PRELIMINARY
PROXY STATEMENT SUBJECT TO COMPLETION – DATED [●], 2019
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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by the Registrant ☒
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Preliminary
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
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Definitive
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Soliciting
Material under § 240.14a-12
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Cadiz
Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
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PRELIMINARY
PROXY STATEMENT SUBJECT TO COMPLETION – DATED [●], 2019
CADIZ
INC.
MESSAGE
FROM THE BOARD OF DIRECTORS
Dear
Fellow Stockholders –
You are cordially invited to attend
the 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”) of Cadiz Inc., a Delaware corporation (the “Company”),
which is scheduled to be held on , , 2019, at [a.m./p.m.] local time,
and any postponements or adjournments thereof, at . Stockholders of record of the Company at the close of business on ,
2019 are entitled to notice of, and to vote at, the 2019 Annual Meeting. Details of the business to be conducted at the 2019 Annual
Meeting are given in the accompanying Notice of Annual Meeting of Stockholders and the proxy statement. The proxy statement was
first sent or given to our stockholders on or about . You should also have received a
WHITE
proxy card or
WHITE
voting
instruction form and postage-paid return envelope, which are being solicited on behalf of our Board of Directors (the “Board”).
Your
vote will be especially important at the 2019 Annual Meeting. As you may know, TRF Master Fund (Cayman) LP, an affiliate of Water
Asset Management, LLC (which we refer to, collectively with all its affiliates, including TRF Master Fund (Cayman) LP, as “WAM”)
has notified the Company that it intends to nominate five candidates to the Board for election as directors
and submit a proposal for stockholder vote at the 2019 Annual Meeting. These WAM nominated director candidates are comprised
of the two incumbent directors currently serving on the Board as a result of a Cooperation Agreement entered into by
WAM and the Company on May 1, 2018 (the “Cooperation Agreement”) and three new nominees (the “Additional
WAM Nominees”).
Pursuant
to the Cooperation Agreement, the Company agreed to expand its Board from nine to eleven directors and add two new members suggested
by WAM, John A. Bohn and Jeffrey J. Brown. While the Board intends to nominate Messrs. Bohn and Brown at the 2019 Annual Meeting
pursuant to the Cooperation Agreement (assuming the Cooperation Agreement has not been terminated prior to the 2019 Annual Meeting),
after a thorough review, the Board has come to its determination not to recommend for the election the Additional WAM Nominees.
Due to the commitments WAM made in the Cooperation Agreement, we believe that WAM is obligated to vote for the Company’s
recommended nominees on the
WHITE
proxy card, and cannot vote for the Additional WAM Nominees as long as the Cooperation
Agreement has not been terminated.
The
Board does
NOT
endorse the election of any of the Additional WAM Nominees, does
NOT
endorse WAM’s proposal
and strongly urges you
NOT
to sign or return any proxy card sent to you by WAM. If you have previously submitted a proxy
card sent to you by WAM, you can revoke that proxy and have your shares voted for our Board’s nominees and on the other
matters to be voted on at the 2019 Annual Meeting by signing, dating and returning the enclosed
WHITE
proxy card or by
following the instructions provided on the
WHITE
proxy card to submit a proxy over the Internet or by telephone or by appearing
at the 2019 Annual Meeting and voting your shares in person.
We
believe that our slate of Board candidates have the right mix of professional achievement, skills, experiences and reputations
that qualify them to serve as stockholder representatives overseeing the management of the Company. We are committed to engaging
with our stockholders and continuing to respond to stockholder concerns about the Company, and we believe we are in the best position
to oversee the execution of our long-term strategic plan. The Board unanimously recommends that you vote “
FOR”
the re-election of Messrs. Keith Brackpool, John A. Bohn, Jeffrey J. Brown, Stephen E. Courter, Geoffrey Grant, Winston H.
Hickox, Murray H. Hutchison, Richard Nevins, Scott S. Slater and the election of Mses. Maria Echaveste and Carolyn Webb de Macías
(the “Intended Nominees”) and, if applicable, the Alternate Nominees recommended by the Company and described directly
below.
In
the event any Intended Nominee cannot serve, revokes his or her consent to serve or resigns from our Board prior to the 2019 Annual
Meeting, (any such nominee a “Departing Nominee”), the Board intends to substitute [●] and, in the event there
is more than one Departing Nominee, [●], (each an “Alternate Nominee”). If the Cooperation Agreement is terminated
by a party other than the Company prior to the 2019 Annual Meeting, Mr. Bohn and Mr. Brown will not be nominated by the Company
and the Alternate Nominees will be nominated in their stead.
After
reading the Notice of Annual Meeting of Stockholders and the proxy statement, please mark your votes on the accompanying
WHITE
proxy card or voting instruction form, sign it and promptly return it in the accompanying postage-paid envelope. You may also
vote by Internet or telephone as instructed in the proxy statement or on the
WHITE
proxy card or vote instruction form.
Please vote by whichever method is most convenient for you to ensure that your shares are represented at the 2019 Annual Meeting.
You
may receive proxy solicitation materials from WAM, including proxy statements and proxy cards. The Board recommends that you disregard
them. We are not responsible for the accuracy of any information provided by or relating to WAM or the nominees contained in any
proxy solicitation materials filed or disseminated by, or on behalf of, WAM or any other statements that WAM or its representatives
have made or may otherwise make. The Board, including all of its independent directors, strongly urges you
NOT
to sign
or return any proxy card sent to you by or on behalf of WAM. If you have previously submitted a proxy card sent to you by or on
behalf of WAM, you can revoke that proxy and vote for your Board’s nominees and on the other matters to be voted on at the
2019 Annual Meeting by using the enclosed
WHITE
proxy card or voting by Internet or telephone by following the instructions
specified on the
WHITE
proxy card.
It
is very important that your shares be represented at the 2019 Annual Meeting. Whether or not you plan to attend, we hope you will
vote as soon as possible. You may vote over the Internet, as well as by telephone, or by mailing the
WHITE
proxy card or
voting instruction form. Returning the proxy or voting by Internet or telephone does not deprive you of your right to attend the
2019 Annual Meeting and to vote your shares in person.
We
look forward to seeing you at the 2019 Annual Meeting. Your vote and participation, no matter how many or how few shares you own,
are very important to us. Your cooperation is greatly appreciated.
By
Order of the Board of Directors,
Keith
Brackpool
Chairman
of the Board
Los
Angeles, California
,
2019
The
attached Notice of Annual Meeting of Stockholders and proxy statement are first being made available to stockholders of record
beginning, 2019. If you have any questions or require assistance in authorizing a proxy or voting your shares of common stock,
please contact the Company’s proxy solicitor at the contact listed below:
509 MADISON AVENUE
SUITE 1206
NEW YORK, NY 10022
Stockholders
Call Toll Free: (800) 662-5200
Banks and Brokers Call Collect: (203)658-9400
Email:
CDZI@morrowsodali.com
CADIZ
INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON , 2019
Dear
Stockholders of Cadiz Inc.:
NOTICE
IS HEREBY GIVEN that the 2019 annual meeting of stockholders (the “2019 Annual Meeting”) of Cadiz Inc., a Delaware
corporation, will be held at , on , , 2019, at [a.m/p.m.], local time, and any postponements or adjournments thereof, to consider
and act upon the following matters:
(1)
The election of eleven members of the Board of Directors (the “Board”), each to serve until the next annual meeting
of stockholders or until their respective successors shall have been elected and qualified (Proposal 1);
(2)
Ratification of the selection by the Audit Committee of our Board of PricewaterhouseCoopers LLP as the Company’s independent
certified public accountants for fiscal year 2019 (Proposal 2);
(3)
The approval of the Cadiz Inc. 2019 Equity Incentive Plan (Proposal 3);
(4)
The approval of a non-binding advisory resolution regarding the compensation of our named executive officers (Proposal 4);
(5)
The stockholder proposal to amend the Company’s Bylaws, as amended (the “Bylaws”), to expand the notice requirements
for stockholder business to be timely brought before an annual meeting, if properly presented (Proposal 5); and
(6)
The transaction of such other business as may properly come before the meeting and any postponements or adjournments thereof.
The
accompanying proxy statement contains a more complete description of these proposals. The Board recommends a vote “
FOR
”
each of the eleven Intended Nominees (as defined below) for director named in the accompanying Proxy Statement, a vote “
FOR
”
Proposals 2, 3, and 4, and a vote “
AGAINST
” Proposal 5 on the enclosed
WHITE
proxy card.
Only
stockholders of record at the close of business on , 2019, are entitled to notice of and to vote at the 2019 Annual Meeting. In
order to constitute a quorum for the conduct of business at the 2019 Annual Meeting, holders of a majority of all outstanding
voting shares of our common stock must be present in person or be represented by proxy. The Annual Meeting may be postponed or
adjourned from time to time. At any adjourned meeting, action with respect to matters specified in this notice may be taken without
further notice to stockholders, unless required by law or the Bylaws.
Whether
or not you expect to attend the 2019 Annual Meeting in person, we encourage you to submit your proxy as soon as possible using
one of three convenient methods by (i) accessing the Internet site described in the
WHITE
proxy card or voting instruction
form provided to you, (ii) calling the toll-free number in the
WHITE
proxy card or voting instruction form provided
to you, or (iii) signing, dating and returning the
WHITE
proxy card or instruction form provided to you. You are urged
to complete and submit the enclosed
WHITE
proxy card, even if your shares were sold after such date.
If
your brokerage firm, bank, broker-dealer or other similar organization is the holder of record of your shares (
i.e.
, your
shares are held in “street name”), you will receive a voting instruction form from the holder of record. You must
provide voting instructions by filling out the voting instruction form in order for your shares to be voted. We recommend that
you instruct your broker or other nominee to vote your shares on the enclosed
WHITE
proxy card. The proxy is revocable
and will not affect your right to vote in person if you attend the 2019 Annual Meeting.
*********************
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR
THE 2019 ANNUAL MEETING TO BE HELD ON , 2019
This
Notice of Annual Meeting of Stockholders, the accompanying proxy statement, our Annual Report on Form 10-K for the year ended
December 31, 2018 and form
WHITE
proxy card are available at:
http://www.cstproxy.com/cadiz/2019
.
Your
vote will be especially important at the 2019 Annual Meeting. As you may know, TRF Master Fund (Cayman) LP, an affiliate of Water
Asset Management, LLC (which we refer to, collectively with all its affiliates, including TRF Master Fund (Cayman) LP, as “WAM”)
has notified the Company that it intends to nominate five candidates to the Board for election as directors and submit a proposal
for stockholder vote at the 2019 Annual Meeting. These WAM nominated directors are comprised of the two incumbent directors currently
serving on the Board as a result of a Cooperation Agreement entered into by WAM and the Company on May 1, 2018 (the “Cooperation
Agreement”) and three new nominees (the “Additional WAM Nominees”). You may receive proxy solicitation materials
from WAM, including proxy statements and proxy cards. The Board recommends that you disregard them. We are not responsible for
the accuracy of any information provided by or relating to WAM or the nominees contained in any proxy solicitation materials filed
or disseminated by, or on behalf of, WAM or any other statements that WAM or its representatives have made or may otherwise make.
The
Board strongly and unanimously recommends that you vote on the
WHITE
proxy card or voting instruction form “
FOR”
the re-election of Messrs. Keith Brackpool, John A. Bohn, Jeffrey J. Brown, Stephen E. Courter, Geoffrey Grant, Winston H.
Hickox, Murray H. Hutchison, Richard Nevins, Scott S. Slater and the election of Mses. Maria Echaveste and Carolyn Webb de Macías
(the “Intended Nominees”) and, if applicable, the Alternate Nominees recommended by the Company and described directly
below.
In
the event any of the Intended Nominees cannot serve, revokes his or her consent to serve or resigns from our Board prior to the
2019 Annual Meeting (any such nominee a “Departing Nominee”), the Board intends to substitute [●] and, in
the event there is more than one Departing Nominee, [●], (each an “Alternate Nominee”) for the Departing Directors.
The Board also unanimously recommends that you vote in accordance with the Board’s recommendations on the other proposals
on the
WHITE
proxy card.
Pursuant
to the Cooperation Agreement, the Company agreed to expand its Board and add two new members suggested by WAM, Messrs. Bohn and
Brown. While the Board intends to nominate Messrs. Bohn and Brown at the 2019 Annual Meeting pursuant to the Cooperation Agreement
(assuming the Cooperation Agreement has not been terminated prior to the 2019 Annual Meeting), the Board has come to its determination
NOT
to recommend for the election the Additional WAM Nominees. Due to the commitments WAM made in the Cooperation Agreement,
we believe that WAM is obligated to vote for the Company’s recommended nominees on the
WHITE
proxy card, and cannot
vote for the Additional WAM Nominees as long as the Cooperation Agreement has not been terminated.
The
Board does
NOT
endorse the Additional WAM Nominees and unanimously recommends that you
NOT
sign or return any proxy
card sent to you by WAM. If you have voted using the proxy card sent to you by WAM, you can subsequently revoke your vote by submitting
the
WHITE
proxy card. If you hold your shares in street name, you may submit new voting instructions by contacting your
broker or other nominee. You may also vote in person at the 2019 Annual Meeting. Only your latest-dated vote will count: any prior
vote may be revoked at any time prior to the 2019 Annual Meeting, as described in the accompanying proxy statement.
The
Intended Nominees and Alternate Nominees of the Board for election as directors of the Company are listed in the accompanying
proxy statement and
WHITE
proxy card.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE 2019 ANNUAL MEETING, REGARDLESS
OF WHETHER OR NOT YOU PLAN TO ATTEND. ACCORDINGLY, AFTER READING THE ACCOMPANYING PROXY STATEMENT, PLEASE FOLLOW THE INSTRUCTIONS
ON THE ENCLOSED
WHITE
PROXY CARD AND PROMPTLY SUBMIT YOUR PROXY BY INTERNET, TELEPHONE OR MAIL AS DESCRIBED ON THE
WHITE
PROXY CARD. PLEASE NOTE THAT EVEN IF YOU PLAN TO ATTEND THE 2019 ANNUAL MEETING, WE RECOMMEND THAT YOU VOTE USING THE ENCLOSED
WHITE
PROXY CARD PRIOR TO THE 2019 ANNUAL MEETING TO ENSURE THAT YOUR SHARES WILL BE REPRESENTED. EVEN IF YOU VOTE YOUR
SHARES PRIOR TO THE 2019 ANNUAL MEETING, IF YOU ARE A RECORD HOLDER OF SHARES, OR A BENEFICIAL HOLDER WHO OBTAINS A “LEGAL”
PROXY FROM YOUR BROKER, BANK, TRUSTEE, OR NOMINEE, YOU STILL MAY ATTEND THE 2019 ANNUAL MEETING AND VOTE YOUR SHARES IN PERSON.
Morrow
Sodali, LLC (“Morrow Sodali”) is assisting us with our effort to solicit proxies. If you have any questions or require
assistance in authorizing a proxy or voting your shares of common stock, please contact Morrow Sodali at (800) 662-5200 (toll
free for stockholders) or (203) 658-9400 (call collect for banks and brokers). We are not aware of any other business, or any
other nominees for election as directors, that may properly be brought before the 2019 Annual Meeting.
Regardless
of the number of shares of common stock of the Company that you own, your vote will be important. Thank you for your continued
support, interest and investment in Cadiz.
By
Order of the Board of Directors
Keith
Brackpool
Chairman
of the Board
Los
Angeles, California
,
2019
Please
sign, date and promptly return the enclosed
WHITE
proxy card in the envelope provided, or grant a proxy and give voting
instructions by Internet or telephone, so that you may be represented at the 2019 Annual Meeting. Instructions are on your
WHITE
proxy card or on the voting instruction form provided by your broker.
Brokers
cannot vote on any of the proposals without your instructions.
********************
The
accompanying proxy statement provides a detailed description of the business to be conducted at the 2019 Annual Meeting. We urge
you to read the accompanying proxy statement, including the appendices, carefully and in their entirety. If you have any questions
concerning the business to be conducted at the 2019 Annual Meeting, would like additional copies of the proxy statement or need
help submitting a proxy for your shares, please contact Morrow Sodali, the Company’s proxy solicitor:
509 MADISON AVENUE
SUITE 1206
NEW YORK, NY 10022
Stockholders
Call Toll Free: (800) 662-5200
Banks and Brokers Call Collect: (203)658-9400
Email:
CDZI@morrowsodali.com
CADIZ
INC.
Annual
Meeting of Stockholders
TABLE
OF CONTENTS
CADIZ
INC.
550
S. Hope Street, Suite 2850
Los
Angeles, California 90071
PROXY
STATEMENT
FOR
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD ON 2019
INFORMATION
ABOUT SOLICITATION AND VOTING
The
Board of Directors (the “Board”) of Cadiz Inc. (“the Company”) is soliciting proxies to be voted at the
annual meeting of our stockholders to be held on , , 2019, and any postponements or adjournments thereof (the “2019 Annual
Meeting”), at the time and place and for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
This proxy statement contains information that may help you decide how to vote. These proxy materials were first sent or given
to our stockholders on or about , 2019, to all stockholders of record.
The
Company’s Annual Report on Form 10-K, including a Form 10-K/A, for the year ended December 31, 2018, including audited financial
statements, is being mailed to you with this proxy statement.
Record
Date, Voting Securities and Quorum
The
Board has fixed the close of business on , 2019, as the record date for determination of stockholders entitled to notice of, and
to vote at, the 2019 Annual Meeting.
On
the record date, shares of the Company’s common stock were outstanding. Holders of common stock are entitled to one vote
per share. The Company’s common stock is the only class of securities entitled to vote. Only stockholders of record at the
close of business on the record date will be entitled to vote.
The
candidates for director receiving a plurality of the votes of the shares present in person or represented by proxy will be elected
(Proposal 1). An affirmative vote of a majority of the shares present or represented by proxy and voting at the meeting is required
for ratification of the Company’s independent registered public accounting firm (Proposal 2), the approval of the Cadiz
Inc. 2019 Equity Incentive Plan (Proposal 3), and the passage of the non-binding advisory resolution approving the compensation
of the Company’s named executive officers (Proposal 4). An affirmative vote of the majority of the outstanding shares entitled
to vote at the 2019 Annual Meeting is required for the passage of the stockholder proposal to amend the Company’s Bylaws,
as amended (the “Bylaws”) to expand the notice requirements for stockholder business to be timely brought before an
annual meeting, if properly presented (Proposal 5). While the vote on Proposal 4 is advisory, and will not be binding on the Company
or our Board, the Board will review the results of the voting on this proposal and take it into consideration when making future
decisions with respect to executive compensation matters, as we have done in this and previous years.
If
you complete, sign and date the enclosed
WHITE
proxy card and return it before the 2019 Annual Meeting, the persons named
will vote your shares as you specify in the proxy. If you sign, date and return your
WHITE
proxy card but do not indicate
how you wish your shares voted, they will be voted in accordance with the Board’s recommendations. If you do not return
a signed proxy, or submit your vote via Internet or by phone, then your shares will not be voted unless you attend the meeting
and vote in person.
To
have a quorum, holders of a majority of all shares of voting stock issued and outstanding on the record date must be present and
entitled to vote at the meeting, either in person or by proxy. If you are a record holder of shares of common stock as of the
record date and you submit your proxy, regardless of whether you abstain from voting on one or more matters, your shares will
be counted as present at the 2019 Annual Meeting for the purpose of determining a quorum. If your shares are held in “street
name,” your shares are counted as present for purposes of determining a quorum if your bank, broker or other nominee submits
a proxy covering your shares. If your bank, broker or other nominee is not given specific voting instructions, shares held in
the name of the bank, broker, or other nominee will be broker non-votes, and as such will not be considered as entitled to vote
on any matter to be considered at the 2019 Annual Meeting because we expect this to be a contested election and, accordingly,
such broker non-votes will not be counted as present for the purpose of determining a quorum. However, because Proposals 2, 3,
4 and 5 require a majority of the shares present in person or by proxy at the meeting and entitled to vote on the proposals to
pass, an abstention, because it is not a vote “for,” will have the effect of a negative vote with respect to Proposals
2, 3, 4 and 5 and could cause these proposals to fail to pass.
In
contested elections, brokers do not have discretionary authority to vote on any proposals to be voted on at such meetings, whether
routine or not. Because TRF Master Fund (Cayman) LP, an affiliate of Water Asset Management, LLC (which we refer to, collectively
with all its affiliates, including TRF Master Fund (Cayman) LP, as “WAM”) has provided notice to the Company that
it intends to nominate two of the Company’s incumbent directors and three new nominees (the “Additional WAM Nominees”)
in opposition to three of the Board’s highly qualified director nominees, the 2019 Annual Meeting is expected to constitute
a contested election. Accordingly, brokers will not be permitted to vote such broker non-vote shares held by a beneficial holder
at the 2019 Annual Meeting, as the beneficial holders of such shares failed to provide instructions as to how the shares are to
be voted. The Company encourages you to provide instructions to your broker regarding the voting of your shares.
Revocability
of Proxies
You
may revoke a proxy any time before the voting begins in any of the following ways:
*
By giving written notice to the Company’s corporate secretary;
*
By signing and delivering a later dated proxy; or
*
By attending and voting in person at the 2019 Annual Meeting.
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING
Why
I am receiving this proxy statement?
The
Board is soliciting your proxy vote to our 2019 Annual Meeting because you owned shares of our common stock, $0.01 par value per
share, at the close of business on , as the record date for the 2019 Annual Meeting, and therefore, are entitled to vote at the
2019 Annual Meeting on the following proposals:
●
|
Proposal
1: The election of eleven directors to serve on our Board for a one-year term of office expiring at the 2020 Annual Meeting
of Stockholders;
|
●
|
Proposal
2: The ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants for the
fiscal year ending December 31, 2019;
|
●
|
Proposal
3: The approval of the Cadiz Inc. 2019 Equity Inventive Plan to serve as the successor of the Cadiz Inc. 2014 Equity Inventive
Plan;
|
●
|
Proposal
4: To vote on a non-binding, advisory resolution approving the compensation of the Company’s named executive officers;
|
●
|
Proposal
5: To vote on a stockholder proposal to amend the Bylaws to expand the notice requirements for stockholder business to be
timely brought before an annual meeting, if properly presented; and
|
●
|
Any
other business as may properly come before the 2019 Annual Meeting or any postponement or adjournment thereof.
|
You
are receiving this proxy statement as a stockholder of the Company as of the record date for purposes of determining the stockholders
entitled to receive notice of and vote at the 2019 Annual Meeting. As further described below, we request that you promptly use
the enclosed
WHITE
proxy card to vote, by Internet, by telephone or by mail, in the event you desire to express your support
of or opposition to the proposals.
THE
BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION OF EACH OF THE BOARD’S INTENDED NOMINEES (AND, IF APPLICABLE,
THE ALTERNATE NOMINEES) ON PROPOSAL 1, “FOR” PROPOSAL 2, “FOR” PROPOSAL 3, “FOR” PROPOSAL
4 AND “AGAINST” PROPOSAL 5,
USING
THE ENCLOSED WHITE PROXY CARD.
THE
BOARD URGES YOU NOT TO SIGN, RETURN OR VOTE ANY PROXY CARD SENT TO YOU BY WAM, EVEN AS A PROTEST VOTE, AS ONLY YOUR LATEST DATED
PROXY CARD WILL BE COUNTED.
Is
my vote important?
Your vote will be particularly important
at the 2019 Annual Meeting. As you may know, the Company has received a notice from WAM regarding its intent to nominate five candidates
to the Board for election as directors in opposition to three of the nominees recommended by the Board and submit a proposal for
a stockholder vote at the 2019 Annual Meeting. These WAM nominated directors are comprised of the two Company incumbent directors
currently serving in connection with a Cooperation Agreement entered into by WAM and the Company on May 1, 2018 (the “Cooperation
Agreement”) and thee new nominees (the “Additional WAM Nominees”).
Pursuant
to the Cooperation Agreement, the Company agreed to expand its Board and add two new members suggested by WAM, Messrs. Bohn and
Brown. While the Board has nominated Messrs. Bohn and Brown in the Company’s proxy statement pursuant to the Cooperation
Agreement, the Board has come to its determination NOT to recommend for the election of the Additional WAM Nominees. Due to the
commitments WAM made in the Cooperation Agreement, we believe that WAM is obligated to vote for the Company’s recommended
nominees on the
WHITE
proxy card, and cannot vote for the Additional WAM Nominees as long as the Cooperation Agreement
has not been terminated.
The
Board recommends a vote “
FOR
” the election of each of the director nominees named in this proxy statement on
the enclosed
WHITE
proxy card, and strongly urges you
NOT
to sign or return any proxy card(s) or voting instruction
form(s) that you may receive from WAM.
To
vote for all of the Board’s Intended Nominees (as defined below), you must sign, date and return the enclosed
WHITE
proxy card or follow the instructions provided in the
WHITE
proxy card for submitting a proxy over the Internet or by telephone
or vote in person at the 2019 Annual Meeting.
If
you have previously signed any proxy card sent to you by WAM in respect of the 2019 Annual Meeting, you can revoke it by signing,
dating and returning the enclosed
WHITE
proxy card or by following the instructions provided in the
WHITE
proxy
card for submitting a proxy to vote your shares over the Internet or by telephone or voting in person at the 2019 Annual Meeting.
Signing, dating and returning any proxy card that WAM may send to you, even with instructions to vote “withhold” with
respect to the Additional WAM Nominees, will cancel any proxy you may have previously submitted to have your shares voted for
the Board’s nominees as only your latest proxy card or voting instruction form will be counted. Beneficial holders who hold
their shares in “street name” should follow the voting instructions provided by their bank, broker or other nominee
to ensure that their shares are represented and voted at the 2019 Annual Meeting, or to revoke prior voting instructions. The
Board urges you to sign, date and return only the enclosed
WHITE
proxy card.
When
and where will the 2019 Annual Meeting be held?
The
2019 Annual Meeting is scheduled to be held on , , 2019, at [a.m./p.m.] local time, at .
Who
is soliciting my vote?
The
Board, on behalf of the Company, is soliciting your proxy to vote your shares of our common stock on all matters scheduled to
come before the 2019 Annual Meeting, whether or not you attend in person. By completing, signing, dating and returning the
WHITE
proxy card or voting instruction form, or by submitting your proxy and voting instructions over the Internet or by telephone,
you are authorizing the persons named as proxies to vote your shares of our common stock at the 2019 Annual Meeting as you have
instructed. Proxies will be solicited on behalf of the Board by the Company’s directors, director nominees, and certain
executive officers and other employees of the Company. Such persons are listed in Appendix A to this proxy statement.
Additionally,
the Company has retained Morrow Sodali, LLC (“Morrow Sodali”), a proxy solicitation firm, which may solicit proxies
on the Board’s behalf. You may also be solicited by press releases issued by us, postings on our corporate website or other
websites or otherwise. Unless expressly indicated otherwise, information contained on our corporate website is not part of this
proxy statement. In addition, none of the information on the other websites, if any, listed in this proxy statement is part of
this proxy statement. Such website addresses are intended to be inactive textual references only.
Will
there be a proxy contest at the 2019 Annual Meeting?
WAM
has nominated a slate of five individuals, two of which are incumbent directors serving on the Board in connection with the Cooperation
Agreement, for election as directors to the Board and submitted a proposal at the 2019 Annual Meeting.
The Additional WAM Nominees
have NOT been endorsed by our Board
. You may receive proxy solicitation materials from WAM, including proxy statements and
proxy cards.
The Board recommends that you disregard them
. We are not responsible for the accuracy of any information provided
by or relating to WAM or the nominees contained in any proxy solicitation materials filed or disseminated by, or on behalf of,
WAM or any other statements that WAM or its representatives have made or may otherwise make.
Our
Board is pleased to nominate for election as director the following eleven persons—Messrs. Keith Brackpool, John A. Bohn,
Jeffrey J. Brown, Stephen E. Courter, Geoffrey Grant, Winston H. Hickox, Murray H. Hutchison, Richard Nevins, Scott S. Slater
and the election of Mses. Maria Echaveste and Carolyn Webb de Macías (the “Intended Nominees”)—named
in this proxy statement and on the enclosed
WHITE
proxy card. However, in the event any of the Intended Nominees cannot
serve, revokes his or her consent to serve or resigns from our Board prior to the annual meeting (any such nominee a “Departing
Nominee”), the Board intends to substitute [●] and, in the event there is more than one Departing Nominee [●],
(each an “Alternate Nominee”) for the Departing Directors. We believe our eleven Intended Nominees and the two Alternate
Nominees have the breadth of relevant and diverse experiences, integrity and commitment necessary to continue to grow the Company
for the benefit of all of the Company’s stockholders.
What
are the Board’s recommendations?
Our
Board unanimously recommends that you vote by proxy using the
WHITE
proxy card with respect to the proposals as follows:
●
|
FOR
the election of Messrs. Keith Brackpool, John A. Bohn, Jeffrey J. Brown, Stephen E. Courter, Geoffrey Grant, Winston H.
Hickox, Murray H. Hutchison, Richard Nevins, Scott S. Slater and Mses. Maria Echaveste and Carolyn Webb de Macías (and,
if applicable, the Alternate Nominees recommended by the Company) to serve on our Board for a one-year term of office expiring
at the 2020 Annual Meeting of Stockholders;
|
●
|
FOR
the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants for the
fiscal year ending December 31, 2019;
|
●
|
FOR
the approval of the Cadiz Inc. 2019 Equity Inventive Plan to serve as the successor of the Cadiz Inc. 2014 Equity Inventive
Plan;
|
●
|
FOR
the non-binding, advisory resolution approving the compensation of the Company’s named executive officers; and
|
●
|
AGAINST
the stockholder proposal to amend the Bylaws to expand the notice requirements for stockholder business to be timely brought
before an annual meeting, if properly presented.
|
Why
is the Board making such recommendations?
