Cadiz Inc.
Annual Report 2001

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KCADIZ INC - CDZIFiled: March 28, 2002 (period: December 31, 2001)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Mark One) [x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 2001 OR [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from..to... Commission File Number 0-12114 --------------------- CADIZ INC. (Exact name of registrant specified in its charter) DELAWARE 77-0313235(State or other jurisdiction of (I.R.S. Employerincorporation or organization) Identification No.)100 Wilshire Boulevard, Suite 1600 Santa Monica, CA 90401-1111(Address of principal executive offices) (Zip Code) (310) 899-4700 (Registrant's telephone number, including area code) -------------------------- Securities Registered Pursuant to Section 12(b) of the Act: None Title of Each Class Name of Each Exchange on Which Registered ------------------- --------------------------------------- None None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 per share (Title of Class)Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes X No ---- ---- Indicate by check mark if disclosure of delinquent filerspursuant to Item 405 of Regulation S-K (220.405 of this chapter)is not contained herein, and will not be contained to the best ofregistrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. /__/As of March 26, 2002, the registrant had 36,230,241 shares ofcommon stock outstanding. The aggregate market value of theCommon Stock held by nonaffiliates as of March 26, 2002 wasapproximately $303,167,898 based on the closing price on thatdate. DOCUMENTS INCORPORATED BY REFERENCESource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Certain portions of Registrant's proxy statement for the annualmeeting to be held on May 6, 2002, to be filed with theSecurities and Exchange Commission pursuant to Regulation 14A notlater than 120 days after the close of the Registrant's fiscalyear, are incorporated by reference under Part III of this Form10-K. TABLE OF CONTENTSPART IItem 1, Business. . . . . . . . . . . . . . . . . . . . . . 1Item 2, Properties. . . . . . . . . . . . . . . . . . . . . 12Item 3, Legal Proceedings. . . . . . . . . . . . . . . . . .14Item 4, Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . 14PART IIItem 5, Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . 15Item 6, Selected Financial Data . . . . . . . . . . . . . . 17Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . .17Item 7A, Quantitative and Qualitative Disclosures about Market Risk. . . . . . . . . . . . . . .32Item 8, Financial Statements and Supplementary Data. . . . .32Item 9, Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . .32PART IIIItem 10, Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . . .32Item 11, Executive Compensation. . . . . . . . . . . . . . .33Item 12, Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . 33Item 13, Certain Relationships and Related Transactions. . .33PART IVItem 14, Exhibits, Financial Statements and Reports of Form 8-K. . . . . . . . . . . . . . . . . . . .33 Page i PART IITEM 1. BUSINESS Information presented in this Form 10-K that discussesfinancial projections, proposed transactions such as those withthe Metropolitan Water District of Southern California andKingdom Agricultural Development Company, information orexpectations about our business strategies, results ofoperations, products or markets, or otherwise makes statementsabout future events, are forward-looking statements. Forward-looking statements can be identified by the use of words such as"intends", "anticipates", "believes", "estimates", "projects","forecasts", "expects", "plans" and "proposes". Although webelieve that the expectations reflected in these forward-lookingstatements are based on reasonable assumptions, there are aSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.number of risks and uncertainties that could cause actual resultsto differ materially from these forward-looking statements.These include, among others, the cautionary statements under thecaption "Certain Trends and Uncertainties", as well as othercautionary language contained in this Form 10-K. Thesecautionary statements identify important factors that could causeactual results to differ materially from those described in theforward-looking statements. When considering forward-lookingstatements in this Form 10-K, you should keep in mind thecautionary statements described above.OVERVIEW The combination of considerable population increases andlimited supplies are placing great demands on water resourcesboth in California and worldwide. Compounding the issue, manypopulation centers are not located where significantprecipitation occurs. We therefore believe that a competitiveadvantage exists for those companies that possess or can providehigh quality, reliable and affordable water supply in locationsworldwide including California and its multi-billion dollaragricultural industry, one of the largest users of water in thestate. Accordingly, Cadiz Inc., which is sometimes referred to as"Cadiz", "we" or "us", has created an integrated andcomplementary portfolio of assets encompassing landholdings withhigh-quality groundwater resources and/or storage potential, aswell as agricultural properties located throughout central andsouthern California with valuable water rights, and othercontractual water rights. We believe that our access to waterwill provide us with a competitive edge both as a majoragricultural concern and as a supplier of water, leading tocontinued appreciation in the value of our portfolio. Additionally, product innovation from our fruit breedingprograms, international licensing programs, global marketingreach, and highly regarded Sun World brand name, provides ouragricultural operations a strong position in the ongoingconsolidation in the global retail grocery industry. Ouragricultural operations are provided through our wholly-ownedsubsidiary, Sun World International, Inc. and its subsidiaries,all of which together we sometimes refer to as "Sun World". SunWorld is one of the largest developers, growers, producers andmarketers of proprietary fruits and vegetables in California,specializing in high-value permanent crops. Currently, Sun Worldowns more than 19,000 acres of land primarily located in twomajor growing areas of California: the San Joaquin Valley andthe Coachella Valley. In addition to our Sun World properties, we holdapproximately 45,300 acres of land in eastern San BernardinoCounty that are substantially underlain by high-qualitygroundwater resources with demonstrated potential for variousapplications, including water storage and Page 1supply programs, and agricultural, municipal, recreational and industrial development. Substantially all of our properties are located in close proximity to California's major aqueduct systems. We expect to use our resources to participate in a broad variety of water storage and supply, transfer, exchange and conservation programs with public agencies and other parties. In December 1997, we commenced discussions with theMetropolitan Water District of Southern California in order todevelop principles and terms for a long-term agreement related toour Cadiz, California property. In July 1998, Cadiz andMetropolitan approved the Principles and Terms for Agreement forthe Cadiz Groundwater Storage and Dry-Year Supply Program, whichwe sometimes refer to as the "Cadiz Program", authorizedpreparation of a final agreement based on these principles andinitiated the environmental review process for the Cadiz Program.Following extensive negotiations with Cadiz to further refine andfinalize these basic principles, Metropolitan's Board ofDirectors approved definitive economic terms and responsibilitiesSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.at their April 2001 board meeting. The Cadiz Program definitiveterms will serve as the basis for a final agreement to beexecuted between Metropolitan and Cadiz. Execution of this finalagreement will be subject to completion of the ongoingenvironmental review process. Based upon our expertise in water and agriculturalresources, in June 1999, Sun World was appointed by KingdomAgricultural Development Company (KADCO), a company currently100% controlled by His Royal Highness Prince Alwaleed Bin TalalBin Abdulaziz Alsaud, to develop and manage up to 100,000 acresof agricultural land in southern Egypt, called the TushkaProject. On January 16, 2002, we announced an agreement in principlewith KADCO to combine the businesses of Sun World and KADCO.Following the proposed combination, KADCO's shareholders willhave a 49.75% interest in the combined business, and Cadiz willretain an ownership interest of 50.25%. Prior to the proposedcombination, KADCO expects to have cash resources in excess of$80 million. On March 11, 2002, we announced our intent to create a newsubsidiary company that will provide an array of innovativebusiness solutions to the significant water problems facing theMiddle East. Through the new subsidiary, we intend to build adiversified water business with both direct investment and theprovision of economic, technical and management services. Mr.Bruce Babbitt, former U.S. Secretary of the Interior and Governorof Arizona, has joined us to lead this new subsidiary as itschairman and chief executive officer. We continually seek to develop and manage our water andagricultural resources for their highest and best uses. We alsocontinue to evaluate acquisition opportunities, which arecomplementary to our current portfolio of water and agriculturalresources.(a) General Development of Business -------------------------------- As part of our current business strategy, we conduct ourland acquisition, water development activities, agriculturaloperations and search for international water and agriculturalopportunities for the purpose of enhancing the long-termappreciation of our properties and future prospects. See"Narrative Description of Business" below. As the most populous state in the nation, California'spopulation is projected to swell to nearly 50 million people bythe year 2020. This increasing population is placing greatdemands on California's infrastructure, particularly its limitedwater resources. According to the California Department of WaterResources, shortfalls of approximately seven million acre-feetare forecasted in a dry year by the year 2020. We thereforebelieve that, with both the increasing scarcity of water suppliesin California and the increasing demand for water, our access towater will provide us with a competitive advantage both as amajor agricultural concern and as a Page 2supplier of water which will lead to continued appreciation in the value of our portfolio. The increasing scarcity of water supplies, coupled withincreased demand from population growth, is not just a Californiaissue but a worldwide issue. Our California experience in waterresource management and development provides a strong foundationfor pursuing water resource opportunities internationally,including opportunities in the Middle East. Sun World, which we acquired in September 1996, ownsapproximately 19,000 acres of agricultural land primarily in theSan Joaquin and Coachella Valleys, giving us total landholdingsSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of approximately 64,400 acres. See Item 2, "Properties".(b) Financial Information about Industry Segments --------------------------------------------- During the year ended December 31, 2001, we operated ouragricultural resources segment and continued to develop our waterresource segment of the business. See Consolidated FinancialStatements. Also, see Item 7, "Management's Discussion andAnalysis of Financial Condition and Results of Operations".(c) Narrative Description of Business --------------------------------- Pursuant to our business strategy, we continually seek todevelop and manage our portfolio of water and agriculturalresources for their highest and best uses. Our development andmanagement activities are currently focused on agriculturaloperations (primarily through Sun World) and water resourcedevelopment. We also continue to evaluate acquisitionopportunities, which are complementary to our current portfolioof water and agricultural resources.WATER RESOURCE DEVELOPMENT Our portfolio of water resources, located in close proximityto the Colorado River or the major aqueduct systems of centraland southern California, such as the State Water Project and theColorado River Aqueduct, provides us with the opportunity toparticipate in a variety of water storage and supply programs,exchanges and transfers.(a) Cadiz Groundwater Storage and Dry-Year Supply Program ----------------------------------------------------- 27,300 acres of our property located in the Cadiz and FennerValleys of eastern California are underlain by a high-qualitygroundwater basin. Precipitation falls within a catchment areaof nearly 1,300 square miles and provides annual recharge to thebasin. The catchment area is the area contributing surface andgroundwater recharge to the groundwater basin. See Item 2,"Properties - The Cadiz/Fenner Property". In July 1998, Cadiz and Metropolitan entered into Principlesand Terms for Agreement for the Cadiz Program. The principlesprovide that Metropolitan will, during wet years or periods ofexcess supply, store surplus water from its Colorado RiverAqueduct in the groundwater basin underlying our property locatedin Cadiz, California. During dry years or times of reducedallocations from the Colorado River, the stored water will bewithdrawn and returned via conveyance facilities to the aqueductto meet Metropolitan's water supply needs. In addition,indigenous groundwater would also be transferred utilizing thesame facilities. The Cadiz Program will have the capacity toconvey, either for storage or transfer, up to 150,000 acre-feetin any given year during its 50-year term. Page 3 Metropolitan's Board of Directors, following extensivenegotiations with us to further refine and finalize these basicprinciples and terms, approved definitive economic terms andresponsibilities for the Cadiz Program in April 2001. Pursuant to the approved definitive terms, during storageoperations, Metropolitan will pay a $50 fee per acre-foot for putof Colorado River water into storage, and a $40 fee per acre-footfor return of Colorado River water from storage, or a total of$90 per acre-foot to cycle water into and out of the basin. Onthe transfer of indigenous water, Metropolitan will pay a baserate of $230 per acre-foot, which will be adjusted according to afair market value adjustment procedure. Metropolitan hascommitted to minimum levels of utilization of the Cadiz Programfor both storage of Colorado River Aqueduct water (900,000 acre-feet) and transfer of indigenous groundwater (up to 1,500,000Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.acre-feet). In addition, the definitive terms for the CadizProgram provide Cadiz the option to sell a portion of theindigenous groundwater (30,000 acre-feet per year for 25 years ora total of 750,000 acre-feet) to outside third parties withinMetropolitan's service area at fair market value. The Cadiz Program facilities will include, among otherthings: * spreading basins, which are shallow ponds that percolate water from the ground surface to the water table; * high yield extraction wells designed to extract stored Colorado River water and indigenous groundwater from beneath the Cadiz Program area; * a 35-mile conveyance pipeline that will connect the spreading basins and wellfield to the Colorado River Aqueduct at Metropolitan's Iron Mountain pumping plant; and * a pumping plant that will pump water through the conveyance pipeline from Metropolitan's Iron Mountain pumping plant to the spreading basins. The facilities are estimated to cost approximately $150million, and both parties will jointly share these costs. Apilot spreading basin project was constructed to model andanalyze the storage and extraction of water. All operationalcosts of the Cadiz Program, including annual operations,maintenance and energy costs, will be an obligation ofMetropolitan. However, Cadiz will assume pro rata operationalcosts associated with the sale of indigenous groundwater to thirdparties. The definitive terms for the Cadiz Program call for theestablishment of a comprehensive groundwater monitoring andmanagement plan to ensure long-term protection of the groundwaterbasin. The final agreement may reflect adjustments to thedefinitive terms in order to reflect information identifiedduring the environmental review process and will be subject toapproval by the respective boards of both parties. In October 2001, the environmental report was issued byMetropolitan and the U.S. Bureau of Land Management, incollaboration with the U.S. Geological Survey and the NationalPark Service, and the related protest period has ended. Beforeconstruction and operation of the Cadiz Program can commence, theenvironmental review process must be completed including the issuance of final regulatory approvals by the U.S. Bureau of Land Management and Metropolitan. The process for obtaining these approvals is often difficult and time consuming as the process includes significant public review and comment and often draws opposition from third parties including litigation of the final regulatory approvals. We anticipate final actions related to the environmental review process to be completed by the end of the Page 4second quarter of 2002 after which construction of the CadizProgram facilities may commence. Once construction is commenced, the Cadiz Program is anticipated to be operational within 18 to 24 months.(b) Other Eastern Mojave Properties ------------------------------- Our water development activities at our 6,000 acre Piuteproperty are located in eastern San Bernardino Countyapproximately 15 miles from the resort community of Laughlin,Nevada and about 12 miles from the Colorado River town ofNeedles, California. Hydrological studies and testing of a full-scale production well have demonstrated that this landholding isSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.underlain by recharging groundwater of high quality andadditional investigations are ongoing regarding the developmentof the property for a variety of uses. Additionally, we own or control additional acreage locatedthroughout other areas of the eastern Mojave Desert, such as theproperty we own near Danby Lake. This area is locatedapproximately 30 miles southeast of our Cadiz/Fenner Valleyproperty and is 10 miles north of the Colorado River Aqueduct.Our initial hydrological studies confirm that this property hasexcellent storage and supply capabilities. (c) Sun World Water Resources ------------------------- Sun World has valuable water rights in various parts ofcentral and southern California. We believe that with increasingwater shortages in California, land with water rights willincrease in value. Sun World's landholdings and associated water resources arelocated adjacent to the major aqueduct systems of central andsouthern California, or are in close proximity to the ColoradoRiver. These holdings complement our other groundwater resourcesand will enhance our opportunities to participate in a broadvariety of water storage, supply, exchange or banking programs.By way of example, we have identified more than 10,000 acre-feetof excess water that we plan to either transfer to our otherproperties or exchange or transfer to other water users withoutaffecting current agricultural production on an annual basis. (d) Proposed New Subsidiary ----------------------- On March 11, 2002, we announced our intent to create a newsubsidiary company that will provide an array of innovativebusiness solutions to the significant water problems facing theMiddle East. Through the new subsidiary, we intend to build adiversified water business with both direct investment and theprovision of economic, technical and management services. Mr.Bruce Babbitt, former U.S. Secretary of the Interior and Governorof Arizona, has joined us to lead this new subsidiary as itschairman and chief executive officer. The new subsidiary will target opportunities in the MiddleEast because of the region's growing need for managed waterresources, sound environmental planning, effective conservationof water resources and the growing need for renewable waterresources proportionate to the growing population and theburgeoning agricultural system. We believe that the Middle Easthas an arid environment similar to parts of California where ouroperations are conducted. Further, we believe that this projectcomplements the work we are conducting at the Tushka Project siteand our relationship with KADCO. Page 5AGRICULTURAL OPERATIONS Through Sun World, we are one of California's largestvertically integrated agricultural companies due to our extensiveresearch and development program, our year-round sourcing offresh fruits and vegetables, our farming and packing activitiesand our strong marketing capabilities. For the 12 months endedDecember 31, 2001, Sun World recorded revenues of $92.4 million.(a) Product Line ------------ Sun World ships over 80 different varieties of fresh fruitsand vegetables throughout the United States and to more than 30foreign countries. Sun World is a leading grower and marketer oftable grapes, seedless watermelons, colored sweet peppers, citrus(oranges and lemons) and stonefruit (plums, peaches, nectarinesand apricots). It is also one of California's largestSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.independent marketers of grapefruit, tangerines, mandarins, naveloranges and lemons. The breadth and diversity of the product line helps tominimize the impact of individual crop earnings fluctuations.Further, the breadth and diversity of its product offeringprovides Sun World with greater presence and influence with itsgrocery and food service customers. Although many fruits and vegetables are fungiblecommodities, Sun World has adopted a strategy of developing andacquiring specialty produce varieties with unique characteristicswhich differentiate them from commodity produce varieties. Mostof these varieties are harvested during favorable marketingwindows when available supply from competitors is limited. Thesespecialty varieties typically command a price premium and areless subject to the same price volatility than the commodityvarieties. They also provide Sun World with a dominant positionin a number of product categories. Examples of the brandedproduce grown and marketed by Sun World include SuperiorSeedless(R) table grapes, Midnight Beauty(R) table grapes, BlackDiamond(R) plums, Honeycot(R) apricots and Amber Crest(R)peaches. These products evolved through a combination ofinternal development and acquisition. Sun World's research anddevelopment center is dedicated to developing additional highvalue proprietary varieties. See "Proprietary ProductDevelopment" below.(b) Farming Operations ------------------ Sun World's farming operations produced approximately sevenmillion units of fruits and vegetables during the year endedDecember 31, 2001 from its approximately 13,400 planted acres ofwhich approximately 12,200 acres are owned by Sun World and 1,200acres are leased. Permanent crops are grown on approximately11,000 of the owned acres of which 42% are proprietary varieties.Sun World's principal agricultural lands are located in the SanJoaquin and Coachella Valleys of California. See Item 2,"Properties". Sun World properties are primarily dedicated to producingpermanent commercial crops and, to a lesser extent, annual (orrow) crops. Over 1,500 acres are currently utilized fordeveloping crops (e.g., new vines and trees that have not yetreached commercial maturity). Sun World has implemented a cropdevelopment plan with the intent of redeploying marginallyproductive acreage to produce varieties of crops that possesssuperior proprietary characteristics and/or are available fordelivery at peak pricing windows throughout the year.Additionally, during 2001, Sun World completed the three-yeartransition of approximately 400 acres of table grapes that arecertified organic for the 2001 growing season. Page 6(c) Packing and Marketing Operations -------------------------------- In addition to merchandising its own products, Sun Worldprovides marketing and packing services to third party growers.For third party growers, Sun World provides three key benefits: * Sun World's brand name, proprietary products and reputation with wholesalers; * a full complement of handling services that include harvest, cooling, packing and shipping; and * an internal sales and marketing force servicing approximately 500 customers throughout the world. Sun World's packing facilities handled over eight millionunits of produce during the year ended December 31, 2001. Thesefacilities provide harvesting, packing, cooling and shippingSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.services for Sun World production, as well as for othercommercial clients. Currently, Sun World owns three facilities,two of which are located in the Coachella Valley and one of whichis located in the San Joaquin Valley. See Item 2, "Properties". Sun World's vertically integrated operations enable it tooffer the market a continuous stream of new specialty products,which receive a market premium. As a large grower, Sun World isable to manage the quality of its own product line, and as asignificant packer and marketer, Sun World works with othergrowers to ensure product quality through packing anddistribution. During fiscal 2001, we sold over 10 million unitswith wholesale value of approximately $94.5 million. This amountincludes the wholesale value for units sold on behalf of thirdparty growers for which only the sales commission and packingrevenues received by Sun World are included in Sun World'sreported revenues. Sun World's sourcing, both external and internal, isdiversified geographically throughout California. Sun World'sowned and leased farming operations are located throughout themajor growing regions in California from the Coachella Valley inthe south to central California's San Joaquin Valley, as well asoperations near the coast. Sun World sources externally producedproduct from throughout California, from other areas of theUnited States, and from international sources. This geographicdiversification not only reduces the impact that unfavorableweather conditions and infestations could have on Sun World'soperations, but also provides Sun World with longer sellingseasons for many crops since harvests occur at different times.In addition, geographic diversification also allows Sun World theability to provide the quality and breadth of product throughoutthe year demanded by retailers. Sun World's customer base consists of approximately 500accounts including supermarket retailers, food service entities,warehouse clubs, and international trading companies located inapproximately 30 countries. Domestic customers include nationalretailers such as Safeway Stores and Albertson's; club stores,including Costco and Sam's; and food service distributors,including Sysco and Alliant. During 2001, approximately 12% ofSun World's products were marketed internationally including inCanada, Europe, Australia, Japan, Hong Kong, Singapore, Malaysia,Taiwan, the Middle East and South Africa. Only one nationalretailer, Safeway Stores, (representing approximately 11%)accounted for more than 10% of Sun World's revenues in 2001. Asis consistent with industry practice, Sun World does not maintainwritten agreements with Safeway Stores or its other significantcustomers. Page 7 (d) Proprietary Product Development ------------------------------- Sun World has a long history of product innovation, and itsresearch and development center maintains a fruit breedingprogram that has introduced dozens of proprietary fruit varietiesin the last six years. Recent product successes include theMidnight Beauty(R) seedless black table grape, the BlackDiamond(R) plum, the Amber Crest(R) peach and the Honeycot(R)apricot. During 2001, Sun World filed for 12 new plant patentsin the United States, including six new varieties of tablegrapes, three new varieties of plums and three new varieties ofpeaches. We believe that these products and several otherpromising grape and stonefruit varieties will be plantedcommercially in the near future, both domestically andinternationally. Sun World also continually assesses thestrategic value of filing patents on its proprietary fruitvarieties internationally and files for patents in countrieswhere it deems strategic value will be obtained. During 2001,Sun World filed for 12 new plant patents internationally inArgentina, Australia, Brazil, Chile, Egypt, European Union,Mexico, Peru and South Africa. The European Union countriesinclude Austria, Belgium, Denmark, Finland, France, Germany,Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,Spain, Sweden and the United Kingdom. Sun World devotes approximately 200 acres to its researchand development center and crop experimentation. The researchand development center facility houses tissue culture rooms,growth rooms, four greenhouses and experimental growing crops.The amounts expended by Sun World on its research and developmentactivities totaled $2,023,000 for the year ended December 31,2001, $1,636,000 for the year ended December 31, 2000, and$1,450,000 for the year ended December 31, 1999. As a result of over 20 years of research and development,Sun World holds rights to 320 patents and trademarks around theworld and has 86 pending applications for additional patents andtrademarks domestically and internationally. The patentregistrations exist in most major fruit producing countries andthe trademarks are held in both fruit producing and consumingregions. Sun World's patents have varying expiration datesoccurring within the next several years through 2024; however,the expiration of any individual patent will not have a materialeffect upon Sun World's operations. Enhancing the value of the proprietary product portfoliothrough licensing is an integral part of Sun World's growthstrategy. Sun World continues to seek licensing opportunitieswith key strategic partners to introduce, trial and produce SunWorld's proprietary products in major production areas that haveappropriate plant protection rights and do not compete with SunWorld's own domestic production. These licensing agreements willprovide Sun World with a long-term annual revenue stream basedupon a royalty fee for each box of proprietary fruit sold overthe lives of the licensed trees or vines approximating 25 to 40years. Currently, Sun World has licensing agreements in place inAustralia, Chile, Israel, Italy, Morocco, Namibia, New Zealand,South Africa, Spain and the United States and expects to continueto expand its licensing portfolio. An example of Sun World'slicensing success is the definitive agreement entered into withthe South African fruit industry granting long-term licenseagreements to South African fruit companies seeking to produceand export Sun World's proprietary Sugraone grape variety (morecommonly known as Sun World's Superior Seedless(R) grape). Thisagreement also provided Sun World compensation for past Sugraonegrapevine plantings and fruit sales and granted Sun Worldexclusive North American marketing rights for the Sugraone grapevariety. We believe these licensing agreements have establisheda precedent that will change the way new and improved varietiesof produce will be brought to market in the future. Page 8TUSHKA PROJECT WITH KADCO The combination of our innovative proprietary products andexpertise in desert farming and water resources management led toSun World's appointment by KADCO, a company currently 100%controlled by His Royal Highness Prince Alwaleed Bin Talal BinAbdulaziz Alsaud, to develop and manage up to 100,000 acres ofagricultural land in southern Egypt, called the Tushka Project.The Tushka Project is the cornerstone in the Egyptiangovernment's multi-billion dollar South Valley Project, animmense infrastructure plan designed to irrigate more than500,000 acres of desert land to foster urban and agriculturaldevelopment. The South Valley Project involves the constructionof one of the world's largest pumping stations and a 43-milecanal that diverts water from Egypt's Lake Nasser, the reservoirformed on the Nile River by the Aswan High Dam, to four separateparcels of land - the first being the Tushka Project site.Construction is well underway, with the main canal, pumpingstation and branch canals slated to be complete and operationalby the end of 2002. The initial commercial plantings ofpermanent crops for the Tushka Project will follow in early 2003.Concurrent to the development of necessary infrastructure, aresearch site and nursery, including 300 acres of test plotsirrigated with local groundwater, have been established.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. As compensation for project development and management ofthe Tushka Project, Sun World earns a quarterly equity interestin KADCO based upon meeting certain developmental milestones andhas been granted an option to purchase additional shares. Thecombined equity interest is expected to equate to approximately10% ownership of KADCO upon completion of the development. Inaddition, Sun World will receive annual marketing and licensingfees equal to the greater of 1.5% of gross revenues or 5% ofearnings before interest, taxes, depreciation and amortization(EBITDA) from the project. No capital investment is required bySun World, and KADCO reimburses Sun World for all expensesincurred. The management agreement, signed in October 1999, hasa four-year term with an option to extend for multiple furtherterms. PROPOSED BUSINESS COMBINATION OF SUN WORLD WITH KADCO On January 16, 2002, we announced an agreement in principlewith KADCO, to combine the businesses of Sun World and KADCO.Following the proposed combination, KADCO's shareholders willhave a 49.75% interest in the combined business, and Cadiz willretain an ownership interest of 50.25%. Prior to the proposedcombination, KADCO expects to have cash resources in excess of$80 million. We intend to utilize the cash resources of the combinedbusiness both to recapitalize Sun World and to provide for futurebusiness expansion. The agreement in principle contemplatesthat, in the future, KADCO shareholders will have an opportunityto make an additional equity investment in the combined business.Should KADCO shareholders make this additional investment, we maychoose to maintain a majority percentage ownership in thecombined business through a proportionate matching investment. The management of Sun World will continue to manage thecombined business with Keith Brackpool as chairman and TimothyShaheen as chief executive officer. The board of the combinedbusiness will consist of seven board members. As Cadiz willinitially hold a majority ownership in the combined business,Cadiz will initially nominate four board members and KADCO shareholders will initially nominate the remaining three board members. Should KADCO ever obtain a majority percentageownership of the combined business, the shareholders of KADCOwill then have the right to nominate a majority of board members. Page 9 The proposed combination is subject to the negotiation andexecution of definitive agreements and a number of otherimportant conditions, including, among others, procurement ofgovernmental, third-party and lender approvals or consents asnecessary, completion of confirmatory due diligence by bothparties and KADCO's completion of additional equity financing. We anticipate that the combination will be consummatedduring the second quarter of 2002. However, management cannotassure that a definitive agreement with KADCO will be reached orthat the combination will be consummated. See the discussionunder the caption "Certain Trends and Uncertainties" and Item 7,"Management's Discussion and Analysis of Financial Condition andResults of Operations". SEASONALITY In connection with our water resource developmentactivities, we do not expect revenues to be seasonal in nature. Sun World's agricultural operations, however, are impactedby the general seasonal trends that are characteristic of theagricultural industry. Sun World has historically received themajority of its operating profit during the months of June toOctober following the harvest and sale of its table grape andstonefruit crops. Due to this concentrated activity, we have,therefore, historically incurred an operating loss with respectSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.to our agricultural operations in the other months during theyear.COMPETITION We face competition for the acquisition, development andsale of our properties from a number of competitors, some ofwhich have greater resources than us. We may also facecompetition in the development of water resources associated withour properties. Since California has scarce water resources andan increasing demand for available water, we believe thatlocation, price and reliability of delivery are the principalcompetitive factors affecting transfers of water in California. The agricultural business is highly competitive. SunWorld's competitors include a limited number of largeinternational food companies, as well as a large number ofsmaller independent growers and grower cooperatives. No singlecompetitor has a dominant market share in this industry due tothe regionalized nature of these businesses. In addition todrawing from its proprietary base of products, Sun World utilizesbrand recognition, product quality, harvesting in favorableproduction windows, effective customer service and consumermarketing programs to enhance its position within the highlycompetitive fresh food industry. Consumer and institutionalrecognition of the Sun World trademark and related brands and theassociation of these brands with high quality food productscontribute to Sun World's ability to compete in the market forfresh fruit and vegetables.EMPLOYEES As of December 31, 2001, we employed approximately 550 full-time employees (including all those individuals who work morethat 1,000 hours per year). Sun World, throughout the year,engages various part-time and seasonal employees, with a seasonalhigh of approximately 1,200 part-time employees. Additionally,Sun World contracts with outside labor contractors for personnelused in the farming operations with a seasonal high ofapproximately 4,800 people. Approximately 190 of our employeesare represented by a labor Page 10union pursuant to contracts renewed in 1999 that expire in 2002. Generally, we believe that our employee relations are good.REGULATION Certain areas of our operations are subject to varyingdegrees of federal, state and local laws and regulations. Ouragricultural operations are subject to a broad range of evolvingenvironmental laws and regulations. These laws and regulationsinclude the Clean Air Act, the Clean Water Act, the ResourceConservation and Recovery Act, the Federal Insecticide, Fungicideand Rodenticide Act and the Comprehensive Environmental Response,Compensation and Liability Act. Compliance with these and otherforeign and domestic laws and related regulations is an ongoingprocess, which is not currently expected to have a materialeffect on our capital expenditures, earnings or competitiveposition. Environmental concerns are, however, inherent in mostmajor agricultural operations, including those conducted by us,and there can be no assurance that the cost of compliance withenvironmental laws and regulations in the future will not bematerial. Our food operations are also subject to regulations enforcedby, among others, the U.S. Food and Drug Administration andstate, local and foreign equivalents and to inspection by theU.S. Department of Agriculture and other federal, state, localand foreign environmental and health authorities. Among otherthings, the U.S. Food and Drug Administration enforces statutorystandards regarding the safety of food products, establishesingredients and manufacturing procedures for certain foods,establishes standards of identity for foods and determines theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.safety of food substances in the United States. Similarfunctions are performed by state, local and foreign governmentalentities with respect to food products produced or distributed intheir respective jurisdictions. Existing environmentalregulations have not, in the past, had a materially adverseeffect upon our operations, and we believe that existingenvironmental regulations will not, in the future, have amaterially adverse effect upon our operations. There can be noassurances, however, as to the effect of any environmentalregulations, which may be adopted in the future. As we proceed with the development of our properties,including the Cadiz Program, we will be required to satisfyvarious regulatory authorities that we are in compliance with thelaws, regulations and policies enforced by such authorities.Groundwater development, and the export of surplus groundwaterfor sale to single entities such as public water agencies, is notsubject to regulation by existing statutes other than generalenvironmental statutes applicable to all development projects.Additionally, we must obtain a variety of approvals and permitsfrom state and federal governments with respect to issues thatmay include environmental issues, issues related to specialstatus species, issues related to the public trust, and others.Because of the discretionary nature of these approvals andconcerns which may be raised by various governmental officials,public interest groups and other interested parties during boththe approval and development process, our ability to developproperties and realize income from our projects, including theCadiz Program, could be delayed, reduced or eliminated.ITEM 2. PROPERTIES We currently lease our executive offices in Santa Monica,California which consist of approximately 10,400 square feet,pursuant to a lease that expires in July 2004. Current base rentunder the lease is approximately $38,000 per month. We have onefive-year option to renew at fair market rate. We also maintaina development office in San Bernardino, California. Sun Worldowns its main packing facility (including sales andadministrative offices) in Bakersfield, California and owns twopacking facilities (including sales offices) in Coachella, Page 11California. We believe that our property and equipment isgenerally well maintained, in good operating condition andadequate for their present needs. The following is a description of our significantproperties. THE CADIZ/FENNER PROPERTY In 1984, we conducted an investigation of the feasibility ofthe agricultural development of land located in the Mojave Desertnear Cadiz, California, and confirmed the availability of high-quality water in commercial quantities appropriate foragricultural development. Since 1985, we have acquiredapproximately 34,500 acres in the Cadiz and Fenner Valleys ofeastern San Bernardino County approximately 30 miles north of theColorado River Aqueduct, including approximately 7,000 acresobtained as part of a litigation settlement with Waste Managementin April 2001. Additional numerous independent geotechnical and engineeringstudies conducted since 1985 have confirmed that the Cadiz/Fennerproperty overlies a natural groundwater basin which is ideallysuited for underground water storage and dry year transfers ascontemplated in the Cadiz Program. See Item 1, "Business -Narrative Description of Business - Water Resource Development". In November 1993, the San Bernardino County Board ofSupervisors unanimously approved a General Plan Amendmentestablishing an agricultural land use designation for 9,600 acresSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.at Cadiz for which 1,600 acres have been developed and are leasedto Sun World. This action also approved permits to constructinfrastructure and facilities to house as many as 1,150 seasonalworkers and 170 permanent residents (employees and theirfamilies) and allows for the withdrawal of more than 1,000,000acre-feet of groundwater from the groundwater basin underlyingour property. We hold substantially all Cadiz/Fenner acreage in feedirectly.THE SUN WORLD PROPERTIES(a) Farm Properties --------------- Sun World owns approximately 19,000 acres and leasesapproximately 2,800 acres of improved land in central andsouthern California. Concurrently with our acquisition of SunWorld in 1996, Sun World entered into a lease for approximately1,600 acres of Cadiz/Fenner agricultural real property fromCadiz. The lease, as amended, has a 10-year term expiring inSeptember 2006 with annual rental of $250 per acre. Sun World isresponsible for all costs associated with growing crops on theleased property. The majority of this land is used for thecultivation of permanent and annual crops and support activities,including packing facilities. Sun World-owned farming property is divided between sixdistinct geographic regions: Madera, Bakersfield, Tulare andArvin (located within the San Joaquin Valley), Coachella (locatedin the state's southeastern corner near Palm Springs) and Blythe(located approximately 100 miles east of the Coachella Valleyadjoining the Colorado River). Page 12 (b) Packing and Handling Facilities ------------------------------- Sun World owns three packing and handling facilities: onefacility located in the San Joaquin Valley at Kimberlina nearBakersfield, a facility in the Coachella Valley and a thirdfacility also in the Coachella Valley that is leased to a thirdparty. The Kimberlina facility, located on an 83 acre parcel ownedby Sun World, consists of two highly automated production linesfor packing stonefruit and citrus, cold storage areas, and officespace. Sun World's Coachella Valley facilities consists of threeindependent buildings located on 26 acres of land in Coachella,California. One building is used primarily for packing citrus,receiving table grapes, cold storage and office space. A secondbuilding is used primarily for receiving, cooling and storingtable grapes and row crops. The third building was usedprimarily for packing lemons and for storage.OTHER EASTERN MOJAVE PROPERTIES We also own approximately 10,900 additional acres in theeastern Mojave Desert, including the Piute and Danby Lakeproperties. The Piute property consists of approximately 6,000 acres andis located approximately 60 miles northeast of Cadiz andapproximately 15 miles west of the Colorado River and Laughlin,Nevada, a small, fast growing town with hotels, casinos and waterrecreation facilities. We identified the Piute property foracquisition by a combination of satellite imaging and geologicaltechniques which we used to identify water at Cadiz. The Piute acreage adjoins Highway 95, approximately 60 milessouth of Las Vegas. The Santa Fe Railroad passes through theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.land and Interstate 40 is approximately 12 miles to the south.DEBT SECURED BY PROPERTIES Of our outstanding debt at December 31, 2001, $117.5 millionrepresents loans secured by Sun World's properties and $25.1million represents loans secured by the majority of our non-SunWorld properties. Information regarding interest rates andprincipal maturities is provided in Note 9 to the consolidatedfinancial statements.ITEM 3. LEGAL PROCEEDINGS We are involved in legal and administrative proceedings andclaims and we actively pursue the protection of our intellectualand proprietary property in the ordinary course of business. Inthe opinion of management, the ultimate outcome of eachproceeding or all such proceedings combined will not have amaterial adverse impact on our financial position.ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of our stockholdersduring the fourth quarter of 2001. The results of our AnnualMeeting of Stockholders held May 14, 2001 were reported in ourQuarterly Report on Form 10-Q for the quarterly period endedMarch 31, 2001. Page 13 PART IIITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is traded on the Nasdaq National StockMarket under the symbol "CLCI". The following table reflectsactual sales transactions. The high and low range of the salesprice of the common stock for the dates indicated have beenprovided by Nasdaq. High Low Sales Sales Quarter Ended Price Price ------------- ----- ----- 2000: March 31 $ 12.500 $ 7.313 June 30 $ 8.875 $ 5.563 September 30 $ 10.125 $ 7.750 December 31 $ 10.750 $ 6.938 2001: March 31 $ 10.500 $ 8.031 June 30 $ 10.180 $ 8.250 September 30 $ 10.000 $ 7.150 December 31 $ 8.980 $ 7.250 On March 26, 2002, the high, low and last sales prices forthe shares, as reported by Nasdaq, were $8.840, $8.570 and$8.780, respectively. Options in our stock trade under the symbol "QAZ". We also have an authorized class of 100,000 shares ofpreferred stock. To date, there are four series of preferredstock designated for issuance including: * 40,259 shares of Series A Junior Participating Preferred Stock pursuant to a Stockholders' Rights Plan, of which none are issued and outstanding; * 5,000 shares of Series D Convertible Preferred Stock ofSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. which 5,000 shares are issued and outstanding; * 3,750 shares of Series E-1 Convertible Preferred Stock of which 3,750 shares are issued and outstanding; and * 3,750 shares of Series E-2 Convertible Preferred Stock of which 3,750 shares are issued and outstanding.The Board of Directors has no present plans or arrangements forthe issuance of additional shares of preferred stock. On May 10, 1999 we adopted a Stockholders' Rights Plan. Inconnection with the Rights Plan, and as further described in theRights Plan, we declared a dividend of one preferred sharepurchase right for each outstanding share of our common stockoutstanding at the close of business on June 1, 1999. As of March 26, 2002, the number of stockholders of recordof our common stock was 161 and the estimated number ofbeneficial owners was approximately 2,604. Page 14 To date, we have not paid a cash dividend on our commonstock and we do not anticipate paying any cash dividends in theforeseeable future. Our ability to pay such dividends is subjectto covenants pursuant to agreements with our lenders that do notallow for the payment of dividends other than out of ourcumulative net income. During the quarter ended December 31, 2001, we issued 40,000shares of common stock and warrants to purchase 215,000 sharesof our common stock at an exercise price of $7.50 per share.These shares and warrants were issued in connection with ourissuance of an aggregate of $7.5 million of Series E-1 and E-2preferred stock. The issuance of the warrants, common stock, andthe Series E-1 and E-2 preferred stock were not registered underthe Securities Act of 1933, as amended. We believe that thetransactions described are exempt from the registrationrequirements of the Securities Act by virtue of Section 4(2) ofthe Securities Act as the transactions did not involve publicofferings. All other securities sold by us during the year endedDecember 31, 2001 which were not registered under the SecuritiesAct have previously been reported in our Quarterly Reports onForm 10-Q. In February 2002, we registered for resale thewarrants and shares issued in connection with the abovetransactions by filing a Registration Statement on Form S-3. Page 15ITEM 6. SELECTED FINANCIAL DATA The following selected financial data insofar as it relatesto the years ended December 31, 2001, 2000, 1999, 1998 and 1997has been derived from financial statements audited byPricewaterhouseCoopers LLP, independent accountants. Theinformation that follows should be read in conjunction with theaudited consolidated financial statements and notes thereto foreach of the three years in the period ended December 31, 2001included in Part IV of this Form 10-K. See also Item 7,"Management's Discussion and Analysis of Financial Condition andResults of Operations". ($ in thousands, except for per share data) Year Ended December 31, ---------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ----Statement of Operations Data: Total revenues $ 92,402 $ 107,745 $ 115,229 $ 106,544 $ 100,157 Net loss (25,722) (22,458) (8,594) (7,470) (8,538)Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Less: Preferred stock dividends 591 - - - (1,213) Imputed dividend on preferred stock 441 - - - - ------- ------- ------- -------- ------- Net loss applicable to common stock $ (26,754) $ (22,458) $ (8,594) $ (7,470) $ (9,751) ========= ========= ======== ======== =========Per share: Net loss (basic and diluted) $ (.75) $ (.64) $ (.25) $ (.23) $ (.33) ========= ========= ======== ======= =========Weighted-average common shares outstanding 35,854 35,344 34,678 33,173 29,485 ========= ========= ======== ======= ======== December 31, --------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ----Balance Sheet Data: Total assets $ 198,275 $ 203,617 $ 214,102 $ 214,359 $ 203,049 Long-term debt $ 141,429 $ 145,610 $ 142,089 $ 142,317 $ 131,689 Redeemable preferred stock $ 9,958 $ 3,950 $ - $ - $ - Common stock and additional paid-in capital $ 152,765 $ 143,063 $ 136,552 $ 127,998 $ 121,199 Accumulated deficit $ (135,062) $(109,340) $ (86,882) $ (78,288)$ (70,818) Stockholders' equity $ 17,703 $ 33,723 $ 49,670 $ 49,710 $ 50,381ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSRESULTS OF OPERATIONS The consolidated financial statements set forth herein foreach of the three years in the period ended December 31, 2001,reflect the results of our operations and the operations of ourwholly-owned subsidiaries including Sun World. Page 16 A summary of the Sun World elements which our managementbelieves is essential to an analysis of the results of operationsfor such periods is presented below. For purposes of thissummary, the term Sun World will be used, when the context sorequires, with respect to the operations and activities of ourSun World subsidiary, and the term Cadiz will be used, when thecontext so requires, with respect to our operations andactivities that do not involve Sun World. Our net income or loss in future fiscal periods will belargely reflective of (a) the operations of our water developmentactivities including the Cadiz Groundwater Storage and Dry-YearSupply Program and (b) the operations of Sun World including itsinternational expansion. Sun World conducts its operationsthrough four operating divisions: farming, packing, marketing andproprietary product development. Net income from farmingoperations varies from year to year primarily due to yield andSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.pricing fluctuations which can be significantly influenced byweather conditions, and are, therefore, generally subject togreater annual variation than Sun World's other divisions.However, the geographic distribution of Sun World's farmingoperations within California and the diversity of its crop mixmakes it unlikely that adverse weather conditions would affectall of Sun World's properties or all of its crops in any singleyear. Nevertheless, net profit from Sun World's packing,marketing and proprietary product development operations tends tobe more consistent from year to year than net profit from SunWorld's farming operations. Packing and marketing revenues fromthird party growers currently represent less than 10% of ourtotal revenues. Sun World has entered into agreementsdomestically and internationally to license selected proprietaryfruit varieties and continues to pursue additional domestic andinternational licensing opportunities. License revenuescurrently represent less than 10% of our total revenues.(a) YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000 ------------------------------------------------------- Our agricultural operations are impacted by the generalseasonal trends that are characteristic of the agriculturalindustry. Sun World has historically received the majority ofits net income during the months of June to October following theharvest and sale of its table grape and stonefruit crops. Due tothis concentrated activity, Sun World has, therefore,historically incurred a loss with respect to its agriculturaloperations in the other months during the year. Page 17 The table below sets forth, for the periods indicated, theresults of operations for Sun World's four main divisions (beforeelimination of any interdivisional charges), as well as thecategories of costs and expenses we incurred which are notincluded within the divisional results (in thousands): Year Ended December 31, 2001 2000 ---- ---- Divisional net income (loss) : Farming $ (3,243) $ 2,791 Packing 8,320 7,193 Marketing 3,303 3,868 Proprietary product development 2,891 4,331 -------- ------- 11,271 18,183 General and administrative 10,890 10,939 Special litigation (7,929) 424 Removal of underperforming crops 736 1,549 Non-recurring compensation expense 5,537 - Depreciation and amortization 8,151 8,381 Interest expense, net 19,551 19,188 Income tax expense 57 160 ------- -------- Net loss $(25,722) $(22,458) ======== ======== FARMING OPERATIONS. Net loss from farming operationstotaled $3.2 million for 2001 compared to a net profit of $2.8million in 2000. Farming revenues were $71.7 million and farmingexpenses were $74.9 million for 2001. For 2000, Sun World hadfarming revenues of $86.4 million and farming expenses of $83.6million. Farming results were negatively impacted by a two-weekweather related delay in the table grape harvest in Coachella andMexico, which created an overlap with the early table grapeharvests in the San Joaquin Valley. This overlap createddownward pressure on F.O.B. prices for table grapes thatSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.continued through the entire San Joaquin Valley harvest. Year-to-date F.O.B. prices for table grapes were 3% below 2000 farmingresults. Additionally, Sun World experienced lower table grapeyields as it sold 3.5 million boxes during 2001 compared to 3.9million boxes during 2000. Results were also negatively impacted in 2001 compared to2000 due to decreased prices for wine grapes, peppers and plums.Average F.O.B. prices for wine grapes and peppers were down dueto oversupply in the industry by 45% and 29%, respectively,compared to 2000. Profits for plums were down due to loweryields coupled with smaller sized fruit resulting from adverseweather. Sun World sold 0.8 million boxes of plums in 2001compared to 1.0 million boxes in 2000. F.O.B. prices for plumswere 25% below 2000 prices. 