Morningstar® Document Research℠ FORM 10-KCADIZ INC - CDZIFiled: November 02, 2004 (period: December 31, 2003)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 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (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, 2003 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.)777 S. FIGUEROA STREET, SUITE 4250 LOS ANGELES, CA 90017(Address of principal executive offices) (Zip Code) (213) 271-1600 (Registrant's telephone number, including area code) --------------------------------- Securities Registered Pursuant to Section 12(b) of the Act: 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 NO X --- --- Indicate by check mark if disclosure of delinquent filerspursuant to Item 405 of Regulation S-K (Section 220.405 of thischapter) is not contained herein, and will not be contained tothe best of registrant's knowledge, in definitive proxy orinformation statements incorporated by reference in Part III ofthis Form 10-K or any amendment of this Form 10-K. XIndicate by check mark whether the Registrant is an acceleratedfiler (as defined in Exchange Act Rule 12b-2). YES NO X --- ---As of September 30, 2004, the Registrant had 6,612,674 shares ofcommon stock outstanding. The aggregate market value of thecommon stock held by nonaffiliates as of June 30, 2004 wasapproximately $41,050,122 based on 4,773,270 shares of commonstock outstanding held by nonaffiliates and the closing price onthat date. Shares of common stock held by each executive officerand director and by each entity that owns more than 5% of theoutstanding common stock have been excluded in that such personsSource: CADIZ INC, 10-K, November 02, 2004Powered 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. may be deemed to be affiliates. This determination of affiliatestatus is not necessarily a conclusive determination for otherpurposes.DOCUMENTS INCORPORATED BY REFERENCEThe Registrant is not incorporating by reference any otherdocuments within this Annual Report on Form 10-K except thosefootnoted in Part IV under the heading "Item 15. Exhibits,Financial Statement Schedules, and Reports on Form 8-K". TABLE OF CONTENTSPART IItem 1. Business. . . . . . . . . . . . . . . . . . . . . . . . 1Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . 10Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . .12Item 4. Submission of Matters to a Vote of Security Holders. . 13PART IIItem 5. Market for Registrant's Common Equity, RelatedStockholder Matters and Issuer Purchases of Equity Securities . 14Item 6. Selected Financial Data . . . . . . . . . . . . . . . .15Item 7. Management's Discussion and Analysis of FinancialCondition and Results of Operations . . . . . . . . . . . . . . 16Item 7A. Quantitative and Qualitative Disclosures about MarketRisk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35Item 8. Financial Statements and Supplementary Data. . . . .. .35Item 9. Changes in and Disagreements with Accountants onAccounting and Financial Disclosure . . . . . . . . . . . . . . 35Item 9A. Controls and Procedures . . . . . . . . . . . . . . . 36PART IIIItem 10. Directors and Executive Officers of the Registrants. .36Item 11. Executive Compensation . . . . . . . . . . . . . . . .40Item 12. Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters . . . . . . . . . . .45Item 13. Certain Relationships and Related Transactions . . . .50Item 14. Principal Accountant Fees and Services . . . . . . . .51PART IVItem 15. Exhibits, Financial Statements and Reports of Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Page i PART IITEM 1. BUSINESS Information presented in this Form 10-K that discussesfinancial projections, proposed transactions such as thoseSource: CADIZ INC, 10-K, November 02, 2004Powered 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. concerning the further development of our land and water assets,information or expectations about our business strategies,results of operations, products or markets, or otherwise makesstatements about future events, are forward-looking statements.Forward-looking statements can be identified by the use of wordssuch as "intends", "anticipates", "believes", "estimates","projects", "forecasts", "expects", "plans" and "proposes".Although we believe that the expectations reflected in theseforward-looking statements are based on reasonable assumptions,there are a number of risks and uncertainties that could causeactual results to differ materially from these forward-lookingstatements. These include, among others, the cautionarystatements under the caption "Certain Trends and Uncertainties",as well as other cautionary language contained in this Form 10-K.These cautionary statements identify important factors that couldcause actual results to differ materially from those described inthe forward-looking statements. When considering forward-lookingstatements in this Form 10-K, you should keep in mind thecautionary statements described above.OVERVIEW Our primary asset consists of three blocks of largelycontiguous land in eastern San Bernardino County, California.This land position totals approximately 45,000 acres. Virtuallyall of this land is underlain by high-quality groundwaterresources with demonstrated potential for various applications,including water storage and supply programs and agricultural,municipal, recreational, and industrial development. Two of thethree blocks of land are located in proximity to the ColoradoRiver Aqueduct, the major source of imported water for southernCalifornia. The third block of land is located near the ColoradoRiver. The value of these assets derives from a combination ofpopulation increases and limited water supplies throughoutsouthern California. In addition, most of the major populationcenters in southern California are not located where significantprecipitation occurs, requiring the importation of water fromother parts of the state. We therefore believe that acompetitive advantage exists for those companies that possess orcan provide high quality, reliable, and affordable water to majorpopulation centers. Notwithstanding certain actions taken in 2002 by theMetropolitan Water District of Southern California("Metropolitan"), as described below, we expect to be able to useour land assets and related water resources to participate in abroad variety of water storage and supply, transfer, exchange,and conservation programs with public agencies and other parties. In 1997 we commenced discussions with Metropolitan in orderto develop principles and terms for a long-term agreement for ajoint venture groundwater storage and supply program on our landin the Cadiz and Fenner valleys ("Cadiz Program"). Followingextensive negotiations with us, in April 2001 Metropolitan'sBoard of Directors approved definitive economic terms,conditions, and responsibilities ("Principles of Agreement"),which were to serve as the basis for a final agreement to beexecuted between us, subject to the then-ongoing environmentalreview process. The Cadiz Program would have provided Metropolitan with avaluable increase in water supply during periods of drought orother emergencies, as well as greater reliability and flexibilityin operation of its Colorado River Aqueduct. During wet years,surplus water from the Page 1Colorado River would be stored in the aquifer system underlying Cadiz' land. When needed, the stored water, together with indigenous groundwater, would be returned to the Colorado River Aqueduct for distribution to Metropolitan's member agencies throughout six southern California counties.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. On August 29, 2002, the U.S. Department of Interior approvedthe Final Environmental Impact Statement for the Cadiz Programand issued its Record of Decision, the final step in the federalenvironmental review process for the Cadiz Program. The Recordof Decision amends the California Desert Conservation Area Planfor an exception to the utility corridor element and offered toMetropolitan a right-of-way grant necessary for the constructionand operation of the Cadiz Program. On October 8, 2002, Metropolitan's Board consideredacceptance of the Record of Decision and the terms and conditionsof the right-of-way grant. The Board voted not to adoptMetropolitan staff's recommendation to approve the terms andconditions of the right-of-way grant issued by the Department ofthe Interior for the Cadiz Program by a vote of 47.11% in favorand 47.36% against the recommendation. Instead, the Board votedfor an alternative motion to reject the terms and conditions ofthe right-of-way grant and to not proceed with the Cadiz Programby a vote of 50.25% in favor and 44.22% against. Irrespective of Metropolitan's actions, SouthernCalifornia's need for water storage and supply programs has notabated. We believe there are several different scenarios tomaximize the value of this water resource, all of which are undercurrent evaluation. See "Water Resource Development", below. Because we expected that these alternatives may havedifferent anticipated capital requirements and implementationperiods than those previously established for the Cadiz Program,we promptly entered into an agreement with our senior securedlender, ING Capital LLC ("ING") for a three year extension ofapproximately $35 million of senior secured loans with a maturitydate of January 31, 2003. We also entered into agreements withthe holders of our preferred stock for an extension until July2006 of the mandatory redemption date of this preferred stock.Our extension with ING was subject to certain conditions,including annual renewals of the revolving credit facility of ourwholly-owned subsidiary, Sun World International, Inc. (which,together with its subsidiaries, we refer to as "Sun World"). Sun World was, however, unable to obtain such a renewal forits 2003-2004 growing season. Historically, we, as the parentcompany of Sun World, had supplemented Sun World's annual workingcapital requirements. We were not able to do this for the 2003-2004 growing season, thereby compelling Sun World to obtain alarger facility than in prior years. Sun World was able toobtain this larger facility but only conditioned on obtaining theconsent of holders of Sun World's outstanding First MortgageNotes, which Sun World was ultimately unable to procure. Becauseof this, the only way Sun World could obtain the new financingneeded to provide working capital for its 2003-2004 growingseasons was to seek court approval, pursuant to Chapter 11, to anew Debtor in Possession ("DIP") facility. Therefore, in January2003 Sun World filed a voluntary petition for Chapter 11bankruptcy protection in order to access its needed seasonalfinancing. Sun World's financial situation and bankruptcy filing, inturn, negated the agreement we had previously reached with INGfor the three year extension of our senior secured loans. Wewere unable to make payment of this debt upon the originalJanuary 31, 2003 maturity date, and in February 2003 ING declaredthese loans to be in default, although we remained innegotiations with ING for an overall restructuring of this debt. Page 2 Given the negative effect of these various developments onthe trading price for our common stock, we were unable tomaintain the minimum price needed for continued listing on theNasdaq National Market. Effective March 27, 2003, our commonstock was delisted from trading on the Nasdaq National Market.In light of these events, we have implemented the followingSource: CADIZ INC, 10-K, November 02, 2004Powered 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. restructuring steps: * In June 2003 we completed an equity offering of $2.0 million in newly issued common stock (including $320 thousand in shares issued for services); * In October 2003 we completed an exchange of all of our then outstanding preferred stock for newly issued common stock; * In November 2003 Sun World submitted its plan of reorganization to the Bankruptcy Court; * In December 2003 we completed a comprehensive restructuring which resulted in: * A new three year extension of our $35 million debt facility with ING; * An additional equity infusion of $8.6 million through the issuance of common stock; * A one for twenty-five reverse split of our outstanding common stock; * The transfer of our properties to Cadiz Real Estate LLC, a Delaware limited liability company wholly owned by us and created at the behest of ING; and * The completion of a binding agreement with the holders of a majority of Sun World's First Mortgage Notes, otherwise referred to as the "Bondholders", which provides for the transfer of an unsecured claim due to us from Sun World of $13.5 million to a trust controlled by the Bondholders, as well as the pledge of our equity in Sun World to this trust as security for our obligation to support a plan of reorganization for Sun World that provides no recovery to us on account of our equity interests in Sun World. In return, the Bondholders agreed to release us from any obligations pursuant to our guarantee of Sun World's First Mortgage Notes. With the implementation of these restructuring steps, wehave been able to retain ownership of all of our assets relatingto our water programs and obtain working capital needed tocontinue our efforts to develop our water programs, albeit withour commitment to support a Sun World plan of reorganization thatprovides for the divestiture of our equity interests in SunWorld. Because many of our pre-existing common stockholders haveparticipated in the equity issuances which were part of therestructuring, our base of common stockholders remains largelythe same as before the restructuring. We remain committed to our water programs and we continue toexplore all opportunities. We cannot predict with certainty whichof these various opportunities will ultimately be utilized. Page 3(A) GENERAL DEVELOPMENT OF BUSINESS We are a Delaware corporation formed in 1992 to act as thesurviving corporation in a Delaware reincorporation mergerbetween us and our predecessor, Pacific Agricultural Holdings,Inc., a California corporation formed in 1983. As part of our historical business strategy, we haveconducted our land acquisition, water development activities,agricultural operations and search for international water andagricultural opportunities for the purpose of enhancing the long-term appreciation of our properties and future prospects. See"Narrative Description of Business" below. The focus of our water development activities has been theCadiz Program. The actions of Metropolitan in late 2002 have, atSource: CADIZ INC, 10-K, November 02, 2004Powered 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 minimum, delayed the Cadiz Program, which in turn has caused usto undergo a corporate restructuring. In 2003, our businessdevelopment activities consisted largely of implementing thisrestructuring, which has included the Chapter 11 filing of andthe substantive disposition of our equity interests in our SunWorld subsidiary and a completion of an amendment and extensionof our credit facilities with our senior secured lender. Ourprimary goal in this process has been to maintain ownership ofour San Bernardino properties and to create a capital structurewhich would allow us to continue our development of the CadizProgram. With the completion of an overall capital restructuringin December 2003, we believe that we have succeeding in achievingthis goal. This overall capital restructuring provided for athree year extension of our $35 million debt facility with INGand an additional equity infusion of $8.6 million through theissuance of common stock, and is described in more detail in Item7, "Management's Discussion and Analysis of Financial Conditionand Results of Operation." We acquired all of the outstanding capital stock of SunWorld in 1996. Since that time, until late 2002, we provided toSun World various management and administrative services andfacilities, and supplemented Sun World's annual working capitalrequirements. In late 2002, it became apparent that we would notbe able to continue to provide such ongoing financial support toSun World. In order to obtain the new financing needed toprovide working capital for its 2003-2004 growing seasons, onJanuary 30, 2003 (the "Petition Date") Sun World and three of itswholly owned subsidiaries filed voluntary petitions under Chapter11 of the Bankruptcy Code in the United States Bankruptcy Court,Central District of California, Riverside Division (Case Nos: RS03-11370 DN, RS 03-11369 DN, RS 03-11371 DN, RS 03-11374 DN).Shortly following the Petition Date, Sun World sought andobtained authority to enter into a Debtor in Possession ("DIP")facility which provided Sun World with sufficient loanavailability to continue its operations. As of the petitiondate, due to the Company's loss of control over the operations ofSun World, the financial statements of Sun World will no longerbe consolidated with those of Cadiz, but instead Cadiz willaccount for its investment in Sun World on the cost basis ofaccounting. In November 2003 Sun World filed a plan of reorganization(Debtors' Joint Plan of Reorganization dated November 24, 2003)with the Bankruptcy Court (the "Plan") and accompanyingdisclosure statement. Under the Plan as proposed, thereorganized Sun World will continue to operate as a going concernfollowing effectiveness of the Plan; however, all of ourownership interests in the reorganized Sun World will becanceled. The reorganized Sun World's equity interests will beheld instead by Sun World's creditors. Also, under the proposedPlan, all service agreements between Sun World and us will beterminated, and approximately $13.5 million in debt owed to us bySun World (including approximately $12.3 million in loans) will becanceled. Page 4 We supported the filing of the Plan in the belief that themanner in which the Plan provides for the resolution of claimsasserted by and against us in the Sun World bankruptcyproceedings would be in our best interests. In furtherance ofthis belief, and in order to ensure that our interests in SunWorld are treated in a manner consistent with that under theproposed Plan irrespective of whether or not the Plan is approvedin its proposed form, in December 2003 we entered into a globalsettlement agreement with Sun World and with the holders of amajority of Sun World's First Mortgage Notes, otherwise referredto as the Bondholders. This global settlement agreement providesfor: * The grant by Sun World to us of a general unsecured claim against Sun World of $13.5 million in full and final settlement of all claims and causes of action between us, and the termination and/or rejection of all contracts andSource: CADIZ INC, 10-K, November 02, 2004Powered 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 between us and Sun World, with the exception of an agricultural lease by us to Sun World of our Cadiz, California farm properties (the "Sun World Settlement"); * The transfer of this unsecured claim to a trust controlled by the Bondholders; * Our agreement not to seek a recovery in the Sun World bankruptcy proceedings on account of our equity interest in Sun World, and a pledge of all of our equity interests in Sun World to the Bondholder trust as security for our obligations under the global settlement; and * The waiver by the Bondholders (and by any other holders of First Mortgage Notes who elect to opt into the settlement) to seek recovery against us on account of our guarantee of Sun World's obligations under the First Mortgage Notes. The Sun World Settlement was subject to the approval of theBankruptcy Court, which was obtained by Sun World. BankruptcyCourt approval was not required for the other aspects of theglobal settlement. The Bankruptcy Court's approval order for theSun World Settlement is currently the subject of an appeal by acreditor of Sun World. Sun World is defending against thisappeal. We have an agreement with the Bondholders providing thatthe other aspects of the global settlement, as described above,shall remain fully effective even if the pending appeal of theSun World Settlement is successful. A hearing to consider the adequacy of the disclosurestatement accompanying the Plan, most recently scheduled for June11, 2004, has been subject to several postponements and nohearing date is currently scheduled. In Sun World's filings withthe Bankruptcy Court, Sun World has reported that it believesthat the Plan likely cannot be confirmed absent the acceptance ofthe holders of the First Mortgage Notes, in their capacity assecured creditors. Sun World has further reported to theBankruptcy Court that the holders of the First Mortgage Noteshave not reached a consensus with respect to certaincorporate governance issues relating to the reorganized company,and that they have been unable to finalize a shareholderagreement term sheet. In the meantime, Sun World has, with BankruptcyCourt approval, expanded the scope of its engagement with Ernst &Young Corporate Finance LLC to include services related to (i) asale of substantially all of its assets pursuant to a motion or aplan of reorganization, and (ii) obtaining an equity investor andfinancing under a plan of reorganization and is actively pursuingthe sales/investment process. Sun World has chosen to delay the preparation of an amended Plan and disclosure statement and the scheduling of a disclosure statement hearing date pending the outcome of these most recent developments. Sun World's exclusivity period (i.e. the period during which only Sun World may file a plan of reorganization) currently expires on December 31, 2004. We cannot predict at this time what changes, if any, Page 5will be made to the Plan as a result of the foregoing or whether or not the Plan, as amended, will be approved.(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS During the year ended December 31, 2003 we continued todevelop the water resource segment of our business and, until SunWorld's January 30 bankruptcy filing, operated our agriculturalresources segment. See Consolidated Financial Statements. Seealso Item 7, "Management's Discussion and Analysis of FinancialCondition and Results of Operations".(C) NARRATIVE DESCRIPTION OF BUSINESS With the completion of our financial restructuring inDecember 2003, we are able to continue with our strategy ofdevelopment of our holdings for their highest and best uses. Atpresent, our development activities are focused on water resourceSource: CADIZ INC, 10-K, November 02, 2004Powered 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. development at our San Bernardino County properties. 