective May 30, 2018.
Mr. Brown was appointed pursuant to the terms of a Cooperation Agreement dated May 1, 2018 between the Company and Water Asset Management, LLC. Mr. Brown is the Chief Executive Officer and founding member of Brown Equity Partners, LLC, a California company that provides equity and debt capital to a variety of business endeavors. Prior to founding Brown Equity Partners in January 2007, Mr. Brown served as a founding partner and primary deal originator for the venture capital and private equity firm Forrest Binkley & Brown from 1993 to 2007. In addition to his board service at Cadiz Inc., Mr. Brown also currently serves on the Nominating and Governance Committee, Compensation Committee and as Audit Committee Chair of Rent-A-Center, Inc. (NASDAQ: RCII) and also on the board of directors and as chair of the audit committee of Medifast, Inc. (NYSE: MED), where he also serves as Lead Director. In his over 30 years in the investment business, Mr. Brown has served on over 40 corporate boards of directors, including nine public company boards. Earlier in his career, Brown held positions at Hughes Aircraft Company, Morgan Stanley & Company, Security Pacific Capital Corporation and Bank of America Corporation. Mr. Brown received his MBA from the Stanford University Graduate School of Business and graduated Summa Cum Laude as a Mathematics Major from Willamette University.
Stephen E. Courter was appointed a director of the Company effective October 9, 2008. Mr. Courter was originally appointed to the Board as a designee of LC Capital Master Fund for a term expiring at the 2009 annual meeting of stockholders. Mr. Courter is currently on the faculty of the McCombs School of Business, University of Texas at Austin where he teaches MBA courses in strategy and new venture creation. He also serves as a director of Mobi Corporation, an information technology firm, and Upland Software, a business process software company. Mr. Courter has over 25 years of experience in management positions in the technology/telecommunications industry, serving most recently as CEO of Broadwing Communications from 2006 to 2007 and CEO of NEON Communications from 2000 to 2006. Mr. Courter began his career as an officer in the U.S. Army and has also held various executive positions, both in the U.S. and Europe, at several major corporations including KPMG, IBM and Sprint.
Geoffrey Grant was appointed a director of the Company effective January 22, 2007. Mr. Grant is presently a private investor. In 2012, Mr. Grant retired from Grant Capital Partners, an asset management firm founded by Mr. Grant in 2008, where he was the Managing Partner and the Chief Investment Officer. Prior to founding Grant Capital Partners, Mr. Grant was a Managing Partner and the Chief Investment Officer of Peloton Partners LLP, a global asset management firm. Mr. Grant co-founded Peloton Partners LLP in 2005. Mr. Grant's career in financial markets spans 35 years beginning at Morgan Stanley in 1982 in foreign exchange options and currency derivatives, then with Goldman Sachs from 1989 to 2004 where he ultimately served as Head of Global Foreign Exchange and Co-head of the Proprietary Trading Group in London.
Winston Hickox was appointed a director of the Company effective October 2, 2006. Mr. Hickox is currently a shareholder at California Strategies, a public policy consulting firm and a member of the Strategic Advisory Group for Palladin Capital, a leading global private investment firm. From 2004 to 2006, Mr. Hickox completed a two-year assignment as Sr. Portfolio Manager with the California Public Employees' Retirement System (CalPERS) where he assisted with the design and implementation of a series of environmentally oriented investment initiatives in the Private Equity, Real Estate, Global Public Equities, and Corporate Governance segments of the fund's investment portfolio. Prior to his assignment at CalPers, from 1999 to 2003, Mr. Hickox served as Secretary of the California Environmental Protection Agency and a member of the Governor Gray Davis' cabinet. Mr. Hickox's environmental policy experience also includes membership on the board of the California League of Conservation Voters, including a four-year term as Board President (1990 - 1994); and two years on the boards of Audubon California and Sustainable Conservation (2004 - 2006). Mr. Hickox formerly served as a member of the board of Thomas Properties Group, Inc., a publicly traded full service real estate investment firm, prior to its acquisition by Parkway Properties, Inc. in December 2013. Additionally, Mr. Hickox formerly served as a member of the board of GRIDiant Corporation, a privately held corporation in the energy technology sector. Earlier in his professional career, Mr. Hickox was a partner and Managing Director with LaSalle Advisors, Ltd., a major force in the world's real estate capital markets, and a Managing Director with Alex Brown Kleinwort Benson Realty Advisors Corp., where he served as head of the firm's Portfolio Management Group.