2001 citrus results were $1.1million higher than 2000 due to an 18% increase in productionyields coupled with a 9% increase in F.O.B. prices. The decreasein farming expenses is primarily due to the removal of certainunderperforming stonefruit and wine grape acreage at theconclusion of the 2000 growing season and the reduction andelimination of certain row crop acreage in 2001 for crops thathad become unprofitable. Sun World's proprietary table grape andstonefruit products have allowed Sun World to continue to commandprice premiums to the overall market. PACKING OPERATIONS. Sun World's packing and handlingfacilities contributed $8.3 million in profit during 2001compared to $7.2 million in 2000. The aggregate packing andhandling revenue for these operations of $21.4 million was offsetby $13.1 million of expenses for 2001. Revenues totaled $21.9million offset by expenses of $14.7 million for 2000. Sun Page 18World packed 2.9 million units during 2001 and moved an additional 5.3 million units through the cold storage facilities for a total of 8.2 million units processed through the packing operations in2001 compared to 8.6 million units in 2000. This decrease inunits is due primarily to lower Sun World-grown table grape andplum yields as well as fewer units of third party citruspartially offset by increased units of third party table grapes.The increase in profits is due to increased profits per unitresulting from a price increase in storage and handling revenuesfor table grapes, stonefruit and peppers that was implemented in2001 to offset increased energy and labor costs. Units packedand handled during 2001 consisted primarily of Sun World-growntable grapes, peppers and seedless watermelons in the CoachellaValley; table grapes and citrus products packed for third partygrowers; and Sun World-grown table grapes, stonefruit, citrus,and peppers from the San Joaquin Valley. MARKETING OPERATIONS. During 2001, a total of 10.1 millionunits were sold consisting primarily of Sun World-grown tablegrapes, peppers and watermelons from the Coachella Valley; tablegrapes and citrus from domestic third party growers; and SunWorld-grown table grapes, stonefruit, citrus, and peppers fromthe San Joaquin Valley. These unit sales resulted in marketingrevenue of $7.5 million. Marketing expenses totaled $4.2 millionfor 2001 resulting in net income from marketing operations of$3.3 million. During 2000, 11.5 million units were soldresulting in revenues of $8.6 million offset by expenses of $4.7million for net income of $3.9 million. The decrease inrevenues, marketing profits and units sold is primarily due tolower F.O.B. prices for table grapes, plums and peppers,decreased units of Sun World-grown table grapes and plums, andthe elimination of certain underperforming stonefruit and rowcrops from production in 2001. PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a longhistory of product innovation, and its research and developmentcenter maintains a fruit breeding program that has introduceddozens of proprietary fruit varieties. Additionally, Sun Worldcontinues to expand its licensing program with key strategicpartners worldwide to introduce, trial and produce Sun World'sproprietary varieties, which provides Sun World with a long-termSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.annual revenue stream based upon a royalty fee for each box ofproprietary fruit sold during the life of the tree or vine.During 2001, net income from proprietary product development was$2.9 million consisting of revenues of $4.9 million offset byexpenses of $2.0 million. For 2000, net income was $4.3 millionconsisting of revenues of $6.0 million offset by expenses of $1.7million. The decrease in proprietary product development netincome is primarily due to decreased intercompany royalties dueto lighter yields, additional costs associated with the expansionof Sun World's licensing distribution structure, and a timingdifference for international royalties due to harvest delays inSouth Africa. Revenues include $1.3 million related to projectdevelopment and management fees payable in equity of KADCO forboth 2001 and 2000. During 2001, Sun World expanded its acreageunder license with its strategic partners by 15% to over 7,000acres. GENERAL AND ADMINISTRATIVE EXPENSES. General andadministrative expenses totaled $10.9 million for 2001 and 2000. SPECIAL LITIGATION. We were engaged in lawsuits againstWaste Management seeking monetary damages arising from activitiesadverse to us in connection with a landfill, which until itsdefeat by the voters of San Bernardino County in 1996, wasproposed to be located adjacent to our Cadiz/Fenner Valleyproperties. In March 2001, we executed a settlement agreementwith Waste Management related to these lawsuits. Pursuant tothe settlement agreement, Waste Management paid Cadiz $6 millionin cash and granted to Cadiz an exclusive option to receive, at no cost to Cadiz, up to approximately 7,000 acres of real property in eastern San Bernardino County primarily adjacent to the Cadiz Program property. In April 2001, we Page 19exercised the option and as a consequence acquired the subject property. The settlement resulted in net proceeds of $7.9 million for 2001. During 2000, expenses including litigation costs and professionalfees related to this matter totaled $0.4 million. NON-RECURRING COMPENSATION. In March 2001, we issued564,163 deferred stock units to certain senior managers of Cadizand Sun World. These deferred stock units were issued inexchange for the cancellation of 1,055,000 fully vested optionsto purchase our common stock held by the senior managers. Thenumber of the deferred stock units issued was calculated based onthe average closing price for the 10 business days following thefiling of our Annual Report on Form 10-K for the year endedDecember 31, 2000 on March 29, 2001. We recorded a one-timecharge of $5,537,000 and no cash was expended in connection withthe issuance of the deferred stock units. REMOVAL OF UNDERPERFORMING CROPS. During 2001, managementdecided to remove approximately 40 acres of citrus at the Cadizranch and Sun World removed approximately 700 acres of winegrapes, citrus, and stonefruit. We recorded a charge of $0.7million in connection with the removal of these crops. InDecember 2000, we recorded a $1.5 million charge to removecertain underperforming crops, primarily 600 acres of wine grapesand stonefruit. DEPRECIATION AND AMORTIZATION. Depreciation andamortization expenses for the year ended December 31, 2001totaled $8.2 million compared to $8.4 million for the year endedDecember 31, 2000. The decrease is primarily attributable tocertain assets being sold or removed in 2001 and other assetsbecoming fully depreciated. INTEREST EXPENSE. Net interest expense totaled $19.6 millionduring the year ended December 31, 2001 compared to $19.2 millionduring the year ended December 31, 2000. The following tablesummarizes the components of net interest expense for the twoperiods (in thousands): Year Ended December 31,Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2001 2000 ---- ---- Interest on outstanding debt - Sun World $ 14,574 $ 14,546 Interest on outstanding debt - Cadiz 1,347 2,319 Amortization of financing costs 3,748 2,546 Interest income (118) (223) -------- -------- $ 19,551 $ 19,188 ======== ======== The increase in interest on outstanding debt during 2001 isprimarily due to (a) increased average borrowings under SunWorld's revolving credit facility; (b) increased interest andfinancing costs related to the debt added by Sun World inDecember 2000, and (c) amortization of warrants issued for theextension of Cadiz' revolving credit facility and term loanfacility, which total increase is partially offset by the savingsfrom lower prime and LIBOR interest rates on our variable ratedebt. Financing costs, which include legal fees, loan fees andwarrants, are amortized over the life of the debt agreement. Page 20(b) YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999 ------------------------------------------------------- The table below sets forth, for the periods indicated, theresults of operations for Sun World's four main divisions (beforeelimination of any interdivisional charges), as well as thecategories of costs and expenses incurred which are not includedwithin the divisional results (in thousands): Year Ended December 31, 2000 1999 ---- ---- Divisional net income Farming $ 2,791 $ 14,542 Packing 7,193 7,656 Marketing 3,868 4,573 Proprietary product development 4,331 3,187 -------- --------- 18,183 29,958 General and administrative 10,939 10,913 Special litigation 424 937 Removal of underperforming crops 1,549 - Depreciation and amortization 8,381 8,891 Interest expense, net 19,188 17,811 Income tax expense 160 - -------- --------- Net loss $(22,458) $ (8,594) ======== ========== FARMING OPERATIONS. Net income from farming operationstotaled $2.8 million for 2000 compared to $14.5 million in 1999.Farming revenues were $86.4 million and farming expenses were$83.6 million for 2000. For 1999, we had farming revenues of$94.9 million and farming expenses of $80.4 million. The decreasein farming results in 2000 compared to 1999 were primarily due todecreased prices on table grapes, wine grapes, stonefruit andcitrus due to an oversupply of products in the industry. AverageF.O.B. prices for 2000 were down 13%. The increase in farmingexpenses is primarily due to costs to grow and harvest citrus inthe San Joaquin Valley in 2000 that were not incurred in 1999 dueto the December 1998 freeze. Sun World's proprietary table grapeand stonefruit products have allowed Sun World to continue tocommand a price premium to the overall market that helped offsetsome of the losses incurred from its commodity products.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PACKING OPERATIONS. Sun World's packing and handlingfacilities contributed $7.2 million in profit during 2000compared to $7.7 million in 1999. We packed 3.6 million unitsand moved an additional 5.0 million units through the coldstorage facilities for a total of 8.6 million units processedthrough the packing operations in 2000 compared to the same totalof 8.6 million units in 1999. Packing results were negativelyimpacted by a significant increase in corrugated box costs andtemporary use of third party storage facilities during July 2000due to capacity constraints. Units packed and handled during2000 primarily consisted of Sun World-grown table grapes,stonefruit, citrus, peppers and seedless watermelons as well astable grapes, citrus and stonefruit products packed for thirdparty growers. Packing and handling revenue for these operationsof $21.9 million was offset by $14.7 million of expenses for2000. Revenues totaled $20.5 million offset by expenses of $12.8million for 1999. MARKETING OPERATIONS. Sun World's marketing operationsinclude selling, merchandising and promoting Sun World-grownproducts, as well as providing these services for third partygrowers. During 2000, a total of 11.5 million units were soldconsisting primarily of Sun World-grown table grapes, stonefruit, citrus, peppers and watermelons as well as table Page 21grapes, watermelons, citrus and stonefruit from domestic third party growers. These unit sales resulted in marketing revenue of $8.6 million. Marketing expenses totaled $4.7 million for 2000 resulting in net income from marketing operations of $3.9million. During 1999, 11.1 million units were sold resulting inrevenues of $9.4 million offset by expenses of $4.8 million fornet income of $4.6 million. The increase in units sold isprimarily due to increased units of Sun World-grown plums andstonefruit marketed for third parties. Average commissions for2000 were down 12% from average commissions in 1999 due to thelower F.O.B. prices noted above. PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a longhistory of product innovation, and its research and developmentcenter maintains a fruit breeding program that has introduceddozens of proprietary fruit varieties including twelve newvarieties for which plant patents were applied for in 2000.During 2000, net income from proprietary product developmenttotaled $4.3 million consisting of revenues of $6.0 millionoffset by expenses of $1.7 million. For 1999, net income fromproprietary product development was $3.2 million consisting ofrevenues of $4.6 million offset by expenses of $1.4 million. Theincrease in revenues resulted from international royaltiesprimarily related to our licensing agreements for Sugraone tablegrapes and consulting income from KADCO. GENERAL AND ADMINISTRATIVE EXPENSES. General andadministrative expenses totaled $10.9 million for both 2000 and1999. SPECIAL LITIGATION. We were engaged in lawsuits seekingmonetary damages in connection with the prevention of a landfillwhich was proposed to be located adjacent to our Cadiz/FennerValley properties. In March 2001, we entered into a settlementagreement with Waste Management related to these lawsuits.During the year ended December 31, 2000, expenses includinglitigation costs and professional fees totaled $0.4 million ascompared to $0.9 million during the year ended December 31, 1999. REMOVAL OF UNDERPERFORMING CROPS. In December 2000, weaccrued costs to remove certain underperforming crops, primarily600 acres of wine grapes and stonefruit. We recorded a charge of$1.5 million in connection with these removals. DEPRECIATION AND AMORTIZATION. Depreciation andamortization expenses for the year ended December 31, 2000totaled $8.4 million compared to $8.9 million for the year endedDecember 31, 1999. The decrease is primarily attributable toSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.certain assets being sold or removed and other assets becomingfully depreciated. INTEREST EXPENSE. Net interest expense totaled $19.2 millionduring the year ended December 31, 2000 compared to $17.8 millionduring the year ended December 31, 1999. The following tablesummarizes the components of net interest expense for the twoperiods (in thousands): Year Ended December 31, 2000 1999 ---- ---- Interest on outstanding debt - Sun World $14,546 $14,204 Interest on outstanding debt - Cadiz 2,319 1,785 Amortization of financing costs 2,546 2,176 Interest income (223) (354) -------- -------- $19,188 $17,811 ======= ======= Page 22 The increase in interest on outstanding debt during 2000 isprimarily due to (a) increased borrowings on Sun World'srevolving credit facility to meet seasonal working capital needsand (b) amortization of warrants issued for the extension ofCadiz' revolving credit facility and term loan facility.Financing costs, which include legal fees, loan fees andwarrants, are amortized over the life of the debt agreement.LIQUIDITY AND CAPITAL RESOURCES(a) Current Financing Arrangements ------------------------------ CADIZ OBLIGATIONS. As Cadiz has not received significantrevenues from our water resource activity to date, Cadiz has beenrequired to obtain financing to bridge the gap between the timewater resource development expenses are incurred and the timethat revenue will commence. Historically, Cadiz has addressedthese needs primarily through secured debt financing arrangementswith our lenders, private equity placements and the exercise ofoutstanding stock options. As of December 31, 2001, we were obligated for approximately$10.1 million under a senior term loan facility and $15 millionunder a $15 million revolving credit facility with the samelender. In the first quarter of 2002, we completed an extensionof both facilities to a maturity date of January 31, 2003 andincreased Cadiz' revolving credit facility to $25 million. $10million of Cadiz' revolving credit facility is convertible into1,250,000 shares of our stock any time prior to January 2003 atthe election of the lender. Currently, the lender holds a seniordeed of trust on substantially all of our non-Sun World assetsunder the term loan facility and a second lien on our non-SunWorld assets under Cadiz' revolving credit facility. We havehistorically structured our financing arrangement with the lenderwith a view toward effective implementation of the Cadiz Program.While we currently anticipate repayment of these facilities withmonies to be received under the Cadiz Program, we may, if we deemappropriate, replace or renegotiate the terms of these facilitiesto accommodate other developments such as delays in the timetablefor regulatory approvals or litigation related to regulatoryapprovals of the Cadiz Program. We retain the right to maintain$25.5 million of senior debt secured by the Cadiz Program arealands pursuant to the definitive economic terms for the CadizProgram agreed with Metropolitan, as described under "Outlook"below. In December 2000, we issued $5 million of Series DConvertible Preferred Stock. The stock is convertible into625,000 shares of our common stock any time prior to July 2004 atthe election of the holder. We also have the right to convert theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.preferred stock, but only when the closing price of our commonstock has exceeded $12 per share for 30 consecutive trading days.The preferred stock will be redeemed in July 2004 if it is stilloutstanding. In October and November 2001, we issued an aggregate of $7.5million of Series E-1 and E-2 Convertible Preferred Stock in$3.75 million issuances respectively. The Series E-1 and E-2preferred stock is convertible into an aggregate of 1,000,000shares of our common stock at any time prior to July 2004 at theelection of the holder. We also have the right to convert theSeries E-1 and E-2 preferred stock, but only when the closingprice of our common stock has exceeded $10.50 per share for 30consecutive trading days. The preferred stock will be redeemedin July 2004 if still outstanding. As we continue to actively pursue our business strategy,additional financing specifically in connection with our waterprograms will be required. Responsibility for funding thedesign, construction and program implementation costs of thecapital facilities for the Cadiz Program will, under currently developed principles and terms, be shared equally by Cadiz and Page 23Metropolitan. We plan to use monies to be received from Metropolitan for its initial payment for 600,000 acre-feet of groundwater storage as well as long-term financing arrangements currently under negotiation, to fund Cadiz' share of the estimated $150 million cost of the program capital facilities. SUN WORLD OBLIGATIONS. Under Sun World's historical workingcapital cycle, working capital is required primarily to financethe costs of growing and harvesting crops, which generally occurfrom January through September with a peak need in June. SunWorld harvests and sells the majority of its crops during theperiod from June through October, when it receives the majorityof its revenues. In order to bridge the gap between incurrenceof expenditures and receipt of revenues, large cash outlays arerequired each year which are financed through a $30 millionrevolving credit agreement guaranteed by Cadiz. In November 2001, Sun World renewed its revolving creditfacility through the 2002 growing season with a maturity date ofNovember 2002. Amounts eligible to be borrowed under therevolving credit facility are based upon a borrowing base ofeligible accounts receivable and inventory balances. Maximumavailability under the revolving credit facility variesthroughout the year with a maximum of $30 million availableduring the peak borrowing periods of April to July. Therevolving credit facility is secured by accounts receivable,inventory, and the proceeds thereof, requires Sun World to meetcertain financial covenants, and is guaranteed by Cadiz. Amountsborrowed under the facility will accrue interest at either primeplus 1.0% or LIBOR plus 2.50% at our election. No amounts wereoutstanding under the revolving credit facility at December 31,2001. In addition, Sun World has outstanding $115 million of FirstMortgage Notes which will mature on April 15, 2004 and arepublicly traded and registered under the Securities Act of 1933.The Sun World notes became redeemable at the option of Sun World,in whole or in part, at any time on or after April 15, 2001.Interest accrues at the rate of 11-1/4%per annum and is payablesemi-annually on April 15th and October 15th of each year. TheSun World notes are secured by a first lien (subject to certainpermitted liens) on substantially all of the assets of Sun Worldand its subsidiaries, other than growing crops, crop inventoriesand accounts receivable and proceeds thereof, which secure SunWorld's revolving credit facility, and certain real propertypledged to third parties. The Sun World notes are also securedby the guarantee of Cadiz and the pledge by Cadiz of all of thestock of Sun World. The Sun World notes include covenants thatdo not allow for the payment of dividends by us or by Sun Worldother than out of cumulative net income.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CASH USED FOR OPERATING ACTIVITIES. Cash used for operatingactivities totaled $4.3 million for the year ended December 31,2001, as compared to cash used for operating activities of $9.1million for the year ended December 31, 2000. The decrease incash used for operating activities is primarily due to the $6million of cash received as part of the special litigationrecovery in 2001 coupled with higher accounts payable balances atDecember 31, 2001. CASH USED FOR INVESTING ACTIVITIES. Cash used for investingactivities totaled $5.5 million for the year ended December 31,2001, as compared to $2.7 million for the same period in 2000.The increase is cash used was primarily due to reduced sales ofproperty, plant and equipment, and the non reoccurrence of a $1.6million final partnership distribution in 2000, partially offsetby decreased expenditures for developing crops. Page 24 CASH PROVIDED BY FINANCING ACTIVITIES. Cash provided byfinancing activities totaled $7.9 million for the year endedDecember 31, 2001 as compared to $10.6 million for the sameperiod in 2000. Cadiz issued $7.5 million of preferred stock in2001 compared to $5.0 million in 2000. Net proceeds from stockoptions exercised totaled $1.6 million in 2001 compared to $1.0million in 2000 and principal payments on long-term debt totaled$1.6 million in 2001 compared to $0.7 million in 2000. Inaddition, Sun World issued $5.2 million of long-term debt in2000.(b) Outlook ------- We are actively pursuing the development of our waterresources. Specifically, in April 2001, Cadiz and Metropolitanapproved definitive economic terms and responsibilities for a 50-year agreement for the Cadiz Program. Under the Cadiz Program,Metropolitan will, during wet years or periods of excess supply,store surplus water from the Colorado River Aqueduct in thegroundwater basin underlying our property. During dry years ortimes of reduced allocations from the Colorado River, thepreviously imported water, together with additional existinggroundwater, will be extracted and delivered, via a conveyancepipeline, back to the aqueduct. The definitive terms will serveas the basis for a final agreement to be executed betweenMetropolitan and Cadiz. Execution of this final agreement willbe subject to completion of the ongoing environmental reviewprocess for the Cadiz Program. Key provisions of the approved definitive terms for theCadiz Program are as follows: * Over the 50-year term of the agreement, Metropolitan will store a minimum of 900,000 acre-feet of Colorado River Aqueduct water in our groundwater basin and purchase up to a minimum of 1,500,000 acre-feet of existing groundwater for transfer during dry years. The Cadiz Program will have the capacity to convey, either for storage or transfer, up to approximately 150,000 acre- feet in any given year. * During storage operations, Metropolitan will pay $50 per acre-foot for put of Colorado River water into storage and $40 per acre-foot for return of Colorado River water from storage, or a total of $90 per acre-foot to cycle water into and out of the basin. These fees will be adjusted by the Consumer Price Index (CPI). * As outlined above, Metropolitan's total minimum commitment for storage is 900,000 acre-feet. Metropolitan will pay for the initial 600,000 acre-feet of put and take activity upon final contract execution and completion of the environmental review process ($54 million before CPI adjustment). Metropolitan will paySource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. for an additional 300,000 acre-feet of put and take activity at the earlier of actual usage or 30,000 acre- foot annual increments during years 5-14 of Cadiz Program operations ($2,700,000 per year before CPI adjustment). * For transfer operations, Metropolitan shall purchase 30,000 acre-feet per year of indigenous groundwater for 25 years at a $230 per acre-foot transfer fee, subject to a fair market value adjustment as described below. In addition, Cadiz may elect to either sell up to an additional 30,000 acre-feet per year of indigenous groundwater to third parties in Metropolitan's service area at fair market value, or require Metropolitan to purchase that amount of water at a fixed transfer fee of $230 per acre-foot. Accordingly, Metropolitan's total potential minimum commitment for the life of the Cadiz Program will be 1,500,000 acre-feet of indigenous groundwater. All transfers of indigenous groundwater, whether to Metropolitan or third parties, will be made in accordance with the terms and conditions of a Groundwater Monitoring and Management Plan. Page 25 * The transfer fee will reflect a "fair market value" adjustment, which shall be determined up to once a year. The transfer fee will be adjusted by one-half of any increase or decrease in the fair market value, above or below the transfer fee currently in place ($230 per acre- foot initially). Each increase or decrease in the transfer fee paid by Metropolitan may not exceed 15%. For example, if the fair market value at the first redetermination is $350 per acre-foot, then the adjusted transfer fee shall be $264 [the lesser of (a) $230 + 50% * ($350-$230) = $290 per acre-foot or (b) $230 * 15% = $264.50 per acre-foot]. * Our right to sell to third parties within Metropolitan's service area includes scheduled access to Metropolitan's system at the rate charged by Metropolitan for conveying water through its aqueduct and pipeline system (the wheeling rate) charged for "as available capacity", plus power costs and any standard water stewardship fee that is uniformly charged to Metropolitan member agencies or third parties. Depending on availability of system capacity, Metropolitan may elect to exchange other water for delivery to our customers and "bank" the water we have sold. * If indigenous water supplies are determined to exceed 1,700,000 acre-feet, Metropolitan shall have the first right of refusal to purchase one-half of that excess yield. * Cadiz groundwater meets all existing federal and state water quality standards. Metropolitan's Colorado River Aqueduct water meets all existing federal and state water quality standards. Metropolitan shall be responsible to ensure, at its expense, that Colorado River Aqueduct water introduced into our groundwater basin shall, at a minimum, meet all existing and potential future federal and state water quality standards applicable to the Colorado River Aqueduct. We shall be responsible to ensure, at our expense, that indigenous groundwater introduced into the Metropolitan delivery system shall at a minimum, meet all existing and potential future federal and state water quality standards. If both indigenous groundwater and stored Colorado River water exceed any future federal or state water quality standard, then the parties will share compliance with the new standard based pro rata on the contribution to exceeding the standard. * The Cadiz Program facilities, including spreading basins, extraction wells, conveyance pipeline and a pumping plant are estimated to cost approximately $150 million, andSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. both parties will equally share these costs. Each party will be responsible for financing its portion of the capital costs. * Metropolitan will be responsible for operational costs of the Cadiz Program. However, we will assume pro rata operational costs associated with the sale of indigenous groundwater to third parties. * We and Metropolitan shall share equally the capital costs required for mitigation at the outset of the Cadiz Program. We shall assume the ongoing annual costs of operating the Groundwater Monitoring and Management Plan and of maintaining the right to withdraw water from the basin underlying the Cadiz Program area. Metropolitan and the U.S. Bureau of Land Management, incooperation with the U.S. Geological Survey and the National ParkService, issued the Final Environmental ImpactReport/Environmental Impact Statement for the Cadiz Program inOctober 2001. Issuance of Page 26the environmental report is a significant milestone in the environmental review process as it represents the last step prior to final actions from the U.S. Bureau of Land Management and Metropolitan. We anticipate final actions related to the environmental review process to be completed by the end of the second quarter of 2002 after which construction of the Cadiz Program facilities may commence. In addition to the development of our water resources, weare actively involved in further agricultural development andreinvestment in our landholdings. Such development will besystematic and in furtherance of our business strategy to providefor maximization of the value of our assets. We also continuallyevaluate acquisition opportunities that are complimentary to ourcurrent portfolio of water and agricultural resources. In January 2002, we announced an agreement in principle withKADCO to combine the businesses of Sun World and KADCO.Following the proposed combination, KADCO's shareholders willhave a 49.75% interest in the combined business, and Cadiz willretain an ownership interest of 50.25%. Prior to the proposedcombination, KADCO expects to have cash resources in excess of$80 million. We intend to use the cash resources of the combined businessboth to recapitalize Sun World and to provide for future businessexpansion. The agreement in principle contemplates that, in thefuture, KADCO shareholders will have an opportunity to make anadditional equity investment in the combined business. ShouldKADCO shareholders make this additional investment, we may chooseto maintain a majority percentage ownership in the combinedbusiness through a proportionate matching investment. We believethat additional investment will help position the combinedbusiness for its planned future transformation into a publicly-traded company. The proposed combination is subject to thenegotiations of definitive agreements and a number of otherimportant conditions. See "Certain Trends and Uncertainties -Proposed Combination of Sun World with KADCO" below. Historically, Sun World has serviced its indebtedness andmet its seasonal working capital needs using available internalcash, its revolving credit facility and through an intercompanyrevolver with Cadiz. Cadiz has met its ordinary working capitalneeds through a combination of available internal cash, quarterlymanagement fee payments from Sun World, payments from Sun Worldunder an agricultural lease whereby Sun World now operates Cadiz'1,600 acres of developed agricultural property at Cadiz,California, Cadiz' revolving credit facility, the exercise ofoutstanding stock options, and equity placements. Except for theforegoing, additional intercompany cash payments between SunWorld and Cadiz are subject to certain restrictions under theirSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.current lending arrangements. We may require additional cash beyond the amounts describedin this section although we are not looking to raise additionalworking capital at this time. We may meet any such futurerequirements through a variety of means to be determined at theappropriate time. Such means may include equity or debtplacements, or the sale or other disposition of assets. Equityplacements would be undertaken only to the extent necessary so asto minimize the dilutive effect of any such placements upon ourexisting stockholders.(c) Certain Trends and Uncertainties -------------------------------- In connection with the "safe harbor" provisions of thePrivate Securities Litigation Reform Act of 1995, we are filingcautionary statements identifying important risk factors thatcould cause our actual results to differ materially from thoseprojected in our forward-looking statements made by or on ourbehalf. Page 27 We wish to caution readers that these factors, among others,could cause our actual results to differ materially from thoseexpressed in any projected, estimated or forward-lookingstatements relating to us. The following factors should beconsidered in conjunction with any discussion of operations orresults by us or our representatives, including any forward-looking discussion, as well as comments contained in pressreleases, presentations to securities analysts or investors, orother communications by us. In making these statements, we are not undertaking toaddress or update each factor in future filings or communicationsregarding our business or results, and are not undertaking toaddress how any of these factors may have caused changes todiscussions or information contained in previous filings orcommunications. In addition, certain of these matters may haveaffected our past results and may affect future results. RISKS INHERENT IN AGRICULTURAL OPERATIONS. We are subjectto risks associated with our agricultural operations. Numerousfactors can affect the price, yield and marketability of thecrops grown on our properties. Crop prices may vary greatly fromyear to year as a result of the relationship between productionand market demand. For example, the production of a particularcrop in excess of demand in any particular year will depressmarket prices, and inflationary factors and other unforeseeableeconomic changes may also, at the same time, increase operatingcosts with respect to such crops. In addition, the agriculturalindustry in the United States is highly competitive, and domesticgrowers and produce marketers are facing increased competitionfrom abroad, particularly from Mexico. There are also a numberof factors outside of our control that could, alone or incombination, materially adversely affect our agriculturaloperations, such as adverse weather conditions, insects, blightor other diseases, labor problems such as boycotts or strikes andshortages of competent laborers. Our operations may also beadversely affected by changes in governmental policies includingfood safety and environmental regulations, social and economicconditions, and industry production levels. PROPOSED COMBINATION OF SUN WORLD WITH KADCO. The proposedcombination of Sun World with KADCO may not occur in the secondquarter of 2002, or at all, if various conditions are not met.These conditions include final negotiation and execution ofdefinitive agreements and a number of other conditions such asobtaining consents of governmental authorities and third partieswith whom we have contracts, including lenders, completing a "duediligence" review of the other's operations, and KADCO obtainingadditional equity financing in order to complete the transaction. RISKS OF WATER DEVELOPMENT PROJECTS. We anticipate that weSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.will continue to incur operating losses from our non-Sun Worldoperations until such time as we are able to receive significantrevenues from the development of our water development projects,including the Cadiz Program. In addition to the risks associatedwith receiving all necessary regulatory approvals and permitswith respect to our water development projects, includinglitigation by environmental or other groups which may delay oreven prevent implementation of the Cadiz Program, we may alsoencounter unforeseen technical difficulties, which could result inconstruction delays, and cost increases or determination thata project is not feasible. We are continuing to negotiate theterms and conditions of water storage and supply programs withvarious California water agencies (including Metropolitan withrespect to preparing the final agreement for the Cadiz Program).However, the outcome of these negotiations cannot be predictedwith any degree of certainty. The circumstances under whichtransfers or storage of water can be made and the profitabilityof any transfers or storage are subject to significantuncertainties, including hydrologic risks of variable watersupplies, risks presented by allocations of water under existingand prospective priorities, and risks of adverse changes to or Page 28interpretations of U.S. federal, state and local laws,regulations and policies. RISKS OF NOT BEING ABLE TO PAY DIVIDENDS. We are restrictedby contract from paying dividends and we do not intend to paydividends in the foreseeable future. As a result, any return oninvestment on our common stock will depend primarily uponappreciation in the price of the common stock. To date, we havenever paid a cash dividend on our common stock. The ability toreceive distributions from Sun World's cash flow and to paydividends in turn to stockholders is restricted by a series ofcovenants in the indenture governing the Sun World notes. Thesecovenants do not allow for the payment of dividends by us or bySun World other than out of cumulative net income. Similarrestrictions are contained in the loan documents governing SunWorld's secured $30 million revolving credit facility, SunWorld's $5 million unsecured term loan and Cadiz' $25 millionrevolving credit facility. As we have a history of operatinglosses, we have been unable to date to pay dividends. Other important risk factors that could cause our actualresults to differ materially from those expressed or implied byor on our behalf are discussed elsewhere within this Form 10-K inthe sections entitled: "Outlook", "Seasonality", "Regulation","Competition" and "Liquidity and Capital Resources".(d) Critical Accounting Policies ---------------------------- As discussed in Note 2 to the Consolidated FinancialStatements of Cadiz, the preparation of financial statements inconformity with accounting principles generally accepted in theUnited States requires management to make estimates andassumptions in certain circumstances that affect amounts reportedin the accompanying consolidated financial statements and relatedfootnotes. In preparing these financial statements, managementhas made its best estimates and judgments of certain amountsincluded in the financial statements based on all relevantinformation available at the time and giving due consideration tomateriality. We do not believe there is a great likelihood thatmaterially different amounts would be reported related to theaccounting policies described below. However, application ofthese policies involves the exercise of judgment and use ofassumptions as to future uncertainties and, as a result, actualresults could differ from these estimates. Management hasconcluded that the following critical accounting policiesdescribed below affect the most significant judgments andestimates used in the preparation of the consolidated financialstatements. REVENUE RECOGNITION. To date we have not had significantSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.revenue earned from our water development programs. As such,virtually all of our revenue has come from Sun World'sagricultural operations. The Securities and ExchangeCommission's Staff Accounting Bulletin (SAB) No. 101, "RevenueRecognition" provides guidance on the application of generallyaccepted accounting principles to selected revenue recognitionissues. Sun World's revenues consist primarily of sales of freshfruits and vegetables to large domestic national and regionalsupermarket chain stores and produce brokers, sales of juice towineries and juice cooperatives, sales of raisins to processors,packing and marketing for third party growers, international licensing, project development and management services, and other miscellaneous receivables. Revenue is recognized when product has been shipped and risk of loss has been transferred to the customer and collection of the resulting receivable is reasonably assured. Packing revenues and marketing commissions from third party growers are recognized when the related services are provided. For licensing, revenue is recognized when the licensee's product has been sold. Project development andmanagement fees are recorded when earned under the terms of therelated agreement. At the time revenue is recognized, we providefor costs associated with any estimated returns or allowanceswhich occur in the produce industry given the perishable natureof Sun World's products. We have Page 29concluded that our revenue recognition policy is appropriate and in accordance with generally accepted accounting principles and SAB No. 101. INVENTORIES AND RELATED ALLOWANCE FOR OBSOLETE AND EXCESSINVENTORY. Inventories are valued at the lower of cost ormarket. Management estimates what market conditions will be forproduce based on the age, size, quality and overall market forfresh product held in inventory at the end of each reportingperiod. When future market conditions indicate that the cost ofthe inventory plus any additional selling expenses exceed theexpected net revenues to be received, we provide a reserve forthe amount of estimated costs in excess of estimated netrevenues. Management also regularly conducts a review of non-product inventory that consists primarily of corrugated boxes,chemicals and seed. Appropriate allowances are made based onmanagement's review for all excess and obsolete inventorycompared to estimated future usage and sales. GOODWILL, INTANGIBLE AND OTHER LONG-LIVED ASSETS. Property,plant and equipment, goodwill, intangible and certain other long-lived assets are amortized over their useful lives. Useful livesare based on management's estimates of the period that the assetswill generate revenue. Long-lived assets are reviewed forimpairment whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable. AtSun World, management regularly reviews crop portfolios in anattempt to identify crops that are underperforming generally atthe conclusion of each growing season. As a result of thesereviews, management determines which crops will be removedimmediately or at the conclusion of the next growing season. Assuch, appropriate writedowns and accruals for estimated removalcosts are made and where appropriate, remaining useful lives areshortened to correspond to the estimated period that the assetswill are expected to generate future revenues. DEFERRED TAX ASSETS AND VALUATION ALLOWANCES. To date, wehave had a history of net operating losses as we have notgenerated significant revenue from our water development programsand Sun World has experienced losses from its agriculturaloperations. As such, we have generated significant deferred taxassets, including large net operating loss carry forwards forfederal and state income taxes for which we have a full valuationallowance. Management is currently working on initiatives atCadiz and Sun World that are designed to generate future taxableincome, although there can be no guarantee that this will occur.As taxable income is generated, some portion or all of thevaluation allowance will be reversed and an increase in netSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.income would consequently be reported in future years.(e) New Accounting Pronouncements ----------------------------- See Footnote 2, Summary of Significant Accounting Policies,to Cadiz Inc. Financial Statements.ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk from changes in interest rateson long-term debt obligations that impact the fair value of theseobligations. Our policy is to manage interest rates through theuse of a combination of fixed and variable rate debt. Ourinterest rate risk management objective is to limit the impact ofinterest rate changes on earnings and cash flows and to lower ouroverall borrowing costs. Other instruments, such as interestrate swaps, options, floors, caps or collars may also be useddepending upon market conditions. No such instruments were usedin 2001. Page 30 The table below presents the principal amounts, weighted-average interests rates, and fair values by year of scheduledmaturities to evaluate the expected cash flows and sensitivity tointerest rate changes (in thousands of dollars). Circumstancescould arise which may cause interest rates and the timing andamount of actual cash flows to differ materially from theschedule below: Long-Term Debt ------------------------------------------------- Variable Average Expected Fixed Rate Average Rate Interest Maturity Maturities Interest Rate Maturities Rate------------ ---------- ------------- ---------- ----- 2002 $ 476 7.7% $ 5,286 4.9% 2003 394 7.8% 25,951 4.0% 2004 115,419 11.2% - - 2005 23 8.8% - - 2006 5 10.2% - - Total $ 116,317 11.2% $ 31,237 4.1% ========== ====== ========= ===== Fair Value at 12/31/01 $ 107,417 $ 31,237 ========== =========ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is submitted inresponse to Part IV below. See the Index to ConsolidatedFinancial Statements.ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information called for by this item is incorporatedherein by reference to the definitive proxy statement involvingthe election of directors which we intend to file with the SECpursuant to Regulation 14A under the Securities and Exchange ActSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of 1934 not later than 120 days after December 31, 2001.ITEM 11. EXECUTIVE COMPENSATION The information called for by this item is incorporatedherein by reference to the definitive proxy statement involvingthe election of directors which we intend to file with the SECpursuant to Regulation 14A under the Securities and Exchange Actof 1934 not later than 120 days after December 31, 2001. Page 31ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT The information called for by this item is incorporatedherein by reference to the definitive proxy statement involvingthe election of directors which we intend to file with the SECpursuant to Regulation 14A under the Securities and Exchange Actof 1934 not later than 120 days after December 31, 2001.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information called for by this item is incorporatedherein by reference to the definitive proxy statement involvingthe election of directors which we intend to file with theCommission pursuant to Regulation 14A under the Securities andExchange Act of 1934 not later than 120 days after December 31,2001. PART IVITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements. See Index to Consolidated Financial Statements. 2. Financial Statement Schedules. See Index to Consolidated Financial Statements. 3. Exhibits. The following exhibits are filed or incorporated byreference as part of this Form 10-K. 3.1 Cadiz Certificate of Incorporation, as amended(1) 3.2 Amendment to Cadiz Certificate of Incorporation dated November 12, 1996(2) 3.3 Amendment to Cadiz Certificate of Incorporation dated September 1, 1998(3) 3.4 Cadiz Bylaws, as amended(4) 3.5 Cadiz Certificate of Designations of Series A Junior Participating Preferred Stock(5) 3.6 Cadiz Certificate of Designations of Series D Convertible Preferred Stock dated December 28, 2000(6) 3.7 Cadiz Certificate of Correction Filed to Correct the Certificate of Designations of Series D Preferred Stock of Cadiz Inc. dated December 28, 2000(6) 3.8 Cadiz Certificate of Designations of Series E-1 Convertible Preferred Stock dated October 22, 2001(7) 3.9 Cadiz Certificate of Designations of Series E-2 Convertible Preferred Stock dated November 28, 2001(8) Page 32Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 4.1 Specimen Form of Stock Certificate for Cadiz registered stock(3) 4.2 Indenture, dated as of April 16, 1997 among Sun World as issuer, Sun World and certain subsidiaries of Sun World as guarantors, and IBJ Whitehall Bank & Trust Company as trustee, for the benefit of holders of 11-1/4%First Mortgage Notes due 2004 (including as Exhibit A to the Indenture, the form of the Global Note and the form of each Guarantee)(9) 4.3 Amendment to Indenture dated as of October 9, 1997(10) 4.4 Amendment to Indenture dated as of January 23, 1998(11) 10.1 Cadiz' 1996 Stock Option Plan(4) 10.2 Amendment to Cadiz' 1996 Stock Option Plan 10.3 Cadiz' Amended and Restated 1998 Non-Qualified Stock Option Plan 10.4 Cadiz 2000 Stock Award Plan(12) 10.5 Employment Agreement between Cadiz and Keith Brackpool dated February 1, 1998(11) 10.6 Employment Agreement dated September 13, 1996 between Sun World, Cadiz and Timothy J. Shaheen(13) 10.7 Employment Agreement dated September 13, 1996 between Sun World, Cadiz and Stanley E. Speer(13) 10.8 Form of Sun World Executive Officer Employment Agreement(14) 10.9 Fifth Amended and Restated Credit Agreement, dated as of March 7, 2002, by and between Cadiz and ING Baring (U.S.) Capital LLC 10.10 Revolving Credit Note, dated as of November 25, 1997, by and between Cadiz and ING Baring (U.S.) Capital Corporation (11) 10.11 The Cadiz Groundwater Storage and Dry-Year Supply Program Definitive Economic Terms and Responsibilities between Metropolitan Water District of Southern California and Cadiz dated March 6, 2001 21.1 Subsidiaries of the Registrant 23.1 Consent of Independent Accountants ---------------------- (1) Previously filed as an Exhibit to our Registration Statement of Form S-1 (Registration No. 33-75642) declared effective May 16, 1994 filed on February 23, 1994 (2) Previously filed as an Exhibit to our Report on Form 10-Q for the quarter ended September 30, 1996 filed on November 13, 1996 Page 33 (3) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 filed on November 13, 1998 (4) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 filed on August 13, 1999 (5) Previously filed as an Exhibit to our Report on Form 8-K dated May 10, 1999 filed on May 18, 1999 Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (6) Previously filed as an Exhibit to our Report on Form 8-K dated December 29, 2000 filed on January 3, 2001 (7) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 filed on November 14, 2001 (8) Previously filed as an Exhibit to our Registration Statement on Form S-3 (Registration Statement No. 333-75006 filed on December 13, 2001 (9) Previously filed as an Exhibit to Amendment No. 1 to our Form S-1 Registration Statement No. 333- 19109 filed on April 29, 1997 (10) Previously filed as an Exhibit to Amendment No. 2 to Sun World's Form S-4 Registration Statement No. 333-31103 filed on October 10, 1997 (11) Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 1997 filed on March 26, 1998 (12) Previously filed as Appendix A to our Proxy Statement dated April 5, 2000, filed on March 29, 2000 (13) Previously filed as an Exhibit to our Transition Report on Form 10-K for the nine months ended December 31, 1996 filed on April 14, 1997 (14) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 filed on May 14, 1997 (b) Reports on Form 8-K 1. Report on Form 8-K filed October 26, 2001 describing our issuance of an aggregate of $7,500,000 in newly authorized Series E-1 and E-2 Convertible Preferred Stock. 2. Report on Form 8-K filed January 18, 2002 reporting that Cadiz had reached an agreement in principle with Kingdom Agricultural Development Company (KADCO), to combine the businesses of Sun World International, Inc. and KADCO. 3. Report on Form 8-K filed March 13, 2002 reporting that Cadiz and ING Baring (U.S.) Capital LLC had amended the terms of their revolving credit and senior term facilities to extend the maturity dates to January 31, 2003 and to increase the revolving credit facility from $15 million to $25 million. Page 34 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned,thereto duly authorized.CADIZ INC.By: /s/ Keith Brackpool By: /s/ Stanley E. Speer ------------------------------- ----------------------- Keith Brackpool, Stanley E. Speer, Chairman and Chief Executive Officer Chief Financial Officer Date: March 27, 2002 Date: March 27, 2002 Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Pursuant to the requirements of the Securities Exchange Act of1934, this report has been signed by the following persons in thecapacities and on the dates indicated. Name and Position Date------------------------------- -------------------/s/ Keith Brackpool March 27, 2002--------------------------------Keith Brackpool, Chairman andChief Executive Officer(Principal Executive Officer)/s/ Anthony L. Coelho March 27, 2002----------------------------------Anthony L. Coelho, Director/s/ Murray H. Hutchison March 27, 2002-----------------------------------Murray H. Hutchison, Director/s/ Dwight W. Makins March 27, 2002------------------------------------Dwight Makins, Director/s/ Timothy J. Shaheen March 27, 2002-------------------------------------Timothy J. Shaheen, Director/s/ Stanley E. Speer March 27, 2002-----------------------------------------Stanley E. Speer, Chief Financial Officer(Principal Financial andAccounting Officer) Page 35 INDEX TO FINANCIAL STATEMENTS PageCADIZ INC. FINANCIAL STATEMENTS-------------------------------Report of Independent Accountants. . . . . . . . . . . . .40Consolidated Statement of Operations for the three years ended December 31, 2001. . . . . . . . . . .41Consolidated Balance Sheet as of December 31, 2001 and 2000. . . . . . . . . . . . . . . .42Consolidated Statement of Cash Flows for the three years ended December 31, 2001. . . . . . . . . . .43Consolidated Statement of Stockholders' Equity for the three years ended December 31, 2001. . . . . . . . .44Notes to the Consolidated Financial Statements. . . . . . 45CADIZ INC. FINANCIAL STATEMENT SCHEDULES----------------------------------------Schedule I - Condensed Financial Information of Registrant for the three years ended December 31, 2001..69Schedule II - Valuation and Qualifying Accounts for the three years ended December 31, 2001. . . . . . . . . . .72Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SUN WORLD INTERNATIONAL, INC. FINANCIAL STATEMENTS--------------------------------------------------Report of Independent Accountants. . . . . . . . . . . . .73Consolidated Statement of Operations for the three years ended December 31, 2001. . . . . . .74Consolidated Balance Sheet as of December 31, 2001 and 2000. . . . . . . . . . . . . . . 75Consolidated Statement of Cash Flows for the three years ended December 31, 2001. . . . . . . . . . 76Consolidated Statement of Stockholder's Equity for the three years ended December 31, 2001. . . . 77Notes to the Consolidated Financial Statements. . . . . . 78(Schedules other than those listed above have been omitted sincethey are either not required, inapplicable, or the requiredinformation is included on the financial statements or notesthereto.) Page 36 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Cadiz Inc. In our opinion, the accompanying consolidated balance sheetand the related consolidated statements of operations, cash flowsand stockholders' equity present fairly, in all materialrespects, the financial position of Cadiz Inc. and itssubsidiaries at December 31, 2001 and 2000, and the results oftheir operations and their cash flows for each of the three yearsin the period ended December 31, 2001 in conformity withaccounting principles generally accepted in the United States ofAmerica. In addition, in our opinion, the financial statementschedules listed in the accompanying index present fairly, in allmaterial respects, the information set forth therein when read inconjunction with the related consolidated financial statements.These financial statements and financial statement schedules arethe responsibility of the Company's management; ourresponsibility is to express an opinion on these financialstatements and financial statement schedules based on our audits.We conducted our audits of these statements in accordance withauditing standards generally accepted in the United States ofAmerica, which require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, andevaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for ouropinion./s/ PricewaterhouseCoopers LLP-------------------------------PricewaterhouseCoopers LLPLos Angeles, CaliforniaFebruary 21, 2002, except as toNote 9, which is as of March 8, 2002 Page 37 CADIZ INC. Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, ---------------------------- 2001 2000 1999 ---- ---- ----(In thousands, except per share data)Revenues $ 92,402 $ 107,745 $ 115,229Special litigation recovery 7,929 - - --------- --------- -------- Total revenues and special litigation recovery 100,331 107,745 115,229 --------- --------- --------Costs and expenses: Cost of sales 79,108 87,925 83,821 General and administrative 12,913 12,576 12,363 Non-recurring compensation expense 5,537 - - Special litigation - 424 937 Removal of underperforming crops 736 1,549 - Depreciation and amortization 8,151 8,381 8,891 --------- --------- -------- Total costs and expenses 106,445 110,855 106,012 --------- --------- --------Operating profit (loss) (6,114) (3,110) 9,217Interest expense, net 19,551 19,188 17,811 --------- --------- --------Net loss before income taxes (25,665) (22,298) (8,594)Income tax expense 57 160 - --------- --------- --------Net loss (25,722) (22,458) (8,594)Less: Preferred stock dividends 591 - - Imputed dividend on preferred stock 441 - - --------- --------- --------Net loss applicable to common stock $ (26,754) $ (22,458) $ (8,594) ========== ========= =========Basic and diluted net loss per share $ (.75) $ (.64) $ (.25) ========== ========= =========Weighted-average shares outstanding 35,854 35,344 34,678 ========== ========= =========See accompanying notes to the consolidated financial statements. Page 38 CADIZ INC. CONSOLIDATED BALANCE SHEET December 31,($ in thousands) 2001 2000 ---- ----ASSETS Current assets:Cash and cash equivalents $ 1,458 $ 3,291Accounts receivable, net 6,327 7,884Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Inventories 13,027 15,203Prepaid expenses and other 788 631 ------- ------- Total current assets 21,600 27,009Property, plant, equipment and water programs, net 165,297 164,824Other assets 11,378 11,784 ------- ------- $ 198,275 $ 203,617 ======== ========LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 11,758 $ 7,900 Accrued liabilities 5,680 5,815 Bank overdraft 410 - Long-term debt, current portion 4,960 859 ------- ------- Total current liabilities 22,808 14,574Long-term debt 141,429 145,610Deferred income taxes 5,447 5,447Other liabilities 930 313ContingenciesSeries D redeemable convertible preferred stock - $0.01 par value: 5,000 shares authorized; shares issued and outstanding - 5,000 at December 31, 2001 and December 31, 2000 4,243 3,950Series E-1 and E-2 redeemable convertible preferred stock - $0.01 par value: 7,500 shares authorized; shares issued and outstanding - 7,500 at December 31, 2001 and none at December 31, 2000 5,715 -Stockholders' equity: Common stock - $0.01 par value; 70,000,000 shares authorized; shares issued and outstanding 36,070,834 at December 31, 2001 and 35,674,674 at December 31, 2000 361 357Additional paid-in capital 152,404 142,706Accumulated deficit (135,062) (109,340) ------- ------- Total stockholders' equity 17,703 33,723 ------- ------- $ 198,275 $ 203,617 ========= ========See accompanying notes to the consolidated financial statements. Page 39 CADIZ INC. CONSOLIDATED STATEMENT OF CASH FLOWSSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Year Ended December 31, -------------------------($ in thousands) 2001 2000 1999 ---- ---- ----Cash flows from operating activities: Net loss $ (25,722) $ (22,458) $ (8,594) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 11,664 10,926 11,060 Issuance of stock for services - - 28 Gain on disposal of assets (421) (96) (104) Removal of underperforming crops 736 1,549 - Land received in litigation recovery (2,000) - - Shares of KADCO stock earned for services (1,250) (1,250) (313) Share of partnership operations - (71) (328) Compensation charge for deferred stock units 566 237 - Non-recurring compensation expense 5,537 - - Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 1,557 552 (2,141) Decrease (increase) in inventories 1,830 2,740 (3,318) (Increase) decrease in prepaid expenses and other (157) 286 75 Increase (decrease) in accounts payable 3,858 (133) (720) (Decrease) increase in accrued liabilities (551) (1,039) 1,668 Increase (decrease) increase in other liabilities 51 (297) (298) ------- ------- ------ Net cash used for operating activities (4,302) (9,054) (2,985) ------- ------- ------Cash flows from investing activities: Additions to property, plant and equipment (1,583) (1,252) (4,835) Additions to water programs (1,359) (1,595) (3,177) Additions to developing crops (3,124) (3,844) (3,531) Proceeds from disposal of property, plant and equipment 452 2,956 233 Partnership distributions - 1,568 - Decrease (increase) in other assets 154 (525) (998) ------- ------- ------ Net cash used for investing activities (5,460) (2,692) (12,308) ------- ------- ------Cash flows from financing activities: Net proceeds from issuance of stock 1,583 1,032 6,803 Proceeds from issuance of preferred stock 7,500 5,000 - Proceeds from issuance of long-term debt - 5,231 - Principal payments on long-term debt (1,564) (686) (685) Bank overdraft 410 - - ------- ------- ------ Net cash provided by financing activities 7,929 10,577 6,118 ------- ------- ------Net decrease in cash and Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. cash equivalents (1,833) (1,169) (9,175)Cash and cash equivalents, beginning of period 3,291 4,460 13,635 ------- ------- -------Cash and cash equivalents, end of period $ 1,458 $ 3,291 $ 4,460 ========= ======== ======== See accompanying notes to the consolidated financial statements. Page 40 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 2001, 2000 and 1999($ in thousands) Total Additional Stock- Common Stock Paid-in Accumulated holders' Shares Amount Capital Deficit Equity ------ ----- -------- ------- ------Balance as of December 31, 1998 33,592,261 $ 336 $ 127,662 $ (78,288) $ 49,710Exercise of stock options 1,513,150 15 6,788 - 6,803Issuance of warrants to a lender - - 1,335 - 1,335Stock issued for services 61,250 1 415 - 416Net loss - - - (8,594) (8,594) --------- ----- --------- -------- --------Balance as of December 31, 1999 35,166,661 352 136,200 (86,882) 49,670Exercise of stock options and warrants 246,149 2 1,030 - 1,032Issuance of warrants to lenders - - 2,126 - 2,126Interest paid with stock 111,864 1 831 - 832Stock issued for services 150,000 2 1,469 - 1,471Issuance of warrants and beneficial conversion feature for Series D convertible preferred stock - - 1,050 - 1,050Net loss - - - (22,458) (22,458) --------- ----- ------- -------- --------Balance as of December 31, 2000 35,674,674 357 142,706 (109,340) 33,723Exercise of stock options and stock awards 331,176 3 1,580 - 1,583Issuance of warrants to lenders - - 1,435 - 1,435Payment of preferred stock dividends with common stock 24,984 - 245 - 245Preferred stock dividend - - (591) - (591)Non-recurring compensation - - 5,537 - 5,537Stock issued in connectionSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. with Series E-1 and E-2 convertible preferred stock 40,000 1 319 - 320Issuance of warrants and beneficial conversion feature for Series E-1 and E-2 convertible preferred stock - - 1,614 - 1,614Imputed dividend from warrants and deferred beneficial conversion feature - - (441) - (441)Net loss - - - (25,722) (25,722) --------- ----- --------- -------- --------Balance as of December 31, 2001 36,070,834 $ 361 $ 152,404 $ (135,062) $ 17,703 ========== ====== ========= ========== ======== See accompanying notes to the consolidated financial statements Page 41 CADIZ INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF BUSINESS-------------------------------- The Company currently has agricultural operations through itswholly-owned subsidiary, Sun World International, Inc. and itssubsidiaries, collectively referred to as "Sun World," and isdeveloping the water resource segment of its business, which is notyet significant to the operations or the balance sheet of theCompany. The primary business of the Company is to acquire anddevelop water and agricultural resources. The Company has created acomplementary portfolio of assets encompassing undeveloped land withhigh-quality groundwater resources and/or storage potential,agricultural properties located throughout central and southernCalifornia with valuable water rights, and other contractual waterrights. Management believes that, with both the increasing scarcityof water supplies in California and an increasing population, theCompany's access to water will provide it with a competitiveadvantage both as a major agricultural concern and as a supplier ofwater. Sun World is a large vertically integrated agricultural companythat owns more than 19,000 acres of land, primarily located in twomajor growing areas of California: the San Joaquin Valley and theCoachella Valley. Fresh produce, including table grapes, stonefruit,citrus, peppers and watermelons, is marketed and shipped to foodwholesalers and retailers throughout the United States and to morethan 30 foreign countries. Sun World owns three cold storage and/orpacking facilities in California, of which two are operated and oneis leased to a third party. Sun World provides the Company with additional water rightsthroughout central and southern California. The Company'slandholdings, which total approximately 64,400 acres, are locatedadjacent to the Colorado River and the major aqueduct systems ofcentral and southern California. The Company expects to utilize itsresources to participate in a broad variety of water storage andsupply, transfer, exchange, and conservation programs with publicagencies and other parties. In 2001, the Company and the Metropolitan Water District ofSouthern California ("Metropolitan") approved definitive economicterms and responsibilities for a water storage and supply program atits Cadiz, California property. The Cadiz Groundwater Storage andDry-Year Supply Program (the "Cadiz Program") will enhance southernSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.California water supply reliability in two ways, providing a new dry-year water supply and much-needed storage. During wet years orperiods of excess supply, Metropolitan will store surplus ColoradoRiver water in the aquifer system underlying the Company's Cadizproperty. During dry years, the previously imported water, togetherwith additional existing groundwater, will be extracted anddelivered, via a 35-mile conveyance pipeline, to Metropolitan'sservice area. Implementation of the Cadiz Program is subject tocompletion and approval of a final agreement and an environmentalreview process which currently is in its final stages and is expectedto be completed during 2002. In January 2002, the Company announced an agreement in principlewith KADCO to combine the businesses of Sun World and KADCO.Following the proposed combination, KADCO's shareholders will have a49.75% interest in the combined business, and Cadiz will retain anownership interest of 50.25%. Prior to the proposed combination,KADCO expects to have cash resources in excess of $80 million whichwill be used to recapitalize Sun World and Page 42provide for future business expansion. Although the development and management activities of theCompany are currently focused on agricultural operations (primarilythrough its wholly-owned subsidiary, Sun World) and water resourcedevelopment, the Company will continue to develop and manage itsland, water and agricultural resources for their highest and bestuses.NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES---------------------------------------------------PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts ofthe Company and Sun World. All material intercompany balances andactivity have been eliminated from the consolidated financialstatements.RECLASSIFICATIONS These financial statements reflect certain reclassificationsmade to the prior period balances to conform to the current yearpresentation.USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity withgenerally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. In preparingthese financial statements, management has made estimates with regardto revenue recognition and the valuation of inventory, goodwill andother long-lived assets, and deferred tax assets. Actual resultscould differ from those estimates.REVENUE RECOGNITION The Company recognizes crop sale revenue upon shipment andtransfer of title to customers. Packing revenues and marketingcommissions from third party growers are recognized when the relatedservices are provided. Proprietary product development revenues arerecognized based upon product sales by licensees. Projectdevelopment and management fees are recorded when earned under theterms of the related agreement. Revenues attributable to one national retailer totaled $10.5million in 2001, $12.8 million in 2000 and $14.4 million in 1999.Export sales accounted for approximately 8.4%, 9.9% and 10.3% of theCompany's revenues for the years ended December 31, 2001, 2000 and1999, respectively.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Page 43RESEARCH AND DEVELOPMENT Sun World incurs costs to research and develop new varieties ofproprietary products. Research and development costs are expensed asincurred. Such costs were approximately $2,023,000 for the yearended December 31, 2001, $1,636,000 for the year ended December 31,2000, and $1,450,000 for the year ended December 31, 1999.NET LOSS PER COMMON SHARE Basic Earnings Per Share (EPS) is computed by dividing the netloss, after deduction for preferred dividends either accrued orimputed, if any, by the weighted-average common shares outstanding.Options, deferred stock units, warrants and preferred stockconvertible into or exercisable for certain shares of the Company'scommon stock, were not considered in the computation of diluted EPSbecause their inclusion would have been antidilutive. Had theseinstruments been included, the fully diluted weighted average sharesoutstanding would have increased by approximately 2.3 million shares,1.5 million shares, and 1.2 million shares for the years endedDecember 31, 2001, 2000 and 1999, respectively.CASH AND CASH EQUIVALENTS The Company considers all short-term deposits with an originalmaturity of three months or less to be cash equivalents. The Companyinvests its excess cash in deposits with major international banksand short-term commercial paper and, therefore, bears minimal risk.Such investments are stated at cost, which approximates fair value,and are considered cash equivalents for purposes of reporting cashflows. At December 31, 2001, the Company had a bank overdrafttotaling $410,000 which is disclosed separately within currentliabilities.INVENTORIES Growing crops, pepper seed, and materials and supplies arestated at the lower of cost or market, on a first-in, first-out(FIFO) basis. Growing crop inventory includes direct costs and anallocation of indirect costs.INVESTMENT IN PARTNERSHIP Sun World, through a wholly-owned subsidiary, owned a 50%interest in ASC/SWB Partnership, formerly named American SunMelon(the "Partnership"). In October 1998, the Partnership soldsubstantially all of its assets. In November 2000, Sun Worldreceived a final distribution of $1.6 million in connection with theliquidation of the Partnership. Sun World had accounted for itsinvestment in the Partnership using the equity method.PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS Property, plant, equipment and water programs are stated atcost. Page 44 The Company capitalizes direct and certain indirect costs ofplanting and developing orchards and vineyards during the developmentperiod, which varies by crop and generally ranges from three to seven years. Depreciation commences in the year commercial production is achieved. Permanent land development costs, such as acquisition costs,clearing, initial leveling and other costs required to bring the landinto a suitable condition for general agricultural use, arecapitalized and not depreciated since these costs have an indefiniteuseful life. Depreciation is provided using the straight-line method over theestimated useful lives of the assets, generally ten to forty-fiveSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.years for land improvements and buildings, three to twenty-five yearsfor machinery and equipment, and five to thirty years for permanentcrops. Water rights and water storage and supply programs are stated atcost. All costs directly attributable to the development of suchprograms are being capitalized by the Company. These costs, whichare expected to be recovered through future revenues, consist ofdirect labor, drilling costs, consulting fees for variousengineering, hydrological, environmental and feasibility studies, andother professional and legal fees.IMPAIRMENT OF LONG-LIVED ASSETS The Company annually evaluates its long-lived assets, includingintangibles, for potential impairment. When circumstances indicatethat the carrying amount of the asset may not be recoverable, asdemonstrated by estimated future cash flows, an impairment loss wouldbe recorded based on estimated fair value. During the year ended December 31, 2001 and 2000, the Companyincurred costs to remove certain underperforming crops, primarilystonefruit, citrus, and wine grapes. The Company recorded a charge of$736,000 and $1,549,000 in 2001 and 2000, respectively, in connectionwith the removal of these crops which is shown under the heading"Removal of underperforming crops" on the Consolidated Statement ofOperations.OTHER ASSETS As a result of a merger in May 1988 between two companies, whicheventually became known as Cadiz Inc., goodwill in the amount of$7,006,000 was recorded. This amount is being amortized on astraight-line basis over thirty years. Accumulated amortization was$3,193,000 and $2,960,000 at December 31, 2001 and December 31, 2000,respectively. Capitalized loan fees represent costs incurred to obtain debtfinancing. Such costs are amortized over the life of the relatedloan. At December 31, 2001, the majority of capitalized loan feesrelate to the issuance of the First Mortgage Notes described in Note9. Trademark development costs represent legal costs incurred toobtain and defend patents and trademarks related to the Company'sproprietary products throughout the world. Such costs arecapitalized and amortized over their estimated useful life, whichrange from 10 to 20 years. Page 45INCOME TAXES Income taxes are provided for using an asset and liabilityapproach which requires the recognition of deferred tax assets andliabilities for the expected future tax consequences of temporarydifferences between the financial statement and tax bases of assetsand liabilities at the applicable enacted tax rates. A valuationallowance is provided when it is uncertain that some portion or allof the deferred tax assets will be realized.SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest during the years ended December 31, 2001,2000 and 1999 was $16,020,000, $16,328,000, and $15,988,000,respectively.NEW ACCOUNTING PRONOUNCEMENTSSFAS 141 and 142---------------- In June 2001, the Financial Accounting Standards Board ("FASB")issued Statement of Financial Accounting Standards No. 141 ("SFAS141"), "Accounting for Business Combinations" and No. 142 ("SFASSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.142"), "Goodwill and Other Intangibles", effective for fiscal yearsbeginning after December 15, 2001. Under the new rules, goodwill andintangible assets deemed to have indefinite lives will no longer beamortized but will be subject to annual impairment tests inaccordance with the Statements. Other intangible assets willcontinue to be amortized over their estimated useful lives. The Company will apply the new rules on accounting for goodwilland other intangible assets beginning January 1, 2002. Applicationof the non-amortization provisions of SFAS 142 is expected to resultin a decrease in amortization expense of approximately $233,000 dueto goodwill no longer being amortized. The Company's current policyfor measuring goodwill impairment is based upon an analysis of futureundiscounted cash flows, which does not result in an indicatedimpairment as of December 31, 2001. Under SFAS 142, goodwill must beassigned to reporting units and measured for impairment based uponfair value of the reporting units. The goodwill carried on theCompany's books at December 31, 2001 relates to the Cadiz waterresource development segment of the business and the Cadiz Program.Management does not anticipate that the adoption of these standardswill have a material adverse effect on the Company's financialposition or results of operations.SFAS 144-------- In August 2001, the FASB issued Statement of FinancialAccounting Standards No. 144 ("SFAS 144"), "Accounting for theImpairment or Disposal of Long-Lived Assets" which supersedes SFAS121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS 144 retains the fundamentalprovisions of SFAS 121 for (a) recognition and measurement of theimpairment of long-lived assets to be held and used and (b)measurement of long-lived assets to be disposed of by sale. Theadoption of SFAS 144 is not anticipated to have a material adverseeffect on the Company's financial position or results of operations. Page 46NOTE 3 - ACCOUNTS RECEIVABLE---------------------------- Accounts receivable consist of the following (dollars inthousands): December 31, 2001 2000 ---- ---- Trade receivables $4,294 $ 4,190 Due from unaffiliated growers 448 541 Other 2,091 3,675 ------ ------- 6,833 8,406 Less allowance for doubtful accounts (506) (522) ------ ------- $6,327 $ 7,884 ======= ======= Substantially all trade receivables are from large domesticnational and regional supermarket chain stores and produce brokersand are unsecured. Amounts due from unaffiliated growers representreceivables for harvest advances and for services (harvest, haul andpack) provided on behalf of growers under agreement with Sun Worldand are recovered from proceeds of product sales. Other receivablesprimarily include wine grape and raisin sales, proceeds due fromthird party marketers, receivables for international licensing, andother miscellaneous receivables.NOTE 4 - INVENTORIES--------------------Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Inventories consist of the following (dollars in thousands): December 31, 2001 2000 ---- ---- Growing crops $10,174 $11,538 Materials and supplies 2,621 2,880 Harvested product 218 528 Pepper seed 14 257 ------- ------- $13,027 $15,203 ======= ======= Page 47NOTE 5 - PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS------------------------------------------------------ Property, plant, equipment and water programs consist of thefollowing (dollars in thousands): December 31, 2001 2000 ---- ---- Land $69,068 $67,034 Permanent crops 66,300 67,278 Developing crops 12,997 9,779 Water programs 16,181 14,433 Buildings 22,544 22,113 Machinery and equipment 20,588 20,042 ------- ------- 207,678 200,679 Less accumulated depreciation (42,381) (35,855) ------- ------- $165,297 $164,824 ======== ======== Depreciation expense during the years ended December 31, 2001,2000 and 1999 was $7,699,000, $7,971,000, and $8,460,000,respectively.NOTE 6 - OTHER ASSETS--------------------- Other assets consist of the following (dollars in thousands): December 31, 2001 2000 ---- ---- Goodwill, net $3,813 $ 4,046 Deferred loan costs, net 2,400 2,662 Long-term receivables 342 1,799 Capitalized trademark development, net 2,000 1,713 Receivable from KADCO to be paid in common shares 2,813 1,563 Other 10 1 ------- ------- $11,378 $11,784 ======= =======NOTE 7 - ACCRUED LIABILITIES---------------------------- Accrued liabilities consist of the following (dollars inthousands): December 31, 2001 2000Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ---- ---- Interest $2,736 $ 2,835 Payroll and benefits 1,907 1,754 Preferred stock dividends 345 - Other 692 1,226 ------ ------- $5,680 $ 5,815 ====== ======= Page 48NOTE 8 - REVOLVING CREDIT FACILITY---------------------------------- In November 2001, Sun World renewed its Revolving CreditFacility through the 2002 growing season with a maturity date ofNovember 2002. Amounts eligible to be borrowed under the RevolvingCredit Facility are based upon a borrowing base of eligible accountsreceivable and inventory balances. Maximum availability under theRevolving Credit Facility varies throughout the year with a maximumof $30 million available during the peak borrowing periods of Aprilto July. The Revolving Credit Facility is secured by accountsreceivable, inventory, and the proceeds thereof, requires Sun Worldto meet certain financial covenants, and is guaranteed by theCompany. Amounts borrowed under the facility will accrue interest ateither prime plus 1.0% or LIBOR plus 2.50% at the Company's election.No amounts were outstanding under the Revolving Credit Facility atDecember 31, 2001 and 2000. Page 49NOTE 9 - LONG-TERM DEBT------------------------ Management estimates that the fair value of the Company's long-term debt approximates the carrying value for all debt instrumentsexcept for the Series B First Mortgage Notes ("First MortgageNotes"). The fair value of the First Mortgage Notes is estimated tobe approximately $106.1 million based on quoted market prices as ofDecember 31, 2001. At December 31, 2001 and December 31, 2000, thecarrying amount of the Company's outstanding debt is summarized asfollows (dollars in thousands): December 31, 2001 2000 ---- ---- Cadiz obligations: Senior term bank loan, interest payable quarterly, variable interest rate based upon LIBOR plus 2% (4.6% at December 31, 2001 and 8.5% at December 31, 2000), due January 31, 2003 $ 10,095 $ 10,345 $15 million revolving line of credit, interest payable quarterly, variable interest rate based upon LIBOR plus 2% (4.6% at December 31, 2001 and 8.5% at December 31, 2000), due January 31, 2003 15,000 15,000 Debt discount (363) (1,433) ------- ------- 24,732 23,912 ------ ------- Sun World obligations:Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Series B First Mortgage Notes, interest payable semi-annually with principal due in April 2004, interest at 11.25% 115,000 115,000 Senior unsecured term loan, interest payable quarterly, due December 31, 2002, interest at LIBOR plus 3% (5.60% at December 31, 2001 and 9.40% at December 31, 2000) 5,000 5,000 Note payable to bank, quarterly principal installments of $72 plus interest payable monthly, due December 31, 2003, interest at prime (4.75% at December 31, 2001 and 9.50% at December 31, 2000) 1,142 1,500 Note payable to insurance company, quarterly installments of $120 (including interest), due January 1, 2005, interest at 7.75% 945 1,639 Note payable to finance company, monthly installments of $18 (including interest), due July 1, 2002, interest at 7.50% 103 305 Other 269 255 Debt discount (802) (1,142) ------ ------- 121,657 122,557 ------- ------- 146,389 146,469 Less current portion (4,960) (859) -------- ------- $141,429 $145,610 ======== ======== Page 50 Annual maturities of long-term debt outstanding (in thousands),excluding $1,165 representing the unamortized portion of warrants, onDecember 31, 2001 are as follows: 2002 - $5,762; 2003 - $26,345; 2004- $115,419; 2005 - $23; and 2006 - $5.CADIZ OBLIGATIONS The senior term bank loan is secured by substantially all of theCompany's non-Sun World related property. During 2001, pursuant tothe loan agreement, the Company repriced certain warrants previouslyissued. In February 2002, the Company completed an amendment to theloan that extended the maturity date of the obligation to January 31,2003. The interest rate is LIBOR plus 300 basis points, payablequarterly. The $15 million revolving credit facility was fully drawn atDecember 31, 2001 and 2000, and is secured by a second lien onsubstantially all of the non-Sun World assets of the Company. During2001, pursuant to the loan agreement, the Company repriced certainwarrants previously issued. In February 2002, the Company completedan amendment to the facility that extended the maturity date of theobligation to January 31, 2003. The interest rate can either beLIBOR plus 300 basis points if paid in cash or LIBOR plus 700 basispoints if paid in common stock. In March 2002, the revolving creditSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.facility was increased to $25 million, with $10 million of the $25million revolver convertible into 1,250,000 of the Company's commonstock any time prior to January 2003 at the election of the lender.In connection with obtaining the extension of the term loan andrevolver and the increase in the revolver, the Company repricedcertain warrants previously issued and issued certain additionalwarrants to purchase shares of the Company's common stock. Theestimated fair value of the warrants issued and repriced wascalculated using the Black Scholes option pricing model and wasrecorded as a debt discount and is being amortized over the remainingterm of the loan.SUN WORLD OBLIGATIONS In April 1997, Sun World issued $115 million of Series A FirstMortgage Notes through a private placement. The notes havesubsequently been exchanged for Series B First Mortgage Notes, whichare registered under the Securities Act of 1933 and are publiclytraded. The First Mortgage Notes are secured by a first lien(subject to certain permitted liens) on substantially all of theassets of Sun World and its subsidiaries other than growing crops,crop inventories and accounts receivable and proceeds thereof, whichsecure the Revolving Credit Facility. The First Mortgage Notesmature April 15, 2004, but became redeemable at the option of SunWorld, in whole or in part, at any time on or after April 15, 2001.The First Mortgage Notes include covenants that do not allow for thepayment of dividends by the Company or by Sun World other than out ofcumulative net income. The First Mortgage Notes are also secured by the guarantees ofCoachella Growers, Inc., Sun Desert, Inc., Sun World/Rayo, and SunWorld International de Mexico S.A. de C.V. (collectively, the "SunWorld Subsidiary Guarantors") and by the Company. The Company alsopledged all of the stock of Sun World as collateral for itsguarantee. Sun World and the Sun World Subsidiary Guarantors are alldirect and indirect wholly-owned subsidiaries of the Company. Theguarantees by the Sun World Subsidiary Guarantors are full,unconditional, and joint and several. Sun World and the Sun WorldSubsidiary Guarantors comprise all of the Page 51direct and indirect subsidiaries of the Company other than inconsequential subsidiaries. Additionally, management believes that the direct and indirect non-guarantor subsidiaries of Cadiz are inconsequential, bothindividually and in the aggregate, to the financial statements of theCompany for all periods presented. In December 2000, Sun World entered into a two-year $5 millionsenior unsecured term loan. In connection with obtaining the loan,the Company issued 50,000 shares of the Company's common stock aswell as certain warrants to purchase shares of the Company's commonstock. The fair values of the stock and the warrants were recorded asa debt discount and are being amortized over the life of the loan.CONDENSED CONSOLIDATING FINANCIAL INFORMATION Condensed consolidating financial information as of December 31,2001 and 2000 and for the three years ended December 31, 2001 for theCompany is as follows (in thousands):ConsolidatingStatementof OperationsInformationYear EndedDecember 31, 2001 Cadiz Sun World Eliminations Consolidated ----- --------- ------------ ------------Revenues $ 1,903 $ 92,399 $ (1,900) $ 92,402Special litigation recovery 7,929 - - 7,929 ------- -------- ------- -------- Total revenues andSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. special litigation recovery 9,832 92,399 (1,900) 100,331 ------- ------- ------- --------Costs and expenses: Cost of sales 118 79,390 (400) 79,108 General and administrative 5,433 8,980 (1,500) 12,913 Non-recurring compensation 2,584 2,953 - 5,537 Removal of underperforming crops 222 514 - 736 Depreciation and amortization 1,137 7,014 - 8,151 ------- ------- ------- -------- Total costs and expenses 9,494 98,851 (1,900) 106,445 ------- ------- ------- --------Operating profit (loss) 338 (6,452) - (6,114)Interest expense, net 3,718 15,598 235 19,551 ------- ------- ------- --------Loss before income taxes (3,380) (22,050) (235) (25,665)Income tax expense - 57 - 57 ------- ------- ------- -------- Net loss (3,380) (22,107) (235) (25,722)Less: Preferred stock dividends 591 - - 591 Imputed dividend on preferred stock 441 - - 441 ------- ------- ------- --------Net loss applicable to common stock $ (4,412) $ (22,107) $ (235) $ (26,754) ======== ======== ======= ========= Page 52ConsolidatingBalance Sheet InformationDecember 31, 2001 Cadiz Sun World Eliminations Consolidated ----- --------- ------------ ------------ASSETSCurrent assets: Cash and cash equivalents $ 400 $ 1,058 $ - $ 1,458 Accounts receivable, net 1 6,326 - 6,327 Due from affiliate 11,254 - (11,254) - Inventories - 13,229 (202) 13,027 Prepaid expenses and other 210 578 - 788 ------ ------- ------- -------- Total current assets 11,865 21,191 (11,456) 21,600Property, plant, equipment and water programs, net 41,266 124,031 - 165,297Other assets 4,432 6,946 - 11,378 ------- ------- ------- -------- $ 57,563 $152,168 $(11,456) $198,275 ======== ======== ======== ========LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITYSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Current liabilities: Accounts payable $ 1,330 $ 10,428 $ - $ 11,758 Accrued liabilities 791 4,889 - 5,680 Due to affiliate - 11,254 (11,254) - Bank overdraft 410 - - 410 Long-term debt, current portion - 4,960 - 4,960 ------- ------- ------- -------- Total current liabilities 2,531 31,531 (11,254) 22,808Long-term debt 24,732 116,697 - 141,429Deferred income taxes - 5,447 - 5,447Other liabilities 371 559 - 930Losses in excess of investment in affiliate 2,066 - (2,066) -Series D redeemable preferred stock 4,243 - - 4,243Series E-1 and E-2 redeemable preferred stock 5,715 - - 5,715Stockholders' equity:Common stock 361 - - 361Additional paid-in capital 152,404 38,273 (38,273) 152,404Accumulated deficit (134,860) (40,339) 40,137 (135,062) -------- ------- -------- -------- Total stockholders' equity 17,905 (2,066) 1,864 17,703 ------- ------- ------- -------- $ 57,563 $152,168 $ (11,456) $198,275 ======== ======== ========= ======== Page 53ConsolidatingStatement ofCash Flow InformationYear EndedDecember 31, 2001 Cadiz Sun World Eliminations Consolidated ----- --------- ------------ ------------Net cash provided by (used for) operating activities $ 1,442 $ (5,509) $ (235) $ (4,302) ------- ------- -------- ---------Cash flows from investing activities: Additions to property, plant and equipment (88) (1,495) - (1,583) Additions to water programs (1,359) - - (1,359) Additions to developing crops (109) (3,015) - (3,124) Proceeds from disposal of property, plant and equipment 2 450 - 452 (Increase) decrease in other assets (575) 494 235 154 ------- ------- ------- ---------Net cash (used for) provided by investing activities (2,129) (3,566) 235 (5,460) ------- ------- ------- ---------Cash flows from financing activities: Net proceeds from issuance of stock 1,583 - - 1,583 Proceeds from issuanceSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. of preferred stock 7,500 - - 7,500 Borrowings from intercompany revolver (11,254) 11,254 - - Principal payments on long-term debt (251) (1,313) - (1,564) Bank overdraft 410 - - 410 ------- ------- -------- ---------Net cash (used for) provided by financing activities (2,012) 9,941 - 7,929 ------- ------- -------- ---------Net (decrease) increase in cash and cash equivalents (2,699) 866 - (1,833)Cash and cash equivalents, beginning of period 3,099 192 - 3,291 ------- ------- -------- ---------Cash and cash equivalents, end of period $ 400 $1,058 $ - $ 1,458 ====== ====== ======== ========= Page 54ConsolidatingStatementof OperationsInformationYear EndedDecember 31, 2000 Cadiz Sun World Eliminations Consolidated ----- --------- ------------ ------------Revenues $ 1,920 $ 107,727 $ (1,902) $ 107,745 -------- --------- -------- ----------Costs and expenses: Cost of sales 124 88,203 (402) 87,925 General and administrative 4,355 9,721 (1,500) 12,576 Special litigation 424 - - 424 Removal of underperforming crops - 1,549 - 1,549Depreciation and amortization 1,174 7,207 - 8,381 ------- ------- ------- -------- Total costs and expenses 6,077 106,680 (1,902) 110,855 ------- ------- ------- --------Operating profit (loss) (4,157) 1,047 - (3,110)Interest expense, net 4,085 15,103 - 19,188 ------- ------- ------- --------Loss before income taxes (8,242) (14,056) - (22,298)Income tax expense - 160 - 160 ------- ------- ------- --------Net loss $ (8,242) $(14,216) $ - $ (22,458) ======== ======== ======= ========== Page 55ConsolidatingBalance Sheet InformationDecember 31, 2000 Cadiz Sun World Eliminations Consolidated ----- --------- ------------ ------------ASSETSSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Current assets: Cash and cash equivalents $ 3,099 $ 192 $ - $ 3,291 Accounts receivable, net 7 7,879 (2) 7,884 Inventories - 15,405 (202) 15,203 Prepaid expenses and other 212 419 - 631 ------- ------- ------- -------- Total current assets 3,318 23,895 (204) 27,009Investment in subsidiary 17,093 - (17,093) -Property, plant, equipment and water programs, net 38,842 125,982 - 164,824Other assets 4,199 7,585 - 11,784 ------- ------- ------- -------- $ 63,452 $157,462 $(17,297) $ 203,617 ======== ======== ======== ==========LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 1,209 $ 6,693 $ (2) $ 7,900 Accrued liabilities 349 5,466 - 5,815 Due to affiliate 202 - (202) - Long-term debt, current portion - 859 - 859 ------- ------- ------- ---------- Total current liabilities 1,760 13,018 (204) 14,574Long-term debt 23,912 121,698 - 145,610Deferred income taxes - 5,447 - 5,447Other liabilities 107 206 - 313Series D redeemable preferred stock 3,950 - - 3,950Stockholders' equity:Common stock 357 - - 357Additional paid-in capital 142,706 35,325 (35,325) 142,706Accumulated deficit (109,340) (18,232) 18,232 (109,340) -------- ------- ------- --------- Total stockholders' equity 33,723 17,093 (17,093) 33,723 ------- ------- ------- --------- $ 63,452 $157,462 $(17,297) $ 203,617 ======== ======== ======== =========== Page 56ConsolidatingStatement ofCash FlowInformationYear EndedDecember 31, 2000 Cadiz Sun World Eliminations Consolidated ----- --------- ------------ ------------Net cash used for operating activities $ (4,849) $ (4,205) $ - $ (9,054) ------- ------- ------- ----------Cash flows from investing activities:Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Additions to property, plant and equipment (293) (959) - (1,252) Additions to water programs (1,595) - - (1,595) Additions to developing crops (159) (3,685) - (3,844) Proceeds from disposal of property, plant and equipment 1 2,955 - 2,956 Partnership distributions - 1,568 - 1,568 Increase in other assets (162) (363) - (525) ------- ------- ------- --------Net cash used for investing activities (2,208) (484) - (2,692) ------- ------- ------- --------Cash flows from financing activities: Net proceeds from issuance of stock 1,032 - - 1,032 Proceeds from issuance of preferred stock 5,000 - - 5,000 Proceeds from issuance of long-term debt - 5,231 - 5,231 Principal payments on long-term debt (21) (665) - (686) ------- ------- ------- --------Net cash provided by financing activities 6,011 4,566 - 10,577 ------- ------- ------- --------Net decrease in cash and cash equivalents (1,046) (123) - (1,169)Cash and cash equivalents, beginning of period 4,145 315 - 4,460 ------- ------- ------- --------Cash and cash equivalents, end of period $ 3,099 $ 192 $ - $ 3,291 ======= ====== ======= =========ConsolidatingStatementof OperationsInformationYear EndedDecember 31, 1999 Cadiz Sun World Eliminations Consolidated ----- --------- ------------ ------------Revenues $ 1,829 $ 115,218 $ (1,818) $ 115,229 ------- -------- -------- ----------Costs and expenses: Cost of sales 132 84,140 (451) 83,821 General and administrative 4,672 9,058 (1,367) 12,363 Special litigation 937 - - 937 Depreciation and amortization 1,179 7,712 - 8,891 ------- -------- -------- --------- Total costs and expenses 6,920 100,910 (1,818) 106,012 ------- -------- -------- ---------Operating profit (loss) (5,091) 14,308 - 9,217Interest expense, net 2,932 14,879 - 17,811 ------- -------- -------- ---------Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Net loss $(8,023) $ (571) $ - $ (8,594) ======= ======== ======== ========== Page 57ConsolidatingStatement ofCash FlowInformationYear EndedDecember 31, 1999 Cadiz Sun World Eliminations Consolidated ----- --------- ------------ ------------Net cash (used for) provided by operating activities $ (4,746) $ 1,761 $ - $ (2,985) -------- -------- ------- -----------Cash flows from investing activities: Additions to property, plant and equipment (3,645) (2,680) 1,490 (4,835) Additions to water programs (3,177) - - (3,177) Additions to developing crops - (3,531) - (3,531) Proceeds from disposal of property, plant and equipment 1,490 233 (1,490) 233 Increase in other assets (64) (934) - (998) -------- -------- ------- ---------Net cash used for investing activities (5,396) (6,912) - (12,308) -------- -------- ------- ---------Cash flows from financing activities: Net proceeds from issuance of stock 6,803 - - 6,803 Principal payments on long-term debt (9) (676) - (685) -------- -------- ------- ---------Net cash provided by (used for) financing activities 6,794 (676) - 6,118 -------- -------- ------- ---------Net decrease in cash and cash equivalents (3,348) (5,827) - (9,175)Cash and cash equivalents, beginning of period 7,493 6,142 - 13,635 -------- -------- ------- ---------Cash and cash equivalents, end of period $ 4,145 $ 315 $ - $ 4,460 ======= ======= ======= ========== Page 58NOTE 10 - INCOME TAXES---------------------- Deferred taxes are recorded based upon differences between thefinancial statement and tax bases of assets and liabilities andavailable carryforwards. Temporary differences and carryforwardswhich gave rise to a significant portion of deferred tax assets andliabilities as of December 31, 2001 and 2000 are as follows (inthousands): December 31, 2001 2000Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ---- ---- Deferred tax liabilities: Fixed asset basis difference $7,987 $ 7,550 Other 48 48 ------ ------- Total deferred tax liabilities 8,035 7,598 ------ ------- Deferred tax assets: Net operating losses 49,437 38,560 Reserve for notes receivable - 1,178 Fixed asset basis difference 6,300 6,300 State taxes 1,855 1,855 Reserves and accruals 3,466 1,372 Other 935 535 ------ ------- Total deferred tax assets 61,993 49,800 Valuation allowance for deferred tax assets (59,405) (47,649) ------- -------- Net deferred tax liability $ 5,447 $ 5,447 ======= ======= As of December 31, 2001, the Company had net operating loss(NOL) carryforwards of approximately $136.3 million for federalincome tax purposes. Such carryforwards expire in varying amountsthrough the year 2021. At December 31, 2001, the Company has stateNOL carryforwards of $35.1 million. These NOL carryforwards expirein varying amounts through the year 2011. A reconciliation of the income tax benefit to the statutoryfederal income tax rate is as follows (dollars in thousands): Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- Expected federal income tax benefit at 34% $ (8,726) $ (7,581) $ (2,922) Loss with no tax benefit provided 8,541 7,380 2,718 State income tax 6 147 - Foreign withholding taxes 51 79 - Amortization 79 79 79 Other non-deductible expenses 106 56 125 -------- -------- -------- Income tax expense $ 57 $ 160 $ - ======== ======== ======== Page 59NOTE 11 - EMPLOYEE BENEFIT PLANS-------------------------------- The Company has a 401(k) Plan for its salaried employees.Employees must work 1,000 hours and have completed one year ofservice to be eligible to participate in this plan. The Companymatches 75% of the first four percent deferred by an employee up to$1,600 per year. In addition, Sun World maintains a definedcontribution pension plan covering its employees who (i) are notcovered by a collective bargaining agreement, (ii) have at least oneyear of service and (iii) have worked at least 1,000 hours per year.Contributions are 2% of each covered employee's salary. For thosehourly employees covered under a collective bargaining agreement,contributions are made to a multi-employer pension plan in accordancewith negotiated labor contracts and are generally based on the numberof hours worked.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.NOTE 12 - PREFERRED AND COMMON STOCK-------------------------------------SERIES D CONVERTIBLE PREFERRED STOCK The Company has an authorized class of 100,000 shares ofpreferred stock. On December 29, 2000, the Company issued 5,000shares of Series D Convertible Preferred Stock ("Series D PreferredStock") for $5,000,000. The holders of the Preferred Stock areentitled to receive dividends, payable semi-annually, at a rate of 7%if paid in cash or 9% if paid in the Company's common stock. TheSeries D Preferred Stock is convertible into 625,000 shares of theCompany's common stock any time prior to July 2004 at the election ofthe holder. The Company also has the right to convert the Series DPreferred Stock, but only when the closing price of the Company'scommon stock has exceeded $12 per share for 30 consecutive tradingdays. Holders are entitled to a liquidation preference equal to theinitial purchase of $1,000 per share plus any accrued and unpaiddividends. The Series D Preferred Stock will be redeemable in July2004 if still outstanding. The Company issued certain warrants to purchase shares of theCompany's common stock in connection with the issuance of the SeriesD Preferred Stock. The fair market value of the Company's commonstock at the time of issuance was above the accounting conversionprice resulting in an imputed dividend (beneficial conversionfeature). The estimated fair value of the warrants issued(calculated using the Black Scholes option pricing model) and theimputed dividend totaled $1,050,000 which was recorded as a discountto the Series D Preferred Stock. The discount is being amortizedthrough the redemption date of the stock and treated as a reductionto earnings for earnings per share calculations although no assets ofthe Company will ever be expended.SERIES E-1 AND E-2 CONVERTIBLE PREFERRED STOCK During the fourth quarter of 2001, the Company issued 7,500shares of Series E-1 and E-2 Convertible Preferred Stock (the "SeriesE Preferred Stock") for an aggregate of $7,500,000. The holders ofthe Preferred Stock are entitled to receive dividends, payable semi-annually, at a rate of 7% if paid in cash or 9% if paid in theCompany's common stock. The Series E Preferred Stock is convertibleinto 1,000,000 shares of the Company's common stock any time prior toJuly 2004 at the election of the holder. The Company also has theright to Page 60convert the Series E Preferred Stock, but only when theclosing price of the Company's common stock has exceeded $10.50 pershare for 30 consecutive trading days. Holders are entitled to aliquidation preference equal to the initial purchase of $1,000 pershare plus any accrued and unpaid dividends. The Series E PreferredStock will be redeemable in July 2004 if still outstanding. The Company issued 40,000 shares of the Company's common stockand certain warrants to purchase shares of the Company's common stockin connection with the issuance of the Series E Preferred Stock. Thefair market value of the Company's common stock at the time ofissuance was above the accounting conversion price resulting in animputed dividend (beneficial conversion feature). The estimated fairvalue of the warrants issued (calculated using the Black Scholesoption pricing model) and the imputed dividend totaled $1,614,000which was recorded as a discount to the Series E Preferred Stock.The discount is being amortized through the redemption date of thestock and treated as a reduction to earnings for earnings per sharecalculations although no assets of the Company will ever be expended.COMMON STOCK In March 2000, the Company issued 100,000 shares of common stockto a hydrological research company upon the deemed satisfaction ofcertain contingencies with respect to the issuance of such sharesestablished in connection with the Company's 1998 acquisition of allSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of such company's assets.NOTE 13 - STOCK-BASED COMPENSATION PLANS AND WARRANTS-----------------------------------------------------STOCK OPTIONS AND WARRANTS The Company issues options pursuant to its 1996 Stock OptionPlan (the "1996 Plan") and the 1998 Non-Qualified Stock Option Plan(the "1998 Plan") approved by the Board of Directors in February1998. The Company also grants stock awards pursuant to its 2000Stock Award Plan described below. Collectively, the plans providefor the granting of up to 4,000,000 shares. At December 31, 2001,the Company has approximately 524,000 shares remaining that can begranted under the plans. All options are granted at a priceapproximating fair market value at the date of grant, have vestingperiods ranging from issuance date to five years, have maximum termsranging from five to seven years and are issued to directors,officers, consultants and employees of the Company. Compensation cost for stock options is measured as the excess,if any, of the quoted market price of the Company's stock at the dateof the grant over the amount an employee must pay to acquire thestock. Had compensation cost for these plans been determined usingfair value, as explained below, the Company's net loss and net lossper common share would have increased to the following pro formaamounts (dollars in thousands): Page 61 Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- Net loss applicable to common stock: As reported $(26,754) $(22,458) $ (8,594) Pro forma $(27,670) $(23,450) $(12,134) Net loss per common share: As reported $ (.75) $ (.64) $ (.25) Pro forma $ (.77) $ (.66) $ (.35) The fair value of each option granted during the periodsreported was estimated on the date of grant using the Black Scholesoption pricing model based on the weighted-average assumptions of:risk-free interest rate of 4.54% for 2001, 4.94% for 2000, and 6.67%for 1999; expected volatility of 40.0% for 2001, 66.7% for 2000, and46.9% for 1999; expected life of three years for 2001 and 2000 andfive years for 1999; and an expected dividend yield of zero for allthree years. The following table summarizes stock option activity for theperiods noted. All options listed below were issued to officers,directors, employees and consultants. Weighted- Average Exercise Amount Price ---------- ------- Outstanding at December 31, 1998 3,891,900 $ 5.26 Granted 800,000 $ 7.58 Expired or canceled (66,000) $ 7.20 Exercised (1,513,150) $ 4.50 ---------- Outstanding at December 31, 1999 3,112,750 $ 6.21 Granted 132,500 $ 9.76 Expired or canceled (19,500) $ 8.56 Exercised (215,152) $ 4.80 ---------- Outstanding at December 31, 2000 3,010,598 $ 6.45 Granted 266,250 $ 9.62Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Expired or canceled (1,096,000) $ 4.76 Exercised (330,098) $ 4.78 ---------- Outstanding at December 31, 2001 1,850,750(a) $ 8.05 ========== Options exercisable at December 31, 1999 2,306,500 $ 5.64 ========== Options exercisable at December 31, 2000 2,549,098 $ 5.98 ========== Options exercisable at December 31, 2001 1,446,750 $ 7.86 ========== Weighted-average years of remaining contractual life of options outstanding at December 31, 2001 2.85 ===== (a) Exercise prices vary from $4.75 to $11.75 and expiration dates vary from March 2002 to October 2008. Page 62 The weighted-average fair value of options granted during theyears 2001, 2000 and 1999 were $3.44, 5.37, and $3.71, respectively. The Company accounts for equity securities issued to non-employees in accordance with the provisions of SFAS 123 and EmergingIssues Task Force 96-18. During the years ended December 31, 2001,2000 and 1999, the Company issued 215,000, 350,000, and 250,000warrants with weighted-average exercise prices of $7.59, $6.46, and$6.50, respectively. During the year ended December 31, 2000, 75,000warrants with a weighted-average exercise price of $5.03 wereexercised in a cashless transaction resulting in the issuance of30,997 shares of common stock. No warrants expired or were canceledduring any of the three periods discussed. During 2001, inconnection with the loan amendments for the Cadiz obligationsdescribed in Note 9, the Company repriced certain warrants previouslyissued resulting in a reduction in the weighted-average exerciseprice. At December 31, 2001, there were 1,240,000 warrantsoutstanding with a weighted-average exercise price of $4.40 pershare, which expire through 2005.2000 STOCK AWARD PLAN The Cadiz Inc. 2000 Stock Award Plan ("Stock Award Plan") wasapproved by the Company's shareholders in May 2000. Under the StockAward Plan, the Company may issue various forms of stock awardsincluding restricted stock and deferred stock units to attract,retain and motivate key employees or other eligible persons. As ofDecember 31, 2001, the Company had outstanding 817,325 deferred stockunits granted under the Stock Award Plan of which 253,162 deferredstock units entitle the holder to receive one share of the Company'scommon stock for each deferred stock unit three years from the dateof grant and 564,163 deferred stock units were granted pursuant tothe exchange noted under Non-Recurring Compensation Expense below.During the year ended December 31, 2001, 1,078 stock units wereexchanged for shares of the Company's common stock. The Companycharged $566,000 and $237,000 to expense during the years endedDecember 31, 2001 and 2000, respectively, in connection with theStock Award Plan.NON-RECURRING COMPENSATION EXPENSE In 2001, the Company issued 564,163 deferred stock units tocertain senior managers of Cadiz and Sun World. These deferred stockunits were issued in exchange for the cancellation of 1,055,000 fullyvested options to purchase the Company's common stock held by seniormanagers. In accordance with the terms of Stock Option ExchangeSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Agreements, the number of the deferred stock units issued wascalculated based on the average closing price for the 10 businessdays following the filing of the Company's Annual Report on Form 10-Kfor the year ended December 31, 2000 on March 29, 2001. Eachdeferred stock unit is exchangeable for one share of the Company'scommon stock at the end of the deferral period elected by the holder.The Company recorded a one-time charge of $5,537,000 in 2001 and nocash was expended in connection with the issuance of the deferredstock units. Page 63RESTRICTED STOCK AWARD Following the acquisition of Sun World in 1996, the Company'sChief Executive Officer was awarded a stock bonus of 125,000 sharesof restricted common stock at no cost. The Company issued the final25,000 of these shares during the year ended December 31, 1999.Compensation expense was recognized as earned over the period ofservice.NOTE 14 - CONTINGENCIES----------------------- In December 1995, the Company filed an action relative to theproposed construction and operation of a landfill (the "Rail-CycleProject") which was to be located adjacent to the Company's Cadizproperty with the Superior Court in San Bernardino County,California. The action challenged the various decisions by theCounty of San Bernardino relative to the proposed Rail-Cycle Projectand sought compensatory damages. In September 1998, the Courtgranted defendants' motion for summary judgment. The Companyappealed this decision and in August 2000, the California Court ofAppeals granted, in part, the Company's appeal. The Court's decisionrevoked all environmental and land-use approvals, and thuseffectively terminated the Rail-Cycle Project, as proposed. The Company filed other civil actions against Waste Management,Inc., which asserted claims arising from alleged criminal andfraudulent conduct against the Company engaged in by Waste Managementin connection with the Rail-Cycle Project. In March 2001, the Company and Waste Management executed asettlement agreement intended to fully and finally compromise andsettle the claims asserted by the Company against Waste Management inall of the outstanding civil actions. Pursuant to the SettlementAgreement, Waste Management paid the Company $6 million in cash andgranted to the Company an exclusive option to receive, at no cost tothe Company, up to approximately 7,000 acres of real property ineastern San Bernardino County primarily adjacent to the Cadiz Programproperty. In April 2001, the Company exercised the option and hasacquired the subject property. Net proceeds from the settlement areincluded in the Company's statement of operations under the caption"Special Litigation Recovery". In the normal course of its agricultural operations, the Companyhandles, stores, transports and dispenses products identified ashazardous materials. Regulatory agencies periodically conductinspections and, currently, there are no pending claims with respectto hazardous materials. The Company is involved in other legal and administrativeproceedings and claims. In the opinion of management, the ultimateoutcome of each proceeding or all such proceedings combined will nothave a material adverse impact on the Company's financial statements. Page 64NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)-----------------------------------------------------(In thousands except per share data) Quarter Ended ------------------------------------------------ March 31, June 30, September 30, December 31, 2001 2001 2001 2001Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ---- ---- ---- ----Revenues $ 7,371 $ 20,371 $ 48,683 $ 15,977Gross profit (loss) (570) 4,927 7,611 1,326Net loss applicable to common stock (7,165) (5,030) (5,267) (9,292)Net loss per common share $ (.20) $ (.14) $ (.15) $ (.26) Quarter Ended ------------------------------------------------ March 31, June 30, September 30, December 31, 2000 2000 2000 2000 ---- ---- ---- ----Revenues $ 7,936 $ 26,928 $ 55,376 $ 17,505Gross profit (loss) (530) 3,698 12,009 4,643Net loss (8,842) (6,282) (342) (6,992)Net loss per common share $ (.25) $ (.18) $ (.01) $ (.20) Page 65 CADIZ INC. SCHEDULE I - CONDENSEND FINANCIAL INFORMATION OF REGISTRANT December 31,BALANCE SHEET ($ in thousands): 2001 2000 ---- ----ASSETS Current assets: Cash and cash equivalents $ 400 $ 3,099 Accounts receivable, net 1 7 Due from subsidiary 11,254 - Prepaid expenses and other 210 212 ------- ------- Total current assets 11,865 3,318Investment in subsidiary - 17,093Property, plant, equipment and water programs, net 41,266 38,842Other assets 4,432 4,199 ------- ------- $ 57,563 $ 63,452 ======= ========LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 1,330 $ 1,209 Accrued liabilities 791 349 Due to subsidiary - 202 Bank overdraft 410 - ------- ------- Total current liabilities 2,531 1,760Long-term debt 24,732 23,912Other liabilities 371 107Losses in excess of investment in subsidiary 2,066 -ContingenciesSeries D redeemable convertible preferred stock - $0.01 par value: 5,000 shares authorized; shares issued and outstanding - 5,000 at December 31, 2001Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. and December 31, 2000 4,243 3,950Series E-1 and E-2 redeemable convertible preferred stock - $0.01 par value: 7,500 shares authorized; shares issued and outstanding - 7,500 at December 31, 2001 and none at December 31, 2000 5,715 -Stockholders' equity: Common stock - $0.01 par value; 70,000,000 shares authorized; shares issued and outstanding 36,070,834 at December 31, 2001 and 35,674,674 at December 31, 2000 361 357Additional paid-in capital 152,404 142,706Accumulated deficit (134,860) (109,340) ------- ------- Total stockholders' equity 17,905 33,723 ------- ------- $ 57,563 $ 63,452 ======= ======= Page 66 CADIZ INC. SCHEDULE I - CONDENSED FINANCIAL INFORMATON OF REGISTRANTSTATEMENT OF OPERATIONS Year Ended December 31,($ in thousands) 2001 2000 1999 ---- ---- ----Revenues $ 1,903 $ 1,920 $ 1,829Special litigation recovery 7,929 - - -------- ------- -------Total revenues and special litigation recovery 9,832 1,920 1,829 -------- ------- -------Costs and expenses: Cost of sales 118 124 132 General and administrative 5,433 4,355 4,672 Special litigation - 424 937 Non-recurring compensation expense 2,584 - - Removal of underperforming crops 222 - - Depreciation and amortization 1,137 1,174 1,179 -------- ------- ------- Total costs and expenses 9,494 6,077 6,920 -------- ------- -------Operating profit (loss) 338 (4,157) (5,091)Loss from subsidiaries (22,107) (14,216) (571)Interest expense, net 3,718 4,085 2,932 -------- ------- -------Net loss (25,487) (22,458) (8,594)Less: Preferred stock dividends 591 - - Imputed dividend on preferred stock 441 - - -------- ------- -------Net loss applicable to common stock $ (26,519) $(22,458) $ (8,594) ========== ======= ========== Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Page 67 CADIZ INC. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT Year Ended December 31,STATEMENT OF CASH FLOWS 2001 2000 1999 ---- ---- ----($ in thousands)Cash flows from operating activities: Net loss $ (25,487) $ (22,458) $ (8,594) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 3,521 2,956 2,498 Issuance of stock for services - - 28 Loss from subsidiaries 22,107 14,216 571 (Gain) loss on disposal of assets 5 (1) 6 Removal of underperforming crops 222 - - Land received from litigation settlement (2,000) - - Compensation charge for deferred stock units 271 100 - Non-recurring compensation expense 2,584 - - Changes in operating assets and liabilities: Decrease in accounts receivable 6 9 61 Increase in due to subsidiary - - 274 Decrease (increase) in prepaid expenses and other 2 174 (133) Increase in accounts payable 121 504 4 Increase (decrease) in accrued liabilities 97 (356) 539 (Decrease) increase in other liabilities (7) 7 - ------- -------- ------- Net cash provided by (used for) operating activities 1,442 (4,849) (4,746) ------- -------- -------Cash flows from investing activities: Additions to property, plant and equipment (88) (293) (3,645) Additions to developing crops (109) (159) - Additions to water programs (1,359) (1,595) (3,177) Proceeds from disposal of property, plant and equipment 2 1 1,490 Increase in other assets (575) (162) (64) ------- -------- ------- Net cash used for investing activities (2,129) (2,208) (5,396) ------- -------- -------Cash flows from financing activities: Net proceeds from issuance of stock 1,583 1,032 6,803 Proceeds from issuance of preferred stock 7,500 5,000 - Intercompany revolver with subsidiary (11,254) - - Principal payments on long-term debt (251) (21) (9) Bank overdraft 410 - - ------- -------- ------- Net cash (used for) provided by financing activities (2,012) 6,011 6,794 ------- -------- -------Net decrease in cash and cash equivalents (2,699) (1,046) (3,348)Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Cash and cash equivalents, beginning of period 3,099 4,145 7,493 ------- -------- -------Cash and cash equivalents, end of period $ 400 $ 3,099 $ 4,145 ======= ======== ======= Page 68 CADIZ INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 2001, 2000 and 1999 ($ in thousands) Balance Additions Balance at Charged to at EndYear ended Beginning Costs and Other ofDecember 31, 2001 of Period Expenses Accounts Deductions Period----------------- --------- -------- -------- ---------- ------ Allowance for doubtful accounts $ 522 $ - $ - $ 16 $ 506 ======== ======= ======== ====== ======== Tax valuation allowance $ 47,649 $ - $ 11,756 $ - $ 59,405 ======== ======= ======== ====== ========Year endedDecember 31, 2000------------------ Allowance for doubtful accounts $ 224 $ 308 $ - $ 10 $ 522 ======== ======= ======== ====== ======== Tax valuation allowance $ 39,665 $ - $ 7,984 $ - $ 47,649 ======== ======= ======== ====== ========Year endedDecember 31, 1999------------------ Allowance for doubtful accounts $ 285 $ - $ - $ 61 $ 224 ======== ======= ======== ====== ======== Tax valuation allowance $ 35,319 $ - $ 4,346 $ - $ 39,665 ======== ======= ======== ====== ======== Page 69 REPORT OF INDEPENDENT ACCOUNTANTSTo the Board of Directors and Stockholder ofSun World International, Inc. In our opinion, the accompanying consolidated balance sheetand the related consolidated statements of operations, cash flowsand stockholder's equity present fairly, in all materialrespects, the financial position of Sun World International,Inc., a wholly-owned subsidiary of Cadiz Inc., and itssubsidiaries at December 31, 2001 and 2000 and the results oftheir operations and their cash flows for each of the three yearsin the period ended December 31, 2001 in conformity withaccounting principles generally accepted in the United States ofAmerica. These financial statements are the responsibility ofthe Company's management; our responsibility is to express anopinion on these financial statements based on our audits. Weconducted our audits of these statements in accordance withSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.auditing standards generally accepted in the United States ofAmerica, which require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, andevaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for ouropinion./s/ PricewaterhouseCoopers LLP-------------------------------- PricewaterhouseCoopers LLPLos Angeles, CaliforniaFebruary 21, 2002 Page 70SUN WORLD INTERNATIONAL, INC.(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.) CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31,($ in thousands) 2001 2000 1999 ---- ---- ----Revenues $ 92,399 $ 107,727 $ 115,218 -------- -------- ---------Costs and expenses: Cost of sales 79,390 88,203 84,140 General and administrative 8,980 9,721 9,058 Non-recurring compensation expense 2,953 - - Removal of underperforming crops 514 1,549 - Depreciation and amortization 7,014 7,207 7,712 -------- -------- -------- 98,851 106,680 100,910 -------- -------- --------Operating income (loss) (6,452) 1,047 14,308Interest expense, net 15,598 15,103 14,879Net loss before income taxes (22,050) (14,056) (571)Income tax expense 57 160 - -------- -------- --------Net loss $ (22,107) $ (14,216) $ (571) ========= ========= ======== See accompanying notes to the consolidated financial statements. Page 71SUN WORLD INTERNATIONAL, INC.(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)CONSOLIDATED BALANCE SHEET December 31,($ in thousands) 2001 2000 ---- ----ASSETSCurrent assets: Cash and cash equivalents $ 1,058 $ 192 Accounts receivable, net 6,326 7,879 Inventories 13,229 15,405Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Prepaid expenses and other 578 419 -------- -------- Total current assets 21,191 23,895Property, plant, equipment, and water programs, net 124,031 125,982Other assets 6,946 7,585 -------- -------- Total assets $ 152,168 $157,462 ======== ========LIABILITIES AND STOCKHOLDER'S EQUITYCurrent liabilities: Accounts payable $ 10,428 $ 6,693 Accrued liabilities 4,889 5,466 Due to parent company 11,254 - Long-term debt, current portion 4,960 859 -------- -------- Total current liabilities 31,531 13,018Long-term debt 116,697 121,698Deferred income taxes 5,447 5,447Other liabilities 559 206ContingenciesStockholder's equity: Common stock, $0.01 par value, 300,000 shares authorized; 42,000 shares issued and outstanding - - Additional paid-in capital 38,273 35,325 Accumulated deficit (40,339) (18,232) -------- -------- Total stockholder's equity (2,066) 17,093 -------- -------- Total liabilities and stockholder's equity $ 152,168 $ 157,462 ======== ======== Page 72 See accompanying notes to the consolidated financial statements.SUN WORLD INTERNATIONAL, INC.(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended December 31,($ in thousands) 2001 2000 1999 ---- ---- ----Cash flows from operating activities:Net loss $ (22,107) $ (14,216) $ (571)Adjustments to reconcile net loss to netcash (used for) providedby operating activities: Depreciation and amortization 8,143 7,970 8,570 Gain on disposal of assets (426) (95) (110) Removal of underperforming crops 514 1,549 - Shares of KADCO stockSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. earned for services (1,250) (1,250) (313) Share of partnership operations - (71) (328) Compensation charge for deferred stock units 296 137 - Non-recurring compensation expense 2,953 - - Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 1,553 552 (2,213) Decrease (increase)in inventories 1,830 2,740 (3,405) (Increase) decrease in prepaid expenses and other (160) 112 207 Increase (decrease)in accounts payable 3,734 (645) (714) (Decrease) increase in accrued liabilities (647) (683) 1,129 Decrease in due to parent - - (193) Increase (decrease) in other liabilities 58 (305) (298) ------- -------- -------- Net cash (used for) provided by operating activities (5,509) (4,205) 1,761 ------- -------- --------Cash flows from investing activities:Additions to property, plant,equipment, and water programs (1,495) (959) (2,680)Additions to developing crops (3,015) (3,685) (3,531)Proceeds from disposal of property,plant and equipment 450 2,955 233Partnership distributions - 1,568 -Decrease (increase) in other assets 494 (363) (934) ------- -------- -------- Net cash used for investing activities (3,566) (484) (6,912) ------- -------- --------Cash flows from financing activities:Proceeds from issuance of long-term debt - 5,231 -Principal payments on long-term debt (1,313) (665) (676)Intercompany revolver with parent 11,254 - - ------- -------- -------- Net cash provided by (used for) financing activities 9,941 4,566 (676) ------- -------- --------Net increase (decrease) in cash and cash equivalents 866 (123) (5,827)Cash and cash equivalents at beginning of period 192 315 6,142 ------- -------- --------Cash and cash equivalents at end of period $ 1,058 $ 192 $ 315 ========= ======== ======See accompanying notes to the consolidated financial statements. Page 73SUN WORLD INTERNATIONAL, INC.(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ($ in thousands)Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Additional Total Common Stock Paid-in Accumulated Stockholders' Shares Amount Capital Deficit Equity ------ ------ ------- ------- ------Balance as of December 31, 1998 42,000 $ - $ 34,183 $ (3,445) $ 30,738Net loss - - - (571) (571) ------ ----- -------- --------- ---------Balance as of December 31, 1999 42,000 - 34,183 (4,016) 30,167Capital contribution from parent for the value of shares and warrants issued in connection with obtaining the senior unsecured term loan financing - - 1,142 - 1,142Net loss - - - (14,216) (14,216) ------ ----- -------- -------- --------Balance as of December 31, 2000 42,000 - 35,325 (18,232) 17,093Capital contribution from parent for the value of the non-recurring compensation - - 2,953 - 2,953Revaluation of derivative for warrants issued by parent - - (235) - (235)Capital contribution from parent for warrants issued relating to senior unsecured term loan - - 230 - 230Net loss - - - (22,107) (22,107) ------ ----- -------- -------- --------Balance as of December 31, 2001 42,000 $ - $ 38,273 $ (40,339) $ (2,066) ====== ====== ========== ========= ========= See accompanying notes to the consolidated financial statements. Page 74 SUN WORLD INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.) NOTES TO THE CONSOLDIATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF OPERATIONS----------------------------- Founded in 1975, Sun World International, Inc. ("SWII") andits subsidiaries (collectively, the "Company") operate as theagricultural segment of Cadiz Inc. ("Cadiz"). The Company is anintegrated agricultural operation that owns more than 19,000acres of land, primarily located in two major growing areas ofCalifornia: the San Joaquin Valley and the Coachella Valley.Fresh produce, including table grapes, stonefruit, citrus,peppers and watermelons is marketed, packed and shipped to foodwholesalers and retailers located throughout the United StatesSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.and to more than 30 foreign countries. The Company owns andoperates three cold storage and/or packing facilities located inCalifornia, of which two are operated and one is leased to athird party. In January 2002, Cadiz announced an agreement in principlewith KADCO to combine the businesses of Sun World and KADCO.Following the proposed combination, KADCO's shareholders willhave a 49.75% interest in the combined business, and Cadiz willretain an ownership interest of 50.25%. Prior to the proposedcombination, KADCO expects to have cash resources in excess of$80 million which will be used to recapitalize Sun World andprovide for future business expansion. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES---------------------------------------------------PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts ofSWII and its subsidiaries, all of which are wholly-owned. Allsignificant intercompany transactions have been eliminated.RECLASSIFICATIONS These financial statements reflect certain reclassificationsmade to the prior period balances to conform to the current yearpresentation.USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity withgenerally accepted accounting principles requires management tomake estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reportingperiod. In preparing these financial statements, management hasmade estimates with regard to revenue recognition and valuationof inventory, long-lived assets, and deferred tax assets. Actualresults could differ from those estimates.REVENUE RECOGNITION The Company recognizes crop sale revenue upon shipment andtransfer of title to customers. Packing revenues and marketingcommissions from third party growers are recognized when therelated services are provided. Proprietary product developmentrevenues are recognized based upon product sales by licensees.Project development and management Page 75fees are recorded when earned under the terms of the related agreement. Revenues attributable to one national retailer totaled $10.5million in 2001, $12.8 million in 2000 and $14.4 million in 1999.Export sales accounted for approximately 8.4%, 9.9% and 10.3%, ofthe Company's revenues for the years ended December 31, 2001,2000 and 1999, respectively.RESEARCH AND DEVELOPMENT The Company incurs costs to research and develop newvarieties of proprietary products. Research and developmentcosts are expensed as incurred. Such costs were approximately$2,023,000 for the year ended December 31, 2001, $1,636,000 forthe year ended December 31, 2000 and $1,450,000 for the yearended December 31, 1999.CASH AND CASH EQUIVALENTS The Company considers all short-term deposits with anSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.original maturity of three months or less to be cash equivalents.The Company invests its excess cash in deposits with majorinternational banks and short-term commercial paper and,therefore, bears minimal risk. Such investments are stated atcost, which approximates fair value, and are considered cashequivalents for purposes of reporting cash flows.INVENTORIES Growing crops, pepper seed, and materials and supplies arestated at the lower of cost or market, on a first-in, first-out(FIFO) basis. Growing crops inventory includes direct costs andan allocation of indirect costs.INVESTMENT IN PARTNERSHIPS The Company, through a wholly-owned subsidiary, owned a 50%interest in ASC/SWB Partnership, formerly named American SunMelon(the "Partnership"). In October 1998, the Partnership soldsubstantially all of its assets. In November 2000, the Companyreceived a final distribution of $1.6 million in connection withthe liquidation of the Partnership. The Company had accountedfor its investment in the Partnership using the equity method.PROPERTY, PLANT, EQUIPMENT, AND WATER PROGRAMS Property, plant, equipment, and water programs are statedat cost. The Company capitalizes direct and certain indirect costsof planting and developing orchards and vineyards during thedevelopment period, which varies by crop and usually ranges fromthree to seven years. Depreciation commences in the yearcommercial production is achieved. Page 76 Permanent land development costs, such as acquisition costs,clearing, initial leveling and other costs required to bring theland into a suitable condition for general agricultural use, arecapitalized and not depreciated since these costs have anindefinite useful life. Depreciation is provided using the straight-line method overthe estimated useful lives of the assets, generally ten to forty-five years for land improvements and buildings, three to twenty-five years for machinery and equipment, and five to thirty yearsfor permanent crops. Water programs are stated at cost. All costs directlyattributable to the development of such programs are beingcapitalized by the Company.IMPAIRMENT OF LONG-LIVED ASSETS The Company annually evaluates its long-lived assets,including intangibles, for potential impairment. Whencircumstances indicate that the carrying amount of the asset maynot be recoverable, as demonstrated by estimated future cashflows, an impairment loss would be recorded based on fair value. During the year ended December 2001 and 2000, the Companyincurred costs to remove certain underperforming crops, primarilystonefruit, citrus, and wine grapes. The Company recorded chargesof $514,000 and $1,549,000 in 2001 and 2000, respectively, inconnection with the removal of these crops which is shown underthe heading "Removal of underperforming crops" on theConsolidated Statement of Operations.OTHER ASSETS Capitalized loan fees represent costs incurred to obtain debtfinancing. Such costs are amortized over the life of the relatedloan. At December 31, 2001, the majority of capitalized loanfees relate to the issuance of the First Mortgage Notes describedSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.in Note 9. Trademark development costs represent legal costs incurred toobtain and defend patents and trademarks related to the Company'sproprietary products throughout the world. Such costs arecapitalized and amortized over their estimated useful life, whichrange from 10 to 20 years.INCOME TAXES The Company is included in the consolidated federal andcombined state tax returns of Cadiz. The Company and Cadiz have atax sharing agreement which provides that the Company's currenttax liability is determined as though the Company filed its ownreturns. Income taxes are provided for using an asset andliability approach which requires the recognition of deferred taxassets and liabilities for the expected future tax consequencesof temporary differences between the financial statement and taxbases of assets and liabilities at the applicable enacted taxrates. A valuation allowance is provided when it is uncertainthat some portion or all of the deferred tax assets will berealized. Page 77SUPPLEMENTAL CASH FLOW INFORMATION Cash payments for interest for the years ended December31, 2001, 2000 and 1999 were $14,660,000, $14,497,000 and$14,204,000, respectively.NEW ACCOUNTING PRONOUNCEMENTSSFAS 141 and 142---------------- In June 2001, the Financial Accounting Standards Board("FASB") issued Statement of Financial Accounting Standards No.141 ("SFAS 141"), "Accounting for Business Combinations" and No.142 ("SFAS 142"), "Goodwill and Other Intangibles", effective forfiscal years beginning after December 15, 2001. Under the newrules, goodwill and intangible assets deemed to have indefinitelives will no longer be amortized but will be subject to annualimpairment tests in accordance with the Statements. Otherintangible assets will continue to be amortized over theirestimated useful lives. The Company will apply the new rules onaccounting for other intangible assets beginning January 1, 2002.Management does not anticipate that the adoption of thesestandards will have a material adverse effect on the Company'sfinancial position or results of operations.SFAS 144-------- In August 2001, the FASB issued Statement of FinancialAccounting Standards No. 144 ("SFAS 144"), "Accounting for theImpairment or Disposal of Long-Lived Assets" which supersedesSFAS 121, "Accounting for the Impairment of Long-Lived Assets andfor Long-Lived Assets to Be Disposed Of". SFAS 144 retains thefundamental provisions of SFAS 121 for (a) recognition andmeasurement of the impairment of long-lived assets to be held andused and (b) measurement of long-lived assets to be disposed ofby sale. The adoption of SFAS 144 is not anticipated to have amaterial adverse effect on the Company's financial position orresults of operations.NOTE 3 - ACCOUNTS RECEIVABLE---------------------------- Accounts receivable consist of the following (dollars inthousands): December 31, 2001 2000Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ---- ---- Trade receivables $ 4,294 $ 4,190 Due from unaffiliated growers 448 541 Other 2,090 3,670 ------- ------- 6,832 8,401 Less allowance for doubtful accounts (506) (522) ------- ------- $ 6,326 $ 7,879 ======= ======= Page 78 Substantially all trade receivables are from large domesticnational and regional supermarket chain stores and producebrokers and are unsecured. Amounts due from unaffiliated growersrepresent receivables for harvest advances and for services(harvest, haul and pack) provided on behalf of growers underagreement with the Company and are recovered from proceeds ofproduct sales. Other receivables primarily include wine grapeand raisin sales, proceeds due from third party marketers,receivables for international licensing, and other miscellaneousreceivables.NOTE 4 - INVENTORIES-------------------- Inventories consist of the following (dollars in thousands): December 31, 2001 2000 ---- ---- Growing crops $ 10,376 $ 11,740 Materials and supplies 2,621 2,880 Harvested product 218 528 Pepper seed 14 257 -------- ------- $ 13,229 $ 15,405 ======== ========NOTE 5 - PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS------------------------------------------------------ Property, plant, equipment and water programs consist of thefollowing (dollars in thousands): December 31, 2001 2000 ---- ---- Land $ 49,178 $ 49,196 Permanent crops 58,489 58,860 Developing crops 12,486 9,546 Buildings 21,182 20,496 Machinery and equipment 14,760 14,025 Water programs 2,525 2,135 -------- -------- 158,620 154,258 Less accumulated depreciation (34,589) (28,276) -------- -------- $124,031 $125,982 ======== ======== Page 79Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.NOTE 6 - OTHER ASSETS--------------------- Other assets consist of the following (dollars inthousands): December 31, 2001 2000 ---- ---- Deferred loan costs, net $ 1,781 $ 2,510 Long-term receivables 342 1,799 Capitalized trademark development, net 2,000 1,713 Receivable from KADCO to be paid in common shares 2,813 1,563 Other 10 - ------- ------- $ 6,946 $ 7,585 ======= =======NOTE 7 - ACCRUED LIABILITIES---------------------------- Accrued liabilities consist of the following (dollars inthousands): December 31, 2001 2000 ---- ---- Interest $ 2,695 $ 2,780 Payroll and benefits 1,743 1,609 Other 451 1,077 ------- ------- $ 4,889 $ 5,466 ======= =======NOTE 8 - REVOLVING CREDIT FACILITIES------------------------------------ In November 2001, Sun World renewed its Revolving CreditFacility through the 2002 growing season with a maturity date ofNovember 2002. Amounts eligible to be borrowed under theRevolving Credit Facility are based upon a borrowing base ofeligible accounts receivable and inventory balances. Maximumavailability under the Revolving Credit Facility variesthroughout the year with a maximum of $30 million availableduring the peak borrowing periods of April to July. TheRevolving Credit Facility is secured by accounts receivable,inventory, and the proceeds thereof, requires Sun World to meetcertain financial covenants, and is guaranteed by the Company.Amounts borrowed under the facility accrue interest at eitherprime plus 1.0% or LIBOR plus 2.50% at the Company's election.No amounts were outstanding under the Revolving Credit Facilityat December 31, 2001 and 2000. Page 80NOTE 9 - LONG-TERM DEBT----------------------- Management estimates that the fair value of the Company'slong-term debt approximates the carrying value for all debtinstruments except the Series B First Mortgage Notes ("FirstMortgage Notes"). The fair value of the First Mortgage Notes isestimated to be approximately $106.1 million based on quotedmarket prices as of December 31, 2001. At December 31, 2001 andDecember 31, 2000, the carrying amount of the Company'soutstanding debt is summarized as follows (dollars in thousands): Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. December 31, 2001 2000 ---- ---- Series B First Mortgage Notes, interest payable semi-annually, with principal due in April 2004, interest at 11.25% $ 115,000 $ 115,000 Senior unsecured term loan, interest payable quarterly, due December 31, 2002, interest at LIBOR plus 3% (5.60% at December 31, 2001 and 9.40% at December 31, 2000) 5,000 5,000 Note payable to bank, quarterly principal installments of $72 plus interest payable monthly, due December 31, 2003, interest at prime (4.75% at December 31, 2001 and 9.50% at December 31, 2000) 1,142 1,500 Note payable to insurance company, Quarterly installments of $120 (including interest), due January 1, 2005, interest at 7.75% 945 1,639 Note payable to finance company, monthly installments of $18 (including interest), due July 1, 2002, interest at 7.50% 103 305 Other 269 255Debt discount (802) (1,142) -------- -------- 121,657 122,557 Less: current portion (4,960) (859) -------- -------- $ 116,697 $ 121,698 ========= ========= Annual maturities of long-term debt outstanding (inthousands), excluding $802 representing the unamortized portionof warrants on December 31, 2001 are as follows: 2002 - $5,762;2003 - $1,250; 2004 - $115,419, 2005 - $23, and 2006 - $5. Page 81 In April 1997, the Company issued $115 million of Series AFirst Mortgage Notes through a private placement. The notes havesubsequently been exchanged for Series B First Mortgage Notes,which are registered under the Securities Act of 1933 and arepublicly traded. The First Mortgage Notes are secured by a firstlien (subject to certain permitted liens) on substantially all ofthe assets of the Company and its subsidiaries other than growingcrops, crop inventories and accounts receivable and proceedsthereof, which secure the Revolving Credit Facility. The FirstMortgage Notes mature April 15, 2004, but are redeemable at theoption of the Company, in whole or in part, at any time on orafter April 15, 2001. The First Mortgage Notes include covenantsthat do not allow for the payment of dividends by the Companyother than out of cumulative net income. The First Mortgage Notes are also secured by the guaranteesof Coachella Growers, Inc., Sun Desert, Inc., Sun World/Rayo, andSun World International de Mexico S.A. de C.V. (collectively, the"Sun World Subsidiary Guarantors") and by the Company. CadizSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.also pledged all of the stock of Sun World as collateral for itsguarantee. In December 2000, Sun World entered into a two-year $5million senior unsecured term loan. In connection with obtainingthe loan, the Company issued 50,000 shares of Cadiz' common stockas well as certain warrants to purchase shares of Cadiz' commonstock. The fair value of the stock and the warrants were recordedas a debt discount and are being amortized over the life of theloan. Pursuant to Statement of Financial Accounting Standards No.133, "Accounting for Derivative Instruments and HedgingActivities", the warrants meet the definition of a derivative forthe Company as the value of the warrants is tied to the marketvalue of Cadiz stock. As such, the value of the warrants will beadjusted to fair value at each reporting date with thecorresponding gain or loss being included in the Statement ofOperations. Page 82NOTE 10 - INCOME TAXES---------------------- Significant components of the Company's deferred income taxassets and liabilities as of December 31, 2001 and 2000 are asfollows (dollars in thousands): December 31, 2001 2000 ---- ---- Deferred tax liabilities: Net fixed assets basis difference $ 8,490 $ 8,077 Other 48 48 -------- -------- Total deferred tax liabilities 8,538 8,125 -------- -------- Deferred tax assets: Net operating losses 19,280 9,811 Reserve for notes receivable - 1,178 State taxes 1,854 1,854 Reserves and accruals 2,098 1,215 Other 894 513 Total deferred tax assets 24,126 14,571 Valuation allowance for deferred tax assets (21,035) (11,893) -------- -------- Net deferred tax liability $ 5,447 $ 5,447 ======== ======== As of December 31, 2001, the Company has net operating loss(NOL) carryforwards of approximately $48.5 million for federalincome tax purposes. Such carryforwards expire in varyingamounts through the year 2021. As of December 31, 2001, theCompany has state NOL carryforwards of approximately $31.7million. These NOL carryforwards expire in varying amountsthrough the year 2011. A reconciliation of the income tax expense to the statutoryfederal income tax rate is as follows (dollars in thousands): Year Ended December 31, 2001 2000 1999 ---- ---- ---- Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Expected federal income tax benefit at 34% $ (7,497) $ (4,779) $ (194) Loss with no tax benefit provided 7,531 4,663 131 State income tax 6 147 8 Foreign withholding taxes 51 79 - Other non-deductible expenses (34) 50 55 -------- -------- -------- Income tax expense $ 57 $ 160 $ - ========= ======= ======= Page 83NOTE 11 - EMPLOYEE BENEFIT PLANS-------------------------------- The Company participates in the Cadiz Inc. 401(k) Plan for itssalaried employees. Employees must work 1,000 hours annually andhave completed one year of service to be eligible to participatein this plan. The Company matches 75% of the first four percentdeferred by an employee up to $1,600 per year. In addition, theCompany maintains a defined contribution pension plan coveringits employees who (i) are not covered by a collective bargainingagreement, (ii) have at least one year of service and (iii) haveworked at least 1,000 hours annually. Contributions are 2% ofeach covered employee's salary. For those hourly employeescovered under a collective bargaining agreement, contributionsare made to a multi-employer pension plan in accordance withnegotiated labor contracts and are generally based on the numberof hours worked.NOTE 12 - RELATED PARTY TRANSACTIONS------------------------------------- Cadiz owns approximately 1,600 acres of irrigated farmland inSan Bernardino County consisting primarily of citrus and grapes.Pursuant to a 10-year lease entered into as of the acquisitiondate, the Company is responsible for the production, packing,handling, and marketing of the products on the Cadiz property.Pursuant to the lease as amended in April 1997, Cadiz is toreceive annual land rent of $250 per acre, or $400,000. Inaddition, the Company entered into a service agreement with Cadizin which Cadiz provides management and financial services to theCompany. The term of the agreement is 10 years with an annualfee of $1.5 million. The agreement provides for certain otherreimbursement of expenses incurred on behalf of the Company. TheCompany made payments to Cadiz of $2.4 million for 2001, $2.3million for 2000, and $2.4 million for 1999 pursuant to theservices agreement and the lease agreement mentioned above. Inaddition, the Company purchased a citrus ranch from Cadiz at bookvalue of $1.5 million in January 1999. The Company has intercompany revolving credit agreementswhereby the Company can loan or borrow from Cadiz as needed.Under the intercompany revolving credit agreement, $11.3 millionwas outstanding as of December 31, 2001 and no amount wasoutstanding as of December 31, 2000.NOTE 13 - NON-RECURRING COMPENSATION EXPENSE-------------------------------------------- In 2001, Cadiz issued 300,860 deferred stock units tocertain senior managers of Sun World. These deferred stock unitswere issued in exchange for the cancellation of 565,000 fullyvested options to purchase the Cadiz common stock held by seniormanagers. In accordance with the terms of the Stock OptionExchange Agreements, the number of the deferred stock unitsissued was calculated based on the average closing price for the10 business days following the filing of the Cadiz Annual Reporton Form 10-K for the year ended December 31, 2000 on March 29,2001. Each deferred stock unit is exchangeable for one share ofCadiz common stock at the end of the deferral period elected bySource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the holder. The Company recorded a one-time charge of $2,953,000in 2001 and no cash was expended in connection with the issuanceof the deferred stock units. Page 84NOTE 14 - CONTINGENCIES----------------------- In the normal course of its agricultural operations, theCompany handles, stores, transports and dispenses productsidentified as hazardous materials. Regulatory agenciesperiodically conduct inspections and, currently, there are nopending claims with respect to hazardous materials. The Company is involved in other legal and administrativeproceedings and claims. In the opinion of management, theultimate outcome of each proceeding or all such proceedingscombined will not have a material adverse impact on the Company'sfinancial statements. Page 85Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.2 ------------ AMENDMENT TO THE CADIZ INC. 1996 STOCK OPTION PLANThe Cadiz Inc. 1996 Stock Option Plan is hereby amended asfollows: 1. Section 5.1.10 shall be amended by adding the following at the end of Section 5.1.10: "Notwithstanding the foregoing, the Participant, upon written notice to the Committee, may elect irrevocably, prior to exercise thereof, to voluntarily disqualify any ISO held by the Participant and to treat such Option for all purposes as a NQSQ. The Company hereby consents to any such valid disqualification of an ISO by a Participant and agrees to characterize such Option as a NQSQ after receipt of a valid disqualification election." 2. Section 6.1 shall be amended by adding the following at the end of Section 6.1: "Notwithstanding the foregoing, if the payment for Shares purchased pursuant to the Plan with respect to the exercise of any Options by a Participant who has a deferral election in effect under the Company's Deferred Compensation Plan (the "Deferral Plan") is paid solely by surrendering Common Stock (which meets the requirements set forth in the Deferral Plan), the Company shall deliver to the trustee of the trust, if any, established under the Deferral Plan, a certificate or certificates representing such number of shares of Common Stock determined by dividing (i) the excess of (A) the Fair Market Value of the shares of Common Stock purchased pursuant to such Option exercise, over (B) the aggregate exercise price of the shares of Common Stock purchased, by (ii) the Fair Market Value of one share of Common Stock. In addition, as soon as practicable after receipt of the shares of Common Stock representing the Option exercise price, the Company shall deliver to the Participant a certificate or certificates representing shares with a Fair Market Value equal to the aggregate option exercise price paid. For purposes of the foregoing, the exercise of any Option will be deemed to have occurred at 5:00 p.m. Pacific Standard time on the immediately preceding business day and Fair Market Value shall be determined as of such time." 3. Section 7.1 shall be replaced in its entirety with the following: "TAX WITHHOLDING. The Company may withhold, at the election of the Participant, from Common Stock to be issued or cash to be paid under the Plan, the number of shares of Common Stock having a Fair Market Value equal to, or cash in the amount of, or a combination of shares and cash equal to, the amount of tax required by any governmental authority to be withheld to cover any applicable withholding and employment taxes; provided, however, that in the event a deferral election is in effect with respect to the shares of Common Stock deliverable upon exercise of an Option, then the Participant may elect to have any such withholding made from the Common Stock tendered to exercise such Option. Alternatively, aSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Participant may pay to the Company the amount of cash required to be withheld in lieu of any withholding of distribution under the Plan." In accordance with authorizations and directions of the Board of Directors of Cadiz Inc., the foregoing amendment to the Cadiz Inc. 1996 Stock Option Plan is hereby adopted effective as of March 14, 2001, by the undersigned duly authorized officers. ___________________________________ Title: _______________________________ Title: SecretarySource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.3 ------------ CADIZ INC. AMENDED AND RESTATED 1998 NON-QUALIFIED STOCK OPTION PLAN1. PURPOSE ------- The purpose of the Plan is to provide incentives to attract,retain and motivate eligible persons whose present and potentialcontributions are important to the success of the Company and itsSubsidiaries and Affiliates, by offering them an opportunity toparticipate in the Company's future performance through awards ofOptions. It is intended that Options issued pursuant to this Planshall constitute non-qualified stock options ("NQSOs") asdescribed in Treasury Regulation Section 1.83-7 to which Section421 does not apply. Capitalized terms not defined in the text are defined inSection 20.2. SHARES SUBJECT TO THE PLAN -------------------------- 2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2and 14, the total number of Shares reserved and available forgrant and issuance pursuant to the Plan shall be 792,500 Shares;provided, however, that the total number of options granted underthe Plan, when combined with the total number of options granted(and not subsequently cancelled) by the Company under its 1996Stock Option Plan, shall at no time exceed 4,000,000. Subject toSections 2.2 and 14, Shares reserved for issuance pursuant toOptions granted under this Plan shall again be available forgrant and issuance, in connection with future Options under thePlan, that: (a) are subject to issuance upon exercise of anOption, but cease to be subject to such Option for any reasonother than exercise of such Option, or (b) are subject to anOption that otherwise terminates without such Shares being issuedand for which the participant did not receive any benefits ofownership. 2.2 ADJUSTMENT OF SHARES. In the event that the number ofoutstanding shares of the Company's Common Stock is changed by astock dividend, recapitalization, stock split, reverse stocksplit, subdivision, combination, reclassification or similarchange in the capital structure of the Company withoutconsideration, then: (a) the number of Shares reserved forissuance under the Plan, and (b) the Exercise Prices of andnumber of Shares subject to outstanding Options, shall beproportionately adjusted, subject to any required action by theBoard or the stockholders of the Company and compliance withapplicable securities laws; provided, however, that fractions ofa Share shall not be issued, but shall either be paid in cash atFair Market Value or shall be rounded up to the nearest Share, asdetermined by the Committee; and provided, further, that theExercise Price of any Option may not be decreased to below thepar value of the Shares. Page 13. ELIGIBILITY ----------- 3.1 ELIGIBILITY OF EMPLOYEES, CONSULTANTS AND INDEPENDENTCONTRACTORS; NON-ELIGIBILITY OF INSIDERS. NQSOs may be grantedto employees, consultants, independent contractors and advisersSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of the Company or any Subsidiary or Affiliate of the Company(other than Insiders, who shall not be eligible to receiveOptions under the Plan); provided, however, that suchconsultants, contractors and advisers render bona fide servicesnot in connection with the offer and sale of securities in acapital-raising transaction.4. ADMINISTRATION. -------------- 4.1 COMMITTEE AUTHORITY. The Plan shall be administered bythe Committee or the Board acting as the Committee. Subject tothe purposes, terms and conditions of the Plan, and to thedirection of the Board, the Committee shall have full power toimplement and carry out the Plan. The Committee shall have theauthority to: (a) construe and interpret the Plan, any Option Agreement and any other agreement or document executed pursuant to the Plan; (b) prescribe, amend and rescind rules and regulations relating to the Plan; (c) select persons to receive Options; (d) determine the form and terms of Options; (e) determine the number of Shares or other consideration subject to Options; (f) determine whether Options will be granted singly, in combination or in tandem with, in replacement of, or as alternatives to, other Options under the Plan or any other incentive or compensation plan of the Company or any Subsidiary or Affiliate of the Company; (g) grant waivers of Plan or Option conditions; (h) determine the vesting, exercisability and payment of Options and to accelerate the vesting and/or exercisability of Options, as provided herein; (i) correct, any defect, supply any omission, or reconcile any inconsistency in the Plan, any Option or any Option Agreement; (j) determine whether an Option has been earned; and (k) make all other determinations necessary or advisable for the administration of the Plan. Page 2 4.2 COMMITTEE DISCRETION. Any determination permitted tobe made by the Committee under the Plan with respect to anyOption shall be made in its sole discretion at the time of grantof the Option or, unless in contravention of any express term ofthe Plan or Option, at any later time, and such determinationshall be final and binding on the Company and all persons havingan interest in any Option under the Plan. 4.3 COMPOSITION OF COMMITTEE. The Committee shall becomprised of either (i) at least two members of the Board; or(ii) the Board acting as the Committee.5. GRANT AND EXERCISE OF OPTIONS ----------------------------- 5.1 GRANT OF OPTIONS. Except as otherwise limited herein,the Committee may grant Options to eligible persons pursuant tothis Section 5.1 and shall determine the number of Shares subjectto the Option, the Exercise Price of the Option, the periodduring which the Option may be exercised, and all other terms andSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.conditions of the Option, subject to the following: 5.1.1 FORM OF OPTION GRANT. Each Option granted shallbe evidenced by an Option Agreement, which shall expresslyidentify the Option as an NQSO ("Stock Option Agreement"), and bein such form and contain such provisions (which need not be thesame for each Participant receiving an Option) as the Committeeshall from time to time approve, and which shall comply with andbe subject to the terms and conditions of the Plan. TheCommittee may in its discretion include in any NQSO granted underthe Plan a condition that the Participant shall agree to remainin the employ of, and to render services to, the Company or anyof its Subsidiaries for a period of time (specified in theagreement) following the date the NQSO is granted. 5.1.2 DATE OF GRANT. The date of grant of an Optionshall be the date on which the Committee makes the determinationto grant such Option. The Stock Option Agreement and a copy ofthe Plan will be delivered to the Participant within a reasonabletime after the granting of such Option. 5.1.3 EXERCISE PERIOD. Options shall be exercisablewithin the times or upon the events determined by the Committeeas set forth in the Stock Option Agreement; provided, howeverthat no Option shall be exercisable after the expiration of ten(10) years from the date the Option is granted. 5.1.4 EXERCISE PRICE. The Exercise Price shall bedetermined by the Committee when an Option is granted and may benot less than the greater of (i) 100% of the Fair Market Value ofthe Shares on the date of grant, or (ii) the par value of theShares. Payment for the Shares purchased may be made inaccordance with Section 6 of the Plan. Page 3 5.1.5 METHOD OF EXERCISE. Options may be exercised onlyby delivery to the Company of a written stock option exerciseagreement (the "Exercise Agreement") in a form approved by theCommittee (which need not be the same for each Participantreceiving an Option pursuant to the Plan), stating the number ofShares being purchased, the restrictions imposed on the Shares,if any, and such representations and agreements regardingParticipant's investment intent, access to information and othermatters, if any, as may be required or desirable by the Companyto comply with applicable securities laws, together with paymentin full of the Exercise Price for the number of Shares beingpurchased. 5.1.6 TERMINATION. Notwithstanding the exercise periodsset forth in the Stock Option Agreement, exercise of an Optionshall always be subject to the following: (a) If the Participant is Terminated for any reason except death or Disability, then the Participant may exercise such Participant's Options, only to the extent that such Options would have been exercisable upon the Termination Date, no later than ninty (90) days after the Termination Date, but in any event, no later than the expiration date of the Options. (b) If the Participant is terminated because of death or Disability, then the Participant's Options may be exercised, only to the extent that such Options would have been exercisable by Participant on the Termination Date (whether through prior vesting or accelerated vesting pursuant to Section 5.2.3 of the Plan), and must be exercised by Participant (or Participant's legal representative or authorized assignee) no later than one hundred eighty (180) days after the Termination Date, but in any event no later than the expiration date of the Options. 5.1.7 LIMITATIONS ON EXERCISE. The Committee mayspecify a reasonable minimum number of Shares that may beSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.purchased on any exercise of an Option, provided that suchminimum number will not prevent Participant from exercising theOption for the full number of Shares for which it is thenexercisable. 5.1.8 MODIFICATION, EXTENSION OR RENEWAL. The Committeemay modify, extend or renew outstanding Options and authorize thegrant of new Options in substitution therefor, provided that anysuch action may not, without the written consent of aParticipant, impair any of such Participant's rights under anyOption previously granted. 5.2 ACCELERATED VESTING. 5.2.1 The Committee shall have the authority toaccelerate the exercisability of Options granted pursuant to theterms of this Plan. 5.2.2 Notwithstanding anything herein to the contrary,if a Change in Control of the Company occurs or if the Committeedetermines in its sole discretion that an Acceleration Event hasoccurred, then all Options shall become fully exercisable as ofthe date such Change in Control occurred or the Committeedetermines that an Acceleration Event has occurred. Page 4 5.2.3 Notwithstanding anything herein to the contrary,any Options granted under the Plan, the vesting of which areconditioned solely upon the passage of time and continuedemployment of the Option holder, shall be accelerated and shallbe immediately exercisable upon the death or disability of suchOption holder (subject only to the limitations on exercise setforth in Section 5.1.6 of the Plan).6. PAYMENT FOR SHARE PURCHASES --------------------------- 6.1 PAYMENT. Payment for Shares purchased pursuant to thePlan may be made in cash (by check or equivalent) or, whereexpressly approved by the Committee and permitted by law by: (a) by cancellation of indebtedness of the Company to the Participant; (b) by surrender of shares of the Company's Common Stock that either: (1) have been owned by Participant for more than six (6) months and have been paid for within the meaning of Rule 144 of the Securities Act; or were obtained by Participant in the public market; and, (2) are clear of all liens, claims, encumbrances or security interests; (c) by waiver of compensation due or accrued to Participant for services rendered; (d) provided that a public market for the Company's stock exists and subject to the ability of the Participant to sell Shares in compliance with applicable securities laws: (i) through a "same day sale" commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD Dealer") whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased in order to pay the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or (ii) through a "margin" commitment from the Participant and an NASD Dealer whereby Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a marginSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or (e) by any combination of the foregoing. Notwithstanding the foregoing, if the payment for Sharespurchased pursuant to the Plan with respect to the exercise of anyOptions by a Participant who has a deferral election in effectunder the Company's Deferred Compensation Plan (the "DeferralPlan") is paid solely by surrendering Common Stock (which meetsthe requirements set forth in the Deferral Plan), the Companyshall deliver to the trustee of the trust, if any, establishedunder the Deferral Plan, a certificate or certificatesrepresenting such number of shares of Page 5Common Stock determined by dividing (i) the excess of (A) the Fair Market Value of the shares of Common Stock purchased pursuant to such Option exercise, over (B) the aggregate exercise price of the shares of Common Stock purchased, by (ii) the Fair Market Value of one share of Common Stock. In addition, as soon as practicable after receipt of the shares of Common Stock representing the Option exercise price, the Company shall deliver to the Participant a certificate or certificates representing shares with a Fair Market Value equal to the aggregate option exercise price paid. For purposes of the foregoing, the exercise of any Option will be deemed to have occurred at 5:00 p.m. Pacific Standard time on the immediately preceding business day and Fair Market Value shall be determined as of such time. 7. WITHHOLDING TAXES ----------------- 7.1 TAX WITHHOLDING. The Company may withhold, at the election of the Participant, from Common Stock to be issued or cash to be paid under the Plan, the number of shares of Common Stock having a Fair Market Value equal to, or cash in the amount of, or a combination of shares and cash equal to, the amount of tax required by any governmental authority to be withheld to cover any applicable withholding and employment taxes; provided, however, that in the event a deferral election is in effect with respect to the shares of Common Stock deliverable upon exercise of an Option, then the Participant may elect to have any such withholding made from the Common Stock tendered to exercise such Option. Alternatively, a Participant may pay to the Company the amount of cash required to be withheld in lieu of any withholding of distribution under the Plan.8. PRIVILEGES OF STOCK OWNERSHIP ----------------------------- 8.1 VOTING AND DIVIDENDS. No Participant shall have any ofthe rights of a stockholder with respect to any Shares until theShares are issued to the Participant. After Shares are issued tothe Participant, the Participant shall be a stockholder and haveall the rights of a stockholder with respect to such Shares,including the right to vote and receive all dividends or otherdistributions made or paid with respect to such Shares. 8.2 FINANCIAL STATEMENTS. The Company shall providefinancial statements to each Participant annually during theperiod such Participant has Options outstanding, provided,however, that the Company shall not be required to provide suchfinancial statements to Participants whose services in connectionwith the Company assure them access to equivalent information.9. TRANSFERABILITY --------------- Options granted under the Plan, and any interest therein,shall not be transferable or assignable by Participant, and maynot be made subject to execution, attachment or similar process,Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.otherwise than by will or by the laws of descent and distributionor as consistent with the specific Plan and Option Agreementprovisions relating thereto. During the lifetime of theParticipant, an Option shall be exercisable only by theParticipant, and any elections with respect to an Option, may bemade only by the Participant.10. CERTIFICATES ------------ All certificates for Shares or other securities deliveredunder the Plan shall be subject to such stock transfer orders,legends and other restrictions as the Committee may deem Page 6necessary or advisable, including restrictions under anyapplicable federal, state or foreign securities law, or anyrules, regulations and other requirements of the SEC or any stockexchange or automated quotation system upon which the Shares maybe listed.11. EXCHANGE AND BUYOUT OF OPTIONS ------------------------------ The Committee may, at any time or from time to time,authorize the Company, with the consent of the respectiveParticipants, to issue new Options in exchange for the surrenderand cancellation of any or all outstanding Options. The Committeemay at any time buy from a Participant an Option previouslygranted with payment in cash, Shares or other consideration,based on such terms and conditions as the Committee and theParticipant shall agree.12. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE ---------------------------------------------- An Option shall not be effective unless such Option is incompliance with all applicable federal and state securities laws,rules and regulations of any governmental body, and therequirements of any stock exchange or automated quotation systemupon which the Shares may then be listed, as they are in effecton the date of grant of the Option and also on the date ofexercise or other issuance. Notwithstanding any other provisionin the Plan, the Company shall have no obligation to issue ordeliver certificates for Shares under the Plan prior to: (a)obtaining any approvals from governmental agencies that theCompany determines are necessary or advisable, and/or (b)completion of any registration or other qualification of suchShares under any state or federal law or ruling of anygovernmental body that the Company determines to be necessary oradvisable. The Company shall be under no obligation to registerthe Shares with the SEC or to effect compliance with theregistration, qualification or listing requirements of any statesecurities laws, stock exchange or automated quotation system,and the Company shall have no liability for any inability orfailure to do so.13. NO OBLIGATION TO EMPLOY ----------------------- Nothing in the Plan or any Option granted under the Planshall confer or be deemed to confer on any Participant any rightto continue in the employ of, or to continue any otherrelationship with, the Company, or any Subsidiary or Affiliateof the Company or limit in any way the right of the Company orany Subsidiary or Affiliate of the Company to terminateParticipant's employment or other relationship at any time, withor without cause.14. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE ------------------------------------------ The existence of outstanding Options shall not affect in anyway the right or power of the Company or its stockholders to makeSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.or authorize all adjustments, recapitalizations, reorganizationsor other changes in the Company's capital structure or itsbusiness, or any merger or consolidation of the Company, or anyissue of bonds, debentures, preferred or prior preference stockahead of or affecting the Common Stock or the rights thereof, orthe dissolution or liquidation of the Company, or any othercorporate act or proceeding, whether of a similar character orotherwise. If the Company shall effect a subdivision or consolidationof shares or other capital readjustment, the payment of a stockdividend, or other increase or reduction of the number of sharesof its Common Stock outstanding, without receiving compensationtherefor in money, services or property, then (i) the number,class, and per share price of Shares subject to outstandingOptions hereunder shall be appropriately adjusted in such amanner as to entitle a Page 7Participant to receive upon exercise thereof (and, if relevant, for the same aggregate cash consideration), the same total number and class of shares as such Participant would have received had such Participant exercised such Option in full immediately prior to such event; and (ii) the number and class of shares with respect to which Options may be granted under the Plan shall be adjusted by substituting for the total number of shares of Common Stock then reserved that number and class of shares of stock that would have been received by the owner of an equal number of outstanding shares of Common Stock as the result of the event requiring the adjustment. After a merger of one or more corporations into the Company,or after a consolidation of the Company and one or morecorporations in which the Company shall be the survivingcorporation, each holder of an outstanding Option shall, at noadditional cost, be entitled to receive upon exercise of suchOption (subject to any required action by stockholders of theCompany) in, lieu of the number of Shares as to which such Optionshall then be so exercisable, the number and class of shares ofstock or other securities to which such holder would have beenentitled pursuant to the terms of the agreement of merger orconsolidation if, immediately prior to such merger orconsolidation, such holder had been the holder of record of anumber of shares of Common Stock equal to the number of shares asto which such Option shall be so exercised. If the Company is merged into or consolidated with anothercorporation under circumstances where the Company is not thesurviving corporation, or if the Company is liquidated, or sellsor otherwise disposes of substantially all its assets to anothercorporation while unexercised Options remain outstanding underthe Plan, (i) subject to the provisions of clause (ii) below,after the effective date of such merger, consolidation or sale,as the case may be, each holder of an outstanding Option shall beentitled to receive upon exercise of such Option in lieu ofshares of Common Stock, shares of such stock or other securities,cash or property as the holders of shares of Common Stockreceived pursuant to the terms of the merger, consolidation orsale; or (ii) all outstanding Options may be canceled by theBoard as of the effective date of any such merger, consolidation,liquidation or sale provided that: (x) notice of suchcancellation shall be given to each holder of an Option, and (y)each holder of an Option shall have the right to exercise suchOption to the extent that the same is then exercisable or, if theBoard shall have accelerated the time for exercise of allunexercised and unexpired Options, in full during the 30-dayperiod preceding the effective date of such merger,consolidation, liquidation or sale. Except as expressly provided above, the issue by the Companyof shares of stock of any class, securities convertible intoshares of stock of any class, for cash, property or services,either upon direct sale or upon the exercise of rights orwarrants to subscribe therefor, or upon conversion of shares orSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.obligations of the Company convertible into such shares or othersecurities, shall not affect, and no adjustment by reason thereofshall be made with respect to, the number or price of Shares thensubject to outstanding Options.15. ADOPTION -------- The Plan shall become effective on the date that it isadopted by the Board (the "Effective Date").16. TERM OF PLAN ------------ The Plan will terminate ten (10) years from the Effective Date. Page 817. AMENDMENT OR TERMINATION OF PLAN -------------------------------- The Board may at any time terminate or amend the Plan in anyrespect, including without limitation amendment of any form ofOption Agreement or instrument to be executed pursuant to thePlan; provided, however, that no termination or amendment to thisPlan may, without the consent of the holder of an outstandingOption, terminate such Option or materially adversely affect therights of the holder under such Option.18. NONEXCLUSIVITY OF THE PLAN -------------------------- Neither the adoption of the Plan by the Board nor anyprovision of the Plan shall be construed as creating anylimitations on the power of the Board to adopt such additionalcompensation arrangements as it may deem desirable, including,without limitation, the granting of stock options and bonuses otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.19. GOVERNING LAW ------------- The Plan and all agreements, documents and instrumentsentered into pursuant to the Plan shall be governed by andconstrued in accordance with the internal laws of the State ofCalifornia, excluding that body of law pertaining to conflict oflaws.20. DEFINITIONS ----------- As used in the Plan, the following terms shall have thefollowing meanings: "ACCELERATION EVENT" means but is not limited to, any Changeof Control of the Company or other event determined in thediscretion of the Committee. "AFFILIATE" means any corporation that directly, orindirectly through one or more intermediaries, controls or iscontrolled by, or is under common control with, anothercorporation, where "control" (including the terms "controlled by"and "under common control with" means the possession, direct orindirect, of the power to cause the direction of the managementand policies of the corporation, whether through the ownership ofvoting securities, by contract or otherwise. "BOARD" means the Board of Directors of the Company. "CHANGE IN CONTROL" means the occurrence of any of thefollowing events: (a) when the Company acquires actual knowledge that anyperson (as such term is used in Sections 13(d) and 14(d) of theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exchange Act) is or becomes the beneficial owner (as defined inRule 13d-3 of the Exchange Act) directly or indirectly, ofsecurities of the Company representing 25% or more of thecombined voting power of the Company's then-outstandingsecurities; (b) upon the first purchase of Common Stock pursuant to atender or exchange offer (other than a tender or exchange offermade by the Company); (c) upon the approval by the Company's shareholders of: (i)a merger or consolidation of the Company with or into anothercorporation, which does not result in any capital reorganizationor reclassification or other change in the Company's then-outstanding shares of Page 9Common Stock), (ii) a sale or disposition of all or substantially all of the Company's assets, or (iii) a plan of liquidation or dissolution of the Company; (d) if during any period of two consecutive years, theindividuals who at the beginning of such period constitute theBoard of Directors of the Company cease for any reason toconstitute at least a majority thereof, unless the election, orthe nomination for election by the Company's shareholders, ofeach new director is approved by a vote of at least two-thirds ofthe directors then still in office who were directors at thebeginning of the period; or (e) if the Board of Directors or any designated committeedetermines, in its sole discretion, that any person (such as thatterm is used in Sections 13(d) and 14(d) of the Exchange Act)directly or indirectly exercises a controlling influence over themanagement or policies of the Company. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMITTEE" means the committee appointed by the Board toadminister the Plan, or if no committee is appointed, the Board. "COMPANY" means Cadiz Inc., a corporation organized underthe laws of the State of Delaware, or any successor corporation. "DISABILITY" means a disability, whether temporary orpermanent, partial or total, within the meaning of Section22(e)(3) of the Code, as determined by the Committee. "EXCHANGE ACT" means the Securities Exchange Act of 1934, asamended. "EXERCISE PRICE" means the price at which a holder of anOption may purchase the Shares issuable upon exercise of theOption, but in no event shall such price be less than the parvalue of the Common Stock. "FAIR MARKET VALUE" means, as of any date, the value of ashare of the Company's Common Stock determined as follows: (a) if such Common Stock is then quoted on the NasdaqNational Market System, its last reported sale price on theNasdaq National Market or, if no such reported sale takes placeon such date, the average of the closing bid and asked prices; (b) if such Common Stock is publicly traded and is thenlisted on a national securities exchange, the last reported saleprice or, if no such reported sale takes place on such date, theaverage of the closing bid and asked prices on the principalnational securities exchange on which the Common Stock is listedor admitted to trading; (c) if such Common Stock is publicly traded but is notquoted on the Nasdaq National Market nor listed or admitted totrading on a national securities exchange, the average of theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.closing bid and asked prices on such date, as reported by theWall Street Journal, for the over-the-counter market; or (d) if none of the foregoing is applicable, by the Board ofDirectors of the Company in good faith. Page 10 "INSIDER" means an officer or director of the Company orother person whose transactions in the Company's Common Stock aresubject to Section 16 of the Exchange Act. "OPTION" means an option to purchase Shares of Common Stockof the Company pursuant to Section 5. "OPTION AGREEMENT" means, with respect to each Option, thesigned written agreement between the Company and the Participantsetting forth the terms and conditions of the Option. "PARTICIPANT" means a person who receives an Option underthe Plan. "PLAN" means this Cadiz Inc., 1998 Non-Qualified StockOption Plan, as amended from time to time. "SECURITIES ACT" means the Securities Act of 1933, asamended. "SHARES" means shares of the Company's Common Stock, $0.01par value, reserved for issuance under the Plan, as adjustedpursuant to Sections 2 and 14, and any security issued in respectthereto or in replacement therefor. "SUBSIDIARY" means any corporation (other than the Company)in an unbroken chain of corporations beginning with the Companyif, at the time of granting of the Option, each of thecorporations other than the last corporation in the unbrokenchain owns stock possessing 50% or more of the total combinedvoting power of all classes of stock in one of the othercorporations in such chain. "TERMINATION" or "TERMINATED" means, for purposes of thePlan with respect to a Participant, that the Participant hasceased to provide services as an employee, director, consultant,independent contractor or adviser, to the Company or a Subsidiaryor Affiliate of the Company, except in the case of sick leave,military leave, or any other leave of absence approved by theCommittee, provided, that such leave is for a period of not morethan ninety (90) days, or reinstatement upon the expiration ofsuch leave is guaranteed by contract or statute. The Committeeshall have sole discretion to determine whether a Participant hasceased to provide services and the effective date on which theParticipant ceased to provide services (the "Termination Date"). Page 11 TABLE OF CONTENTS1. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . .12. SHARES SUBJECT TO THE PLAN. . . . . . . . . . . . . . . . .1 2.1 Number of Shares Available. . . . . . . . . . . . . . 1 2.2 Adjustment of Shares. . . . . . . . . . . . . . . . . 13. ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . 2 3.1 Eligibility of Employees, Consultants and Independent Contractors; Non-Eligibility of Insiders. . . . . . . . . . . . . .24. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . .2 4.1 Committee Authority. . . . . . . . . . . . . . . . . .2Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 4.2 Committee Discretion . . . . . . . . . . . . . . . . .3 4.3 Composition of Committee . . . . . . . . . . . . . . .35. GRANT AND EXERCISE OF OPTIONS. . . . . . . . . . . . . . . 3 5.1 Grant of Options. . . . . . . . . . . . . . . . . . . 3 5.1.1Form of Option Grant. . . . . . . . . . . . . . .3 5.1.2Date of Grant . . . . . . . . . . . . . . . . . .3 5.1.3Exercise Period. . . . . . . . . . . . . . . . . 3 5.1.4Exercise Price. . . . . . . . . . . . . . . . . .3 5.1.5Method of Exercise. . . . . . . . . . . . . . . .4 5.1.6Termination. . . . . . . . . . . . . . . . . . . 4 5.1.7Limitations on Exercise. . . . . . . . . . . . . 4 5.1.8Modification, Extension or Renewal. . . . . . . .4 5.2 Accelerated Vesting. . . . . . . . . . . . . . . . . .46. PAYMENT FOR SHARE PURCHASES. . . . . . . . . . . . . . . . 5 6.1 Payment. . . . . . . . . . . . . . . . . . . . . . . .57. TAX WITHHOLDING. . . . . . . . . . . . . . . . . . . . . . 6 7.1 Withholding Generally. . . . . . . . . . . . . . . . .68. PRIVILEGES OF STOCK OWNERSHIP. . . . . . . . . . . . . . . 6 8.1 Voting and Dividends. . . . . . . . . . . . . . . . . 6 8.2 Financial Statements. . . . . . . . . . . . . . . . . 69. TRANSFERABILITY. . . . . . . . . . . . . . . . . . . . . . 610. CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . .611. EXCHANGE AND BUYOUT OF OPTIONS. . . . . . . . . . . . . . .712. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. . . . . . .713. NO OBLIGATION TO EMPLOY. . . . . . . . . . . . . . . . . . 714. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. . . . . . . . .715. ADOPTION. . . . . . . . . . . . . . . . . . . . . . . . . .816. TERM OF PLAN. . . . . . . . . . . . . . . . . . . . . . . .817. AMENDMENT OR TERMINATION OF PLAN. . . . . . . . . . . . . .918. NONEXCLUSIVITY OF THE PLAN. . . . . . . . . . . . . . . . .919. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . 920. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 9Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.9 ------------ FIFTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of March 7, 2002 for Credit Agreement originally executed as of November 25, 1997 among CADIZ INC., The Lenders Party Hereto and ING BARING (U.S.) CAPITAL LLC, as Administrative Agent TABLE OF CONTENTS PageSECTION 1.01 Defined terms. . . . . . . . . . . . . . . . . . . . . . . . ..2SECTION 1.02 [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . .18SECTION 1.03 Terms Generally. . . . . . . . . . . . . . . . . . . . . . . .18SECTION 1.04 Accounting Terms; GAAP. . . . . . . . . . . . . . . . . . . . 18SECTION 2.01 Commitments. . . . . . . . . . . . . . . . . . . . . . . . . .19SECTION 2.02 Loans and Borrowings. . . . . . . . . . . . . . . . . . . . . 19SECTION 2.03 Requests for Borrowings. . . . . . . . . . . . . . . . . . . .20SECTION 2.04 Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . .20SECTION 2.05 [Intentionally Omitted] . . . . . . . . . . . . . . .. . . . .20SECTION 2.06 Funding of Borrowings. . . . . . . . . . . . . . . . . . . . .20SECTION 2.07 Conversion of Rights for Holders of Tranche B Loans. . . . . .21SECTION 2.08 Security. . . . . . . . . . . . . . . . . . . . . . . . . . . 27SECTION 2.09 Termination and Reduction of Commitments. . . . . . . . . . . 28SECTION 2.10 Repayment of Loans; Evidence of Debt. . . . . . . . . . . . . 29SECTION 2.11 Prepayment of Loans; Reborrowings. . . . . . . . . . . . . . .30SECTION 2.12 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30SECTION 2.13 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 30SECTION 2.14 Stock Payment Election. . . . . . . . . . . . . . . . . . . . 31SECTION 2.15 Increased Costs. . . . . . . . . . . . . . . . . . . . . . . .32SECTION 2.16 Increased Costs; Problems Ascertaining Applicable Interest Rate. . . . . . . . . . . . . . .. . . . .33SECTION 2.17 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33SECTION 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-offs. . . . . . . . . . . . . . . . . . . . . .34SECTION 2.19 Mitigation Obligations; Replacement of Lenders. . . . . . . . 35SECTION 2.20 Break Funding Payments. . . . . . . . . . . . . . . . . . . . 36SECTION 2.21 Certain Mandatory Prepayments . . . . . . . . . . . . . . . . 37SECTION 2.22 Registration Rights . . . . . . . . . . . . . . . . . . . . . 38SECTION 3.01 Organization Powers . . . . . . . . . . . . . . . . . . . . . 39SECTION 3.02 Authorization; Enforceability . . . . . . . . . . . . . . . . 39SECTION 3.03 Governmental Approvals; No Conflicts . . . . . . . . . . . . .39SECTION 3.04 Financial Condition; No Material Adverse Change . . . . . . . 39SECTION 3.05 Properties . . . . . . . . . . . . . . . . . . . . . . . . . .40SECTION 3.06 Litigation and Environmental Matters . . . . . . . . . . . . .40SECTION 3.07 Compliance with Laws and Agreements . . . . . . . . . . . . . 40SECTION 3.08 Investment and Holding Company Status . . . . . . . . . . . . 41SECTION 3.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41SECTION 3.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41SECTION 3.11 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . .41SECTION 3.12 Security Interests . . . . . . . . . . . . . . . . . . . . . .41SECTION 3.13 Participating Subsidiaries . . . . . . . . . . . . . . . . . .42SECTION 3.14 Inactive Subsidiaries . . . . . . . . . . . . . . . . . . . . 42SECTION 3.15 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . .42SECTION 3.16 Excluded Items . . . . . . . . . . . . . . . . . . . . . . . .42Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SECTION 3.17 Equity Acquisition Assets . . . . . . . . . . . . . . . . . . 42 Page i SECTION 3.18 Rolling Stock. . . . . . . . . . . . . . . . . . . . . . . . .42SECTION 3.19 Certain Acknowledgements . . . . . . . . . . . . . . . . . . .43SECTION 3.20 No Satisfaction. . . . . . . . . . . . . . . . . . . . . . . .43SECTION 4.01 Effective Date . .. . . . . . . . . . . . . . . . . . . . . . 44SECTION 4.02 Each Credit Event . . .. . . . . . . . . . . . . . . . . . . .48SECTION 5.01 Financial Statements and Other Information. . . . . . . . . . 48SECTION 5.02 Notices of Material Events. . . . . . . . . . . . . . . . . . 49SECTION 5.03 Existence; Conduct of Business. . . . . . . . . . . . . . . . 50SECTION 5.04 Payment of Obligations. . . . . . . . . . . . . . . . . . . . 50SECTION 5.05 Maintenance of Properites; Insurance. . . . . . . . . . . . . 50SECTION 5.06 Books and Records; Inspection Rights. . . . . . . . . . . . . 50SECTION 5.07 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 50SECTION 5.08 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . .50SECTION 5.09 New Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 51SECTION 5.10 Acquisition by Borrower. . . . . . . . . . . . . . . . . . . .51SECTION 5.11 Acquisitions with Proceeds of Loans . . . . . . . . . . . . . 52SECTION 5.12 Revolving Credit Agreement Warrants . . . . . . . . . . . . . 52SECTION 5.13 Stock Payment Common Stock. . . . . . . . . . . . . . . . . . 53SECTION 5.14 Conversion Shares. . . . . . . . . . . . . . . . . . . . . . .53SECTION 6.01 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 53SECTION 6.02 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . .54SECTION 6.04 Fundamental Changes. . . . . . . . . . . . . . . . . . . . . .55SECTION 6.04 Investments, Loans, Advances, Guarantees and Acquisitions . . 56SECTION 6.05 Hedging Agreements. . . . . . . . . . . . . . . . . . . . . . 56SECTION 6.06 Restricted Payments. . . . . . . . . . . . . . . . . . . . . .56SECTION 6.07 Transactions with Affiliates. . . . . . . . . . . . . . . . . 56SECTION 6.08 Restrictive Agreements. . . . . . . . . . . . . . . . . . . . 57SECTION 6.09 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . .57SECTION 6.10 Management Fees from Sun World. . . . . . . . . . . . . . . . 57SECTION 8.01 Appointment, Powers and Immunities . . . . . . . . . . . . . .61SECTION 8.02 Administrative Agent in its Individual Capacity. . . . . . . .61SECTION 8.03 Nature of Duties of Administrative Agent. . . . . . . . . . . 62SECTION 8.04 Certain Rights of Administrative Agent. . . . . . . . . . . . 62SECTION 8.05 Reliance by Administrative Agent. . . . . . . . . . . . . . . 62SECTION 8.06 Sub-Agents. . . . . . . . . . . . . . . . . . . . . . . . . . 63SECTION 8.07 Resignation by Administrative Agent. . . . . . . . . . . . . .63SECTION 8.08 Non-Reliance on Administrative Agent and Other Lenders. . . . 63SECTION 8.09 Security Documents. . . . . . . . . . . . . . . . . . . . . . 64SECTION 9.01 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .64SECTION 9.02 Waivers; Amendments. . . . . . . . . . . . . . . . . . . . . .66SECTION 9.03 Expenses; Indemnity; Damage Waiver. . . . . . . . . . . . . . 67SECTION 9.04 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 68SECTION 9.05 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 70SECTION 9.06 Counterparts; Integration, Effectiveness . . . . . . . . . . .70SECTION 9.07 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 70SECTION 9.08 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . .70 Page iiSECTION 9.09 Governing Law; Jurisdiction; Consent to Service of Process. . . . . . . . . . . . . . . . .71SECTION 9.10 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . 71SECTION 9.11 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 72SECTION 9.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 72SECTION 9.13 Foreclosure of Cadiz/Sun World Lease. . . . . . . . . . . . . 72SECTION 9.14 Waiver of Anti-Deficiency Protection. . . . . . . . . . . . . 73SECTION 9.15 Costs Borne by Non-Prevailing Party . . . . . . . . . . . . . 73SECTION 9.16 Interest Rate Limitation. . . . . . . . . . . . . . . . . . . 73SECTION 9.17 Status of ING . . . . . . . . . . . . . . . . . . . . . . . . 73SECTION 9.18 Amendments to Sun World Indenture . . . . . . . . . . . . . . 73SECTION 9.19 General Release . . . . . . . . . . . . . . . . . . . . . . . 74SCHEDULES:Schedule 2.01 -- CommitmentsSchedule 2.04 -- Borrower's Wire Instructions for Initial BorrowingSchedule 3.13 -- Borrower's Participating SubsidiariesSchedule 3.14 -- Borrower's Inactive SubsidiariesSchedule 6.01 -- Existing IndebtednessSchedule 6.02 -- Existing LiensSchedule 6.08 -- Existing RestrictionsSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBITS:Exhibit A - Additional Stock Letter AgreementExhibit B - Form of Assignment and AcceptanceExhibit C - Cadiz Reaffirmation AgreementExhibit D - Fee Warrant CertificateExhibit E - Tranche A Note, with Amendments thereto (previously executed)Exhibit F - Tranche B NoteExhibit G - Purchaser CertificateExhibit H - Registration Rights AddendumExhibit I - Fourth Amendment to Revolving Credit NoteExhibit J - Fourth Modification of Pledge and Security AgreementExhibit K - Fourth Modification of Revolver Deed of TrustExhibit L - Fourth Modification of Revolver SWFG Deed of TrustExhibit M - Fourth Modification of Revolver Piute Deed of TrustExhibit N - Form of Opinion of Borrower's Counsel Page iii FIFTH AMENDED AND RESTATED CREDIT AGREEMENT dated as ofMarch 7, 2002, among CADIZ INC. (f/k/a Cadiz Land Company, Inc.),the LENDERS party hereto, and ING BARING (U.S.) CAPITAL LLC.(f/k/a ING Baring (U.S.) Capital Corporation), as AdministrativeAgent. W I T N E S S E T H: WHEREAS, pursuant to that certain Revolving CrediLAgreement, dated as of November 25, 1997 (the "1997 RevolvingCredit Agreement"), among Borrower, the Lenders party thereto andthe Administrative Agent, as agent for such Lenders, such Lendersagreed to provide a revolving credit facility to Borrower; WHEREAS, pursuant to that certain First Amendment toCredit Agreement, dated as of September 28, 1999, by and betweenBorrower, Lenders and the Administrative Agent (the "FirstAmendment Agreement"), the parties agreed to amend certain termsof the 1997 Revolving Credit Agreement; WHEREAS, pursuant to that certain Second Amendment toCredit Agreement, dated as of December 22, 1999, by and betweenBorrower, Lenders and the Administrative Agent (the "SecondAmendment Agreement"), and the other Second Amendment Documents,as defined in the Second Amendment Agreement (collectively, the"Second Amendment Documents"), the parties agreed to amendcertain terms of the 1997 Revolving Credit Agreement, as amendedand in effect at that time; WHEREAS, pursuant to that certain Third Amendment toCredit Agreement, dated as of December 22, 2000, by and betweenBorrower, Lenders and the Administrative Agent (the "ThirdAmendment Agreement"), as amended by that certain First Amendmentto Third Amendment to Credit Agreement dated as of October 22,2001 between Borrower, Lenders and the Administrative Agent, andthe other Third Amendment Documents, as defined in the ThirdAmendment Agreement (collectively, the "Third AmendmentDocuments"), the parties agreed to amend certain terms of the1997 Revolving Credit Agreement, as amended and in effect at thattime; WHEREAS, pursuant to that certain Fourth Amendment toCredit Agreement, dated as of January 31, 2002, by and betweenBorrower, Lenders and the Administrative Agent (the "FourthAmendment Agreement"), and the other Fourth Amendment Documents,as defined in the Fourth Amendment Agreement (collectively, the"Fourth Amendment Documents"), the parties agreed to amendcertain terms of the 1997 Revolving Credit Agreement, as amendedand in effect at that time; WHEREAS, the Borrower has requested that the 1997Revolving Credit Agreement, as amended and in effect at thistime, be amended and restated in its entirety and that Page 1 Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. an additional new $10 million convertible revolvingfacility be added to the existing credit facility; WHEREAS, the Lenders and the Administrative Agent arewilling to amend and restate the 1997 Revolving Credit Agreement,as amended and in effect at this time, in its entirety on theterms and subject to the conditions and requirements set forth inthis Agreement. NOW THEREFORE, in consideration of the premises andmutual covenants contained herein, the parties to this Agreementhereby agree to amend and restate the 1997 Revolving CreditAgreement, as amended and in effect at this time, in its entiretyas follows: ARTICLE I DEFINITIONS ----------- SECTION 1.01. DEFINED TERMS. As used in thisAgreement, the following terms have the meanings specified below: "ADDITIONAL STOCK LETTER AGREEMENT" means that certainletter agreement between Borrower and Administrative Agent in theform as attached hereto in Exhibit A that provides that Borrowershall issue 25,000 shares of Borrower's common stock to theAdministrative Agent if at least the principal amount of$10,000,000 of Term Loan Obligations and/or Tranche A Loans arenot prepaid (and, to the extent that Tranche A Loans are prepaid,with the termination and permanent reduction of Tranche ACommitments in such amount) between the Effective Date and on orprior to July 31, 2002. "ADMINISTRATIVE AGENT" means ING Baring (U.S.) CapitalLLC, in its capacity as administrative agent for the Lendershereunder. "ADMINISTRATIVE QUESTIONNAIRE" means an AdministrativeQuestionnaire in a form supplied by the Administrative Agent. "AFFILIATE" means, with respect to a specified Person,another Person that directly, or indirectly through one or moreintermediaries, Controls or is Controlled by or is under commonControl with the Person specified. "AGREEMENT" means this Fifth Amended and RestatedCredit Agreement, dated as of the date set forth above, amongBorrower, the Lenders party hereto, and the Administrative Agent. "APPLICABLE INTEREST RATE" means, with respect to anyBorrowing for any Interest Period, either (a) if the Borrowerdoes not elect the Stock Payment Election, the Cash Payment Rate,or (b) if the Borrower elects the Stock Payment Election, theStock Payment Rate. "APPLICABLE PERCENTAGE" means, with respect to anyLender, the percentage of the total Commitments represented bysuch Lender's Commitment. If the Commitments have Page 2 terminated or expired, the Applicable Percentages shallbe determined based upon the Commitments most recently in effect,giving effect to any assignments. "ASSIGNMENT AND ACCEPTANCE" means an assignment andacceptance entered into by a Lender and an assignee (with theconsent of any party whose consent is required by Section 9.04),and accepted by the Administrative Agent, in the form ofExhibit B or any other form approved by the Administrative Agent. "AVAILABILITY PERIOD" means the period from andincluding the Effective Date to but excluding the earlier of theMaturity Date and the date of termination of the Commitments.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "BOARD" means the Board of Governors of the FederalReserve System of the United States of America. "BORROWER" means Cadiz Inc., a Delaware corporation. "BORROWING" means Loans of a Lender made, converted orcontinued on the same date. "BORROWING REQUEST" means a request by the Borrower fora Borrowing in accordance with Section 2.03. "BUSINESS DAY" means any day that is not a Saturday,Sunday or other day on which commercial banks in New York Cityare authorized or required by law to remain closed. "CADIZ REAFFIRMATION AGREEMENT" means the agreementevidencing Borrower's assumption and reaffirmation of allliabilities and obligations of Cadiz Valley DevelopmentCorporation in the form as attached hereto in Exhibit C. "CADIZ/SUN WORLD LEASE" means that certain AgriculturalLease by and between Southwest Fruit Growers, L.P. and theBorrower (both in its own capacity and as successor by merger toCadiz Valley Development Corporation), the lessors, and SunWorld, as lessee, dated as of September 13, 1996, as amended bythat certain Amendment to Lease with Lender Cure Rights betweenSouthwest Fruit Growers, L.P., Cadiz, Sun World and CreditAgricole, dated as of September 13, 1996, as further amended bythat certain Amendment to Agricultural Lease, dated as of April16, 1997, as further amended from time to time. "CADIZ/SUN WORLD SERVICES AGREEMENT" means that certainServices Agreement between Borrower and Sun World, datedSeptember 13, 1996, as amended by that certain Amendment dated asof April 16, 1997, as further amended from time to time. "CAPITAL LEASE OBLIGATIONS" of any Person means theobligations of such Person to pay rent or other amounts under anylease of (or other arrangement conveying the right to use) realor personal property, or a combination thereof, which obligationsare required to be classified and accounted for as capital leaseson a balance sheet of such Person under GAAP, and the amount ofsuch obligations shall be the capitalized amount thereofdetermined in accordance with GAAP. PAGE 3 "CASH EQUIVALENT" has the meaning assigned to such termin the Sun World Indenture. "CASH PAYMENT RATE" means the sum of (a) the LIBO Rate,computed in accordance with Section 2.13, plus (b) 3.0%. "CHANGE IN CONTROL" means (a) the acquisition ofownership, directly or indirectly, beneficially or of record, byany Person or group (within the meaning of the SecuritiesExchange Act of 1934 and the rules of the Commission thereunderas in effect on the date hereof), of shares representing morethan 35% of the aggregate ordinary voting power represented bythe issued and outstanding capital stock of the Borrower;(b) occupation of a majority of the seats (other than vacantseats) on the board of directors of the Borrower by Persons whowere neither (i) nominated by the board of directors of theBorrower nor (ii) appointed by directors so nominated; or (c) theacquisition of direct or indirect Control of the Borrower by anyPerson or group. "CHANGE IN LAW" means (a) the adoption of any law, ruleor regulation after the date of this Agreement, (b) any change inany law, rule or regulation or in the interpretation orapplication thereof by any Governmental Authority after the dateof this Agreement or (c) compliance by any Lender (or, forpurposes of Section 2.15(b), by any lending office of such Lenderor by such Lender's holding company, if any) with any request,Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.guideline or directive (whether or not having the force of law)of any Governmental Authority made or issued after the date ofthis Agreement. "CHARGES" has the meaning ascribed to such term inSection 9.16 hereof. "CLOSING PRICE" means the last sale price per share ofCommon Stock regular way or, in the case no such reported saletakes place on such day, the average of the last reported bid andasked prices regular way, in either case on the principalnational securities exchange on which the Common Stock isadmitted to trading on such exchange, the average of the lastreported bid and asked prices as reported by Nasdaq, or othersimilar organization if Nasdaq is no longer reporting suchinformation, or if not so available, the fair market price, asdetermined in good faith by the Administrative Agent. "CODE" means the Internal Revenue Code of 1986, asamended from time to time. "COMMISSION" means the Securities and ExchangeCommission. "COMMITMENT" means, with respect to each Lender, thesum of such Lenders' Tranche A Commitments and Tranche BCommitments, as such commitments may be (a) reduced from time totime pursuant to Section 2.09 and (b) reduced or increased fromtime to time pursuant to assignments by or to such Lenderpursuant to Section 9.04. The aggregate amount of all of theLenders' Commitments on the Effective Date will be $25,000,000. "COMMON STOCK" means authorized common stock, $0.01 parvalue, of the Borrower. Page 4 "CONTROL" means the possession, directly or indirectly,of the power to direct or cause the direction of the managementor policies of a Person, whether through the ability to exercisevoting power, by contract or otherwise. "CONTROLLING" and"CONTROLLED" have meanings correlative thereto. "CONVERSION LOAN AMOUNT" shall have the meaningascribed to such term in Section 2.07(a) hereof. "CONVERSION PRICE" shall have the meaning ascribed tosuch term in Section 2.07(a) hereof. "CONVERSION SHARES" shall have the meaning ascribed tosuch term in Section 2.07(b) hereof. "DEFAULT" means any event or condition whichconstitutes an Event of Default or which upon notice, lapse oftime or both would, unless cured or waived, become an Event ofDefault. "DISCLOSED MATTERS" means the actions, suits andproceedings and the environmental matters disclosed in anyperiodic and other reports, proxy statements and other materialsfiled by the Borrower or any Subsidiary with the Commission thatare publicly available. "Dollars" or "$" refers to lawful money of the UnitedStates of America. "EFFECTIVE DATE" means the date on which the conditionsspecified in Section 4.01 are satisfied (or waived in accordancewith Section 9.02). "EIGHTH WARRANT CERTIFICATE" means the Eight WarrantCertificate issued in connection with the Fourth AmendmentAgreement. "ELEVENTH WARRANT CERTIFICATE" means the EleventhSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Warrant Certificate issued in connection with the FourthAmendment Agreement. "ENVIRONMENTAL LAWS" means all laws, rules,regulations, codes, ordinances, orders, decrees, judgments,injunctions, notices or binding agreements issued, promulgated orentered into by any Governmental Authority, relating in any wayto the environment, preservation or reclamation of naturalresources, the management, release or threatened release of anyHazardous Material or to health and safety matters. "ENVIRONMENTAL LIABILITY" means any liability,contingent or otherwise (including any liability for damages,costs of environmental remediation, fines, penalties orindemnities), of the Borrower or any Subsidiary directly orindirectly resulting from or based upon (a) violation of anyEnvironmental Law, (b) the generation, use, handling,transportation, storage, treatment or disposal of any HazardousMaterials, (c) exposure to any Hazardous Materials, (d) therelease or threatened release of any Hazardous Materials into theenvironment or (e) any contract, agreement or other consensualarrangement pursuant to which liability is assumed or imposedwith respect to any of the foregoing. Page 5 "EQUITY ACQUISITION ASSET" has the meaning set forth inSection 5.10(c) hereof. "EQUITY ACQUISITION THRESHOLD" has the meaning setforth in Section 5.10(c) hereof. "ERISA" means the Employee Retirement Income SecurityAct of 1974, as amended from time to time. "ERISA AFFILIATE" means any trade or business (whetheror not incorporated) that, together with the Borrower, is treatedas a single employer under Section 414(b) or (c) of the Code or,solely for purposes of Section 302 of ERISA and Section 412 ofthe Code, is treated as a single employer under Section 414 ofthe Code. "ERISA EVENT" means (a) any "reportable event", asdefined in Section 4043 of ERISA or the regulations issuedthereunder with respect to a Plan (other than an event for whichthe 30-day notice period is waived); (b) the existence withrespect to any Plan of an "accumulated funding deficiency" (asdefined in Section 412 of the Code or Section 302 of ERISA),whether or not waived; (c) the filing pursuant to Section 412(d)of the Code or Section 303(d) of ERISA of an application for awaiver of the minimum funding standard with respect to any Plan;(d) the incurrence by the Borrower or any of its ERISA Affiliatesof any liability under Title IV of ERISA with respect to thetermination of any Plan; (e) the receipt by the Borrower or anyERISA Affiliate from the PBGC or a plan administrator of anynotice relating to an intention to terminate any Plan or Plans orto appoint a trustee to administer any Plan; (f) the incurrenceby the Borrower or any of its ERISA Affiliates of any liabilitywith respect to the withdrawal or partial withdrawal from anyPlan or Multiemployer Plan; or (g) the receipt by the Borrower orany ERISA Affiliate of any notice, or the receipt by anyMultiemployer Plan from the Borrower or any ERISA Affiliate ofany notice, concerning the imposition of Withdrawal Liability ora determination that a Multiemployer Plan is, or is expected tobe, insolvent or in reorganization, within the meaning of TitleIV of ERISA. "EVENT OF DEFAULT" has the meaning assigned to suchterm in Article VII. "EXCHANGE ACT" has the meaning set forth inSection 9.17 hereof. "EXCLUDED ITEM" has the meaning set forth inSection 5.10(b) hereof.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "EXCLUDED ITEMS/ROLLING STOCK THRESHOLD" has themeaning set forth in Section 5.10(b) hereof. "EXCLUDED TAXES" means, with respect to theAdministrative Agent, any Lender, any other recipient of anypayment to be made by or on account of any obligation of theBorrower hereunder, (a) income or franchise taxes imposed on (ormeasured by) its net income by the United States of America, orby the jurisdiction under the laws of which such recipient isorganized or in which its principal office is located or, in thecase of any Lender, in which its applicable lending office islocated, (b) any branch profits taxes imposed by the UnitedStates of America or any similar tax imposed by any otherjurisdiction in which the Borrower is located and (c) in the caseof a Foreign Lender (other than an assignee pursuant to a requestby the Borrower under Section 2.19(b)), any withholding tax thatis imposed on amounts payable to Page 6 such Foreign Lender at the time such Foreign Lender becomes aparty to this Agreement (or designates a new lending office) oris attributable to such Foreign Lender's failure to comply withSection 2.17(e), except to the extent that such Foreign Lender(or its assignor, if any) was entitled, at the time ofdesignation of a new lending office (or assignment), to receiveadditional amounts from the Borrower with respect to suchwithholding tax pursuant to Section 2.17(a). "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, theweighted average (rounded upwards, if necessary, to the next1/100 of 1%) of the rates on overnight Federal funds transactionswith members of the Federal Reserve System arranged by Federalfunds brokers, as published on the next succeeding Business Dayby the Federal Reserve Bank of New York, or, if such rate is notso published for any day that is a Business Day, the average(rounded upwards, if necessary, to the next 1/100 of 1%) of thequotations for such day for such transactions received by theAdministrative Agent from three Federal funds brokers ofrecognized standing selected by it. "FEE WARRANT CERTIFICATE" means the three-year warrantsthat will vest and become exercisable commencing on August 1,2002 if at least the principal amount of $10,000,000 of Term LoanObligations and/or Tranche A Loans are not prepaid (and, to theextent that Tranche A Loans are prepaid, with the termination andpermanent reduction of Tranche A Commitments in such amount)between the Effective Date and on or prior to July 31, 2002, forthe purchase up to 100,000 shares of Cadiz's common stock with anexercise price equal to the average closing price for all tradingdays in July 2002, that entitles the holder thereof to purchaseup to 100,000 shares based upon the terms and conditions setforth therein, in the form as attached hereto in Exhibit D. "FINANCIAL OFFICER" means the chief financial officer,principal accounting officer, treasurer or controller of theBorrower. "FIRST AMENDMENT AGREEMENT" has the meaning ascribed tosuch term in the recitals hereto. "FIXED RATE" means, with respect to any Borrowing forany Interest Period, either (a) if the Borrower does not electthe Stock Payment Election, the Cash Payment Rate or (b) if theBorrower elects the Stock Payment Election, the Stock PaymentRate. "FOREIGN LENDER" means any Lender that is organizedunder the laws of a jurisdiction other than that in which theBorrower is located. For purposes of this definition, the UnitedStates of America, each State thereof and the District ofColumbia shall be deemed to constitute a single jurisdiction. "FOURTH AMENDMENT AGREEMENT" has the meaning ascribedSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.to such term in the recitals hereto. "FOURTH AMENDMENT DOCUMENTS" has the meaning ascribedto such term in the recitals hereto. "GAAP" means generally accepted accounting principlesin the United States of America. Page 7 "GOVERNMENTAL AUTHORITY" means the government of theUnited States of America, any other nation or any politicalsubdivision thereof, whether state or local, and any agency,authority, instrumentality, regulatory body, court, central bankor other entity exercising executive, legislative, judicial,taxing, regulatory or administrative powers or functions of orpertaining to government. "GUARANTEE" of or by any Person (the "GUARANTOR") meansany obligation, contingent or otherwise, of the guarantorguaranteeing or having the economic effect of guaranteeing anyIndebtedness or other obligation of any other Person (the"PRIMARY OBLIGOR") in any manner, whether directly or indirectly,and including any obligation of the guarantor, direct orindirect, (a) to purchase or pay (or advance or supply funds forthe purchase or payment of) such Indebtedness or other obligationor to purchase (or to advance or supply funds for the purchaseof) any security for the payment thereof, (b) to purchase orlease property, securities or services for the purpose ofassuring the owner of such Indebtedness or other obligation ofthe payment thereof, (c) to maintain working capital, equitycapital or any other financial statement condition or liquidityof the primary obligor so as to enable the primary obligor to paysuch Indebtedness or other obligation or (d) as an account partyin respect of any letter of credit or letter of guaranty issuedto support such Indebtedness or obligation; provided, that theterm Guarantee shall not include endorsements for collection ordeposit in the ordinary course of business. "HAZARDOUS MATERIALS" means all explosive orradioactive substances or wastes and all hazardous or toxicsubstances, wastes or other pollutants, including petroleum orpetroleum distillates, asbestos or asbestos containing materials,polychlorinated biphenyls, radon gas, infectious or medicalwastes and all other substances or wastes of any nature regulatedpursuant to any Environmental Law. "HEDGING AGREEMENT" means any interest rate protectionagreement, foreign currency exchange agreement, commodity priceprotection agreement or other interest or currency exchange rateor commodity price hedging arrangement. "INACTIVE SUBSIDIARIES" means all Subsidiaries of theBorrower, excluding Sun World Entities, that (a) do not conductany business activities and (b) hold no assets or properties(either tangible or intangible). "INDEBTEDNESS" of any Person means, withoutduplication, (a) all obligations of such Person for borrowedmoney or with respect to deposits or advances of any kind,(b) all obligations of such Person evidenced by bonds,debentures, notes or similar instruments, (c) all obligations ofsuch Person upon which interest charges are customarily paid,(d) all obligations of such Person under conditional sale orother title retention agreements relating to property acquired bysuch Person, (e) all obligations of such Person in respect of thedeferred purchase price of property or services (excludingcurrent accounts payable incurred in the ordinary course ofbusiness), (f) all Indebtedness of others secured by (or forwhich the holder of such Indebtedness has an existing right,contingent or otherwise, to be secured by) any Lien on propertyowned or acquired by such Person, whether or not the Indebtednesssecured thereby has been assumed, (g) all Guarantees by suchPerson of Indebtedness of others, (h) all Capital LeaseObligations of such Person, (i) all obligations, contingent orSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.otherwise, of such Person as an Page 8account party in respect of letters of credit and letters ofguaranty and (j) all obligations, contingent or otherwise, ofsuch Person in respect of bankers' acceptances. The Indebtednessof any Person shall include the Indebtedness of any other entity(including any partnership in which such Person is a generalpartner) to the extent such Person is liable therefor as a resultof such Person's ownership interest in or other relationship withsuch entity, except to the extent the terms of such Indebtednessprovide that such Person is not liable therefor. "INDEMNIFIED TAXES" means Taxes other than ExcludedTaxes. "INDEMNITEE" has the meaning ascribed to such term inSection 9.03(b) hereof. "ING" means ING Baring (U.S.) Capital LLC, a Delawarecompany. "ING COLLATERAL" means the collateral security granted,pledged or hypothecated to the Administrative Agent or theLenders under the Security Documents to secure the payment andsatisfaction of the obligations hereunder and under the otherLoan Documents, including the Revolving Loan Obligations. "INTEREST PAYMENT DATE" means the last day of theInterest Period applicable to the Borrowing of which such Loan isa part. "INTEREST PERIOD" means each period commencing on thedate of such Borrowing or the last day of the next precedingInterest Period for such Borrowing and ending thereafter on thefirst to occur of March 15, June 15, September 15 and December 15in each year, provided, that (i) except as provided in clauses(ii) and (iii) below, if any Interest Period would end on a dayother than a Business Day, such Interest Period shall be extendedto the next succeeding Business Day, (ii) any Interest Periodthat commences on the last Business Day of a calendar month (oron a day for which there is no numerically corresponding day inthe last calendar month of such Interest Period) shall end on thelast Business Day of the last calendar month of such InterestPeriod, and (iii) if any Interest Period would end after theMaturity Date, such Interest Period shall end on the MaturityDate. For purposes hereof, the date of a Borrowing initiallyshall be the date on which such Borrowing is made. "LENDERS" means the Person or Persons, as the case maybe, listed on Schedule 2.01 and any other Person that shall havebecome a party hereto pursuant to an Assignment and Acceptance,other than any such Person that ceases to be a party heretopursuant to an Assignment and Acceptance. "LIBO RATE" means, with respect to any Borrowing forany Interest Period, the rate per annum at which theAdministrative Agent is offered dollar deposits in the Londoninterbank market at approximately 11:30 a.m. (London time) of thefirst day of the relevant Interest Period, for the number ofmonths comprised therein and in an amount equal to the amount ofthe indebtedness to be outstanding hereunder for such Borrowingduring such Interest Period. "LIEN" means, with respect to any asset, (a) anymortgage, deed of trust, lien, pledge, hypothecation,encumbrance, charge or security interest in, on or of such asset,(b) the interest of a vendor or a lessor under any conditionalsale agreement, capital lease or title Page 10retention agreement (or any financing lease having substantiallythe same economic effect as any of the foregoing) relating toSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.such asset and (c) in the case of securities, any purchaseoption, call or similar right of a third party with respect tosuch securities. "LOAN DOCUMENTS" means this Agreement, each SecurityDocument, each Note, the First Amendment Agreement, the SecondAmendment Documents, the Third Amendment Documents, the FourthAmendment Documents, and any other document, instrument oragreement delivered, executed or to be executed under or inconnection with any of the foregoing. "LOAN OBLIGATIONS" means collectively, the RevolvingLoan Obligations and the Term Loan Obligations. "LOANS" OR "REVOLVING LOANS" means, collectively, theTranche A Loans and the Tranche B Loans, each as made pursuant toSection 2.03 or 2.04 hereof. "MATERIAL ADVERSE EFFECT" means a material adverseeffect on (a) the business, assets, operations, prospects orcondition, financial or otherwise, of the Borrower and theSubsidiaries taken as a whole, (b) the ability of the Borrower toperform any of its obligations under this Agreement or any otherLoan Document, (c) the rights of or benefits available to theLenders under this Agreement or any other Loan Document, or(d) the Transactions. "MATERIAL INDEBTEDNESS" means Indebtedness (other thanthe Loans), or obligations in respect of one or more HedgingAgreements, of any one or more of the Borrower and itsSubsidiaries, but excluding SWFG and PSWRI, in an aggregateprincipal amount exceeding $500,000. For purposes of determiningMaterial Indebtedness, the "principal amount" of the obligationsof the Borrower or any Subsidiary in respect of any HedgingAgreement at any time shall be the maximum aggregate amount(giving effect to any netting agreements) that the Borrower orsuch Subsidiary would be required to pay if such HedgingAgreement were terminated at such time. "MATURITY DATE" means January 31, 2003. "MAXIMUM RATE" has the meaning ascribed to such term inSection 9.16 hereof. "MOODY'S" means Moody's Investors Service, Inc. "MORTGAGES" means, collectively, (a) any mortgageagreement or deed of trust dated as of the Effective Date for thebenefit of Mortgagee pursuant to Section 2.08 and (b) each othermortgage granted to Mortgagee pursuant to Sections 2.08, 5.10 and5.11, each substantially in the form as annexed to the 1997Revolving Credit Agreement. "MORTGAGEE" means, with respect to any Mortgage, theAdministrative Agent as mortgagee or beneficiary thereof, foritself and on behalf of the Lenders, under such Mortgage. "MULTIEMPLOYER PLAN" means a multiemployer plan asdefined in Section 4001(a)(3) of ERISA. Page 10 "1997 REVOLVING CREDIT AGREEMENT" has the meaningascribed to such term in the recitals hereto. "NINTH WARRANT CERTIFICATE" means the Ninth WarrantCertificate issued in connection with the Fourth AmendmentAgreement. "NON-ADVERSE AMENDMENT" has the meaning set forth inSection 9.19 hereof. "NOTES" means, collectively, the Tranche A Notes andthe Tranche B Notes. Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "OBLIGORS" has the meaning assigned to such term inthe Pledge and Security Agreement. "OTHER TAXES" means any and all present or future stampor documentary taxes or any other excise or property taxes,charges or similar levies arising from any payment made hereunderor from the execution, delivery or enforcement of, or otherwisewith respect to, this Agreement. "PARTICIPANTS" has the meaning ascribed to such term inSection 9.04(e) hereof. "PARTICIPATING SUBSIDIARIES" means the Subsidiariesexcluding (a)the Inactive Subsidiaries, (b) the Sun WorldEntities, and (c) SWFG. "PBGC" means the Pension Benefit Guaranty Corporationreferred to and defined in ERISA and any successor entityperforming similar functions. "PERMITTED ENCUMBRANCES" means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the Page 11 affected property or interfere with the ordinary conduct of business of the Borrower or any Participating Subsidiary; (f) Liens arising out of any judgment awarded against the Borrower which have been discharged, vacated, reversed or execution thereof stayed pending appeal; (g) any other Lien with respect to which the Borrower or related lessee shall have provided a bond or other security in an amount and under terms reasonably satisfactory to the Required Lenders and which does not involve any material risk of the sale, forfeiture or loss of any interest in Borrower's real or personal property; and (h) the Liens of the Security Documents; provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "PERMITTED INVESTMENTS" means: (a) Cash Equivalents; and (b) transactions permitted pursuant to the provisions of Sections 5.10 and 5.11 hereof. Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "PERSON" means any natural person, corporation, limitedliability company, trust, joint venture, association, company,partnership, Governmental Authority or other entity. "PLAN" means any employee pension benefit plan (otherthan a Multiemployer Plan) subject to the provisions of Title IVof ERISA or Section 412 of the Code or Section 302 of ERISA, andin respect of which the Borrower or any ERISA Affiliate is (or,if such plan were terminated, would under Section 4069 of ERISAbe deemed to be) an "employer" as defined in Section 3(5) ofERISA. "PLEDGE AND SECURITY AGREEMENTS" means, collectively,(a) any security agreement dated as of the Effective Date for thebenefit of the Administrative Agent, for itself and on behalf ofthe Lenders, pursuant to Section 2.08, (b) any stock pledgeagreement pursuant to which the shares of capital stock of eachParticipating Subsidiary are pledged to the Administrative Agent,and (c) each other security agreement executed pursuant toSections 2.08, 5.10 and 5.11, each substantially (to the extentapplicable) in the form as annexed to the 1997 Revolving CreditAgreement, as amended from time to time thereafter. "PREPAYMENT DATE" has the meaning set forth inSection 2.11 hereof. "PSWRI" means P.S.W.R.I. Limited, a Guernseycorporation. "PURCHASER CERTIFICATE" means the Purchaser Certificatein the form as attached hereto in Exhibit G. "REGISTER" has the meaning set forth in Section 9.04. Page 12 "REGISTRABLE COMMON STOCK" means (a) Stock PaymentCommon Stock and (b) any additional shares of Common Stock issuedor distributed by way of dividend, stock split or otherdistribution in respect of the Stock Payment Common Stock, oracquired by way of any rights offering or similar offering madein respect of the Stock Payment Common Stock or any of theforegoing. REGISTRATION RIGHTS ADDENDUM means the RegistrationRights Addendum agreed to by Borrower in favor of ING in the formattached hereto as Exhibit H. "RELATED PARTIES" means, with respect to any specifiedPerson, such Person's Affiliates and the respective directors,officers, employees, agents and advisors of such Person and suchPerson's Affiliates. "RELEASED PARTIES" has the meaning ascribed to suchterm in Section 9.19 hereof. "REQUIRED LENDERS" means, at any time, Lenders havingRevolving Credit Exposures and unused Commitments representing atleast 66 2/3% of the sum of the total Revolving Credit Exposuresand unused Commitments at such time. "RESTRICTED PAYMENT" means any dividend or otherdistribution (whether in cash, securities or other property) withrespect to any shares of any class of capital stock of theBorrower or any Subsidiary, or any payment (whether in cash,securities or other property), including any sinking fund orsimilar deposit, on account of the purchase, redemption,retirement, acquisition, cancellation or termination of any suchshares of capital stock of the Borrower or any option, warrant orother right to acquire any such shares of capital stock of theBorrower. "REVISED AND RESTATED ADDITIONAL DRAW WARRANTCERTIFICATE" means the Revised and Restated Additional DrawCertificate issued in connection with the Fourth AmendmentSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Agreement. "REVISED AND RESTATED INITIAL DRAW CERTIFICATE" meansthe Revised and Restated Initial Draw Certificate issued inconnection with the Fourth Amendment Agreement. "REVOLVER DEED OF TRUST" means that certain Deed ofTrust, Assignment of Rents, Security Agreement, FinancingStatement and Fixture Filing, dated November 25, 1997, as amendedfrom time to time, executed by Borrower in favor of theAdministrative Agent for the benefit of itself and the Lenders,which was recorded on November 26, 1997, as Instrument No.19970434910 in the Official Records of San Bernardino CountyCalifornia. "REVOLVER (PIUTE) DEED OF TRUST" means that certainDeed of Trust, Assignment of Rents, Security Agreement, FinancingStatement and Fixture Filing, dated as of July 1, 1999, asamended from time to time, executed by Borrower in favor of theAdministrative Agent for the benefit of itself and the Lenders,which was recorded on December 23, 1999, as Instrument No. 524213in the Official Records of San Bernardino County California. "REVOLVER (SWFG) DEED OF TRUST" means that certainDeed of Trust, Assignment of Rents, Security Agreement, FinancingStatement and Fixture Filing, dated October 30, 1998, Page 13as amended from time to time, executed by Borrower in favor ofthe Administrative Agent for the benefit of itself and theLenders, which was recorded on November 4, 1998, as InstrumentNo. 19980473321 in the Official Records of San Bernardino CountyCalifornia. "REVOLVER DEEDS OF TRUST" means, collectively, theRevolver Deed of Trust, the Revolver (Piute) Deed of Trust, theRevolver (SWFG) Deed of Trust and any and all mortgages and deedsof trust delivered pursuant to Sections 5.10 and 5.11 hereof. "REVOLVING CREDIT EXPOSURE" means, with respect to anyLender at any time, the sum of the outstanding principal amountof such Lender's Tranche A Loans and Tranche B Loans. "REVOLVING CREDIT AGREEMENT WARRANTS" collectively, theRevised and Restated Initial Draw Warrant Certificate, theRevised and Restated Additional Draw Warrant Certificate, theEighth Warrant Certificate, the Ninth Warrant Certificate, theTenth Warrant Certificate, the Eleventh Warrant Certificate andthe Fee Warrant Certificate, each as revised, restated and ineffect from time to time. "REVOLVING LOAN OBLIGATIONS" means the obligations ofBorrower to the Administrative Agent and/or the Lenders under theLoan Documents, as amended and in effect from time to time. "ROLLING STOCK": has the meaning assigned to such termin the Pledge and Security Agreement. "S&P" means Standard & Poor's. "SECOND AMENDMENT AGREEMENT" has the meaning ascribedto such term in the recitals hereto. "SECOND AMENDMENT DOCUMENTS" has the meaning ascribedto such term in the recitals hereto. "SECURITIES ACT" has the meaning set forth inSection 9.17 hereof. "SECURITY DOCUMENTS" means, collectively, the Mortgagesand the Pledge and Security Agreement. "STOCK PAYMENT" has the meaning set forth inSection 2.14 hereof.