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. The Company owns approximately 35,000 acres of land andrelated high-quality groundwater resources in the Cadiz andFenner valleys of eastern San Bernardino County. The aquifersystem underlying this property is naturally recharged byprecipitation (both rain and snow) within a watershed ofapproximately 1,300 square miles. See Item 2, "Properties - TheCadiz/Fenner Property". In 1997 we commended discussions with Metropolitan inorder to develop principles and terms for a long-term agreementfor a joint venture groundwater storage and supply program onthis land. The Cadiz Program would provide Metropolitan with avaluable increase in water supply during periods of drought orother emergencies, as well as greater reliability and flexibilityin operation of its Colorado River Aqueduct. During wet years,surplus water from the Colorado River would be stored in theaquifer system that underlies the Cadiz property. When needed,the stored water and indigenous groundwater would be returned tothe Colorado River Aqueduct for distribution to Metropolitan'smember agencies throughout six southern California counties.Metropolitan provides supplemental water to approximately 17million people. In addition, temporary withdrawals of indigenous groundwaterwould also be available from the Cadiz Program duringemergencies, in full compliance with the GROUNDWATER MONITORING &MANAGEMENT PLAN approved by the U.S. Department of the Interiorin its RECORD OF DECISION. With this provision of the MANAGEMENTPLAN the effective long-term storage capacity of the CadizProgram may exceed two million acre-feet. Following extensive negotiations with us, in April 2001Metropolitan's Board of Directors approved definitive economicterms and responsibilities, which were to serve as the basis fora final agreement to be executed between us, subject to the then-ongoing environmental review process. Pursuant to thesedefinitive terms, during storage operations, Metropolitan wouldpay a Page 6$50 fee per acre-foot for put of Colorado River water intostorage, and a $40 fee per acre-foot for return of Colorado Riverwater from storage, or a total of $90 per acre-foot to cyclewater into and out of the basin. On the transfer of indigenouswater, Metropolitan would pay a base rate of $230 per acre-foot,which will be adjusted according to a fair market valueadjustment procedure. Metropolitan would commit to minimum levelsof utilization of the Cadiz Program for both storage of ColoradoRiver Aqueduct water (900,000 acre-feet) and transfer ofindigenous groundwater (up to 1,500,000 acre-feet). In addition,the definitive terms provided for the grant to Cadiz of theoption to sell a portion of the indigenous groundwater (30,000acre-feet per year for 25 years or a total of 750,000 acre-feet)to outside third parties within Metropolitan's service area atfair market value. Cadiz Program facilities would include, among other things: * Spreading basins, which are shallow ponds that percolate water from the ground surface to the water table;Source: CADIZ INC, 10-K, November 02, 2004Powered 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. * 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 to connect the spreading basins and wellfield to the Colorado River Aqueduct at Metropolitan's Iron Mountain pumping plant; and * A pumping plant to pump water through the conveyance pipeline from Metropolitan's Iron Mountain pumping plant to the spreading basins. The expected costs of these facilities is approximately $150million, which was to be jointly shared. The definitive terms for the Cadiz Program also call for theestablishment of a comprehensive groundwater monitoring andmanagement plan to ensure long-term protection of the groundwaterbasin. 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. On August 29, 2002, the U.S. Department ofInterior approved the Final Environmental Impact Statement forthe Cadiz Program and issued its Record of Decision, the finalstep in the federal environmental review process for the CadizProgram. The Record of Decision amends the California DesertConservation Area Plan for an exception to the utility corridorelement and offered to Metropolitan a right-of-way grantnecessary for the construction and operation of the CadizProgram. On October 8, 2002, Metropolitan's Board consideredacceptance of the Record of Decision and the terms and conditionsof the right-of-way grant. The Board voted not to adoptMetropolitan staff's recommendation to approve the terms andconditions of the right-of-way grant issued by the Department ofthe Interior for the Cadiz Program by a vote of 47.11% in favorand 47.36% against the recommendation. Instead, the Board votedfor an alternative motion to reject the terms and conditions ofthe right-of-way grant and to not proceed with the Cadiz Programby a vote of 50.25% in favor and 44.22% against. Subsequent to Metropolitan's actions, negotiations towards afinal agreement for the Cadiz Program on the basis of thepreviously approved definitive terms have ceased. Page 7 With Metropolitan's actions, we have not been able tocomplete the environmental review phase of the Cadiz Program. Itis our position that Metropolitan's actions of October 2002breached various contractual and fiduciary obligations ofMetropolitan to us, and interfered with the economic advantage wewould obtain from the Cadiz Program. Therefore, in April 2003 wefiled a claim against Metropolitan seeking compensatory andpunitive damages. See Item 3 - "Legal Proceedings". Irrespective of Metropolitan's actions, the need for newwater storage and supply programs has not diminished in thesouthwestern United States. The Colorado River watershed iscurrently in the grip of a prolonged drought that presents majorchallenges to the economies of California, Nevada, and Arizona.As population continues to grow at record rates, these states arefaced with the very real possibility that current and futuresupplies will not be able to meet demand. Implementation of the Cadiz Program would provide a valuableincrease in water supply during periods of drought or otheremergencies, as well as greater reliability and flexibility inoperation of the Colorado River Aqueduct. During wet years,excess water from the Colorado River would be stored in theaquifer system that underlies approximately 35,000 acres of landSource: CADIZ INC, 10-K, November 02, 2004Powered 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. owned by Cadiz. When needed, the stored water would be returnedto the Colorado River Aqueduct for distribution. In addition, temporary withdrawals of indigenous groundwaterwould also be available during emergencies, in full compliancewith the GROUNDWATER MONITORING & MANAGEMENT PLAN approved by theU.S. Department of the Interior in its RECORD OF DECISION. Withthis provision of the MANAGEMENT PLAN the effective long-termstorage capacity of the Cadiz Program may exceed two million acre-feet. The Company believes there are a variety of scenarios underwhich the value of the Cadiz Program may be realized. Indeed,exploratory discussions have been initiated with representativesof governmental organizations, water agencies, and private waterusers with regard to their expressed interest in implementationof the Cadiz Program. Several such discussions have been heldwith water agencies that are independently seeking reliability ofsupply. Other discussions have focused on the possibility ofexchanging water stored at the Cadiz Program with watercontractors in other regions in California. In addition, thecurrent drought within the Colorado River watershed has served asan impetus to cooperative discussions between states, with thegoal that interstate exchanges and transfers may also becomefeasible in the future. Because of the Company's long-term relationship withMetropolitan, the Company also intends to pursue discussions withthe agency in an effort to determine whether there are termsacceptable to both parties under which the Cadiz Program could beimplemented. With the recent finalization of the QuantificationSettlement Agreement (QSA), an agreement between the Secretary ofthe Interior, the State of California, Metropolitan and threeother southern California water agencies quantifying the amountof water California's Colorado River users could expect on anannual basis, Metropolitan's Colorado River supplies are nowspecified and limited only by the variable volume of flow on theriver. To meet the growing needs of its service area,Metropolitan must take advantage of all opportunities to storeavailable Colorado River water during periods of surplus. Withvirtually all environmental permits and approvals in place forthe Cadiz Program, except for those dependent upon Metropolitan'scertification of the Environmental Impact Report (EIR), theCompany believes a partnership with Metropolitan could be renewedin a timely manner if terms acceptable to both parties were to benegotiated. Page 8 In the absence of a negotiated resolution, the Company wouldcontinue to seek an administrative resolution of its claimagainst Metropolitan. In April 2003 the Company filed anadministrative notice of claim with Metropolitan asserting thebreach by Metropolitan of various obligations specified in thePRINCIPLES OF AGREEMENT. The Company believes that by failing tocomplete the environmental review process, as specified in thePRINCIPLES OF AGREEMENT, Metropolitan violated this contract,breached its fiduciary duties to the Company and interfered withthe Company's prospective economic advantages. In discussionsfollowing presentation of this claim, Cadiz and Metropolitanagreed to evaluate alternative approaches to implementation ofthe Cadiz Program. Metropolitan has not to date responded to theclaim and Cadiz has until October 2005 to file a lawsuit againstthe agency.(B) OTHER EASTERN MOJAVE PROPERTIES Our second largest block of land is approximately 9,000acres in the Piute Valley of eastern San Bernardino County. Thislandholding is located approximately 15 miles from the resortcommunity of Laughlin, Nevada, and about 12 miles from theColorado River town of Needles, California. Extensivehydrological studies, including the drilling and testing of afull-scale production well, have demonstrated that thislandholding is underlain by high-quality groundwater. The aquiferSource: CADIZ INC, 10-K, November 02, 2004Powered 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. system underlying this property is naturally recharged byprecipitation (both rain and snow) within a watershed ofapproximately 975 square miles. Additional hydrological investigations and discussions withpotential partners have commenced with the objective ofdeveloping our Piute Valley assets. Additionally, we own or control additional acreage locatednear Danby Dry Lake, approximately 30 miles southeast of ourlandholdings in Cadiz and Fenner valleys. Our Danby Lakeproperty is located approximately 10 miles north of the ColoradoRiver Aqueduct, and initial hydrological studies indicate that ithas excellent potential for a groundwater storage and supplyproject.AGRICULTURAL OPERATIONS Sun World is a leading producer of high value crops and oneof California's largest vertically integrated agriculturalconcerns. Farming approximately 10,000 acres of agriculturalcrops throughout southern and central California, Sun World growsdozens of varieties of fresh fruit and vegetables, and is one ofthe top three domestic producers of table grapes (5% of UnitedStates production) plums (6%), colored peppers (4%), andwatermelon (3%). Sun World's operations include divisionsspecializing in farming, packing, marketing, and proprietaryproduct development. On January 30, 2003, Sun World filed voluntary petitionsunder Chapter 11 of the Bankruptcy Code. See "General Developmentof Business", above. Since the filing date, Sun World hasoperated its business and managed its affairs as debtor anddebtor in possession. As of that date due to the Company's lossof control over the operations of Sun World, the financialstatements of Sun World will no longer be consolidated with thoseof Cadiz, but instead, Cadiz will account for its investment inSun World on the cost basis of accounting. As a result ofchanging to the cost basis of accounting on January 31, 2003, wehad a net investment in Sun World of approximately $195 thousand consisting of loans and amounts due from Sun World of$13,500,000 less losses in excess of investment in Sun World of$13,305,000. We wrote off the net investment in Sun World of $195thousand at the Chapter 11 filing date because we do not anticipatebeing able to recover our investment. Page 9 As part of the Sun World bankruptcy process, we are nolonger engaged in agricultural operations. We lease for operationby others approximately 1,600 acres of Cadiz/Fenner agriculturalreal property. See Item 2. "Properties - Leased Farm Property".SEASONALITY Our water resource development activities are not seasonalin nature. With our divestiture of Sun World as contemplated by theagreement with a majority of Sun World's bondholders, ouroperations will no longer be subject to the general seasonaltrends that are characteristic of the agricultural industry.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.EMPLOYEESSource: CADIZ INC, 10-K, November 02, 2004Powered 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 of December 31, 2003, we employed 7 full-time employees(i.e. those individuals working more than 1,000 hours per year).We believe that our employee relations are good.REGULATION Our operations are subject to varying degrees of federal,state and local laws and regulations. As we proceed with thedevelopment of our properties, including the Cadiz Program, wewill be required to satisfy various regulatory authorities thatwe are in compliance with the laws, regulations and policiesenforced by such authorities. Groundwater development, and theexport of surplus groundwater for sale to single entities such aspublic water agencies, is not subject to regulation by existingstatutes other than general environmental statutes applicable toall development projects. Additionally, we must obtain a varietyof approvals and permits from state and federal governments withrespect to issues that may include environmental issues, issuesrelated to special status species, issues related to the publictrust, and others. Because of the discretionary nature of theseapprovals and concerns which may be raised by variousgovernmental officials, public interest groups and otherinterested parties during both the development and approvalprocess, our ability to develop properties and realize incomefrom our projects, including the Cadiz Program, could be delayed,reduced or eliminated.ITEM 2. PROPERTIES We currently lease our executive offices in Los Angeles,California, which consist of approximately 4,770 square feet,pursuant to a sublease that expires on June 14, 2006. Currentbase rent under the lease is approximately $7,550.00 per month. As part of our December 2003 overall capital restructuring,we transferred all of our assets (with the exception of ouroffice sublease, certain office furniture and equipment and any Page 10Sun World related assets) to Cadiz Real Estate LLC, a Delawarelimited liability company ("Cadiz Real Estate"). We hold 100% ofthe equity interests of Cadiz Real Estate, and therefore wecontinue to hold 100% beneficial ownership of the propertieswhich we transferred to Cadiz Real Estate. Cadiz Real Estate wascreated at the behest of our senior secured lender, ING. TheBoard of Managers of Cadiz Real Estate consists of two managersappointed by us and one independent manager named by ING. As longas our obligations to ING are outstanding, Cadiz Real Estate maynot institute bankruptcy proceedings without the unanimousconsent of this Board of Managers (including the independentmanager). Cadiz Real Estate is a co-obligor under our creditfacilities with ING, for which assets of Cadiz Real Estate havebeen pledged as security. Because the transfer of our properties to Cadiz Real Estatehas no effect on our ultimate beneficial ownership of theseproperties, we refer throughout this Report to properties ownedof record either by Cadiz Real Estate or by us as "our"properties. 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 forSource: CADIZ INC, 10-K, November 02, 2004Powered 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. agricultural 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. Additional numerous independent geotechnical and engineeringstudies conducted since 1985 have confirmed that the Cadiz/Fennerproperty overlies a natural groundwater basin which is ideallysuited fro the underground water storage and dry year transfersas contemplated 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 acresat Cadiz for which 1,600 acres have been developed and are leasedto Sun World and an unaffiliated third party. This action alsoapproved permits to construct infrastructure and facilities tohouse as many as 1,150 seasonal workers and 170 permanentresidents (employees and their families) and allows for thewithdrawal of more than 1,000,000 acre-feet of groundwater fromthe groundwater basin underlying our property.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 9,000 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. Page 11LEASED FARM PROPERTY Concurrently with our acquisition of Sun World in 1996, weleased to Sun World approximately 1,600 acres of our Cadiz/Fennerproperty which has been developed for agricultural use. Thislease, as amended pursuant to Sun World's bankruptcy proceedings,now provides for the lease by Sun World of 1,100 acres of thisproperty through the 2004 harvest season. The remainder of the property is leased to an unaffiliated third party. These leases provide for the lessee to be responsible for all costs associated with growing crops on the leased property. The majority of this land is used for thecultivation of permanent and annual crops and support activities,including packing facilities.DEBT SECURED BY PROPERTIES Our outstanding debt at December 31, 2003 of $35 millionrepresents loans secured by our properties (including propertiesheld of record by Cadiz Real Estate). Information regardinginterest rates and principal maturities is provided in Note 10 tothe consolidated financial statements.ITEM 3. LEGAL PROCEEDINGS CLAIM AGAINST METROPOLITAN On April 7, 2003 we filed an administrative claim againstThe Metropolitan Water District of California ("Metropolitan"),asserting the breach by Metropolitan of various obligationsspecified in our Principles of Agreement with Metropolitan. Webelieve that by failing to complete the environmental reviewprocess for the Cadiz Program, as specified in the Principles ofAgreement, Metropolitan violated this contract, breached itsfiduciary duties to us and interfered with our prospectiveeconomic advantages. See Item 1, "Business - NarrativeSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Description of Business - Water Resource Development". Thefiling was made with the Executive Secretary of Metropolitan. Weare seeking recovery of compensatory and punitive damages. In discussions following presentation of this claim, we andMetropolitan have agreed to evaluate alternative approaches toimplementation of the Cadiz Program. Metropolitan has not todate responded to the claim and we have until October 2005 tofile a lawsuit against the agency. SUN WORLD BANKRUPTCY FILING On January 30, 2003, (the "Petition Date") Sun World andthree of its wholly owned subsidiaries (Sun Desert, Inc.,Coachella Growers and Sun World/Rayo) filed voluntary petitionsunder Chapter 11 of the Bankruptcy Code in the United StatesBankruptcy Court, Central District of California, RiversideDivision (Case Nos: RS 03-11370 DN, RS 03-11369 DN, RS 03-11371DN, RS 03-11374 DN). See Item 1, "Business - General Developmentof Business".ING NOTICES OF DEFAULT/NOTICES OF RESCISSION On July 7 and 8, 2003, ING recorded a series of Notices ofDefault and Election to Sell under Deed of Trust in the office ofthe San Bernardino County Recorder evidencing a foreclosureaction by ING against the property which was securing our seniorsecured loans Page 12with ING. ING had declared these senior secured loans, which then had a maturity date of January 31, 2003, to be in default in February 2003. In December 2003, subsequent to the completion of ourcomprehensive financial restructuring which included a three yearextension of our loans with ING (See Item 1. Business -Overview), ING recorded Notices of Rescission in San BernardinoCounty whereby ING rescinded, canceled and withdrew each suchNotice of Default and Election to Sell.OTHER PROCEEDINGS There are no other material pending legal proceedings towhich we are a party or of which any of our property is thesubject.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 2003. The results of a SpecialMeeting of Stockholders held August 21, 2003 were reported in ourQuarterly Report on Form 10-Q for the quarterly period endedSeptember 30, 2003. Page 13 PART IIITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is currently traded over the counter on theOTC U.S. Market, often referred to as the "Pink Sheets" under thesymbol "CDZI-OTC". Prior to March 27, 2003, the Company's commonstock was listed on the Nasdaq National Market (Nasdaq). On March27, 2003, the Company's common stock was delisted from Nasdaq,and thereafter traded on the OTC Bulletin Board until May 23,2003, at which time our common stock was removed from theBulletin Board and began trading on the Pink Sheets. Thefollowing table reflects actual sales transactions for the datesthat the Company was trading on Nasdaq, and high and low bidinformation for dates subsequent. The OTC Bulletin Board and PinkSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Sheet market quotations reflect inter-dealer prices, withoutretail mark-up, mark-down or commission and may not necessarilyrepresent actual transactions. The high and low ranges of thecommon stock for the dates indicated have been provided byBloomberg LP. Please note that all stock prices listed throughoutthis annual report on Form 10K have been adjusted for the one for25 reverse stock split that took place in December 2003. HIGH LOW QUARTER ENDED SALES PRICE SALES PRICE ------------- ----------- ----------- 2002: March 31 $ 225.00 $ 191.75 June 30 $ 275.00 $ 205.75 September 30 $ 155.50 $ 75.00 December 31 $ 68.75 $ 5.25 2003: March 31 $ 20.25 $ 2.625 June 30 $ 4.75 $ 2.425 September 30 $ 4.00 $ 1.425 December 31 $ 5.90 $ 3.375 On July 31, 2004, the high, low and last sales prices forthe shares, as reported by Bloomberg, were $15.00, $15.00, and$15.00, respectively. We also have an authorized class of 100,000 shares ofpreferred stock. There is one series of preferred stock (SeriesF) authorized for issuance. All 100,000 authorized shares ofSeries F Preferred Stock are issued and outstanding. 