We
describe each proposal and the Board’s reason for its recommendation with respect to each proposal on pages 15, 44, 45,
57 and 58 and elsewhere in this proxy statement.
Who
is entitled to vote at the 2019 Annual Meeting?
The
Board has set , 2019 as the record date for the 2019 Annual
Meeting. You are entitled to notice and to vote if you were a stockholder of record of our common stock, as of the close of
business on , 2019. You are entitled to one vote on each proposal for
each share of common stock you held on the record date. Your shares may be voted at the 2019 Annual Meeting only if you are
present in person or your shares are represented by a valid proxy. At the close of business on the record date, there were
shares of our common stock
issued, outstanding and entitled to vote at the 2019 Annual Meeting.
What
is the difference between a stockholder of “record” and a “street name” holder?
If
your shares are registered directly in your name, you are considered the stockholder of record with respect to those shares. The
Company sent the proxy materials directly to you.
If
your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other
nominee is considered to be the stockholder of record with respect to those shares. You are considered to be the beneficial owner
of those shares and your shares are said to be held in “street name,” and the proxy materials are being forwarded
to you by that organization. Street name holders generally cannot submit a proxy or vote their shares directly and must instead
instruct the broker, bank, trust or other nominee how to vote their shares. If you do not provide that organization specific direction
on how to vote, your shares held in the name of that organization may not be voted and will not be considered entitled to vote
on any matters to be considered at the 2019 Annual Meeting, and as such, will not be considered present at the 2019 Annual Meeting.
If you hold your shares in “street name,” please instruct your bank, broker, trust or other nominee how to vote your
shares using the
WHITE
voting instruction form provided by your bank, broker, trust or other nominee so that your vote
can be counted. The
WHITE
voting instruction form provided by your bank, broker or other nominee may also include information
about how to submit your voting instructions over the Internet or by telephone, if such options are available. The
WHITE
proxy card accompanying this proxy statement will provide information regarding internet and telephone voting.
What
constitutes a quorum?
The
presence in person or by proxy of the holders of a majority of the issued and outstanding shares of our common stock entitled
to vote constitutes a quorum, which is required to hold and conduct business at the 2019 Annual Meeting. At the close of business
on the record date, shares of our common stock were outstanding and entitled to vote at the 2019 Annual Meeting. Shares are counted
as present at the 2019 Annual Meeting if:
●
|
you
are present in person at the 2019 Annual Meeting; or
|
●
|
your
shares are represented by a properly authorized and submitted proxy (submitted over the Internet, by telephone or by mail).
|
If
you are a record holder and you submit your proxy, regardless of whether you abstain from voting on one or more matters, your
shares will be counted as present at the 2019 Annual Meeting for the purpose of determining a quorum. If your shares are held
in “street name,” your shares are counted as present for purposes of determining a quorum if you provide voting instructions
to your broker, bank, trust or other nominee and such broker, bank, trust or other nominee submits a proxy covering your shares.
In the absence of a quorum, the 2019 Annual Meeting may be postponed or adjourned, from time to time, by the chairman of the 2019
Annual Meeting, without notice other than announcement at the meeting.
Who
can attend the 2019 Annual Meeting?
Admission
to the 2019 Annual Meeting is limited to stockholders and their duly appointed proxy holders as of the close of business on the
record date with proof of ownership of our common stock, as well as valid government-issued photo identification, such as a valid
driver’s license or passport. If your shares are held in “street name” and you plan to attend the 2019 Annual
Meeting, you must present proof of your ownership of our common stock, such as a bank or brokerage account statement, as well
as valid government-issued photo identification to be admitted to the 2019 Annual Meeting. Any holder of a proxy from a stockholder
must present the proxy card, properly executed, and a copy of proof of ownership as well as valid government-issued photo identification.
We
will be unable to admit anyone who does not present identification or refuses to comply with our rules of conduct for the
2019 Annual Meeting. For security reasons, you and your bags will be subject to search prior to your admittance to the 2019
Annual Meeting. These rules provide, among other things, that no cameras, recording equipment, electronic devices, large bags
or packages will be permitted at the 2019 Annual Meeting. You are encouraged to submit a
WHITE
proxy card to have your
shares voted regardless of whether or not you plan to attend the 2019 Annual Meeting.
Your
vote is very important. Please submit your WHITE proxy card even if you plan to attend the 2019 Annual Meeting.
How
do I vote my shares?
The
process for voting your shares depends on how your common stock is held. Generally, you may hold common stock in your name as
a “stockholder of record” or in an account with a broker, bank, trust or other nominee (
i.e.
, in “street
name”). If your shares are registered in your name, you may vote your shares in person at the 2019 Annual Meeting or by
proxy whether or not you attend the 2019 Annual Meeting. You may vote using any of the following methods:
●
|
By
Internet — Stockholders of record may submit proxies over the Internet at [●], as described in the Internet voting
instructions on the
WHITE
proxy card. Most stockholders who hold shares beneficially in street name may provide voting
instructions by accessing the website specified on the voting instruction forms provided by their brokers, banks, trusts or
nominees. Please check the voting instruction form for Internet voting availability.
|
|
|
●
|
By Telephone
— Stockholders of record may submit proxies by telephone by calling (800) 662-5200 if in the United States or Canada,
as described in the telephone voting instructions on their
WHITE
proxy cards. Most stockholders who hold shares beneficially
in street name and live in the United States or Canada may provide voting instructions by telephone by calling the number
specified on the voting instruction forms provided by their brokers, banks, trusts or nominees. Please check the voting instruction
form for telephone voting availability.
|
|
|
●
|
By Mail —
Stockholders of record may submit proxies by completing, signing and dating the
WHITE
proxy cards and mailing them
in the accompanying pre-addressed envelopes. Stockholders who hold shares beneficially in street name may provide voting instructions
by mail by completing, signing and dating the voting instruction forms provided by their brokers, banks or other nominees
and mailing them in the accompanying pre-addressed envelopes.
|
|
|
●
|
In Person
at the 2019 Annual Meeting — Shares held in your name as the stockholder of record may be voted in person at the 2019
Annual Meeting. Shares held beneficially in street name may be voted in person only if you obtain a legal proxy from the broker,
bank, trust or nominee that holds your shares as of the record date, indicating that you were a beneficial owner of shares
as of the close of business on such date and the number of shares that you beneficially owned at that time.
|
Even
if you plan to attend the 2019 Annual Meeting, we recommend that you also submit your proxy or voting instructions by Internet,
telephone, or mail so that your vote will be counted if you later decide not to attend the 2019 Annual Meeting. The Internet and
telephone voting facilities will close at [7:00 p.m. ET] for stockholders of record and [11:59 p.m. ET] for shares held beneficially
in street name on , 2019. Stockholders who submit a proxy by Internet or telephone need not return a proxy card or the form forwarded
by your broker, bank, trust or other holder of record by mail.
If
you have any questions or require assistance in submitting a proxy for your shares, please call Morrow Sodali, at (800) 662-5200
(toll free for stockholders) or
(
203) 658-9400 (call collect for banks and brokers).
How
can I change my vote or revoke my proxy?
As
a stockholder of record, if you submit a proxy, you may revoke that proxy at any time before it is voted at the 2019 Annual Meeting.
Stockholders of record may revoke a proxy prior to the 2019 Annual Meeting by (i) delivering a written notice of revocation
that is dated later than the date of your proxy to the attention of the Corporate Secretary at our offices at 550 S. Hope Street,
Suite 2850, Los Angeles, California 90071, (ii) signing and delivering a later-dated proxy over the Internet, by telephone
or by mail, that we receive no later than or (iii) attending and voting in person at the 2019 Annual Meeting. Attendance
at the 2019 Annual Meeting will not, by itself, revoke a proxy.
If
your shares are held in the name of a broker, bank, trust or other nominee, you may change your voting instructions by following
the instructions of your broker, bank, trust or other nominee. You may also vote in person at the 2019 Annual Meeting if you obtain
a legal proxy from your bank, broker, trust or other nominee which holds your shares in street name.
If
you have previously submitted a proxy card sent to you by WAM, you may change your vote by completing and returning the enclosed
WHITE
proxy card in the accompanying postage-paid envelope or by voting over the Internet or by telephone by following
the instructions on your
WHITE
proxy card. Submitting a proxy card sent to you by WAM will revoke votes you have previously
made via the Company’s
WHITE
proxy card.
Has
the Company received notice from one or more stockholders that they are intending to nominate director candidates or bring proposals
at the 2019 Annual Meeting?
Yes.
WAM has indicated that it beneficially owns an aggregate of 3,257,547 shares of our common stock (representing approximately 12.4%
of our outstanding common stock), and has delivered notice to the Company of its intention to nominate five candidates to the
Board for election as directors in opposition to three of the nominees recommended by the Board and submit a proposal
for stockholder vote at the 2019 Annual Meeting. These WAM nominated directors are comprised of the two Company
incumbent directors currently serving in connection with a cooperation agreement entered into by WAM and the Company in 2018 and
three Additional WAM Nominees.
Has
the Company received notice from one or more stockholders that they are intending to submit a stockholders’ proposal at
the 2019 Annual Meeting?
Yes.
WAM has indicated that it beneficially owns an aggregate of 3,257,547 shares of our common stock (representing approximately 12.4%
of our outstanding common stock), and has delivered notice to the Company of its intention to submit a stockholder proposal at
the 2019 Annual Meeting requesting that stockholders vote to amend the Bylaws to change the notice requirements allowing stockholders
to timely bring business at an annual meeting. In the Company’s opinion, the stockholder proposal presented by WAM fails
to include many terms related to information that nominating/proposing stockholders should include in their nomination/proposal
submissions that are crucial to the Company’s ability to evaluate potential nominations/proposals and determine how such
business affects the interests of stockholders. As a result, the Company recommends you vote “AGAINST” Proposal 5,
and ignore any materials sent to you by WAM related to the stockholder proposal presented by WAM.
What
does it mean if I receive more than one notice from the Company or WHITE proxy card?
Because
WAM has submitted Additional WAM Nominees to the Board in opposition to the slate proposed by our Board and a stockholder proposal
which the Board recommends that stockholders vote against, we may conduct multiple mailings prior to the 2019 Annual Meeting to
ensure stockholders have our latest proxy information and materials to vote. In that event, we will send you a new
WHITE
proxy card or voting instruction form with each mailing, regardless of whether you have previously voted. You may also receive
more than one set of proxy materials, including multiple
WHITE
proxy cards, if you hold shares that are registered in more
than one account—please vote the
WHITE
proxy card for every account you own. The latest dated proxy you submit will
be counted, and
IF YOU WISH TO VOTE AS RECOMMENDED BY THE BOARD, THEN YOU SHOULD ONLY SUBMIT WHITE PROXY CARDS.
What
should I do if I receive a proxy card from WAM?
WAM
has nominated a slate of five individuals, two of which are incumbent directors serving on the Board in connection
with the Cooperation Agreement, for election as directors to the Board and submitted a proposal at the 2019 Annual Meeting
in opposition to the nominees proposed by our Board. WAM has also brought a stockholder proposal to be voted on at the 2019 Annual
Meeting. We expect that you may receive proxy solicitation materials from WAM, including opposition proxy statements and proxy
cards.
The Board strongly urges you NOT to sign or return any proxy cards or voting instruction forms that you may receive
from WAM, including to vote “withhold” with respect to the Additional WAM nominees
. We are not responsible for
the accuracy of any information provided by or relating to WAM or its nominees contained in any proxy solicitation materials filed
or disseminated by, or on behalf of, WAM or any other statements that WAM or its representatives have made or may otherwise make.
If you have already voted using the proxy card provided by WAM, you have every right to change your vote by completing and returning
the enclosed
WHITE
proxy card or by voting over the Internet or by telephone by following the instructions provided on
the enclosed
WHITE
proxy card or voting instruction form. Only the latest proxy you submit will be counted. If you vote
“Withhold” on the Additional WAM Nominees using the proxy card sent to you by WAM, your vote will not be counted as
a vote for any of the director nominees recommended by our Board, but will result in the revocation of any previous vote you may
have cast on the
WHITE
proxy card.
If you wish to vote pursuant to the recommendation of our Board, you should disregard
any proxy card that you receive other than the WHITE proxy card
. If you have any questions or need assistance voting, please
call Morrow Sodali at (800) 662-5200 (toll free for stockholders) or (203)658-9400 (call collect for banks and brokers).
How
will my shares be voted?
Stockholders
of record as of the close of business on , 2019, the record date, are entitled to one vote for each share of our common stock
held on each matter to be voted upon at the 2019 Annual Meeting. All shares entitled to vote and represented by properly submitted
proxies received before the polls are closed at the 2019 Annual Meeting, and not revoked or superseded, will be voted at the 2019
Annual Meeting in accordance with the instructions indicated on those proxies. Where a choice has been specified on the
WHITE
proxy card with respect to the proposals, the shares represented by the
WHITE
proxy card will be voted as you specify.
If you return a validly executed
WHITE
proxy card without indicating how your shares should be voted on a matter and you
do not revoke your proxy, your proxy will be voted: “
FOR
” the election of the eleven Intended Nominees (or,
in the event any of the Intended Nominees cannot serve, revokes his or her consent to serve or resigns from our Board prior to
the 2019 Annual Meeting, the Alternate Nominees) set forth on the
WHITE
proxy card (Proposal 1); “
FOR
”
the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants for the fiscal
year ending December 31, 2019 (Proposal 2); “
FOR
” the approval of the Cadiz Inc. 2019 Equity Incentive
Plan (Proposal 3); “
FOR
” the non-binding, advisory resolution approving the compensation of the Company’s
named executive officers (Proposal 4); and “
AGAINST
” the stockholder proposal to amend the deadline for timely
notice of stockholder business before an annual meeting, if properly presented (Proposal 5).
What
happens if I do not specify how I want my shares voted? What is discretionary voting? What is a broker non-vote?
As
a stockholder of record, if you properly complete, sign, date and return a
WHITE
proxy card or voting instruction form,
your shares of common stock will be voted as you specify. However, if you submit a signed
WHITE
proxy card or submit your
proxy by telephone or Internet and do not specify how you want your shares voted, the persons named as proxies will vote your
shares:
●
|
“FOR”
the election of the eleven Intended Nominees listed on the
WHITE
proxy card (
i.e.
, Messrs. Brackpool, Bohn,
Brown, Courter, Grant, Hickox, Hutchison, Nevins, Slater and Mses. Echaveste and Webb de Macías) (and, if applicable,
the Alternate Nominees recommended by the Company) to serve on our Board for a one-year term of office expiring at the 2020
Annual Meeting of Stockholders;
|
●
|
“FOR”
the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants for the
fiscal year ending December 31, 2019;
|
●
|
“FOR”
the approval of the Cadiz Inc. 2019 Equity Incentive Plan;
|
●
|
“FOR”
the approval of the non-binding, advisory resolution approving the compensation of the Company’s named executive
officers; and
|
●
|
“
AGAINST
”
the stockholder proposal to amend the Bylaws to expand the notice requirements for stockholder business to be timely brought
before an annual meeting, if properly presented.
|
A
“broker non-vote” occurs when a nominee holding shares for a beneficial owner has not received voting instructions
from the beneficial owner and the nominee does not have discretionary authority to vote the shares. If you hold your shares in
street name and do not provide voting instructions to your broker or other nominee, your shares will be considered to be broker
non-votes and will not be voted on any proposal. As a result, if you are a beneficial owner, then we encourage you to provide
voting instructions to the bank, broker, trust or other nominee that holds your shares by carefully following the instructions
provided in their notice to you.
What
is the effect of abstentions and broker non-votes on voting?
Abstentions
will be counted as present at the Annual Meeting for the purpose of determining a quorum. Abstention may not be specified with
respect to the election of directors (Proposal 1), and abstention with respect to Proposals 2, 3, 4 and 5 will have the same effect
as a vote against such proposal.
A
broker non-vote occurs when the broker is unable to vote on a proposal because the proposal is not routine and the stockholder
who owns the shares in “street name” has not provided any voting instructions to the broker on that matter. The New
York Stock Exchange (“NYSE”) rules determine whether proposals are routine or not routine. If a proposal is routine,
a broker holding shares for an owner in street name may vote on the proposal without voting instructions. Because we are facing
a contested election, the NYSE rules governing brokers’ discretionary authority do not permit brokers to exercise discretionary
voting power regarding any of the proposals to be voted on at the 2019 Annual Meeting, whether routine or not. As a result, brokers
are not entitled to vote on any of the proposals at the 2019 Annual Meeting without receiving voting instructions from the beneficial
owners, and thus the underlying shares will not be counted for establishing the presence of a quorum, and will have no effect
on the outcome of Proposals 1, 2, 3, 4 or 5. If you do not provide voting instructions to your bank, broker, trustee or other
nominee holding shares of our common stock for you, your shares will not be voted with respect to any proposal. We therefore encourage
you to provide voting instructions on a
WHITE
proxy card or the voting instruction form provided by the bank, broker, trustee
or other nominee that holds your shares, in each case by carefully following the instructions provided.
Could
other matters be decided at the 2019 Annual Meeting?
We
do not expect any other items of business will be presented for consideration at the 2019 Annual Meeting other than those described
in this proxy statement. However, by signing, dating and returning a
WHITE
proxy card or submitting your proxy or voting
instructions over the Internet or by telephone, you will give to the persons named as proxies discretionary voting authority with
respect to any matter that may properly come before the 2019 Annual Meeting, and of which we did not have notice at least by ,
and such persons named as proxies intend to vote on any such other matter in accordance with their best judgment.
Who
will count the votes?
All
votes will be tabulated as required by Delaware law, the state of our incorporation, by the inspector of election appointed for
the 2019 Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Shares
held by persons attending the 2019 Annual Meeting but not voting and shares represented by proxies that reflect abstentions as
to one or more proposals and broker non-votes will be counted as present for purposes of determining a quorum.
When
will the voting results be announced?
The
final voting results will be reported in a Current Report on Form 8-K, which will be filed with the Securities and Exchange Commission
(the “SEC”) within four business days after the 2019 Annual Meeting. If our final voting results are not available
within four business days after the 2019 Annual Meeting, we will file a Current Report on Form 8-K reporting the preliminary voting
results and subsequently file the final voting results in an amendment to the Current Report on Form 8-K within four business
days after the final voting results are known to us.
What
vote is required with respect to the proposals?
Election
of Directors.
Vote by a plurality of the shares present in person (including by remote communication, if applicable) or
represented by proxy at the 2019 Annual Meeting and entitled to vote thereon is required for the election of directors under Proposal
1. This means that, among the Company’s Intended Nominees (and if applicable, the Alternate Nominees) and the Additional
WAM Nominees, the eleven nominees receiving the highest number of “FOR” votes of the shares entitled to be voted in
the election of directors will be elected. You may vote “FOR” all Intended Nominees, “WITHHOLD” your vote
as to all Intended Nominees, or “FOR” all Intended Nominees except the specific nominee from whom you “WITHHOLD”
your vote. If you are voting by proxy, you will have the opportunity to vote conditionally on the election of the Alternate Nominees.
That vote will only be used in the event the Board substitutes an Alternate Nominee for a Departing Nominee. If none of the Intended
Nominees becomes a Departing Nominee, neither [●] nor [●] will be nominated by the Board and votes cast for or withheld
on their election shall be discarded and of no effect. There is no “against” option. A properly executed proxy marked
“WITHHOLD” with respect to the election of one or more directors will not be voted with respect to the director or
directors indicated. Proxies may not be voted for more than eleven directors and stockholders may not cumulate votes.
Ratification
of Auditors.
The ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders
of a majority of the shares present or represented by proxy at the 2019 Annual Meeting and entitled to vote on the matter. You
may vote “FOR,” “AGAINST” or “ABSTAIN.” If you ABSTAIN from voting on Proposal 2, the abstention
will have the same effect as an “AGAINST” vote.
Approval
of Equity Plan.
The approval of the Cadiz Inc. 2019 Equity Incentive Plan requires an affirmative vote of the holders
of a majority of the shares present or represented by proxy at the 2019 Annual Meeting and entitled to vote on the matter. You
may vote “FOR,” “AGAINST” or “ABSTAIN.” If you ABSTAIN from voting on Proposal 3, the abstention
will have the same effect as an “AGAINST” vote.
Non-binding
Resolution to Approve Compensation for Executive Officers.
The approval of a non-binding, advisory resolution approving
the compensation of the Company’s named executive officers requires the affirmative vote of the holders of a majority of
the shares present or represented by proxy at the 2019 Annual Meeting and entitled to vote on the matter. You may vote “FOR,”
“AGAINST” or “ABSTAIN.” If you ABSTAIN from voting on Proposal 4, the abstention will have the same effect
as an “AGAINST” vote. While the vote on Proposal 4 is advisory, and will not be binding on the Company or our Board,
the Board will review the results of the voting on this proposal and take it into consideration when making future decisions regarding
executive compensation as we have done in this and previous years.
Stockholder
Proposal to Amend the Bylaws.
If properly presented at the 2019 Annual Meeting, the approval of the stockholder proposal
to amend the Bylaws to expand the notice requirements for stockholder business to be timely brought before an annual meeting,
if properly presented, requires the affirmative vote of the majority of shares outstanding and entitled to vote thereon. The enclosed
WHITE
proxy card enables a stockholder to vote “FOR,” “AGAINST” or “ABSTAIN” on this
proposal. Abstentions and broker non-votes will have the same effect as an “AGAINST” vote on this proposal.
Who
will pay for the solicitation of proxies?
The
Company will bear the entire cost of solicitation of proxies, including preparation, assembly and mailing of this proxy statement,
the
WHITE
proxy card, the Notice of Annual Meeting of Stockholders and any additional information furnished to stockholders.
Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding shares of our
common stock in their names that are beneficially owned by others to forward to those beneficial owners. We may reimburse persons
representing beneficial owners for their costs of forwarding the solicitation materials to the beneficial owners. Original solicitation
of proxies may be supplemented by telephone, facsimile, electronic mail or personal solicitation by our directors, officers or
staff members. Other than the persons described in this proxy statement, no general class of employee of the Company will be employed
to solicit stockholders in connection with this proxy solicitation. However, in the course of their regular duties, employees
may be asked to perform clerical or ministerial tasks in furtherance of this solicitation. No additional compensation will be
paid to our directors, officers or staff members for such services. We have retained Morrow Sodali to act as a proxy solicitor
in conjunction with the 2019 Annual Meeting. We have agreed to pay Morrow Sodali $[●], plus reasonable out-of-pocket expenses
for proxy solicitation services. Morrow Sodali expects that approximately [●] of its employees will assist in the solicitation.
Our aggregate expenses, including legal fees and the fees and expenses of Morrow Sodali, are expected to be approximately $[●],
of which $[●] has been incurred as of the date of this proxy statement.
Appendix
A sets forth information relating to our directors, director nominees, Alternate Nominees, as well as certain of our officers
and employees who are considered “participants” in our solicitation under the rules of the SEC by reason of their
position as directors and director nominees of the Company or because they may be soliciting proxies on our behalf.
Do
I have appraisal or dissenters’ rights?
None
of the applicable Delaware law, our Certificate of Incorporation, as amended (the “Certificate of Incorporation”)
nor our Bylaws provide for appraisal or other similar rights for dissenting stockholders in connection with any of the proposals
set forth in this proxy statement. Accordingly, you will have no right to dissent and obtain payment for your shares in connection
with such proposals.
Whom
should I call if I have questions about the 2019 Annual Meeting?
Morrow
Sodali is assisting us with our effort to solicit proxies. If you have any questions concerning the business to be conducted at
the 2019 Annual Meeting, would like additional copies of this proxy statement or need help submitting a proxy for your shares,
please contact Morrow Sodali, the Company’s proxy solicitor:
509 MADISON AVENUE
SUITE 1206
NEW YORK, NY 10022
Stockholders
Call Toll Free: (800) 662-5200
Banks and Brokers Call Collect: (203)658-9400
Email:
CDZI@morrowsodali.com
THE
BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION OF EACH
OF
THE BOARD’S INTENDED NOMINEES (AND, IF APPLICABLE, THE ALTERNATE NOMINEES)
ON PROPOSAL 1, “FOR” PROPOSAL 2, “FOR”
PROPOSAL 3, “FOR” PROPOSAL 4 AND
“AGAINST” PROPOSAL 5, USING THE ENCLOSED
WHITE
PROXY CARD OR VOTE INSTRUCTION FORM.
THE
BOARD URGES YOU NOT TO SIGN, RETURN OR VOTE ANY PROXY CARD OR
VOTE INSTRUCTION FORM SENT TO YOU BY WAM EVEN
AS A PROTEST VOTE,
AS
ONLY YOUR LATEST DATED PROXY CARD WILL BE COUNTED.
BACKGROUND
OF THE SOLICITATION
In February 2016,
the Company entered into a lease agreement with Fenner Valley Farms (“FVF”), a subsidiary of WAM, a related party,
pursuant to which FVF leased, for a 99-year term, 2,100 acres at the Cadiz/Fenner property (the “WAM Lease”). In exchange,
FVF paid the Company a one-time payment of $12 million. WAM has failed to maintain the leased property in accordance with the WAM
Lease, despite numerous communications from the Company notifying both WAM and its Board designees of such noncompliance.
On
May 1, 2018, the Company and WAM entered into the Cooperation Agreement, pursuant to which the Board agreed to expand from nine
to eleven members, and add Messrs. Bohn and Brown as Board designees of WAM. According to the Cooperation Agreement, for so long
as WAM beneficially owns at least 12% of the Company’s outstanding stock (the “12% Ownership Threshold”), it
is entitled to nominate two designees to the Board.
Also
pursuant to the Cooperation Agreement, WAM agreed to vote its shares in favor of the election of the slate of directors nominated
by the Board at each annual meeting of the Company while the Cooperation Agreement is in effect.
On
May 31, 2018, the Company announced the appointment of Messrs. Bohn and Brown to the Board.
On November 14, 2018, during
a meeting with the Board and representatives of WAM, WAM and Anthony L. Arnerich, one of the Additional WAM Nominees, made a presentation
(the “WAM Presentation”) that included, among other things, a proposal that the Company enter into a transaction with
WAM which would result in the Company purchasing two disparate conventionally farmed properties from WAM (the “WAM Properties”)
for $90 million in Cadiz convertible preferred stock, which was a price and resulting level of dilution, upon later reflection,
that the Company’s senior management determined to be well in excess of the WAM Properties’ value, and as a result,
not in the best interests of the Company’s stockholders.
On
April 3, 2019, Tim Shaheen, Chief Financial Officer of the Company, sent a letter to Matthew Diserio of WAM, informing WAM
that its ownership in the Company had fallen below the 12% Ownership Threshold. The Company sent the letter understanding
that it had no obligation to inform WAM of WAM’s failure to own the 12% Ownership Threshold, but chose to do so as a
courtesy to WAM even though the Cooperation Agreement does not contain anti-dilution provisions. Mr. Shaheen offered WAM the
opportunity to restore its ownership up to 12% by April 10, 2019, in preparation of the Company’s proxy statement for
the 2019 Annual Meeting, so that WAM would not lose one of its designated Board seats.
On
April 5, 2019, Schulte Roth & Zabel LLP, WAM’s legal counsel (“Schulte”) sent Mr. Shaheen and Richards,
Layton & Finger, P.A., the Company’s Delaware legal counsel, (“Richards, Layton & Finger”) a letter
expressing disappointment and requesting that the Company nominate all of the incumbent directors for re-election at the 2019
Annual Meeting regardless of WAM’s failure to own the 12% Ownership Threshold.
On
April 9, 2019, Richards, Layton & Finger responded on behalf of the Company in a letter to Schulte, reiterating its offer
to allow WAM to come into compliance with the requisite 12% Ownership Threshold to maintain its two Board designees.
On
April 10, 2019, Schulte sent a letter to Richards, Layton & Finger and Mr. Shaheen, disclosing that WAM initiated a process
to convert a sufficient portion of its 7.00% Convertible Senior Notes due 2020 (the “Convertible Notes”) to restore
its ownership to the 12% Ownership Threshold.
On
April 12, 2019, Richards, Layton & Finger sent a letter to Schulte acknowledging receipt of the April 10th letter and confirming
that the Company would nominate Messrs. Bohn and Brown for election at the 2019 Annual Meeting.
On
April 19, 2019, WAM delivered a formal notice to Mr. Shaheen of its intent to nominate and solicit proxies in support of the Additional
WAM Nominees and Messrs. Bohn and Brown for election to the Board at the 2019 Annual Meeting. WAM further notified the Company
that it intends to submit a proposal at the 2019 Annual Meeting to vote on a stockholder proposal to amend the Bylaws to expand
the notice requirements for stockholder business to be timely brought before an annual meeting.
According
to WAM’s nomination notice, WAM owned approximately 3,257,547 shares of the Company’s outstanding common stock (representing
approximately 12.4% of our outstanding common stock).
On
April 22, 2019, Richards, Layton & Finger sent a letter to Schulte acknowledging receipt of the nomination notice and informing
WAM that the Company had not yet received notice that conversion of the Convertible Notes had taken place. Again the Company offered
WAM an opportunity to bring its stake in compliance with the 12% Ownership Threshold, and requested that WAM deliver its notice
of conversion by April 22, 2019. The conversion notice was subsequently received and the shares were issued on April 22, 2019.