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "STOCK PAYMENT COMMON STOCK" has the meaning set forthin Section 5.13 hereof. "STOCK PAYMENT ELECTION" has the meaning set forth inSection 2.14 hereof. Page 14 "STOCK PAYMENT ELECTION DEADLINE" has the meaning setforth in Section 2.14 hereof. "STOCK PAYMENT ELECTION REQUEST" means a request byBorrower to make a payment of accrued interest for a Borrowingthrough the remittance of the Stock Payment in accordance withSection 2.14. "STOCK PAYMENT RATE" means the sum of (a) the LIBORate, computed in accordance with Section 2.13, plus (b) 7.0%. "SUBSIDIARY" means, with respect to any Person (the"parent") at any date, any corporation, limited liabilitycompany, partnership, association or other entity the accounts ofwhich would be consolidated with those of the parent in theparent's consolidated financial statements if such financialstatements were prepared in accordance with GAAP as of such date,as well as any other corporation, limited liability company,partnership, association or other entity (a) of which securitiesor other ownership interests representing more than 50% of theequity or more than 50% of the ordinary voting power or, in thecase of a partnership, more than 50% of the general partnershipinterests are, as of such date, owned, controlled or held, or(b) that is, as of such date, otherwise Controlled, by the parentor one or more subsidiaries of the parent or by the parent andone or more subsidiaries of the parent. "SUBSIDIARY" means any subsidiary of the Borrower. "SUN WORLD" means Sun World International, Inc., aSubsidiary of the Borrower. "SUN WORLD DOCUMENTS" has the meaning assigned to suchterm in the Term Fifth Global Amendment Agreement. "SUN WORLD ENTITIES" means Sun World and itssubsidiaries. "SUN WORLD INDENTURE" means that certain Indenture,dated as of April 16, 1997, among Sun World, Borrower, theSubsidiary Guarantors thereto, and the Sun World Trustee, asamended by that certain Amendment to Indenture, dated as ofOctober 9, 1997, as further amended by any Non-AdverseAmendments. "SUN WORLD NOTES" means the $115,000,000 of 11 1/4%First Mortgage Notes due April 15, 2004 issued pursuant to theSun World Indenture. "SUN WORLD TRUSTEE" means IBJ Schroder Bank & TrustCompany in its capacity as the trustee under the Sun WorldIndenture. "SWFG" means Southwest Fruit Growers, L.P., a Delawarelimited partnership. "TAXES" means any and all present or future taxes,levies, imposts, duties, deductions, charges or withholdingsimposed by any Governmental Authority. "TENTH WARRANT CERTIFICATE" means the Tenth WarrantCertificate issued in connection with the Fourth AmendmentAgreement. "TERM LOAN OBLIGATIONS" means the obligations ofBorrower to ING under the Term Loan Documents.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Page 15 "TERM LOAN DOCUMENTS" means collectively, the CreditDocuments (as defined in the Term Fifth Global AmendmentAgreement), each as amended and modified from time to time. "TERM FIFTH GLOBAL AMENDMENT AGREEMENT" means thatcertain Fifth Global Amendment Agreement, dated as of January 31,2002, between Cadiz, as borrower, and ING, as lender, as amendedand modified from time to time. "THRESHOLD" has the meaning assigned to such term inSection 2.11(c). "THIRD AMENDMENT AGREEMENT" has the meaning ascribed tosuch term in the recitals hereto. "THIRD AMENDMENT DOCUMENTS" has the meaning ascribed tosuch term in the recitals hereto. "TITLE POLICIES" has the meaning ascribed to such termin Section 4.01(r) hereof. "TRANCHE A COMMITMENT" means, with respect to eachLender, the commitment of such Lender to make Tranche A Loans,expressed as an amount representing the maximum aggregate amountof such Lender's Tranche A Revolving Credit Exposure hereunder,as such commitment may be (a) reduced from time to time pursuantto Section 2.09 and (b) reduced or increased from time to timepursuant to assignments by or to such Lender pursuant toSection 9.04. The initial amount of each Lender's Tranche ACommitment is set forth on Schedule 2.01, or in the Assignmentand Acceptance pursuant to which such Lender shall have assumedits Tranche A Commitment, as applicable. The aggregate amount ofthe Tranche A Commitments on the Effective Date will be$15,000,000, which amount has been fully drawn and isoutstanding. "TRANCHE A LENDERS" means the Lenders listed onSchedule 2.01 who have a Tranche A Commitment greater than zeroset forth under their names, subject to the provisions ofSection 9.04 hereof pertaining to Persons becoming or ceasing tobe Lenders; "Tranche A Lender" shall mean any one of them. "TRANCHE A LOANS" shall have the meaning ascribed tosuch term in Section 2.01(a) hereof. "TRANCHE A NOTES" means the Notes issued by Borrowerand payable to the order of the Lenders, as evidence of theTranche A Loans, each in the form of Exhibit E hereto, and anyextensions, renewals, modifications or replacements thereof ortherefor. "TRANCHE A REVOLVING CREDIT EXPOSURE" means, withrespect to any Tranche A Lender at any time, the sum of theoutstanding principal amount of such Lender's Tranche A Loans. "TRANCHE B COMMITMENT" means, with respect to eachLender, the commitment of such Lender to make Tranche B Loans,expressed as an amount representing the maximum aggregate amountof such Lender's Tranche B Revolving Credit Exposure hereunder,as such Page 16commitment may be (a) reduced from time to time pursuant toSection 2.09 and (b) reduced or increased from time to timepursuant to assignments by or to such Lender pursuant toSection 9.04. The initial amount of each Lender's Tranche BCommitment is set forth on Schedule 2.01, or in the Assignmentand Acceptance pursuant to which such Lender shall have assumedits Tranche B Commitment, as applicable. The aggregate amount ofthe Tranche B Commitments on the Effective Date will be$10,000,000. Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "TRANCHE B LENDERS" means the Lenders listed onSchedule 2.01 who have a Tranche B Commitment greater than zeroset forth opposite their names, subject to the provisions ofSection 9.04 hereof pertaining to Persons becoming or ceasing tobe Lenders; "Tranche B Lender" shall mean any one of them. "TRANCHE B LOANS" shall have the meaning ascribed tosuch term in Section 2.01(b) hereof. "TRANCHE B NOTES" means the Notes issued by Borrowerand payable to the order of the Lenders, as evidence of theTranche B Loans, each in the form of Exhibit F hereto, and anyextensions, renewals, modifications or replacements thereof ortherefor. "TRANCHE B REVOLVING CREDIT EXPOSURE" means, withrespect to any Tranche B Lender at any time, the sum of theoutstanding principal amount of such Lender's Tranche B Loans. "TRANSACTIONS" means the execution, delivery andperformance by the Borrower of this Agreement, the other LoanDocuments, the transactions contemplated herein and therein, theborrowing of Loans, and the use of the proceeds thereof. "WITHDRAWAL LIABILITY" means liability to aMultiemployer Plan as a result of a complete or partialwithdrawal from such Multiemployer Plan, as such terms aredefined in Part I of Subtitle E of Title IV of ERISA. "WHOLLY OWNED SUBSIDIARY" means, with respect to anyPerson, any corporation, partnership, or other entity of whichall of the equity securities or other ownership interests (otherthan, in the case of a corporation, directors' qualifying shares)are directly or indirectly owned or controlled by such Person orone or more Wholly Owned Subsidiaries of such Person or by suchPerson and one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02 [Intentionally Omitted] SECTION 1.03 TERMS GENERALLY. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or Page 17 modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04 ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the AdministrativeSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. ARTICLE II THE CREDITS SECTION 2.01 COMMITMENTS. (a) TRANCHE A LOANS. Subject to the terms and conditions set forth herein, each Lender severally agrees, upon Borrower's request, to make loans (the "Tranche A Loans") to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender's Tranche A Revolving Credit Exposure exceeding such Lender's Tranche A Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, and only if the full $10,000,000 in principal amount of the Tranche B Loans is outstanding and/or has been converted into Conversion Shares in accordance with Section 2.07 hereof, the Borrower may borrow, prepay and reborrow Tranche A Loans. (b) TRANCHE B LOANS. Subject to the terms and conditions set forth herein, each Lender severally agrees, upon Borrower's request, to make loans (the "Tranche B Loans") to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender's Tranche B Revolving Credit Exposure exceeding such Lender's Tranche B Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Tranche B Loans. SECTION 2.02 LOANS AND BORROWINGS. (a) Each Tranche A Loan shall be made as part of a Borrowing consisting of Tranche A Loans made by the Lenders ratably in accordance with their respective Tranche A Page 18 Commitments. The failure of any Lender to make any Tranche A Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Tranche A Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Tranche A Loans as required. (b) Each Tranche B Loan shall be made as part of a Borrowing consisting of Tranche B Loans made by the Lenders ratably in accordance with their respective Tranche B Commitments. The failure of any Lender to make any Tranche B Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Tranche B Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Tranche B Loans as required. (c) Each Borrowing shall be comprised entirely of Applicable Interest Rate Loans as the Borrower may request in accordance herewith. Each Borrowing shall be in an aggregate amount equal to $2,500,000 or a larger multiple of $100,000 (provided that a Borrowing may be in an aggregateSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. amount that is equal to the entire unused balance of the total Commitments). (d) The Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.03 REQUESTS FOR BORROWINGS. Except for the Tranche B Loan Borrowing described in Section 2.04, the Borrower shall notify the Administrative Agent of such request by telephone not later than 1 p.m., New York City time, three Business Days before the date of the proposed Borrowing. Any such notices received after 1 p.m., New York time, shall be deemed received on the next Business Day, Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is a Tranche A Loan or a Tranche B Loan; and (iv) the location and number of the Borrower's account to which funds are to be disbursed. Promptly following receipt of a Borrowing Request in accordancewith this Section 2.03, the Administrative Agent shall (a) adviseeach Lender of the details thereof and of the amount of suchLender's Loan to be made as part of the requested Borrowing and(b) as applicable, advise the Borrower of the number of shares ofthe Borrower's Common Stock that may be purchased as a result ofthe requested Borrowing through the exercise of the RevolvingCredit Agreement Warrants. Page 19 SECTION 2.04 BORROWING. As of the Effective Date,the Borrower shall be deemed to have requested a Tranche B LoanBorrowing in the aggregate amount of $10,000,000, with theEffective Date being the date of such Borrowing. The locationand number of the Borrower's account to which these funds are tobe disbursed are set forth in Schedule 2.04 hereto. SECTION 2.05 [INTENTIONALLY OMITTED] SECTION 2.06 FUNDING OF BORROWINGS. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account maintained and designated by the Borrower in the applicable Borrowing Request (or in the case of the Borrowing on the Effective Date, as set forth in Schedule 2.04 hereof). (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date inSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. accordance with paragraph (a) of this Section 2.06 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender hereby agrees to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at the interest rate applicable to that Loan. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.07 CONVERSION RIGHTS FOR HOLDERS OF TRANCHE B LOANS. (a) CONVERSION RIGHTS. Each Tranche B Lender shall at any time have the right (at its sole option) to convert the unpaid principal and interest thereof, up to a maximum of (x) such Tranche B Lender's pro rata share of the Tranche B Loans plus (y) all accrued and unpaid interest thereon that is in arrears and delinquent at the time of such conversion (collectively, such amount a Tranche B Lender's "Conversion Loan Amount"), into the common stock of Borrower pursuant to the terms hereof. The number of shares of Common Stock to be issued to such Tranche B Lender upon such conversion shall equal (x) such Tranche B Lender's Conversion Loan Amount as of such conversion date, divided by (y) a price per share initially equal to $8.00 (the "Conversion Price"). The Conversion Price is subject to certain anti-dilution adjustments provided for below. Within seven (7) Business Days of its receipt of a written notice from a Tranche B Lender that sets forth the Conversion Loan Amount that the Tranche B Loans is electing to be converted in accordance with the terms of this Section 2.07, Borrower shall issue the Conversion Shares relating to such election to such Tranche B Lender, provided Page 20 that Borrower shall make good faith efforts to issue and deliver such certificate prior to the expiration of such seven Business Day Period. (b) ANTI-DILUTION PROVISIONS. The Conversion Price and the number and kind of securities purchasable upon the exercise of the conversion rights set forth above (the "Conversion Shares") shall be subject to adjustment from time to time upon the happening of certain events as hereinafter provided in this Section 2.07. The Conversion Price in effect at any time and the Conversion Shares shall be subject to adjustment as follows: (1) In case the Borrower shall (i) pay a dividend or make a distribution on its shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding Common Stock in shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, then the Conversion Price in effect at the time of the record date (and thereafter) for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that such Conversion Price shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date or effective date by a fraction, the numerator of which is the number of shares of Common Stock outstanding on such record date or effective date, and the denominator of which is the number of shares of Common stock outstanding immediately after such dividend, distribution, subdivision, combination or reclassification. For example, if the Borrower declares a 2 for 1 stock dividend or stock split and the Conversion Price immediately prior to suchSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. event was $8.00 per share, the adjusted Conversion Price immediately after such event would be $4.00 per share. Such adjustment shall be made successively whenever any event listed in this Subsection (1) shall occur. (2) In case the Borrower shall hereafter issue rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (or having a conversion price or exercise price per share) less than the current market price of the Common Stock (as defined below) on the record date mentioned below, then the Conversion Price shall be adjusted so that the Conversion Price shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date mentioned below by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on the record date mentioned below and the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion or exercise price of the securities so offered) would purchase at such current market price per share of the Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date and the number of additional shares of Common Stock offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered Page 21 (or securities convertible or exercisable into Common Stock are not delivered) after the expiration of such rights or warrants the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into or exercisable for Common Stock) actually delivered. (3) In case the Borrower shall hereafter distribute to all holders of its Common Stock evidences of its indebtedness or assets (excluding regular cash dividends or distributions and dividends or distributions referred to in Subsection (1) above) or subscription rights or warrants (excluding those referred to in Subsection (2) above), then in each such case the Conversion Price in effect thereafter shall be determined by multiplying the Conversion Price in effect immediately prior thereto by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined in Subsection (8) below), less the aggregate fair market value (as determined in good faith by the Borrower's Board of Directors and reasonably acceptable to the Administrative Agent on behalf of the Tranche B Lenders) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (4) In case the Borrower shall issue shares of its Common Stock (excluding shares issued (a) in any of the transactions described in Subsection (1) above, (b) uponSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. exercise of options granted to the Borrower's employees under a plan or plans adopted by the Borrower's Board of Directors and approved by its shareholders, if such shares would otherwise be included in this Subsection (4), (but only to the extent that the aggregate number of shares excluded hereby and issued after the date hereof, shall not exceed 5% of the Borrower's Common Stock outstanding at the time of any issuance), (c) upon exercise of options and warrants outstanding at the date hereof, and conversion of the loan amounts provided for herein, (d) upon the exercise or conversion of any security as to which the Conversion Price has already been adjusted pursuant to Subsection (5) below, and (e) to shareholders of any corporation which merges into the Borrower in proportion to their stock holdings of such corporation immediately prior to such merger, upon such merger, or issued in a bona fide public offering pursuant to a firm commitment underwriting, but only if no adjustment is required pursuant to any other provision of this Section 2.07(b) (without regard to Subsection (9) below) with respect to the transaction giving rise to such rights) for a consideration per share less than the current market price per share defined in Subsection (8) below, then on the date the Borrower fixes the offering price of such additional shares, the Conversion Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Conversion Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding Page 22 immediately prior to the issuance of such additional shares and the number of shares of Common Stock which the aggregate consideration received (determined as provided in Subsection (7) below) for the issuance of such additional shares would purchase at such current market price per share of Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made; provided, however, that no such adjustment shall be made unless, in such issuance, the Borrower issues shares of Common Stock in an amount which, when combined with all other issuances of Common Stock after the date hereof and all other issuances of securities convertible into or exchangeable for its Common Stock after the date hereof, which securities are excluded from Subsections (4) or (5) by operation of this proviso or the proviso in the last Section of Subsection (5), would exceed 20% of the Borrower's Common Stock outstanding immediately prior to the time of such issuance. (5) In case the Borrower shall issue any securities convertible into or exercisable or exchangeable for its Common Stock (excluding securities issued in transactions described in Subsections (2) and (3) above) for a consideration per share of Common Stock initially deliverable upon conversion, exercise or exchange of such securities (determined as provided in Subsection (7) below) less than the current market price per share (as defined in Subsection (8) below) in effect immediately prior to the issuance of such securities, then the Conversion Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Conversion Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such securities and the number of shares of Common Stock which the aggregate consideration received (determined as provided in Subsection (7) below) for such securities would purchase at such current market price per share of Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstandingSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. immediately prior to such issuance and the maximum number of shares of Common Stock of the Borrower deliverable upon conversion or exercise of, or in exchange for, such securities at the initial conversion or exchange price or rate. Such adjustment shall be made successively whenever such an issuance is made; provided, however, that no such adjustment shall be made unless, in such issuance, the Borrower issues securities convertible into or exercisable or exchangeable for a number of shares of its Common Stock in an amount which, when combined with all other issuances of Common Stock after the date hereof and all other issuances of securities convertible into or exercisable or exchangeable for its Common Stock after the date hereof, which securities are excluded from Subsections (4) or (5) by operation of this proviso or the proviso in the last Section of Subsection (4), would exceed 20% of the Borrower's Common Stock outstanding immediately prior to the time of such issuance. (6) Whenever the Conversion Price is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the number of Conversion Shares purchasable pursuant to the terms hereof shall simultaneously be adjusted by multiplying the number of Page 23 Conversion Shares issuable upon conversion pursuant to the terms hereof immediately prior to such adjustment by the Conversion Price in effect immediately prior to such adjustment and dividing the product so obtained by the Conversion Price, as adjusted. (7) For purposes of any computation respecting consideration received pursuant to Subsections (4) and (5) above, the following shall apply: (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Borrower for any underwriting of the issue or otherwise in connection therewith: (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Borrower (irrespective of the accounting treatment thereof) and reasonably acceptable to the Administrative Agent on behalf of the Tranche B Lenders; and (C) in the case of the issuance of securities convertible into or exchangeable or exercisable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the Borrower for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Borrower upon the conversion, exercise or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (7)). (8) For the purpose of any computation underSubsections (2), (3), (4) and (5) above, the current market priceper share of Common Stock at any date shall be deemed to be theaverage of the daily closing prices for 30 consecutive businessdays before such date. The closing price for each day shall bethe last sale price regular way or, in case no such reported saletakes place on such day, the average of the last reported bid andasked prices regular way, in either case on the principalnational securities exchange on which the Common Stock isSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.admitted to trading or listed, or if not listed or admitted totrading on such exchange, the average of the last reported bidand asked prices as reported by NASDAQ, or other similarorganization if NASDAQ is no longer reporting such information,of if not so available, the fair market price as determined ingood faith by the Board of Directors and reasonably acceptable tothe Administrative Agent on behalf of the Tranche B Lenders. (9) No adjustment in the Conversion Price shall berequired unless such adjustment would require an increase ordecrease of at least five cents ($0.05) in such price; provided,however, that any adjustments which by reason of thisSubsection (9) are not required to be made shall be carriedforward and taken into account in any subsequent adjustmentrequired to be made hereunder. All calculations pursuant to theterms hereof shall be made to the nearest cent or to the nearestone- Page 24hundredth of a share, as the case may be. Anything herein to thecontrary notwithstanding, the Borrower shall be entitled, butshall not be required, to reduce the Conversion Price, inaddition to those changes required by the terms and provisionshereof, as it, in its sole discretion, shall determine to beadvisable in order that any dividend or distribution in shares ofCommon Stock, subdivision, reclassification or combination ofCommon Stock, issuance of warrants to purchase Common Stock ordistribution or evidences of indebtedness or other assets(excluding cash dividends) referred to hereinabove in the termsand provisions hereof hereafter made by the Borrower to theholders of its Common Stock shall not result in any tax to suchholders of its Common Stock or securities convertible into orexercisable or exchangeable Common Stock. (10) In the event that at any time, as a result of anadjustment made pursuant to Subsection (1) above, a Tranche BLender shall become entitled to receive any shares of theBorrower, other than Common Stock, thereafter the number of suchother shares so receivable upon conversion pursuant to the termshereof shall be subject to adjustment from time to time in amanner and on terms as nearly equivalent as practicable to theprovisions with respect to the Common Stock contained inSubsections (1) to (9), inclusive above. The Borrower may retaina firm of independent certified public accountants selected bythe Board of Directors (who may be the regular accountantsemployed by the Borrower) to make any computation requiredpursuant to the terms hereof, and a certificate signed by suchfirm shall be conclusive evidence of the correctness of suchadjustment absent manifest error or negligence. (c) OFFICER'S CERTIFICATE. Whenever the Conversion Price or number of Conversion Shares shall be adjusted as required by the provisions of this Section 2.07, the Borrower shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Conversion Price or number of Conversion Shares determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by any Tranche B Lender and the Borrower shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to such Tranche B Lender. (d) NOTICES TO TRANCHE B LENDERS. So long any Tranche B Lender shall have the conversion rights set forth herein, (i) if the Borrower shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Borrower shall offer to the holders of Common Stock for subscription or purchase by them any share of or class of its capitalSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. stock or any other rights or (iii) if any capital reorganization of the Borrower, reclassification of the capital stock of the Borrower, consolidation or merger of the Borrower with or into another entity, sale, lease, or transfer of all or substantially all of the property and assets of the Borrower to another entity, or voluntary or involuntary dissolution, liquidation or winding up of the Borrower shall be effected, then in any such case, the Borrower shall cause to be mailed by certified mail to such Tranche B Lender, at least fifteen days prior the record date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which Page 25 (x) a record is to be taken for the purpose of such dividend, distribution or offer of rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, transfer, sale dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall be entitled to receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, lease, transfer, sale, dissolution, liquidation or winding up. (e) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Borrower, or in case of any consolidation or merger of the Borrower with or into another entity (other than a merger with a subsidiary in which merger the Borrower is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon conversion of Conversion Loan Amounts pursuant to the terms hereof) or in case of any sale, lease, or conveyance to another entity of all or substantially all of the property and assets of the Borrower, the Borrower shall, as a condition precedent to such transaction, cause effective provisions to be made so that each Tranche B Lender shall have the right thereafter by conversion of Conversion Loan Amounts pursuant to the terms hereof, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale, lease or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon conversion of Conversion Loan Amounts pursuant to the terms hereof immediately prior to such reclassification, change, consolidation, merger, sale, lease or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for herein. The Borrower shall not effect any such reorganization, consolidation, merger, sale or conveyance unless prior to or simultaneously with the consummation thereof the survivor or successor corporation (if other than the Borrower) resulting from such reorganization, consolidation or merger or the corporation purchasing such assets shall assume by written instrument executed and sent to each Tranche B Lender of the obligation to deliver to such Tranche B Lender such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Tranche B Lender may be entitled to receive, and containing the express assumption by such successor corporation of the due and punctual performance and observance of every provision herein to be performed and observed by the Borrower and of all liabilities and obligations of the Borrower hereunder. The foregoing provisions of this Section 2.07(e) shall similarly apply to successive reclassifications, capital reorganizations, and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases or conveyances. In the event that in connection with any such capitalSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. reorganization or reclassification, consolidation, merger, sale, lease or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution, or payment, in whole or in part, for a security of the Borrower other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection 2.07(b)(1) hereof. SECTION 2.08 SECURITY. The Borrower's obligations under this Agreement shall be secured in accordance with and/or have the benefit of the Pledge and Security Agreement, the Mortgages, any other Security Document, and each other mortgage, security interest, pledge agreement or other document granted pursuant to Sections 5.09, 5.10 and 5.11. Page 26 SECTION 2.09 TERMINATION AND REDUCTION OF COMMITMENTS. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) The Borrower may at any time terminate, or from time to time reduce, the Tranche A Commitments; provided that (i) each reduction of the Tranche A Commitments shall be in an amount that is an integral multiple of $500,000 and not less than $2,500,000 and (ii) the Borrower shall not terminate or reduce the Tranche A Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11, the sum of the Tranche A Revolving Credit Exposures would exceed the total Tranche A Commitments. (c) Subject to the Tranche B Lenders right to exercise its conversion rights under Section 2.07 hereof, the Borrower may at any time terminate, or from time to time reduce, the Tranche B Commitments; provided that (i) each reduction of the Tranche B Commitments shall be in an amount that is an integral multiple of $500,000 and not less than $2,500,000, (ii) the Borrower shall not terminate or reduce the Tranche B Commitments unless the Tranche A Commitments have been reduced to zero and all other Loan Obligations (excluding the principal of the Tranche B Loans) have been repaid in full, and (iii) the Borrower shall not terminate or reduce the Tranche B Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11, the sum of the Tranche B Revolving Credit Exposures would exceed the total Tranche B Commitments. (d) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Tranche A Commitments under paragraph (b) of this Section at least six (6) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Tranche B Commitments under paragraph (c) of this Section at least ten (10) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof, which termination or reduction shall be subject to the Tranche B Lenders rights to exercise the conversion rights under Section 2.07 hereof at any time prior to the expiration of such ten (10) Business Day period. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.09 shall be irrevocable; provided that a notice of termination of the Tranche A Commitments or Tranche B Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effectiveSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. date) if such condition is not satisfied. Any termination or reduction of the Tranche A Commitments or Tranche B Commitments shall be permanent. Each reduction of the Tranche A Commitments or Tranche B Commitments shall be made ratably among the Lenders in accordance with their respective Tranche A Commitments or Tranche B Commitments. (e) If at any time the aggregate outstanding principal amount of all of the Loans made by any Lender shall exceed the amount of the Commitment of such Lender, the Borrower shall immediately upon receipt of notice thereof from the Administrative Agent or Page 27 such Lender, or immediately upon the Borrower's acquiring actual knowledge thereof, prepay the Loans of such Lender to the extent necessary to eliminate such excess. (f) Notwithstanding anything herein to the contrary, the sum of the aggregate outstanding principal balance of all Loans made by all Lenders at any one time shall not exceed the aggregate amount of all Commitments as then in effect. If at any time the aggregate outstanding principal balance of the Loans exceeds the applicable limit stated in the immediately preceding sentence, the Borrower shall immediately upon receipt of notice thereof from the Administrative Agent or such Lender, or immediately upon the Borrower's acquiring actual knowledge thereof, prepay the Loans to the extent necessary to eliminate such excess. (g) Any reduction of the Commitments under this Section 2.09 shall apply as a proportional and permanent reduction of the Commitments of each of the Lenders. If the aggregate outstanding principal balance of the Loans exceeds any applicable limit specified hereunder after giving effect to any such reduction of the Commitments, Borrower shall immediately prepay such Loans to the extent necessary to eliminate such excess. (h) In the event any reduction in the Commitments is made in accordance with this Section 2.09, the Administrative Agent will issue to the Borrower and each Lender a revised Schedule 2.01 to this Agreement reflecting such reduction, which revised Schedule 2.01 shall supersede and replace the prior version thereof and shall be substituted by each party in lieu thereof. SECTION 2.10 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure ofSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) To further evidence the existence and amounts of the Borrower's obligations to pay principal and interest on each Loan made by a Lender hereunder, (i) with Page 28 respect to each Tranche A Loan, the Borrower shall execute and deliver to that Lender a Tranche A Note payable to the Lender, with all blanks therein appropriately filled, with the face amount equal to the principal amount of such Lender's Tranche A Commitment, and (ii) with respect to each Tranche B Loan, the Borrower shall execute and deliver to that Lender a Tranche B Note payable to the Lender, with all blanks therein appropriately filled, with the face amount equal to the principal amount of such Lender's Tranche B Commitment. The Borrower shall prepare, execute and deliver each such Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns). Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more Notes payable to the order of the payee named therein (or, if such Note is a registered note, to such payee and its registered assigns). SECTION 2.11 PREPAYMENT OF LOANS; REBORROWINGS. (a) Subject to Section 2.11(d) hereof, the Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section; provided that unless all outstanding amounts are being repaid, each prepayment of Borrowing shall be in an amount that is an integral multiple of $100,000 and not less than $2,500,000.00. (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder not later than 1 p.m., New York City time, (the following date, as applicable, the "Prepayment Date") (i) with respect to Tranche A Loans, six Business Days before the date of prepayment or (ii) with respect to Tranche B Loans, ten (10) Business Days before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.09; provided further that any prepayment of Tranche B Loans shall be subject to the Tranche B Lenders rights to exercise the conversion rights under Section 2.07 hereof at any time prior to the expiration of the ten (10) Business Day notice period. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13 and Section 2.14. At its discretion, Borrower may elect to make such payment of accrued interest on the date of a prepayment through a Stock Payment in accordance with Section 2.14 hereof. (c) The Borrower may reborrow any principal amount repaid under this Section 2.11 in accordance with theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. provisions of this Article II, provided that the Borrower can satisfy the requirements for obtaining a Loan set forth in Section 4.02 hereof, and provided further that with respect to Tranche A Loans, Borrower may not reborrow any amounts repaid unless the full $10,000,000 in principal amount of the Tranche B Loans is outstanding and/or has Page 29 been converted into Conversion Shares in accordance with Section 2.07 hereof. Each such reborrowing shall be treated as a Borrowing for all purposes hereunder. (d) Notwithstanding any other provision of this Agreement, any provision in any other Loan Documents or any provision of the Term Loan Documents, no prepayment or repayments of the Tranche B Loans may be made until all other Loan Obligations (excluding the outstanding principal of the Tranche B Loans) have been paid in full to the Lenders and the Administrative Agent. Mandatory or optional prepayments by Borrower shall first apply to currently outstanding Tranche A Loans or the Term Loan Obligations (excluding the principal of the Tranche B Loans) (as allocated between such Loan Obligations within the sole discretion of the Administrative Agent). Further, the Administrative Agent and the Lenders shall have right to exercise their conversion rights prior to any prepayment of the Tranche B Loans in accordance with Sections 2.07 and 2.11(b) hereof. SECTION 2.12 FEES. (a) As a fee for this amended and restated facility and the Loans to Borrower hereunder, on the Effective Date, the Borrower shall execute and deliver to the Administrative Agent for the account of each Lender (i) the Fee Warrant Certificate, (ii) the Purchaser Certificate, and (iii) the Additional Stock Letter Agreement, each in form and substance satisfactory to the Administrative Agent (in Administrative Agent's absolute discretion). (b) All fees payable hereunder shall be paid on the date due to the Administrative Agent for distribution to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.13 INTEREST. (a) The Loans comprising each Borrowing shall bear interest at a rate per annum equal to the Applicable Interest Rate for the Interest Period in effect for such Borrowing. (b) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraph of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to Loans as provided in paragraph (a) of this Section. (c) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments; provided that (i) interest accrued pursuant to paragraph (b) of this Section shall be payable on demand and (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment. (d) All interest hereunder shall be computed on theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. basis of a year of 360 days, and shall be payable for the actual number of days elapsed (including the first day but Page 30 excluding the last day). The LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.14 STOCK PAYMENT ELECTION. (a) In its sole discretion, as provided in this section, Borrower may elect to pay accrued interest on a Borrowing on an Interest Payment Date (or, in the case of a prepayment under Section 2.11, on the Prepayment Date) for such Borrowing through the remittance of the Stock Payment (instead of immediately available funds) (such election a "Stock Payment Election"). (b) To make a Stock Payment Election pursuant to this Section 2.14 with respect to any Borrowing for any Interest Period (or in the case of a prepayment under Section 2.11, the portion of an Interest Period ending on the Prepayment Date), the Borrower shall notify the Administrative Agent of such election by telephone not later than 1:00 p.m., New York time, six (6) Business Days before the Interest Payment Date (or, in the case of a prepayment under Section 2.11, six (6) Business Days before the Prepayment Date) for the current Interest Period for such Borrowing (the "Stock Payment Election Deadline"). Each telephone Stock Payment Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Stock Payment Election Request in a form approved by the Administrative Agent and signed by the Borrower. Promptly upon receipt of the written Stock Payment Election Request, the Administrative Agent shall give notice of such Stock Payment Election Request to the Lenders. (c) Each telegraphic and written Stock Payment Election Request shall specify the Borrowing to which such Stock Payment Election Request applies; (d) Following receipt of a Stock Payment Election Request, the Administrative Agent shall advise each Lender and the Borrower by 11 a.m., New York time, on the Interest Payment Date (or, in the case of a prepayment under Section 2.11, on the Prepayment Date) relating to such Stock Payment Election Request of the details thereof, including the Administrative Agent's determination of the Stock Payment (including its calculation thereof) as determined pursuant to Subsection (g) hereof. (e) If the Borrower fails to deliver a timely Stock Payment Election Request with respect to any Borrowing prior to the Stock Payment Election Deadline applicable thereto and in accordance with requirements of this section, then (a) the Borrower shall be deemed to have decided not to elect the Stock Payment Election for that Borrowing for that Interest Period and (b) the Applicable Interest Rate for that Borrowing for that Interest Period shall be the Cash Payment Rate. (f) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to make the Stock Payment Election or notify the Administrative Agent of a Stock Payment Election Request if a Default or an Event of Default has occurred and is continuing (unless this requirement is waived by the Required Lenders). (g) With respect to any Borrowing for which a Stock Payment Election has been made in accordance with this Section 2.14, the Stock Payment shall mean the quantity of Page 31Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. shares of the Borrower's Common Stock (with any fractional amount rounded to the next highest integer) that has a value at least equal to the amount of accrued interest at the Stock Payment Rate for that Borrowing for the Interest Period (or, in the case of a prepayment under Section 2.11, the portion of an Interest Period ending on the Prepayment Date) for which the Stock Payment Election has been made (the "Stock Payment"). For purposes of this Section 2.14, the value of each share of Common Stock shall equal the average daily Closing Price of the Common Stock over the five (5) Business Days immediately prior to the Interest Payment Date (or, in the case of a prepayment under Section 2.11, over the five (5) Business Days immediately prior to the Prepayment Date) for the Borrowing for which the Stock Payment Election has been made. SECTION 2.15 INCREASED COSTS. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender; or (ii) impose on any Lender any other condition affecting this Agreement or Applicable Interest Rate Loans made by such Lender or participation therein; and the result of any of the foregoing shall be to increase thecost to such Lender of making or maintaining any ApplicableInterest Rate Loan (or of maintaining its obligation to make anysuch Loan) or to increase the cost to such Lender or to reducethe amount of any sum received or receivable by such Lenderhereunder (whether of principal, interest or otherwise), then theBorrower will pay to such Lender such additional amount oramounts as will compensate such Lender for such additional costsincurred or reduction suffered. (b) If any Lender determines that any Change in Lawregarding capital requirements has or would have the effect ofreducing the rate of return on such Lender's capital or on thecapital of such Lender's holding company, if any, as aconsequence of this Agreement or the Loans made by such Lender toa level below that which such Lender or such Lender's holdingcompany could have achieved but for such Change in Law (takinginto consideration such Lender's policies and the policies ofsuch Lender's holding company with respect to capital adequacy),then from time to time the Borrower will pay to such Lender suchadditional amount or amounts as will compensate such Lender orsuch Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amountor amounts necessary to compensate such Lender or its holdingcompany, as the case may be, as specified in paragraph (a) or (b)of this Section shall be delivered to the Borrower and shall beconclusive absent manifest error. The Borrower shall pay suchLender the amount shown as due on any such certificate within 10days after receipt thereof. (d) Failure or delay on the part of any Lender todemand compensation pursuant to this Section 2.15 shall notconstitute a waiver of such Lender's right to demand suchcompensation; provided that the Borrower shall not be required tocompensate a Lender pursuant Page 32to this Section 2.15 for any increased costs or reductionsincurred more than 270 days prior to the date that such Lendernotifies the Borrower of the Change in Law giving rise to suchincreased costs or reductions and of such Lender's intention toclaim compensation therefor; provided further that, if the Changein Law giving rise to such increased costs or reductions isSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.retroactive, then the 270-day period referred to above shall beextended to include the period of retroactive effect thereof. SECTION 2.16 INCREASED COSTS; PROBLEMS ASCERTAINING APPLICABLE INTEREST RATE. If prior to the commencement of the Interest Period for a Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or (b) if Administrative Agent determines that the LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to the Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;then the Administrative Agent shall give notice thereof to theBorrower and the Lenders by telephone or telecopy as promptly aspracticable thereafter and, until the Administrative Agentnotifies the Borrower and the Lenders that the circumstancesgiving rise to such notice no longer exist, any Borrowing Requestthat requests such Borrowing shall be ineffective. SECTION 2.17 TAXES. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of Page 33 such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.18 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursements, or of amounts payable under Section 2.15, 2.17 or 2.20, or otherwise) prior to 2:00 p.m., New York City time, on the date when due, in immediately available funds (or (a) with respect to accrued interest for a Borrowing for which the Borrower has made the Stock Payment Election in accordance with Section 2.14, Common Stock, or (b) with respect to fees under Section 2.12, the Fee Warrant Certificate), without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at c/o ING Baring (U.S.) Capital LLC, 135 East 57th Street, New York, New York 10022 Attention: Joan Chiappe, Vice President, except that payments pursuant to Sections 2.15, 2.17, 2.20 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars (or, (a) in the case of a Stock Payment Election, Common Stock, or (b) in the case of the fees under Section 2.12, the Fee Warrant Certificate). (b) If at any time insufficient funds or property are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds or property shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, (ii) second, towards payment of principal on the Tranche A Loans then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties, and (iii) third, towards payment of Page 34 principal on the Tranche B Loans then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations inSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it to the Administrative Agent pursuant to the terms of this Agreement, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.19 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS. (a) If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable Page 35 efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expensesSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 2.20 BREAK FUNDING PAYMENTS. In the event of (a) the payment of any principal of any Loan other than on the last day of an Interest Period therefor (including as a result of an Event of Default), or (b) the failure to borrow, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto, then, in such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of any Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment to the last day of the then current Interest Period for such Loan if the interest rate payable on such deposit were equal to the Cash Payment Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for deposits from other banks in the eurocurrency market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. Page 36 SECTION 2.21 CERTAIN MANDATORY PREPAYMENTS. In addition to any other prepayments required under the Loan Documents, prepayments of the Loan Obligations shall be required as follows (any prepayment of the Revolver Loan Obligations set forth in (a) and (b) of this Subsection shall be effected in each case in the manner and to the extent specified in Subsection (c) of this Section 2.21). (a) Certain Mandatory Prepayments for EquitySource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Contribution. To the extent, if any, that Borrower raises, collects, or receives, in any manner, a cumulative amount after September 30, 2001 equal to or greater than $7,500,000 from the Net Available Proceeds from, relating to, or arising from any Equity Issuance, then the Borrower shall prepay the Loan Obligations an aggregate amount equal to 25% of such cumulative proceeds in excess of $7,500,000 to prepay the Lender's outstanding loans (as allocated between the Revolving Loan Obligations and the Term Loan Obligations as determined by ING in its sole discretion). (b) Payments from the Metropolitan Water District of Southern California. If the Borrower or its Subsidiaries receives any Metropolitan Water District Payments, then the Borrower shall prepay the Loan Obligations in an aggregate amount equal to 100% of the Net Available Proceeds thereof (as allocated between the Revolving Loan Obligations and the Term Loan Obligations as determined by the ING in its sole discretion). (c) Application. Prepayments to the Revolving Loan Obligations described in the above subsections of Section 2.21 and allocated, in accordance with subsections 2.21(a) and (b) for the prepayment of Revolving Loan Obligations, shall be applied in the following order: (i) then due and payable interest and fees under the Revolving Loan Documents; and (ii) then the principal amounts outstanding under the Tranche A Loans, and (iii) then the principal amounts outstanding under the Tranche B Loans, and (iv) then all other Revolving Loan Obligations and other amounts due under the Revolving Loan Documents. (d) For purposes of this Section 2.21, the following terms shall have the following meanings: "EQUITY ISSUANCE" shall mean (a) any issuance or sale by the Borrower or any of its Subsidiaries after September 30, 2001 of (i) any capital stock, (ii) any warrants or options exercisable in respect of capital stock (other than any warrants or options issued to directors, officers or employees of the Borrower or any of its Subsidiaries pursuant to employee benefit plans established in the ordinary course of business and any capital stock of the Borrower issued upon the exercise of such warrants or options) or (iii) any other security or instrument representing an equity interest (or the right to obtain any equity interest), in the Borrower or any of its Subsidiaries, or (iv) to the extent not covered in subsections (a)(i) through (iii) above, the proceeds from convertible debt or debt with warrants attached thereto that Page 37 provides the lender with an effective annual yield in excess of 18% (as reasonably determined by the Lender using Black-Scholl's pricing methodology), or (b) the receipt by the Borrower or any of its Subsidiaries after September 30, 2001 of any capital contribution (whether or not evidenced by any equity security issued by the recipient of such contribution); provided that Equity Issuance shall not include (x) any such issuance or sale by any Subsidiary of the Borrower to the Borrower or any Subsidiary of the Borrower, (y) any capital contribution by the Borrower or any Wholly Owned Subsidiary of the Borrower to any Subsidiary of the Borrower, or (z) the issuance or sale of any securities described in subsection (a) above of any of the Sun World Entities if, under the terms of the SunSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. World Indenture (1) the Net Available Proceeds of such issuance or sale are required to be offered to the holders of pre-existing debt obligations of any of the Sun World Entities, or (2) any of the Sun World Entities are prohibited from distributing or otherwise transferring the Net Available Proceeds to Borrower or from directly applying the Net Available Proceeds to the payment of the obligations of the Borrower . "METROPOLITAN WATER DISTRICT PAYMENTS" shall mean, any payments received by the Borrower or any of its Subsidiaries or Affiliates from or on account of the Metropolitan Water District of Southern California and/or the Cadiz Groundwater Storage and Dry-Year Supply Program. "NET AVAILABLE PROCEEDS" shall mean, (1) in the case of any Equity Issuance, the aggregate amount of all cash received by the Borrower and its Subsidiaries in respect of such Equity Issuance net of reasonable expenses incurred by the Borrower and its Subsidiaries in connection therewith, and (2) in the case of any Metropolitan Water District Payments, the aggregate amount of all cash received by the Borrower and its Subsidiaries in respect of such Metropolitan Water District Payments, but excluding out-of-pocket expense reimbursements paid to the Borrower or its subsidiaries by the Metropolitan Water District of Southern California and/or the Cadiz Groundwater Storage and Dry- Year Supply Program in an aggregate amount not to exceed $5,000,000. SECTION 2.22 REGISTRATION RIGHTS. Borrower hereby agrees that all Common Stock of Borrower, each of the Revolving Credit Agreement Warrants and their respective underlying shares and/or issued at any time, whether before or after the date hereof, under any of the Loan Documents, including stock issued pursuant to a Stock Payment Election in accordance with Section 2.14 of this Agreement, shall be accorded registration rights by the Borrower as set forth in the Registration Rights Addendum. Page 38 ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lendersthat the following representations and warranties are true andcorrect on the date hereof as if made on the date hereof (except,to the extent any such representations and warrantiesspecifically refer to an earlier date, in which case, suchrepresentations or warranties are represented and warranted to betrue and correct as of such earlier specified date): SECTION 3.01 ORGANIZATION; POWERS. Each of the Borrower and its Participating Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3.02 AUTHORIZATION; ENFORCEABILITY. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization,Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03 GOVERNMENTAL APPROVALS; NO CONFLICTS. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries (except those imposed by the Loan Documents). SECTION 3.04 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE. (a) The Borrower has heretofore furnished to the Administrative Agent its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended December 31, 2000, reported on by PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2001, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. Page 39 (b) Since September 30, 2001, there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole. SECTION 3.05 PROPERTIES. (a) Each of the Borrower and its Participating Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for Permitted Encumbrances and minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and its Participating Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Participating Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06 LITIGATION AND ENVIRONMENTAL MATTERS. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of anSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or the Transactions. (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.07 COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the Borrower and the Participating Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. Page 40 SECTION 3.08 INVESTMENT AND HOLDING COMPANY STATUS. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09 TAXES. Each of the Borrower and its Participating Subsidiaries has timely filed or caused to be filed all tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Participating Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $500,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $500,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11 DISCLOSURE. The Borrower has disclosed to the Administrative Agent all agreements, instruments andSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. SECTION 3.12 SECURITY INTERESTS. Except for (a) the filing of UCC financing statements in respect of the collateral covered by the Security Documents in the States of Delaware and California and such other applicable jurisdictions in the United States of America and (b) filing and recording of Mortgages in respect of the real property collateral in the county in which the real property is located, which filings shall have been made and be in effect on (or simultaneously with) the Effective Date, the taking of possession by the Administrative Agent of the certificates representing the shares of capital stock of the Participating Subsidiaries and various instruments pledged to it pursuant to the Pledge and Security Agreement, and the delivery of notice of the security interests granted in the accounts covered by the Pledge and Page 41 Security Agreement to the bank or banks whereat such accounts are maintained and receipt of acknowledgements of such notices by such banks (which actions shall be effected as of or promptly following the Effective Date), no further filing or recording of any document and no other action is necessary or advisable in the States of Delaware or California or any other applicable jurisdiction in the United States of America in order to establish and perfect, under the laws of Delaware or California or such other applicable jurisdiction in the United States of America, the Administrative Agent's security interest in such collateral, to the extent required by the applicable Security Documents, on behalf of the Lenders. SECTION 3.13 PARTICIPATING SUBSIDIARIES. The Borrower has no Participating Subsidiaries except as set forth on Schedule 3.13 hereto. SECTION 3.14 INACTIVE SUBSIDIARIES. The Borrower has no Inactive Subsidiaries except as set forth on Schedule 3.14 hereto. The Inactive Subsidiaries (a) do not conduct any business activities of any type or nature, and (b) do not own or have any interest in any assets or property of any type or nature. SECTION 3.15 SOLVENCY. After giving effect to the Transactions, (i) the assets of the Borrower, at a fair valuation, will exceed its debts, (ii) the Borrower's capital will not be unreasonably small to conduct its business, (iii) the Borrower will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature, and (iv) the then-current fair salable value of the Borrower's assets will be greater than the amount that will be required to pay its probable liabilities (including debts) as they become absolute and matured. For purposes of this Section, "debt" means any liability on a claim, and "claim" means (x) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, securedSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. or unsecured, or (y) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. For purposes of this Section, the Borrower may assume that the Loans will be refinanced on the Maturity Date. SECTION 3.16 EXCLUDED ITEMS. The aggregate acquisition cost of (i) all Excluded Items plus (ii) all Rolling Stock (in existence as of the Effective Date or thereafter acquired) for which the Borrower or other Obligor, as the case may be, has not granted Liens in favor of the Administrative Agent, for itself and on behalf of the Lenders, is not more than $2,000,000. SECTION 3.17 EQUITY ACQUISITION ASSETS. The aggregate acquisition cost of all Equity Acquisition Assets for which the Borrower or other Obligor, as the case may be, has not granted Liens in favor of the Administrative Agent, for itself and on behalf of the Lenders, is not more than $2,000,000. SECTION 3.18 ROLLING STOCK. The aggregate acquisition cost of all Rolling Stock for which the Borrower, without the consent of the Administrative Agent, has not granted Liens in favor of the Administrative Agent, for itself and on behalf of the Lenders, is not more than $2,000,000. Page 42 SECTION 3.19 CERTAIN ACKNOWLEDGEMENTS. The Borrower hereby expressly acknowledges and agrees that as of the Effective Date (and prior to any draw on the Tranche B Loans), the outstanding principal under the Loan Documents is in the amount of $15,000,000.00, representing the full Tranche A Commitments. The foregoing amount does not include accrued and unpaid interest from and after January 31, 2002. Further, the Borrower hereby confirms that (a) the following documents remain valid and binding agreements and/or instruments, and (b) the Borrower and, as applicable, its Participating Subsidiaries remain bound by the terms and provisions of the following documents: (i) the Pledge and Security Agreement (together with the share certificates representing all of the issued and outstanding shares of the Participating Subsidiaries, endorsed in blank), and the Mortgages, and/or any amendments to any such existing Loan Documents; (ii) the Revised and Restated Initial Draw Warrant Certificate; (iii) the Revised and Restated Additional Draw Warrant Certificate; (iv) the Eighth Warrant Certificate; (v) the Ninth Warrant Certificate; (vi) the Tenth Warrant Certificate; (vii) the Eleventh Warrant Certificate; (viii) the Cadiz Reaffirmation Agreement; and (ix) the other Loan Documents, as amended from time to time. SECTION 3.20 NO SATISFACTION. The Borrower hereby expressly represents, warrants, acknowledges and agrees that nothing in this Agreement or in any document or instrument executed in connection with or pursuant to this Agreement shall constitute a satisfaction of or a novation as to allSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. or any portion of Borrower's indebtedness under the Loan Documents. Borrower hereby unconditionally reaffirms, reconfirms and restates its obligation to pay in full the Revolving Loan Obligations arising under the Loan Documents and all other Loan Obligations to the Administrative Agent and/or the Lenders, as the case may be. Borrower hereby further acknowledges and agrees that it has no defenses to the enforcement of the Revolving Loan Obligations (or any portion thereof), or the other Loan Obligations, nor any counter-claims or claims of offset whatsoever and that neither this Agreement nor the consummation of the transactions contemplated herein will give rise to any such defenses, counter-claims or claims of offset. Page 43 ARTICLE IV CONDITIONS SECTION 4.01 EFFECTIVE DATE. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent shall have received the following documents, each in form and substance satisfactory to the Administrative Agent , duly executed and delivered by all the parties thereto: (i) this Agreement; (ii) the Borrower filed or registered certificate of incorporation, as amended, modified, restated or supplemented to the date hereof and certified as of the Effective Date as being a true and correct copy thereof by an officer of the Borrower; (iii) a copy, certified as of the Effective Date of the resolutions of the board of directors of the Borrower duly authorizing the execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents to which it is a party, and each other document required to be executed and delivered by the Borrower pursuant to this Agreement; (iv) a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (o) and (q) of this Section 4.01; (v) Fourth Amendment to the Revolving Credit Note, in the form as attached hereto in Exhibit I; (vi) Fourth Modification of the Pledge and Security Agreement, in the form as attached hereto in Exhibit J; (vii) Fourth Modification of the Revolver Deed of Trust, in the form as attached hereto in Exhibit K; (viii) Fourth Modification of the Revolver SWFG Deed of Trust, in the form as attached hereto in Exhibit L; (ix) Fourth Modification of the Revolver Piute Deed of Trust, in the form as attached hereto in Exhibit M; (x) the Registration Rights Addendum, in the form as attached hereto in Exhibit H; (xi) the Fee Warrant Certificate, in the form as attached hereto in Exhibit D; Page 44 (xii) the Purchaser Certificate in the form asSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. attached hereto in Exhibit G; (xiii) the Additional Stock Letter Agreement, in the form as attached hereto in Exhibit A. (b) The Borrower shall have confirmed in writing that the following documents remain valid and binding agreements and/or instruments, which written confirmation is in form and substance satisfactory to the Administrative Agent, in its sole discretion, and that Borrower and, as applicable, its Participating Subsidiaries remain bound by the terms and provisions of the following documents: (i) the Pledge and Security Agreement (together with the share certificates representing all of the issued and outstanding shares of the Participating Subsidiaries, endorsed in blank), and the Mortgages, and/or any amendments to any such existing Loan Documents; (ii) the Revised and Restated Initial Draw Warrant Certificate; (iii) the Revised and Restated Additional Draw Warrant Certificate; (iv) the Eighth Warrant Certificate; (v) the Ninth Warrant Certificate; (vi) the Tenth Warrant Certificate; (vii) the Eleventh Warrant Certificate; (viii) the Cadiz Reaffirmation Agreement; and (ix) the other Loan Documents, as amended from time to time. (c) The Administrative Agent shall have received an opinion from the Borrower's counsel in form and substance satisfactory to the Administrative Agent (A) that Borrower is in good standing in the States of Delaware and California, (B) as to the due authorization, execution and delivery of this Agreement and the other Loan Documents, (C) that this Agreement and the other Loan Documents constitute valid, binding and enforceable obligations of Borrower, and (D) as to such other matters as the Administrative Agent shall reasonably request. (d) The Administrative Agent shall have received certified copies of the resolutions (in form and content satisfactory to Administrative Agent) of the Board of Directors of Borrower approving and authorizing this Agreement and the other documents executed and/or delivered in connection herewith (including each of the exhibits hereto), and the effectuation of the transactions contemplated herein and/or therein, as the case may be, and any and all actions to be taken by Borrower in furtherance and in connection with this Agreement and/or the other documents executed and/or delivered in connection herewith. Page 45 (e) The Administrative Agent shall have received from the Delaware Secretary of State a Certificate of Good Standing with respect to Borrower and a certificate evidencing that Borrower is qualified to do business in California, all of which certificates must be in form and content satisfactory to Administrative Agent. (f) The Administrative Agent shall have received certificates (in form and content satisfactory to Administrative Agent) of the Secretary of Borrower, certifying as to the names and signatures of the officers authorized to sign this Agreement and the other documents toSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. be executed and delivered on its behalf pursuant to this Agreement. (g) To the best of Borrower's knowledge, all real property taxes with respect to the property encumbered by any of the ING Collateral, as well as all real property taxes affecting the property encumbered by any and all deeds of trust pledged or assigned to Administrative Agent as security for the Revolving Loan Obligations (or any of them), shall have been paid prior to the date any fine, penalty, interest, late-charge or loss may be added to such taxes or charged against such real property or other ING Collateral for the non-payment or late-payment of such taxes. (h) The Borrower shall have caused appropriate officers of Borrower to execute and deliver to Administrative Agent such additional certificates with respect to matters relating to the transactions contemplated herein as Administrative Agent may reasonably require. (i) The Borrower shall have executed and delivered or caused the appropriate third parties to execute and/or deliver (in recordable form, where appropriate, and otherwise in form and content satisfactory to Administrative Agent) such other documents, instruments, agreements and writings as Administrative Agent may reasonably require in connection with the creation or continuation of any security interest(s) granted to Administrative Agent in furtherance of the transactions contemplated by this Agreement or as Administrative Agent may otherwise require in connection with the consummation of such transactions (including, without limitation, estoppel certificates, guaranty waivers, security agreements, pledges, assignments, subordination agreements, endorsements, certificates, certifications, reports, and studies). (j) as of the date hereof, or as soon as practicable hereafter, but in no event later than ten (10) days hereafter, UCC financing statements covering all the security interests created by or pursuant to the Pledge and Security Agreements in the collateral pledged pursuant thereto, shall have been executed and delivered by the Borrower to the Administrative Agent and such financing statements, or other statements or documents to the same purposes, shall have been duly filed in all other applicable jurisdictions in the United States of America necessary or desirable to perfect said security interests and there shall have been taken all other action as the Administrative Agent or any Lender through the Administrative Agent may reasonably request or as shall be necessary to perfect such security interests to the extent required by the applicable Security Documents. (k) [Intentionally omitted]. Page 46 (l) The representations and warranties of the Borrower set forth in this Agreement and each other Loan Document shall be true and correct on and as of the Effective Date of such Borrowing. (m) No Default shall have occurred and be continuing. (n) The Borrower shall have performed or observed and be continuing to perform each term, covenant or agreement contained in any Loan Document. (o) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (p) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (q) All governmental and third party approvals necessary or, in the discretion of the Administrative Agent, advisable in connection with the Transaction, the financing contemplated hereby and the continuing operations of the Borrower shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Transactions or the financing thereof. (r) The Administrative Agent shall have received a "date down and modification" endorsement to each of the mortgagee title insurance policies (collectively, the "Title Policies") issued for the benefit of the Lender with respect to the Revolver Deeds of Trust, which endorsements shall (i) be issued by the Chicago Title Insurance Company for the benefit of the Lender and its successors and assigns, (ii) insure the amendments to the Revolver Deeds of Trust required to be delivered pursuant to this Section 4.01 of this Agreement and the continued priority of Revolver Deeds of Trust granted to the Lender, (iii) confirm that all real property taxes with respect to the property encumbered by the Revolver Deeds of Trust have been paid prior to the date any fine, penalty, interest, late charge or similar fine or penalty shall accrue with respect to the payment of such taxes, (iv) be otherwise in form and substance satisfactory to the Lender in its sole discretion. (s) The Lender shall have received confirmation, in form and substance satisfactory to the Lender, that (i) Borrower has paid (a) all premiums for the endorsements to the Title Policies required pursuant to Section 4.01(r) hereof and (b) all recording and filing fees relating to the recording of the amendment to the Revolver Deeds of Trust required to be delivered pursuant to this Section 4.01 of this Agreement and (ii) all amendments to the Revolver Deeds of Trust required to be delivered pursuant to this Section 4.01 of this Agreement have been duly accepted for recording. (t) The Administrative Agent shall have received such other documents as the Administrative Agent may reasonably request. Page 47 The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on March 20, 2002 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.02 EACH CREDIT EVENT. The obligation of each Lender to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing. (b) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Each Borrowing shall be deemed to constitute a representation andwarranty by the Borrower on the date thereof as to the mattersspecified in paragraphs (a) and (b) of this Section. ARTICLE V AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminatedand the principal of and interest on each Loan and all feespayable hereunder shall have been paid in full, the Borrowercovenants and agrees with the Lenders that: SECTION 5.01 FINANCIAL STATEMENTS AND OTHERINFORMATION. The Borrower will furnish to the AdministrativeAgent and each Lender: (a) within 15 days following Borrower's filing each Annual Report on Form 10-K with the Commission, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 15 days following Borrower's filing each Quarterly Report on Form 10-Q with the Commission, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of Page 48 the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under Subsection (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, and (ii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) [Intentionally omitted] (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally,Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. as the case may be; and (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02 NOTICES OF MATERIAL EVENTS. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section 5.02 shall beaccompanied by a statement of a Financial Officer or otherexecutive officer of the Borrower setting forth the details ofthe event or Page 49development requiring such notice and any action taken orproposed to be taken with respect thereto. SECTION 5.03 EXISTENCE; CONDUCT OF BUSINESS. The Borrower will, and will cause each of its Subsidiaries (including Sun World, but excluding Borrower's Inactive Subsidiaries and the subsidiaries of Sun World) to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.04 PAYMENT OF OBLIGATIONS. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.05 MAINTENANCE OF PROPERTIES; INSURANCE. The Borrower will, and will cause each of its Participating Subsidiaries and SWFG to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. Further, within ten (10) Business Days after the Effective Date, the Borrower shall provide evidence to the Administrative Agent of the insurance required to be carried pursuant to the foregoing sentence, which evidence shall beSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. in form and substance satisfactory to, in form and substance satisfactory the Administrative Agent. SECTION 5.06 BOOKS AND RECORDS; INSPECTION RIGHTS. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries (excluding the Sun World Entities) to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07 COMPLIANCE WITH LAWS. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.08 USE OF PROCEEDS. Subject to the terms and restrictions set forth herein, the proceeds of the Loans will be used solely for the purpose of (a) financing a Page 50 Permitted Investment and (b) financing the working capital and general corporate needs of the Borrower. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations G, U and X. Notwithstanding the foregoing, to the extent that the Borrower transfers any proceeds of the Loans to any of its Affiliates, such transfer must be a loan evidenced by a note and as properly authorized by the Board of Directors of the Borrower and the board of directors for such Affiliate; which note shall be pledged to the Borrower and constitute ING Collateral. SECTION 5.09 NEW SUBSIDIARIES. In the event that any Person shall become a Participating Subsidiary of Borrower after the date hereof, Borrower shall execute (or cause such other Participating Subsidiary as may be the direct parent company of the new Participating Subsidiary to execute) a Pledge and Security Agreement, as the case may be, sufficient to subject all of the capital stock of such new or additional Participating Subsidiary to a Lien in favor of the Administrative Agent, on behalf of the Lenders, and any other documents as the Administrative Agent may reasonably request from time to time in order to perfect or maintain the perfection of the Administrative Agent's Liens thereunder, each in form and substance reasonably satisfactory to the Administrative Agent. SECTION 5.10 ACQUISITIONS BY BORROWER. (a) In the event that after the date of this Agreement the Borrower acquires ownership of any additional real or personal property of any type or nature (including, but not limited to, notes or other obligations from a Subsidiary or Affiliate to Borrower), the Borrower shall promptly give written notice of such acquisition to the Administrative Agent, and if requested by the Administrative Agent at the direction of the Required Lenders, Borrower shall execute and deliver any and all Security Documents or collateral assignments, security agreements, mortgages, deeds of trust, pledge agreements, financing statements, fixture filings, notice filings or other documents as the Administrative Agent may reasonably request from time to time in order forSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. the Administrative Agent to acquire a Lien on the property so acquired by Borrower as additional security for the obligations under this Agreement or to perfect or maintain the perfection of such Lien. (b) Notwithstanding paragraph (a) of this Section 5.10, so long as no Event of Default is then in existence, Borrower shall not be required to deliver to the Administrative Agent any Security Documents or collateral assignments, security agreements, mortgages, deeds of trust, pledge agreements, financing statements, fixture filings, notice filings or other documents for any item of real or personal property acquired by Borrower on or after the Effective Date if both (i) the acquisition cost of each such item of real or personal property (including, but not limited to, Rolling Stock) is less than $250,000 and (ii) the aggregate acquisition cost of (A) all such real or personal property (including, but not limited to, Rolling Stock) in which no Lien has been granted in favor of the Administrative Agent pursuant to this paragraph (b) of this Section (collectively, the "Excluded Items") plus (B) Rolling Stock in existence as of the Effective Date is not more than $2,000,000. To the extent that the aggregate acquisition cost of (i) all Excluded Items plus (ii) Rolling Stock in existence as of the Effective Date is more than $2,000,000 (the "Excluded Items/Rolling Stock Threshold"), Borrower will, and will cause its Subsidiaries to, grant (and such Liens shall be deemed immediately to have Page 51 been granted) Liens on such assets to the extent in excess of the Excluded Items/Rolling Stock Threshold in favor of the Administrative Agent, for itself and on behalf of the Lenders. (c) Notwithstanding paragraph (a) and (b) of this Section 5.10, so long as no Event of Default is then in existence, Borrower also shall not be required to deliver to the Administrative Agent any Security Documents or collateral assignments, security agreements, mortgages, deeds of trust, pledge agreements, financing statements, fixture filings, notice filings or other documents for any item of real or personal property acquired on or after the Effective Date if each of the following conditions are satisfied: (a) each such item of real or personal property is acquired or purchased on or after the Effective Date solely in exchange for the Common Stock or other equity interest in the Borrower (an "Equity Acquisition Asset"), (b) no Lien is created, imposed, or permitted to exist on any Equity Acquisition Asset, and (c) the aggregate acquisition value of all Equity Acquisition Assets does not exceed $2,000,000. To the extent that the aggregate acquisition value of all Equity Acquisition Assets is more than $2,000,000 ("Equity Acquisition Threshold"), Borrower will, and will cause its Subsidiaries to, grant Liens (and such Liens shall be deemed immediately to have been granted) on such assets to the extent in excess of the Equity Acquisition Threshold in favor of the Administrative Agent, for itself and on behalf of the Lenders. SECTION 5.11 ACQUISITIONS WITH PROCEEDS OF LOANS. In the event that after the date of this Agreement, a Subsidiary or Borrower's Affiliate utilizes the proceeds of any Loans, which are either directly or indirectly transferred or otherwise forwarded to such Subsidiary or Borrower's Affiliate from Borrower, to acquire real or personal property of any type or nature, Borrower shall promptly give written notice of such acquisition to the Administrative Agent, and if requested by the Administrative Agent at the direction of the Required Lenders, Borrower shall cause such Subsidiary or Borrower's Affiliate to execute and deliver Security Documents or collateral assignments, security agreements, mortgages, deeds of trust, pledge agreements, financing statements, fixture filings,Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. notice filings or other documents the Administrative Agent may reasonably request from time to time in order for the Administrative Agent to acquire a Lien on the property so acquired by the Subsidiary or Borrower's Affiliate as the case may be, as additional security for the obligations under this Agreement or to perfect or maintain the perfection of such Lien. SECTION 5.12 REVOLVING CREDIT AGREEMENT WARRANTS. On the date hereof, the Borrower shall issue the Fee Warrant Certificate and the Purchaser Certificate. The Fee Warrant Certificate shall be duly executed and registered in such name or names and in such denominations as each Lender shall have notified the Borrower and shall be deemed earned in accordance with Section 2.12 hereof and the terms and conditions of the Fee Warrant Certificate. The Borrower shall keep available for issuance upon exercise of the Fee Warrant Certificate and the other Revolving Credit Agreement Warrants a sufficient quantity of Common Stock to satisfy the exercise in full of the Revolving Credit Agreement Warrants from time to time outstanding. The Borrower will comply in all respects with its obligations under the Revolving Credit Agreement Warrants and shall take all steps as shall be necessary to insure that the Lenders and any subsequent holders of the Revolving Credit Agreement Warrants receive all of the benefits which they are intended to receive thereunder. Page 52 SECTION 5.13 STOCK PAYMENT COMMON STOCK. On each Interest Payment Date that the Borrower has made a Stock Payment Election on account of a Borrowing, the Borrower shall issue Common Stock to the Lenders equal to the applicable Stock Payment ("Stock Payment Common Stock"). All shares of Common Stock issued pursuant to a Stock Payment shall be duly authorized, validly issued, fully paid, non-assessable, and free and clear of all Liens and other encumbrances. SECTION 5.14 CONVERSION SHARES. The Borrower shall keep available for issuance a sufficient quantity of Common Stock to satisfy, at all times, the exercise by any Tranche B Lender of such Tranche B Lenders' conversion rights pursuant to Section 2.07 hereof. All shares of Common Stock issued pursuant to the exercise of conversion rights under Section 2.07 hereof shall be duly authorized, validly issued, fully paid, non-assessable, and free and clear of all Liens and other encumbrances. ARTICLE VI NEGATIVE COVENANTS Until the Commitments have expired or terminated andthe principal of and interest on each Loan and all fees payablehereunder have been paid in full, the Borrower covenants andagrees with the Lenders that: SECTION 6.01 INDEBTEDNESS. The Borrower will not, and will not permit any Participating Subsidiary or SWFG to, create, incur, assume or permit to exist any Indebtedness of Borrower, the Participating Subsidiaries or SWFG, except: (a) Indebtedness created hereunder; (b) Indebtedness existing on November 25, 1997 and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; (c) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary; (d) Guarantees by the Borrower of Indebtedness of anySource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Subsidiary and by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary; (e) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this Subsection (e) shall not exceed $135 million at any time outstanding; Page 53 (f) Indebtedness of the Borrower or any Subsidiary as an account party in respect of trade letters of credit; (g) "Parent Permitted Debt" (as defined in the Sun World Indenture), to the extent such debt may be incurred by Borrower pursuant to the terms of the Sun World Indenture without any action or authorization by the Sun World Trustee under the Sun World Indenture or by the holders of the Sun World Notes; provided, however, no "Parent Permitted Debt" (as defined in the Sun World Indenture) may be created, incurred, assumed or permitted to exist that would have a Material Adverse Effect upon Borrower's ability to satisfy the Borrower's obligations hereunder and under the other Loan Documents; (h) intercompany loans payable to the Borrower that evidences the intercompany transfer of the proceeds of the Loans to affiliates of the Borrower, provided, however, that any such intercompany loan is evidenced by a note that is pledged by Borrower to and for the benefit of the Administrative Agent for account of the Lenders. SECTION 6.02 LIENS. The Borrower will not, and will not permit any Subsidiary (excluding the Sun World Entities) to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower or any Subsidiary (excluding the Sun World Entities) existing on November 25, 1997 and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secured on November 25, 1997 and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (d) Liens on assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Subsection (e) of Section 6.01, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of Page 54 such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 90% of the cost of acquiring, constructing or improving such assets and (iv) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary; (e) Liens to the extent permitted pursuant to the terms of the Sun World Indenture without any action or authorization by the Sun World Trustee under the Sun World Indenture or by the holders of the Sun World Notes; provided that such Liens do not include any Liens on the ING Collateral; and (f) Liens on the Excluded Items or any portion thereof;notwithstanding the foregoing, the Borrower will not, and willnot permit any Subsidiary to, create, incur, assume or permit toexist any Lien on any Equity Acquisition Asset now owned orhereafter acquired, or any proceeds thereof. SECTION 6.03 FUNDAMENTAL CHANGES. (a) The Borrower will not, and will not permit any Subsidiary, excluding the Sun World Entities, to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) any substantial part of its assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Subsidiary/Person may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Subsidiary/Person may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Subsidiary and (iv) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04. (b) The Borrower will not, and will not permit any of its Subsidiaries (excluding the Sun World Entities) to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto. (c) Notwithstanding the foregoing, the Borrower may sell assets to the extent such sale may be consummated pursuant to the terms of the Sun World Indenture without any action or authorization by the Sun World Trustee under the Sun World Indenture or the holders of the Sun World Notes; provided that such sales do not include or affect in any manner the ING Collateral. (d) Unless an Inactive Subsidiary shall comply withSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. each and every obligation that Participating Subsidiaries (either directly or indirectly) have hereunder or under any of the Loan Documents, (a) the Borrower will not permit such Inactive Subsidiary to engage in any Page 55 business of any type or nature, (b) the Borrower will not permit the Inactive Subsidiaries, and will cause the Inactive Subsidiaries to refrain from, obtaining any assets or properties of any type or nature, (c) the Borrower will not permit any Inactive Subsidiary to, create, incur, assume or permit to exist any Indebtedness, and (d) the Borrower will not permit any Inactive Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues. SECTION 6.04 INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS. The Borrower will not, and will not permit any of its Subsidiaries (excluding the Sun World Entities) to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (a) Permitted Investments; (b) investments by the Borrower existing on the date hereof in the capital stock, other securities or equity interests of its Subsidiaries; (c) loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary to the Borrower or any other Subsidiary; (d) Guarantees constituting Indebtedness permitted by Section 6.01; and (e) assets acquired by Borrower solely in exchange for the equity interests of the Borrower. SECTION 6.05 HEDGING AGREEMENTS. The Borrower will not, and will not permit any of its Subsidiaries (excluding the Sun World Entities) to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities. SECTION 6.06 RESTRICTED PAYMENTS. The Borrower will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment; except that the Borrower and its Affiliates may make "Restricted Payments" (as defined in the Sun World Indenture) to the extent such payments may be effected pursuant to the terms of the Sun World Indenture without any action or authorization by the Sun World Trustee under the Sun World Indenture or by the holders of the Sun World Notes, provided, however, that no such "Restricted Payments" (as defined in the Sun World Indenture) may be made that would have a Material Adverse Effect upon Borrower's ability to satisfy the Borrower's obligations hereunder and under the other Loan Documents. SECTION 6.07 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not permit any of itsSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Subsidiaries to, sell, lease or otherwise transfer any property or assets Page 56 to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and its Subsidiaries not involving any other Affiliate, (c) any Restricted Payment permitted by Section 6.06, and (d) "Affiliate Transactions" (as defined in the Sun World Indenture), to the extent such transactions may be incurred by Borrower and its Subsidiaries pursuant to the terms of the Sun World Indenture without any action or authorization by the Sun World Trustee under the Sun World Indenture or by the holders of the Sun World Notes, provided, however, that no such "Affiliate Transactions" (as defined in the Sun World Indenture) may be undertaken that would have a Material Adverse Effect upon Borrower's ability to satisfy the Borrower's obligations hereunder and under the other Loan Documents. SECTION 6.08 RESTRICTIVE AGREEMENTS. The Borrower will not, and will not permit any of its Subsidiaries (excluding the Sun World Entities) to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary (excluding the Sun World Entities) to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary (excluding the Sun World Entities) to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by this Agreement or any other Loan Document, (ii) the foregoing shall not apply to restrictions and conditions existing on November 25, 1997 identified on Schedule 6.08 (but shall apply to any amendment or modification expanding the scope of any such restriction or condition), (iii) except as may be required pursuant to Section 5.10 hereof, the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) except as may be required pursuant to Section 5.10 hereof, Subsection (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) except as may be required pursuant to Section 5.10 hereof, Subsection (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof. SECTION 6.09 USE OF PROCEEDS. Borrower shall not use the proceeds of any of the Loans for any purpose other than as and to the extent permitted by Section 5.08 hereof. SECTION 6.10 MANAGEMENT FEES FROM SUN WORLD. Borrower shall not, and will cause Sun World to refrain from taking any action to, either directly or indirectly, amend, modify, alter or voluntary terminate or suspend the Borrower/Sun World Services Agreement in any manner that would restrict, limit, affect, modify, suspend or terminate Borrower's right to receive at least $1,500,000.00 annually for management fees paid by Sun World to Cadiz under theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. terms of the Cadiz/Sun World Services Agreement. Page 57 ARTICLE VII EVENTS OF DEFAULT If any of the following events ("Events of Default") shalloccur: (a) the Borrower shall fail to pay any principal of, or interest on, any Loan or any fee or any other amount payable under this Agreement or any other Loan Document when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or waiver hereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or waiver hereunder, shall prove to have been incorrect in any material respect when made or deemed made; (c) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower's existence) or 5.08 or in Article VI; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clauses (a), (b) or (c) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender); (e) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; provided that this clause (e) shall not apply solely by reason of a failure to make a payment when and as the same shall become due and payable under the Sun World Indenture or other Sun World Documents unless (i) such failure would cause an Event of Default hereunder pursuant to a Section other than this Section (e), (ii) the Sun World Notes or any of the obligations under the Sun World Documents to the Sun World Trustee or the holders of the Sun World Notes have been accelerated pursuant to the provisions of the Sun World Indenture or otherwise, (iii) the Sun World Trustee and/or any of the holders of the Sun World Notes have instituted legal proceedings to enforce the Sun World Notes, the Sun World Indenture, or any obligations referred to in any of the Sun World Documents, (iv) the Sun World Trustee and/or any of the holders of the Sun World Notes have commenced foreclosure proceedings (judicial or nonjudicial) with respect to any collateral held as security for the obligations under the Sun World Documents, or (v) such failure to make payments has a Material Adverse Effect upon Borrower's ability to satisfy its obligations under this Agreement or any other Loan Document (as determined solely in the Administrative Agent's reasonable judgment); provided further Page 58 that this clause (e) shall not apply solely by reason of a failure to make a payment when and as the same shall become due and payable under any other Sun World IndebtednessSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. unless (i) such failure would cause an Event of Default hereunder pursuant to a Section other than this Section (e), (ii) such Sun World Indebtedness have been accelerated pursuant to the terns thereof or otherwise, (iii) the holders of such Sun World Indebtedness or any agent therefor have instituted legal proceedings to enforce such Sun World Indebtedness, (iv) the holders of such Sun World Indebtedness or any agent therefor have commenced foreclosure proceedings (judicial or nonjudicial) with respect to any collateral held as security for such Indebtedness, or (v) such failure to make payments has a Material Adverse Effect upon Borrower's ability to satisfy its obligations under this Agreement or any other Loan Document (as determined solely in the Administrative Agent's reasonable judgment). (f) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; provided further that this clause (f) shall not apply solely by reason of an "Event of Default" under the Sun World Indenture or other Sun World Documents unless (i) such event would cause an Event of Default hereunder regardless of its classification as an "Event of Default" under the Sun World Indenture or other Sun World Documents, (ii) the Sun World Notes or any of the obligations under the Sun World Documents to the Sun World Trustee or the holders of the Sun World Notes have been accelerated pursuant to the provisions of the Sun World Indenture or otherwise, (iii) the Sun World Trustee and/or any of the holders of the Sun World Notes have instituted legal proceedings to enforce the Sun World Notes, the Sun World Indenture, or any obligations referred to in any of the Sun World Documents, (iv) the Sun World Trustee and/or any of the holders of the Sun World Notes have commenced foreclosure proceedings (judicial or nonjudicial) with respect to any collateral held as security for the obligations under the Sun World Documents, or (v) such event has a Material Adverse Effect upon Borrower's ability to satisfy its obligations under this Agreement or any other Loan Document (as determined solely in the Administrative Agent's reasonable judgment); provided further that this clause (f) shall not apply solely by reason of an "Event of Default" under any other Sun World Indebtedness unless (i) such event would cause an Event of Default hereunder regardless of its classification as an "Event of Default" for such other Sun World Indebtedness, (ii) such Sun World Indebtedness has been accelerated pursuant to the terms thereof or otherwise, (iii) the holders of such Sun World Indebtedness or any agent therefor have instituted legal proceedings to enforce the Sun World Indebtedness, (iv) the holders of such Sun World Indebtedness or any agent therefor have commenced foreclosure proceedings (judicial or nonjudicial) with respect to any collateral held as security for such Indebtedness, or (v) such event has a Material Adverse Effect upon Borrower's ability to satisfy its obligations under this Agreement or any other Loan Document (as determined solely in the Administrative Agent's reasonable judgment). Page 59 (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy,Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (i) the Borrower or any Subsidiary (other than PSWRI and SWFG) shall become unable, admit in writing or fail generally to pay its debts as they become due; (j) one or more judgments for the payment of money in excess of insurance coverage in an aggregate amount in excess of $500,000 shall be rendered against the Borrower, any Participating Subsidiary, SWFG or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Participating Subsidiary to enforce any such judgment; (k) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; (l) a Change in Control shall occur; (m) any of the Security Documents shall for any reason cease to be a valid perfected security interest in favor of the Administrative Agent, for itself and on behalf of the Lenders, in the Borrower's right, title and interest in and to the collateral subject thereto (subject only to Permitted Encumbrances), to the extent required by such Security Document, and in the case of any Mortgage, such cessation continues unremedied for more than 10 days; or (n) an "Event of Default" shall have occurred and be continuing under any other Loan Document; Page 60then, and in every such event (other than an event with respectto the Borrower described in clause (g) or (h) of this Article),and at any time thereafter during the continuance of such event,the Administrative Agent may, and at the request of the RequiredLenders shall, by notice to the Borrower, take either or both ofthe following actions, at the same or different times:(i) terminate the Commitments, and thereupon the Commitmentsshall terminate immediately, and (ii) declare the Loans thenoutstanding to be due and payable in whole (or in part, in whichcase any principal not so declared to be due and payable maythereafter be declared to be due and payable), and thereupon theprincipal of the Loans so declared to be due and payable,together with accrued interest thereon and all fees and otherSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.obligations of the Borrower accrued hereunder, shall become dueand payable immediately, without presentment, demand, protest orother notice of any kind, all of which are hereby waived by theBorrower; and in case of any event with respect to the Borrowerdescribed in clause (g) or (h) of this Article, the Commitmentsshall automatically terminate and the principal of the Loans thenoutstanding, together with accrued interest thereon and all feesand other obligations of the Borrower accrued hereunder, shallautomatically become due and payable, without presentment,demand, protest or other notice of any kind, all of which arehereby waived by the Borrower. In addition to any other remediesavailable to the Administrative Agent and the Lenders hereunderor at law or otherwise, if an Event of Default shall haveoccurred and so long as the same shall be continuing unremedied,then and in every such case, the Administrative Agent and theRequired Lenders may exercise any or all of the rights and powersand pursue any and all of the remedies set forth in any SecurityDocument in accordance with terms thereof. ARTICLE VIII THE ADMINISTRATIVE AGENT SECTION 8.01 APPOINTMENT, POWERS AND IMMUNITIES.Each of the Lenders hereby irrevocably appoints theAdministrative Agent as its agent and authorizes theAdministrative Agent to take such actions on its behalf and toexercise such powers as are delegated to the Administrative Agentby the terms hereof and by the other Loan Documents, togetherwith such actions and powers as are reasonably incidentalthereto. SECTION 8.02 ADMINISTRATIVE AGENT IN ITS INDIVIDUALCAPACITY. The Lender serving as the Administrative Agenthereunder and under the other Loan Documents shall have the samerights and powers in its capacity as a Lender as any other Lenderand may exercise the same as though it were not theAdministrative Agent, and such Lender and its Affiliates may lendmoney to and generally engage in any kind of business with theBorrower or any Subsidiary or other Affiliate thereof as if itwere not the Administrative Agent hereunder. In that regard, theterms "Lenders", "Required Lenders", or any similar terms usedherein shall, unless the context clearly otherwise indicates,include the Administrative Agent in its individual capacity. TheAdministrative Agent may lend money to, and generally engage inany kind of financial, financial advisory or other business withthe Borrower or any Affiliate of the Borrower as if it were notperforming the duties specified herein, and may accept fees andother consideration from the Borrower for services in connectionwith this Agreement and otherwise without having to account forthe same to the Lenders. Page 61 SECTION 8.03 NATURE OF DUTIES OF ADMINISTRATIVEAGENT. The Administrative Agent shall not have any duties orobligations except those expressly set forth herein and in theother Loan Documents. Without limiting the generality of theforegoing (a) the Administrative Agent shall not be subject toany fiduciary or other implied duties, regardless of whether aDefault has occurred and is continuing, (b) the AdministrativeAgent shall not have any duty to take any discretionary action orexercise any discretionary powers, except discretionary rightsand powers expressly contemplated hereby that the AdministrativeAgent is required to exercise in writing by the Required Lenders(or such other number or percentage of the Lenders as shall benecessary under the circumstances as provided in Section 9.02),and (c) except as expressly set forth herein or in any other LoanDocument, the Administrative Agent shall not have any duty todisclose, and shall not be liable for the failure to disclose,any information relating to the Borrower or any of itsSubsidiaries that is communicated to or obtained by the Lenderserving as Administrative Agent or any of its Affiliates in anycapacity. The Administrative Agent shall not be liable for anySource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.action taken or not taken by it with the consent or at therequest of the Required Lenders (or such other number orpercentage of the Lenders as shall be necessary under thecircumstances as provided in Section 9.02) or in the absence ofits own gross negligence or willful misconduct. TheAdministrative Agent shall be deemed not to have knowledge of anyDefault unless and until written notice thereof is given to theAdministrative Agent by the Borrower or a Lender, and theAdministrative Agent shall not be responsible for or have anyduty to ascertain or inquire into (i) any statement, warranty orrepresentation made in or in connection with this Agreement,(ii) the contents of any certificate, report or other documentdelivered hereunder or in connection herewith, (iii) theperformance or observance of any of the covenants, agreements orother terms or conditions set forth herein, (iv) the validity,enforceability, effectiveness or genuineness of this Agreement orany other agreement, instrument or document, or (v) thesatisfaction of any condition set forth in Article IV orelsewhere herein, other than to confirm receipt of itemsexpressly required to be delivered to the Administrative Agent. SECTION 8.04 CERTAIN RIGHTS OF ADMINISTRATIVE AGENT.If the Administrative Agent shall request instructions from theRequired Lenders with respect to any act or action (including thefailure to act) in connection with this Agreement or any otherCredit Document, the Administrative Agent shall be entitled torefrain from such act or taking such action unless and until theAdministrative Agent shall have received instructions from theRequired Lenders; and the Administrative Agent shall not incurliability to any Person by reason of so refraining. Withoutlimiting the foregoing, but subject to the terms of Section 9.02hereof, no Lender shall have any right of action whatsoeveragainst the Administrative Agent as a result of theAdministrative Agent acting or refraining from acting hereunderin accordance with the instructions of the Required Lenders. SECTION 8.05 RELIANCE BY ADMINISTRATIVE AGENT. TheAdministrative Agent shall be entitled to rely upon, and shallnot incur any liability for relying upon, any notice, request,certificate, consent, statement, instrument, document or otherwriting believed by it to be genuine and to have been signed orsent by the proper Person. The Administrative Agent also mayrely upon any statement made to it orally or by telephone andbelieved by it to be made by the proper Person, and shall notincur any liability for relying thereon. The AdministrativeAgent may consult with legal counsel (who may be counsel for theBorrower), independent accountants and other experts selected byit, and shall not be liable for any action taken or not Page 62taken by it in accordance with the advice of any such counsel,accountants or experts. The Administrative Agent may deem andtreat the payee of any Note as the owner thereof for all purposeshereof unless and until a written notice of the assignment ortransfer thereof shall have been filed with the AdministrativeAgent pursuant to Section 9.04 below. Any request, authority orconsent of any Person who, at the time of making such request orgiving such authority or consent, is the holder of any Note shallbe conclusive and binding on any subsequent holder, transferee orassignee of such Note or any Note issued in exchange therefor. SECTION 8.06 SUB-AGENTS. The Administrative Agentmay perform any and all its duties and exercise its rights andpowers by or through any one or more sub-agents appointed by theAdministrative Agent. The Administrative Agent and any suchsub-agent may perform any and all its duties and exercise itsrights and powers through their respective Related Parties. Theexculpatory provisions of the preceding paragraphs shall apply toany such sub-agent and to the Related Parties of theAdministrative Agent and any such sub-agent, and shall apply totheir respective activities in connection with the syndication ofthe credit facilities provided for herein as well as activitiesas Administrative Agent. SECTION 8.07 RESIGNATION BY ADMINISTRATIVE AGENT.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Subject to the appointment and acceptance of a successorAdministrative Agent as provided in this paragraph, theAdministrative Agent may resign at any time by notifying theLenders and the Borrower. Upon any such resignation, theRequired Lenders shall have the right, in consultation with theBorrower, to appoint a successor. If no successor shall havebeen so appointed by the Required Lenders and shall have acceptedsuch appointment within 30 days after the retiring AdministrativeAgent gives notice of its resignation, then the retiringAdministrative Agent may, on behalf of the Lenders, appoint asuccessor Administrative Agent. Upon the acceptance of itsappointment as Administrative Agent hereunder by a successor,such successor shall succeed to and become vested with all therights, powers, privileges and duties of the retiringAdministrative Agent and the retiring Administrative Agent shallbe discharged from its duties and obligations hereunder and underthe other Loan Documents. The fees payable by the Borrower to asuccessor Administrative Agent shall be the same as those payableto its predecessor unless otherwise agreed between the Borrowerand such successor. After the Administrative Agent's resignationhereunder, the provisions of this Article and Section 9.03 shallcontinue in effect for the benefit of such retiringAdministrative Agent, its sub-agents and their respective RelatedParties in respect of any actions taken or omitted to be taken byany of them while it was acting as Administrative Agent. SECTION 8.08 NON-RELIANCE ON ADMINISTRATIVE AGENT ANDOTHER LENDERS. Each Lender acknowledges that it has,independently and without reliance upon the Administrative Agentor any other Lender and based on such documents and informationas it has deemed appropriate, made its own credit analysis anddecision to enter into this Agreement. Each Lender alsoacknowledges that it will, independently and without relianceupon the Administrative Agent or any other Lender and based onsuch documents and information as it shall from time to time deemappropriate, continue to make its own decisions in taking or nottaking action under or based upon this Agreement, any relatedagreement or any document furnished hereunder or thereunder. Page 63 SECTION 8.09 SECURITY DOCUMENTS. (a) Each Lender hereby authorizes the Administrative Agent to enter into each of the Security Documents and to take all actions contemplated thereby. All rights and remedies under the Security Documents may be exercised by the Administrative Agent for the benefit of the Lenders and the other beneficiaries thereof upon the terms thereof. With the consent of the Required Lenders, the Administrative Agent may assign its rights and obligations as Administrative Agent under any of the Security Documents to any Affiliate of the Administrative Agent, and such Affiliate thereafter shall be entitled to (i) all the rights of the Administrative Agent under the applicable Security Document and (ii) all rights hereunder of the Administrative Agent with respect to the applicable Security Document. (b) In each circumstance where, under any provision of any Security Document, the Administrative Agent shall have the right to grant or withhold any consent, exercise any remedy, make any determination or direct any action by the Administrative Agent under such Security Document, the Administrative Agent shall act in respect of such consent, exercise of remedies, determination or action, as the case may be, with the consent of and at the direction of the Required Lenders; provided, however, that no such consent of the Required Lenders shall be required with respect to any consent, determination or other matter that is, in the Administrative Agent's judgment, ministerial or administrative in nature. In each circumstance where any consent of or direction from the Required Lenders is required, the Administrative Agent shall send to the Lenders a written notice setting forth a description in reasonable detail of the matter as to which consent or direction isSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. requested and the Administrative Agent's proposed course of action with respect thereto. In the event the Administrative Agent shall not have received a response from any Lender within five (5) Business Days after the giving of such notice, such Lender shall be deemed to have agreed to the course of action proposed by the Administrative Agent. ARTICLE IX MISCELLANEOUS SECTION 9.01 NOTICES. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at: Cadiz Inc. Attn: Chief Financial Officer 100 Wilshire Blvd. Sixteenth Floor Santa Monica, CA 90401-1111 Telephone No.: 310-899-4700 Facsimile No.: 310-899-4752 Page 64with a copy to:Howard Unterberger, Esq.Miller & Holguin 1801 Century Park East Seventh Floor Los Angeles, CA 90067 Telephone No.: 310-556-1990 Facsimile No.: 310-557-2205 (b) if to the Administrative Agent, to it at: ING Baring (U.S.) Capital LLC 135 E. 57th Street New York, NY 10022-2101 Attention: Joan Chiappe, Vice President Reference: Cadiz Telephone No.: 212-409-1742 Facsimile No.: 212-371-9295 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Michael J. Edelman, Esq. Telephone No.: 212-504-6000 Facsimile No.: 212-504-6666 (c) if to ING, as a Lender, to it at: ING Baring (U.S.) Capital LLC 135 E. 57th Street New York, NY 10022-2101 Attention: Joan Chiappe, Vice President Reference: Cadiz Telephone No.: 212-409-1742 Facsimile No.: 212-371-9295 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Attention: Michael J. Edelman, Esq. Telephone No.: 212-504-6000 Facsimile No.: 212-504-6666 Page 65 (d) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number fornotices and other communications hereunder by notice to the otherparties hereto. All notices and other communications given toany party hereto in accordance with the provisions of thisAgreement shall be deemed to have been given on the date ofreceipt. SECTION 9.02 WAIVERS; AMENDMENTS. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section 9.02 or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, or (vi) release any security interest in any material collateral for the obligations evidenced by the Loan Documents (except in accordance with the Loan Documents) without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. Page 66Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 9.03 EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including its rights under this Section 9.03, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans. (b) The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated therein, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. Page 67Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (e) All amounts due under this Section 9.03 shall be payable promptly after written demand therefor. SECTION 9.04 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $2,000,000 unless each of the Borrower and the Administrative Agent otherwise consents, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $1,000, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. Page 68 (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at its officesSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other financial institutions (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as though it were a Lender. Page 69Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section 9.04 shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. SECTION 9.05 SURVIVAL. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration of the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07 SEVERABILITY. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08 RIGHT OF SETOFF. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the BorrowerSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Page 70 against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 9.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) This Agreement shall be construed in accordance with and governed by the law of the State of California. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of (i) the Supreme Court of the State of New York sitting in New York County, (ii) the United States District Court of the Southern District of New York, (iii) any United States federal court sitting in the Central District of California, or (iv) any other court of appropriate jurisdiction sitting in the County of Los Angeles, City of Los Angeles, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or California Court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD Page 71 NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHERSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10. SECTION 9.11 HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12 CONFIDENTIALITY. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower; provided, however, that such information, to the Administrative Agent's or Lender's knowledge, without any duty of inquiry, has not been provided in violation of any obligation owed by the source thereof to the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13 FORECLOSURE OF CADIZ/SUN WORLD LEASE. If, in enforcing remedies hereunder, the Administrative Agent or a Lender forecloses on the property subject to that certain Cadiz/Sun World Lease, whether judicially or non- judicially, or obtains title to such property by deed in lieu of foreclosure, by purchase, or otherwise, then (a) so long as Sun World is not in default under the Cadiz/Sun World Lease: (i) Sun World and the Sun World Trustee under the Sun World Indenture shall be named or joined in any foreclosure, trustee's sale or other proceeding only if required by law; and (ii) the enforcement of any remedies hereunder that effects a transfer of title to the property subject to the Cadiz/Sun World Lease shall not terminate the Cadiz/Sun World Lease nor terminate nor affect in any manner the lien of the Sun World Trustee thereon, nor disturb Sun World in the possession and use of the property subject thereto. Page 72 SECTION 9.14 WAIVER OF ANTI-DEFICIENCY PROTECTION.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Borrower hereby waives, as to this Agreement and any and all Loan Documents heretofore or hereafter executed in connection with the Transactions any defense, protection or right under: (a) California Code of Civil Procedure ("CCP") Section 580(d) concerning the bar against rendition of a deficiency judgment after foreclosure under a power of sale; (b) CCP Section 580(a) purporting to limit the amount of a deficiency judgment which may be obtained following exercise of a power of sale under a deed of trust; and (c) CCP Section 726 concerning exhaustion of collateral, the form of foreclosure proceedings with respect to real property security located in California and otherwise limiting the amount of a deficiency judgment which may be recovered following completion of judicial foreclosure by reference to the "fair value" of the foreclosed collateral. SECTION 9.15 COSTS BORNE BY NON-PREVAILING PARTY. In the event of any dispute with respect to this Agreement or any other Loan Document, the prevailing party shall be entitled to recover from the non-prevailing party all costs and attorneys' fees. SECTION 9.16 INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 9.17 STATUS OF ING. ING hereby represents to the Borrower that it is not a Foreign Lender. SECTION 9.18 AMENDMENTS TO SUN WORLD INDENTURE. An amendment or modification of the Sun World Indenture will be a Non-Adverse Amendment only upon the satisfaction of each and every one of the following conditions (such amendment or modification that satisfies all of the following requirements, a "Non-Adverse Amendment"): (a) the Borrower, in accordance with Section 9.01 of this Credit Agreement, gives notice of, and delivers to, the Administrative Agent, a true and correct copy of such amendment or modification; Page 73 (b) as determined solely in the Administrative Agent's reasonable judgment, the terms of the amendment or modification of the Sun World Indenture do not, and will not, adversely affect either (i) the ability of the Borrower or the other Obligors to satisfy their respective obligations under this Credit Agreement and/or the other Loan DocumentsSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. or (ii) the rights of the Administrative Agent or Lenders hereunder or under the other Loan Documents; and (c) such amendment or modification of the Sun World Indenture is validly effected and becomes effective pursuant to the terms of the Sun World Indenture. The failure of the Borrower to notify, and deliverto, the Administrative Agent any amendment ormodification of the Sun World Indenture willpreclude such amendment or modification from beinga Non-Adverse Amendment until each of therequirements set forth in the previous sentenceare satisfied. If, however, (x) the Borrower gives notice of, and delivers to, the Administrative Agent, a true and correct copy of an amendment or modification to the Sun World Indenture; and (y) the Administrative Agent does not notify the Borrower within five (5) Business Days after the Administrative Agent's receipt of the documents set forth in subclause (x) above that the amendment or modification (in the Administrative Agent's reasonable judgment) has or will have an adverse effect upon (i) the ability of the Borrower or the other Obligors to satisfy their respective obligations under this Credit Agreement and/or the other Loan Documents or (ii) the rights of the Administrative Agent or Lenders hereunder or under the other Loan Documents; then such amendment or modification of the Sun World Indentureshall be deemed to be a Non-Adverse Amendment for all purposeshereunder. Notwithstanding the foregoing, and without requiringany action by the Borrower or the Administrative Agent, anyamendments or modifications of the Sun World Indenture that maybe validly effected pursuant to the terms of the Sun WorldIndenture without any action or authorization by the holders ofthe Sun World Notes (or any portion of such holders) shall alsobe deemed to be a Non-Adverse Amendment provided that suchamendment or modification does not, and will not, in theAdministrative Agent's reasonable judgment, adversely affect(i) Borrower's ability to satisfy the Borrower's obligationshereunder and under the other Loan Documents or (ii) the rightsof the Administrative Agent or Lenders hereunder or under theother Loan Documents. SECTION 9.19 GENERAL RELEASE. In consideration ofthe amendments, waivers, consents, and the other terms andprovisions of this Agreement and the other Loan Documents,Borrower, on behalf of itself, its agents, successors, assigns,subsidiaries, partners and Affiliates hereby fully release andforever discharge the Administrative Agent, the Lenders and eachof their agents, consultants, heirs, successors, assigns,Affiliates, directors, officers, employees, shareholders,executives, servants, attorneys, accountants, representatives andother Page 74related persons (collectively, the "Released Parties") from anyand all rights, claims, demands, actions, causes of action,costs, losses, suits, liens, debts, damages, judgments,executions and demands of every nature, kind and descriptionwhatsoever, whether now known or unknown, either at law, inequity or otherwise, which Borrower or any of its agents,successors, assigns, subsidiaries, partners and/or Affiliatesever had or may have against the Administrative Agent, theLenders or the other Released Parties, including, withoutlimitation, all claims arising under or in connection with theLoan Documents, and/or in connection with the dealings betweenSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the parties up to and including the closing of the transactionscontemplated in this Agreement and all claims which have arisenor may arise in any other way whatsoever; provided that nothingherein shall be deemed to release the Administrative Agent, theLenders or any other Released Party from any liability orobligations arising in connection with facts or circumstanceswhich occur or arise for the first time after the Effective Date.It is further understood and agreed that the foregoing generalrelease extends to all claims of every kind and naturewhatsoever, known, suspected or unsuspected, liquidated orcontingent, foreseen or unforeseen, and Borrower and its agents,successors, assigns, subsidiaries, partners and Affiliates herebywaive all rights under Section 1542 of the California Civil Code.Section 1542 of the California Civil Code provides as follows:"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITORDOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OFEXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLYAFFECTED HIS SETTLEMENT WITH DEBTOR." Page 75 IN WITNESS WHEREOF, the parties hereto have caused thisAgreement to be duly executed by their respective authorizedofficers as of the day and year first above written. CADIZ INC., the Borrower By: /s/ Stanley E. Speer ------------------------- Stanley E. Speer Chief Financial Officer ING BARING (U.S.) CAPITAL LLC, Individually and as Administrative Agent By: /s/ William Soto ------------------------ Name: William Soto Title: Vice PResident Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.11 ------------- THE CADIZ GROUNDWATER STORAGE AND DRY-YEAR SUPPLY PROGRAM DEFINITIVE ECONOMIC TERMS AND RESPONSIBILITIES BETWEENMETROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA AND CADIZ INC. March 6, 20011. General Provisions 1.1 The Cadiz Groundwater Storage and Dry-Year Supply Program (Program) shall have a life of 50 years. 1.2 Except where otherwise noted, Cadiz Inc. or its successors (Cadiz) and The Metropolitan Water District of Southern California (Metropolitan) may not contract with any third party for the use of the Capital Facilities or the Cadiz or Fenner groundwater basins for storage or exportation of water during the life of the Program. 1.3 Except as otherwise provided, Metropolitan has exclusive use of the Cadiz Program Capital Facilities. 1.4 Year one of the program shall begin the first day after completion of facilities necessary for the storage of Colorado River water in the Cadiz Basin and ending on December 31st of that year. Year two and all-subsequent years of the program shall begin on January 1st. Year fifty of the program shall extend beyond December 31st up to the fiftieth anniversary of the first day after completion of facilities necessary for the storage of Colorado River water in the Cadiz-Fenner Groundwater Basin (Basin). 1.5 Except as otherwise provided, all payments shall be made in quarterly installments and be due on the first day of each calendar year quarter (January 2nd, April 1st, July 1st, and October 1st). Except that the first payment, pursuant to Section 4.1, shall be due no earlier than 45 days from completion of facilities necessary for the storage of Colorado River water in the Cadiz Basin.2. Capital Facilities 2.1 Metropolitan and Cadiz shall share equally the actual cost of Capital Facilities (mutually agreed estimates, at the time of execution of the contract, not to exceed $150,000,000) including spreading and recovery facilities and a conveyance pipeline including pump Page 1 facilities (all having a capacity to transport 150,000 AF per year to and from the Colorado River Aqueduct and the Basin)and including the costs of design, construction and Program implementation cost of the Capital Facilities (including estimated mitigation capital costs, provided that these costs do not cause the total capital cost to exceed $150,000,000). If one party desires to modify the Capital Facilities, and that modification increases costs, the requesting party shall bear the increased costs. If, when Metropolitan's Board authorizes execution of the definitive contract, estimated Capital Facilities costs listed above exceed $150,000,000, because the environmental documents and permits require mitigation measures that areSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. not anticipated as of the date of issuance of the Supplement to the Draft EIR/EIS, then Metropolitan's Board shall consider the impact of these costs in determining whether to proceed with the Program. Cadiz may assume such increased costs or the parties shall meet to renegotiate the agreement. If, after execution of the contract, actual Capital Facilities costs listed above exceed estimates due to construction costs overruns then these costs shall be shared equally. 2.2 Metropolitan shall finance its portion of the Capital Facilities, as Metropolitan deems appropriate. 2.3 Any operation of the Capital Facilities after the end of the 50 year Program term shall be negotiated at a future date and shall give fair compensation to Cadiz for any indigenous water or storage beyond the terms of this agreement or to Metropolitan for the use of the Capital Facilities by Cadiz. 2.4 Cadiz shall pay for its portion of the Capital Facilities. Prior to any payments by Metropolitan to Cadiz, Metropolitan shall have the right to review and reasonably approve the terms of Cadiz' financing for Cadiz' one-half share of the costs of the Capital Facilities. Any security interest in the Capital Facilities created by Cadiz financing shall not encumber Metropolitan's ownership interest in, or interfere with Metropolitan's right to operate, the Capital Facilities. Page 2 2.5 The parties shall jointly own the Capital Facilities. Except as otherwise provided, the parties shall equally share the cost of replacing any portion of the Capital Facilities that requires replacement during the term of the contract unless the replacement is required due to normal wear and tear or as a result of improper maintenance, in which case these costs will be paid by Metropolitan. Metropolitan shall use due care in providing necessary maintenance of the Capital Facilities pursuant to Section 3.1. Each party shall insure its interest in the Capital Facilities with reasonably acceptable commercial insurance or, in the case of Metropolitan, self- insurance.3. O&M and Energy Costs 3.1 Except as otherwise provided, Metropolitan shall be responsible for any and all O&M and energy costs during the term of the contract to operate the Capital Facilities. Metropolitan shall use ordinary care in the operation and maintenance of the Capital Facilities. Cadiz shall be responsible for any and all costs, including but not limited to O&M and energy, of the Groundwater Monitoring and Management Plan (GWMMP) of the Program beyond the capital costs shared pursuant to Section 2.1.4. Transfer Component Fees and Operations 4.1 In years 1-5 of the Program (a total of 20 calendar quarters), Metropolitan shall purchase a minimum of 30,000 acre-feet per year (7,500 AF per calendar quarter) of indigenous water for a minimum total of 150,000 acre-feet to be banked or withdrawn from the Cadiz basin at Metropolitan'sSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. option. This purchased indigenous water shall be guaranteed to Metropolitan in accordance with the provisions of Sections 4.8, 8.6, and 8.14, including through reduction in Cadiz' agricultural water production. In years 6 through 25 of the Program (a total of 80 calendar quarters), Metropolitan shall purchase the balance of at least 750,000 AF of indigenous water not purchased by Metropolitan in years 1-5 of the Program, subject to adjustments as described in Sections 4.6 and 4.8 (all water purchased by Metropolitan pursuant to this Section 4.1 shall hereafter be referred to as Firm Transfer Water). Subject to Sections 4.6 and 4.8, Metropolitan shall build up a "water bank" by purchasing up to 30,000 AF per year (7,500 AF per quarter) of Firm Page 3 Transfer Water. Metropolitan shall pay Cadiz a "Transfer Fee" for the purchase of the Firm Transfer Water. 4.2 The Transfer Fee shall initially be $230 per AF ("Base Rate") in year 1 of the Program and be redetermined to an "Adjusted Rate", if applicable, in years 2-25 of the Program as follows: 4.2.1 Metropolitan and Cadiz shall determine a Fair Market Value through the process described in Attachment A, provided that the increase or decrease in the Fair Market Value shall not exceed 30% of the Fair Market Value in the immediately prior redetermination or 30% of the Base Rate in the initial redetermination; 4.2.2 The Adjusted Rate shall equal the Base Rate plus one-half of the difference between the Fair Market Value and the Base Rate. Example: If the Fair Market Value is $350 per acre-foot, then the Transfer Fee would be $230 + .5* ($350 - $230) = $290 per acre- foot. If the Fair Market Value is $130 per acre-foot, then the Transfer Fee would be $230 + .5* ($130 - $230) = $180 per acre-foot. 4.3 The applicable Base Rate or Adjusted Rate shall be paid upon the earlier of (a) delivery of the Firm Transfer Water to the Colorado River Aqueduct or (b) in accordance with the payment schedule set forth in Section 4.1 in the year of payment, whichever is earlier. Any indigenous water for which Metropolitan has made payment but has not taken delivery shall become part of a Metropolitan "water bank" in the Basin and may be withdrawn by Metropolitan at any time during the Program. Firm Transfer Water deliveries in excess of the above payment schedule shall be paid at the Base Rate or Adjusted Rate in effect in the year of delivery. Firm Transfer Water delivered and purchased ahead of the above payment schedule will directly offset subsequent scheduled purchases acre-foot for acre- foot with 50% applied to the next scheduled payment and 50% applied in inverse order from the last scheduled payment. 4.4 Any payment for indigenous water constitutes the complete payment for such water and establishes a forward contract obligating Cadiz to deliver indigenous water on demand to Page 4 the Capital Facilities, subject to Section 4.8. Deliveries of water shall be metered at the Colorado River Aqueduct.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 4.5 In each Program Year 1 through 25, Cadiz shall have the right to sell to third parties indigenous water (Third Party Indigenous Water) in an amount up to 30,000 AF per year (Potential Sale Option Amount) for sale and use in the Metropolitan service area, subject to Sections 4.6.1 and 8.11. Metropolitan shall deliver such water either through unused capacity in the Metropolitan conveyance system or through an Exchange (as described in Section 8.10) choosing the method of delivery at its sole discretion. Cadiz shall pay a pro-rata share of direct O&M (O&M without overhead or G&A expense) costs of the Capital Facilities in the year of delivery to the Cadiz customer based on Cadiz' pro-rata use of the Capital Facilities to transfer indigenous water to a third party or, in the case of an Exchange, the amount that would have been paid for a third party transfer. 4.5.1 In Program Years 1 through 25, Cadiz shall have the option (Put Option) to require Metropolitan to purchase in each year an amount of indigenous water (Put Transfer Water) that equals the difference between the Potential Sale Option Amount and the amount of Third Party Indigenous Water for such Program Year. If required under this section, Metropolitan shall buy Put Transfer Water at a fixed rate of $230.00 per acre-foot. Cadiz must inform Metropolitan in writing of its exercise of the Put Option no later than March 1st of each year. In the event that Cadiz exercises the Put Option after January 1st, Metropolitan shall not be required to make payment for the portion of Put Transfer Water delivered during the first quarter of that year until April 1st 4.5.2 The annual Put Option shall expire if not exercised within the time allowed in this Section, and the Potential Sale Option Amount of water for sale shall not accumulate and carry-over from year to year. 4.6 In years 1-5 of the Program, Metropolitan and Cadiz shall operate the Program in a manner that will assist in the continuing assessment of recharge, safe yield, total volume of indigenous water available for transfer during the life of the Program, and the best mode of operations consistent with the Groundwater Monitoring and Management Plan. Page 5 Prior to signing of an agreement, Cadiz and Metropolitan shall agree on this 5-year operating plan within the parameters of the GWMMP. During this five-year period, Cadiz shall not pump water from nor add water to the basin except in a manner consistent with its current agricultural activities. Based on the information gathered pursuant to the GWMMP and through the initial five years of operations, Cadiz and Metropolitan shall jointly determine the total expected yield of the Cadiz indigenous water over the life of the Program by consulting the GWMMP and ensuring compliance with applicable permit requirements. If the parties cannot agree upon the expected yield, the dispute will be referred to binding arbitration. Expected yield of indigenous water from the Program shall be reassessed on an ongoing basis every subsequent two years for the life of the Program. The expected yield of the Program shall be determined after excluding (a) Cadiz' projected use of indigenous water, unless Cadiz has agreed on terms reasonably acceptable to Metropolitan not to use such indigenous water, and (b) the amount of indigenous water that any third party has theSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. legal right to use and is reasonably expected to use. 4.6.1 If an adjustment is made under Section 4.6 decreasing the expected yield below 1,500,000 AF, then the Potential Sale Option Amount shall equal 30,000 AF per year up to the positive difference, if any, of the expected yield less 750,000 AF. If an adjustment is made under Section 4.6 decreasing the expected yield below 750,000 AF, Metropolitan shall continue to make scheduled water bank program purchases of Firm Transfer Water spread equally over the remaining years beginning with the Program year following the yield adjustment and continuing through year 25 of the Program. 4.7 Upon 12 months notice of Cadiz indigenous water supplies above 1.70 MAF based on the process in Section 4.6, Metropolitan has the option to purchase one-half of such supply of water in excess of 1.70 MAF starting in Program Year 26 at a rate of 30,000 AF per year at the Base Rate or Adjusted Rate in effect in the year of payment. If Metropolitan exercises such option, then Cadiz may market to third parties within Metropolitan's service area one-half of this supply in excess of 1.70 MAF at a rate of Page 6 30,000 AF per year starting in Year 26 pursuant to Section 8.12. If Metropolitan does not exercise this option, then Cadiz may market to third parties within Metropolitan's service area the entire supply in excess of 1.70 MAF at a rate of 60,000 AF per year starting in Year 26 pursuant to Section 8.12. Cadiz shall be responsible for obtaining all required approvals for the transfer of such water to third parties under this Section 4.7. Metropolitan shall deliver such excess water through the Capital Facilities and Metropolitan conveyance system only if there is unused capacity. 4.8 Payments of Transfer Fees shall be suspended if the expected Program yield agreed upon between Metropolitan and Cadiz or determined by arbitration (pursuant to Section 4.6), is the same or less than the amount of indigenous water for which Metropolitan has paid Cadiz. Cadiz shall be obligated to repay Metropolitan for the difference, up to a maximum of 300,000 AF which shall be secured by Cadiz' obligations pursuant to Sections 8.6 and 8.14. This repayment obligation shall first offset any remaining payment obligations for Puts and Takes, pursuant to Section 5.3 with the remainder repaid to Metropolitan dollar for dollar, within twelve months of notice by Metropolitan. In the event that the amount of water that Metropolitan is entitled to be repaid for, or otherwise compensated for, exceeds Metropolitan's unpaid obligations for Puts and Takes and repayment for 300,000 AF, Metropolitan shall receive credits for additional storage of water pursuant to Section 5.5 at the storage rates in effect at the time the payments of the Transfer Fees were made.5. Storage Component Fees and Operations 5.1 Metropolitan shall pay Cadiz $90 per AF, adjusted by CPI commencing upon Metropolitan's Board of Directors approval of contract "as to form", of CRA water Metropolitan cycles through the Capital Facilities and storage. This amount consists of aSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. rate of $50, adjusted by CPI commencing upon Metropolitan's Board of Directors approval of contract "as to form", to Put such water ("Put Fee") and $40, adjusted by CPI commencing upon Metropolitan's Board of Directors approval of contract "as to form", to Take such water ("Take Fee"). Page 7 5.2 At contract execution and subject to provisions under Sections 2.4, 8.1 through 8.5 and 8.15, Metropolitan shall pay at the rate set forth in Section 5.1 for the operation of 600,000 AF of Put and Take activity entitling Metropolitan to 600,000 AF of movement in and 600,000 AF of movement out of the storage program. 5.3 In addition to amounts set forth in Section 5.2, Metropolitan's minimum commitment for storage shall include an additional 300,000 AF of Put and Take activity for which Metropolitan must pay Cadiz at the earlier of (a) delivery or withdrawal; or (b) in accordance with the following schedule: In each of Program Years 5 through 14, Metropolitan shall pay for the operation of 30,000 AF of Put and Take activity entitling Metropolitan to 30,000 AF of movement in and 30,000 AF of movement out of the storage program for each year of payment. 5.4 Metropolitan's minimum commitment for storage is 900,000 AF of Put and Take activity, provided that Metropolitan's storage obligations under the Program shall be in accordance with the GWMMP. 5.5 Additional operations of the Program above amounts set forth in Sections 5.2 and 5.3 shall be paid at rates listed in Section 5.1. 5.6 Program storage capacity shall be a minimum of 1,000,000 AF at any one time. 5.7 Evaporative and conveyance losses of stored water shall initially be set to 10% and shall be reset to actual losses through a biannual redetermination in accordance with the GWMMP.6. Water Quality Payment 6.1 The Principles of Agreement anticipated an avoided cost payment to Cadiz for any benefit in reducing salinity in the Metropolitan service area. In consideration of the other terms and conditions set forth herein, no water quality payment shall be made. Currently, all constituent levels of indigenous water in the Program area are below state and federal Maximum Contaminant Levels ("MCLs"). Except as provided below, Cadiz will pay the cost of treating all water introduced into the Metropolitan delivery system if necessary so that it meets all federal and state standards applicable to the Colorado River Aqueduct as Page 8 established by the California Department of Health Services or other permitting authority. Due to consideration of water quality benefits and increases in supply reliability and subject to approval through a public process for the introduction of water into the Metropolitan System, indigenous water introduced by Cadiz into the Metropolitan delivery system shall not be required to meet ambient conditions. With respect to the Cadiz Program, this public process shallSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. take the form and run concurrently with the public review by Metropolitan's Board of the Cadiz Program. Action by the Metropolitan Board approving the water quality provision of the Cadiz Program shall be determinative and shall not be subject to subsequent Board action establishing any general policies. Further, Metropolitan shall not impose any future ambient quality standards if Cadiz continues to meet all federal and state water quality standards at Cadiz' expense. Cadiz may elect to have Metropolitan provide any treatment required to meet federal and state water quality standards and requirements provided that Cadiz shall pay all costs incurred by Metropolitan for providing such treatment. Metropolitan will ensure that water it delivers for storage in the Cadiz/Fenner groundwater basin shall, at a minimum, meet all federal and state standards applicable at the time of delivery to the Colorado River Aqueduct as established by the California Department of Health Services or other permitting authority. If these federal or state standards change as to any constituent in the water Metropolitan delivered for storage so that the stored water would not have met the changed standards when it was delivered for storage, then Metropolitan and Cadiz shall share the cost of treatment for water withdrawn by Metropolitan from the basin for that particular constituent based on the proportion of the levels of the regulated constituent above the changed regulatory standard in Metropolitan's storage water to the levels of the regulated constituent above the changed regulatory standard in the indigenous groundwater in the basin, if any.7. Groundwater Management Plan 7.1 All withdrawals of water from the Basin shall be made in accordance with the GWMMP. Page 98. Other Provisions 8.1 The legal structure of the agreement between Cadiz and Metropolitan shall have provisions to protect Metropolitan's interest in the program. These provisions shall include appropriate security interests described in the attachment hereto (Attachment B). Cadiz may propose alternative security interests or agreement structures that achieve the same results as those described in the attachment. If Metropolitan determines that the alternatives proposed by Cadiz do not provide the same level of security as those described in the attachment, Metropolitan, in its sole reasonable discretion, may reject the proposed alternatives and require the security interests in the form described in the attachment as a condition to proceeding with the program. 8.2 Any costs imposed by third parties for the use of the Cadiz or Fenner groundwater basins or exportation of transfer water shall be borne exclusively by Cadiz. 8.3 Metropolitan shall have no obligation to make any payments to Cadiz, acquire any project lands or rights-of-way or pay for or perform any construction work on the Capital Facilities until the California Department of Health Services approves the introduction of Program water into the Colorado River Aqueduct.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 8.4 Metropolitan shall have no obligation to make any payments to Cadiz, pay for or perform any construction work on the Capital Facilities until all rights-of-way, use permits, or easements necessary for the construction and maintenance of the Capital Facilities have been obtained from the Bureau of Land Management. 8.5 Metropolitan shall not execute the contract for the Program prior to thirty (30) days after the filing of a Notice of Determination by Metropolitan as required by the California Environmental Quality Act or the issuance of a Record of Decision by the Bureau of Land Management as required by the National Environmental Policy Act, whichever is later. In the event any litigation is filed challenging any aspect of the Program's environmental compliance or the authority or right of any party to perform its obligations under the contract, then Metropolitan and Cadiz shall jointly defend such litigation. Counsel shall be selected by mutual agreement, and all costs of litigation shall be shared equally. Page 10 8.5.1 If litigation challenging any aspect of the Program's environmental compliance or the authority or right of a party to perform its obligations under the contract has been commenced, and the issuance of any permits required for the Program or the performance of any obligation required under the contract is enjoined or withheld by a court or agency with authority to do so, the performance of all other obligations under the contract shall be suspended until such permits are issued or such injunction is permanently lifted. If such suspension is not lifted within five years the parties' shall meet to negotiate in good faith any future obligation under the contract. 8.5.2 If litigation challenging any aspect of the Program's environmental compliance or the authority or right of any party to perform its obligations under the contract has commenced, but the issuance of any permits required for the Program or the performance of any obligations required under the contract has not been enjoined or withheld by a court or agency with authority to do so, the parties shall confer to determine reasonably and in good faith whether there is merit to the legal challenges which requires further environmental review or other legal authority to proceed with the Program. Either party may elect, if it is reasonable to do so under all the circumstances, to suspend performance of the contract pending resolution of such legal challenge. If such suspension exceeds five years from the election to suspend performance, the parties' shall meet to negotiate in good faith any future obligations under the contract. 8.5.3 If, after the parties have commenced performance under the contract, the Program or any permit required for the Program is permanently suspended or terminated by the action of a court or agency with authority to do so, then Metropolitan shall not be required to proceed with further obligations without the prior approval of its Board of Directors. If the litigation or other legal challenge results in a final determination that precludes the operation of the Program, then: 8.5.3.1 Cadiz shall reimburse Metropolitan the amount paid by Metropolitan for the right to transfer indigenous water that Metropolitan has paid for or banked and cannot transfer up toSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 300,000 AF of water; Page 11 8.5.3.2 Cadiz shall reimburse Metropolitan the amount paid by Metropolitan for the right to store water that Metropolitan cannot store or that Metropolitan has stored but cannot retrieve from the basin; and 8.5.3.3 Such reimbursement shall be paid by Cadiz to Metropolitan within twelve (12) months following the final determination. 8.6 If, for any reason, Cadiz is unable or unwilling to perform under the term of the agreement then Metropolitan shall have the right to operate the Program at its discretion without further payment to Cadiz. This right shall include the right to enter upon Cadiz land for operation and maintenance of Capital Facilities. If the lack of performance includes unrealizable water supplies or moneys due to Metropolitan, then Metropolitan shall have the right to take all or partial possession and ownership of Cadiz lands in the Cadiz and Fenner Valleys. Offsets as expressed in Section 4.8 shall also apply. Cadiz shall provide Metropolitan with a security interest in the Cadiz share of the Capital Facilities and its land, improvements and water rights related to the groundwater basin in a form reasonably acceptable to Metropolitan as a condition to Metropolitan's performance of its obligations; provided, however, that upon termination of the Program and satisfaction of any surviving Cadiz obligations such security interest shall be terminated. The security interest in the Cadiz share of the Capital Facilities shall be subordinate only to direct construction liens on the Capital Facilities and the security interest in the Cadiz lands, improvements and water rights shall be subordinate only to liens approved in accordance with Section 8.8 and in an amount that shall not exceed $25,500,000 during the term of the Program. 8.7 If Metropolitan executes the contract for the Program: 8.7.1 Cadiz shall not increase its use of Colorado River water on lands that it owns or controls within the Palo Verde Mesa or Valley without the consent of Metropolitan. 8.7.2 Cadiz shall take no action, and shall use its reasonable good faith efforts to cause its subsidiaries, affiliates, successors, directors, officers, employees, shareholders and Page 12 agents to refrain from taking any action, to interfere with any cooperative water supply program between Palo Verde Irrigation District and Metropolitan. 8.7.3 Cadiz shall take no action, and shall use its reasonable good faith efforts to cause its subsidiaries, affiliates, successors, directors, officers, employees, shareholders and agents to refrain from taking any action, to reduce or cause the reduction of Colorado River water available to Metropolitan or to increase the cost of Colorado River water to Metropolitan with respect to: (1) Priority 1, 2 and 3(b) (Palo Verde Mesa lands) lands; (2) Present Perfected Rights lands (miscellaneous rights holders or tribal lands); and (3) Surplus Criteria.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 8.8 Cadiz shall not deed or encumber ownership of its properties in the Cadiz or Fenner Valleys, during the life of the Program, without the written permission of Metropolitan except as allowed under Section 8.6. Such permission shall not be unreasonably withheld. 8.9 Section 4.5 permits Metropolitan to perform an exchange in response to a Cadiz request for delivery of indigenous water to a third party. Metropolitan may instead deliver water other than indigenous water to such third party ("Exchange"). In such an event, an amount of indigenous water equal to the amount of water subject to the Exchange ("Exchange Water") shall be banked in the Cadiz basin for later extraction by Metropolitan without additional Transfer or Storage Fees. Cadiz shall be responsible to deliver Metropolitan banked Exchange Water upon demand. If Exchange Water is not available and it is concluded through subsequent determinations of the GWMMP that the Exchange Water was not available for transfer, Cadiz shall have the obligation to repay Metropolitan for such Exchange Water. Notwithstanding the above, if the Exchange Water is not available due to a subsequent event, not the result of Cadiz' intentional or negligent act or omission, but in accordance with the GWMMP was available for transfer at the time of Exchange, Cadiz shall not be obligated to repay Metropolitan for the Exchange Water. Cadiz shall provide Metropolitan with a property interest in a form reasonably acceptable to Metropolitan for the purpose of recovering any exchange water. Page 13 8.10 The rate charged to Cadiz for the use of the Metropolitan conveyance system for the delivery at Cadiz' request of indigenous water pursuant to Section 4.5, either through conveyance or Exchange, shall be Metropolitan's posted wheeling rate for "as available" capacity. In addition, Cadiz shall pay power costs as charged to member agencies for wheeling or to third parties in long- term (greater than 12 months) wheeling agreements, and any water treatment costs for delivery of treated water (which shall be provided, if requested, at the water treatment rates as uniformly charged to all purchasers of water treated by Metropolitan's same treatment plant). Cadiz shall also pay any water stewardship fees that are uniformly charged on water delivered through the Metropolitan conveyance system by Metropolitan to all member agencies and third party wheelers, excluding agreements negotiated prior to the approval by Metropolitan's Board of this Proposal "as to form." 8.11 The rate charged to Cadiz for the use of the Metropolitan conveyance system for the delivery at Cadiz' request of indigenous water pursuant to Section 4.7, shall be Metropolitan's best available wheeling rate offered to third parties under equivalent terms and conditions. In addition, Cadiz shall pay power costs as charged to member agencies for wheeling or to third parties in long-term (greater than 12 months) wheeling agreements, and any water treatment costs for delivery of treated water (which shall be provided, if requested, at the water treatment rates as uniformly charged to purchasers of water treated by Metropolitan's same treatment plant). Cadiz shall also pay any water stewardship feesSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. that are uniformly charged on water delivered through the Metropolitan conveyance system by Metropolitan to all member agencies and third party wheelers excluding agreements negotiated prior to the approval by Metropolitan's Board of this Proposal "as to form." 8.12 Metropolitan shall take no action, and shall use its reasonable good faith efforts to cause its directors, officers, employees, agents and member agencies to refrain from taking action, to interfere with Cadiz' ability to market and deliver the newly developed water supply as described in Sections 4.5 and 4.7; provided that the discretion and authority of Page 14 Metropolitan, its directors, officers, and employees to perform their duties and obligations authorized by law shall not be impaired in any way. Actions taken by Metropolitan within its authority, and actions taken by its directors, officers, and employees within the scope of their office or employment, shall not be considered as actions which interfere with Cadiz' ability to market and deliver the newly developed water supply. However, interference in breach of this provision shall include actions taken by Metropolitan's directors, officers, employees and agents acting independently of the policy or direction of Metropolitan's Board to prevent a purchaser from entering into a transaction to purchase Cadiz indigenous water. 8.13 At Metropolitan's option, and in accordance with the expected Program yield as determined under Section 4.6 and security interest under Section 4.8, Cadiz shall manage agricultural production in the Cadiz/Fenner Valleys to ensure the availability of at least the first 300,000 AF of transfer water (including by adjusting the amount of agricultural production). Cadiz shall not increase its use of water for agricultural production or other purposes in the Cadiz or Fenner Valleys without the consent of Metropolitan. 8.14 Cadiz shall grant to Metropolitan rights of easement necessary for the construction and maintenance of the Capital Facilities. 8.15 A final contract for the Project would be subject to approval of Metropolitan's Board of Directors and shall be in conformance with the terms and conditions of any mitigation plan adopted by Metropolitan's Board pursuant to CEQA. Page 15 ATTACHMENT A TRANSFER FEE REDETERMINATION PROCEDURE1. GENERAL To ensure that payments for indigenous water made under the Cadiz Groundwater Storage and Dry-Year Supply Program ("Program") represent the fair market value for transfers, a Transfer Fee Redetermination provision is included as part of this Agreement. The purpose of this provision is to adjust on a periodic basis the Transfer Fee for Cadiz indigenous groundwater to ensure consistency with prevailing market values for water transfers with reasonably equivalent long term supplySource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. reliability benefits to Metropolitan's Service Area. 2. TIMING AND FREQUENCY In any year 2 through 25 of the Program in which Metropolitan purchases indigenous groundwater from Cadiz, either party may request a Transfer Fee Redetermination. Such request shall be made in writing ("Transfer Fee Redetermination Notice"). Within ninety (90) days following such request, the parties shall exchange any and all data relied upon by each party to calculate or support the fair market value of transfers. Within thirty (30) days following the exchange of data, the parties shall negotiate in good faith to establish the fair market value of Cadiz indigenous groundwater purchased under this Program ("FMV"). The increase or decrease in the FMV shall not exceed thirty-percent (30%) from the FMV in the immediately prior redetermination, or from the Base Rate in the initial redetermination. The Adjusted Rate, calculated in accordance with Section 4.2.2, shall become effective as of January 1 of the year in which the applicable Transfer Fee Redetermination Notice is delivered. Both parties agree the following guidelines should be considered (including by any arbitration panel) in establishing the FMV. 3. ELIGIBILITY CRITERIA (a) INFORMATION AVAILABILITY: The data exchanged by each party must include a complete copy of any underlying contract, financial information, and similar documents reflecting the terms, conditions and costs, of water supplies upon which each party relied as a basis for the Transfer Fee Redetermination. (b) VOLUNTARY NEGOTIATED TRANSFER: Each transfer must be the result of a voluntary process between willing participants establishing the terms, conditions and costs of such transfer. (c) AG-TO-AG WATER TRANSFERS: Transactions between agricultural water users are eligible when either of the following two conditions are met: 1) the ag-to- ag transfer is the result of a general offer to sell and the seller's water district has made general offers to sell that resulted in a transaction between the seller and a municipal and industrial user or supplier in the past five years; or 2) the area of origin is outside of Metropolitan's Service Area and the transferred water will be applied to agricultural operations within the Service Area. (d) GEOGRAPHY: The source of water or water rights must be capable of being used for domestic, municipal and industrial, or agricultural use within Metropolitan's Service Area. (e) WATER QUALITY: The quality of the source of water, when subjected to ordinary and customary treatment in the Metropolitan Service Area, would fall within the controlling Federal and State maximum contaminant levels for potable water. (f) WATER TRANSFERS: Transactions must be water transfer agreements between arms-length participants executed within five years of the price redetermination, but not prior to the execution of this agreement. This specifically excludes, groundwater conjunctive use projects in Page 16Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Metropolitan's service area, desalination projects, or water recycling projects. (g) SIZE AND DURATION: Eligible transactions must be sales of at least 20,000 acre-feet per transaction and last a minimum duration of 4 years. 4. CALCULATION OF TRANSFER FEE The initial FMV is a firm non-escalating $230 per acre- foot until sufficient evidence is found to redetermine the FMV. Sufficient evidence is defined as at least five (5) transactions meeting the eligibility criteria in Section 3 in the five years immediately preceding redetermination. If sufficient information is found then the FMV shall be calculated as the five-year volume-weighted rolling average of eligible transactions. Once a FMV has been established, it shall persist for five years or until further information exists to redetermine the FMV. If, five years after a price redetermination has occurred, there is insufficient information to re-estimate a FMV then the parties shall negotiate to establish the FMV or submit to arbitration to determine the appropriate methodology for determining FMV. A methodology for determining the delivered cost per acre-foot, including necessary adjustments to reflect differences in payment schedules, transport costs (1), and treatment costs shall be developed and mutually agreed to by both parties prior to the first price redetermination. This methodology shall be adhered to for all subsequent price redeterminations to ensure consistency over time in the estimates of the delivered cost per acre-foot of comparable transfers. FN (1) For the purposes of the Cadiz transactions, transportation costs shall include, among other costs, 1/2 of the capital cost paid by Metropolitan for the development and construction of the Cadiz Program 5. FMV DISPUTE RESOLUTION In the event the parties are not able to agree upon the FMV within 90 days of entering into good faith negotiations as described in Section 2, then the FMV shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). Any such dispute will be referred to one (1) arbitrator agreed to by the parties within fifteen (15) days after submission of the dispute to arbitration; provided, however, that if the parties are unable to agree upon the selection of an arbitrator, such dispute will be referred to three (3) arbitrators. In such an event, each party shall select one of the three arbitrators. The third arbitrator will be selected by the two party- appointed arbitrators; provided, however, if the two party-appointed arbitrators are unable to agree upon the third arbitrator, then the third arbitrator shall be appointed by the AAA. Each arbitrator must have expertise in California water issues and natural resource valuation. Each arbitrator, including party- appointed arbitrators, is subject to disclosure and disqualification pursuant to Rule R-19 of the Commercial Arbitration Rules. Based on a schedule to be set by the arbitrator(s), Cadiz and Metropolitan will each prepare a written claim specifying its proposal for the FMV (denominated in dollars per acre-foot of water) and written documentation supporting its proposal, not to exceed 100 pages. No party may submit data or documentationSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. for any transfer that was not exchanged during the negotiations between the parties. Metropolitan and Cadiz each may also file a rebuttal to the other party's submission, which shall not exceed 25 pages. Except for disputes arising out of Section 6 below, the only issue to be decided by the arbitrator(s) is which of the two proposed amounts for the FMV (i.e., the amount proposed by Metropolitan or the amount proposed by Cadiz) is closest to the actual FMV. The proposed amount chosen by the arbitration panel shall be the FMV for purposes of calculating the Adjusted Rate for the Transfer Fee as described in Sections 2 and 4. Page 176. RE-FORMULATION OF THE TRANSFER FEE REDETERMINATION METHODOLOGY If at any time during the course of this Agreement a regularly published water transfer market index accurately representing the relevant markets of transfers for Metropolitan becomes available, either party has the option to request the use of this index. If both parties agree to the use of the index, it shall replace the Transfer Fee Redetermination procedure set forth in this Attachment. Disputes arising over the substitution of an index meeting the above conditions shall be addressed under the dispute resolution provisions of this Agreement. Page 18 ATTACHMENT B ATTACHMENT RE FINANCING AND SECURITY ISSUES FOR A METROPOLITAN-CADIZ WATER STORAGE AND DRY-YEAR SUPPLY PROGRAM1. Bankruptcy Remoteness. Cadiz shall establish a separate single-purpose, "bankruptcy remote" corporate entity for the purpose of owning its interest in the Capital Facilities and the Program Agreement, the property, water rights and other appurtenant rights related to the Program and securing its obligations under the Agreement. Cadiz would also guarantee performance and payment of such subsidiary's obligations under the Agreement. In connection with the above, Cadiz shall comply with "bankruptcy remote" structures by limiting the activities and liabilities of the subsidiary, appointing an independent director to the subsidiary's board of directors, and requiring unanimous director approval to borrow money, dissolve, sell all or substantially all of its assets, merge or reorganize, file bankruptcy, or amend the articles of incorporation. * Single purpose subsidiary: - No other liabilities. - No other activities. - Independent director. - Unanimous vote for bankruptcy/winding-up/dissolution. * Consent by senior Cadiz lender to assignment. * Guarantee of performance by Cadiz: - limit on other indebtedness of Cadiz/Cadiz subsidiary. - Material Adverse Change standard. - Limitation on other transactions. * Title insurance/project-easement absolute.2. SECURITY FOR PERFORMANCE. As collateral security for Cadiz' performance of all contract provisions (to deliver water and storage), a deed of trust on its interests would be a condition of the Program. The deed of trust would address:Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. * A junior lien on Cadiz' share of improvements. * A junior lien on land. * The priority to be determined, depends on other lenders rights/agreements in the event of default and termination.3. SEPARATE PROFITS AND EASEMENTS. The Program documents should be separated into discrete packages of rights and obligations for: * Purchase of indigenous ground water. * Storage of Colorado River surplus water. This would keep the rights and conditions separate and clean in case for any reason the supply arrangement was terminated but the storage continued or was taken over by MWD.4. CONDITIONS PRECEDENT - The Program shall be subject to the satisfaction of specific conditions precedent, including: * Obtaining environmental clearance for the Program and all aspects of the removal and storage of water. * The negotiation, approval and concurrent effectiveness of all collateral security documents. * The satisfaction of all Cadiz senior lender issues: - The consent by Cadiz senior lender of the Program, including the single-purpose entity and the easement and profit. - Dollar limitation on the senior indebtedness. - Notice/cure rights granted in favor of MWD. - Off-set rights. - A purchase option granted in favor of MWD to acquire the senior loan at a predetermined price. * The availability and approval of Cadiz' project financing commitment. Page 19 * The receipt of all permits and easements necessary or desirable for the project. * Joint approval of the Plan: - To build the project, the EPC contract, Plans for the project, the budget for the project. - To operate the storage and removal Program, the groundwater management plan * No Material Adverse Change. * The truthfulness of all representations, warranties and covenants regarding the Program.5. CADIZ PROJECT FINANCING. MWD's right to review and approve the Cadiz financing shall include the right to review and approve the establishment and structure of the separate corporate entity and to obtain consent from Cadiz' project lender on terms approved by MWD. Any security interest in the Capital Facilities created by Cadiz financing shall not encumber MWD's ownership interest in, or interfere with MWD's right to operate, the Capital Facilities, and shall acknowledge MWD'sSource: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. rights under and in this Agreement. Cadiz's project loan shall also: * Be adequate to cover Cadiz's share of capital budget. * Provide for an outside dollar limitation and set forth the requirements for any equity investment. * Be secured by a lien on Cadiz contract payments and other Cadiz assets * Be a firm commitment - ready to close. * MWD protections to include: - Subordination/acknowledgment of MWD rights in contract and non-disturbance. - Provide for notice/cure rights in favor of MWD. - Provide for off-set rights. - Acknowledge MWD's right to take over facilities in certain circumstances, free of project lien. Page 20Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 21.1 ------------ CADIZ INC. SUBSIDIARIES OF THE COMPANY Rancho Cadiz Mutual Water CompanySun World International, Inc.Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 23.1 ------------ CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in theRegistration Statements on Form S-8 (Nos. 33-83360, 33-63065,333-35491, 333-41367, 333-74699, 333-81805, and 333-63990)and on Form S-3 (Nos. 333-53069, 333-53768 and 333-75006) of Cadiz Inc. of our reports dated February 21, 2002, except as to Note 9 for Cadiz Inc., which is as of March 8, 2002, relating to the financial statements and financial statements schedules, which appear in this Form 10-K. We also consent to the reference to us under the heading "Selected Financial Data,"which appears in this Form 10-K./s/ PricewaterhouseCoopers LLPLos Angeles, CaliforniaMarch 26, 2002 Source: CADIZ INC, 10-K, March 28, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

Continue reading text version or see original annual report in PDF format above