Murray H. Hutchison was appointed a director of the Company in June 1997. He is also a member of the Board of Managers (an LLC's functional equivalent of a Board of Directors) of the Company's subsidiary, Cadiz Real Estate LLC. In his capacity as a manager of the LLC, he performs essentially the same duties on behalf of the LLC as he would as an outside director for a corporation. Since his retirement in 1996 from International Technology Corporation ("ITC"), a publicly traded diversified environmental management company, Mr. Hutchison has been self-employed with his business activities involving primarily the management of an investment portfolio. From 1976 to 1996, Mr. Hutchison served as Chief Executive Officer and Chairman of International Technology for ITC. Mr. Hutchison formerly served as Chairman of the Board of Texas Eastern Product Pipelines Company (TEPPCO), a publicly traded company operating in refined petroleum products, liquefied petroleum gases and petrochemical transportation and storage, prior to its acquisition by Enterprise Products Partners L.P. in October 2011. Mr. Hutchison formerly served as Lead Director on the board of Jack in the Box, Inc., a publicly traded fast food restaurant chain since May 1998 until February 2012. Mr. Hutchison serves as a director on the board of Cardium Therapeutics, Inc., a publicly traded medical technology company. Additionally, Mr. Hutchison serves as a director of several other non-publicly traded U.S. companies.
Richard Nevins was appointed as a Director of the Company effective July 1, 2016. Mr. Nevins was originally appointed to the Board as a designee of LC Capital Master Fund. Mr. Nevins is an independent financial advisor and has over 30 years of financial experience as a senior investment banker and senior corporate officer. Mr. Nevins holds a Master of Business Administration from the Stanford Graduate School of Business and a Bachelor of Arts in Economics from the University of California, Riverside.
Raymond J. Pacini was appointed a director of the Company effective June 16, 2005. Since April 9, 2018 Mr. Pacini has been the
Chief Financial Officer of BrixInvest, LLC (dba "Rich Uncles"), a sponsor and advisor for various publicly-registered, nontraded REITs including Rich Uncles Real Estate Investment Trust I, RW Holdings NNN REIT, Inc. and
Brix Student Housing REIT, Inc
.
From November 2017 until April 2018, Mr. Pacini was an independent director of Brix Student Housing REIT, Inc.
From
June 2013 until April 6, 2018 Mr. Pacini was the Chief Financial Officer of Northbound Treatment Services, a privately held company which treats drug and alcohol addictions. From May 1998 to March 2011, Mr. Pacini served as President, Chief Executive Officer and a Director of California Coastal Communities, Inc. ("CALC"), a residential land development and homebuilding company operating in Southern California which was formerly publicly traded.
On October 27, 2009, CALC and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the Central District of California.
On March 1, 2011, CALC satisfied the various conditions to its plan of reorganization with the respect to its Chapter 11 bankruptcy cases, emerged from bankruptcy and became a privately held company. From June 1992 until May 1998, Mr. Pacini was the Chief Financial Officer of CALC (formerly known as Koll Real Estate Group, Inc. and Henley Properties, Inc.). Mr. Pacini has seven years of experience as a certified public accountant with the accounting firm of Coopers & Lybrand (now known as PricewaterhouseCoopers LLP). Mr. Pacini has been a National Association of Corporate Directors (NACD) Board Leadership Fellow since 2014. He has demonstrated his commitment to boardroom excellence by completing NACD's comprehensive program of study for corporate directors. In August 2018, Mr. Pacini earned the NACD/CERT Certificate in Cybersecurity Oversight.