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, and filed aCertificate of Designations designating for issuance 40,259shares of Series A Junior Participating Preferred Stock. Noshares of Series A Participating Preferred Stock were everissued. The Rights Plan was amended and terminated by our Boardof Directors on March 25, 2004. On March 26, 2004, Cadiz filed acertificate of elimination which eliminated this series ofpreferred stock. As of July 31, 2004, the number of stockholders of record ofour common stock was 240 and the estimated number of beneficialowners was approximately 2,263. To date, we have not paid a cash dividend on our commonstock and we do not Page 14anticipate paying any cash dividends in the foreseeable future. Our ability to pay such dividends is subject to covenants pursuant to agreements with our primary lender that prohibits the payment of dividends. During the quarter ended December 31, 2003, we issued4,190,699 shares of common stock and 100,000 shares of Series FPreferred Stock. 3,440,000 shares of common stock were issued at$2.50 per share in connection with a private sale of our commonstock for an aggregate amount of $8.6 million. 400,000 shareswere issued in exchange for the cancellation of all of ouroutstanding Series D, Series E-1 and Series E-2 preferred stock.160,000 shares were issued as part of a settlement agreement witha potential claimant and were valued by us for purposes of thissettlement at $2.50 per share. ING exercised all of theiroutstanding warrants and received 94,000 shares of common stockat an exercise price of $0.25 per share. The remaining 84,699shares were issued upon conversion of all of our 8% unsecuredconvertible promissory notes in the aggregate principal amount of$200,000 plus accrued interest, which was previously reported in our Source: CADIZ INC, 10-K, November 02, 2004Powered 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. quarterly report on Form 10-Q for the quarter ended March 31, 2003. The Series F preferred stock, which is initially convertible into 1,728,955 shares of common stock (subject to anti-dilution adjustments), was issued in connection with the restructuring of our senior secured debt with ING. The issuances of common stock and Series F preferred stock were not registered under the Securities Act. We believe that the transactions described are exempt from theregistration requirements of the Securities Act by virtue ofSection 4(2) of the Securities Act as the transactions did notinvolve public offerings, the number of investors was limited,the investors were provided with information about us, and weplaced restrictions on resale of the securities. All othersecurities sold by us during the three years ended December 31,2003 which were not registered under the Securities Act havepreviously been reported in our Annual and Quarterly Reports onForms 10K and 10-Q.ITEM 6. SELECTED FINANCIAL DATA The following selected financial data insofar as it relatesto the years ended December 31, 2003, 2002, 2001, 2000 and 1999has been derived from our audited financial statements. 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, 2003included 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, ------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ----Statement of Operations Data: Total revenues $ 3,162 $ 114,250 $ 92,402 $107,745 $ 115,229 Net loss (11,536) (22,225) (25,722) (22,458) (8,594) Less: Preferred stock dividends 918 1,125 591 - - Imputed dividend on preferred stock 1,600 984 441 - - --------- --------- --------- --------- --------- Net loss applicable to common stock $ (14,054) $ (24,334) $ (26,754) $ (22,458) $ (8,594) ========= ========= ========= ========= =========Per share: Net loss (basic and diluted) $ (6.39) $ (16.76) $ (18.66) $ (15.89) $ (6.20) ========= ========= ========= ========= =========Weighted-average common shares outstanding 2,200 1,452 1,434 1,414 1,387 ========= ========= ========= ========= ========= Page 15 DECEMBER 31, --------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ----Balance Sheet Data: Total assets $ 49,526 $ 191,883 $ 198,275 $ 203,617 $ 214,102 Long-term debt $ 30,253 $ 115,447 $ 141,429 $ 145,610 $ 142,089 Redeemable preferred Source: CADIZ INC, 10-K, November 02, 2004Powered 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 $ - $ 10,942 $ 9,958 $ 3,950 $ - Preferred stock, common stock and additional paid-in capital $ 185,040 $ 156,166 $ 152,765 $ 143,063 $ 136,552 Accumulated deficit $(168,823) $(157,287) $(135,062) $(109,340) $ (86,882) Stockholders' equity $ 16,217 $ (1,121) $ 17,703 $ 33,723 $ 49,670ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In connection with the "safe harbor" provisions of thePrivate Securities Litigation Reform Act of 1995, the followingdiscussion contains trend analysis and other forward-lookingstatements. Forward-looking statements can be identified by theuse of words such as "intends", "anticipates", "believes","estimates", "projects", "forecasts", "expects", "plans" and"proposes". Although we believe that the expectations reflectedin these forward-looking statements are based on reasonableassumptions, there are a number of risks and uncertainties thatcould cause actual results to differ materially from theseforward-looking statements. These include, among others, ourability to maximize value from our Cadiz, California land andwater resources; the uncertainty of the outcome of Sun World'sbankruptcy proceedings; our outstanding guarantee of Sun World'sFirst Mortgage Notes; and our ability to obtain new financings asneeded to meet our ongoing working capital needs. See additionaldiscussion under the heading "Certain Trends and Uncertainties"below.OVERVIEW As discussed in further detail below, as of January30, 2003 the financial statements of our Sun World subsidiary areno longer being consolidated with ours. Presently, ouroperations (and, accordingly, our working capital requirements)relate primarily to our water development activities and, morespecifically, to the Cadiz Groundwater Storage and Dry-YearSupply Program. Our results of operations for periods subsequentto January 2003 have been, and in future fiscal periods will be,largely reflective of the operations of our water developmentactivities. CADIZ GROUNDWATER STORAGE AND DRY-YEAR SUPPLY PROGRAM. In1997, we commenced discussions with the Metropolitan WaterDistrict of Southern California (Metropolitan) in order todevelop principles and terms for a long-term agreement for ajoint venture water storage and supply program on and under ourCadiz, California property. In July 1998, Cadiz and Metropolitanapproved the Principles and Terms for Agreement for the CadizGroundwater Storage and Dry-Year Supply Program (the CadizProgram). At the same time, Cadiz and Metropolitan 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 responsibilitiesat their April 2001 board meeting. The Cadiz Program definitiveeconomic terms were to serve as the basis for a final agreementto be executed between Metropolitan and Cadiz, subject to thethen-ongoing environmental review process. Page 16 Under the Cadiz Program, during wet years or periods ofexcess supply, surplus water from the Colorado River Aqueductwould be stored in the groundwater basin underlying our property.During dry years or times of reduced allocations from theColorado River, the previously imported water, together withadditional existing groundwater, would be extracted anddelivered, via a conveyance pipeline, back to the aqueduct. On August 29, 2002, the U.S. Department of Interiorapproved the Final Environmental Impact Statement for the CadizProgram and issued its Record of Decision, the final step in theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. federal environmental review process for the Cadiz Program. TheRecord of Decision amends the California Desert Conservation AreaPlan for an exception to the utility corridor element and offeredto Metropolitan a right-of-way grant necessary for theconstruction and operation of the Cadiz Program. On September 17, 2002, the Metropolitan Subcommittee onRules and Ethics scheduled a series of meetings in October andNovember 2002 to consider (a) acceptance of the Record ofDecision and the terms and conditions of the right-of-way grant,(b) certification of the environmental documentation for theCadiz Program under state law, and (c) the final agreementbetween Cadiz and Metropolitan. On October 8, 2002, Metropolitan's Board consideredacceptance of the Record of Decision and the terms and conditionsof the right-of-way grant. The Board voted not to adoptMetropolitan staff's recommendation to approve the terms andconditions of the right-of-way grant issued by the Department ofthe Interior for the Cadiz Program by a vote of 47.11% in favorand 47.36% against the recommendation. Instead, the Board votedfor an alternative motion to reject the terms and conditions ofthe right-of-way grant and to not proceed with the Cadiz Programby a vote of 50.25% in favor and 44.22% against. Irrespective of Metropolitan's actions, SouthernCalifornia's need for water storage and supply programs has notabated. We believe there are several different scenarios tomaximize the value of this water resource, all of which are undercurrent evaluation. Until October 2002 we had expected that the Cadiz Programwould be implemented upon the previously negotiated terms, and wehad structured our financing arrangements with a view to suchimplementation. Following Metropolitan's vote in October 2002 tonot proceed with the Cadiz Program, these financing arrangementswere no longer workable on their then existing terms. In January 2003 our wholly-owned subsidiary, Sun WorldInternational, Inc. (which, together with its subsidiaries, werefer to as "Sun World") filed a voluntary petition for Chapter11 bankruptcy protection in order to access seasonal financing.Historically, we, as the parent company of Sun World, hadsupplemented Sun World's annual working capital requirements.However, at the time of Sun World's filing we did not have theability to do this. The only way Sun World could obtain the newfinancing needed to provide working capital for its 2003-2004growing seasons was to seek court approval, pursuant to Chapter11, to a new Debtor in Possession ("DIP") facility. Sun World's financial situation and bankruptcy filing, inturn, negated an agreement we had previously reached with ourprimary lender, ING Capital LLC ("ING") for a three yearextension of approximately $35 million of senior secured loanswith a maturity date of January 31, 2003. As we were unable tomake payment of this debt when due, in February 2003 ING declaredthese loans to be in default, although we remained innegotiations with ING for an overall restructuring of this debt. Page 17 Our financing activities during 2003 were directed primarilytowards completion of an overall restructuring of our capitalstructure which would preserve our ability to continue with ourwater resource development programs. This overall capitalrestructuring was successfully completed in December 2003, andfeatured the following components, in chronological order: * In June 2003 we completed a private equity offering of 800,000 shares of our common stock (after giving effect to our one for twenty-five reverse stock split effective December 15, 2003 (the "Reverse Split")). 672,000 shares were issued in consideration of $1.68 million in cash, 112,000 were issued in consideration for $280 thousand in services rendered to us, and 16,000 were issued asSource: CADIZ INC, 10-K, November 02, 2004Powered 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. consideration for fees related to the equity offering. The proceeds raised in this offering provided sufficient working capital for us to continue operations pending completion of the larger $8.6 million private placement in December 2003 described below. * In August 2003 our stockholders approved implementation of a reverse split of our outstanding common stock, with the exact ratio for the split to be determined by our Board of Directors at the time of the split. The reverse split was intended to increase the likelihood of our being able to meet the minimum trading price required for listing our stock on The Nasdaq SmallCap Market or other national securities exchange, as well as to provide us with additional authorized but unissued shares of common stock to be used for capital raising and other purposes. * In October 2003 we entered into an agreement with the holder of all of our outstanding Series D, Series E-1 and Series E-2 preferred stock whereby we issued 400,000 shares of our common stock (after giving effect to the Reverse Split) in exchange of all of our then outstanding Series D, Series E-1 and Series E-2 preferred stock. In connection with this conversion, we recorded a charge against paid-in capital as an inducement to convert. * In December 2003 we simultaneously completed: * An extension of up to three years of our $35 million debt facility with ING (see "Liquidity and Capital Resources - Current Financing Arrangements - Cadiz Obligations" below); * A one for twenty-five reverse split of our outstanding common stock; * An additional equity infusion of $8.6 million through the issuance of 3,440,000 shares of common stock; * The transfer of our properties to Cadiz Real Estate LLC, a Delaware limited liability company wholly owned by us and created at the behest of ING; and * The completion of our global settlement agreement with the holders of a majority of Sun World's First Mortgage Notes (the "Bondholders") which provides for the pledge of our equity in Sun World together with an unsecured claim due to us from Sun World of $13.5 million to a Page 18 trust controlled by the Bondholders (see "Liquidity and Capital Resources - Current Financing Arrangements - Sun World Obligations" below). As a consequence of all of these transactions, the numberof outstanding shares of our common stock (after giving effect toour December 2003 one for twenty-five reverse stock split) hasincreased from 1,858,659 shares as of December 31, 2002(including 400,000 common shares issuable upon the conversion ofoutstanding Series D and E preferred stock) to 8,200,340 sharesas of December 31, 2003 (including 1,728,955 common shares issuable uponthe conversion of outstanding Series F preferred stock). With the completion of these transactions, we have providedfor our short-term working capital needs and are able to refocusour efforts on obtaining and utilizing the capital necessary toproceed with our water resource development programs.RESULTS OF OPERATIONS On January 30, 2003, Sun World filed a voluntary petitionSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Chapter 11 bankruptcy protection. As of that date due to theCompany's loss of control over the operations of Sun World, thefinancial statements of Sun World are no longer consolidated withours, but instead, we are accounting for our investment in SunWorld on the cost basis of accounting. As a result of changingto the cost basis of accounting on January 31, 2003, we had a netinvestment in Sun World of approximately $195 thousand consistingof loans and amound due from Sun World of $13,500,000 less lossesin excess of investment in Sun World of $13,305,000. As a result, the Company wrote off its net investment in Sun World of $195 thousand at the Chapter 11 filing date because it does not anticipate being able to recover its investment. Our consolidated financial statements for the year endedDecember 31, 2003 include the results of operations for Sun Worldonly for the period January 1, 2003 through January 30, 2003.The results of operations of Sun World subsequent to January 30,2003 are not included in these consolidated financial statements.As a result of the foregoing, direct comparisons of ourconsolidated results of operations for year ended December 31,2003 with results for the year ended December 31, 2002 will not,in our view, prove meaningful. For this reason, we believe that material trends anddevelopments with respect to our results of operations fromperiod to period are more readily identifiable by comparing theunconsolidated results of Cadiz Inc., which do not include theJanuary 2003 operations of Sun World, rather than ourconsolidated results of operations, which include the January2003 operations of Sun World. Therefore, in the followingdiscussion of results of operations for 2003 as compared to 2002,we are using only the unconsolidated results of Cadiz Inc. Tables which disclose the results of Cadiz Inc. separatefrom its consolidated subsidiary Sun World for the years endedDecember 31, 2003 and 2002, and from which the numbers used inthe following discussion are derived, can be found in Note 10 tothe Consolidated Financial Statements. (A) YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002 We have not received significant revenues from our waterresource activity to date. As a result, we have historicallyincurred a net loss from operations. Cadiz had revenues of $0.3million for the year ended December 31, 2003 and $2.1 million forthe year ended December 31, Page 192002. Our net loss, excluding our loss from Sun World, totaled $9.2 million for the year ended December 31, 2003 compared to $12.7 million for the year ended December 31, 2002, with the decrease for the 2003 period resulting from decreases in general and administrative and interest expense offset by a reduction in revenue and no cost incurred for the removal of underperforming crops in 2003. Our primary expenses are our ongoing overhead costs (i.e.general and administrative expense) and our interest expense. REVENUES. Cadiz standalone revenue during the year totaled $0.3 million during the year ended December 31, 2003 compared to $2.1 million the preceding year. The decrease is primarily due to discontinuation of the management fee payable by Sun World as ofJanuary 30, 2003 due to Sun World's Chapter 11 filing. GENERAL AND ADMINISTRATIVE EXPENSES. General andadministrative expenses during the year ended December 31, 2003totaled $4.7 million compared to $7.5 million for the year endedDecember 31, 2002. The decrease in general and administrativeexpenses is primarily due to reductions in salaries and othercosts associated with a reduction in staffing, elimination offoreign water programs, and reduced facility and insurance costs,partly offset by increased professional fees related to theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. restructuring. WRITE OFF OF INVESTMENT IN SUBSIDIARY. On January 30, 2003, SunWorld and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. As of that date,due to the Company's loss of control over the operations of SunWorld, the financial statements are no longer consolidated with thoseof Cadiz, but instead Cadiz accounts for its investment in Sun Worldon the cost basis of accounting. As a result of changing to the cost basis of accounting and because the Company does not believe itwill be able to recover its investment, the Company wrote off itsinvestment in Sun World of $195,000. REMOVAL OF UNDERPERFORMING CROPS. During 2002, 200 acres ofunderperforming table grapes and citrus were removed at the CadizRanch resulting in a charge of $1.0 million in connection with theremoval of these crops. No such removals occurred during 2003. DEPRECIATION AND AMORTIZATION. Depreciation and amortizationfor Cadiz totaled $0.6 million for the year ended December 31, 2003compared to $1.0 million for the 2002 year. The reduction indepreciation and amortization is primarily due to the removal ofunderperforming crops in 2002 and certain assets becoming fullydepreciated during the past year. INTEREST EXPENSE, NET. Net interest expense totaled $3.6million during the year ended December 31, 2003, compared to $5.1million during the same period in 2002. The following tablesummarizes the components of net interest expense for the twoperiods (in thousands): YEAR ENDED DECEMBER 31, 2003 2002 ---- ---- Interest on outstanding debt $ 3,053 $ 3,101 Amortization of financing costs 641 2,712 Interest income (58) (705) --------- --------- $ 3,636 $ 5,108 ========= ========= Page 20 Financing costs, which include legal fees and warrant costs,are amortized over the life of the debt agreement, most of whichrelated to the ING obligation which became due near the beginningof 2003 resulting in lower costs during 2003. The lower interestincome was the result of no interest accruing on the intercompany loans to Sun World following the Chapter 11 petition.(B) YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001 Sun World's agricultural operations are impacted by thegeneral seasonal trends that are characteristic of theagricultural industry. Sun World has historically received themajority of its net income during the months of June to Octoberfollowing the harvest and sale of its table grape and stonefruitcrops. Due to this concentrated activity, Sun World hashistorically incurred losses with respect to its agriculturaloperations during the other months of the year. The table below sets forth, for the periods indicated, theresults of operations for Sun World's four main operatingdivisions (before elimination of any interdivisional charges) aswell as the categories of costs and expenses we incurred whichare not included within the divisional results (in thousands): YEAR ENDED DECEMBER 31, 2002 2001 ---- ---- Divisional income (loss): Farming $ 6,701 $ (3,243) Packing 9,761 8,320Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Marketing 4,551 3,303 Proprietary product development 4,457 2,891 --------- --------- 25,470 11,271 General and administrative 12,819 10,890 Unusual items included in G&A 1,710 - Special litigation - (7,929) Non-recurring compensation expense - 5,537 Removal of underperforming crops 4,514 736 Depreciation and amortization 7,480 8,151 Interest expense, net 21,172 19,551 Income tax (benefit) expense - 57 --------- --------- Net loss $ (22,225) $ (25,722) ========= ========= FARMING OPERATIONS. Income from farming operations totaled$6.7 million for the year ended December 31, 2002 compared to aloss of $3.2 million for the year ended December 31, 2001.Farming revenues were $87.4 million and farming expenses were$80.7 million for the year ended December 31, 2002 compared tofarming revenues of $71.7 million and farming expenses of $74.9million for 2001. Farming results were favorably impacted by thetiming of the table grape harvest in Coachella and Mexicoreturning to normal as opposed to the harvest starting two weekslate in 2001, which created an overlap with the early table grapeharvests in the San Joaquin valley. Year-to-date average F.O.B.prices for table grapes were 3.5% higher than the prior year.Additionally, Sun World experienced increased table grapeproduction due to increased yields and due to leasing someadditional organic table grape acreage for the 2002 season. SunWorld sold 4.4 million boxes of table grapes for the year endedDecember 31, Page 212002 compared to 3.5 million boxes during the same period in 2001. Results were also favorably affected by increased plum yields as plum units sold were 32% higher in 2002 than in 2001. Sun World also experienced a 58% increase in F.O.B. prices for peppers. Results were favorably impacted by the continued strong performance of Sun World's proprietary SUPERIOR SEEDLESS(R) and MIDNIGHT BEAUTY(R) table grapes and BLACK DIAMOND(R) plums as production increased and F.O.B. prices remained strong coupled with the removal of certain underperforming crops at the conclusion of the 2001 season. Sun World continues to achieve a price premium for its proprietary table grape and stonefruit products compared to competing commercially available varieties. PACKING OPERATIONS. Sun World's packing and handlingfacilities contributed $9.8 million in income during the yearended December 31, 2002 and $8.3 million during the year endedDecember 31, 2001. Packing and handling revenue for theseoperations of $23.3 million was offset by $13.5 million ofexpenses for the year ended December 31, 2002. Revenues totaled$21.4 million offset by expenses of $13.1 million for the yearended December 31, 2001. Sun World packed 3.0 million unitsduring the year ended December 31, 2002 compared to 2.9 millionunits for the year ended December 31, 2001. For the year endedDecember 31, 2002, Sun World handled 8.9 million units comparedto 8.2 million units in 2001. The increase in units packed andhandled was due primarily to increased production of table grapesand plums. Units packed and handled during the year endedDecember 31, 2002 consisted of Sun World-grown table grapes,peppers and seedless watermelons in the Coachella Valley; tablegrapes and citrus products packed for third party growers; andtable grapes, stonefruit, citrus, and peppers from the SanJoaquin Valley. MARKETING OPERATIONS. During the year ended December 31,2002, a total of 10.1 million units were sold consistingprimarily of Sun World-grown table grapes, peppers andSource: CADIZ INC, 10-K, November 02, 2004Powered 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. watermelons from the Coachella Valley; table grapes and citrusfrom domestic third party growers; and Sun World-grown tablegrapes, stonefruit, citrus, and peppers from the San JoaquinValley. These unit sales resulted in marketing revenue of $12.2million. Marketing expenses totaled $7.6 million for the yearended December 31, 2002 resulting in income from marketingoperations of $4.6 million. During the year ended December 31,2001, 10.1 million units were marketed resulting in revenues of$7.5 million offset by expenses of $4.2 million for income of$3.3 million. The increase in marketing profits was primarilydue to increased F.O.B. prices for table grapes, plums andpeppers. Additionally, revenues and expenses increased due to fruit purchased from third party suppliers and sold primarily toa customer's distribution center related to Sun World's role as a primary supplier of certain fruit categories in 2002. 