On
April 23, 2019, Eisner LLP, the Company’s counsel, met telephonically with Schulte to discuss the ramifications of WAM’s
nomination notice in light of the Cooperation Agreement.
On
April 30, 2019, the Company received a letter from Hoving & Partners S.A., a stockholder representing more than 34% of the
Company’s outstanding stock, expressing its support for the Company, its business plan and its leadership, which was filed
on a Current Report on Form 8-K with the SEC on May 6, 2019.
On
May 7, 2019, Scott Slater, Chief Executive Officer of the Company, met telephonically with WAM to discuss, among other things,
a settlement proposal made by the Company in an effort to amicably resolve WAM’s nomination of the Additional WAM Nominees
at the 2019 Annual Meeting. WAM refused to accept the Company’s offer.
Also on May 7, 2019, Vinson & Elkins L.L.P.
(“V&E”), the Company’s outside counsel, sent a letter to Schulte, asking for clarification on whether WAM
intends to uphold its commitment to vote for the Company’s Intended Nominees, pursuant to the Cooperation Agreement.
On May 8, 2019, Schulte
responded to V&E with a letter that neither confirmed that WAM would vote in accordance with its obligations under the Cooperation
Agreement, nor did it affirm that WAM intends to violate the Cooperation Agreement.
On May 10, 2019, V&E
sent a letter to Schulte, expressing the Company’s disappointment that despite Mr. Slater’s attempts to schedule follow-up
meetings to discuss the Company’s settlement proposal, no further negotiations had taken place due to WAM’s scheduling
conflicts. Notwithstanding WAM’s failure to respond to the Company’s overtures, V&E notified Schulte that the Company’s
settlement proposal would remain open until May 11, 2019.
On May 11, 2019, five
days after the Company proposed a settlement, WAM responded to V&E’s May 10th letter without addressing the Company’s
settlement proposal. Although WAM’s letter claimed that “WAM remains eager to meet with the Company,” WAM has
offered to meet with the Company no earlier than May 20, 2019.
On
May 13, 2019, the Company filed a preliminary proxy statement with the SEC.
OUR
BOARD STRONGLY URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD OR VOTING INSTRUCTION FORM THAT YOU MAY RECEIVE FROM WAM, EVEN TO
VOTE “WITHHOLD” WITH RESPECT TO THE ADDITIONAL WAM NOMINEES, AS DOING SO WILL CANCEL ANY PROXY YOU MAY HAVE PREVIOUSLY
SUBMITTED TO HAVE YOUR SHARES VOTED FOR THE BOARD’S PROPOSED SLATE ON A WHITE PROXY CARD, AS ONLY YOUR LATEST PROXY CARD
OR VOTING INSTRUCTION FORM WILL BE COUNTED.
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board intends to nominate the eleven Intended Nominees listed below for election at the 2019 Annual Meeting. However, in the event
any of the Intended Nominees cannot serve, revokes his or her consent to serve or resigns from our Board prior to the 2019 Annual
Meeting, the Board intends to submit [●] and, in the event there is more than one Departing Nominee, [●] (the Alternate
Nominees), to serve as directors for a term expiring at the 2020 Annual Meeting of Stockholders (“2020 Annual Meeting”)
or until their respective successors are elected and qualified. If you are voting by proxy, you will have the opportunity to vote
conditionally on the election of the Alternate Nominees. That vote will only be used in the event the Board substitutes an Alternate
Nominee for a Departing Nominee. If none of the Intended Nominees becomes a Departing Nominee, neither [●] nor [●]
will be nominated by the Board and the votes cast for or withheld on their election shall be discarded and of no effect.
Intended
Nominees
:
Keith
Brackpool
John
A. Bohn
Jeffrey
J. Brown
Stephen
E. Courter
Maria
Echaveste
Geoffrey
Grant
Winston
H. Hickox
Murray
H. Hutchison
Richard
Nevins
Scott
S. Slater
Carolyn
Webb de Macías
Alternate
Nominees
:
[●]
[●]
Each
of the Intended Nominees and Alternate Nominees has consented to be named in this proxy statement and to serve as a director,
if elected. The Board has reviewed the background of the nominees, as set out on the following page, and has determined
to nominate each Intended Nominee for election. Mr. Pacini shall continue to serve on the Board, as well as on the committees
of the Board of which he is currently a member, until the 2019 Annual Meeting. Proxies may not be voted for a greater number of
persons than eleven.
The Board believes that each Intended Nominee
and Alternate 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 the Company. As
indicated in the following biographies, the Intended Nominees and Alternate Nominees have extensive and diverse experience in
a variety of fields, including water policy (Messrs. Bohn, Brackpool and Slater), real estate development (Messrs. Hutchison Hickox),
environmental stewardship (Messrs. Hutchison Hickox), agricultural development (Mr. Brackpool), capital raising (Messrs. Brackpool,
Brown, Grant, Hickox and Nevins), public accounting (Mr. Courter), public policy (Mses. Echaveste and Webb de Macías and
Messrs. Hickox, Hutchison and Slater), community engagement (Mses. Echaveste and Webb de Macías) and academia (Mses. Echaveste
and Webb de Macías and Messrs. Courter and Slater).
The
Board also believes that, as indicated in the biographies, the Intended Nominees and Alternate Nominees have demonstrated significant
leadership skills as a chief executive officer (Messrs. Bohn, Brown, Brackpool, Hutchison, Grant, Hickox, Courter and Nevins and
Ms. Echaveste), or as high-ranking appointments in state and federal government administrations (Messrs. Brackpool, Bohn and Hickox
and Mses. Echaveste and Webb de Macías) and as chair of community and academic foundation boards (Mses. Echaveste and Webb
de Macías). All of the Intended Nominees and Alternate Nominees have significant experience in the oversight
of public companies due to their service as the Company’s directors or as directors of other companies. The Board
believes that these skills and experiences qualify each Intended Nominee and Alternate Nominee to serve as a director of the Company.
Pursuant
to the May 2018 Cooperation Agreement with WAM, the Company agreed to expand its Board and add two new members, suggested by WAM,
John A. Bohn and Jeffrey J. Brown. In honoring its obligations under the Cooperation Agreement, the Board has included Messrs.
Bohn and Brown in the Company’s proxy statement and intends to nominate each of them, unless the Cooperation Agreement is
terminated prior to the 2019 Annual Meeting. Due to the commitments WAM made in the Cooperation Agreement, we believe that WAM
is obligated to vote for the Company’s recommended nominees on the
WHITE
proxy card, and cannot vote for the Additional
WAM Nominees.
WHITE
proxy cards will be voted for the election of the Intended Nominees (and, if applicable, the Alternate Nominees recommended
by the Company) 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 Intended Nominee or Alternate 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 may designate to fill that position.
Required Vote.
Vote
by a plurality of the shares present in person (including by remote communication, if applicable) or represented by proxy at the
2019 Annual Meeting and entitled to vote thereon is required for the election of directors under Proposal 1. This means that,
among the Company’s Intended Nominees (and if applicable, the Alternate Nominees) and the Additional WAM Nominees, the eleven
nominees receiving the highest number of “FOR” votes of the shares entitled to be voted in the election of directors
will be elected. You may vote “FOR” all Intended Nominees, “WITHHOLD” your vote as to all Intended Nominees,
or “FOR” all Intended Nominees except the specific nominee from whom you “WITHHOLD” your vote. If you
are voting by proxy, you will have the opportunity to vote conditionally on the election of the Alternate Nominees. That vote
will only be used in the event the Board substitutes an Alternate Nominee for a Departing Nominee. If none of the Intended Nominees
becomes a Departing Nominee, neither [●] nor [●] will be nominated by the Board and votes cast for or withheld on
their election shall be discarded and of no effect. There is no “against” option. A properly executed proxy marked
“WITHHOLD” with respect to the election of one or more directors will not be voted with respect to the director or
directors indicated. Proxies may not be voted for more than eleven directors and stockholders may not cumulate votes.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF
THE COMPANY’S INTENDED NOMINEES (AND, IF
APPLICABLE,
THE ALTERNATE NOMINEES) 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 individual we presently intend to nominate to the Board at our 2019 Annual Meeting of Stockholders.
Intended
Nominees for director:
Name
|
|
Age
|
|
Position with Cadiz
|
|
|
|
|
|
Keith Brackpool
|
|
61
|
|
Chairman of the Board
|
|
|
|
|
|
John A. Bohn
|
|
81
|
|
Director
|
|
|
|
|
|
Jeffrey J. Brown
|
|
58
|
|
Director
|
|
|
|
|
|
Stephen E. Courter
|
|
64
|
|
Director
|
|
|
|
|
|
Maria Echaveste
|
|
64
|
|
Director
|
|
|
|
|
|
Geoffrey Grant
|
|
58
|
|
Director
|
|
|
|
|
|
Winston H. Hickox
|
|
76
|
|
Director
|
|
|
|
|
|
Murray H. Hutchison
|
|
80
|
|
Director
|
|
|
|
|
|
Richard Nevins
|
|
71
|
|
Director
|
|
|
|
|
|
Scott S. Slater
|
|
61
|
|
Director, President and Chief Executive Officer
|
|
|
|
|
|
Carolyn Webb de Macías
|
|
71
|
|
Director
|
Alternate
Nominees for director:
Name
|
|
Age
|
|
Position with Cadiz
|
|
|
|
|
|
[●]
|
|
[●]
|
|
[●]
|
|
|
|
|
|
[●]
|
|
[●]
|
|
[●]
|
Keith
Brackpool is a co-founder of the Company and Chairman of the Board, a position he has held since 2001. Mr.
Brackpool was appointed to the Board 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 to January 2013, including a term as Chairman from 2010 to 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 as a director effective May 30, 2018. Mr. Bohn was appointed pursuant to the terms of the Cooperation Agreement.
Mr. Bohn has served as 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 as a director effective May 30, 2018. Mr. Brown was appointed pursuant to the terms of a Cooperation Agreement.
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 the Company, 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 more than 30 years in the investment business, Mr. Brown has served on more than 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 more than 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.
On
April 4, 2019, Maria Echaveste was nominated by the Board to stand for election as a director at its 2019 Annual Meeting. Ms.
Echaveste is a scholar with a distinguished career working as a community leader, public policy advisor, lecturer, senior White
House official and attorney. She is presently President and CEO of the Opportunity Institute, a non-profit working to increase
economic and social mobility focused on equity for the most vulnerable communities, a position she has held since March 2019.
Ms. Echaveste has been affiliated with UC Berkeley in various capacities since 2004 including: lecturing at the School of Law
and in the undergraduate division on immigration and education; serving as program and policy director of the Law School’s
Chief Justice Earl Warren Institute on Law and Social Policy from 2006 to 2012; serving as a Senior Fellow at UC Berkeley’s
Center for Latin American Studies since 2008; and as a Visiting Scholar with the Berkeley Food Institute from 2015 to 2016. Previously,
from 1998 to 2001, Ms. Echaveste served as Assistant to the President and Deputy Chief of Staff for President Bill Clinton focused
on issues relating to immigration, civil rights, education, finance, Mexico and Latin America. From 1993 to 1997 she served
as Administrator of the Wage and Hour Division at the U.S. Department of Labor. In 2009, then-Secretary of State Hillary Clinton
appointed Ms. Echaveste as a special representative to Bolivia. From 2015 to 2017, Ms. Echaveste served as vice-chair of
the California International Trade and Investment Advisory Committee, an appointment by Governor Brown. Ms. Echaveste presently
serves on the board of directors of the Level Playing Field Institute, Mi Familia Vota and UCSF Benioff Children’s Hospitals.
Geoffrey
Grant was appointed a director of the Company effective January 22, 2007. Mr. Grant is currently 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 stockholder at
California Strategies, LLC, 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 Senior 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 of the Company’s
subsidiary, Cadiz Real Estate LLC (“Cadiz Real Estate”). In his capacity as a manager of Cadiz Real Estate, he performs
essentially the same duties on behalf of Cadiz Real Estate 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.(NASDAQ: JACK), 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. (OTCMKTS:
CRXM), 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 more than 30 years
of financial experience as a senior investment banker and senior corporate officer. Mr. Nevins holds a MBA from the Stanford Graduate
School of Business and a Bachelor of Arts in Economics from the University of California, Riverside.
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 Board since February 2012. Mr.
Slater is an accomplished negotiator and litigator and, in addition to his role at the Company, is a stockholder 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.
On
April 4, 2019, Carolyn Webb de Macías was nominated by the Board to stand for election as a director at the 2019 Annual
Meeting. Carolyn Webb de Macías is a community leader with an extensive career in public policy and higher education. Ms. Webb de Macías serves as Board Chair for the Los Angeles Partnership, a non-profit organization that manages
17 public schools through a Memorandum Of Understanding with the Los Angeles Unified School District, and as Member of the Board
of the Community Coalition of South Los Angeles, a community education and advocacy organization. Previously Ms. Webb de Macías
served in the office of Elementary and Secondary Education in the U.S. Department of Education as an appointee of President Barack
Obama from 2010 to 2012. From 1997 to 2008, Ms. Webb de Macías served in various roles at the University of Southern California
including adjunct faculty member in the USC Rossier School of Education, associate provost from 1997 to 2002 and vice president
for external relations from 2002 to 2008. From 1991 to 1997 Ms. Webb de Macías served as chief of staff for Los Angeles
City Councilman Mark Ridley-Thomas. Ms. Webb de Macías’ strong record of community service includes roles as founding
member of the Board for the Alliance for Regional Collaboration to Heighten Educational Success (“ARCHES”), member of the Boards
of the Los Angeles African American Women’s Public Policy Institute and the International Black Women’s Public Policy
Institute, member of the Central City Association Executive Committee and founding president of the Education Consortium of Central
Los Angeles. Ms. Webb de Macías has been honored for her work as a founding member of Young Black Scholars of Los Angeles
and named a
Black Woman of Achievement
by the NAACP Legal Defense and Education Fund.
[Alternate Nominee Biography]
[Alternate Nominee Biography]
THE
BOARD OF DIRECTORS
Directors
of the Company hold office until the next annual meeting of stockholders or until their successors are elected and qualified.
If the Company’s slate is elected, we will have added four new directors since May 2018, and two of our directors with the
longest tenure will have retired since then. There are no family relationships between any directors or current officers of the
Company. Officers serve at the discretion of the Board.
The
Board 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 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 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 provides 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 currently composed of Jeffrey J. Brown, Stephen E. Courter, Winston H. Hickox and Raymond Pacini. The Board
as 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 of 1933 (the “Securities Act”).
Mr. Pacini will not be standing for re-election at the 2019 Annual Meeting. Following the 2019 Annual Meeting, Mr. Courter, whom
he Board has determined to be an “audit committee financial expert”, will replace Mr. Pacini as Chair of the Audit
Committee.
Director
Independence
Messrs.
Bohn, Brown, Courter, Grant, Hickox, Hutchison, Nevins, Pacini and Mses. Echaveste and Webb de Macías 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
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
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
During
the year ended December 31, 2018, the Board held nine 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 were present at each meeting,
with the exception of (i) Mr. Hickox, who was unable to attend three telephonic meetings, (ii) Mr. Pacini, who was unable to attend
one telephonic meeting, and (iii) Mr. Brown, who was unable to attend one in-person meeting, Mr. Bohn and Mr. Brown were not named
to the Board until May 2018 and therefore each did not attend one in-person meeting and three telephonic meeting in 2018.
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 regarding the financial, investment
and accounting procedures and practices followed by the Company. The Audit Committee is currently composed of Messrs. Pacini,
Brown Hickox and Courter. Mr. Pacini is currently the Audit Committee Chair. Following the 2019 Annual Meeting, Mr. Pacini will
be replaced as Audit Committee Chair by Mr. Courter. 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, 2018. All then serving members of the Audit Committee were
present at each meeting. Mr. Brown was not appointed to the Audit Committee until May 2018 and therefore did not attend two of
the meetings. 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 Chief Executive Officer’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 regarding the compensation of
directors and executive officers. The Committee operates under a written charter adopted by the Board, 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 Corporate Governance and Nominating Committee makes recommendations to the
Board of corporate guidelines applicable to the Company. The Corporate Governance and Nominating Committee is also responsible
for the identification and recommendation to the Board of qualified candidates for nomination to the Board. The Corporate Governance
and Nominating 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 the Bylaws, 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 must possess certain minimum qualifications. The Corporate Governance and Nominating 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. 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, 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 Messrs. Hutchison, Bohn, Pacini, Hickox and 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. In 2018, the Corporate Governance and Nominating Committee met two times in-person and
conferred on a number of occasions through telephone conferences, and took action, when appropriate, by unanimous written consent.
All members of the Corporate Governance and Nominating Committee were present at the meetings with the exception of (i) Mr. Pacini,
who was unable to attend one telephonic meeting and (ii) 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.
At the 2018 Annual Meeting of Stockholders, ten members of the Board were present.
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 Chief Executive Officer and members of the Board, with such discussion to take place regardless of whether those questions
have been submitted in advance.
CODE
OF ETHICS
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.
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
2018 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
2018, our named executive officers effectively completed multiple transactions important to the long-term success of the Company,
including:
●
|
Negotiated
and entered into a Purchase Agreement for 124 miles of a 30” idle natural gas pipeline
.
This pipeline, together
with a 96 mile segment that the Company already owns, crosses San Bernardino, Los Angeles and Kern counties, including the
Barstow and Bakersfield areas, which serve as hubs for water delivered from northern and central California to communities
in Southern California. We believe the pipeline could diversify delivery opportunities for the Cadiz Valley Water Conservation,
Recovery and Storage Project (the “Water Project”) and the Company’s broader water resource development
efforts.
|
●
|
Defeated
a California legislative attack on the Water Project via Senate Bill 120 and implemented a strategic plan to defeat new state
legislative and administrative efforts to slow or stop implementation of the Water Project.
Following successful approval
of the Water Project in applicable public agency and court venues, environmental organizations opposed to the Water Project
initiated a strategy in 2017 to create new and additional regulatory hurdles for the Water Project in the California State
Legislature and via the Executive Branch. This strategy began with the introduction of Assembly Bill 1000, which sought to
create additional environmental review permitting for the Water Project carried out by state agencies. The Company worked
with a coalition of bill opponents to educate the Legislature about its impacts, and AB 1000 was held in the Senate Appropriations
subcommittee and did not advance further. In 2018, the organized opponents of the Water Project revived AB 1000 via another
“gut and amend” of Senate Bill 120 in the last week of the legislative session. Again, the Company worked with
a coalition of bill opponents in the condensed time frame, and successfully argued that the bill should be stopped from becoming
law.
|
●
|
Directed
ongoing permitting and technical initiatives related to implementation of Phase 1 of the Water Project.
In 2018, project
technical planning continued and management oversaw ongoing watershed monitoring, the preparation of construction permit applications,
pilot and feasibility testing for water treatment programs, land acquisitions and technical review of hydrology and geology
study at the project area.
|
Compensation
Committee activities in 2018 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 2018 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.
We
welcome direct stockholder feedback on our programs. Throughout the year we have met, through meetings and telephone calls, with
stockholders representing over 65% of shares outstanding and have taken into consideration the issues which have been expressed
as being important to them.
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:
●
|
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.
|
●
|
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.
|
●
|
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.
|
●
|
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.
|
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:
●
|
Alico,
Inc.
|
●
|
Forestar
Group, Inc.
|
●
|
Limoneira
Company
|
●
|
PICO
Holdings, Inc.
|
●
|
Taylor
Morrison, Inc.
|
●
|
Tejon
Ranch Co.
|
●
|
Pure
Cycle Corp.
|
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 strategic 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. Consequently, in setting executive officer
compensation levels, we do not have a policy of setting compensation levels within a fixed range of benchmarks of our peer companies.
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 2018 Compensation
1.
SALARY. In evaluating base salaries for 2018, the Compensation Committee believed it was important to maintain competitive base
salary compensation that would also keep cash compensation expenditures to a minimum. In 2018, each of Messrs. Slater’s,
Shaheen’s and Brackpool’s annual base salary remained the same as in 2017.
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 our primary form of incentive compensation and maintain alignment with the
goals of stockholders, the Committee and the Board have created plans subject to stockholder approval. The Company’s
most recent equity incentive program (the “2014 Incentive Plan”) was approved by stockholders at the
Company’s 2014 Annual Meeting of Stockholders. The 2014 Incentive Plan reserved 675,000 shares for issuance; the plan
currently has 20,269 shares available for issuance.
The
Committee did not award restricted stock or options to the Company’s named executive officers in 2018 and has authored the
new Cadiz Inc. 2019 Equity Incentive Plan (being considered for approval at the 2019 Annual Meeting) that better aligns the Company’s
current objectives with equity incentive awards (See “Proposal 3”). Implementation of the Cadiz Inc. 2019 Equity Incentive
Plan is expressly contingent upon the Company obtaining stockholder approval prior to December 31, 2019.
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 2018, Mr. Brackpool, Mr. Shaheen 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 2018. 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. Nevertheless, if an executive leaves under circumstances that call into question whether
any compensation amounts paid to him or her were validly earned, we would pursue any legal rights we deemed appropriate under
the circumstances.
A
summary of the severance and change-in-control provisions applicable to compensation arrangements with the Company’s named
executive officers named in the Summary Compensation Table, along with a quantification of the benefits available to each named
executive officer as of December 31, 2018, can be found in the section captioned “Potential Payments upon Termination or
Change in Control.” The Company does not provide excise tax gross-ups as part of these benefits.
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 $1 million the Company’s deduction for compensation paid to each of our executive officers,
which does not qualify as “performance based.” The 2014 Equity Incentive Plan was designed to permit grant awards
that qualify as performance-based compensation, thereby permitting the Company to receive a federal income tax deduction in connection
with the awards.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management of the Company. Based
on this review and discussion, we recommend to the Board that the Compensation Discussion and Analysis be included in this proxy
statement.
|
THE
COMPENSATION COMMITTEE
|
|
|
|
Murray
H. Hutchison, Chairman
|
|
John
A. Bohn
Stephen
E. Courter
Geoffrey
Grant
Winston
H. Hickox
Raymond
J. Pacini
|
The
foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this statement
into any filing under the Securities Act or under the Securities Exchange Act of 1934 (the “Exchange Act”), except
to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed
under the Securities Act or Exchange Act.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table shows the compensation awarded to, earned by, or paid during the years ended December 31, 2018, 2017 and 2016,
to the Company’s current Chief Executive Officer and president, our Chief Financial Officer and our former Chief Executive
Officer and current Chairman.
Name
and Principal Position
(1)
|
|
Year
|
|
|
Salary
($)
|
|
|
|
Bonus
($)
|
|
|
|
Stock
Awards
(2)
($)
|
|
|
|
Option
Awards
(2)
($)
|
|
|
|
All Other
Compensation
(3)
($)
|
|
|
|
Total
($)
|
|
Scott Slater
President and current Principal Executive Officer
|
|
2018
2017
2016
|
|
|
300,000
300,000
300,000
|
|
|
|
300,000
300,000
-
|
|
|
|
-
-
-
|
|
|
|
-
-
-
|
|
|
|
-
-
-
|
|
|
|
600,000
600,000
300,000
|
|
Timothy J. Shaheen
Principal Financial Officer and Secretary
|
|
2018
2017
2016
|
|
|
350,000
350,000
200,000
|
|
|
|
300,000
300,000
200,000
|
|
|
|
-
851,500
59,934
|
|
|
|
-
-
-
|
|
|
|
12,587
12,336
9,271
|
|
|
|
662,587
1,513,836
469,205
|
|
Keith Brackpool
Chairman and former Principal Executive Officer
|
|
2018
2017
2016
|
|
|
275,000
275,000
35,000
|
|
|
|
300,000
300,000
-
|
|
|
|
-
851,500
95,895
|
|
|
|
-
-
-
|
|
|
|
44,936
47,260
42,943
|
|
|
|
319,936
1,473,760
173,838
|
|
|
(1)
|
The
executive officers listed in the Summary Compensation Table above were the Company’s only executive officers during the
year ended December 31, 2018.
|
|
(2)
|
This
column discloses the dollar amount of compensation cost recognized for the respective fiscal year in accordance with FASB ASC
Topic 718. The assumptions used for determining the value of stock awards and options are set forth in the relevant Cadiz Inc.
Annual Report to Stockholders in Note 9 to the Consolidated Financial Statements, “Stock-Based Compensation Plans and Warrants.”
All Stock Awards listed were approved by stockholders as part of the 2014 Equity Incentive Plan and became fully vested and were
issued in 2017.
|
|
(3)
|
All
Other Compensation includes a 401k match that is generally available to all employees. Messrs. Brackpool and Shaheen each received
$11,000 in 401k matching contributions in 2018. In 2018, Mr. Brackpool’s other compensation also includes $33,936 of company
paid expenses related to a leased automobile. Mr. Shaheen’s other compensation for 2018 includes $1,587 in a car allowance.
The value of perquisites for Mr. Slater was less than $10,000, and thus no amount relating to perquisites is included in the Summary
Compensation Table.
|
Grants
of Plan-Based Award
There
were no non-equity incentive plan awards or equity awards granted to our named executive officers in 2018.
Outstanding
Equity Awards at Fiscal Year
The
following table sets forth certain information concerning outstanding stock and option awards as of December 31, 2018, for
each named executive officer.
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
|
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
|
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
|
|
|
Equity Incentive Plan Awards: Marked or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
|
Scott Slater
|
|
|
100,000
|
(1)
|
|
|
-
|
|
|
|
12.51
|
|
|
4/12/21
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. Shaheen
|
|
|
100,000
|
(1)
|
|
|
-
|
|
|
|
11.50
|
|
|
1/14/20
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith Brackpool
|
|
|
200,000
|
(1)
|
|
|
-
|
|
|
|
11.50
|
|
|
1/14/20
|
|
|
-
|
|
|
|
-
|
|
(1)
|
Options
granted by the Company under the 2009 Equity Incentive Plan.
|
Option
Exercises and Stock Vested
The
following table sets forth certain information concerning stock option exercises and restricted stock vesting during 2018 for
each named executive officer.
|
|
|
Option Awards
|
|
|
|
Stock Awards
|
|
Name
|
|
|
Shares Acquired
on Exercise (#)
|
|
|
|
Value Realized
on Exercise ($)
|
|
|
|
Shares Acquired
on Vesting (#)
|
|
|
|
Value Realized
on Vesting ($)
|
|
Scott Slater
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Timothy J. Shaheen
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Keith Brackpool
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Pension
Benefits
The
Company does not have any qualified or non-qualified defined benefits plans.
Nonqualified
Deferred Compensation
The
Company does not have any non-qualified defined contribution plans or other deferred compensation plans.
EMPLOYMENT
ARRANGEMENTS
Mr.
Slater has served with the Company since November 2008 pursuant to an agreement with the law firm Brownstein Hyatt Farber and
Schreck LLP, where Mr. Slater is also a stockholder. From 2008 to 2012, Mr. Slater was primarily focused on the development
of the Company’s Water Project and did not receive a base salary from the Company for his role as General Counsel (2008
– 2012) and President (2011 – 2012). Mr. Slater’s compensation from the Company consisted exclusively
of long-term incentives due to the nature of the development of the Water Project. In April 2011, Mr. Slater received options
to purchase 100,000 shares of common stock at an exercise price of $12.51 per share under the Company’s 2009 Incentive Plan
with such options vesting 1/3 when issued, 1/3 in April 2012 and 1/3 in April 2013. On February 1, 2013, Mr. Slater was
named Chief Executive Officer in addition to his ongoing role as President. As a result, Mr. Slater’s employment arrangements
were amended to reflect the broadening of his responsibilities and leadership role over all of the Company’s asset development
initiatives. In consideration of Mr. Slater’s agreement to serve as Chief Executive Officer and President, Mr. Slater began
to receive an annual base salary from the Company of $300,000 effective February 1, 2013.
The Company’s Chief Financial Officer,
Mr. Shaheen, entered into an amended and restated employment agreement with the Company effective July 1, 2014 replacing a May
2009 employment agreement. Mr. Shaheen serves as the Principal Financial Officer of the Company and as Chairman and
Chief Executive of the Board of Managers of Cadiz Real Estate, our subsidiary holding title to the Company’s land and water
assets. Mr. Shaheen also oversees the Company’s agricultural operations. Mr. Shaheen’s amended and restated
agreement provided for a new base salary compensation structure and established milestone principles for further long-term incentive
equity awards. Pursuant to the amended and rested agreement, Mr. Shaheen’s annual base cash compensation was reduced
for 2014, 2015 and 2016 in exchange for equity based salary in the form of restricted stock units (“RSUs”) that vested
ratably during those years. Effective July 1, 2014, Mr. Shaheen’s salary was decreased to $200,000 per annum, and
he received a total of 62,500 RSUs, 12,500 in 2014 and 25,000 each in 2015 and 2016. In addition, Mr. Shaheen received a
long-term equity incentive milestone award of 100,000 shares of the Company’s stock in the form of 100,000 RSUs. These
RSUs were earned and issued in June 2017. No RSUs have been granted in 2018 to Mr. Shaheen. In accordance with the
terms of his amended and restated employment agreement, effective January 1, 2017 the base cash salary for Mr. Shaheen automatically
reverted to $350,000, representing his salary as in effect immediately prior to the 2014 RSU grants.
Mr.