Timothy J. Shaheen was appointed Chief Financial Officer and Secretary of the Company in November 2008, and has served as a director of the Company since March 1999. Effective April 12, 2011, Mr. Shaheen also serves as Chairman and Chief Executive Officer of the Board of Managers of Cadiz Real Estate LLC, a wholly-owned subsidiary of the Company. Mr. Shaheen is also a private investor and principal of Shaheen & Associates. From September 1996 to April 2005, Mr. Shaheen served as the President, Chief Executive Officer and a director of Sun World International. From 1999 through 2005, Mr. Shaheen served as a Governor appointee to the Los Angeles Regional Water Quality Control Board and from 2001 through 2003, as Chairman of the Food Security Task Force for the United Fresh Fruit and Vegetable Association. Prior to joining Sun World, from 1989 to 1996, Mr. Shaheen served as a senior executive with Albert Fisher North America, a publicly traded international produce company. Mr. Shaheen also has seven years of experience with the accounting firm Ernst & Young LLP; and is a certified public accountant.
Scott S. Slater is the Company's President and Chief Executive Officer, appointed to the role of President in April 2011 and Chief Executive Officer effective February 1, 2013. In addition, Mr. Slater has been a member of the Company's Board of Directors since February 2012. Mr. Slater is an accomplished negotiator and litigator and, in addition to his role at the Company, is a shareholder in Brownstein Hyatt Farber Schreck LLP, the nation's leading water law firm. For more than 30 years, Mr. Slater's practice has been limited to litigation and the negotiation of agreements related to the acquisition, distribution, and treatment of water. He has served as lead negotiator on a number of important water transactions, including the negotiation of the largest conservation-based water transfer in U.S. history on behalf of the San Diego County Water Authority. Mr. Slater is also the author of
California Water Law and Policy
, the state's leading treatise on the subject, and has taught water law and policy courses at University of California, Santa Barbara, Pepperdine University, and the University of Western Australia, among others.
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.
The Board of Directors is responsible for our management and direction and for establishing broad corporate policies, including our leadership structure. Assessing and managing risk is the responsibility of the management of the Company. Our Board of Directors oversees and reviews certain aspects of the Company's risk management efforts. Annually, the Board reviews our strategic business plans, which includes evaluating the objectives of and risks associated with these plans.
The separation of the Chairman of the Board and Chief Executive Officer roles at public companies has been recommended by proxy advisory experts, stockholder groups and American legislators as a means to promote good corporate governance and manage risk following the enactment in the United States of the 2002 Sarbanes-Oxley Act. Currently, Mr. Brackpool serves as Chairman of the Board and Mr. Slater serves as Chief Executive Office and President. Mr. Brackpool had previously served as Chairman and Chief Executive Officer from 2001 until January 2013. The Board separated the capacities of Chairman and Chief Executive in January 2013 for the first time since 2001. The Board believes this change provided additional independence between the Board and management and allows the Board to provide objective guidance and oversight to Mr. Slater and management as they execute the Company's business plans, carry out the Company's strategic initiatives, and confront any challenges.
In addition, under its charter, the Audit Committee (acting on its behalf and concomitantly as the Risk Committee, as described below) reviews and discusses with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies.
The Audit Committee is composed of Raymond J. Pacini, Jeffrey J. Brown, Stephen E. Courter, and Winston H. Hickox. The Board of Directors has determined that Mr. Pacini, a member of the Company's Audit Committee, is an "audit committee financial expert" as that term is defined in Item 407(d)(5) of Regulation S-K under the Securities Act.
Director Independence
Messrs. Bohn, Brown, Courter, Grant, Hickox, Hutchison, Nevins and Pacini have all been affirmatively determined by the Board to be "independent" under all relevant securities and other laws and regulations, including those set forth in SEC and regulations and pertinent listing standards of the NASDAQ Global Market, as in effect from time to time. In February 2017, the directors unanimously elected Mr. Grant as the Company's lead independent director to further enhance independent director oversight of management.
The Company's independent directors meet routinely in executive session without the presence of management. Independent directors met in executive session at each regularly scheduled meeting of the Board, at least four (4) times annually, in each case outside the presence of any director who also serves as an executive officer. In addition to regularly scheduled board meetings, the Board of Directors and various committees of the Board regularly meet to receive and discuss operating and financial reports presented by the Chief Executive Officer and other members of management as well as reports by experts and other advisors.