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-termannual revenue stream based upon a royalty fee for each box ofproprietary fruit sold during the life of the tree or vine.During the year ended December 31, 2002, income from proprietaryproduct development was $4.5 million consisting of revenues of$6.9 million offset by expenses of $2.4 million. For the yearended December 31, 2001, income was $2.9 million consisting ofrevenues of $4.9 million offset by expenses of $2.0 million. Theincrease in proprietary product development net income wasprimarily due to a $0.5 million increase in intercompanyroyalties due to increased yields and higher F.O.B. prices and a$1.4 million increase in international royalties due primarily toimproved table grape yields for acreage under license coupledwith a delay in the South Africa harvest season, whicheffectively shifted a portion of South African revenues from thefourth Page 22quarter of 2001 to the first quarter of 2002. Revenuesinclude $1.3 million related to project development andmanagement fees payable in equity of KADCO for both 2002 and2001. GENERAL AND ADMINISTRATIVE EXPENSES. General andadministrative expenses for the year ended December 31, 2002totaled $12.8 million compared to $10.9 million for the 2001period before inclusion in 2002 of $1.1 million for the write-offof capitalized legal costs incurred by Sun World in litigationrelating to the unsuccessful defense of intellectual property rightsand $0.6 million in professional fees relating to unsuccessfulattempts by Sun World to restructure debt during the year. The increase was primarily due to higher employee related costs coupled with $0.8 million of professional fees related to the KADCO combination that was not completed and costs related to exploring water development opportunities in the Middle East. UNUSUAL ITEMS INCLUDED IN GENERAL AND ADMINISTRATIVEEXPENSES. Unusual items for the year ended December 31, 2002totaled $1.7 million compared to none in 2001. The unusual itemsconsisted of $1.1 million for the write-off of capitalized legalcosts incurred by Sun World relating to an adverse ruling inlitigation involving the unauthorized domestic production of oneof Sun World's proprietary grapevines and $0.6 million inprofessional fees relating to unsuccessful attempts by Sun Worldto restructure debt during the year. SPECIAL LITIGATION. Cadiz was 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, Cadiz executed a settlement agreementSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Waste Management related to these lawsuits. Pursuant to thesettlement agreement, Waste Management paid Cadiz $6 million incash and granted to Cadiz approximately 7,000 acres of realproperty in eastern San Bernardino County primarily adjacent tothe Cadiz Program property. The settlement resulted in netproceeds recognized of $7.9 million (consisting of $6 million incash and land valued at $1.9 million) for the year ended December31, 2001. NON-RECURRING COMPENSATION. In March 2001, Cadiz agreed toissue 564,163 deferred stock units to certain senior managers ofCadiz and 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. Werecorded a one-time charge of $5,537,000 and no cash was expendedin connection with the issuance of the deferred stock units. REMOVAL OF UNDERPERFORMING CROPS. During 2002, we removedapproximately 1,900 acres of underperforming crops consisting of200 acres from the Cadiz ranch and 1,700 acres from Sun World'sranches. The crops removed include approximately 100 acres ofjuice grapes and 100 acres of citrus at the Cadiz ranch and 500acres of wine grapes, 300 acres of raisin grapes, 400 acres ofstonefruit, 400 acres of citrus, and 100 acres of table grapesfrom Sun World's operations. The Company recorded a non- cashcharge of $4.5 million in connection with the removal of thesecrops. During 2001, management decided to remove approximately 40acres of citrus at the Cadiz ranch and Sun World removedapproximately 700 acres of wine grapes, citrus, and stonefruit.We recorded a charge of $0.7 million in connection with theremoval of these crops. DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation andamortization expense for the year ended December 31, 2002 totaled$7.5 million compared to $8.2 million during the same period in2001. The decrease in depreciation was primarily attributable tocertain assets being removed in 2001 and 2002 and certain assets Page 23becoming fully depreciated during the past year. INTEREST EXPENSE, NET. Net interest expense totaled $21.5million compared to $19.6 million for the years ended December31, 2002 and 2001. The following table summarizes the componentsof net interest expense for the two periods (in thousands): YEAR ENDED DECEMBER 31, 2002 2001 ---- ---- Interest on outstanding debt - Sun World $ 14,484 $ 14,574 Interest on outstanding debt - Cadiz 976 1,347 Amortization of financing costs 5,761 3,748 Interest income (49) (118) --------- --------- $ 21,172 $ 19,551 ========= ========= The decrease in interest on outstanding debt for the yearended December 31, 2002 is primarily due to the impact of lowerrates on the Company's variable rate debt. Increased amortization of financing costs during 2002 is due to the amortization ofwarrants issued for the extension and increase in the Cadizcredit facilities in the first quarter of 2002. Financing costs, which include legal fees and warrants, are amortized over the life of the debt agreement.LIQUIDITY AND CAPITAL RESOURCES(A) CURRENT FINANCING ARRANGEMENTSSource: CADIZ INC, 10-K, November 02, 2004Powered 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. CADIZ OBLIGATIONS. As we have not received significantrevenues from our water resource activity to date, we have beenrequired to obtain financing to bridge the gap between the timewater resource development expenses are incurred and the timethat revenue will commence. Historically, we have addressed theseneeds primarily through secured debt financing arrangements withour lenders, private equity placements and the exercise ofoutstanding stock options. As of December 31, 2002, we were obligated for approximately$10,095,068 under a senior term loan facility and $25 millionunder a revolving credit facility with our primary securedlender, ING Capital LLC. Each facility had a maturity date ofJanuary 31, 2003. Sun World's bankruptcy filing negated anagreement we had previously reached with ING for a three yearextension of these loans, and in February 2003 ING declared theseloans to be in default. During 2003 we remained in continuing discussions with INGconcerning an overall restructuring of this debt and in December2003, as part of an overall restructuring of our capitalstructure, we entered into agreements with ING which providedfor: * Establishing the outstanding principal amount owed under the senior term loan facility at $10 million and under the revolving credit facility at $25 million, for an aggregate outstanding principal balance owed to ING of $35 million; Page 24 * The immediate payment to ING of approximately $2.4 million, representing payment of approximately $2 million in accrued and unpaid interest on the credit facilities through September 30, 2003 and payment of approximately $400,000 in expenses incurred by ING; * An extension of the maturity date of the credit facilities until March 31, 2005, with three additional automatic 6 month extensions conditioned on our maintaining, as of the commencement date of each extension, cash in an amount equal to at least 4% of the outstanding principal balance of the credit facilities in a cash collateral account held by ING; * Interest commencing as of October 1, 2003 at the rate of either (i) 8%, payable in cash, or (ii) 4% payable in cash plus 8% payable in kind. Interest is payable every six months commencing March 31, 2004. We have the right to choose the form of payment with respect to each date upon which an interest payment is due. At the closing of our restructuring, we deposited into ING's cash collateral account the sum of $2,142,280, representing interest accruing at the rate of 4% per annum from October 1, 2003 until March 31, 2005; * The issuance to ING of 100,000 shares of Series F preferred stock, convertible as of the date of issuance into 1,728,955 shares of our common stock. As the holder of this preferred stock, in addition to conversion rights ING has: * The right to appoint two members of our Board of Directors * The right to approve the authorization or issuance of any other class or shares of our preferred stock; * Anti-dilution protection; * Pre-emptive rights; * Registration rights; and * Dividend, liquidation and voting rights shared on anSource: CADIZ INC, 10-K, November 02, 2004Powered 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-converted basis with common stock. * The transfer of all of our assets (with the exception of any Sun World related assets) to Cadiz Real Estate LLC, a Delaware limited liability company ("Cadiz Real Estate"), a newly created Delaware limited liability company in which we hold 100% of the economic interests. Cadiz Real Estate is a co-obligor with us on our credit facilities with ING, and the properties now held of record by Cadiz Real Estate secure our obligations under these facilities. We have entered into a management agreement with Cadiz Real Estate pursuant to which we will manage the assets now held by Cadiz Real Estate, subject to the requirements of the Operating Agreement of Cadiz Real Estate. The Operating Agreement of Cadiz Real Estate provides for a Board of Managers consisting of two managers appointed by us and one independent manager named by ING. As long as our obligations to ING are outstanding, Cadiz Real Estate may not institute bankruptcy proceedings without the unanimous consent of this Board of Managers (including the independent manager). The debt covenants associated with these credit facilitieswere negotiated by the parties with a view towards our operatingand financial condition as it existed at the time of therestructuring. Given current circumstances, we do not considerit likely that we will be in material breach of such covenants. Page 25 As we continue to actively pursue our business strategy,additional financing specifically in connection with our waterprograms will be required. See "Outlook", below. As the partiesanticipated this need at the time of our credit restructuring,the covenants in the credit facility which would otherwiseprohibit our incurrence of additional debt (or our use of ourassets as security for such debt) contain an exception for debtand liens incurred in order to finance the acquisition,construction or improvement of any assets (up to a maximum of$135 million at any one time outstanding). The covenants in thecredit facilities do not prohibit our use of equity financing,but do provide that 35% of the proceeds of such issuance beapplied as a prepayment against such facilities (which prepaymentmay take the form of a deposit in ING's cash collateral account).We do not expect these covenants to materially limit our abilityto undertake debt or equity financing in order to finance ourwater development activities. At December 31, 2003, we have no outstanding creditfacilities or preferred stock other than that held by ING asdescribed above.SUN WORLD OBLIGATIONS--------------------- Sun World has outstanding $115 million of First MortgageNotes. The First Mortgage Notes were originally to mature onApril 15, 2004. The First Mortgage Notes are currently in defaultas a consequence of the Sun World bankruptcy filing. Sun World'sproposed plan of reorganization currently provides for settlementof claims held by the holders of these notes through the issuanceof equity interests in Sun World to such holders. The Sun World notes are also secured by the guarantee ofCadiz. As we are not a party to the Sun World bankruptcy filing,the effectiveness of a plan of reorganization which dischargesSun World's obligation to holders of these notes will not, in andof itself, release us of any obligations which we may still haveunder this guarantee. The Plan, as currently proposed, includes arelease in our favor with respect to any of our remainingobligations under this guarantee; however, we do not know whetherthis provision of the Plan will be approved by the BankruptcyCourt. We have limited any potential obligation we may haveotherwise had under the guarantee by entering into releaseSource: CADIZ INC, 10-K, November 02, 2004Powered 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 with the majority of holders of the Sun World notes.For example, in December 2003 we entered into a global settlementagreement with Sun World and with the holders of a majority ofSun World's First Mortgage Notes (the "Bondholders") (see Item 1,"Business - General Development of Business"). Pursuant to thisglobal settlement agreement, the Bondholders waived their rightsto seek recovery against us on account of our guarantee of SunWorld's obligations under the First Mortgage Notes. This rightwill similarly be waived by any other note holder which elects toopt into this settlement. The identity and ownership interests ofSun World's bondholders is not a matter of public record,however, based on the results of investigations performed onbehalf of Sun World, we believe that we have obtained waiversand/or releases to date from Bondholders which hold, togetherwith their affiliates, approximately 88% in interest ofoutstanding Sun World notes. All of the remaining Sun Worldnotes (other than a nominal interest of less than 1%) are held bypersons who are also shareholders of ours. No non-releasing bondholder has sought to enforce ourguarantee of Sun World's obligations against us, nor has any suchbondholder given any indication to us that it plans to do so. Aspart of our December 2003 global settlement agreement, theBondholders gave written direction to the indenture trusteeirrevocably instructing the trustee to take no action against uson behalf of bondholders or on account of the guarantee.Further, we believe that if a bondholder's claim against SunWorld is ultimately satisfied in whole or in part through a Sun Page 26World plan of reorganization, then such bondholder will not beentitled to enforce the guarantee against us as to the amount ofthe claim so satisfied. In view of all of these factors, we do not anticipate thatsignificant claims will be made against us under the guaranteeand we are not setting aside existing working capital or seekingto raise additional working capital in order to pay claims underthe guarantee. We have no other obligations or working capital needs withrespect to Sun World. As part of our December 2003 globalsettlement, we have settled all of our claims and obligationswith Sun World. Although we continue to be the record owner ofSun World's stock, Sun World will not be receiving workingcapital contributions from us while it is in bankruptcyproceedings. Sun World's currently proposed plan ofreorganization provides for our ownership interests in Sun Worldto be canceled. Whether or not this plan is approved, we do notexpect to provide working capital support for a reorganized SunWorld. CASH USED FOR OPERATING ACTIVITIES. Cash used foroperating activities totaled $6.6 million for the year endedDecember 31, 2003, as compared to cash used for operatingactivities of $10.1 million for the year ended December 31, 2002.The above amounts are not comparable because of the deconsolidationof Sun World in January 2003. Cash used by Cadiz for operating activities for the yearended December 31, 2003 totaled $4.9 million compared to $7.9 millionfor the previous year. The decrease in cash used for operating activities was primarily due to a reduced loss in 2003. Cadiz lossin 2003, excluding its loss from Sun World, was $9.1 million as compared to $12.7 million in 2002. CASH USED FOR INVESTING ACTIVITIES. Cash used for investing activities totaled $3.5 million for the year ended December 31, 2003, as compared to $2.1 million for the same period in 2002. $1.0 million of the cash used in 2003 was the result of the deconsolidation of Sun World in 2003. Cash used by Cadiz for investing activities for the yearended December 31, 2003 totaled $2.0 million, primarily for cashSource: CADIZ INC, 10-K, November 02, 2004Powered 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. placed in a restricted bank account to pay for interest on the$35 million term loan through March 2005, compared to $1.7 millionfor the previous year. The 2002 expenditures were primarily due tocapital expenditures for water programs and a $1.0 million loan toan officer. CASH PROVIDED BY FINANCING ACTIVITIES. Cash provided byfinancing activities totaled $10.2 million for the year endedDecember 31, 2003 consisting primarily of $10.3 million from theissuance of capital stock by Cadiz. For the same periodin 2002, cash provided by financing activities totaled $14.0million primarily from short-term borrowings of $10.0 million by Cadiz and $4.4 million by Sun World.(B) OUTLOOK SHORT TERM OUTLOOK. The proceeds of our 2003 privateplacements have provided us with sufficient cash to meet ourexpected working capital needs through approximately May 2005.$2.0 million of the proceeds of our December 2003 privateplacement were used to bring current our outstanding interestpayments owed to ING under our ING credit facilities. $2.1million of the proceeds of our December 2003 private placementwere placed in a cash collateral account with ING in order toextend the maturity date of the credit facility through March 31,2005. These funds can be applied, if necessary, to the payment ofaccrued interest Page 27due under our credit facilities with ING. The remainder of the proceeds will be used to meet our ongoing working capital needs. LONG TERM OUTLOOK. In the longer term, our working capitalneeds will be determined based upon the specific measures wepursue in the development of our water resources. Whichevermeasure or measures are chosen, we expect that we will need toraise additional cash from time to time until we are able togenerate cash through our development activities. We willevaluate the amount of cash needed, and the manner in which suchcash will be raised, on an ongoing basis. We may meet any suchfuture cash requirements through a variety of means to bedetermined at the appropriate time. Such means may include equityor debt placements, or the sale or other disposition of assets.Equity placements would be undertaken only to the extentnecessary so as to minimize the dilutive effect of any suchplacements upon our existing 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. We wish to caution readers that these factors, amongothers, could cause our actual results to differ materially fromthose expressed 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 to 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.