Brackpool entered into an amended and restated employment agreement effective July 1, 2014 (“2014 Amended Agreement”)
replacing a May 2009 employment agreement. The 2014 Amended Agreement provided for a new base salary compensation structure
and established milestone principles for further long-term incentive equity awards. Pursuant to the 2014 Amended Agreement,
Mr. Brackpool’s annual base cash compensation was reduced for 2014, 2015 and 2016 in exchange for equity based salary in
the form of restricted stock units (“RSUs”) that vested ratably during those years. Effective July 1, 2014,
Mr. Brackpool’s salary was decreased to $35,000 per annum, and he received a total of 100,000 RSUs, 20,000 in 2014 and 40,000
each in 2015 and 2016. In addition, Mr. Brackpool received a long-term equity incentive milestone award of 100,000 shares
of the Company’s stock in the form of 100,000 RSUs. These RSUs were earned and issued in June 2017. No RSUs
have been granted in 2018 to Mr. Brackpool. In accordance with the terms of his amended and restated employment agreement,
effective January 1, 2017, the base cash salary for Mr. Brackpool automatically reverted to $275,000, representing his salary
as in effect immediately prior to the RSU grants.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The
following table and summary set forth estimated potential payments the Company would be required to make to our named executive
officers upon termination of employment or change in control of the Company, pursuant to each executive’s employment or
consulting agreement in effect at year end. Except as otherwise indicated, the table assumes that the triggering event occurred
on December 31, 2018.
Name
|
|
Benefit
|
|
Termination
without
Cause or
Resignation upon Company Material Breach ($)
|
|
|
Death or
Disability ($)
|
|
|
Termination
Following Change
of Control ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Slater
|
|
Salary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Bonus
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Equity Acceleration
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Benefits Continuation
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Total Value
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. Shaheen
|
|
Salary
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
350,000
|
|
|
|
Bonus
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Equity Acceleration
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Benefits Continuation
(1)
|
|
|
23,162
|
|
|
|
-
|
|
|
|
46,323
|
|
|
|
Total Value
|
|
|
198,162
|
|
|
|
175,000
|
|
|
|
396,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith Brackpool
|
|
Salary
|
|
|
275,000
|
|
|
|
550,000
|
|
|
|
550,000
|
|
|
|
Bonus
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Equity Acceleration
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Benefits Continuation
(1)
|
|
|
68,154
|
|
|
|
-
|
|
|
|
132,308
|
|
|
|
Total Value
|
|
|
341,154
|
|
|
|
550,000
|
|
|
|
682,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
benefits continuation amounts include car allowances, 401(k) matching benefits and paid vacation.
|
Termination
without Cause or Resignation upon Company Material Breach
Mr.
Shaheen’s 2014 Employment Agreement provides that if Mr. Shaheen were terminated by the Company without cause or if he resigns
due to a breach of the 2014 Employment Agreement by us, then the Company is obligated to pay severance and continuation of benefits
(to the extent such benefits could then be lawfully made available by the Company) for 180 days following the effective date of
the termination, as though Mr. Shaheen were continuing to provide services to the Company under the 2014 Employment Agreement.
Mr.
Brackpool’s 2014 Amended Agreement provides that if Mr. Brackpool were terminated by the Company without cause or if he
resigns due to a breach of the 2014 Amended Agreement by us, then the Company is obligated to pay severance and continuation of
benefits (to the extent such benefits could then be lawfully made available by the Company) for one year following the effective
date of the termination, as though Mr. Brackpool were continuing to provide services to the Company under his 2014 Amended Agreement.
Termination
of Employment Due to Death or Disability
Mr.
Shaheen’s 2014 Employment Agreement provides that if he dies or became disabled, he or his estate would be entitled to receive
severance for 180 days consisting of his base compensation.
Mr.
Brackpool’s 2014 Amended Agreement provides that if he dies or became disabled, he or his estate would be entitled to receive
severance for two years consisting of his base compensation.
Change
in Control
Mr.
Shaheen’s 2014 Employment Agreement provides that if Mr. Shaheen is terminated by the Company following a change in control,
the Company is obligated to pay severance and continuation of benefits (to the extent such benefits could then be lawfully made
available by the Company) for one year following the effective date of the termination, as though Mr. Shaheen were continuing
to provide services to the Company under his 2014 Employment Agreement.
Mr.
Brackpool’s 2014 Amended Agreement provides that if Mr. Brackpool is terminated by the Company following a change in control,
the Company is obligated to pay severance and continuation of benefits (to the extent such benefits could then be lawfully made
available by the Company) for two years following the effective date of the termination, as though Mr. Brackpool were continuing
to provide services to the Company under his 2014 Amended Agreement.
DIRECTOR
COMPENSATION
The
following table summarizes the compensation earned by each of the non-employee directors in 2018. Directors who are also officers
or employees of the Company receive no compensation for duties performed as a director. No current director has an agreement
or arrangement with any third party relating to compensation or other payments in connection with the director’s candidacy
or service as a director.
Name
|
|
Fees Earned
or Paid in Cash ($)
|
|
|
Stock
Awards ($)
(1)
|
|
|
Option
Awards ($)
(2)
|
|
|
Total ($)
|
|
John A. Bohn
|
|
|
22,500
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
27,500
|
|
Jeffrey J. Brown
|
|
|
-
|
|
|
|
27,500
|
|
|
|
-
|
|
|
|
27,500
|
|
Stephen E. Courter
|
|
|
30,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
50,000
|
|
Geoffrey Grant
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
Winston H. Hickox
|
|
|
30,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
50,000
|
|
Murray H. Hutchison
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
Richard Nevins
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
Raymond J. Pacini
(3)
|
|
|
30,000
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
50,000
|
|
(1)
|
This
column discloses the dollar amount of compensation cost recognized in 2018 based on the fair value at grant date in accordance
with FASB ASC Topic 718. These awards were valued at the market value of the underlying stock on the date of grant
in accordance with FASB ASC Topic 718.
|
(2)
|
Directors
of the Company do not receive stock option awards.
|
(3)
|
Mr.
Pacini will not be standing for re-election at the 2019 Annual Meeting.
|
DIRECTOR
COMPENSATION POLICY
All
non-employee directors are entitled to receive, for each 12-month period ending June 30 of each year, the amount of $30,000, prorated
for directors serving less than the full 12 months. Payments are made in quarterly installments of $7,500. A director may elect
to receive any or all of his or her cash compensation earned in the form the Company’s common stock. A director is entitled
to a $7,500 fee for any quarter in which services are rendered. Each June 30, non-employee directors are also entitled to receive
a deferred stock award consisting of shares of the Company’s common stock with a value equal to $20,000 (calculated with
reference to the average closing price of the Company’s common stock during the one month preceding the annual award date),
prorated for directors serving less than the full 12 months.
The
compensation arrangements for our Board will be revised in the event the Company’s stockholders approve Proposal 3 (See
Proposal 3 – Adoption of the Cadiz Inc. 2019 Equity Incentive Plan, “Automatic Awards of Cash, Restricted Unit Awards
and Shares for Outside Directors”).
DIRECTOR
STOCK OWNERSHIP POLICY
The
Company encourages stock ownership on behalf of its directors. Thus, the Company’s compensation structure for non-employee
directors includes awards of stock as compensation for director services. See “Director Compensation Policy”, above.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table provides information as of December 31, 2018 with respect to shares of the Company’s common stock that may
be issued under its existing compensation plans. The table includes plan grants to executive officers and other Company employees.
Plan Category
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
|
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
|
|
Number
of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column
(a))
(c)
|
|
Equity compensation plans approved by stockholders
|
|
|
492,500
|
(1)
|
|
$
|
11.66
|
|
|
|
33,332
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
492,500
|
|
|
$
|
11.66
|
|
|
|
33,332
|
|
(1)
|
Represents
492,000 options outstanding under the Company’s 2009 Equity Incentive Plan as of December 31, 2018.
|
|
|
(2)
|
Represents
33,332 securities issuable under the Company’s 2014 Equity Incentive Plan as of December 31, 2018.
|
PAY
RATIO DISCLOSURE
Pursuant
to the Dodd-Frank Act, the SEC adopted a rule requiring annual disclosure of the ratio of the total annual compensation of the
principal executive officer (“CEO”) to the median employee’s annual total compensation. Mr. Scott Slater is
the Company’s Chief Executive Officer. In the pay ratio table below, Mr. Slater’s total compensation as reflected
in the foregoing Summary Compensation Table, is compared to the median employee’s total compensation. For simplicity, the
value of the Company’s retirement plan was excluded for Mr. Slater and all permanent employees, as all employees, including
the CEO, are offered the same benefits. In determining the median employee, a listing was prepared of all employees that were
actively employed as of December 31, 2018, with the exception of Mr. Slater. All wages, bonuses and stock awards paid to each
employee were deemed to be the employee’s total compensation. If a permanent employee was not employed by the Company for
the entirety of the year, an annualized total compensation was calculated for that employee. The below table presents the ratio
of the total annual compensation of the Company’s Chief Executive Officer, Mr. Slater, to the median employee’s annual
total compensation:
Mr. Scott Slater (CEO) total annual compensation
|
|
$
|
600,000
|
|
|
|
|
|
|
Median Employee total annual compensation
|
|
$
|
190,900
|
|
|
|
|
|
|
Ratio of CEO to Median Employee total annual compensation
|
|
|
3.14:1.00
|
|
Compensation
Committee Interlocks and Insider Participation
In
fiscal 2018, there were no Compensation Committee interlocks and no insider participation in Compensation Committee decisions
that were required to be reported under the rules and regulations of the Exchange Act.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth the beneficial ownership of the Company’s voting securities, as of April 22, 2019 for the 2019
Annual Meeting, by each stockholder whom the Company knows to own beneficially more than five percent of our common stock, and
by each director, each of the Company’s Intended Nominees and Alternate Nominees, each named executive officer and all directors
and executive officers as a group, excluding, in each case, rights under options or warrants not exercisable within 60 days. All
persons named have sole voting power and investment power over their shares except as otherwise noted.
Name
and Address
|
|
Amount
and Nature of
Beneficial
Ownership
|
|
|
Percent
of
Class
|
|
|
|
|
|
|
|
|
Hoving & Partners S.A.
Jan-Paul Menke
30A Route de Chene
CH-1208, Geneva
Switzerland
|
|
|
8,353,960
|
(1)
|
|
|
31.84
|
%
|
|
|
|
|
|
|
|
|
|
LC Capital Master Fund, Ltd.
LC
Capital Partners LP
LC Capital Advisors LLC
LC Offshore Fund, Ltd.
Lampe, Conway & Co., LLC
Steven G.
Lampe
Richard F. Conway
c/o Lampe, Conway & Co., LLC
680 Fifth Avenue, 12th Floor
New York, NY 10019-5429
|
|
|
7,014,779
|
(2)
|
|
|
21.69
|
%
|
|
|
|
|
|
|
|
|
|
Water Asset Management LLC
TRF Master Fund (Cayman) LP
Disque D. Deane, Jr.
Matthew J. Diserio
Marc Robert
509 Madison Avenue
Suite 804
New York, NY 10022
|
|
|
3,258,219
|
(3)
|
|
|
12.42
|
%
|
|
|
|
|
|
|
|
|
|
Nokomis Capital, L.L.C.
Brett Hendrickson
2305 Cedar Springs Road, Suite 420
Dallas, TX 75201
|
|
|
2,911,000
|
(4)
|
|
|
9.99
|
%
|
|
|
|
|
|
|
|
|
|
BlackRock Inc.
BlackRock Advisors,
LLC
BlackRock Investment Management (uk), Ltd.
BlackRock Asset Management Canada Ltd.
BlackRock Fund Advisors
BlackRock Institutional Trust Company, National Association
BlackRock Financial Management, Inc.
BlackRock Japan Co.,
Ltd.
BlackRock Investment Management, LLC
55 East 52nd Street
New York, NY 10055
|
|
|
1,665,449
|
(5)
|
|
|
6.35
|
%
|
The Vanguard Group
Vanguard Fiduciary Trust Company
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
1,320,020
|
(6)
|
|
|
5.03
|
%
|
|
|
|
|
|
|
|
|
|
Keith Brackpool
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
345,000
|
(7)
|
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
Timothy J. Shaheen
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
191,500
|
(8)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Geoffrey Grant
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
166,241
|
(9)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Scott S. Slater
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
109,000
|
(10)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Winston H. Hickox
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
105,765
|
(11)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Murray Hutchison
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
51,543
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Raymond J. Pacini
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
26,676
|
(12)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Stephen Courter
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
23,948
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Richard Nevins
c/o o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
11,412
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Brown
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
3,718
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
John A. Bohn
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
893
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Maria Echaveste
c/o 550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
0
|
|
|
|
*
|
|
Carolyn Webb de Macias
c/o
550 S. Hope St., Suite 2850
Los Angeles, CA 90071
|
|
|
0
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
[●]
|
|
|
[●]
|
|
|
|
[●]
|
|
|
|
|
|
|
|
|
|
|
[●]
|
|
|
[●]
|
|
|
|
[●]
|
|
|
|
|
|
|
|
|
|
|
All directors and officers as a group (nine
individuals)
|
|
|
1,035,696
(7)(8)(9)(10)(11)(12)
|
|
|
|
3.89
|
%
|
*
|
Represents
less than one percent of the 26,237,089 outstanding shares of common stock of the Company as of April 22, 2019.
|
Footnotes
(1)
|
Based
upon a Form 13G/A filed on February 12, 2019, Hoving & Partners S.A. owns 8,353,960 shares of the Company’s common
stock. Hoving & Partners’ filings with the SEC do not indicate which natural persons have the right to vote or
dispose of the shares it presently owns.
|
|
|
(2)
|
Based
upon Form 13D/A filed on February 7, 2019 with the SEC by LC Capital Master Fund Ltd.
(“Master Fund”), information provided by Master Fund and the Company’s
corporate records, Master Fund and affiliates beneficially own a total of 7,014,779 shares
of the Company’s common stock.
Includes
759,492 shares of common stock presently outstanding.
Includes
145,000 shares of common stock presently outstanding and held by Steven G. Lampe over which he has sole voting and dispositive
power, but for which Master Fund disclaims beneficial ownership.
Includes
6,040,137 shares of common stock issuable upon conversion of $40.771 million in Convertible Notes at a conversion rate
of $6.75 per share as of April 22, 2019 and 70,150 shares of common stock issuable upon conversion of interest that will
have accrued within 60 days of April 22, 2019.
These
securities, except for the common stock owned solely by Steven G. Lampe, are owned by Master Fund and may also be deemed
to be beneficially owned by the named persons below by virtue of the following relationships: (i) LC Capital Partners,
LP (“Partners”) and LC Offshore Fund, Ltd. (“Offshore Fund”) beneficially own 100% of the outstanding
shares of Master Fund; (ii) LC Capital Advisors LLC (“Advisors”) is the sole general partner of Partners;
(iii) Lampe, Conway & Co., LLC (“LC&C”) is investment manager to Master Fund, Partners, and Offshore
Fund pursuant to certain investment management agreements and shares voting and dispositive power over the securities;
and (iv) Steven G. Lampe and Richard F. Conway are the sole managing members of each of Advisors and LC&C and therefore,
have indirect voting and dispositive power over securities held by Master Fund. Each of the persons named above, other
than Master Fund, specifically disclaims beneficial ownership of these securities except to the extent of his or its pecuniary
interest therein, if any.
Master
Fund and/or its affiliates have designated Messrs. Courter and Nevins, directors of the Company, as their designees on
our Board.
|
(3)
|
Based
upon Schedule 13D/A filed on April 23, 2019 with the SEC, information provided by WAM
and the Company’s corporate records, WAM beneficially own 3,258,219 shares
of the Company’s common stock presently outstanding.
Disque
D. Deane, Jr., Matthew J. Diserio and Marc Robert are the managing members of WAM and Limited Partners in TRF.
WAM
and/or its affiliates have designated Mr. Jeffrey Brown and Mr. John Bohn, directors of the Company, as their designees
on our Board of Directors.
|
(4)
|
Based
upon a Schedule 13G/A filed on February 13, 2019 with the SEC, information provided by
Nokomis Capital, L.L.C. (“Nokomis Capital”) and the Company’s corporate
records, Nokomis Capital owns or controls 4,015,733 shares of common stock upon
conversion of $27.106 million in Convertible Notes at a conversion rate of $6.75 per
share, of which only 2,911,000 are issuable as of April 22, 2019 and included in the
calculation of beneficial ownership, because Nokomis Capital is prohibited from converting
Convertible Notes to obtain ownership in excess of 9.99% of the Company’s outstanding
common stock.
Does
not include 1,104,733 shares of common stock otherwise issuable to Nokomis Capital upon conversion of Convertible Notes
held as of April 22, 2019, plus 46,639 shares of common stock issuable upon conversion of interest that will have accrued
within 60 days April 22, 2019, but which may not currently be issued due to the 9.99% beneficial ownership limitation.
Nokomis
Capital purchased the Convertible Notes through the accounts of certain private funds and managed accounts (collectively,
the “Nokomis Accounts”). Nokomis Capital serves as the investment manager to the Nokomis Accounts and may
direct the vote and dispose of the shares held by the Nokomis Accounts. Mr. Brett Hendrickson is the principal
of Nokomis Capital and may direct the vote and disposition of the shares held by the Nokomis Accounts.
|
(5)
|
Based
upon a Form 13G/A filed on February 4, 2019, BlackRock, Inc. and affiliates own 1,665,449 shares of the Company’s
stock. BlackRock has sole power to vote or to direct the vote for 1,601,557 shares and sole power to dispose of or to
direct the disposition of 1,665,449 shares. Blackrock filings with the SEC indicate that various persons have the right to
control its ownership of the Company’s common stock and no one person at Blackrock has control of more than five percent
of the total common stock shares outstanding.
|
|
|
(6)
|
Based
upon a Form 13G filed on February 11, 2019, the Vanguard Group owns 1,320,020 shares of the Company’s stock. Vanguard
has sole power to vote for and shared dispositive power as to 19,574 shares and sole power to dispose of or to direct the
disposition of 1,300,446 shares. Vanguard’s filing indicates that Vanguard Fiduciary Trust Company (“VFTC”),
a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 19,574 shares
as a result of its serving as investment manager of collective trust accounts. Vanguard’s
filings with the SEC do not indicate which natural persons have the right to vote or dispose of the shares it presently owns.
|
|
|
(7)
|
Includes
200,000 shares underlying presently exercisable options.
|
|
|
(8)
|
Includes
100,000 shares underlying presently exercisable options. Mr. Shaheen will not be standing for re-election at the 2019 Annual Meeting.
|
(9)
|
Includes
30,500 shares held in five separate trusts, each holding 6,100 shares for the benefit of Mr. Grant’s children. The trustee
of these trusts is not a member of the Reporting Person’s immediate family. Mr. Grant disclaims beneficial ownership of
the shares held by these trusts.
|
(10)
|
Includes
100,000 shares underlying presently exercisable options.
|
(11)
|
Includes
35,000 shares held by Mr. Hickox’s spouse.
|
(12)
|
Mr.
Pacini will not be standing for re-election at the 2019 Annual Meeting.
|
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than 10% of a registered
class of our equity securities (each, a “reporting person”), to file with the SEC 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
the SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
To
our knowledge, based solely on a review of the copies of reports and amendments thereto on Forms 3, 4 and 5 furnished to us by
reporting persons and forms that we filed on behalf of certain directors and officers, during, and with respect to, our fiscal
year ended December 31, 2018, and on a review of written representations from reporting persons to us that no other reports
were required to be filed for such fiscal year, all Section 16(a) filing requirements applicable to our reporting persons were
satisfied in a timely manner, except that a Form 3 filing of John A. Bohn, a director of the Company in 2018, and a Form 4 filing
of WAM were inadvertently filed late.
AUDIT
COMMITTEE REPORT
As
of December 31, 2018, the Audit Committee was composed of Messrs. Pacini, Courter and Hickox. Mr. Brown was appointed to the Audit
Committee in May 2018. Mr. Pacini currently serves as Chairman of the Audit Committee.
Each
member of the Audit Committee is an independent director as defined under the listing standards of the NASDAQ Global Market. The
Audit Committee operates under a written charter that is reviewed on an annual basis. During fiscal year 2018, the Audit Committee
performed all of its duties and responsibilities under its charter. The purpose of the Audit Committee is to assist the Board
in its oversight of management’s control of the Company’s financial reporting processes. In February 2017, the Board
designated the Audit Committee to act concomitantly as the Company’s Risk Committee.
Management
is responsible for the preparation, presentation and integrity of the Company’s financial statements, accounting and financial
reporting principles, internal controls and procedures designed to ensure compliance with accounting standards, applicable laws
and regulations. The Audit Committee reviews the Company’s accounting and financial reporting process on behalf of the Board.
In that regard, the Committee met four times in 2018 in order to expressly exercise the Audit Committee’s responsibilities
related to the Company’s quarterly and annual financial statements for fiscal 2018 and management’s assessment of
the effectiveness of our internal controls over financial reporting as of December 31, 2018. During these meetings, the Audit
Committee reviewed and discussed with management and PricewaterhouseCoopers LLP, our independent registered public accounting
firm, our consolidated financial statements, including our audited consolidated financial statements for the year ended December
31, 2018, and financial reporting process, including the system of internal controls over financial reporting and significant
accounting policies applied by the Company.
The
Audit Committee also reviewed the report of management contained in our Annual Report on Form 10-K for the year ended December
31, 2018, filed with the SEC, as well as PricewaterhouseCoopers LLP’s Report of Independent Registered Public Accounting
Firm included in our 2018 Annual Report on Form 10-K related to its audit of: (i) the consolidated financial statements and (ii)
the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Company’s efforts
related to its internal control over financial reporting and management’s preparations for the evaluation of its internal
controls for fiscal year 2019.
The
Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of PricewaterhouseCoopers
LLP. The Audit Committee regularly meets in executive session with PricewaterhouseCoopers LLP, without management present, to
discuss the results of its examinations, evaluations of the Company’s internal controls and the overall quality of the Company’s
financial reporting.
Our
independent registered public accounting firm is responsible for performing an independent audit of the consolidated financial
statements of the Company and expressing an opinion on the conformity of our financial statements with U.S. generally accepted
accounting principles. The Audit Committee discussed with the Company’s independent registered public accounting firm the
scope and plan for its audits including the review of internal controls prescribed in Section 404 of the Sarbanes-Oxley Act of
2002. The Committee has discussed with PricewaterhouseCoopers LLP the matters that are required to be discussed by Statement on
Auditing Standards No. 61, as amended (Communication with Audit Committees) as adopted by the Public Company Accounting Oversight
Board in Rule 3200T. PricewaterhouseCoopers LLP has provided the Audit Committee with the written disclosures and the letter required
by applicable requirements of the Public Company Accounting Oversight Board regarding PricewaterhouseCoopers LLP’s communications
with the Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP its independence from the Company.
The Audit Committee also considered the nature and scope of the non-audit services provided by PricewaterhouseCoopers LLP to the
Company and the compatibility of these services with PricewaterhouseCoopers LLP’s independence. The Audit Committee pre-approves
all audit and permitted non-audit services to be performed by the Company’s independent registered public accounting firm
pursuant to the terms of the Audit Committee’s written charter.
In
reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved,
that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31,
2018. The Audit Committee also appointed PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2019,
and has recommended that such appointment be submitted to the Company’s stockholders for ratification at the 2019 Annual
Meeting.
THE
AUDIT COMMITTEE
Raymond
J. Pacini, Chairman
Jeffrey
J. Brown
Stephen
E. Courter
Winston
H. Hickox
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
For
the fiscal years ended December 31, 2018 and 2017, professional services were performed by PricewaterhouseCoopers LLP. The
Company’s Audit Committee annually approves the engagement of outside auditors for audit services in advance. The
Audit Committee has also established complementary procedures to require pre-approval of all audit-related, tax and permitted
non-audit services provided by PricewaterhouseCoopers LLP, and to consider whether the outside auditors’ provision of non-audit
services to the Company is compatible with maintaining the independence of the outside auditors. The Audit Committee may
delegate pre-approval authority to one or more of its members. Any such fees pre-approved in this manner shall be reported
to the Audit Committee at its next scheduled meeting. All services described below were pre-approved by the Audit Committee.
All
fees for services rendered by PricewaterhouseCoopers LLP aggregated $328,900 and $270,000 during the fiscal years ended December
31, 2018 and 2017, respectively, and were composed of the following:
Audit
Fees. The aggregate fees accrued by the Company for the audit of the annual financial statements during the fiscal years
ended December 31, 2018 and 2017, for reviews of the financial statements included in the Company’s Quarterly Reports on
Form 10-Q, and for assistance with and review of documents filed with the SEC were $328,000 for 2018 and $270,000 for
2017.
Audit
Related Fees. No audit-related fees were billed by PricewaterhouseCoopers LLP to the Company during the fiscal years ended
December 31, 2018 and 2017.
Tax
Fees. No tax fees were billed by PricewaterhouseCoopers LLP to the Company during the fiscal years ended December 31, 2018
and 2017.
All
Other Fees. Fees filed for all other services, including licensing for disclosure checklist tools, were $900 and $0 during
the fiscal years ended December 31, 2018 and 2017.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
There
have been no transactions since the beginning of our fiscal year commencing January 1, 2018 with our directors and officers and
beneficial owners of more than five percent of our voting securities and their affiliates requiring disclosure.
POLICIES
AND PROCEDURES WITH RESPECT TO RELATED PARTY TRANSACTIONS
Our
Audit Committee Charter requires that the Audit Committee review and approve all related-party transactions between the Company,
on the one hand, and directors, officers, employees, consultants, and any of their family members, on the other hand. In
addition, the Company’s written Conflicts of Interest policy provides that no employee, officer or director may use or attempt
to use his or her position at the Company to obtain any improper personal benefit for himself or herself, for his or her family,
or for any other person.
In
order to implement these requirements, the Company requires that, prior to entering into any transaction with the Company, a related
party must advise Company management of the potential transaction. Management will, in turn, provide to the Audit Committee
a description of the material terms of the transaction, including the dollar amount, the nature of the related party’s direct
or indirect interest in the transaction, and the benefits to be received by the Company from the transaction. The Audit
Committee may make such other investigations as it considers appropriate under the circumstances. The Audit Committee
will also consider whether the benefits of the proposed transaction could be obtained by the Company upon better terms from non-related
parties, and whether the transaction is one that would be reportable by the Company in our public filings. The Audit
Committee will then make a determination as to whether the proposed transaction is in the best interests of the Company and should
therefore be approved.
PROPOSAL
2
APPROVAL
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee has selected PricewaterhouseCoopers LLP as the Company’s independent certified public accountants to audit
our financial statements for the 2019 fiscal year. Stockholder ratification of this appointment is not required by our Bylaws
or other applicable legal requirements. However, consistent with our past practice, the appointment of PricewaterhouseCoopers
LLP is being submitted to our stockholders for ratification. In the event stockholders do not ratify PricewaterhouseCoopers LLP
as the Company’s independent certified public accountants for the 2019 fiscal year, the Audit Committee will reconsider
its selection of PricewaterhouseCoopers LLP, but will not be required to select another firm to audit the Company’s financial
statements. Even if the stockholders do ratify the appointment, the Audit Committee, in its discretion, may appoint a different
firm at any time during the year if it believes that such a change would be in the best interests of the Company and our stockholders.
PricewaterhouseCoopers LLP has advised us 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 2019 Annual Meeting, and will be given the
opportunity to make a statement if desired.
Required
Vote.
The
ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the
shares present or represented by proxy at the 2019 Annual Meeting and entitled to vote on the matter. You may vote “FOR,”
“AGAINST” or “ABSTAIN.” If you ABSTAIN from voting on Proposal 2, the abstention will have the same effect
as an “AGAINST” vote.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A
VOTE “FOR” PROPOSAL 2.
PROPOSAL
3
APPROVAL
OF THE CADIZ INC. 2019 EQUITY INCENTIVE PLAN
On
April __
,
2019, the Board adopted the Cadiz Inc. 2019 Equity Incentive Plan and recommended that it be submitted to the
Company’s stockholders for their approval. At the 2019 Annual Meeting, the Company’s stockholders are being asked
to approve the Cadiz Inc. 2019 Equity Incentive Plan. If approved, the Cadiz Inc. 2019 Equity Incentive Plan will be effective
as of June 11, 2019. The proposed Cadiz Inc. 2019 Equity Incentive Plan is attached hereto as Appendix B.
Background
and Purpose of the Proposal.
The
use of stock-based awards under the Cadiz Inc. 2014 Equity Incentive Plan has been a key component of our compensation since its
original adoption in 2014. If the Cadiz Inc. 2019 Equity Incentive Plan is approved, no more awards will be made under the Cadiz
Inc. 2014 Equity Incentive Plan on or after the June 11, 2019 effective date of the Cadiz Inc. 2019 Equity Incentive Plan. The
Board has determined that, in order to ensure there are sufficient shares available to meet our needs for future grants during
the coming years, it is in the best interests of the Company and its stockholders to adopt the Cadiz Inc. 2019 Equity Incentive
Plan.
The
purpose of the Cadiz Inc. 2019 Equity Incentive Plan is to assist the Company and its subsidiaries in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers, directors and individual consultants who provide
services to the Company or its subsidiaries, by enabling such persons to acquire or increase a proprietary interest in the Company
in order to strengthen the mutuality of interests between such persons and the Company’s stockholders, and providing such
persons with performance incentives to expend their maximum efforts in the creation of stockholder value.