Independence of Committee Members
The Board maintains three committees, whose functions are described below. The Board has determined that all members of its committees are independent. Each Board committee is chaired by an independent Director and maintains a written charter detailing its authority and responsibilities. These charters are reviewed periodically as legislative and regulatory developments and business circumstances warrant and are available in their entirety on the Company's website at
http://www.cadizinc.com
and to any stockholder otherwise requesting a copy.
Communications with the Board of Directors
Stockholders wishing to communicate with the Board, or with a specific Board member, may do so by writing to the Board, or to the particular Board member, and delivering the communication in person or mailing it to: Board of Directors c/o Timothy J. Shaheen, Corporate Secretary, Cadiz Inc., 550 S. Hope Street, Suite 2850, Los Angeles, California 90071.
Meetings and Committees of the Board of Directors
During the year ended December 31, 2017, the Board of Directors held six formal meetings, conferred on a number of occasions through telephone conferences, and took action, when appropriate, by unanimous written consent. All then serving members of the Board of Directors were present at each meeting
The Board of Directors has three standing committees, the Audit Committee (also acting concomitantly as the Risk Committee), the Compensation Committee and the Corporate Governance and Nominating Committee, each of which is comprised entirely of directors whom the Board has affirmatively determined to be independent, as they meet the objective requirements set forth by the NASDAQ Global Market and the SEC, and have no relationship, direct or indirect, to the Company other than as stockholders or through their service on the Board.
The Audit Committee is responsible for (i) considering the adequacy of the Company's internal accounting control procedures, (ii) overseeing the Company's compliance with legal and regulatory requirements, (iii) reviewing the independent auditor's qualifications and independence, (iv) the appointment, compensation and oversight of all work performed by the independent registered public accounting firm and (v) overseeing the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The Committee advises and makes recommendations to the Board of Directors regarding the financial, investment and accounting procedures and practices followed by the Company.
The Audit Committee is currently composed of Mr. Pacini, Mr. Brown Mr. Hickox and Mr. Courter. Mr. Pacini is the Audit Committee Chair. The Board has determined that all members of its Audit Committee are independent. The Audit Committee met four times during the year ended December 31, 2017. All the members of the Audit Committee were present at each meeting with the exception of Mr. Brown as he was appointed to the Audit Committee in May 2018. Each member of the Audit Committee receives quarterly training from the Company's independent auditors, with such training to include coverage of compliance with Generally Accepted Accounting Principles, the Sarbanes Oxley Act, corporate governance, assessment of risk, compliance auditing, and reporting requirements for publicly-traded corporations.
In February 2017, the Board designated the Audit Committee to act concomitantly as the Company's Risk Committee. In addition to and separately from the Audit Committee's duties, the Risk Committee's duties include (i) ensuring that the Company makes decisions that will more likely than not allow it to construct a pipeline to deliver water from its property to the Southern California water transportation system without violating any governing laws or regulations, (ii) monitoring the Company's compliance with all risk assessment and reporting conducted by the Company's employees, (iii) identifying material risks relating to the Company's compliance and preparing a written report to the Board whenever a material risk relating to the Company's compliance is identified, (iv) monitoring compliance with the Company's Code of Business Conduct and Ethics, and (v) reporting to the Compensation Committee on an annual basis regarding the CEO's and Chief Financial Officer's contribution to the Company's culture of ethics and compliance and their effectiveness and dedication to ensuring the Company's compliance with applicable laws, rules, and regulations. The Risk Committee will meet at least two times annually in executive session with no member of management present.
The Compensation Committee oversees compensation of the Chief Executive Officer and key executives and oversees regulatory compliance with respect to the Company's compensation matters. The Committee also oversees the Company's compensation policy applicable to senior management of the Company and advises and makes recommendations to the Board of Directors regarding the compensation of directors and executive officers. The Committee operates under a written charter adopted by the Board of Directors, which is available on the Company's website at
http://www.cadizinc.com
and to any stockholder otherwise requesting a copy. The Compensation Committee is currently composed of Mr. Hutchison, Mr. Bohn, Mr. Pacini, Mr. Hickox, Mr. Courter and Mr. Grant. Mr. Hutchison is the Compensation Committee Chair. The Board has determined that all members of its Compensation Committee are independent. The Compensation Committee conferred on a number of occasions through telephone conferences, and took action, when appropriate, by unanimous written consent.