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. OUR REVENUES ARE DEPENDENT UPON THE SUCCESS OF OUR WATERDEVELOPMENT PROJECTS. We may never generate revenues or becomeprofitable unless we are able to successfully implement our waterdevelopment programs. At present, we do not know the terms, ifany, upon which we may be able to proceed with the Cadiz Program,or of any alternative means which we may be able to use in orderto implement our water development programs. Regardless of theform of our water development programs, the circumstances underwhich transfers or storage of water can be made and theprofitability of any transfers or storage are subject tosignificant uncertainties, including hydrologic risks of variablewater supplies, risks presented by allocations of water underexisting and prospective priorities, and risks of adverse changesto or interpretations of U.S. federal, state and local laws,regulations and policies. Additional risks attendant to suchprograms include our ability to obtain all necessary regulatoryapprovals and permits, possible litigation by environmental orother groups, unforeseen technical difficulties, and generalmarket conditions for water supplies. WE ARE UNCERTAIN OF THE OUTCOME OF SUN WORLD'S BANKRUPTCYPROCEEDINGS. Sun World's plan of reorganization, as filed withthe U.S. Bankruptcy Court, has not been approved. We do not knowwhen or if this plan will ever be approved. In addition, we donot know whether changes will need to be made to the plan inorder to obtain approval of the plan and, if so, what Page 28such changes would be. Notwithstanding our separate and binding globalsettlement agreements with Sun World and with the holders of amajority in interest of Sun World's First Mortgage Notes, we willnot know the exact nature of the post-bankruptcy ownershipstructure of Sun World or the final disposition of our claims andthe claims of Sun World's creditors in the bankruptcy proceedingsuntil such proceedings are formally concluded. A PENDING APPEAL OF THE BANKRUPTCY COURT'S APPROVAL OF OURSETTLEMENT WITH SUN WORLD MAY BE SUCCESSFUL. A single unsecuredcreditor of Sun World has appealed the order of the BankruptcyCourt which authorized Sun World to enter into a globalsettlement agreement with us. We may be exposed to significantmonetary damages (and, as a result, potential default under ouragreements with our senior secured lender) if (i) this appeal issuccessful in reversing the Bankruptcy Court's order, (ii) oursettlement with Sun World is thereafter disapproved andabandoned, (iii) litigation is commenced on behalf of Sun World'sestate against us, and (iv) a judgment is obtained against us andenforced. OUR GUARANTEE OF SUN WORLD'S FIRST MORTGAGE NOTES REMAINSOUTSTANDING. Sun World's First Mortgage Notes are secured by ourguarantee. If, notwithstanding our efforts to limit potentialobligations under this guarantee, a claim is successfullyasserted against us under this guarantee, we may not have theability to pay such a claim. Our inability to pay a claim underthe guarantee may materially and adversely affect our ability toconduct our business and thereby cause a default under ouragreements with our senior secured lender. OUR FAILURE TO MAKE TIMELY PAYMENTS OF PRINCIPAL ANDINTEREST ON OUR INDEBTEDNESS MAY RESULT IN A FORECLOSURE ON OURASSETS. As of December 31, 2003, we had indebtedness outstandingto our senior secured lender of approximately $35 million. Ourassets have been put up as collateral to secure the payment ofthis debt. If we cannot generate sufficient cash flow to maketimely payments of principal and interest on this indebtedness,or if we otherwise fail to comply with the terms of agreementsgoverning our indebtedness, we may default on our obligations.If we default on our obligations, our lenders may sell off theassets that we have put up as collateral. This, in turn, mayresult in a cessation or sale of our operations. OUR STOCK IS NOT TRADED ON A NATIONAL SECURITIESEXCHANGE. Effective March 27, 2003, our common stock wasSource: CADIZ INC, 10-K, November 02, 2004Powered 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. delisted from trading on the Nasdaq National Market. While weintend to reapply for a Nasdaq listing as soon as we are eligibleto do so, certain requirements for such a listing, such asminimum trading price, are not within our control, and thereforewe cannot be certain when or if we will be able to meet theinitial listing requirements of Nasdaq or another nationalsecurities exchange. FURTHER EQUITY FINANCINGS WILL RESULT IN THE DILUTIONOF OWNERSHIP INTERESTS OF CURRENT STOCKHOLDERS. We may requireadditional capital to finance our operations until such time asour water development operations produce revenues. We cannotassure you that our current lenders, or any other lenders, willgive us additional credit should we seek it. Consequently, wewill likely seek to raise additional working capital in the nearterm through further equity financings, which will result indilution to the equity interests of current common stockholders. THE REGISTRATION FOR RESALE OF COMMON STOCK PURSUANT TOEXISTING REGISTRATION RIGHTS AGREEMENTS WILL INCREASE THE NUMBEROF OUTSTANDING SHARES OF OUR COMMON STOCK ELIGIBLE FOR RESALE.The sale, or availability for sale, of these shares could causedecreases in the market price of our common stock, particularlyin the event that a large number of shares were sold in thepublic market over a short period of time. Similarly, theperception that Page 29additional shares of our common stock could be sold in the public market in the future, could cause a reduction in the trading price of our stock. WE ARE RESTRICTED BY CONTRACT FROM PAYING DIVIDENDS ANDWE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE. Anyreturn on investment on our common stock will depend primarilyupon the appreciation in the price of our common stock. To date,we have never paid a cash dividend on our common stock. The loandocuments governing our credit facilities with ING prohibit thepayment of dividends while such facilities are outstanding. Aswe have a history of operating losses, we have been unable todate to pay dividends. Even if we post a profit in future years,we currently intend to retain all future earnings for theoperation of our business. As a result, we do not anticipatethat we will declare any dividends in the foreseeable future.(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 that affect amounts reported in the accompanyingconsolidated financial statements and related footnotes. Inpreparing these financial statements, management has made itsbest estimates and judgments of certain amounts included in thefinancial statements based on all relevant information availableat the time and giving due to consideration to materiality. We donot believe there is a great likelihood that materially differentamounts would be reported related to the accounting policiesdescribed below. However, application of these policies involvesthe exercise of judgment and use of assumptions as to futureuncertainties and, as a result, actual results could differ fromthese estimates. Management has concluded that the followingcritical accounting policies described below affect the mostsignificant judgments and estimates used in the preparation ofthe consolidated financial statements. (1) PRINCIPLES ON CONSOLIDATION. The Consolidated Financial Statements have been prepared by Cadiz Inc., sometimes referred to as "Cadiz" or "the Company". On January 30, 2003, Sun World filed voluntary petitions under Chapter 11 of the Bankruptcy Code. Since the filing date, Sun World has operated its business and managed its affairs as debtor and debtor in possession. As of that date due to the Company's Source: CADIZ INC, 10-K, November 02, 2004Powered 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. loss of control over the operations of Sun World, the financial statements of Sun World are no longer consolidated with those of Cadiz, but instead, Cadiz is accounting for its investment in Sun World on the cost basis of accounting. The foregoing Consolidated Financial Statements include the accounts of the Company and, until January 30, 2003, those of its then wholly-owned subsidiary, Sun World International, Inc. and its subsidiaries collectively referred to as "Sun World", and contain all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation. Certain reclassifications have been made to the prior period to conform to the current presentation. (2) INVENTORIES AND RELATED ALLOWANCE FOR OBSOLETE ANDEXCESS INVENTORY. 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 Page 30allowances are made based on management's review for all excess and obsolete inventory compared to estimated future usage and sales. (3) INTANGIBLE AND OTHER LONG-LIVED ASSETS. Property,plant and equipment, intangible and certain other long-livedassets are amortized over their useful lives. Useful lives arebased 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 assetsare expected to generate future revenues. As a result of theactions taken by Metropolitan in the fourth quarter of 2002 asdescribed in Note 1, the Company, with the assistance of anindependent valuation firm, evaluated the carrying value of itswater program and determined that the asset was not impaired andthat the costs will be recovered through sale or operation of theproject. (4) GOODWILL. As a result of a merger in May 1988 betweentwo companies, which eventually became known as Cadiz Inc.,goodwill in the amount of $7,006,000 was recorded. This amountwas being amortized on a straight-line basis over thirty years.Accumulated amortization was $3,193,000 at December 31, 2001. InJune 2001, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standards No. 142, ("SFAS No.142") "Goodwill and Other Intangible Assets". Under SFAS No. 142goodwill and intangible assets deemed to have indefinite livesare no longer amortized but will be subject to annual impairmenttests in accordance with the Statement. Upon adoption of SFASNo. 142, effective at the beginning of fiscal 2002, the Companyperformed a transitional fair value based impairment test anddetermined that its goodwill was not impaired. In addition,cessation of amortization of goodwill upon adoption of SFAS No.142 did not have a material impact upon the Company's financialposition or results of operations. Goodwill is tested forimpairment annually in the fourth quarter, or earlier if eventsoccur which require an impairment analysis be performed. As aresult of the actions taken by Metropolitan in the fourth quarterof 2002 as described in Note 1 to the financial statements, theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Company, with the assistance of an independent appraisal firm,performed an impairment test of its goodwill and determined thatits goodwill was not impaired. In addition, in the first quarterof 2003, the Company, with the assistance of an independentappraisal firm, performed its annual impairment test of goodwilland determined its goodwill was not impaired. (5) DEFERRED TAX ASSETS AND VALUATION ALLOWANCES. To date,we have had a history of net operating losses as we have notgenerated significant revenue from our water development programsand Sun World had 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 that are designed to generate future taxable income,although there can be no guarantee that this will occur. Astaxable income is generated, some portion or all of the valuationallowance will be reversed and an increase in net income wouldconsequently be reported in future years.(E) NEW ACCOUNTING PRONOUNCEMENTS In April 2002, the Financial Accounting Standards Board(FASB) issued Statement of Page 31 Financial Accounting Standard (SFAS) No. 145, which rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers, and FASB Statement No. 64, Extinguishments of Debt Made to Satisfy SinkingFund Requirements as well as amends FASB No. 13, to make varioustechnical various corrections. The Statement is effective forfinancial statements issued after May 15, 2002. The adoption ofthis standard did not have a material impact on the Company'sfinancial position or results of operations. In June 2002, the FASB issued Statement of FinancialAccounting Standards No. 146, Accounting for Costs Associatedwith Exit or Disposal Activities ("SFAS 146"), which addressesfinancial accounting and reporting for costs associated with exitor disposal activities and supersedes Emerging Issues Task Force("EITF") Issue 94-3, Liability Recognition for Certain EmployeeTermination Benefits and Other Costs to Exit an Activity(including Certain Costs Incurred in a Restructuring). SFAS 146requires that a liability for a cost associated with an exit ordisposal activity be recognized when the liability is incurred.Under EITF Issue 94-3, a liability for an exit cost as defined inEITF Issue 94-3 was recognized at the date of an entity scommitment to an exit plan. SFAS 146 also establishes that theliability should initially be measured and recorded at fairvalue. The Company adopted the provisions of SFAS 146 effectiveJanuary 1, 2003 and such adoption did not have a material impacton the consolidated financial statements. In November 2002, the FASB issued Interpretation No. 45,Guarantor s Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees and Indebtedness ofOthers ("FIN 45"). FIN 45 elaborates on the disclosures to bemade by the guarantor in its interim and annual financialstatements about its obligations under certain guarantees that ithas issued. It also requires that a guarantor recognize, at theinception of a guarantee, a liability for the fair value of theobligation undertaken in issuing the guarantee. The Companyadopted the disclosure provisions of FIN 45 during the fourthquarter of 2002 and the recognition provisions of FIN 45effective January 1, 2003. Such adoption did not have a materialimpact on the consolidated financial statements. In December 2002, the FASB issued SFAS No. 148, Accountingfor Stock-Based Compensation-Transition and Disclosure-anamendment of SFAS No. 123. This Statement amends FASB StatementNo. 123, Accounting for Stock-Based Compensation, to provideSource: CADIZ INC, 10-K, November 02, 2004Powered 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. alternative methods of transition for a voluntary change to thefair value based method of accounting for stock-based employeecompensation. In addition, this Statement amends the disclosurerequirements of Statement 123 to require prominent disclosures inboth annual and interim financial statements about the method ofaccounting for stock-based employee compensation and the effectof the method used on reported results. The amendments toStatement 123 in paragraphs 2(a)-2(e) of this Statement shall beeffective for financial statements for fiscal years ending afterDecember 15, 2002. Earlier application of the transitionprovisions in paragraphs 2(a)-2(d) is permitted for entities witha fiscal year ending prior to December 15, 2002, provided thatfinancial statements for the 2002 fiscal year have not beenissued as of the date this Statement is issued. Early applicationof the disclosure provisions in paragraph 2(e) is encouraged. Theamendment to Statement 123 in paragraph 2(f) of this Statementand the amendment to Opinion 28 in paragraph 3 shall be effectivefor financial reports containing condensed financial statementsfor interim periods beginning after December 15, 2002. Theadoption of SFAS No. 148 did not have a material impact on itsfinancial position or results of its operations. In January 2003, FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities ("FIN 46"). Ingeneral, a variable interest entity is a corporation,partnership, trust or any Page 32other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation requirements of FIN 46 apply immediately tovariable interest entities created after January 31, 2003. TheCompany adopted the provisions of FIN 46 effective February 1,2003 and such adoption did not have an impact on its consolidatedfinancial statements since it currently has no variable interestentities. In December 2003, the FASB issued FIN 46R with respectto variable interest entities created before January 31, 2003,which among other things, revised the implementation date to thefirst year or interim period ending after March 15, 2004, withthe exception of Special Purpose Entities ( SPE). Theconsolidation requirements apply to all SPE s in the first yearor interim period ending after December 15, 2003. The Company'sadoption of the provisions of FIN 46R is not expected to have amaterial impact on its consolidated financial statements. In April 2003, FASB issued Statement of Financial AccountingStandards No. 149, Amendment of Statement 133 on DerivativeInstruments and Hedging Activities ("SFAS 149"). SFAS 149 amendsand clarifies accounting for derivative instruments, includingcertain derivative instruments embedded in other contracts, andfor hedging activities under SFAS 133. SFAS 149 is effective forcontracts and hedging relationships entered into or modifiedafter June 30, 2003. The Company adopted the provisions of SFAS149 effective June 30, 2003 and such adoption did not have animpact on its consolidated financial statements since the Companyhas not entered into any derivative or hedging transactions. In May 2003, FASB issued Statement of Financial AccountingStandards No. 150, Accounting for Certain Financial Instrumentswith Characteristics of Both Liabilities and Equity ("SFAS 150").SFAS 150 establishes standards for how an issuer classifies andmeasures certain financial instruments with characteristics ofboth debt and equity and requires an issuer to classify thefollowing instruments as liabilities in its balance sheet: * a financial instrument issued in the form of shares that is mandatorily redeemable and embodies an unconditionalSource: CADIZ INC, 10-K, November 02, 2004Powered 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. obligation that requires the issuer to redeem it by transferring its assets at a specified or determinable date or upon an event that is certain to occur; * a financial instrument, other than an outstanding share, that embodies an obligation to repurchase the issuer s equity shares, or is indexed to such an obligation, and requires the issuer to settle the obligation by transferring assets; and * a financial instrument that embodies an unconditional obligation that the issuer must settle by issuing a variable number of its equity shares if the monetary value of the obligation is based solely or predominantly on (1) a fixed monetary amount, (2) variations in something other than the fair value of the issuer s equity shares, or (3) variations inversely related to changes in the fair value of the issuer s equity shares. In November 2003, FASB issued FASB Staff Position No. 150-3which deferred the effective dates for applying certainprovisions of SFAS 150 related to mandatorily redeemablefinancial instruments of certain non-public entities and certainmandatorily redeemable non-controlling interests for public andnon-public companies. For public entities, SFAS 150 is effectivefor mandatorily redeemable financial instruments entered into ormodified after May 31, 2003 and is effective for all otherfinancial instruments as of the first interim period beginning Page 33after June 15, 2003. For mandatorily redeemable non-controllinginterests that would not have to be classified as liabilities bya subsidiary under the exception in paragraph 9 of SFAS 150, butwould be classified as liabilities by the parent, theclassification and measurement provisions of SFAS 150 aredeferred indefinitely. The measurement provisions of SFAS 150 arealso deferred indefinitely for other mandatorily redeemable non-controlling interests that were issued before November 4, 2003.For those instruments, the measurement guidance for redeemableshares and non-controlling interests in other literature shallapply during the deferral period. The Company adopted theprovisions of SFAS 150 effective June 30, 2003, and such adoptiondid not have an impact on our consolidated financial statements. In March 2004, the consensus of Emerging Issues Task Force (EITF)Issue No. 03-06, Participating Securities and the Two-Class Methodunder FASB Statement 128, was published. EITF Issue No. 03-06 addresses the computations of earnings per share by companies that have issued securities other than common stock that contractuallyentitle the holder to participate in dividends and earnings of thecompany. Further guidance on the application and allocations of thetwo-class method of calculating earnings per share is also included.The provisions of EITF Issue No. 03-06 will be effective for reportingperiods beginning after March 31, 2004. The adoption of this guidanceis not expected to have significant impact on the Company's financialresults of operations and financial position.(F) OFF BALANCE SHEET ARRANGEMENTS Cadiz does not have any off balance sheet arrangements atthis time other than the guarantee of Sun World's first mortgagenotes (as discussed in "(g)" below).(G) CERTAIN KNOWN CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIODCONTRACTUAL LESS THAN OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS 4-5 YEARS AFTER 5 YEARS----------- ----- ------ --------- --------- -------------Cadiz Inc.----------Long term debt obligations (A) $ 35,000 $ - $ 35,000 $ - $ -Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Operating leases 262 112 150 - - --------- ------ --------- ------- --------- $ 35,262 $ 112 $ 35,150 $ - $ - ========= ====== ========= ======= =========(A) Cadiz long-term debt included in the table above reflectsthe debt restructuring which occurred in December 2003 asdescribed above in Item 7, Managements Discussion and Analysis ofFinancial Condition and Results of Operation; Liquidity andCapital Resources; Cadiz 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,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 Sun World and its subsidiaries other than growingcrops, crop inventories and accounts receivable and proceedsthereof, which secure the Revolving Credit Facility. With theentering into the DIP Facility as described in Note 9, the noteholders now have a second position on substantially all of theCompany's assets for so long as the DIP Facility is outstanding.The First Mortgage Notes Page 34mature April 15, 2004, but are redeemable at the option of Sun World, in whole or in part, at any time prior to the maturity date. The First Mortgage Notes include covenants that do not allow for the payment of dividends by the Company other 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 Cadiz. Cadiz alsopledged all of the stock of Sun World as collateral for itsguarantee. The guarantees by the Sun World Subsidiary Guarantorsare full, unconditional, and joint and several. Sun World andthe Sun World Subsidiary Guarantors comprise all of the directand indirect subsidiaries of the Company other thaninconsequential subsidiaries.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates on long-term debt obligations that impact the fair value of theseobligations. Our policy is to manage interest ratesfair values by year of scheduled maturities to evaluate theexpected cash flows and sensitivity to interest rate changes (inthousands of dollars). Circumstances could arise which may causeinterest rates and the timing and amount of actual cash flows todiffer materially from the schedule below: LONG-TERM DEBT -------------------------------------------------------EXPECTED FIXED RATE AVERAGE VARIABLE RATE AVERAGEMATURITY MATURITIES INTEREST RATE MATURITIES INTEREST RATE-------- ---------- ------------- ---------- -------------Cadiz Inc. 2005 $ 35,000 12.0% $ - $ - ========= ===== ========= ==== Cadiz long-term debt included in the table above reflectsthe debt restructuring which occurred in December 2003 asdescribed above in Item 7, Managements Discussion and Analysis ofFinancial Condition and Results of Operation; Liquidity andCapital Resources; Cadiz Obligations. Cadiz has guaranteed the First Mortgage Notes issued by Sun World as described in Item 7(g) above.