The
Cadiz Inc. 2019 Equity Incentive Plan is a broad-based plan under which we may grant awards to all employees, including our officers
and officers of our subsidiaries, and to non-employee members of the Board and consultants. We believe that approval of the Cadiz
Inc. 2019 Equity Incentive Plan will give us the flexibility to make stock-based grants and other awards permitted under the Cadiz
Inc. 2019 Equity Incentive Plan; however, this timeline is simply an estimate that was used to determine the number of shares
of common stock to be reserved for issuance under the Cadiz Inc. 2019 Equity Incentive Plan and future circumstances may require
a change to expected equity grant practices. These circumstances include, but are not limited to, the future price of our common
stock, award levels and our hiring activity over the next few years.
Please
see “Summary of the Cadiz Inc. 2019 Equity Incentive Plan—Shares Available for Awards; Annual Per-Person Limitations”
below for information regarding the number of available shares being requested under the Cadiz Inc. 2019 Equity Incentive Plan.
While we are aware of the potential dilutive effect of compensatory equity awards, we also recognize the significant retention,
motivational and performance benefits that may be achieved from making such awards.
The
Cadiz Inc. 2019 Equity Incentive Plan is not qualified under the provisions of section 401(a) of the Internal Revenue Code of
1986, as amended (the “Code”), and is not subject to any of the provisions of the Employee Retirement Income Security
Act of 1974.
Consequences
of Failure to Approve the Proposal.
The
Cadiz Inc. 2019 Equity Incentive Plan will not be implemented unless approved by the Company’s stockholders. If the Cadiz
Inc. 2019 Equity Incentive Plan is not approved by the Company’s stockholders, the Cadiz Inc. 2014 Equity Incentive Plan
will remain in effect in its current form, and we will continue to grant awards under the Cadiz Inc. 2014 Equity Incentive Plan
until our share reserve under the Cadiz Inc. 2014 Equity Incentive Plan is exhausted. The share reserve could last for a longer
period of time, depending on our future equity grant practices, which we cannot predict with certainty. If the remaining share
pool is exhausted, we may elect to provide compensation through other means, such as cash-settled awards or other cash compensation,
to assure that we can attract and retain qualified personnel. Failure of our stockholders to approve the Cadiz Inc. 2019 Equity
Incentive Plan will not affect the rights of existing award holders under the Cadiz Inc. 2014 Equity Incentive Plan or under any
previously granted awards under the Cadiz Inc. 2014 Equity Incentive Plan. However, under the Cadiz Inc. 2014 Equity Incentive
Plan, no awards are permitted to be made after April 25, 2024.
Summary
of the Cadiz Inc. 2019 Equity Incentive Plan.
The
following is a summary of certain principal features of the Cadiz Inc. 2019 Equity Incentive Plan, but is not a complete description
of all provisions of the Cadiz Inc. 2019 Equity Incentive Plan. This summary is qualified in its entirety by reference to the
complete text of the Cadiz Inc. 2019 Equity Incentive Plan attached as Appendix B to this proxy statement, which is incorporated
by reference in this proposal.
Key
Features of the Cadiz Inc. 2019 Equity Incentive Plan.
Key
features of the Cadiz Inc. 2019 Equity Incentive Plan include:
●
|
Except
as permitted by applicable law, no discounted options or related awards may be granted;
|
●
|
No
reuse or “recycling” of shares used to pay the exercise price of awards or to satisfy withholding taxes;
|
●
|
No
participant may be granted, in any fiscal year during which the Cadiz Inc. 2019 Equity Incentive Plan is in effect: (i) stock
options or stock appreciation rights with respect to more than 300,000 shares of common stock; or (ii) restricted stock or
any other awards payable in shares of common stock that are subject to the satisfaction of performance goals, with respect
to more than 300,000 shares of common stock;
|
●
|
No
participant who is a director (but is also not an employee or consultant) may be granted awards that have a “fair value”
as of the date of grant, as determined in accordance with FASB ASC Topic 718 (or any other applicable accounting guidance),
that exceeds $100,000 in the aggregate;
|
●
|
Dividend
equivalents on unvested awards are subject to the same vesting conditions (including any applicable performance conditions)
and risk of forfeiture as the underlying awards;
|
●
|
No
repricing, replacement or re-granting of stock options or stock appreciation rights without stockholder approval if the effect
would be to reduce the exercise price of the award;
|
●
|
Awards
are generally non-transferrable except by will or by the laws of descent and distribution, or to a designated beneficiary
upon the participant’s death; and
|
●
|
Awards
are subject to potential reduction, cancelation, forfeiture or other clawback under certain specified circumstances.
|
Shares
Available for Awards; Annual Per-Person Limitations.
Under
the Cadiz Inc. 2019 Equity Incentive Plan, the total number of shares of our common stock (the “Shares”) reserved
and available for delivery at any time during the term of the Cadiz Inc. 2019 Equity Incentive Plan will be equal to (i) 1,200,000,
plus any Shares still available of grant under the Cadiz Inc. 2014 Equity Incentive Plan immediately prior to the effective date
of the Cadiz Inc. 2019 Equity Incentive Plan. The maximum number of Shares that may be delivered under the Cadiz Inc. 2019 Equity
Incentive Plan as a result of the exercise of incentive stock options is 1,200,000 Shares, subject to certain adjustments.
The
Cadiz Inc. 2019 Equity Incentive Plan permits the grant of stock options, stock appreciation rights, restricted stock, restricted
stock units, stock awards, dividend equivalents, other stock-based awards, performance awards and substitute awards (collectively,
“Awards”). If any Shares subject to an Award, or after the Effective Date, Shares subject to any awards granted under
the Cadiz Inc. 2014 Equity Incentive Plan, are forfeited, expire or otherwise terminate without issuance of such Shares, or are
settled for cash or otherwise do not result in the issuance of all or a portion of the Shares subject to such Award, the Shares
to which those Awards were subject, will, to the extent of such forfeiture, expiration, termination, non-issuance or cash settlement,
again be available for delivery with respect to Awards under the Cadiz Inc. 2019 Equity Incentive Plan. However, Shares withheld
to pay the exercise price and/or applicable tax withholdings with respect to an Award, will not again be available for new grants.
Substitute
awards will not reduce the Shares authorized for delivery under the Cadiz Inc. 2019 Equity Incentive Plan or authorized for delivery
to a participant in any period. Additionally, in the event that a company acquired by the Company or any subsidiary or with which
the Company or any subsidiary combines has shares available under a pre-existing plan approved by its stockholders and not adopted
in contemplation of such acquisition or combination, the shares available for delivery pursuant to the terms of such pre-existing
plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used
in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party
to such acquisition or combination) may be used for Awards under the Cadiz Inc. 2019 Equity Incentive Plan and will not reduce
the Shares authorized for delivery under the Cadiz Inc. 2019 Equity Incentive Plan; provided, that Awards using such available
shares will not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent
the acquisition or combination, and will only be made to individuals who were not employees or directors of the Company or its
subsidiaries prior to such acquisition or combination.
The
Cadiz Inc. 2019 Equity Incentive Plan imposes individual limitations on the amount of certain Awards. Under these limitations,
in any fiscal year of the Company during any part of which the Cadiz Inc. 2019 Equity Incentive Plan is in effect:
●
|
No
participant may be granted (i) stock options or stock appreciation rights with respect to more than 300,000 Shares, or (ii)
restricted stock or other Awards payable in shares of common stock that are subject to satisfaction of performance goals,
with respect to more than 300,000 Shares, in each case, subject to adjustment in certain circumstances; and
|
●
|
No
participant who is a director (but is also not an employee or consultant) may be granted Awards that have a “fair value”
as of the date of grant, as determined in accordance with FASB ASC Topic 718 (or any other applicable accounting guidance),
that exceeds $100,000 in the aggregate.
|
The
Compensation Committee is authorized to adjust the limitations on the number of Shares available for issuance under the Cadiz
Inc. 2019 Equity Incentive Plan (other than the $100,000 limitation described below with respect to incentive stock option awards)
and is authorized to adjust outstanding Awards (including adjustments to exercise prices of options and other affected terms of
Awards) to the extent it deems equitable in the event that a dividend or other distribution (whether in cash, Shares or other
property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase,
share exchange or other similar corporate transaction or event affects the Shares so that an adjustment is appropriate. See the
sections called “Acceleration of Vesting; Change in Control” and “Other Adjustments” below for a summary
of certain additional adjustment provisions of the Cadiz Inc. 2019 Equity Incentive Plan.
The
Cadiz Inc. 2019 Equity Incentive Plan is intended to serve as the successor to the Cadiz Inc. 2014 Equity Incentive Plan. Outstanding
awards granted under the Cadiz Inc. 2014 Equity Incentive Plan will continue to be governed by the terms of the Cadiz Inc. 2014
Equity Incentive Plan but no awards may be made under the Cadiz Inc. 2014 Equity Incentive Plan after the effective date of the
Cadiz Inc. 2019 Equity Incentive Plan.
Eligibility.
The
persons eligible to receive Awards under the Cadiz Inc. 2019 Equity Incentive Plan are the directors, employees (including officers)
and consultants who provide services to the Company or any subsidiary. The foregoing notwithstanding, only employees of the Company,
or any parent corporation or subsidiary corporation of the Company (as those terms are defined in Sections 424(e) and (f) of the
Code, respectively), are eligible for purposes of receiving any incentive stock options that are intended to comply with the requirements
of Section 422 of the Code (“ISOs”). An employee on leave of absence may be considered as still in the employ of the
Company or a subsidiary for purposes of eligibility for participation in the Cadiz Inc. 2019 Equity Incentive Plan.
Administration.
The
Cadiz Inc. 2019 Equity Incentive Plan is to be administered by the Compensation Committee. Subject to the terms of the Cadiz Inc.
2019 Equity Incentive Plan, the Compensation Committee is authorized to select eligible persons to receive Awards, grant Awards,
determine the type, number and other terms and conditions of, and all other matters relating to, Awards, prescribe Award agreements
(which need not be identical for each participant) and the rules and regulations for the administration of the Cadiz Inc. 2019
Equity Incentive Plan, construe and interpret the Cadiz Inc. 2019 Equity Incentive Plan and Award agreements, correct defects,
supply omissions or reconcile inconsistencies therein and make all other decisions and determinations as the Compensation Committee
may deem necessary or advisable for the administration of the Cadiz Inc. 2019 Equity Incentive Plan. Decisions of the Compensation
Committee shall be final, conclusive and binding on all persons or entities, including the Company, any subsidiary or any participant
or beneficiary, or any transferee under the Cadiz Inc. 2019 Equity Incentive Plan or any other person claiming rights from or
through any of the foregoing persons or entities.
Stock
Options and Stock Appreciation Rights.
The
Compensation Committee is authorized to grant (i) stock options, including both ISOs, which can result in potentially favorable
tax treatment to the participant, and non-qualified stock options, and (ii) stock appreciation rights, entitling the participant
to receive the amount by which the fair market value of a Share on the date of exercise exceeds the grant price of the stock appreciation
right. The exercise price per share subject to an option and the grant price of a stock appreciation right are determined by the
Compensation Committee. The exercise price per share of an option and the grant price of a stock appreciation right may not be
less than 100% of the fair market value of a Share on the date the option or stock appreciation right is granted. An option granted
to a person who owns or is deemed to own stock representing 10% or more of the voting power of all classes of stock of the Company
or any parent company (sometimes referred to as a “10% owner”) will not qualify as an ISO unless the exercise price
for the option is not less than 110% of the fair market value of a Share on the date the ISO is granted.
The
aggregate fair market value of Shares on the date of grant underlying ISOs that can be exercisable by any individual for the first
time during any year cannot exceed $100,000 (or such other amount as specified in Section 422 of the Code). Any excess will
be treated as a non-qualified stock option. For purposes of the Cadiz Inc. 2019 Equity Incentive Plan, the term “fair market
value” means the fair market value of Shares, Awards or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the fair market value of a Share as of any given date
is the closing sales price per Share as reported on the principal stock exchange or market on which Shares are traded on the date
as of which such value is being determined (or as of such later measurement date as determined by the Compensation Committee on
the date the Award is authorized by the Compensation Committee), or, if there is no sale on that date, then on the last previous
day on which a sale was reported. The maximum term of each option or stock appreciation right, the times at which each option
or stock appreciation right will be exercisable, and provisions requiring forfeiture of unexercised options or stock appreciation
rights at or following termination of employment or service generally are fixed by the Compensation Committee, except that no
option or stock appreciation right may have a term exceeding ten years, and no ISO granted to a 10% owner (as described above)
may have a term exceeding five years (to the extent required by the Code at the time of grant). Methods of exercise and settlement
and other terms of options and stock appreciation rights are determined by the Compensation Committee. Accordingly, the Compensation
Committee may permit the exercise price of options awarded under the Cadiz Inc. 2019 Equity Incentive Plan to be paid in cash,
Shares, other Awards or other property (including loans to participants).
The
Company may grant stock appreciation rights in tandem with options, which we refer to as “Tandem stock appreciation rights”,
under the Cadiz Inc. 2019 Equity Incentive Plan. A Tandem stock appreciation right may be granted at the same time as the related
option is granted or, for options that are not ISOs, at any time thereafter before exercise or expiration of such option. A Tandem
stock appreciation right may only be exercised when the related option would be exercisable and the fair market value of the Shares
subject to the related option exceeds the option’s exercise price. Any option related to a Tandem stock appreciation right
will no longer be exercisable to the extent the Tandem stock appreciation right has been exercised and any Tandem stock appreciation
right will no longer be exercisable to the extent the related option has been exercised.
Restricted
Stock and Restricted Stock Units.
The
Compensation Committee is authorized to grant restricted stock and restricted stock units. Restricted stock is a grant of Shares
which are subject to such risks of forfeiture and other restrictions as the Compensation Committee may impose, including time
or performance restrictions or both. A participant granted restricted stock generally has all of the rights of a stockholder of
the Compensation Company (including voting and dividend rights, subject to restrictions and a risk of forfeiture to the same extent
as the restricted stock with respect to which such dividend is payable), unless otherwise determined by the Compensation Committee.
An Award of restricted stock units confers upon a participant the right to receive Shares or cash equal to the fair market value
of the specified number of Shares covered by the restricted stock units at the end of a specified deferral period, subject to
such risks of forfeiture and other restrictions as the Compensation Committee may impose. Prior to settlement, an Award of restricted
stock units carries no voting or dividend rights or other rights associated with Share ownership, although dividend equivalents
may be granted, as discussed below.
Dividend
Equivalents.
The
Compensation Committee is authorized to grant dividend equivalents conferring on participants the right to receive, currently
or on a deferred basis, cash, Shares, other Awards or other property equal in value to dividends paid on a specific number of
Shares or other periodic payments. Dividend equivalents may be granted alone or in connection with another Award, shall be deemed
to have been reinvested in additional Shares, Awards or otherwise, or shall be settled upon vesting of such dividend equivalent
as specified by the Compensation Committee;
provided
, that in no event shall such Dividend Equivalents be paid out to Participants
prior to vesting of the corresponding Shares underlying the Award. Notwithstanding the foregoing, dividend equivalents credited
in connection with an award that vests based on the achievement of performance goals will be subject to restrictions and risk
of forfeiture to the same extent as the award with respect to which such dividend equivalents have been credited.
Bonus
Stock and Awards in Lieu of Obligations.
The
Compensation Committee is authorized to grant Shares as a bonus free of restrictions, or to grant Shares or other Awards in lieu
of Company obligations to pay cash or deliver other property under the Cadiz Inc. 2019 Equity Incentive Plan or other plans or
compensatory arrangements, subject to such terms as the Compensation Committee may specify.
Other
Stock-Based Awards.
The
Compensation Committee is authorized to grant Awards that are denominated or payable in, valued by reference to, or otherwise
based on or related to Shares. The Compensation Committee determines the terms and conditions of such Awards.
Performance
Awards.
The
Committee is authorized to grant performance Awards to participants on terms and conditions established by the Compensation Committee.
The performance criteria to be achieved during any performance period and the length of the performance period will be determined
by the Compensation Committee upon the grant of the performance Award. Performance Awards may be valued by reference to a designated
number of Shares (in which case they are referred to as performance shares) or by reference to a designated amount of property
including cash (in which case they are referred to as performance units). Performance Awards may be settled by delivery of cash,
Shares or other property, or any combination thereof, as determined by the Compensation Committee.
Substitute
Awards.
Individuals
who become eligible to participate in the Cadiz Inc. 2019 Equity Incentive Plan following a merger, consolidation or other acquisition
by the Company may be entitled to receive substitute Awards in exchange for similar Awards that the individual may have held prior
to the applicable merger, consolidation or other acquisition. If the substitute Award is in the form of a stock option or stock
appreciation right, these Awards may be granted with an exercise price that is less than the fair market value per share on the
replacement date, to the extent necessary to preserve the value of the original award for that individual.
Automatic
Awards of Cash, Restricted Unit Awards and Shares for Outside Directors.
Each
Director who is not an employee of the Company or an affiliate (an “Outside Director”) and who has served as a
director for the preceding twelve months ending on June 30, 2020 or June 30
th
of any calendar year thereafter,
shall, on June 30
th
of such year, receive payment of annual compensation consisting of (i) cash compensation of
$50,000 (which shall be paid in quarterly installments of $12,500 over the succeeding twelve months) and (ii) restricted
stock unit Awards with a value equal to $25,000 (calculated with reference to the average closing price of the Shares for the
month preceding the annual June 30
th
payment date). Any Outside Director who has not served as a director for the
full twelve months preceding June 30
th
of any calendar year shall be entitled to receive one-quarter of the annual
compensation award described above for each three consecutive months (or portion thereof) served by any such director. Grants
of such restricted stock unit Awards will vest and be delivered in Shares upon the January 31
st
which first
follows the June 30
th
date with respect to which such restricted stock unit Awards are granted (
e.g.
,
January 31, 2021 for restricted stock unit Awards granted with respect to services provided July 1, 2019 to June 30, 2020).
Notwithstanding the foregoing, each Outside Director may elect to receive any or all of his or her annual cash compensation
in the form of Shares which shall be granted on the date the Outside Director would have otherwise been paid a quarterly
installment of his or her cash compensation.
Other
General Terms of Awards.
Awards
may be settled in the form of cash, Shares, other Awards or other property, in the discretion of the Compensation Committee. The
Compensation Committee may require or permit participants to defer the settlement of all or part of an Award in accordance with
such terms and conditions as the Compensation Committee may establish, including payment or crediting of interest or dividend
equivalents on deferred amounts, and the crediting of earnings, gains and losses based on deemed investment of deferred amounts
in specified investment vehicles. The Compensation Committee is authorized to place cash, Shares or other property in trusts or
make other arrangements to provide for payment of the Company’s obligations under the Cadiz Inc. 2019 Equity Incentive Plan.
The Compensation Committee may condition any payment relating to an Award on the withholding of taxes and may provide that a portion
of any Shares or other property to be distributed will be withheld (or that previously acquired Shares or other property be surrendered
by the participant) to satisfy withholding and other tax obligations. Awards granted under the Cadiz Inc. 2019 Equity Incentive
Plan generally may not be pledged or otherwise encumbered and are not transferable except by will or by the laws of descent and
distribution, or to a designated beneficiary upon the participant’s death, except that the Compensation Committee may, in
its discretion, permit transfers, subject to any terms and conditions the Compensation Committee may impose pursuant to the express
terms of an Award agreement. A beneficiary, transferee, or other person claiming any rights under the Cadiz Inc. 2019 Equity Incentive
Plan from or through any participant will be subject to all terms and conditions of the Cadiz Inc. 2019 Equity Incentive Plan
and any Award agreement applicable to such participant, except as otherwise determined by the Compensation Committee, and to any
additional terms and conditions deemed necessary or appropriate by the Compensation Committee.
Awards
under the Cadiz Inc. 2019 Equity Incentive Plan generally are granted without a requirement that the participant pay consideration
in the form of cash or property for the grant (as distinguished from the exercise), except to the extent required by law. The
Compensation Committee may, however, grant Awards in exchange for other Awards under the Cadiz Inc. 2019 Equity Incentive Plan,
awards under other Company plans, or other rights to payment from the Company, and may grant Awards in addition to and in tandem
with such other Awards, rights or other awards.
Acceleration
of Vesting; Change in Control.
Subject
to certain limitations set forth in the Cadiz Inc. 2019 Equity Incentive Plan, the Compensation Committee may, in its discretion,
accelerate the exercisability, the lapsing of restrictions or the expiration of deferral or vesting periods of any Award. In the
event of a “change in control” of the Company, as defined in the Cadiz Inc. 2019 Equity Incentive Plan, and only to
the extent provided in any employment or other agreement between the participant and the Company or an affiliate, or in any Award
agreement, or to the extent otherwise determined by the Compensation Committee in its sole discretion in each particular case,
(i) any option or stock appreciation right that was not previously vested and exercisable at the time of the “change
in control” will become immediately vested and exercisable; (ii) any restrictions, deferral of settlement and forfeiture
conditions applicable to a restricted stock award, restricted stock unit award or another stock-based award subject only to future
service requirements will lapse and such Awards will be deemed fully vested; and (iii) with respect to any outstanding Award
subject to achievement of performance goals and conditions under the Cadiz Inc. 2019 Equity Incentive Plan, the Compensation Committee
may, in its discretion, consider such Awards to have been earned and payable based on achievement of performance goals or based
upon target performance (either in full or pro-rata based on the portion of the performance period completed as of the “change
in control”).
Subject
to any limitations contained in the Cadiz Inc. 2019 Equity Incentive Plan relating to the vesting of Awards in the event of any
merger, consolidation or other reorganization in which the Company does not survive, or in the event of any “change in control,”
the agreement relating to such transaction and/or the committee may provide for: (i) the continuation of the outstanding Awards
by the Company, if the Company is a surviving entity, (ii) the assumption or substitution for outstanding Awards by the surviving
entity or its parent or subsidiary pursuant to the provisions contained in the Cadiz Inc. 2019 Equity Incentive Plan, (iii) full
exercisability or vesting and accelerated expiration of the outstanding Awards, or (iv) settlement of the value of the outstanding
Awards in cash or cash equivalents or other property followed by cancellation of such. The foregoing actions may be taken without
the consent or agreement of a participant in the Cadiz Inc. 2019 Equity Incentive Plan and without any requirement that all such
participants be treated consistently.
Other
Adjustments.
The
Compensation Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards
(i) in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses
and assets) affecting the Company, any subsidiary or any business unit, or the financial statements of the Company or any subsidiary,
(ii) in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions
or (iii) in view of the Compensation Committee’s assessment of the business strategy of the Company, any subsidiary or business
unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a participant,
and any other circumstances deemed relevant.
Clawback
of Benefits.
The
Compensation Committee may (i) cause the cancellation or forfeiture of any Award, (ii) require reimbursement of any Award by a
participant or beneficiary, and (iii) effect any other right of recoupment of equity or other compensation provided under the
Cadiz Inc. 2019 Equity Incentive Plan or otherwise in accordance with any Company policies that currently exist or that may from
time to time be adopted in the future by the Company to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act and/or applicable stock exchange requirements, which we refer to each as a “clawback policy.” By accepting
an Award, a participant is also agreeing to be bound by any clawback policy adopted by the Company (including any clawback policy
amendment to comply with applicable laws or stock exchange requirements).
Amendment
and Termination.
The
Board may amend, alter, suspend, discontinue or terminate the Cadiz Inc. 2019 Equity Incentive Plan or the Compensation Committee’s
authority to grant Awards without the consent of stockholders or participants or beneficiaries, except that stockholder approval
must be obtained for any amendment or alteration if such approval is required by law or regulation or under the rules of any stock
exchange or quotation system on which Shares may then be listed or quoted; provided that, except as otherwise permitted by the
Cadiz Inc. 2019 Equity Incentive Plan or an Award agreement, without the consent of an affected participant, no such Board action
may materially and adversely affect the rights of such participant under the terms of any previously granted and outstanding Award.
The Compensation Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award
theretofore granted and any Award agreement relating thereto, except as otherwise provided in the Cadiz Inc. 2019 Equity Incentive
Plan; provided that, except as otherwise permitted by the Cadiz Inc. 2019 Equity Incentive Plan or Award agreement, without the
consent of an affected participant, no such Committee or the Board action may materially and adversely affect the rights of such
participant under terms of such Award. The Cadiz Inc. 2019 Equity Incentive Plan will terminate at the earliest of (i) such time
as no Shares remain available for issuance under the Cadiz Inc. 2019 Equity Incentive Plan, (ii) termination of the Cadiz Inc.
2019 Equity Incentive Plan by the Board or (iii) the tenth anniversary of the effective date of the Cadiz Inc. 2019 Equity Incentive
Plan. Awards outstanding upon expiration of the Cadiz Inc. 2019 Equity Incentive Plan will remain in effect until they have been
exercised or terminated, or have expired.
Federal
Income Tax Consequences of Awards.
The
following discussion is for general information only and is intended to briefly summarize the United States federal income tax
consequences to participants arising from participation in the Cadiz Inc. 2019 Equity Incentive Plan. This description is based
on current law, which is subject to change (possibly retroactively). The tax treatment of a participant in the Cadiz Inc. 2019
Equity Incentive Plan may vary depending on his or her particular situation and may, therefore, be subject to special rules not
discussed below. No attempt has been made to discuss any potential foreign, state, or local tax consequences. In addition, certain
Awards granted under the Cadiz Inc. 2019 Equity Incentive Plan could be subject to additional taxes unless they are designed to
comply with certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder.
Nonqualified
Stock Options.
An
optionee generally is not taxable upon the grant of a nonqualified stock option granted under the Cadiz Inc. 2019 Equity Incentive
Plan. On exercise of a nonqualified stock option granted under the Cadiz Inc. 2019 Equity Incentive Plan, an optionee will recognize
ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the Shares acquired on exercise
of the option over the exercise price. If the optionee is an employee of the Company or a subsidiary, that income will be subject
to the withholding of Federal income tax. The optionee’s tax basis in those Shares will be equal to their fair market value
on the date of exercise of the option, and his or her holding period for those Shares will begin on that date.
If
an optionee pays for Shares on exercise of an option by delivering Shares, the optionee will not recognize gain or loss on the
Shares delivered, even if their fair market value at the time of exercise differs from the optionee’s tax basis in them.
The optionee, however, otherwise will be taxed on the exercise of the option in the manner described above as if he or she had
paid the exercise price in cash. If a separate identifiable stock certificate or other indicia of ownership is issued for that
number of Shares equal to the number of Shares delivered on exercise of the option, the optionee’s tax basis in the Shares
represented by that certificate or other indicia of ownership will be equal to his or her tax basis in the Shares delivered, and
his or her holding period for those Shares will include his or her holding period for the Shares delivered. The optionee’s
tax basis and holding period for the additional Shares received on exercise of the option will be the same as if the optionee
had exercised the option solely in exchange for cash.
The
Company generally will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income taxable
to the optionee, provided that amount constitutes an ordinary and necessary business expense for the Company and is reasonable
in amount, and either the employee includes that amount in income or the Company timely satisfies its reporting requirements with
respect to that amount.
Incentive
Stock Options.
Under
the Code, an optionee generally is not subject to tax upon the grant or exercise of an ISO. In addition, if the optionee holds
a Share received on exercise of an ISO for at least two years from the date the option was granted and at least one year from
the date the option was exercised (the “Required Holding Period”), the difference, if any, between the amount realized
on a sale or other taxable disposition of that Share and the holder’s tax basis in that Share will be long-term capital
gain or loss.
If
an optionee disposes of a Share acquired on exercise of an ISO before the end of the Required Holding Period, (a “Disqualifying
Disposition”), the optionee generally will recognize ordinary income in the year of the Disqualifying Disposition equal
to the excess, if any, of the fair market value of the Share on the date the ISO was exercised over the exercise price. If, however,
the Disqualifying Disposition is a sale or exchange on which a loss, if realized, would be recognized for federal income tax purposes,
and if the sales proceeds are less than the fair market value of the Share on the date of exercise of the option, the amount of
ordinary income recognized by the optionee will not exceed the gain, if any, realized on the sale. If the amount realized on a
Disqualifying Disposition exceeds the fair market value of the Share on the date of exercise of the option, that excess will be
short-term or long-term capital gain, depending on whether the holding period for the Share exceeds one year.
An
optionee who exercises an ISO by delivering Shares acquired previously pursuant to the exercise of an ISO before the expiration
of the Required Holding Period for those Shares is treated as making a Disqualifying Disposition of those Shares. This rule prevents
“pyramiding” or the exercise of an ISO (that is, exercising an ISO for one Share and using that Share, and others
so acquired, to exercise successive ISOs) without the imposition of current income tax.
For
purposes of the alternative minimum tax, the amount by which the fair market value of a Share acquired on exercise of an ISO exceeds
the exercise price of that option generally will be an adjustment included in the optionee’s alternative minimum taxable
income for the year in which the option is exercised. If, however, there is a Disqualifying Disposition of the Share in the year
in which the option is exercised, there will be no adjustment with respect to that Share. If there is a Disqualifying Disposition
in a later year, no income with respect to the Disqualifying Disposition is included in the optionee’s alternative minimum
taxable income for that year. In computing alternative minimum taxable income, the tax basis of a Share acquired on exercise of
an ISO is increased by the amount of the adjustment taken into account with respect to that Share for alternative minimum tax
purposes in the year the option is exercised.
The
Company is not allowed an income tax deduction with respect to the grant or exercise of an ISO or the disposition of a Share acquired
on exercise of an ISO after the Required Holding Period. However, if there is a Disqualifying Disposition of a Share, the Company
generally is allowed a deduction in an amount equal to the ordinary income includible in income by the optionee, provided that
amount constitutes an ordinary and necessary business expense for the Company and is reasonable in amount, and either the employee
includes that amount in income or the Company timely satisfies its reporting requirements with respect to that amount.