The Corporate Governance and Nominating Committee is responsible for the establishment of procedures for the Committee's oversight of the evaluation of the Board and management. The Committee makes recommendations to the Board of corporate guidelines applicable to the Company. The Committee is also responsible for the identification and recommendation to the Board of qualified candidates for nomination to the Company's Board of Directors. The Committee will consider director candidates recommended by stockholders provided the nominations are received on a timely basis and contain all information relating to such nominee as is required to be disclosed in solicitations of proxies for elections of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, including such person's written consent to being named in the Proxy Statement as a nominee and to serve as a director if elected, the name and address of such stockholder or beneficial owner on whose behalf the proposed nomination is being made, and the class and number of shares of the Company owned beneficially and of record by such stockholder or beneficial owner. The Corporate Governance and Nominating Committee will consider nominees suggested by stockholders on the same terms as nominees selected by the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee believes that nominees for election to the Board of Directors must possess certain minimum qualifications. The Committee will consider a candidate's judgment, skill, diversity, experience with businesses and other organizations of comparable size, financial background, beneficial ownership of the Company, and the interplay of the candidate's experience with the experience of other Board members, among other factors, in assessing a candidate. The Board believes that diversity is an important factor in determining the composition of the Board and that the Company would be best served by increased diversity in Board membership. As noted under Proposal 1 above, the Company has formed a sub-committee of the Committee for the purpose of identifying and nominating qualified candidates whose membership on the Board will expand the diversity of the Board. Except as set forth in this paragraph, the Corporate Governance and Nominating Committee does not currently have a formal policy regarding the handling or consideration of director candidate recommendations received from a stockholder, or a formal process for identifying and evaluating nominees for directors (including nominees recommended by stockholders). These issues will be considered by the Corporate Governance and Nominating Committee, which will then make a recommendation to the Board. The Corporate Governance and Nominating Committee operates under a written charter adopted by the Board of Directors, which is available on the Company's website at
http://www.cadizinc.com
and to any stockholder otherwise requesting a copy. The Corporate Governance and Nominating Committee is currently composed of Mr. Hutchison, Mr. Bohn, Mr. Pacini, Mr. Hickox and Mr. Grant. Mr. Hickox is the Corporate Governance and Nominating Committee Chair. The Board has determined that all members of its Corporate Governance and Nominating Committee are independent. The Corporate Governance and Nominating Committee met one time during the year ended December 31, 2017. All the members of the Corporate Governance and Nominating Committee were present at the meeting with the exception of Mr. Bohn as he was appointed to the Corporate Governance and Nominating Committee in May 2018.
Beginning with the 2017 Annual Meeting of Stockholders, a majority of the members of the Board shall attend each annual stockholder meeting. During annual stockholder meetings, stockholders shall have the right to ask questions, both orally and in writing, and, where appropriate, receive answers and discussion from the CEO and members of the Board, with such discussion to take place regardless of whether those questions have been submitted in advance.
The Company has adopted a code of ethics that applies to all of our employees, including the chief executive officer and chief financial officer. A copy of the code of ethics may be found on the Company's website at
http://www.cadizinc.com
.
Any employee who becomes aware of any existing or potential violation of the code of ethics is required to report it. Any waivers from and amendments to the code of ethics granted to directors or executive officers will be promptly disclosed on the Company's website at
http://www.cadizinc.com
.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The Company's compensation policies and practices are developed and implemented through the Compensation Committee of the Board of Directors. The Committee's responsibility is to review and consider annually the performance of the Company's named executive officers in achieving both corporate and individual goals and objectives, and to assure that the Company's compensation policies and practices are competitive and effective in incentivizing management.
The Compensation Discussion and Analysis section provides a description of the primary elements of the Company's fiscal year 2017 compensation program and policies for the following individuals, who are referred to throughout this proxy statement as our named executive officers:
·
|
Scott Slater, President and Chief Executive Officer
|
·
|
Timothy Shaheen, Chief Financial Officer
|
·
|
Keith Brackpool, Chairman of the Board
|
In February 2013, the Board separated the roles of Chief Executive Officer and Chairman, which had until that time been held by Mr. Brackpool. Mr. Slater manages the day-to-day operation of the Company and its projects and Mr. Brackpool, a Company founder, holds an essential role advising management in the Chairman position. Therefore, Mr. Brackpool remains among our named executive officers and his compensation is further described in this statement.