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 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 DISLCOSURE Not applicable. Page 35ITEM 9A. CONTROLS AND PROCEDURES We carried out an evaluation, under the supervision and withthe participation of our management, including our Chairman,Chief Executive Officer and Chief Financial Officer (PrincipalExecutive and Financial Officer), of the effectiveness of thedesign and operation of our disclosure controls and procedures asof December 31, 2003. As of the date of that evaluation, our Chairman, Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures are effective in timely alerting him to material information relating to Cadiz (including our consolidated subsidiaries) required to be included in our periodic Securities and Exchange Commission filings. There was no significant change in our internal control over financial reporting that occurredduring the most recent fiscal quarter that materially affected,or is reasonably likely to affect, our internal control overfinancial reporting, and no corrective actions with regard tosignificant deficiencies or weaknesses. PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Name Age Position with Cadiz ---- --- ------------------- Keith Brackpool 47 Chairman of the Board, President, Chief Executive and Financial Officer Murray H. Hutchison 66 Director Timothy J. Shaheen 44 Director and President and Chief Executive Officer of Sun World International, Inc. Geoffrey Arens 40 Director Gregory Ritchie 40 Director Richard E. Stoddard 53 CEO and Chairman of the Board of Managers of Cadiz Real Estate LLC Keith Brackpool is a founder of Cadiz, has served as amember of Cadiz' Board of Directors since September 1986, and hasserved as President and Chief Executive Officer of Cadiz sinceDecember 1991. Mr. Brackpool assumed the role of Chairman of theBoard of Cadiz on May 14, 2001, and the role of Chief FinancialOfficer on May 19, 2003. Mr. Brackpool has also been a principalof 1334 Partners L.P., a partnership that owns commercial realestate from 1989 to present. Murray H. Hutchison was appointed a director of Cadiz inJune 1997. He is also a member of the Board of Managers (an LLC'sfunctional equivalent of a Board of Directors) of Cadiz'subsidiary, Cadiz Real Estate LLC. In his capacity as a managerSource: CADIZ INC, 10-K, November 02, 2004Powered 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 LLC he performs essentially the same duties on behalf ofthe LLC as he would as an outside director for a corporation.Since his retirement in 1996 from International TechnologyCorporation, a publicly traded diversified environmentalmanagement company, Mr. Hutchison has been self-employed Page 36with his business activities involving primarily the management of an investment portfolio. From 1976 to 1994, Mr. Hutchison served asChief Executive Officer and Chairman of International Technology.Mr. Hutchison currently serves as a director of Jack in the Box,Inc., a publicly traded fast food restaurant chain. Additionally,Mr. Hutchison serves as Chairman of the Huntington HotelCorporation, a privately owned hotel and office building, and asa director of several other non-publicly traded U.S. companies. Timothy J. Shaheen was appointed a director of Cadiz inMarch 1999. Mr. Shaheen has also served as the President, ChiefExecutive Officer and a director of Cadiz' wholly-ownedsubsidiary, Sun World International, Inc., since September 1996.Mr. Shaheen has 18 years of experience in the produce industryand is active on several industry advisory committees. Prior tojoining Sun World, he served as a senior executive with AlbertFisher North America, a publicly traded domestic andinternational produce company from 1989 to 1996. While withAlbert Fisher, Mr. Shaheen also served as director of itsCanadian produce operations and as a director of Fresh WesternMarketing, one of the largest growers and shippers of freshvegetables in the Salinas Valley of California. Prior to hisemployment with Albert Fisher, Mr. Shaheen has seven years ofexperience with the accounting firm of Ernst & Young LLP. Mr.Shaheen is a certified public accountant. As described morefully in "Item 1 Description of Business - General Development ofBusiness" above, Sun World and its domestic subsidiaries filedfor bankruptcy on January 30, 2003. Geoffrey Arens was appointed a director of Cadiz on January30, 2004 as a nominee of ING pursuant to the rights of ING asholder of Cadiz' Series F preferred stock. Mr. Arens has beenwith ING since 1995 and is the co-Head of ING's Strategic TradingPlatform Americas group and as such is responsible for thatgroup's global proprietary investing business. He is also CEO ofING Capital Advisors, LLC, a registered investment advisorspecializing in the management of leveraged loan assets for largeinstitutional clients. In addition to his Board duties at Cadiz,Mr. Arens also serves on the Board of Directors of ING CapitalManagement, Ltd., and California Coastal Communities, Inc. Gregory Ritchie was appointed a director of Cadiz on March25, 2004 as a nominee of ING pursuant to the rights of ING asholder of Cadiz' Series F preferred stock. Mr. Ritchie has beenwith ING since 1995 and is a Managing Director and the co-head ofING's Strategic Trading Platform and as such is responsible forthe group's global proprietary investing business. He is alsohead of the Strategic Trading Platform's Equities team. Richard E. Stoddard serves as CEO and Chairman of the Boardof Managers of Cadiz Real Estate LLC, the subsidiary of Cadiz,directing the development of the Cadiz Groundwater StorageProgram and the other Cadiz real estate assets. In addition,since 1988, Mr. Stoddard has served as the Chairman and CEO ofKaiser Ventures LLC, an unrelated public entity involved inwater development, real estate development and waste managementprojects in southern California. Mr. Stoddard also serves as ageneral business consultant to Cadiz. The certificate of designation for our Series F preferredstock provides that the holder(s) of the Series F preferred stock(currently ING) have the right to elect two members of the Boardof Directors. Directors of Cadiz hold office until the next annual meetingof stockholders or until their successors are elected andqualified. There are no family relationships between anySource: CADIZ INC, 10-K, November 02, 2004Powered 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. directors or current officers of Cadiz. Officers serve at thediscretion of the Board of Directors. Page 37 The Board of Directors has determined that Mr. Hutchison, amember of the Company's Audit Committee, is an "audit committeefinancial expert" as that term is defined in Item 401(h) ofRegulation S-K under the Securities Act. The other members of theAudit Committee are Messrs. Arens and Ritchie. The Board hasdetermined that Messrs. Hutchison, Arens and Ritchie areindependent in accordance with the criteria and guidelinesestablished by Nasdaq. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires our directors andexecutive officers, and persons who beneficially own more than10% of a registered class of our equity securities ("reportingpersons"), to file with the SEC initial reports of ownership andreports of changes in ownership of common stock and other equitysecurities of Cadiz. Reporting persons are required by the SECregulations to furnish Cadiz with copies of all Section 16(a)forms they file. We have filed these forms on behalf of some ofour directors and officers in the past and have a power ofattorney to assist certain of them in the future. To Cadiz'knowledge, based solely on a review of the copies of reports andamendments thereto on Forms 3, 4 and 5 furnished to us byreporting persons and forms that we filed on behalf of certaindirectors and officers, during, and with respect to, Cadiz'fiscal year ended December 31, 2003, and on a review of writtenrepresentations from reporting persons to Cadiz that no otherreports were required to be filed for such fiscal year, and allSection 16(a) filing requirements applicable to Cadiz' directors,executive officers and greater than 10% beneficial owners duringsuch period were satisfied in a timely manner.CODE OF ETHICS Cadiz has adopted a code of ethics that applies to all ofits employees, including its principal executive and financialofficer. A copy of the code of ethics may be found on Cadiz'website at www.cadizinc.com. Other information on this websiteis not incorporated as part of this filing. Page 38ITEM 11. EXECUTIVE COMPENSATION The tables and discussion below set forth information aboutthe compensation awarded to, earned by, or paid to Cadiz' chiefexecutive and financial officer during the years ended December31, 2003, 2002 and 2001. SUMMARY COMPENSATION TABLE OTHER LONG-TERM ANNUAL COMPENSATION(2) COMPENSATION AWARDS ---------------------- -------------------NAME AND FISCAL RESTRICTED STOCK ALL OTHERPRINCIPAL POSITION YEAR(1) SALARY BONUS AWARDS(3)(4) COMPENSATIONKeith Brackpool 12/31/03 $ 288,461 $ 200,000(5) $ -0- $ 850,000(6) President and Chief Executive 12/31/02 500,000 233,124 -0- -0- and Financial Officer 12/31/01 500,000 -0- -0- -0-------------------------------- (1) The information presented in this table is for the years ended December 31, 2003, 2002 and 2001. The executive officer for whom compensation has been disclosed for the year ended December 31, 2003, is the only executive officer of Cadiz as of December 31, 2003. No other executive officer received total salary or bonus exceeding $100,000 during theSource: CADIZ INC, 10-K, November 02, 2004Powered 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, 2003. (2) No column for "Other Annual Compensation" has been included to show compensation not properly categorized as salary or bonus, which consisted entirely during each fiscal year of perquisites and other personal benefits, because the aggregate amounts did not exceed the lesser of either $50,000 or 10% of the total of annual salary and bonus reported for Mr. Brackpool for each fiscal year. See "Employment Arrangements" below. (3) 1,616 and 615 deferred stock units were granted to Mr. Brackpool in May 2000 and February 2001, respectively, as part of his bonus for the preceding calendar year. These deferred stock units vested three years from the date of issuance and therefore 1,616 and 615 shares of common stock were issued to him in 2003 and 2004 accordingly. The 1,616 deferred stock unit grant was exchanged in March 2003 for 1,616 shares of common stock valued at $4,040 (based upon a $2.50 sale price per share on the expiration date). Mr. Brackpool's 615 deferred stock units outstanding at December 31, 2003 (based upon the Pink Sheets closing sales price per share of $5.10 on that date) were valued at $3,136. Upon their vesting in February 2004, the Company's Board of Directors authorized the buyout of the tax withholding portion of Mr. Brackpool's deferred stock units and he was issued 370 shares valued at $4,637 including the tax withholding amount (based upon a $7.54 closing sale price per share on the expiration date). (4) Deferred stock units, which were fully vested but could not be exchanged for shares of common stock without restrictions until March 31, 2003, were issued to Mr. Brackpool in March 2001 in exchange for fully vested and expiring options in amounts equaling the value of the expiring options in excess of their exercise price. Mr. Brackpool exchanged 12,000 expiring stock options in March 2001 for 5,415 deferred stock units and was issued shares of common stock upon the exercise of the deferred stock units on March 31, 2003 for a net value of $13,538 (based upon a $2.50 sale price per share on that date). (5) This bonus was paid to Mr. Brackpool in February 2004 for services completed in the preceding calendar year. Mr. Brackpool was provided the opportunity to receive the bonus in cash or shares of common stock valued at $2.50 per share and elected to receive his compensation in stock. (6) Mr. Brackpool received an aggregate $850,000 due to the termination of his previous employment agreement without cause and foregone salary, as described more fully in "Employment Arrangements" below. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES NUMBER OF VALUE OF UNEXERCISED UNEXERCISED OPTIONS AT OPTIONS AT FY-END(#) FY-END($) SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)---- -------------- ----------- ------------- ----------------Keith Brackpool -0- -$0- 80,000(2)/-0- -$0-/-$0--------------------------------------- (1) Based upon the Pink Sheets closing sales price per share of Cadiz common stock at December 31, 2003 which was $5.10. Page 39 (2) These options expired without exercise on January 15, 2004.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. COMPENSATION OF DIRECTORS In the fiscal year 2003, Messrs. Anthony Coelho, Murray H.Hutchison and Dwight W. Makins each received cash compensationfor their services as directors of Cadiz in the amount of $6,250for each of the first and fourth quarter. For the second andthird quarters, each director received an aggregate of 4,000shares of Cadiz common stock valued at $2.50 per share for theirservices as directors during those periods. Messrs. Coelho andMakins served as directors in 2003 until their resignations whichwere effective December 15, 2003. Mr. Philip R. Burnaman IIjoined the Cadiz Board of Directors for a brief period in January2003 at the nomination of ING, however, he resigned within amonth and did not receive any compensation from Cadiz for hisservices. Messrs. Brackpool, Shaheen, Arens and Ritchie do not receiveany compensation from Cadiz for serving as directors of Cadiz orSun World. Mr. Hutchison will receive $25,000 per year inaccordance with his agreement with Cadiz for services as adirector. EMPLOYMENT ARRANGEMENTS Until February 1, 2003, Mr. Brackpool was employed pursuantto an Employment Agreement which provided for base compensationof $500,000 annually plus an annual incentive based bonus not toexceed 120% of his base compensation. This agreement providedthat in the event of a material change or reduction in Mr.Brackpool's responsibilities, he would be entitled to terminatethe agreement and continue to receive base compensation for theremainder of the term of the agreement, and also provided thatMr. Brackpool would be entitled to continue to receive basesalary and a deemed bonus equal to 60% of base salary in theevent of any other termination of the agreement by Cadiz companyother than for cause. Subsequent to February 1, 2003, Cadiz failed to makepayments of base compensation to Mr. Brackpool as and whenrequired under this agreement, thereby giving Mr. Brackpool theright to terminate the agreement, which was effectivelyterminated as of February 1, 2003. In accordance with thetermination provisions of the agreement governing terminationwithout cause, Mr. Brackpool became entitled to receive paymentof $800,000. This $800,000 payment was made to Mr. Brackpool as part ofan overall settlement of obligations arising under a $1 millionloan entered into by Mr. Brackpool with Cadiz on July 5, 2002.See "Item 13. Certain Relationships and Related Transactions",below. This overall settlement with Mr. Brackpool was madeeffective July 5, 2003, by way of a corresponding reduction inMr. Brackpool's obligations to Cadiz under the loan. Thisreduction, along with cash payments by Mr. Brackpool in theamount of $181,013 and an application of $50,000 of accrued butunpaid compensation owed by Cadiz to Mr. Brackpool under his postFebruary 1, 2003 employment arrangements with Cadiz, resulted inthe settlement in full by Mr. Brackpool of his obligations underthis loan. Notwithstanding the agreed termination of Mr. Brackpool'sexisting employment agreement as of February 1, 2003, andnotwithstanding Mr. Brackpool's right to collect terminationpayments pursuant to that agreement without continuing to provideservices to Cadiz following that date, Cadiz had and continues tohave a need for Mr. Brackpool's services subsequent to February1, 2003. However, given our then existing circumstances andlimited financial resources, we agreed that it was necessary tochange certain of Mr. Brackpool's duties and responsibilities andto materially reduce his compensation. Page 40 Source: CADIZ INC, 10-K, November 02, 2004Powered 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 this end, effective as of the first pay period afterFebruary 1, 2003 Mr. Brackpool has been compensated pursuant toan Agreement Regarding Employment pursuant to which Mr. Brackpoolreceives base compensation of $20,000 per month, plus the samefringe benefits that Mr. Brackpool had been receiving under hisprior employment agreement, including the use of a leasedautomobile and life and disability insurance benefits funded byus. While this Agreement requires Mr. Brackpool to perform hisservices in a satisfactory manner, it does not require that hisservices be provided on a full-time basis. Although the initialterm of the Agreement Regarding Employment ended September 30,2003, Mr. Brackpool continues to provide services to us upon theterms and conditions set forth in this Agreement. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During the year ended December 31, 2003, all decisions concerning executive officer compensation were made by the Compensation Committee of the Board of Directors. The members of the Compensation Committee were Messrs. Hutchison (Chairman), Makins and Coehlo until the resignation of Messrs. Makins and Coehlo effective December 15, 2003, all of whom were non-employee directors. No meetings of the Compensation Committee were held after December 15, 2003 through the end of the fiscal year 2003. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Board of Directors has formed a Compensation Committee which is responsible for reviewing and establishing the compensation payable to Cadiz' executive officers, including the President and Chief Executive Officer. For executive officers other than the President and Chief Executive Officer, the Committee establishes compensation levels based, in part, upon the recommendations of the President and Chief Executive Officer. The Compensation Committee has furnished the following report on executive compensation:(1) Cadiz' executive compensation programs are designed to enhance operating performance and to maximize the long- term value of Cadiz' assets and stockholder value, by aligning the financial interest of the executive officers with those of the stockholders. Such a compensation program helps to achieve Cadiz' business and financial objectives and provide incentives needed to attract and retain well-qualified executives in a highly competitive marketplace. To this end, Cadiz has developed a compensation program with three primary components: base salary, performance-based cash awards and long-term incentives through stock awards. BASE SALARY. An effort is made to establish base salary levels for all executive officers so as to be competitive with the salaries of executives of other companies with similarly sized asset portfolios and to ensure the continued services of key individuals. No specific or set formula has been used to tie base salary levels to precise measurable factors. Adjustments to an executive officer's base salary, once established, can be made at the discretion of the Compensation Committee, based upon such factors as position and responsibility, salary history and cost of living increases. Where applicable, the Compensation Committee may also consider the past Page 41 performance of the officer, both in adjusting base salary levels and in determining additional incentive compensation, such as the cash awards and long term incentives discussed below.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. PERFORMANCE-BASED CASH AWARDS. The Compensation Committee believes that incentives should be offered to executives which are related to improvements in performance that yield increased value for stockholders. Although the Compensation Committee relies primarily upon the grant of incentive stock options or other stock awards to reward executive performance (see "Long-Term Incentives" below), under certain circumstances, the Compensation Committee will utilize performance-based cash awards from time to time to provide additional incentives. As Chairman and Chief Executive Officer of Cadiz, Mr. Brackpool is charged with the overall responsibility for the performance of Cadiz. Mr. Brackpool is compensated pursuant to a written agreement effective as of February 1, 2003 which reduced his base salary to 50% of its previous amount. It is intended within the terms of the agreement that Mr. Brackpool and Cadiz mutually attempt to negotiate a new employment agreement setting forth the terms and conditions of his employment. Historically, the Compensation Committee has established bonus compensation for Mr. Brackpool pursuant to criteria established in his employment agreement. Since a new agreement is not yet in place at this time, the Compensation Committee separately granted Mr. Brackpool a performance-based bonus of $200,000 (which Mr. Brackpool could elect to receive in stock or cash) upon the successful completion of the refinancing of Cadiz in December 2003. This bonus was paid to Mr. Brackpool in February 2004. LONG-TERM INCENTIVES. The primary form of incentive compensation offered by Cadiz to executives consists of long-term incentives in the form of stock options or other stock awards. This form of compensation is intended to help retain executives and motivate them to improve Cadiz' long-term performance and hence long- term stock market performance. Stock options and other stock awards are granted at the prevailing market value and will only have added value if Cadiz' stock price increases. The Compensation Committee views the grant of stock awards as both a reward for past performance and an incentive for future performance. Stock options or other stock awards granted by Cadiz may vest immediately upon grant, with the passage of time, at the discretion of the Board, and/or upon the achievement of certain specific performance goals. Where performance is not readily measurable, the vesting of performance based options or other stock awards may be dependent upon the satisfaction of subjective performance criteria. Options previously granted by Cadiz, whether vesting immediately or contingently, are exercisable for a period of five to seven years from grant. The Compensation Committee anticipates that options or stock awards will continue to be granted in the future in order to provide executives with additional long- term incentives. Such options and stock awards may be granted to executives pursuant to the Cadiz 1996 Stock Option Plan or 2000 Stock Award Plan. Due to the difficult circumstances which Cadiz and its subsidiaries have faced in the past year, however, all stock options granted under the three existing plans have become virtually worthless and a majority of them have expired within the last year without exercise. Therefore, the Compensation Committee, Board of Page 42Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Directors, management and our senior secured lender have agreed upon the implementation of a proposed Management Equity Incentive Plan with a total of 1,472,051 shares authorized which would provide incentive