Stock
Awards.
Generally,
the recipient of a stock award will recognize ordinary compensation income at the time the Shares are received equal to the excess,
if any, of the fair market value of the Shares received over any amount paid by the recipient in exchange for the Shares. If,
however, the Shares are not vested when they are received under the Cadiz Inc. 2019 Equity Incentive Plan (for example, if the
recipient is required to work for a period of time in order to have the right to sell the Shares), the recipient generally will
not recognize income until the Shares become vested, at which time the recipient will recognize ordinary compensation income equal
to the excess, if any, of the fair market value of the Shares on the date they become vested over any amount paid by the recipient
in exchange for the Shares. A recipient may, however, file an election with the Internal Revenue Service, within 30 days of his
or her receipt of the Award, to recognize ordinary compensation income, as of the date the recipient receives the Award, equal
to the excess, if any, of the fair market value of the Shares on the date the Award is granted over any amount paid by the recipient
in exchange for the Shares.
The
recipient’s basis for the determination of gain or loss upon the subsequent disposition of Shares acquired as Awards will
be the amount paid for the Shares plus any ordinary income recognized either when the Shares are received or when the Shares become
vested. Upon the disposition of any Shares received as a Share Award under the Cadiz Inc. 2019 Equity Incentive Plan, the difference
between the sales price and the recipient’s basis in the Shares will be treated as a capital gain or loss and generally
will be characterized as long-term capital gain or loss if the Shares have been held for more the one year from the date as of
which he or she would be required to recognize any compensation income.
The
Company generally will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income taxable
to the recipient, provided that amount constitutes an ordinary and necessary business expense for the Company, is reasonable in
amount, and is not precluded by the deduction limitations imposed by Section 162(m) of the Code, and either the recipient includes
that amount in income or the Company timely satisfies its reporting requirements with respect to that amount.
Stock
Appreciation Rights.
The
Company may grant stock appreciation rights, separate from any other Award (“Stand-Alone stock appreciation rights”),
under the Cadiz Inc. 2019 Equity Incentive Plan. Generally, the recipient of a Stand-Alone stock appreciation right will not recognize
any taxable income at the time the Stand-Alone stock appreciation right is granted.
With
respect to Stand-Alone stock appreciation rights, if the recipient receives the appreciation inherent in the stock appreciation
rights in cash, the cash will be taxable as ordinary compensation income to the recipient at the time that the cash is received.
If the recipient receives the appreciation inherent in the stock appreciation rights in Shares, the recipient will recognize ordinary
compensation income equal to the excess of the fair market value of the Shares on the day they are received over any amounts paid
by the recipient for the Shares.
With
respect to Tandem stock appreciation rights, if the recipient elects to surrender the underlying option in exchange for cash or
Shares equal to the appreciation inherent in the underlying option, the tax consequences to the recipient will be the same as
discussed above relating to the Stand-Alone stock appreciation rights. If the recipient elects to exercise the underlying option,
the holder will be taxed at the time of exercise as if he or she had exercised a nonqualified stock option (discussed above),
i.e.
, the recipient will recognize ordinary income for Federal tax purposes measured by the excess of the then fair market
value of the Shares over the exercise price.
In
general, there will be no federal income tax deduction allowed to the Company upon the grant or termination of Stand-Alone stock
appreciation rights or Tandem stock appreciation rights. Upon the exercise of either a Stand-Alone stock appreciation right or
a Tandem stock appreciation right, however, the Company generally will be entitled to a deduction for federal income tax purposes
equal to the amount of ordinary income that the employee is required to recognize as a result of the exercise, provided that the
deduction is not otherwise disallowed under the Code.
Dividend
Equivalents.
Generally,
the recipient of a dividend equivalent award will recognize ordinary compensation income at the time the dividend equivalent award
is received equal to the fair market value of the amount received. The Company generally will be entitled to a deduction for federal
income tax purposes equal to the amount of ordinary income that the recipient is required to recognize as a result of the dividend
equivalent award, provided that the deduction is not otherwise disallowed under the Code.
Section 409A
of the Code.
The
Cadiz Inc. 2019 Equity Incentive Plan is intended to comply with Section 409A of the Code to the extent that such section
would apply to any Award under the Cadiz Inc. 2019 Equity Incentive Plan. Section 409A of the Code governs the taxation of
deferred compensation. Any participant that is granted an Award that is deemed to be deferred compensation, such as a grant of
restricted stock units that does not qualify for an exemption from Section 409A of the Code, and does not comply with Section 409A
of the Code, could be subject to taxation on the Award as soon as the Award is no longer subject to a substantial risk of forfeiture
(even if the Award is not exercisable) and an additional 20% tax (and a further additional tax based upon an amount of interest
determined under Section 409A of the Code) on the value of the Award.
New
Plan Benefits.
Other
than the automatic director grants of restricted stock units described above, the awards, if any, that will be made under the
Cadiz Inc. 2019 Equity Incentive Plan to eligible persons other than the non-employee directors described above are subject to
the discretion of the Compensation Committee and, therefore, we cannot currently determine the benefits or number of shares subject
to awards that may be granted in the future to our executive officers or employees under the Cadiz Inc. 2019 Equity Incentive
Plan. Therefore, a New Plan Benefits Table is not provided with respect to our executive officers or other employees.
Each
director who is not an employee or a consultant is eligible to receive certain automatic grants of restricted stock units under
the Cadiz Inc. 2019 Equity Incentive Plan on an annual basis. The New Plan Benefits Table below is provided solely with respect
to the current directors who are not employees or consultants.
Cadiz
Inc. 2019 Equity Incentive Plan.
Name and Position
|
|
Dollar Value ($)*
|
|
|
Number of Shares (#)(*)
|
Non-Executive Director Group
|
|
$
|
25,000
|
|
|
Unknown
|
|
(*)
|
The
dollar value shown represents the annual grant of restricted stock units with a value equal to $25,000 (calculated based on the
average closing price of the Shares for the month preceding June 30th of the applicable year of grant) to which directors are
entitled under the Cadiz Inc. 2019 Equity Incentive Plan, beginning June 30, 2020. The number of Shares that could ultimately
be granted to each director in the future cannot be determined at this time.
|
Required
Vote.
The
approval of the Cadiz Inc. 2019 Equity Incentive Plan requires an affirmative vote of the holders of a majority of the shares
present or represented by proxy at the 2019 Annual Meeting and entitled to vote on the matter. You may vote “FOR,”
“AGAINST” or “ABSTAIN.” If you ABSTAIN from voting on Proposal 3, the abstention will have the same effect
as an “AGAINST” vote.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 3.
PROPOSAL
4
ADVISORY
VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS
This
proposal, commonly referred to as a “say-on-pay” proposal, gives our stockholders the opportunity to consider the
compensation of our named executive officers as described in this proxy statement. This proposal is not intended to address any
specific item of compensation, but rather to provide an opportunity for our stockholders to express their opinion of the overall
compensation program for our named executive officers and the philosophy, policies and practices described in this proxy statement.
As
described more fully in the Compensation Discussion and Analysis section of this proxy statement, the Company is focused on the
long-term development of our significant land and water assets and, as a result, our compensation programs have been designed
to attract and retain well-qualified executives with experience in the water and asset development sector, a highly competitive
and specialized marketplace, and to encourage achievement of our business and financial objectives for our assets, which are typically
long-term in nature. The Compensation Committee has established competitive compensation programs that emphasize incentives that
encourage our executive officers to achieve our long-term goals and also align the financial interests of the executive officers
and management with those of our stockholders. These long-term incentives are guided by stockholder approved plans, an important
feature of our compensation philosophy and program.
We
request that our stockholders consider and approve the following resolution:
“RESOLVED,
that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K,
including the Compensation Discussion and Analysis, the compensation tables and the narrative disclosures is hereby APPROVED.”
This
vote is nonbinding and advisory. However, our Board and the Compensation Committee will consider the outcome of the vote when
making decisions related to the executive compensation for our named executive officers in the future.
Required
Vote.
The
approval of a non-binding, advisory resolution approving the compensation of the Company’s named executive officers requires
the affirmative vote of the holders of a majority of the shares present or represented by proxy at the 2019 Annual Meeting and
entitled to vote on the matter. You may vote “FOR,” “AGAINST” or “ABSTAIN.” If you ABSTAIN
from voting on Proposal 4, the abstention will have the same effect as an “AGAINST” vote.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR”
APPROVAL
OF THE NON-BINDING ADVISORY RESOLUTION APPROVING THE
COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
PROPOSAL
5
STOCKHOLDEr
proposal to amend the Bylaws
The
following stockholder proposal (with the changed portion of the Bylaws appearing in bold and italics) will be voted on at the
2019 Annual Meeting, if properly presented, by or on behalf of WAM. As of the date of our receipt of this proposal, WAM stated
that it may be deemed to beneficially own 3,257,547 shares of our common stock.
“RESOLVED,
that, effectively immediately, Section 2.16 of the Bylaws be and hereby is, amended and restated as follows:
2.16
Notice of Stockholder Business.
At
an annual meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting.
To be properly brought before an annual meeting, business must be (a) specified in the notice of the meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (c) otherwise properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, a stockholder must have given timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive
offices of the Corporation,
(a) in the case of an annual meeting that is called for a date that is within 30 days before
or after the anniversary date of the immediately preceding annual meeting, not less than 90 days prior to such anniversary date,
and (b) in the case of an annual meeting that is called for a date that is not within 30 days before or after the anniversary
date of the immediately preceding annual meeting, not later than the close of business on the tenth day following the day on which
notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever
occurs first.
A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes
to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for
conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation’s books, of
the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by
the stockholder and (d) any material interest of the stockholder in such business. Notwithstanding anything to the contrary, no
business shall be conducted at an annual meeting except in accordance with the provisions of this Section 2.16. The Chairman of
an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before
the meeting and in accordance with the provisions of this Section, and if he or she should so determine, he or she shall so declare
to the meeting and any such business not properly brought before such meeting shall not be transacted.”
Supporting
Statement of WAM.
This
Proposal seeks to amend the Bylaws in an effort to align the Company’s corporate governance with best practices. As currently
written, Section 2.16 has the potential to impede the stockholder franchise, by preventing stockholders from making nominations
or submitting proposals in the event that the Company announces the date of its annual meeting less than 90 days before it is
to take place.
The
proposed amendment allows stockholders to calculate the deadline for submitting nominations and proposals based off of either
the established and easily determinable anniversary date of the last meeting or 10 days after the announcement of an annual meeting
date that departs from the Company’s previous meeting date by more than 30 days.
Statement
of the Board Regarding Proposal 5.
The
Board unanimously recommends that stockholders vote “
AGAINST”
this
stockholder proposal, as,
among other reasons, the Board intends to adopt a comprehensive amendment to Section 2.16 of the Bylaws to incorporate certain aspects
of WAM’s proposal and further improve upon its nomination requirements by bringing it into
alignment with current corporate governance standards, which will, as a result, render WAM’s proposal moot.
While
the Board believes that advance notice provisions for annual meetings, as a general matter, provide management and the Board time
and opportunity to evaluate and make recommendations with respect to stockholder proposals, the proposed Bylaws amendment
by WAM fails to include many terms related to information that nominating/proposing stockholders should include in their
nomination/proposal submissions that are crucial to the Company’s ability to evaluate potential nominations/proposals
and determine how such business affects the interests of stockholders. Further, in the Company’s opinion, the
proposal by WAM does not provide sufficient time for the Board to go through the necessary steps to vet potential candidates
for election to the Board. As part of its nomination process, the Board and Nominating and Corporate Governance Committee
undertake a careful and thorough evaluation of each candidate, including those proposed by stockholders. An advance notice
provision with only 30 days’ notice such as suggested in Proposal 5 could run the risk of not allowing full diligence on
proposed candidates for the Board, and is not typical for a company of Cadiz’s size.
For
these reasons, pursuant to Section 9.2 of the Bylaws, the Board intends to adopt a comprehensive amendment to Section 2.16 of
the Bylaws to, as previously stated, incorporate certain aspects of WAM’s proposal and further improve upon its nomination
requirements.
Required
Vote.
If
properly presented at the 2019 Annual Meeting, the approval of the stockholder proposal to amend the Bylaws to expand the notice
requirements for stockholder business to be timely brought before an annual meeting, if properly presented, requires a majority
of outstanding shares entitled to vote at the 2019 Annual Meeting. The enclosed
WHITE
proxy card enables a stockholder
to vote “FOR,” “AGAINST” or “ABSTAIN” on this proposal. Abstentions and broker non-votes will
have the same effect as an “AGAINST” vote on this proposal.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “AGAINST”
THE
STOCKHOLDER PROPOSAL TO AMEND THE BYLAWS.
WHITE
PROXY CARDS WILL BE VOTED “AGAINST” THIS STOCKHOLDER PROPOSAL UNLESS OTHERWISE SPECIFIED.
OTHER
MATTERS
The
Board does not know of any other matters that may come before the 2019 Annual Meeting. However, if any other matter shall properly
come before the 2019 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
Stockholder proposals to be included in
our proxy statement for the 2020 Annual Meeting must be received by the Secretary of the Corporation at 550 S. Hope Street,
Suite 2850, Los Angeles, California 90071 no later than. For a proposal to be included, you must comply with the rules of the
SEC governing the submission of stockholder proposals.
Under our Bylaws, no business may be brought
before the 2020 Annual Meeting unless it is specified in the notice of the meeting, is otherwise properly brought before the meeting
by or at the direction of the Board, or is properly brought before the meeting by a stockholder who has delivered notice to the
Secretary of the Corporation (containing certain information specified in the Bylaws) not less than 90 calendar days but not more
than 120 calendar days in advance of the date that is the one-year anniversary of the date on which the Company first mailed its
proxy statement for the preceding year’s annual meeting (subject to certain exceptions if the annual meeting is advanced
or delayed a certain number of days). These requirements are separate from and in addition to the SEC’s requirements that
a stockholder must meet in order to have a stockholder proposal included in the Company’s proxy statement.
HOUSEHOLDING
OF PROXY MATERIALS
The
SEC has adopted rules that permit companies and intermediaries (such as brokers and banks) to satisfy the delivery requirements
for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single
proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” is
also permissible under the General Corporation Law of the State of Delaware and potentially means extra convenience for stockholders
and cost savings for companies.
This
year, a number of banks and brokers with account holders who are our stockholders may be householding our proxy materials. A single
Notice of Annual Meeting of Stockholders, proxy statement and Annual Report on Form 10-K will be delivered to multiple stockholders
sharing an address unless contrary instructions have been received from one or more of the affected stockholders. Once you have
received notice from your bank or broker that it will be householding communications to your address, householding will continue
until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding
and would prefer to receive a separate Notice of Annual Meeting of Stockholders, proxy statement and Annual Report on Form 10-K,
please notify your bank or broker and direct your request to Board of Directors c/o Timothy J. Shaheen, Corporate Secretary, Cadiz
Inc., 550 S. Hope Street, Suite 2850, Los Angeles, California 90071, or telephone at (213) 271-1600. Stockholders who currently
receive multiple copies of the proxy statement at their address and would like to request householding of their communications
should contact their bank or broker.
ADDITIONAL
INFORMATION
This
proxy statement is accompanied by our Annual Report on Form 10-K for the year ended December 31, 2018. Exhibits to the Form
10-K will be made available to stockholders for a reasonable charge upon their written request to the Company, Attention: Corporate
Communications, 550 S. Hope Street, Suite 2850, Los Angeles, California 90071.
By
Order of the Board of Directors
Los
Angeles, California
,
2019
APPENDIX A
ADDITIONAL
INFORMATION REGARDING PARTICIPANTS IN THE SOLICITATION
Under
applicable SEC rules and regulations, members of the Board, the Board’s nominees and certain officers and other employees
of the Company are “participants” with respect to the Company’s solicitation of proxies in connection with the
2019 Annual Meeting. The following sets forth certain information about such persons (the “Participants”).
Directors
and Director Nominees
The
names and present principal occupation of our directors, director nominees and Alternate Nominees, each a Participant, are set
forth below. The business address for the Company’s current directors and director nominees is c/o Cadiz Inc., 550 S. Hope
Street, Suite 2850, Los Angeles, California 90071.
Name
|
|
Present
Principal Occupation
|
Keith
Brackpool
|
|
Chairman
of the Board, Cadiz Inc.
|
John
A. Bohn
|
|
Partner
and Chief Strategist, Deepwater Desal, LLC
|
Jeffrey
J. Brown
|
|
Chief
Executive Officer, Brown Equity Partners, LLC
|
Stephen
E. Courter
|
|
Faculty,
the McCombs School of Business, University of Texas at Austin
|
Maria
Echaveste
|
|
President
and Chief Executive Officer, the Opportunity Institute
|
Geoffrey
Grant
|
|
Former
(Retired) Managing Partner and the Chief Investment Officer, Grant Capital Partners
|
Winston
H. Hickox
|
|
Member
of Strategic Advisory Group, Palladin Capital
|
Murray
H. Hutchison
|
|
Member
of Board of Managers, Cadiz Real Estate LLC
|
Richard
Nevins
|
|
Independent
Financial Advisor
|
Scott
S. Slater
|
|
Stockholder,
Brownstein Hyatt Farber Schreck LLP
|
Carolyn
Webb de Macías
|
|
Chair
of the Board, Los Angeles Partnership
|
[Alternate
Nominee]
|
|
[●]
|
[Alternate
Nominee]
|
|
[●]
|
Officers
and Employees
Executive
officers and employees of the Company who are Participants are Scott Slater, Timothy Shaheen and Keith Brackpool. The business
address for each is c/o Cadiz Inc., 550 S. Hope Street, Suite 2850, Los Angeles, California 90071. Their present principal occupations
are stated below.
Name
|
|
Present
Principal Occupation
|
Scott
Slater
|
|
President
and Chief Executive Officer, Cadiz Inc.
|
Timothy
Shaheen
|
|
Chief
Financial Officer and Secretary, Cadiz Inc.
|
Information
Regarding Ownership of the Company’s Securities by Participants
The
number of the Company’s securities beneficially owned by the Participants as of April 22, 2019 is set forth in the section
entitled “Security Ownership of Directors and Executive Officers” in this proxy statement. Mses. Echaveste
and Webb de Macías do not own any Company securities.
Information
Regarding Transactions in the Company’s Securities by Participants
The
following table sets forth information regarding purchases and sales of the Company’s securities by the Participants within
the past two years. No part of the purchase price or market value of these securities is represented by funds borrowed or otherwise
obtained for the purpose of acquiring or holding such securities.
Name
|
|
Date
|
|
Title of Security
|
|
Number of
Shares
|
|
|
Transaction
|
Keith Brackpool
|
|
06/07/2017
07/07/2017
10/11/2017
11/24/2017
10/03/2018
|
|
Common Stock
Restricted Stock Units
Common Stock
Common Stock
Common Stock
|
|
|
100,000
100,000
40,000
40,000
25,000
|
|
|
Exercise or Conversion of Derivative Security
Gift of Securities from Insider
Gift of Securities from Insider
Gift of Securities from Insider
Gift of Securities from Insider
|
|
|
|
|
|
|
|
|
|
|
|
John A. Bohn
|
|
06/30/2018
|
|
Common Stock
|
|
|
393
|
|
|
Grant, Award or Other Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey J. Brown
|
|
06/13/2018
06/30/2018
|
|
Common Stock
Common Stock
|
|
|
393
|
|
|
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
|
|
|
07/01/2018
10/03/2018
01/02/2019
04/01/2019
|
|
Common Stock
Common Stock
Common Stock
Common Stock
|
|
|
574
676
728
783
|
|
|
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
Stephen E. Courter
|
|
06/30/2017
|
|
Common Stock
|
|
|
1,449
|
|
|
Grant, Award or Other Acquisition
|
|
|
06/30/2018
|
|
Common Stock
|
|
|
1,573
|
|
|
Grant, Award or Other Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
Geoffrey Grant
|
|
06/30/2017
|
|
Common Stock
|
|
|
1,449
|
|
|
Grant, Award or Other Acquisition
|
|
|
07/01/2017
|
|
Common Stock
|
|
|
559
|
|
|
Grant, Award or Other Acquisition
|
|
|
10/03/2017
|
|
Common Stock
|
|
|
587
|
|
|
Grant, Award or Other Acquisition
|
|
|
01/02/2018
03/19/2018
04/01/2018
|
|
Common Stock
Common Stock
Common Stock
|
|
|
528
10,000
564
|
|
|
Grant, Award or Other Acquisition
Gift of Securities from Insider
Grant, Award or Other Acquisition
|
|
|
06/30/2018
|
|
Common Stock
|
|
|
1,573
|
|
|
Grant, Award or Other Acquisition
|
|
|
07/01/2018
|
|
Common Stock
|
|
|
574
|
|
|
Grant, Award or Other Acquisition
|
|
|
10/03/2018
01/02/2019
04/01/2019
|
|
Common Stock
Common Stock
Common Stock
|
|
|
676
728
783
|
|
|
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
Winston H. Hickox
|
|
06/30/2017
|
|
Common Stock
|
|
|
1,449
|
|
|
Grant, Award or Other Acquisition
|
|
|
06/30/2018
|
|
Common Stock
|
|
|
1,573
|
|
|
Grant, Award or Other Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
Murray H. Hutchison
|
|
06/30/2017
07/01/2017
10/03/2017
01/02/2018
04/01/2018
06/30/2018
07/01/2018
10/03/2018
01/02/2019
04/01/2019
|
|
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
|
|
|
1,449
559
587
528
564
1,573
574
676
728
783
|
|
|
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
Richard Nevins
|
|
06/30/2017
|
|
Common Stock
|
|
|
1,449
|
|
|
Grant, Award or Other Acquisition
|
|
|
07/01/2017
|
|
Common Stock
|
|
|
559
|
|
|
Grant, Award or Other Acquisition
|
|
|
10/03/2017
|
|
Common Stock
|
|
|
587
|
|
|
Grant, Award or Other Acquisition
|
|
|
01/02/2018
|
|
Common Stock
|
|
|
528
|
|
|
Grant, Award or Other Acquisition
|
|
|
04/01/2018
|
|
Common stock
|
|
|
564
|
|
|
Grant, Award or Other Acquisition
|
|
|
06/30/2018
|
|
Common Stock
|
|
|
1,573
|
|
|
Grant, Award or Other Acquisition
|
|
|
07/01/2018
10/03/2018
01/02/2019
04/01/2019
|
|
Common Stock
Common Stock
Common Stock
Common Stock
|
|
|
574
676
728
783
|
|
|
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
Grant, Award or Other Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
Timothy J. Shaheen
|
|
05/18/2017
|
|
Common Stock
|
|
|
5,000
|
|
|
Gift of Securities from Insider
|
|
|
06/07/2017
|
|
Common Stock
|
|
|
100,000
|
|
|
Exercise or Conversion of Derivative Security
|
|
|
06/21/2017
|
|
Common Stock
|
|
|
50,000
|
|
|
Open Market Sale
|
|
|
08/14/2017
|
|
Common Stock
|
|
|
10,000
|
|
|
Gift of Securities from Insider
|
|
|
09/21/2017
|
|
Common Stock
|
|
|
50,000
|
|
|
Open Market Sale
|
|
|
12/19/2017
|
|
Common Stock
|
|
|
4,000
|
|
|
Gift of Securities from Insider
|
Miscellaneous
Information Concerning Participants
Other
than as set forth in this Appendix A or elsewhere in this proxy statement and based on the information provided by each Participant,
none of the Participants or their associates (i) beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, or owns of record but not beneficially, any shares of common stock or other securities of the Company
or any of its subsidiaries or (ii) has any substantial interest, direct or indirect, by security holdings or otherwise, in any
matter to be acted upon at the 2019 Annual Meeting. In addition, neither the Company nor any of the Participants listed above
is now or has been within the past year a party to any contract, arrangement, or understanding with any person with respect to
any of the Company’s securities, including, but not limited to, joint ventures, loan or option arrangements, puts or calls,
guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies. No Participant
has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) during the past ten years.
Other
than as set forth in this Appendix A or elsewhere in this proxy statement and based on the information provided by each Participant,
neither the Company nor any of the Participants listed above or any of their associates have or will have (i) any arrangements
or understandings with any person with respect to any future employment by the Company or its affiliates or with respect to any
future transactions to which the Company or any of its affiliates will or may be a party or (ii) a direct or indirect material
interest in any transaction or series of similar transactions since the beginning of our last fiscal year or any currently proposed
transactions, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party in which
the amount involved exceeds $120,000.
APPENDIX
B
CADIZ
Inc.
2019
EQUITY INCENTIVE PLAN
CADIZ
INC.
2019
EQUITY INCENTIVE PLAN
1.
|
Purpose
.
The purpose of this 2019 EQUITY INCENTIVE PLAN (as amended from time to time, the “
Plan
”) is to assist
Cadiz Inc., a Delaware corporation, and its Related Entities (as hereinafter defined) in attracting, motivating, retaining
and rewarding high-quality executives and other employees, officers, directors, consultants and other persons who provide
services to the Company or its Related Entities by enabling such persons to acquire or increase a proprietary interest in
the Company in order to strengthen the mutuality of interests between such persons and the Company’s stockholders, and
providing such persons with performance incentives to expend their maximum efforts in the creation of stockholder value.
|
B-
3
|
|
|
|
2.
|
Definitions
.
For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section
1 hereof and elsewhere herein.
|
B-
3
|
|
|
|
3.
|
Administration
.
|
B-9
|
|
|
|
4.
|
Shares
Subject to Plan
.
|
B-10
|
|
|
|
5.
|
Eligibility;
Per-Participant Limitations
. Awards may be granted under the Plan only to Eligible Persons. Subject to adjustment as provided
in Section 9(c) of the Plan, in any fiscal year of the Company during any part of which the Plan is in effect, no Participant
may be granted (i) Options and/or Stock Appreciation Rights with respect to more than 300,000 Shares or (ii) Restricted Stock
and/or any other Awards payable in Shares that are subject to the satisfaction of performance goals, with respect to more
than 300,000 Shares.
|
B-
11
|
|
|
|
6.
|
Specific
Terms of Awards
.
|
B-12
|
|
|
|
7.
|
Certain
Provisions Applicable to Awards
.
|
B-20
|
|
|
|
8.
|
Change
in Control
.
|
B-2
2
|
|
|
|
9.
|
General
Provisions
.
|
B-
25
|
CADIZ
INC.
2019
EQUITY INCENTIVE PLAN
1.
Purpose
. The purpose of this 2019 EQUITY INCENTIVE PLAN (as amended from time to time, the “
Plan
”)
is to assist Cadiz Inc., a Delaware corporation, and its Related Entities (as hereinafter defined) in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers, directors, consultants and other persons who provide
services to the Company or its Related Entities by enabling such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such persons and the Company’s stockholders, and providing
such persons with performance incentives to expend their maximum efforts in the creation of stockholder value.
2.
Definitions
. For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such
terms defined in Section 1 hereof and elsewhere herein.
(a)
“
Award
” means any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award,
Share granted as a bonus or in lieu of another Award, Dividend Equivalent, Other Stock-Based Award, Performance Award or any award
to an Outside Director under Section 6(j), together with any other right or interest relating to Shares or other property (including
cash), granted to a Participant under the Plan.
(b)
“
Award Agreement
” means any written agreement, contract or other instrument or document evidencing any
Award granted by the Committee hereunder.
(c)
“
Beneficiary
” means the person, persons, trust or trusts that have been designated by a Participant
in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant’s death or to which Awards or other rights are transferred if and to the extent permitted under
Section 9(b) hereof. If, upon a Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means the Participant’s estate.
(d)
“
Beneficial Owner
”
and
“
Beneficial Ownership
” shall have the
meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.
(e)
“
Board
” means the Company’s Board of Directors.
(f)
“
Cause
” shall, with respect to any Participant, have the meaning specified in the Award Agreement. In
the absence of any definition in the Award Agreement, “Cause” shall have the equivalent meaning or the same meaning
as “cause” or “for cause” set forth in any employment, consulting, or other agreement for the performance
of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition
in such agreement, “Cause” shall mean (i) the failure by the Participant to perform, in a reasonable manner, his or
her duties as assigned by the Company or a Related Entity, (ii) any violation or breach by the Participant of his or her employment,
consulting or other similar agreement with the Company or a Related Entity, if any, (iii) any violation or breach by the Participant
of any non-competition, non-solicitation, non-disclosure and/or other similar agreement with the Company or a Related Entity,
(iv) any act by the Participant of dishonesty or bad faith with respect to the Company or a Related Entity, (v) use of alcohol,
drugs or other similar substances in a manner that adversely affects the Participant’s work performance, or (vi) the commission
by the Participant of any act, misdemeanor, or crime reflecting unfavorably upon the Participant or the Company or any Related
Entity. The good faith determination by the Committee of whether the Participant’s Continuous Service was terminated by
the Company for “Cause” shall be final and binding for all purposes hereunder.
(g)
“
Change in Control
” means a Change in Control as defined in Section 8(b) hereof.
(h)
“
Code
” means the Internal Revenue Code of 1986, as amended from time to time, including regulations
thereunder and successor provisions and regulations thereto.
(i)
“
Committee
” means a committee of the Board designated and empowered by the Board to administer the Plan;
provided, however, that if the Board fails to designate and empower such a committee or if there are no longer any members on
the committee so designated and empowered by the Board, or for any other reason (or no reason) determined by the Board (which
determination may be evidenced by the taking of any action to administer the Plan by the Board), then the Board shall serve as
the Committee. While it is intended that the Committee shall consist of at least two (2) directors, each of whom shall be (i) a
“non-employee director” within the meaning of Rule 16b-3 (or any successor rule) under the Exchange Act, unless administration
of the Plan by “non-employee directors” is not then required in order for exemptions under Rule 16b-3 to apply to
transactions under the Plan, and (ii) Independent, the failure of the Committee to be so comprised shall not invalidate any Award
that otherwise satisfies the terms of the Plan.