In 2017, our named executive officers effectively completed multiple transactions important to the long-term success of the Company, including:
·
|
Negotiated over several months
a strategic transaction with funds affiliated with Apollo Global Management to initiate financial arrangements for the construction and implementation of the Company's Cadiz Valley Water Conservation, Recovery & Storage Project ("Water Project" or the "Project"). In furtherance of the strategic transaction, funds managed by affiliates of Apollo and the Company executed a series of agreements that replaced and refinanced our senior secured mortgage debt and provided $15M of new senior debt to fund immediate construction related expenditures. Apollo Funds also executed a conditional commitment letter to fund up to $240M in construction finance expenditures for the Water Project, subject to the satisfaction of conditions precedent. The conditional commitment for up to $240M was intended to provide the additional resources necessary to complete the construction of Phase I of the Water Project.
|
·
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Lead
efforts to support the withdrawal and replacement of a controversial 2015 evaluation of the Water Project by the U.S. Bureau of Land Management ("BLM"), which had found that the Water Project's proposed use of a portion of an existing railroad right-of-way for construction of its water conveyance pipeline was outside the right-of-way's scope. In July the federal appropriations bill was adopted for the first time in eight years without a budget rider annually authored by Senator Dianne Feinstein (D-CA) that sought to require a unique certification of the Water Project by the U.S. Department of the Interior and also blocked BLM from spending any funds on permitting of the Water Project. In October, BLM issued a letter ("BLM Letter") to the Company finding that the Water Project's proposed use of the existing Arizona & California Railroad ("ARZC") Company's right-of-way to construct a pipeline and related railroad improvements "furthers railroad purposes" and concluding that the Project is within the scope of the original right-of-way grant. The BLM Letter also formally rescinded the agency's October 2015 evaluation of the Project's proposed use of the ARZC right-of-way. Following the receipt of the BLM Letter, the Project required no further federal permits or authorizations to construct within the ARZC railroad right-of-way.
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Compensation Committee activities in 2017 included:
·
|
Evaluating the performance of the Company's executive officers;
|
·
|
Reviewing and approving the total compensation and benefits of the Company's executive officers, including cash compensation and long-term incentive compensation; and
|
·
|
Reviewing guidelines and standards regarding the Company's compensation practices and philosophy.
|
For the Company's named executive officers, other than Mr. Slater, the committee established compensation levels based, in part, on the recommendations of Mr. Slater as Chief Executive Officer.
This section should be read in conjunction with the "Summary Compensation Table" and related tables pertaining to the compensation earned in 2017 by the named executive officers presented in this proxy statement under the caption "Executive Compensation".
Compensation Philosophy
The Company's business plan and goals have historically been and continue to be linked to the development of the Water Project. The Company's annual cash resources are focused on funding the completion of the Water Project's development process. Due to the long-term nature of developing such a project,
the progress made by the Company in the development of the Water Project and the general development of our land and water resources does not bear a direct relationship to
quarterly and annual results of operations.
It is critical to the development of the Water Project that the Company attracts and retains well-qualified executives familiar with the water sector as well as long-term infrastructure and project development. As a result, the Company's executive compensation programs seek to maintain a competitive annual salary structure while emphasizing long-term incentives that are connected to the ultimate implementation of the Water Project. These programs strive to align the interests of the executive officers and management with those of the Company's stockholders through the use of equity-based programs. In doing so, the Company intentionally reduces the risk that executives will place too much focus on short-term achievements to the detriment of the long-term goals of the Company.
Elements of Compensation
The Company's compensation program has four primary components: cash salary, performance-based cash awards, long-term incentives through equity stock awards, and benefits. Each element of the Company's compensation program has been specifically chosen to reward, motivate and incentivize the executives of the Company to complete the development and implementation of the Water Project. The Compensation Committee determines the amount for both total compensation and each compensation element through discussions with the Company's management, consideration of benchmarking data, past performance and future corporate and individual objectives.
The four basic elements of compensation, described in further detail below, are:
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SALARY. Base salaries for the Company's named executives are determined by the Compensation Committee depending on a variety of factors including the scope of their responsibilities, their leadership skills and values, their performance and length of service. Salaries for our named executive officers are intended to create a minimum level of compensation that is competitive with other companies deemed comparable, depending on the prior experience and position of the executive. Salaries are typically paid in cash, but could also be paid with restricted stock awards. Decisions regarding salary increases are affected by the named executive's current salary and the amounts paid to their peers within and outside the Company.
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LONG-TERM INCENTIVES. The primary form of incentive compensation that is offered to the Company's executives consists of long-term incentives in the form of equity awards. The use of such long-term incentives is intended to focus and align goals of Company executives with those of stockholders and creates a direct interest in the results of operations, long-term performance and achievement of the Company's long-term goals.
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PERFORMANCE BASED CASH AWARDS. The Compensation Committee believes that it is sometimes important to offer cash incentives to executives for the achievement of specified objectives that yield increased value for stockholders and will utilize performance based cash awards from time to time to provide additional incentives.
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BENEFITS. The Compensation Committee also incorporates retirement, insurance, termination and severance benefits in the compensation program for executive officers. These benefits are offered to retain top executives, maintain their health and wellness and remain competitive in the industry. The retirement and insurance benefits are consistent with those benefits offered more broadly to the Company's employees.
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The Company's overall compensation packages for our named executive officers have historically emphasized equity incentives due to the long-term development timelines of our projects and the focus of the Company on achieving the implementation of these projects. Even with the emphasis on long-term incentives, the Company's overall compensation is established at a level comparable to our peer group of companies, which share a similar focus on long-term development of assets. As the Water Project has finalized numerous permitting milestones and prepares for construction and implementation, the Committee has also utilized performance based cash awards to reward achieved milestones and goals in that calendar year.
Use of Peer Group
Our main asset consists of a large land position with water rights in Southeastern California and our business is primarily focused on the permitting of a water supply and storage project at our primary property in Cadiz, California. Because no other publicly-traded company is similarly situated, it is difficult to identify directly comparable peer companies.
However, for guidance on the pay mix and compensation package of our named executive officers, we identified a peer group of companies operating in the property and asset development sectors, specifically companies with comparable market capitalization and an emphasis on the development of property and real estate in the Southwestern United States. The peer group includes the following companies:
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Alico, Inc.
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Forestar Group, Inc.
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Limoneira Company
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PICO Holdings, Inc.
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Taylor Morrison, Inc.
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Tejon Ranch Co.
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Pure Cycle Corp.
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Benchmarking
The Compensation Committee believes it is important to understand and analyze the current compensation programs of other companies when making compensation decisions. We traditionally consider the compensation programs of our peers when determining compensation for the named executive officers. This year the Committee reviewed publicly available information for our peer group companies to compare the components of our compensation program for the executive officers with those of the peer group.
Due to the Company's unique business plan and current focus on development of the Water Project, the Compensation Committee exercises its discretion in determining compensation packages that may differ from the peer group. Nevertheless, the peer group is instructive in assessing elements of compensation and structure for similarly situated companies.
Upon review of publicly available information for our peers, the Committee found the total compensation of our Chief Executive Officer to be among the lowest in the peer group.
Performance Objectives
The Committee emphasizes performance objectives for executives when granting long-term equity compensation awards from existing plans. Currently, as described above, the Company is focused on the performance of objectives related to implementation of the Water Project and fixes equity grants to satisfaction of such project development objectives including both restrictions as to sale and on a vesting schedule commensurate with the anticipated Water Project development timeline.
Elements of 2017 Compensation
1. SALARY. In evaluating base salaries for 2017, the Compensation Committee believed it was important to maintain competitive base salary compensation that would also keep cash compensation expenditures to a minimum. In 2017, Mr. Slater's annual base salary remained the same as in 2016 at $300,000 reflecting the desire of the Committee to conserve its cash resources while it prepares for the construction and implementation of the Water Project. In addition, in 2017, the Committee continued to follow the salary structure approved by the Company's stockholders for Mr. Shaheen and Mr. Brackpool as outlined in their amended and restated employment agreements. These amended and restated agreements provided for their base cash compensation to be reduced for 2014, 2015 and 2016 in exchange for equity based salary in the form of restricted stock units ("RSUs") that vested ratably during
these years.