(j)
“
Company
” means Cadiz Inc., a Delaware corporation, and any successor thereto.
(k)
“
Consultant
” means any consultant or advisor who provides services to the Company or any Related Entity,
so long as (i) such Person renders bona fide services that are not in connection with the offer and sale of the Company’s
securities in a capital-raising transaction, (ii) such Person does not directly or indirectly promote or maintain a market for
the Company’s securities, and (iii) the identity of such Person would not preclude the Company from offering or selling
securities to such Person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under
the Securities Act or, if the Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration
on a Form S-8 Registration Statement under the Securities Act.
(l)
“
Continuous Service
” means the uninterrupted provision of services to the Company or any Related Entity
in any capacity of Employee, Director, Consultant or other service provider. Continuous Service shall not be considered to be
interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entities or any successor
entities in any capacity of Employee, Director, Consultant or other service provider, or (iii) any change in status as long as
the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director, Consultant or
other service provider (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick
leave, military leave, or any other authorized personal leave.
(m)
“
Director
” means a member of the Board or the board of directors of any Related Entity.
(n)
“
Disability
” means a permanent and total disability (within the meaning of Section 22(e) of the Code),
as determined by a medical doctor satisfactory to the Committee.
(o)
“
Dividend Equivalent
” means a right, granted to a Participant under Section 6(g) hereof, to receive
cash, Shares, other Awards or other property equal in value to dividends paid with respect to a specified number of Shares, or
other periodic payments.
(p)
“
Effective Date
” means the effective date of the Plan, which shall be June 11, 2019.
(q)
“
Eligible Person
” means each officer, Director, Employee, Consultant and other Person who provides services
to the Company or any Related Entity. The foregoing notwithstanding, only Employees of the Company, or any parent corporation
or subsidiary corporation of the Company (as those terms are defined in Sections 424(e) and (f) of the Code, respectively), shall
be Eligible Persons for purposes of receiving any Incentive Stock Options. An Employee on leave of absence may, in the discretion
of the Committee, be considered as still in the employ of the Company or a Related Entity for purposes of eligibility for participation
in the Plan.
(r)
“
Employee
” means any individual, including an officer or Director, who is an employee of the Company
or any Related Entity, or is a prospective employee of the Company or any Related Entity (conditioned upon and effective not earlier
than, such individual becoming an employee of the Company or any Related Entity). The payment of a director’s fee by the
Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.
(s)
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended from time to time, including rules
thereunder and successor provisions and rules thereto.
(t)
“
Fair Market Value
” means the fair market value of Shares, Awards or other property on the date as of
which the value is being determined, as determined by the Committee, or under procedures established by the Committee, subject
to the following:
(i)
If, on such date, the Shares are listed on a national or regional securities exchange or market system, the Fair Market Value
of a Share shall be the closing price of a Share (or the mean of the closing bid and asked prices of a Share if the Share is so
quoted instead) as quoted on the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or such other
national or regional securities exchange or market system constituting the primary market for the Share, as reported on the website
Nasdaq.com (if applicable), by Bloomberg LP or such other source as the Committee deems reliable. If the relevant date does not
fall on a day on which the Share has traded on such securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Share was so traded prior to the relevant date, or such other appropriate
day as shall be determined by the Committee, in its discretion.
(ii)
If, on such date, the Share are not listed on a national or regional securities exchange or market system, the Fair Market Value
of a Share shall be as determined by the Committee in good faith without regard to any restriction other than a restriction which,
by its terms, will never lapse.
(u)
“
Good Reason
” shall, with respect to any Participant, have the meaning specified in the Award Agreement.
In the absence of any definition in the Award Agreement, “Good Reason” shall have the equivalent meaning or the same
meaning as “good reason” or “for good reason” set forth in any employment, consulting or other agreement
for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement
or any such definition in such agreement, such term shall mean (i) the assignment to the Participant of any duties or responsibilities
inconsistent in any material respect with the Participant’s duties or responsibilities as assigned by the Company or a Related
Entity, or any other action by the Company or a Related Entity which results in a material diminution in such duties or responsibilities,
excluding for this purpose an action which is remedied by the Company or a Related Entity promptly after receipt of notice thereof
given by the Participant; (ii) any material failure by the Company or a Related Entity to comply with its obligations to the Participant
as agreed upon, other than a failure which is remedied by the Company or a Related Entity promptly after receipt of notice thereof
given by the Participant; or (iii) a material breach by the Company or any Related Entity of any employment, consulting or other
agreement under which the Participant provides services to the Company or any Related Entity. For purposes of the Plan, upon termination
of a Participant’s Continuous Service, Good Reason shall not be deemed to exist unless the Participant’s termination
of Continuous Service for Good Reason occurs within sixty (60) days following the initial existence of one of the conditions specified
in clauses (i) through (iii) above, the Participant provides the Company or the Related Entity for which the Participant provides
services with written notice of the existence of such condition with thirty (30) days after the initial existence of the condition,
and the Company fails to remedy the condition within thirty (30) days after its receipt of notice.
(v)
“
Incentive Stock Option
” means any Option intended to be designated as an incentive stock option within
the meaning of Section 422 of the Code or any successor provision thereto.
(w)
“
Independent
”, when referring to either the members of the Board or the members of the Committee, shall
have the same meaning as used in the rules of the Listing Market.
(x)
“
Incumbent Board
” means the Incumbent Board as defined in Section 8(b)(ii) hereof.
(y)
“
Listing Market
” means the national securities exchange on which any securities of the Company are listed
for trading, and if not listed for trading, by the rules of the Nasdaq Stock Market.
(z)
“
Option
” means a right granted to a Participant under Section 6(b) hereof, to purchase Shares or other
Awards at a specified price during specified time periods.
(aa)
“
Optionee
” means a person to whom an Option is granted under the Plan or any person who succeeds to
the rights of such person under the Plan.
(bb)
“
Other Stock-Based Awards
” means Awards granted to a Participant under Section 6(i) hereof.
(cc)
“
Outside Director
” means a Director that is not an Employee.
(dd)
“
Parent
” means any corporation or other entity (other than the Company), whether now or hereafter existing,
in an unbroken chain of corporations or other entities ending with the Company, if each of the corporations or other entities
in the chain (other than the Company) owns stock or other form of equity possessing 50% or more of the combined voting power of
all classes of stock in one of the other corporations or other entities in the chain.
(ee)
“
Participant
” means a Person who has been granted an Award under the Plan which remains outstanding,
including a Person who is no longer an Eligible Person.
(ff)
“
Performance Award
” means any Award granted pursuant to Section 6(h) hereof.
(gg)
“
Performance Period
” means that period established by the Committee at the time any Performance Award
is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award
are to be measured.
(hh)
“
Person
” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and
used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section 13(d) thereof.
(ii)
“
Prior Plan
” means the Cadiz Inc. 2014 Equity Incentive Plan.
(jj)
“
Related Entity
” means any Parent or Subsidiary, and any business, corporation, partnership, limited
liability company or other entity designated by the Committee in which the Company, a Parent or a Subsidiary holds a substantial
ownership interest, directly or indirectly, and with respect to which the Company may offer or sell securities pursuant to the
Plan in reliance upon either Rule 701 under the Securities Act or, if the Company is required to file reports pursuant to Section
13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act.
(kk)
“
Restricted Stock
” means any Share issued with such risks of forfeiture and other lawful restrictions
as the Committee, in its sole discretion, may impose in the Award Agreement (including any restriction on the right to vote such
Share and restrictions on the right to receive dividends), which restrictions may lapse separately or in combination at such time
or times, in installments or otherwise, as the Committee may deem appropriate.
(ll)
“
Restricted Stock Award
” means an Award granted to a Participant under Section 6(d) hereof.
(mm)
“
Restricted Stock Unit
” means a right to receive Shares, including Restricted Stock, cash measured based
upon the value of Shares, or a combination thereof, at the end of a specified deferral period.
(nn)
“
Restricted Stock Unit Award
” means an Award of a Restricted Stock Unit granted to a Participant under
Section 6(e) hereof.
(oo)
“
Restriction Period
” means the period of time specified by the Committee that Restricted Stock Awards
shall be subject to such restrictions on transferability, risk of forfeiture and other lawful restrictions, if any, as the Committee
may impose.
(pp)
“
Rule 16b-3
” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants,
promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
(qq)
“
Securities Act
” means the Securities Act of 1933, as amended from time to time, including rules thereunder
and successor provisions and rules thereto.
(rr)
“
Shares
” means the shares of common stock of the Company, par value $0.01 per share, and such other
securities as may be substituted (or resubstituted) for Shares pursuant to Section 9(c) hereof.
(ss)
“
Stock Appreciation Right
” means a right granted to a Participant under Section 6(c) hereof.
(tt)
“
Subsidiary
” means any corporation or other entity in which the Company has a direct or indirect ownership
interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation
or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or
more of the distribution of profits or 50% or more of the assets on liquidation or dissolution.
(uu)
“
Substitute Awards
” means Awards granted or Shares issued by the Company in assumption of, or in substitution
or exchange for, awards previously granted, or the right or obligation to make future awards, by a company (i) acquired by the
Company or any Related Entity, (ii) which becomes a Related Entity after the date hereof, or (iii) with which the Company or any
Related Entity combines.
3.
Administration
.
(a)
Authority of the Committee
. The Plan shall be administered by the Committee. The Committee shall have full and final
authority, subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, grant
Awards, determine the type, number and other terms and conditions of, and all other matters relating to, Awards, prescribe Award
Agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe
and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to
make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan.
In exercising any discretion granted to the Committee under the Plan or pursuant to any Award, the Committee shall not be required
to follow past practices, act in a manner consistent with past practices, or treat any Eligible Person or Participant in a manner
consistent with the treatment of any other Eligible Persons or Participants. Decisions of the Committee shall be final, conclusive
and binding on all Persons, including the Company, any Related Entity or any Participant or Beneficiary, or any transferee under
Section 9(b) hereof or any other person claiming rights from or through any of the foregoing persons or entities.
(b)
Manner of Exercise of Committee Authority.
The Committee, and, notwithstanding anything contained in the Plan to
the contrary, not the Board, shall exercise sole and exclusive discretion (i) on any matter relating to a Participant then subject
to Section 16 of the Exchange Act with respect to the Company to the extent necessary in order that transactions by such
Participant shall be exempt under Rule 16b-3 under the Exchange Act, and (ii) with respect to any Award to an Independent Director.
The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. Subject to applicable law, the Committee may delegate to a subcommittee of
the Committee, or officers or managers of the Company or any Related Entity, or a committee of the governing body of any Related
Entity, the authority, subject to such terms and limitations as the Committee shall determine, to perform such functions, including
administrative functions as the Committee may determine to the extent that such delegation will not result in the loss of an exemption
under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company.
The Committee may appoint agents to assist it in administering the Plan.
(c)
Limitation of Liability
. The Committee and the Board, and each member thereof, shall, in the performance of their,
his or her duties under the Plan, including, without limitation, in the administration of the Plan, be fully protected in relying
in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company
by any of the Company’s officers or employees, or by any other Person as to matters the Committee or the Board or such member
thereof, as applicable, reasonably believes are within such other Person’s professional or expert competence and who has
been selected with reasonable care by or on behalf of the Company. To the fullest extent permitted by applicable law, members
of the Committee and members of the Board, and any officer or Employee acting at the direction or on behalf of the Committee or
the Board, shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan,
and shall be fully indemnified and protected by the Company with respect to any such action or determination.
4.
Shares Subject to Plan
.
(a)
Limitation on Overall Number of Shares Available for Delivery Under Plan
. Subject to adjustment as provided in Section
9(c) hereof, the total number of Shares reserved and available for delivery under the Plan shall be 1,200,000, plus any Shares
remaining available for delivery under the Prior Plan on the Effective Date. Any Shares delivered under the Plan may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
(b)
Application of Limitation to Grants of Awards.
No Award may be granted if the number of Shares to be delivered in
connection with such an Award exceeds the number of Shares remaining available for delivery under the Plan, minus the number of
Shares deliverable upon settlement of then outstanding Awards. The Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments
if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award.
(c)
Availability of Shares Not Delivered under Awards and Adjustments to Limits.
(i)
If any Shares subject to an Award, or after the Effective Date, any Shares subject to any awards granted under the Prior Plan,
are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award, or after the Effective Date, any Shares
subject to any award granted under the Prior Plan, is settled for cash or otherwise does not result in the issuance of all or
a portion of the Shares subject to such Award, or award under the Prior Plan, the Shares to which those Awards, or awards under
the Prior Plan, were subject, shall, to the extent of such forfeiture, expiration, termination, non-issuance or cash settlement,
again be available for delivery with respect to Awards under the Plan.
(ii)
The full number of Shares subject to an Option granted under the Plan shall count against the number of Shares remaining available
for issuance pursuant to Awards granted under the Plan, even if the exercise price of the Option is satisfied through net-settlement
or by delivering Shares to the Company (by either actual delivery or attestation). Upon exercise of Stock Appreciation Rights
granted under the Plan that are settled in Shares, the full number of Stock Appreciation Rights (rather than the net number of
Shares actually delivered upon exercise) shall count against the maximum number of Shares remaining available for issuance pursuant
to Awards granted under the Plan.
(iii)
Shares withheld from an Award granted under the Plan to satisfy tax withholding requirements shall count against the maximum number
of Shares remaining available for issuance pursuant to Awards granted under the Plan, and Shares delivered by a participant to
satisfy tax withholding requirements shall not be added back to the Plan’s Share pool.
(iv)
Substitute Awards shall not reduce the Shares authorized for delivery under the Plan or authorized for delivery to a Participant
in any period. Additionally, in the event that an entity acquired by the Company or any Related Entity or with which the Company
or any Related Entity combines has shares available under a pre-existing plan approved by its stockholders and not adopted in
contemplation of such acquisition or combination, the shares available for delivery pursuant to the terms of such pre-existing
plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used
in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party
to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for delivery
under the Plan if and to the extent that the use of such Shares would not require approval of the Company’s stockholders
under the rules of the Listing Market. Awards using such available shares shall not be made after the date awards or grants could
have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals
who were not Employees or Directors prior to such acquisition or combination.
(v)
Any Share that again becomes available for delivery pursuant to this Section 4(c) shall be added back as one (1) Share.
(vi)
Notwithstanding anything in this Section 4(c) to the contrary but subject to adjustment as provided in Section 9(c) hereof, the
maximum aggregate number of Shares that may be delivered under the Plan as a result of the exercise of Incentive Stock Options
shall be 1,200,000 Shares. In no event shall any Incentive Stock Options be granted under the Plan after the tenth (10
th
)
anniversary of the date on which the Board adopts the Plan.
(vii)
Notwithstanding anything in this Section 4 to the contrary, but subject to adjustment as provided in Section 9(c) hereof, in any
fiscal year of the Company during any part of which the Plan is in effect, no Participant who is a Director but is not also an
Employee or Consultant may be granted any Awards that have a “fair value” as of the date of grant, as determined in
accordance with FASB ASC Topic 718 (or any other applicable accounting guidance), that exceeds $100,000 in the aggregate.
(d)
No Further Awards Under Prior Plan
. In light of the adoption of the Plan, no further awards shall be made under
the Prior Plan after the Effective Date.
5.
Eligibility; Per-Participant Limitations
. Awards may be granted under the Plan only to Eligible Persons. Subject
to adjustment as provided in Section 9(c) of the Plan, in any fiscal year of the Company during any part of which the Plan is
in effect, no Participant may be granted (i) Options and/or Stock Appreciation Rights with respect to more than 300,000 Shares
or (ii) Restricted Stock and/or any other Awards payable in Shares that are subject to the satisfaction of performance goals,
with respect to more than 300,000 Shares.
6.
Specific Terms of Awards
.
(a)
General
. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee
may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 9(e) hereof), such additional
terms and conditions, not inconsistent with the provisions of the Plan or applicable law, as the Committee shall determine, including
terms requiring forfeiture of Awards in the event of termination of the Participant’s Continuous Service and terms permitting
a Participant to make elections relating to his or her Award. Except as otherwise expressly provided herein, the Committee shall
retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory
under the Plan. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or
to the extent other forms of consideration must be paid to satisfy the requirements of California or other applicable law, no
consideration other than services may be required for the grant (as opposed to the exercise) of any Award.
(b)
Options
. The Committee is authorized to grant Options to any Eligible Person on the following terms and conditions:
(i)
Exercise Price
. Other than in connection with Substitute Awards, the exercise price per Share purchasable under
an Option shall be determined by the Committee, provided that such exercise price shall not be less than 100% of the Fair Market
Value of a Share on the date of grant of the Option and shall not, in any event, be less than the par value of a Share. If an
Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10%
of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the
Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and an Incentive Stock Option is granted
to such Employee, the exercise price of such Incentive Stock Option (to the extent required by the Code at the time of grant)
shall be no less than 110% of the Fair Market Value of a Share on the date such Incentive Stock Option is granted. Other than
pursuant to Section 9(c)(i) and (ii) of the Plan, the Committee shall not be permitted to (A) lower the exercise price per Share
of an Option after it is granted, (B) cancel an Option when the exercise price per Share exceeds the Fair Market Value of the
underlying Shares in exchange for cash or another Award (other than in connection with Substitute Awards), (C) cancel an outstanding
Option in exchange for an Option with an exercise price that is less than the exercise price of the original Options or (D) take
any other action with respect to an Option that may be treated as a repricing pursuant to the applicable rules of the Listing
Market, without approval of the Company’s stockholders.
(ii)
Time and Method of Exercise
. The Committee shall determine and shall state in a resolution adopted by the Committee
providing for the creation and issuance of such Option, the terms upon which, including the time or times, at or within which,
and the consideration (including a formula by which such consideration may be determined) for which Shares may be acquired from
the Company upon the exercise of any Option, which consideration, to the fullest extent permitted by applicable law, may be cash,
shares (including, without limitation, the withholding of Shares otherwise deliverable pursuant to the Award), other Awards or
awards granted under other plans of the Company or a Related Entity, or other property (including notes or other contractual obligations
of Participants to make payment on a deferred basis provided that such deferred payments are not in violation of Section 13(k)
of the Exchange Act, or any rule or regulation adopted thereunder or any other applicable law), and which shall be set forth or
incorporated by reference in the Award Agreement evidencing such Option to which the relevant Participant is a party. The Committee
shall also determine the methods by or forms in which Shares will be delivered or deemed to be delivered to Participants, subject
to the requirements of applicable law.
(iii)
Form of Settlement.
The Committee may, in its sole discretion, provide that the Shares to be issued upon exercise
of an Option shall be in the form of Restricted Stock or other similar securities.
(iv)
Incentive Stock Options
. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects
with the provisions of Section 422 of the Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating
to Incentive Stock Options (including any Stock Appreciation Right issued in tandem therewith) shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code, unless the Participant has first requested, or consents to, the change that
will result in such disqualification. Thus, if and to the extent required to comply with Section 422 of the Code, Options granted
as Incentive Stock Options shall be subject to the following special terms and conditions:
(A)
the Option shall not be exercisable for more than ten (10) years after the date such Incentive Stock Option is granted; provided,
however, that if a Participant owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more
than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation
of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and the Incentive Stock Option
is granted to such Participant, the term of the Incentive Stock Option shall be (to the extent required by the Code at the time
of the grant) for no more than five (5) years from the date of grant;
(B)
the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares with respect to
which Incentive Stock Options granted under the Plan and all other option plans of the Company (and any parent corporation or
subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) that become
exercisable for the first time by the Participant during any calendar year shall not (to the extent required by the Code at the
time of the grant) exceed $100,000; and
(C)
if Shares acquired by exercise of an Incentive Stock Option are disposed of within two (2) years following the date the Incentive
Stock Option is granted or one (1) year following the issuance of such Shares to the Participant upon exercise, the Participant
shall, promptly following such disposition, notify the Company in writing of the date and terms of such disposition and provide
such other information regarding the disposition as the Committee may reasonably require.
(c)
Stock Appreciation Rights
. The Committee may grant Stock Appreciation Rights to any Eligible Person in conjunction
with all or part of any Option granted under the Plan or at any subsequent time during the term of such Option (a “Tandem
Stock Appreciation Right”), or without regard to any Option (a “Freestanding Stock Appreciation Right”), in
each case upon such terms and conditions as the Committee may establish in its sole discretion, not inconsistent with the provisions
of the Plan, including the following:
(i)
Right to Payment
. A Stock Appreciation Right shall confer on the Participant to whom it is granted a right to receive,
upon exercise thereof, the excess of (A) the Fair Market Value of one (1) Share on the date of exercise over (B) the grant price
of the Stock Appreciation Right as determined by the Committee. The grant price of a Stock Appreciation Right shall not be less
than 100% of the Fair Market Value of a Share on the date of grant, in the case of a Freestanding Stock Appreciation Right, or
less than the associated Option exercise price, in the case of a Tandem Stock Appreciation Right. Other than pursuant to Section
9(c)(i) and (ii) of the Plan, the Committee shall not be permitted to (A) lower the grant price per Share of a Stock Appreciation
Right after it is granted, (B) cancel a Stock Appreciation Right when the grant price per Share exceeds the Fair Market Value
of the underlying Shares in exchange for another Award (other than in connection with Substitute Awards), (C) cancel an outstanding
Stock Appreciation Right in exchange for a Stock Appreciation Right with a grant price that is less than the grant price of the
original Stock Appreciation Right, or (D) take any other action with respect to a Stock Appreciation Right that may be treated
as a repricing pursuant to the applicable rules of the Listing Market, without approval of the Company’s stockholders.
(ii)
Other Terms
. The Committee shall determine at the date of grant or thereafter, the time or times at which and the
circumstances under which a Stock Appreciation Right may be exercised in whole or in part (including based on achievement of performance
goals and/or future service requirements), the time or times at which Stock Appreciation Rights shall cease to be or become exercisable
following termination of Continuous Service or upon other conditions, the method of exercise, method of settlement, form of consideration
payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to Participants, whether
or not a Stock Appreciation Right shall be in tandem or in combination with any other Award, and any other terms and conditions
of any Stock Appreciation Right.
(iii)
Tandem Stock Appreciation Rights
. Any Tandem Stock Appreciation Right may be granted at the same time as the related
Option is granted or, for Options that are not Incentive Stock Options, at any time thereafter before exercise or expiration of
such Option. Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable
and the Fair Market Value of the Shares subject to the related Option exceeds the exercise price at which Shares can be acquired
pursuant to the Option. In addition, if a Tandem Stock Appreciation Right exists with respect to less than the full number of
Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which
the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of
Shares to which the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock Appreciation Right shall no
longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised, and any Tandem Stock Appreciation
Right shall no longer be exercisable to the extent the related Option has been exercised.
(d)
Restricted Stock Awards
. The Committee is authorized to grant Restricted Stock Awards to any Eligible Person on
the following terms and conditions:
(i)
Grant and Restrictions
. Restricted Stock Awards shall be subject to such restrictions on transferability, risk of
forfeiture and other lawful restrictions, if any, as the Committee may impose, or as otherwise provided in the Plan, during the
Restriction Period. The restrictions may lapse separately or in combination at such times, under such circumstances (including
based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee
may determine at the date of grant or, subject to applicable law, thereafter. Except to the extent restricted as permitted by
applicable law under the terms of the Plan and any Award Agreement relating to a Restricted Stock Award, a Participant granted
Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right
to receive dividends thereon (subject to any lawful requirement imposed by the Committee). During the period that the Restricted
Stock Award is subject to a risk of forfeiture, subject to Section 9(b) below and except as otherwise provided in the Award Agreement,
the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant
or Beneficiary. The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement
evidencing such Restricted Stock Award to which the relevant Participant is a party, which Award Agreement shall contain provisions
determined by the Committee and not inconsistent with the Plan.
(ii)
Forfeiture
. Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous
Service during the applicable Restriction Period, the Participant’s Restricted Stock that is at that time subject to a risk
of forfeiture that has not lapsed or otherwise been satisfied shall, to the fullest extent permitted by applicable law, be forfeited
and reacquired by the Company; provided that, subject to the limitations set forth in Section 6(j) hereof, the Committee may provide,
by resolution or other action or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating
to Restricted Stock Awards shall be waived in whole or in part in the event of terminations resulting from specified causes, and
the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock.
(iii)
Certificates for Stock
. Subject to applicable law, Restricted Stock granted under the Plan may be evidenced in such
manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant,
the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant
deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.
(iv)
Dividends and Splits
. As a condition to the grant of a Restricted Stock Award, the Committee shall require that
any cash dividends paid on a Share of Restricted Stock be delayed (with or without interest at such rate, if any, as the Committee
shall determine) and remain subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect
to which such cash dividend is payable, in a manner that does not violate the requirements of Section 409A of the Code or other
applicable law. In addition, the Committee shall require that Shares distributed in connection with a stock split or stock dividend,
and other property distributed as a dividend, shall be subject to restrictions on transfer and a risk of forfeiture and any other
lawful restrictions to the same extent as the Restricted Stock with respect to which such Shares or other property have been distributed.
(e)
Restricted Stock Unit Award
. The Committee is authorized to grant Restricted Stock Unit Awards to any Eligible Person
on the following terms and conditions:
(i)
Award and Restrictions
. Satisfaction of a Restricted Stock Unit Award shall occur upon expiration of the deferral
period specified for such Restricted Stock Unit Award by the Committee (or, if permitted by the Committee, as elected by the Participant
in a manner that does not violate the requirements of Section 409A of the Code). In addition, a Restricted Stock Unit Award shall
be subject to such lawful restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions
may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance
goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine.
A Restricted Stock Unit Award may be satisfied by delivery of Shares, cash equal to the Fair Market Value of the specified number
of Shares covered by the Restricted Stock Units, or a combination thereof, as determined by the Committee at the date of grant
or, subject to applicable law, thereafter. Prior to satisfaction of a Restricted Stock Unit Award satisfied by the delivery of
Shares, such Restricted Stock Unit Award carries no voting or dividend or other rights associated with Share ownership. Prior
to satisfaction of a Restricted Stock Unit Award, except as otherwise provided in an Award Agreement and as permitted under Section
409A of the Code, a Restricted Stock Unit Award may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered
by the Participant or any Beneficiary. The terms of any Restricted Stock Unit Award granted under the Plan shall be set forth
in a written Award Agreement evidencing such Restricted Stock Unit Award to which the relevant Participant is a party, which Award
Agreement shall contain provisions determined by the Committee and not inconsistent with the Plan.
(ii)
Forfeiture
. Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous
Service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award
Agreement evidencing the Restricted Stock Unit Award), the Participant’s Restricted Stock Unit Award that is at that time
subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall, to the fullest extent permitted by applicable
law, be forfeited; provided that, subject to the limitations set forth in Section 6(j) hereof, the Committee may provide, by resolution
or other action or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to a Restricted
Stock Unit Award shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee
may in other cases waive in whole or in part the forfeiture of any Restricted Stock Unit Award.
(iii)
Dividend Equivalents
. As a condition to the grant of a Restricted Stock Unit, the Committee shall require that any
cash dividends paid on a Share attributable to such Restricted Stock Unit be delayed (with or without interest at such rate, if
any, as the Committee shall determine) and remain subject to restrictions on transfer and a risk of forfeiture to the same extent
as the Restricted Stock Unit with respect to which such cash dividend is payable, in a manner that does not violate the requirements
of Section 409A of the Code or other applicable law. In addition, the Committee shall require that Shares distributed in connection
with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions on transfer
and a risk of forfeiture to the same extent as the Restricted Stock Unit with respect to which such Shares or other property have
been distributed.
(f)
Bonus Stock and Awards in Lieu of Obligations
. The Committee is authorized to grant Shares to any Eligible Persons
as a bonus, or to grant Shares or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or
under other plans or compensatory arrangements, provided that, in the case of Eligible Persons subject to Section 16 of the Exchange
Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions
of Shares or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Shares or Awards granted hereunder
shall be subject to such other lawful terms as shall be determined by the Committee.
(g)
Dividend Equivalents
. Subject to the requirements of applicable law, the Committee is authorized to grant Dividend
Equivalents to any Eligible Person entitling the Eligible Person to receive cash, Shares, other Awards, or other property equal
in value to the dividends paid with respect to a specified number of Shares, or other periodic payments. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another Award. Subject to the requirements of applicable law, the
Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or at some later date, or whether such
Dividend Equivalents shall be deemed to have been reinvested in additional Shares, Awards, or other investment vehicles, and subject
to such lawful restrictions on transferability and risks of forfeiture, as the Committee may specify; provided, that in no event
shall such Dividend Equivalents be paid out to Participants prior to vesting of the corresponding Shares underlying the Award.
Any such determination by the Committee shall be made at the grant date of the applicable Award. Notwithstanding the foregoing,
Dividend Equivalents credited in connection with an Award that vests based on the achievement of performance goals shall be subject
to restrictions on transfer and risk of forfeiture to the same extent as the Award with respect to which such Dividend Equivalents
have been credited.