In accordance with the terms of their stockholder approved amended and restated employment agreements, effective January 1, 2017 the base cash salaries for Mr. Shaheen and Mr. Brackpool automatically reverted to $350,000 and $275,000, respectively, representing their salaries as in effect immediately prior to the stockholder approved split between salary and RSUs in 2014.
2. LONG-TERM INCENTIVES. The Committee has chosen to rely upon equity instruments, such as restricted stock and options, in designing compensation packages for executives. The Committee views the grant of equity based awards as an incentive for future performance since the value of these equity based awards will increase as the Company's stock price increases, thereby satisfying the Committee's goal of linking executive compensation to share price appreciation over the longer term and promoting the retention of the key executives throughout the development process of our projects. The Committee is conscious of the potential dilutive effect arising from the use of equity incentives and tries to limit issuances to maintain appropriate ratios of overall ownership levels in the Company from year to year.
In order for us to utilize equity based awards as a form of incentive compensation and maintain alignment with the goals of stockholders, the Committee and the Board have created plans subject to stockholder approval. At the 2014 Annual Meeting held on June 11, 2014, the Company's stockholders approved the 2014 Equity Incentive Plan that replaced an existing 2009 equity incentive plan and better aligns the Company's current objectives with equity incentive awards. Under the 2014 EIP, Mr. Brackpool and Mr. Shaheen were each eligible to receive a milestone-based long-term equity incentive award of 100,000 shares, once construction financing necessary for the implementation of the Water Project, as defined in the approved Final Environmental Impact Report, is secured ("Milestone RSUs"). The Milestone RSUs were earned and issued in June 2017.
3. CASH AWARDS. While the Compensation Committee believes that equity based awards rather than cash based awards allow the Company to better preserve our existing cash resources and, accordingly, has relied primarily upon the grant of equity based awards to reward executive performance (see "Long-Term Incentives") of named executive officers, the Compensation Committee also believes that it is important to offer cash incentives to executives for the achievement of specified objectives that yield increased value for stockholders and to reduce the tax burdens associated with the issuance of restricted equity based awards. In 2017, Mr. Shaheen, Mr. Brackpool and Mr. Slater were each granted a $300,000 cash award by the Board for exemplary service in implementing Company objectives throughout the course of the year, including those transactions described under "Overview", above.
4. BENEFITS. Per their 2014 amended and restated employment agreements described below, Mr. Brackpool and Mr. Shaheen received retirement benefits as part of their compensation packages in 2017. Termination and severance terms are adjusted annually in Mr. Brackpool's and Mr. Shaheen's existing employment agreements.
Severance and Change in Control Provisions
The Company's current compensation agreements with Messrs. Brackpool and Shaheen provide for certain severance provisions and benefits associated with various termination scenarios, as well as certain vesting acceleration for equity-based compensation in the event of a change-in-control. The severance and change in control provisions were determined largely by negotiations between the parties as one of the many elements of a larger negotiation involving the particular executive's employment or consulting agreement with the Company. These agreements are designed to be competitive in the marketplace and provide security for these executives in the event that the Company is acquired and their position is impacted. This will allow the Company's executives to consider and implement transformative transactions of significant benefit to our stockholders without undue concern over their own financial situations.
A summary of the severance and change-in-control provisions applicable to compensation arrangements with the Company's executive officers named in the Summary Compensation Table, along with a quantification of the benefits available to each named officer as of December 31, 2017, can be found in the section captioned "Potential Payments upon Termination or Change in Control".
Tax and Accounting Considerations
Impact of Code Section 162(m)
The Compensation Committee has considered the impact of provisions of the Internal Revenue Code of 1986, specifically Code Section 162(m). Section 162(m) limits to $1 million the Company's deduction for compensation paid to each of our executive officers, which does not qualify as "performance based". The 2014 Equity Incentive Plan was designed to permit grant awards that qualify as performance-based compensation, thereby permitting the Company to receive a federal income tax deduction in connection with the awards.