(h)
Performance Awards
. The Committee is authorized to grant Performance Awards to any Eligible Person payable in cash,
Shares, or other Awards, on lawful terms and conditions established by the Committee. The performance criteria to be achieved
during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of
each Performance Award. Except as provided in Section 8 or as may be provided in an Award Agreement, Performance Awards will be
distributed only after the end of the relevant Performance Period. The performance goals to be achieved for each Performance Period
shall be conclusively determined by the Committee and may be based upon the criteria that the Committee, in its sole discretion,
shall determine should be used for that purpose. The amount of the Award to be distributed shall be conclusively determined by
the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or,
in accordance with procedures established by the Committee, on a deferred basis in a manner that does not violate the requirements
of Section 409A of the Code.
(i)
Other Stock-Based Awards
. The Committee is authorized, subject to limitations under applicable law, to grant to
any Eligible Person such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise
based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan. Subject to any limitations
imposed by applicable law, other Stock-Based Awards may be granted to Participants either alone or in addition to other Awards
granted under the Plan, and such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other
Awards granted under the Plan. Except as otherwise provided in the last sentence of Section 6(h) hereof and subject to the requirements
of applicable law, the Committee shall determine the terms and conditions of such Awards. Subject to any limitations imposed by
applicable law, Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(i) shall
be purchased for such consideration (including without limitation loans from the Company or a Related Entity; provided that such
loans are not in violation of Section 13(k) of the Exchange Act or any rule or regulation adopted thereunder or any other applicable
law) paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, other Awards or
other property, as the Committee shall determine. The terms of any other Award denominated or payable, or otherwise based on,
or related to, Shares shall be set forth in a written Award Agreement evidencing such Award to which the relevant Participant
is a party, which Award Agreement shall contain provisions determined by the Committee and not inconsistent with the Plan.
(j)
Automatic Awards of Cash, Restricted Unit Awards and Shares for Outside Directors.
(i)
Outside Directors shall automatically be granted cash compensation and Restricted Stock Unit Awards as follows:
(A)
Annual Awards
. Each Outside Director who has served as a Director for the preceding twelve (12) months ending on
June 30, 2020 or June 30
th
of any calendar year thereafter, shall, on June 30
th
of such year, receive payment
of annual compensation consisting of (x) cash compensation of $50,000 (which shall be paid in four (4) quarterly installments
of $12,500 over the succeeding twelve (12) months) and (y) Restricted Stock Unit Awards with a value equal to $25,000 (calculated
with reference to the average closing price of the Shares for the month preceding the annual June 30
th
payment date).
Any Outside Director who has not served as a Director for the full twelve (12) months preceding June 30
th
of any calendar
year shall be entitled to receive one-quarter (1/4) of the annual compensation award described in this Section 6(j)(i)(A) for
each three (3) consecutive months (or portion thereof) served by any such Director, so that, by way of example, a Director whose
service commenced on February 1 of a year would be entitled to $25,000 in cash and $12,500 in Restricted Stock Unit Awards as
of June 30
th
, inasmuch as such Director will have served for one (1) full three (3) month period and one (1) partial
three (3) month period as of June 30
th
.
(B)
Payment of Restricted Stock Unit Awards
. Grants of Restricted Stock Unit Awards pursuant to this Section 6(j)(i)
will vest and be delivered in Shares upon the January 31
st
which first follows the June 30
th
date with respect
to which such Restricted Stock Unit Awards are granted (
e.g.
, January 31, 2020 for Restricted Stock Unit Awards granted
with respect to services provided for the twelve (12) months ended June 30, 2019).
(ii)
Election to Receive Cash Compensation in Shares
. Notwithstanding anything herein to the contrary, each Outside Director
may elect to receive any or all of his or her cash compensation earned under Section 6(j)(i)(A) above in the form of Shares under
this Section 6(j)(ii). Each such election shall be irrevocable, and must be in writing and filed with the Secretary of the Company
by December 31
st
of the calendar year preceding the period in which such cash compensation is earned. An Outside Director
may file a new election each calendar year applicable to cash compensation earned in the immediately succeeding calendar year,
provided that a new election to receive benefits in the form of Shares shall not be effective until the period covered by the
Outside Director’s current election has ended. If no new election is received by December 31
st
of any calendar
year, the election, if any, then in effect shall continue in effect until a new election is made and has become effective. If
an Outside Director does not elect to receive his or her cash compensation in the form of Shares, the cash compensation due such
Outside Director shall be paid as provided in Section 6(j)(i)(A) above. Each Share due to an Outside Director under this Section
6(j)(ii) pursuant to an election shall be granted on the date the Outside Director would have otherwise been paid a quarterly
installment of his or her cash compensation. On each such grant date, an electing Outside Director shall receive a number of whole
Shares with a Fair Market Value closest to, but not in excess of, the amount of cash compensation the Outside Director has elected
to receive in the form of Shares.
7.
Certain Provisions Applicable to Awards
.
(a)
Stand-Alone, Additional, Tandem, and Substitute Awards
. Awards granted under the Plan may, in the discretion of
the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award
or any award granted under another plan of the Company, any Related Entity, or any business entity to be acquired by the Company
or a Related Entity, or any other right of a Participant to receive payment from the Company or any Related Entity. Such additional,
tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another
Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new
Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other
plans of the Company or any Related Entity, in which the value of Shares subject to the Award is equivalent in value to the cash
compensation (for example, Restricted Stock or Restricted Stock Units), or in which the exercise price, grant price or purchase
price of the Award in the nature of a right that may be exercised is equal to the Fair Market Value of the underlying Shares minus
the value of the cash compensation surrendered (for example, Options or Stock Appreciation Right granted with an exercise price
or grant price “discounted” by the amount of the cash compensation surrendered), provided that any such determination
to grant an Award in lieu of cash compensation must be made in a manner intended to be exempt from or comply with Section 409A
of the Code or other applicable law.
(b)
Term of Awards
. The term of each Award shall be for such period as may be determined by the Committee; provided
that in no event shall the term of any Option or Stock Appreciation Right exceed a period of ten (10) years (or in the case of
an Incentive Stock Option such shorter term as may be required under Section 422 of the Code); provided, however, that in the
event that on the last day of the term of an Option or a Stock Appreciation Right, other than an Incentive Stock Option, (i) the
exercise of the Option or Stock Appreciation Right is prohibited by applicable law, or (ii) Shares may not be purchased, or sold
by certain employees or directors of the Company due to the “black-out period” of a Company policy or a “lock-up”
agreement undertaken in connection with an issuance of securities by the Company, the term of the Option or Stock Appreciation
Right may be extended by the Committee for a period of up to thirty (30) days following the end of the legal prohibition, black-out
period or lock-up agreement, provided that such extension of the term of the Option or Stock Appreciation Right would not cause
the Option or Stock Appreciation Right to violate the requirements of Section 409A of the Code.
(c)
Form and Timing of Payment Under Awards; Deferrals
. Subject to the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or a Related Entity upon the exercise of an Option or other Award or settlement of an Award
may be made in such forms as the Committee shall determine, including, without limitation, cash, Shares, other Awards or other
property, and may be made in a single payment or transfer, in installments, or on a deferred basis, provided that any determination
to pay in installments or on a deferred basis shall be made by the Committee at the date of grant. Any installment or deferral
provided for in the preceding sentence shall, however, subject to the terms of the Plan, be subject to the Company’s compliance
with the provisions of the Sarbanes-Oxley Act of 2002, as amended, the rules and regulations adopted by the Securities and Exchange
Commission thereunder, all applicable rules of the Listing Market and any other applicable law, and in a manner intended to be
exempt from or otherwise satisfy the requirements of Section 409A of the Code. Subject to Section 7(e) of the Plan, the settlement
of any Award may be accelerated, and cash paid in lieu of Shares in connection with such settlement, in the sole discretion of
the Committee or upon occurrence of one or more specified events (in addition to a Change in Control). Any such settlement shall
be at a value determined by the Committee in its sole discretion, which, without limitation, may in the case of an Option or Stock
Appreciation Right be limited to the amount if any by which the Fair Market Value of a Share on the settlement date exceeds the
exercise or grant price. Installment or deferred payments may be required by the Committee (subject to Section 7(e) of the Plan,
including the consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original
Award Agreement) or permitted at the election of the Participant on terms and conditions established by the Committee. The acceleration
of the settlement of any Award, and the payment of any Award in installments or on an deferred basis, all shall be done in a manner
that is intended to be exempt from or otherwise satisfy the requirements of Section 409A of the Code. The Committee may, without
limitation, make provision for the payment or crediting of a reasonable interest rate on installment or deferred payments or the
grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Shares.
(d)
Exemptions from Section 16(b) Liability.
It is the intent of the Company that the grant of any Awards to or other
transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16 of the Exchange
Act pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by such Participant).
Accordingly, if any provision of the Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 then applicable
to any such transaction, such provision shall, to the fullest extent permitted by applicable law, be construed or deemed amended
to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability
under Section 16(b) of the Exchange Act.
(e)
Code Section 409A
.
(i) The
Award Agreement for any Award that the Committee reasonably determines to constitute a “nonqualified deferred compensation
plan” under Section 409A of the Code (a “
Section 409A Plan
”), and the provisions of the Section
409A Plan applicable to that Award, shall be construed in a manner consistent with the applicable requirements of Section 409A
of the Code, and the Committee, in its sole discretion and without the consent of any Participant, may amend any Award Agreement
(and the provisions of the Plan applicable thereto) if and to the extent that the Committee determines that such amendment is
necessary or appropriate to comply with the requirements of Section 409A of the Code.
(ii)
If any Award constitutes a Section 409A Plan, then the Award shall be subject to the following additional requirements, if and
to the extent required to comply with Section 409A of the Code:
(A)
Payments under the Section 409A Plan may be made only upon (u) the Participant’s “separation from service”,
(v) the date the Participant becomes “disabled”, (w) the Participant’s death, (x) a “specified time (or
pursuant to a fixed schedule)” specified in the Award Agreement at the date of the deferral of such compensation, (y) a
“change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets”
of the Company, or (z) the occurrence of an “unforeseeble emergency”;
(B)
The time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent provided in applicable
Treasury Regulations or other applicable guidance issued by the Internal Revenue Service;
(C)
Any elections with respect to the deferral of such compensation or the time and form of distribution of such deferred compensation
shall comply with the requirements of Section 409A(a)(4) of the Code; and
(D)
In the case of any Participant who is “specified employee”, a distribution on account of a “separation from
service” may not be made before the date which is six (6) months after the date of the Participant’s “separation
from service” (or, if earlier, the date of the Participant’s death).
For
purposes of the foregoing, the terms in quotations shall have the same meanings as those terms have for purposes of Section 409A
of the Code, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary
to comply with any requirements of Section 409A of the Code that are applicable to the Award.
(iii)
Notwithstanding the foregoing, or any provision of the Plan or any Award Agreement, the Company does not make any representation
to any Participant or Beneficiary that any Awards made pursuant to the Plan are exempt from, or satisfy the requirements of, Section
409A of the Code, and the Company shall have no liability or other obligation to indemnify or hold harmless the Participant or
any Beneficiary for any tax, additional tax, interest or penalties that the Participant or any Beneficiary may incur in the event
that any provision of the Plan, or any Award Agreement, or any amendment or modification thereof, or any other action taken with
respect thereto, is deemed to violate any of the requirements of Section 409A of the Code.
8.
Change in Control
.
(a)
Effect of “Change in Control.”
If and only to the extent provided in any employment or other agreement
between the Participant and the Company or any Related Entity, or in any Award Agreement, or to the extent otherwise determined
by the Committee in its sole discretion and without any requirement that each Participant be treated consistently, and except
as otherwise provided in Section 8(a)(iv) hereof, upon the occurrence of a Change in Control:
(i)
Any Option or Stock Appreciation Right that was not previously vested and exercisable as of the time of the Change in Control,
shall become immediately vested and exercisable, subject to applicable restrictions set forth in Section 9(a) hereof.
(ii)
Any restrictions, deferral of settlement, and forfeiture conditions applicable to a Restricted Stock Award, Restricted Stock Unit
Award or an Other Stock-Based Award subject only to future service requirements granted under the Plan shall lapse and such Awards
shall be deemed fully vested as of the time of the Change in Control, except to the extent of any waiver by the Participant and
subject to applicable restrictions set forth in Section 9(a) hereof.
(iii)
With respect to any outstanding Award subject to achievement of performance goals and conditions under the Plan, the Committee
may, in its discretion, deem such Awards to have been earned and payable based on the deemed achievement of performance goals
or based upon target performance (either in full or pro-rata based on the portion of the Performance Period completed as of the
Change in Control), except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in
Section 9(a).
(iv)
Except as otherwise provided in any employment or other agreement for services between the Participant and the Company or any
Subsidiary, and unless the Committee otherwise determines in a specific instance, each outstanding Option, Stock Appreciation
Right, Restricted Stock Award, Restricted Stock Unit Award or Other Stock-Based Award shall not be accelerated as described in
Sections 9(a)(i), (ii) and (iii), if either (A) the Company is the surviving entity in the Change in Control and the Option, Stock
Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award or Other Stock-Based Award continues to be outstanding
immediately after the Change in Control on substantially the same terms and conditions as were applicable immediately prior to
the Change in Control or (B) the successor company or its parent company assumes or substitutes for the applicable Award, as determined
in accordance with Section 9(c)(ii) hereof.
(b)
Definition of “Change in Control.”
Unless otherwise specified in any employment or other agreement for
services between the Participant and the Company or any Related Entity, or in an Award Agreement, a “Change in Control”
shall mean the occurrence of any of the following:
(i)
The acquisition by any Person of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the “
Outstanding Company Voting Securities
”) (the foregoing
Beneficial Ownership hereinafter being referred to as a “
Controlling Interest
”); provided, however,
that for purposes of this Section 8(b), the following acquisitions shall not constitute or result in a Change in Control: (v)
any acquisition directly from the Company; (w) any acquisition by the Company; (x) any acquisition by any Person that as of the
Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Related Entity; or (z) any acquisition by any entity pursuant to a transaction
which complies with clauses (1), (2) and (3) of subsection (iii) below; or
(ii)
During any period of twelve (12) consecutive months (not including any period prior to the Effective Date) individuals who constitute
the Board on the Effective Date (the “
Incumbent Board
”) cease for any reason to constitute at least
a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company’s stockholders, was recommended or approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board; or
(iii)
Consummation of (A) a reorganization, merger, statutory share exchange or consolidation or similar transaction involving (x) the
Company or (y) any one or more Subsidiaries whose combined revenues for the prior fiscal year represented more than 50% of the
consolidated revenues of the Company and its Subsidiaries for the prior fiscal year (the “
Major Subsidiaries
”),
or (B) a sale or other disposition of all or substantially all of the assets of the Company or the Major Subsidiaries, or the
acquisition of assets or equity of another entity by the Company or any of its Subsidiaries (each of the events referred to in
clauses (A) and (B) sometimes hereinafter being referred to a “
Business Combination
”), unless, following
such Business Combination, (1) all or substantially all of the Persons who were the Beneficial Owners, respectively, of the Outstanding
Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty
percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election
of members of the board of directors (or comparable governing body of an entity that does not have a board of directors), as the
case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result
of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one
or more subsidiaries) (the “
Continuing Entity
”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company Voting Securities (excluding any outstanding voting
securities of the Continuing Entity that such Beneficial Owners hold immediately following the consummation of the Business Combination
as a result of their ownership, prior to such consummation, of voting securities of any company or other entity involved in or
forming part of such Business Combination other than the Company), (2) no Person (excluding any employee benefit plan (or related
trust) of the Company or any Continuing Entity or any entity controlled by the Continuing Entity or any Person that as of the
Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty percent (50%)
or more of the combined voting power of the then outstanding voting securities of the Continuing Entity except to the extent that
such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors
or other governing body of the Continuing Entity were members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business Combination; or
(iv)
Approval by the stockholders of the Company of the dissolution of the Company.
9.
General Provisions
.
(a)
Compliance With Legal and Other Requirements
. The Company may, to the extent deemed necessary or advisable by the
Committee, postpone the issuance or delivery of Shares or payment of other benefits under any Award until completion of such registration
or qualification of such Shares or other required action under any federal or state law, rule or regulation, listing or other
required action with respect to the Listing Market, or compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or
be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Shares or payment
of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations.
(b)
Limits on Transferability; Beneficiaries
. No Award or other right or interest granted under the Plan that is not
a Share, and without the prior written consent of the Company, no Share, shall be pledged, hypothecated or otherwise encumbered
or subject to any lien, obligation or liability of such Participant to any party, or assigned or transferred by such Participant
otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards
or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or
her guardian or legal representative, except that Awards and other rights (other than Incentive Stock Options and Stock Appreciation
Rights in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant,
and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers
are permitted by the Committee pursuant to the express terms of an Award Agreement (subject to any lawful terms and conditions
which the Committee may impose thereon), are by gift or pursuant to a domestic relations order, and are to a Permitted Assignee
(as defined below) that is a permissible transferee under the applicable rules of the Securities and Exchange Commission for registration
of securities on a Form S-8 registration statement. For this purpose, a “Permitted Assignee” shall mean (i) the Participant’s
spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings,
(ii) a trust for the benefit of one or more of the Participant or the natural persons referred to in clause (i), (iii) a partnership,
limited liability company or corporation in which the Participant or the natural persons referred to in clauses (i) and (ii) are
the only partners, members or stockholders, or (iv) a foundation in which any Person designated in clauses (i), (ii) or (iii)
above control the management of assets. A Beneficiary, transferee, or other Person claiming any rights under the Plan from or
through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant,
except as otherwise determined by the Committee, and to any additional lawful terms and conditions deemed necessary or appropriate
by the Committee.
(c)
Adjustments.
(i)
Adjustments to Awards
. In the event that any extraordinary dividend or other distribution (whether in the form of
cash, Shares, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the
Shares and/or such other securities of the Company or any other issuer, then the Committee shall, in such manner as it may deem
appropriate and equitable, and subject to and in compliance with applicable law, substitute, exchange or adjust any or all of
(A) the number and kind of Shares which may be delivered in connection with Awards granted thereafter, (B) the number
and kind of Shares by which annual per-person Award limitations are measured under Section 4 hereof, (C) the number and kind
of Shares subject to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other property in respect of any outstanding Award, and (E)
any other aspect of any Award that the Committee determines to be appropriate in order to prevent the reduction or enlargement
of benefits under any Award.
(ii)
Adjustments in Case of Certain Transactions
. In the event of any merger, consolidation or other reorganization in
which the Company does not survive, or in the event of any Change in Control (and subject to the provisions of Section 8 of the
Plan relating to the vesting of Awards in the event of any Change in Control), any outstanding Awards may be dealt with in accordance
with any of the following approaches, without the requirement of obtaining any consent or agreement of a Participant as such,
as determined by the agreement effectuating the transaction or, if and to the extent not so determined, as determined by the Committee:
(A) the continuation of the outstanding Awards by the Company, if the Company is a surviving entity, (B) the assumption or substitution
for, as those terms are defined below, the outstanding Awards by the surviving entity or its parent or subsidiary, (C) full exercisability
or vesting and accelerated expiration of the outstanding Awards, or (D) settlement of the value of the outstanding Awards in cash
or cash equivalents or other property followed by cancellation of such Awards (which value, in the case of Options or Stock Appreciation
Rights, shall be measured by the amount, if any, by which the Fair Market Value of a Share exceeds the exercise or grant price
of the Option or Stock Appreciation Right as of the effective date of the transaction). For the purposes of the Plan, an Option,
Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Other Stock-Based Award shall
be considered assumed or substituted for if immediately following the effectiveness of the applicable transaction the Award confers
the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Restricted Stock Award, Restricted
Stock Unit Award, Performance Award or Other Stock-Based Award immediately prior to the effectiveness of the applicable transaction,
on substantially the same vesting and other terms and conditions as were applicable to the Award immediately prior to the applicable
transaction, the consideration (whether stock, cash or other securities or property) received in the applicable transaction by
holders of Shares for each Share held immediately prior to the effectiveness of such transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the applicable transaction is not solely common stock of the successor company
or its parent or subsidiary, the Committee may, with the consent of the successor company or its parent or subsidiary, provide
that the consideration to be received upon the exercise or vesting of an Option, Stock Appreciation Right, Restricted Stock Award,
Restricted Stock Unit Award, Performance Award or Other Stock-Based Award, for each Share subject thereto, will be solely common
stock of the successor company or its parent or subsidiary substantially equal in fair market value to the per share consideration
received by holders of Shares in the applicable transaction. The determination of such substantial equality of value of consideration
shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding. The Committee shall
give written notice of any proposed transaction referred to in this Section 9(c)(ii) a reasonable period of time prior to the
closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order
that Participants may have a reasonable period of time prior to the closing date of such transaction within which to exercise
any Awards that are then exercisable (including any Awards that may become exercisable upon the closing date of such transaction).
A Participant may condition his or her exercise of any Awards upon the consummation of the transaction.
(iii)
Other Adjustments
. The Committee is authorized to make adjustments in the terms and conditions of, and the criteria
included in, Awards (including Performance Awards subject to satisfaction of performance goals and conditions relating thereto)
in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and
assets) affecting the Company, any Related Entity or any business unit, or the financial statements of the Company or any Related
Entity, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business
conditions or in view of the Committee’s assessment of the business strategy of the Company, any Related Entity or business
unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant,
and any other circumstances deemed relevant.
(d)
Award Agreements.
Subject to the requirements of applicable law, each Award Agreement shall either be (a) in writing
in a form approved by the Committee and executed by the Company by an officer duly authorized to act on its behalf, or (b) an
electronic notice in a form approved by the Committee and recorded by the Company (or its designee) in an electronic recordkeeping
system used for the purpose of tracking one or more types of Awards as the Committee may provide; in each case and if required
by the Committee, the Award Agreement shall be executed or otherwise electronically accepted by the recipient of the Award in
such form and manner as the Committee may require. The Committee may authorize any officer of the Company to execute any or all
Award Agreements on behalf of the Company. The Award Agreement shall set forth the material terms and conditions of the Award
as established by the Committee consistent with the provisions of the Plan and applicable law.
(e)
Taxes
. The Company and any Related Entity are authorized to withhold from any Award granted, any payment relating
to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts
of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such
other action as the Committee may deem advisable to enable the Company or any Related Entity and Participants to satisfy obligations
for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to
withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of a Participant’s
tax obligations, either on a mandatory or elective basis in the discretion of the Committee. The amount of withholding tax paid
with respect to an Award by the withholding of Shares otherwise deliverable pursuant to such Award or by delivering Shares already
owned shall not exceed the maximum statutory withholding required with respect to such Award (or such other limit as the Committee
shall impose, including without limitation, any limit imposed to avoid or limit any financial accounting expense relating to such
Award).
(f)
Changes to the Plan and Awards
. The Board may amend, alter, suspend, discontinue or terminate the Plan, or the Committee’s
authority to grant Awards under the Plan, without the consent of the Company’s stockholders or the Participants, except
that any amendment or alteration to the Plan shall be subject to the approval of the Company’s stockholders not later than
the annual meeting next following such Board action if such stockholder approval is required by any federal or state law or regulation
(including, without limitation, Rule 16b-3) or the rules of the Listing Market, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to the Company’s stockholders for approval; provided that, except as
otherwise permitted by the Plan or Award Agreement, without the consent of an affected Participant, no such Board action may materially
and adversely affect the rights of such Participant under the terms of any previously granted and outstanding Award. The Committee
may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and
any Award Agreement relating thereto, except as otherwise provided in the Plan; provided that, except as otherwise permitted by
the Plan or Award Agreement, without the consent of an affected Participant, no such Committee or the Board action may materially
and adversely affect the rights of such Participant under terms of such Award.
(g)
Clawback Policy
.
(i)
The Committee may, to the fullest extent permitted by applicable law, (A) cause the cancellation or forfeiture of any Award, (B)
require reimbursement of any Award by a Participant or Beneficiary, and (C) effect any other right of recoupment of equity or
other compensation provided under this Plan or otherwise in accordance with any Company policies that currently exist or that
may from time to time be adopted in the future by the Company to comply with Section 954 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act and/or applicable stock exchange requirements (each, a “
Clawback Policy
”).
By accepting an Award, a Participant is also agreeing to be bound by any Clawback Policy (including any Clawback Policy amendment
as necessary to comply with applicable laws or stock exchange requirements).
(ii)
If the Participant, without the consent of the Company, while employed by or providing services to the Company or any Related
Entity or after termination of such employment or service, violates a non-competition, non-solicitation or non-disclosure covenant
or agreement or otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any Related
Entity, as determined by the Committee in its sole discretion, then, to the fullest extent permitted by applicable law, (i) any
outstanding, vested or unvested, earned or unearned portion of the Award may, at the Committee’s discretion, be canceled
and (ii) the Committee, in its discretion, may require the Participant or other person to whom any payment has been made or Shares
or other property have been transferred in connection with the Award to forfeit and pay over to the Company, on demand, all or
any portion of the gain (whether or not taxable) realized upon the exercise of any Option or Stock Appreciation Right and the
value realized (whether or not taxable) on the vesting or payment of any other Award during the time period specified in the Award
Agreement or otherwise specified by the Committee.
(h)
Arbitration
. Any dispute or claim concerning any Awards granted (or not granted) pursuant to the Plan or any disputes
or claims relating to or arising out of the Plan shall be fully, finally and exclusively resolved by binding and confidential
arbitration conducted pursuant to the rules of Judicial Arbitration and Mediation Services, Inc. in Los Angeles, California. The
Company shall pay all arbitration fees. In addition to any other relief, the arbitrator may award to the prevailing party recovery
of its attorneys’ fees and costs. By accepting an Award, Participants and the Company waive their respective rights to have
any such disputes or claims tried by a judge or jury to the fullest extent permitted by applicable law.
(i)
Limitation on Rights Conferred Under Plan
. Neither the Plan nor any action taken hereunder or under any Award or
Award Agreement shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible
Person or Participant or in the employ or service of the Company or a Related Entity, (ii) interfering in any way with the
right of the Company or a Related Entity to terminate any Eligible Person’s or Participant’s Continuous Service at
any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and Employees, or (iv) conferring on a Participant any of the rights of a stockholder of
the Company or any Related Entity including, without limitation, any right to receive dividends or distributions, any right to
vote or act by written consent, any right to attend meetings of stockholders or any right to receive any information concerning
the Company’s or any Related Entity’s business, financial condition, results of operation or prospects, unless and
until such time as the Participant is duly issued Shares on the stock ledger of the Company or any Related Entity in accordance
with the terms of an Award. None of the Company, its officers or its directors shall have any fiduciary obligation to the Participant
with respect to any Awards unless and until the Participant is duly issued Shares pursuant to the Award on the stock ledger of
the Company in accordance with the terms of an Award and applicable law. Neither the Company, nor any Related Entity, nor any
of their respective officers, directors, representatives or agents is granting any rights under the Plan to the Participant whatsoever,
oral or written, express or implied, other than those rights expressly set forth in the Plan or the Award Agreement.
(j)
Unfunded Status of Awards; Creation of Trusts
. The Plan is intended to constitute an “unfunded” plan
for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Shares
pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give any such Participant any rights that are
greater than those of a general creditor of the Company or Related Entity that issues the Award; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Shares, other Awards or other property, or make other arrangements
to meet the obligations of the Company or Related Entity under the Plan. Such trusts or other arrangements shall be consistent
with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee may specify and in accordance with applicable law.
(k)
Nonexclusivity of the Plan
. Neither the adoption of the Plan by the Board nor its submission to the stockholders
of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to
adopt such other incentive arrangements as it may deem desirable.
(l)
Payments in the Event of Forfeitures; Fractional Shares
. Unless otherwise determined by the Committee or otherwise
required by applicable law, in the event of a forfeiture of an Award with respect to which a Participant paid cash or other consideration,
the Participant shall be repaid the amount of such cash or other consideration. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine to arrange for the disposition of fractions of a Share by those
entitled thereto or pay in cash the fair value of fractions of a Share as of the time when those entitled to receive such fractions
are determined.
(m)
Governing Law
. Except as otherwise provided in any Award Agreement or required by the laws of the State of Delaware,
the validity, construction and effect of the Plan, any rules and regulations under the Plan, and any Award Agreement shall be
determined in accordance with the laws of the State of California without giving effect to principles of conflict of laws, and
applicable federal law.
(n)
Non-U.S. Laws
. The Committee shall have the authority to adopt such modifications, procedures, and subplans as may
be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Related Entities
may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries
and to meet the objectives of the Plan.
(o)
Plan Effective Date and Stockholder Approval; Termination of Plan
. The Plan shall become effective on the Effective
Date, subject to subsequent approval, within twelve (12) months of its adoption by the Board, by stockholders of the Company eligible
to vote in the election of directors, by a vote sufficient to meet the requirements of Code Section 422, Rule 16b-3 (if applicable),
applicable requirements under the rules of any stock exchange or automated quotation system on which the Shares may be listed
or quoted, and other laws, regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject to
stockholder approval, but may not be exercised or otherwise settled in the event the stockholder approval is not obtained. The
Plan shall terminate at the earliest of (a) such time as no Shares remain available for issuance under the Plan, (b) termination
of the Plan by the Board, or (c) the tenth (10
th
) anniversary of the Effective Date. Awards outstanding upon expiration
of the Plan shall remain in effect until they have been exercised or terminated, or have expired.
(p)
Construction and Interpretation.
Whenever used herein, nouns in the singular shall include the plural, and the masculine
pronoun shall include the feminine gender. Headings of Articles and Sections hereof are inserted for convenience and reference
and constitute no part of the Plan.
(q)
Severability
. If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable
by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other jurisdiction.
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