to senior management in a going-forward manner. The Board formed an initial allocation committee made up of Messrs. Brackpool, Hutchison, and Stoddard (a consultant to Cadiz), to direct the initial allocation of 717,373 of these shares, 1/3 of which will vest on the date of the grant. The remaining two- thirds will vest in two equal installments on December 11, 2004 and December 11, 2005 (subject to continued employment or immediate vesting upon termination without cause). It is intended that the remaining 754,678 shares covered by the incentive plan are issuance pursuant to the direction of, and upon such vesting and other conditions as may be established by, the Compensation Committee. DEDUCTIBILITY OF CERTAIN EXECUTIVE COMPENSATION EXPENSES UNDER FEDERAL TAX LAWS The Compensation Committee has considered the impact of provisions of the Internal Revenue Code of 1986, specifically Code Section 162(m). Section 162(m) limits to $1 million Cadiz' deduction for compensation paid to each executive officer of Cadiz, which does not qualify as "performance based". While Cadiz expects that this provision will not limit its tax deductions for executive compensation in the near term, the Cadiz 1996 Stock Option Plan ?enables Cadiz to comply, to the extent deemed advisable, with the requirements of Section 162(m) for performance based compensation to insure that Cadiz will be able to avail itself of all deductions otherwise available with respect to awards made under the 1996 Stock Option Plan. However, any shares of stock issued to executives under the Cadiz 2000 Stock Award Plan and Management Equity Incentive Plan will not qualify as performance- based compensation and, therefore, will be counted in determining whether the $1 million limit has been reached. CONCLUSION Through the programs described above, a very significant portion of Cadiz' executive compensation is contemplated to be linked directly to corporate performance. The Compensation Committee intends to implement this policy of linking executive compensation to corporate performance in order to continue to align the interest of executives with those of Cadiz' stockholders. THE COMPENSATION COMMITTEE Murray H. Hutchison, Chairman_______________________________(1) This report shall not be deemed incorporated by reference byany general statement incorporating by reference this annualreport on Form 10-K into any filing under the Securities Act of1933, except to the extent that Cadiz specifically incorporatesthis report by reference, and shall not otherwise be deemed filedunder such acts. Page 43STOCK PRICE PERFORMANCE The stock price performance graph below compares thecumulative total return of Cadiz common stock against thecumulative total return of the Standard & Poor's Small Cap 600Nasdaq U.S. index and the Russell 2000r index for the past fiveSource: CADIZ INC, 10-K, November 02, 2004Powered 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. fiscal years. The graph indicates a measurement point of December31, 1998 and assumes a $100 investment on such date in Cadizcommon stock, the Standard & Poor's Small Cap 600 and the Russell2000r indices. With respect to the payment of dividends, Cadizhas not paid any dividends on its common stock, but the Standard& Poor's Small Cap 600 and the Russell 2000r indices assume thatall dividends were reinvested. The stock price performance graphshall not be deemed incorporated by reference by any generalstatement incorporating by reference this annual report on Form10-K into any filing under the Securities Act of 1933, asamended, except to the extent that Cadiz specificallyincorporates this graph by reference, and shall not otherwise bedeemed filed under such acts. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN Assumes initial investment of $100.00 and re-investment of dividends------------------------------------------------------------------------------ 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03Cadiz 100 124.59016 117.21311 105.18033 7.2131148 2.6754098 Share Value Russell 100 119.62034 114.59143 115.76927 90.788226 131.9817 2000 Index ValueS&P Small 100 168.53272 187.10804 197.83572 167.53579 230.41922 Cap Index Value Page 44ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe following table provides information as of December 31, 2003with respect to shares of our common stock that may be issuedunder our existing compensation plans:EQUITY COMPENSATION PLAN INFORMATION Number of securities Weighted-securities Number of securities to be issued upon exercise price of remaining available exercise of outstanding for future issuance outstanding options, options, warrants under equity warrants and rights and rights compensation plans (excluding securities reflected in column (a))Plan Category (A) (B) (C)-----------------------------------------------------------------------------Equity 40,202 $ 184.66 35,756compensationplansapproved bystockholders(1)Equity 16,500(2) $ 228.30(2) 1,487,611(3)compensationplans notapproved bystockholdersTOTAL 56,702 $ 197.36 1,507,807(4)(1) Represents 37,450 shares for the Cadiz Inc. 1996 Stock Option Plan and 2,752 shares for the Cadiz Inc. 2000 Stock Award Plan.(2) Represents the Cadiz Inc. 1998 Stock Option Plan(3) Represents 15,560 shares for the 1998 Stock Option Plan and 1,472,051 shares for the Management Equity Incentive Plan(4) There is a cumulative cap on the 1996 Stock Option Plan, the 1998 Stock Option Plan and the 2000 Stock Award Plan ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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. 160,000 shares.STOCK OPTION AND AWARD PLANS IN GENERAL The purpose of Cadiz' stock option and award plans is toprovide incentives to attract, retain and motivate eligiblepersons whose present and potential contributions are importantto the success of Cadiz and its subsidiaries and affiliates, byoffering them an opportunity to participate in Cadiz futureperformance through awards of options, restricted stock grantsand other similar stock awards.1996 Stock Option Plan In 1996, our board of directors and stockholders approvedthe adoption of the Cadiz Inc. 1996 Stock Option Plan (the "1996Plan") to provide incentives to key employees of Cadiz and itssubsidiaries. Under the 1996 Plan, stock options may be grantedto directors, officers, employees, consultants, independentcontractors and advisors of Cadiz or its subsidiaries oraffiliates. The 1996 Plan is administered by a committee of the Board orthe Board acting as the committee. Grants under the Plan mayconsist of: (i) options intended to qualify as incentive Page 45stock options ("ISOs") within the meaning of the Internal Revenue Codeof 1986, as amended (the "Code"), (ii) so-called "non-qualifiedstock options" ("NQSOs") that are not intended to so qualify, or(iii) a combination thereof. Directors who are not employees ofthe Company will be entitled to receive only NQSOs under thePlan. The 1996 Plan permits the governing committee to grantoptions either as ISOs or as NQSOs, and allows the committee toestablish, as to any participant, the number of options, exerciseprice, exercise term (subject to a maximum of ten years), andother terms and conditions. Subject to the foregoing, the optionexercise price may not be less than 85% of the fair market valueof a share of Cadiz common stock on the date of grant of suchoption; however, in the case of an ISO, the price shall be noless than 100% of the fair market value of a share of CommonStock at the time such option is granted; and in the case of anISO granted to a 10% stockholder, the exercise price will be noless than 110% of the fair market value of the common stock onthe date of grant. Upon a "change in control" (as defined in the1996 Plan), the Board has the right to accelerate vesting of alloptions so that they become exercisable within the 30-day periodpreceding the change in control. The Board may amend or terminate the Plan at any time;provided, however, that the Board may not, without the approvalof stockholders, amend the Plan in any manner that requires suchstockholder approval pursuant to the Code or pursuant to theSecurities Exchange Act of 1934, as amended (the "Exchange Act")or Rule 16b-3 thereunder. According to its terms, the 1996 Planwill terminate 10 years from its effective date. Originally, 120,000 shares of common stock were reserved andauthorized for issuance under the 1996 Plan. An additional 40,000shares (for an aggregate of 160,000 shares) were subsequentlyauthorized for issuance, however, the reservation andauthorization of 160,000 shares is cumulative of all three ofCadiz' stock option and award plans. Shares subject to a grant oraward under the 1996 Plan which are not issued or delivered byreason of the failure to vest or the expiration, termination,cancellation or forfeiture are again available for future grantsand awards. As of December 31, 2003, 35,756 shares remainedavailable for grant under the 1996 Plan (subject to thecumulative cap for issuance under all three stock option andaward plans).1998 STOCK OPTION PLANSource: CADIZ INC, 10-K, November 02, 2004Powered 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 1998, the Board approved a Non-Qualified Stock OptionPlan (the "1998 Plan") to provide grants of stock options tocertain employees, consultants, independent contractors andadvisors of Cadiz or its subsidiaries and affiliates, butexcluding any directors or officers including those who would berequired to file reports of beneficial ownership pursuant to theExchange Act. The 1998 Plan is administered by a committee of the Boardor the Board acting as the committee. It permits the governingcommittee to establish, as to any participant, the number ofoptions, exercise price, exercise term (subject to a maximum often years), and other terms and conditions, however, the Board'sgeneral intent with the plan is to grant options at an exerciseprice equal to the fair market value of Cadiz common stock at thetime of grant, which options vest ratably over a five-year periodsubject to vesting acceleration for a change in control of theCompany or the Board's determination of satisfaction of certainspecified performance criteria. Page 46 The Board may amend or terminate the Plan at any time;provided, however, that the Board may not, with respect to anyparticular option grant, without the consent of the holder ofthat outstanding option, amend or terminate such option ormaterially adversely affect the rights of the holder under suchoption. According to its terms, the 1998 Plan will terminate 10years from its effective date. 31,700 shares are reserved and authorized for issuance underthe 1998 Plan, which amount may be decreased by the cumulativecap of 160,000 for issuance under all three stock option andaward plans. Shares subject to a grant or award under the 1998Plan which are not issued or delivered by reason of the failureto vest or the expiration, termination, cancellation orforfeiture are again available for future grants and awards. Asof December 31, 2003, 15,560 shares remained available for grantunder the 1998 Plan (subject to the cumulative cap for issuanceunder all three stock option and award plans).2000 STOCK AWARD PLAN In 2000, our board of directors and stockholders approvedthe adoption of the Cadiz Inc. 2000 Stock Award Plan (the "2000Plan") to add additional forms of stock awards (i.e., restrictedstock, deferred stock units, stock bonus and stock awards in lieuof cash) to the currently available stock option grants toprovide incentives to key employees of Cadiz and its subsidiarieswithout as significant a dilutive effect on the stockholders.Under the 2000 Plan, stock options may be granted to certaindirectors, officers, employees, consultants, independentcontractors and advisors of Cadiz or its subsidiaries andaffiliates. The 2000 Plan is administered by a committee of the Boardor the Board acting as the committee. It permits the governingcommittee to establish, as to any participant, the number andtype of options, stock awards, deferred stock units, stockbonuses or the like, exercise price, exercise term (subject to amaximum of ten years), and other terms and conditions. A changein control of the Company shall accelerate the vesting ofoutstanding, but unvested, stock awards under the 2000 Plan. The Board may amend or terminate the Plan at any time;provided, however, that the Board may not, without the approvalof stockholders, amend the Plan in any manner that requires suchstockholder approval pursuant to the Code or pursuant to theExchange Act or Rule 16b-3 thereunder. Further, the Board maynot, with respect to any particular stock grant, without theconsent of the holder of that outstanding grant, amend orterminate such grant or materially adversely affect the rights ofthe holder under such grant. According to its terms, the 2000Plan will terminate 10 years from its effective date.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 40,000 shares are reserved and authorized for issuance underthe 2000 Plan, which amount may be decreased by the cumulativecap of 160,000 for issuance under all three stock option andaward plans. Shares subject to a grant or award under the 2000Plan which are not issued or delivered by reason of the failureto vest or the expiration, termination, cancellation orforfeiture are again available for future grants and awards. Asof December 31, 2003, 10,596 shares remained available for grantunder the 2000 Plan (subject to the cumulative cap for issuanceunder all three stock option and award plans). Page 47MANAGEMENT EQUITY INCENTIVE PLAN In December 2003, concurrently with the completion of therestructuring of our financing arrangements with ING, our boardof directors authorized the adoption of a Management EquityIncentive Plan (the "Incentive Plan"). Under the Incentive Plan,a total of 1,472,051 shares of our common stock may be granted toour key personnel. Our Board has formed an initial allocationcommittee to direct the initial allocation of 717,373 of theseshares. This initial allocation committee consists of Mr.Hutchison (as Chairman of the Compensation Committee), Mr.Brackpool and Mr. Richard Stoddard (a consultant to Cadiz). TheBoard has authorized the initial allocation committee to awardall or part of the initial allocation shares to key personnel(including members of such committee) without further approval ofthe Board. Any initial allocation shares so granted will besubject to vesting conditions. One-third of the shares grantedwill vest immediately on the date of the grant. The remaining two-thirds will vest in two equal installments on December 11, 2004and December 11, 2005 (subject to continued status of the recipient as an employee or consultant to Cadiz as of the respective vesting date, but also subject to immediate vesting in full of any theretofore unvested shares upon any termination without cause). The 754,678 shares covered by the Incentive Plan which arenot part of the initial allocation are issuable pursuant to thedirection of, and upon such vesting and other conditions as maybe established by, the Compensation Committee. As of September 30, 2004, no shares have been issued under theIncentive Plan. Page 48BENEFICIAL OWNERSHIP The following table sets forth, as of September 15, 2004, theownership of common stock of Cadiz by each stockholder who isknown by Cadiz to own beneficially more than five percent of theoutstanding common stock, by each director, by each executiveofficer listed in the summary compensation table above, and byall directors and executive officers as a group excluding, ineach case, rights under options or warrants not exercisablewithin 60 days. All persons named have sole voting power andinvestment power over their shares except as otherwise noted.CLASS OF COMMON STOCK AMOUNT AND NATURE OF PERCENT NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS ---------------- -------------------- -------- ING Groep N.V. 1,828,429(1) 21.9% ING Capital LLC Amstelveenseweg 500 1081 KL Amsterdam SACC Partners LP 634,699(2) 9.6% Riley Investment Management LLC B. Riley & Co. Inc. B. Riley & Co. Retirement TrustSource: CADIZ INC, 10-K, November 02, 2004Powered 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. 11100 Santa Monica Blvd., Suite 800 Los Angeles, CA 90025 FMR Corp. 602,806(8) 9.1% 82 Devonshire Street Boston, MA 02109 Bedford Oak Partners, L.P. 601,500(4) 9.1% Bedford Oak Capital, L.P. Bedford Oak Offshore 100 South Bedford Road Mt. Kisco, NY 10549 Lloyd Miller MILGRAT I 501,400(3) 7.6% Lloyd I. Miller Fund C Lloyd Miller A4 Trust Lloyd Miller MILFAM II 4550 Gordon Drive Naples, FL 34102-7914 Morgan Stanley & Co. International 339,603(5) 5.1% Limited 1585 Broadway New York, NY 10036 Keith Brackpool 127,223(6) 1.9% c/o 777 S. Figueroa St., Suite 4250 Los Angeles, CA 90017 Timothy J. Shaheen 10,109 * c/o 777 S. Figueroa St., Suite 4250 Los Angeles, CA 90017 Murray Hutchison 6,490(7) * c/o 777 S. Figueroa St., Suite 4250 Los Angeles, CA 90017 Geoffrey Arens 0 * c/o 777 S. Figueroa St., Suite 4250 Los Angeles, CA 90017 Gregory Ritchie 1,000 * c/o 777 S. Figueroa St., Suite 4250 Los Angeles, CA 90017 All directors and officers 144,822(6)(7) as a group (seven individuals)----------------------------------------------------------------- * Represents less than one percent of the 6,612,665 outstanding shares of common stock of Cadiz as of March 31, 2004 Page 49 CLASS OF SERIES F PREFERRED STOCK AMOUNT AND NATURE OF PERCENTNAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS---------------- -------------------- --------ING Groep N.V. 100,000(1) 100%ING Capital LLC Amstelveenseweg 5001081 KL Amsterdam (1) Based upon a Schedule 13D filed on February 2, 2004 with the SEC by ING Groep N.V. on behalf of its wholly-owned subsidiary ING Capital LLC, and based on Cadiz corporate records, the ING entities beneficially own 100,000 shares of Cadiz Series FSource: CADIZ INC, 10-K, November 02, 2004Powered 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 and have sole voting and dispositive power as to all of the shares. The preferred stock held by ING is initially convertible into 1,728,955 shares of Cadiz common stock. In addition to the preferred stock, ING holds 99,474 shares of Cadiz common stock, 94,000 of which were issued at the end of 2003 upon ING's exercise of warrants, and ING has sole voting and dispositive power as to the common stock. The principal office of ING Capital LLC is located at 1325 Avenue of the Americas, New York, NY 10019. (2) Based upon a Schedule 13G filed on May 12, 2004 with the SEC by SACC Partners LP and its affiliated entities, Cadiz corporate records of stock issuances and correspondence with Mr. Riley, the listed affiliated entities beneficially own an aggregate of 634,699 shares of Cadiz common stock, and have sole voting and dispositive power of the stock. (3) Based upon a Schedule 13G filed on May 17, 2004 with the SEC by Lloyd I. Miller, III, Cadiz corporate records of stock issuances and correspondence with Mr. Miller, the listed affiliated entities beneficially own an aggregate of 501,400 shares of Cadiz common stock. Mr. Miller has sole voting power of 300,000 of the shares, and sole dispositive power of 100,000 of the shares. The remaining shares beneficially owned by Mr. Miller are subject to shared voting and dispositive power. (4) Based upon a Schedule 13G filed on September 8, 2004 with the SEC, Cadiz corporate records of stock issuances and correspondence with Bedford Oak, the listed related funds beneficially own an aggregate of 339,603 shares of Cadiz common stock. (5) Based upon a Schedule 13G filed on February 18, 2004 with the SEC by Morgan Stanley & Co. International Limited and its affiliated entities, Cadiz corporate records of stock issuances and correspondence with Morgan Stanley, Morgan Stanley has shared voting rights and shared dispositive power over an aggregate of 339,603 shares of Cadiz common stock. (6) Includes 2,000 shares owned by a foundation of which Mr. Brackpool is a trustee, but in which Mr. Brackpool has no economic interest and 2,000 shares owned by his separated spouse. Mr. Brackpool disclaims any beneficial ownership of the 4,000 shares owned by the foundation and his spouse. (7) Includes 1,490 shares underlying presently exercisable options. (8) Based upon a Schedule 13G files on October 14, 2004 with the SEC by FMR Corp. and its affiliated entities, Cadiz corporate records of stock issuances and correspondence with FMR Corp., the listed affiliated entities beneficially own an aggregate of 602,806 shares of Cadiz common stock, and have sole voting and dispositive power of the stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On July 5, 2002, we entered into an agreement with KeithBrackpool, our Chief Executive Officer, whereby we agreed to loanhim up to $1 million. The loan had a term of one year and bore aninterest rate of 6% per annum. As of December 31, 2002, themaximum $1 million amount of the loan was outstanding. The loanwas repaid in full by Mr. Brackpool in 2003 at the expiration ofthe loan term. Page 50 Our loan with Mr. Brackpool was intended to be structuredwith terms no more favorable than those which Mr. Brackpool wouldhave been able to obtain from unrelated third parties, and theloan agreement therefore provided for the loan to be secured bycollateral with a value of at least 133% of the outstanding loanamount. Initially, the loan was secured by a portion of Mr.Brackpool's otherwise unencumbered equity holdings in our stock.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 November 2002 Mr. Brackpool provided additional security forthe loan in the form of a pledge of a portion of Mr. Brackpool'sinterests in a real estate limited partnership. This loan was authorized by our Board in May 2002. We werethen nearing final votes on the various approvals needed for theCadiz Program, and both the company and our executives were thesubject of intense media interest. At the same time, Mr.Brackpool required a source of funds to satisfy personalobligations incurred by him in 1999 in order to finance hispurchase that year, for $5.25 million, of 750,000 of our sharesupon the exercise of previously issued stock options. Our Boardwas concerned that the publicity accompanying a public sale ofCadiz stock by Mr. Brackpool, regardless of the reasons for thesale, at a time when the outcome of voting on the Cadiz Programwas not certain would significantly impair our ability to obtainthe approvals we needed. Given the importance to us of the CadizProgram, the Board approved the loan so as to provide Mr.Brackpool with funds without selling any of his Cadizshareholdings in the public markets. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES For the fiscal years ended December 31, 2003 and 2002,professional services were performed by PricewaterhouseCoopersLLC (PwC). Cadiz' audit committee annually approves theengagement of outside auditors for audit services in advance. Theaudit committee has also established complementary procedures torequire pre-approval of all audit-related, tax and permitted non-audit services provided by PwC, and to consider whether theoutside auditors' provision of non-audit services to Cadiz iscompatible with maintaining the independence of the outsideauditors. The audit committee may delegate pre-approval authorityto one or more of its members. Any such fees pre-approved in thismanner shall be reported to the audit committee at its nextscheduled meeting. All services described below were pre-approvedby the audit committee. All fees for services rendered by PwC aggregated $296,050and $307,726 for the fiscal years ended December 31, 2003 and2002, respectively, and were composed of the following: Audit Fees. The aggregate fees billed for the audit of theannual financial statements for the fiscal years ended December31, 2003 and 2002, for reviews of the financial statementsincluded in the Company's Quarterly Reports on Form 10Q, and forassistance with and review of documents filed with the SEC were$296,050 for 2003 and $246,500 for 2002. Audit Related Fees. The aggregate fees billed for audit-related services for the fiscal years ended December 31, 2003 and2002 were $0 and $48,976, respectively. These feesrelate to assurance and related services performed by PwC thatare reasonably related to the performance of the audit or reviewof the Company's financial statements. These services includeattest services that are not required by statute or regulation,internal control reviews and consultations concerning financialaccounting and reporting matters. Tax Fees. Fees billed for tax services for the fiscal years ended December 31, 2003 and 2002 were $0 and $12,250, respectively. Page 51 All Other Fees. No other fees were billed The aggregate fees billed by PwC to Cadiz for services other than as discussed above for the fiscal years ended December 31, 2003 and 2002. Page 52ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, ANDREPORTS ON FORM 8-K (A) 1. Financial Statements. See Index to ConsolidatedSource: CADIZ INC, 10-K, November 02, 2004Powered 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. 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 8, 1996(2) 3.3 Amendment to Cadiz Certificate of Incorporation dated September 1, 1998(3) 3.4 Amendment to Cadiz Certificate of Incorporation dated December 15, 2003 3.5 Certificate of Elimination of Series D Preferred Stock, Series E-1 Preferred Stock and Series E-2 Preferred Stock of Cadiz Inc. dated December 15, 2003 3.6 Certificate of Elimination of Series A Junior Participating Preferred Stock of Cadiz Inc., dated March 25, 2004 3.7 Certificate of Designations of Series F Preferred Stock of Cadiz Inc. dated December 15, 2003 3.8 Cadiz Bylaws, as amended (4) 4.1 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 11.25% First Mortgage Notes due 2004 (including as Exhibit A to the Indenture, the form of the Global Note and the form of each Guarantee)(5) 4.2 Amendment to Indenture dated as of October 9, 1997(6) 4.3 Amendment to Indenture dated as of January 23, 1998(7) 4.4 Preferred Stock Exchange Agreement, dated October 20, 2003, by and among Cadiz Inc., OZ Master Fund, Ltd. and OZF Credit Opportunities Master Fund, Ltd. 10.1 Cadiz Inc. 1996 Stock Option Plan(4) 10.2 Amendment to the Cadiz Inc. 1996 Stock Option Plan(10) Page 53 10.3 Amended and Restated Cadiz Inc. 1998 Non- Qualified Stock Option Plan(15) 10.4 Cadiz Inc. 2000 Stock Award Plan(8) 10.5 Security Agreement between Cadiz Inc. and Keith Brackpool dated July 5, 2002(9) 10.6 Pledge Agreement between Keith Brackpool and Cadiz Inc. dated November 2002(10)Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 10.7 Agreement Regarding Employment Between Cadiz Inc. and Keith Brackpool dated July 5, 2003(11) 10.8 Agreement Regarding Satisfaction of Note Obligations Between Cadiz Inc. and Keith Brackpool dated July 5, 2003(11) 10.9 Employment Agreement dated September 13, 1996 between Sun World International, Inc., Cadiz Inc. and Timothy J. Shaheen(12) 10.10 Sixth Amended and Restated Credit Agreement, dated as of December 15, 2003, among Cadiz Inc., Cadiz Real Estate LLC, and ING Capital LLC, as Administrative Agent, and the lenders party thereto 10.11 Sixth Global Amendment Agreement, dated as of December 15, 2003, between Cadiz Inc., Cadiz Real Estate LLC, and ING Capital LLC 10.12 ING Capital LLC Amended and Restated Tranche A Note in principal amount of $25 million 10.13 ING Capital LLC Amended and Restated Tranche B Note in principal amount of $10 million 10.14 Limited Liability Company Agreement of Cadiz Real Estate LLC dated December 11, 2003 10.15 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(13) 10.16 Sun World-Bondholder-Cadiz Term Sheet and Agreement in Principle, dated as of October 13, 2003, by and among Cadiz, Sun World International, Inc. and its debtor affiliates, and Black Diamond Capital Management, L.L.C. and CFSC Wayland Advisers, Inc. and their respective affiliates 10.17 Sun World Noteholder Trust Agreement, dated December 15, 2003, by and among Cadiz Inc., Logan & Company, as Trustee, Black Diamond Capital Management, L.L.C. on behalf of its affiliates, and CFSC Wayland Advisers, Inc. 10.18 Assignment of Claims, dated December 15, 2003, by Cadiz Inc. and the Sun World Noteholder Trust Page 54 10.19 Pledge Agreement, dated as of December 12, 2003, by and between Cadiz Inc., as Pledgor, and Sun World Noteholder Trust, as Secured Party 10.20 Agreement re Closing of "Sun World- Bondholder-Cadiz Term Sheet and Agreement in Principle", dated as of November 24, 2003, by and between Cadiz Inc. and Black Diamond Capital Management, L.L.C. and CFSC Wayland Advisers, Inc. and their respective affiliates 10.21 Mutual General Release, dated December 15, 2003 by and between Cadiz Inc., and Sun World International, Inc., Sun Desert Inc., Coachella Growers and Sun World/Rayo 10.22 Resolution of the Directors of Cadiz Inc., authorizing the Management Equity Incentive Plan. 21.1 Subsidiaries of the RegistrantSource: CADIZ INC, 10-K, November 02, 2004Powered 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. 31.1 Certification of Keith Brackpool, Chairman, Chief Executive Officer and Chief Financial Officer of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Keith Brackpool, Chairman, Chief Executive Officer and Chief Financial Officer of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002--------------------------- (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 14, 1996 (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 Amendment No. 1 to our Form S-1 Registration Statement No. 333- 19109 filed on April 29, 1997 (6) Previously filed as an Exhibit to Amendment No. 2 to Sun World's Form S-4 Registration Statement No. 333-31103 filed on October 14, 1997 (7) 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 (8) Previously filed as Appendix A to our Proxy Statement dated April 5, 2000, filed on March 29, 2000 (9) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 filed on November 14, 2002 (10) Previously filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 2002 filed concurrently with this Annual Report on Form 10-K (11) Previously filed as an Exhibit to our Report on Form 10-Q for the quarter ended September 30, 2003 filed concurrently with this Annual Report on Form 10-K (12) Previously filed as an Exhibit to our Transition Report on Form 10-K for Page 55 the nine months ended December 31, 1996 filed on April 14, 1997 (13) Previously filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 2001 filed on March 28, 2002. (B) REPORTS ON FORM 8-K We filed a report on Form 8-K dated December 17, 2003reporting numerous transactions involved with the comprehensiverefinancing of the Company, extension of the Company's seniordebt, exchange of its pre-existing preferred stock into shares ofcommon stock, divestiture of its agricultural subsidiary and theimplementation of a one for 25 reverse stock split. Page 56SIGNATURESPursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly causedSource: CADIZ INC, 10-K, November 02, 2004Powered 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. this report to be signed on its behalf by the undersigned,thereto duly authorized. CADIZ INC. By: /s/ Keith Brackpool -------------------- Keith Brackpool, Chairman and Chief Executive and Financial Officer Date: November 1, 2004 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 November 1, 2004-------------------------------------------- ---Keith Brackpool, Chairman and Chief Executiveand Financial Officer(Principal Executive, Financial and Accounting Officer)/s/ Murray H. Hutchison November 1, 2004-------------------------------------------- ---Murray H. Hutchison, Director/s/ Timothy J. Shaheen November 1, 2004-------------------------------------------- ---Timothy J. Shaheen, Director/s/ Geoffrey Arens November 1, 2004-------------------------------------------- ---Geoffrey Arens, Director/s/ Gregory Ritchie November 1, 2004-------------------------------------------- ---Gregory Ritchie, Director Page 57CADIZ INC. FINANCIAL STATEMENTS------------------------------- PageReport of Independent Registered Public Accounting Firm. . . . 59Consolidated Statement of Operations for the three years endedDecember 31, 2003. . . . . . . . . . . . . . . . . . . . . . . 60Consolidated Balance Sheet as of December 31, 2003 and 2002. . 61Consolidated Statement of Cash Flows for the three years endedDecember 31, 2003. . . . . . . . . . . . . . . . . . . . . . . 63Consolidated Statement of Stockholders' Equity for the threeyears ended December 31, 2003 . . . . . . . . . . . . . . . . .65Notes to the Consolidated Financial Statements. . . . . . . . .67CADIZ INC. FINANCIAL STATEMENT SCHEDULES----------------------------------------Schedule I - Condensed Financial Information of Registrant forSource: CADIZ INC, 10-K, November 02, 2004Powered 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 three years ended December 31, 2003. . . . . . . . . . . .104Schedule II - Valuation and Qualifying Accounts for the threeyears ended December 31, 2003. . . . . . . . . . . . . . . . .108SUN WORLD INTERNATIONAL, INC. FINANCIAL STATEMENTS--------------------------------------------------Report of Independent Registered Public Accounting Firm. . . .109Consolidated Statement of Operations for the three years ended December 31, 2003. . . . . . . . . . . . . . . . . . . .110Consolidated Balance Sheet as of December 31, 2003 and 2002. .111Consolidated Statement of Cash Flows for the three years endedDecember 31, 2003. . . . . . . . . . . . . . . . . . . . . . .112Consolidated Statement of Stockholder's Equity for the three years ended December 31, 2003. . . . . . . . . . . . . . . . .113Notes to the Consolidated Financial Statements. . . . . . . . 114(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 58REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo 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, 2003 and 2002, and the results oftheir operations and their cash flows for each of the three yearsin the period ended December 31, 2003 in conformity withaccounting principles generally accepted in the United States ofAmerica. In addition, in our opinion, the financial statementschedules listed in the index appearing under Item 15(a)(2)present fairly, in all material respects, the information setforth therein when read in conjunction with the relatedconsolidated financial statements. These financial statementsand financial statement schedules are the responsibility of theCompany's management; our responsibility is to express an opinionon these financial statements and financial statement schedulesbased on our audits. We conducted our audits of these statementsin accordance with the standards of the Public Company AccountingOversight Board (United States). These standards require that weplan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used andsignificant estimates made by management, and evaluating theoverall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion. As discussed in Note 2 to the accompanying financialstatements, the Company incurred losses of approximately $11.5million and $22.2 million in 2003 and 2002, respectively, andused cash for operating activities of $6.6 million and $10.1million in 2003 and 2002, respectively. In addition, theCompany's wholly-owned subsidiary, Sun World International, Inc.,and certain of its subsidiaries ("Sun World") filed voluntarypetitions for reorganization under Chapter 11 of the UnitedSource: CADIZ INC, 10-K, November 02, 2004Powered 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. States Bankruptcy Code on January 30, 2003. Management of SunWorld continues to operate as debtor-in-possession until a Planof Reorganization is approved by its creditors and confirmed bythe Bankruptcy Court. The Company's and Sun World's objectivesin regard to this matter are also discussed in Note 2. Theaccompanying consolidated financial statements have been preparedusing accounting principles applicable to a going concern, whichassumes realization of assets and settlement of liabilities inthe normal course of business. The matters described above andthe uncertainties inherent in the bankruptcy process raisesubstantial doubt about the Company's ability to continue as agoing concern. The financial statements do not include anyadjustments that might result from the outcome of thisuncertainty./s/ PricewaterhouseCoopers LLP-------------------------------PricewaterhouseCoopers LLPLos Angeles, CaliforniaSeptember 18, 2004 Page 59 CADIZ INC. CONSOLIDATED STATEMENT OF OPERATIONS------------------------------------------------------------------------ Three Year Ended December 31,(In thousands, except per share data) 2003 2002 2001------------------------------------------------------------------------Revenues $ 3,162 $ 114,250 $ 92,402Special litigation recovery - - 7,929 --------- --------- --------- Total revenues and special litigation recovery 3,162 114,250 100,331 --------- --------- ---------Costs and expenses: Cost of sales 2,965 86,356 79,108 General and administrative 5,235 16,953 12,913 Write off of investment in subsidiary 195 - - Reorganization costs 655 - - Non-recurring compensation expense - - 5,537 Removal of underperforming crops - 4,514 736 Depreciation and amortization 743 7,480 8,151 --------- --------- --------- Total costs and expenses 9,793 115,303 106,445 --------- --------- ---------Operating loss (6,631) (1,053) (6,114)Interest expense, net 4,905 21,172 19,551 --------- --------- ---------Net loss before income taxes (11,536) (22,225) (25,665)Income tax expense - - 57 --------- --------- ---------Net loss (11,536) (22,225) (25,722)Less: Preferred stock dividends 918 1,125 591 Imputed dividend on preferred stock 1,600 984 441 --------- --------- ---------Net loss applicable to common stock $ (14,054) $ (24,334) $ (26,754) ========= ========= =========Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Basic and diluted net loss per share $ (6.39) $ (16.76) $ (18.66) ========= ========= =========Weighted-average shares outstanding 2,200 1,452 1,434 ========= ========= =========See accompanying notes to the consolidated financial statements. Page 60 CADIZ INC. CONSOLIDATED BALANCE SHEET------------------------------------------------------------------------ December 31,($ in thousands) 2003 2002------------------------------------------------------------------------ASSETS Current assets:Cash and cash equivalents $ 3,422 $ 3,229Accounts receivable, net - 6,732Note receivable from officer - 1,022Inventories - 13,513Prepaid expenses and other 248 1,166 --------- --------- Total current assets 3,670 25,662Property, plant, equipment and water programs, net 39,514 154,928Goodwill 3,813 3,813Restricted cash 2,142 -Other assets 387 7,480 --------- --------- $ 49,526 $ 191,883 ========= =========LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 857 $ 7,394 Accrued liabilities 1,545 6,816 Revolving credit facility - 4,400 Long-term debt, current portion - 41,019 --------- --------- Total current liabilities 2,402 59,629Long-term debt 30,253 115,447Deferred income taxes - 5,447Other liabilities 654 1,539Contingencies (Note 16)Series D redeemable convertible preferred stock - $0.01 par value: 5,000 shares authorized; shares issued and outstanding - none at December 31, 2003 and 5,000 at December 31, 2002 - 4,536Series E-1 and E-2 redeemable convertible preferred stock - $0.01 par value: 7,500 shares authorized; shares issued and outstanding - none at December 31, 2003 and 7,500 at December 31, 2002 - 6,406Stockholders' equity: Series F convertible preferred stock - $.01 par value: 100,000 shares authorized; shares issued and outstanding - 100,000 at December 31, 2003 1 -Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Common stock - $0.01 par value: 70,000,000 shares authorized; shares issued and outstanding 6,471,385 at December 31, 2003 and 1,458,659 at December 31, 2002 65 15 Page 61Additional paid-in capital 184,974 156,151Accumulated deficit (168,823) (157,287) --------- --------- Total stockholders' equity 16,217 (1,121) --------- --------- $ 49,526 $ 191,883 ========= =========See accompanying notes to the consolidated financial statements. Page 62 CADIZ INC. CONSOLIDATED STATEMENT OF CASH FLOWS------------------------------------------------------------------------ Year Ended December 31,($ in thousands) 2003 2002 2001------------------------------------------------------------------------Cash flows from operating activities: Net loss $ (11,536) $ (22,225) $ (25,722) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 1,602 13,241 11,664 Write off of investment in subsidiary 195 - - Stock issued for services 550 - - Compensation paid through settlement of note receivable from officer 841 - - Interest paid in common stock 12 - - Loss (gain) on disposal of assets 43 346 (421) Removal of underperforming crops - 4,514 736 Land received in litigation recovery - - (2,000) Shares of KADCO stock earned for services - (1,250) (1,250) Compensation charge for deferred stock units 152 579 566 Non-recurring compensation expense - - 5,537 Accrued interest on note receivable from officer - (22) - Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 1,488 (405) 1,557 Decrease (increase) in inventories (3,043) (1,116) 1,830 Increase in prepaid expenses and other (112) (378) (157) Increase (decrease) in accounts payable 1,393 (4,365) 3,858 (Decrease) increase in accrued liabilities 1,831 633 (551) Increase in other liabilities - 315 51 --------- --------- --------- Net cash used for operating activities (6,584) (10,133) (4,302) --------- --------- ---------Cash flows from investing activities: Deconsolidation of subsidiary (1,019) - - Additions to property, plant and equipment (140) (638) (1,583) Additions to water programs - (643) (1,359) Additions to developing crops (231) (2,176) (3,124)Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Proceeds from disposal of property, plant and equipment - 2,463 452 Loan to officer 181 (1,000) - Increase in restricted cash (2,142) - - Decrease (increase) in other assets (104) (95) 154 --------- --------- --------- Net cash used for investing activities (3,455) (2,089) (5,460) --------- --------- ---------Cash flows from financing activities: Net proceeds from issuance of stock 10,304 764 1,583 Proceeds from issuance of long-term debt 135 - 7,500 Financing costs (400) - - Proceeds from convertible note payable 200 - - Net proceeds from short-term borrowings - 14,400 - Principal payments on long-term debt (7) (761) (1,564) Bank overdraft - (410) 410 --------- --------- --------- Net cash provided by financing activities 10,232 13,993 7,929 --------- --------- ---------Net increase (decrease) in cash and cash equivalents 193 1,771 (1,833)Cash and cash equivalents, beginning of period 3,229 1,458 3,291 --------- --------- --------- Page 63Cash and cash equivalents, end of period $ 3,422 $ 3,229 $ 1,458 ========= ========= =========Non-cash financing and investing activities:Settlement of note receivable from officer $ 841 $ - $ -Common stock issued upon conversion of preferred stock 14,020 - -Issuance of preferred stock with loan extension 5,000 - -Issuance of common stock upon conversion of note payable 212 - -Exchange of deferred stock units for common stock 1,054 43 -Payment of preferred stock dividends with common stock - 908 245See accompanying notes to the consolidated financial statements. Page 64 CADIZ INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY--------------------------------------------------------------------------------For the Years Ended December 31, 2003, 2002 and 2001($ in thousands)-------------------------------------------------------------------------------- PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL --------------- ------------ PAID-IN ACCUMULATED STOCKHOLDERS' SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY ------ ------ ------ ------ ------- ------- ------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Balance as of December 31, 2000 - - 1,426,987 $ 14 $ 143,049 $(109,340) $ 33,723Exercise of stock options and stock awards - - 13,247 - 1,583 - 1,583 Issuance of warrants to lenders - - - - 1,435 - 1,435Payment of preferred stock dividends with common stock - - 999 - 245 - 245Preferred stock dividend - - - - (591) - (591)Non-recurring compensation - - - - 5,537 - 5,537Stock issued in connection with Series E-1 and E-2 convertible preferred stock - - 1,600 - 320 - 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 - - 1,442,833 14 152,751 (135,062) 17,703Exercise of stock options - - 5,741 1 763 - 764Issuances of common stock to lender - - 1,000 - 208 - 208Beneficial conversion feature for convertible notes payable - - - - 884 - 884Exchange of deferred stock units for common stock - - 3,482 - 43 - 43Issuance of warrants to lenders - - - - 2,703 - 2,703Payment of preferred stock dividends with common stock - - 5,603 - 908 - 908Preferred stock dividend - - - - (1,125) - (1,125)Imputed dividend from warrants and deferred beneficial conversion Source: CADIZ INC, 10-K, November 02, 2004Powered 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. feature - - - - (984) - (984)Net loss - - - - - (22,225) (22,225) ------- ---- --------- ---- --------- --------- ---------Balance as of December 31, 2002 - - 1,458,659 15 156,151 (157,287) (1,121) Page 65Exchange of deferred stock units for common stock - - 26,027 - 1,054 - 1,054Issuance of common stock for cash - - 4,112,000 41 10,239 - 10,280Issuance of stock to lenders - - 168,000 2 430 - 432Issuance of common stock for services - - 128,000 1 279 - 280Exercise of warrants - - 94,000 1 23 - 24Conversion of Series D and E convertible preferred stock - - 400,000 4 14,016 - 14,020Conversion of convertible note payable - - 84,699 1 211 - 212Beneficial conversion feature of note payable - - - - 90 - 90Preferred stock dividend - - - - (918) - (918)Imputed dividend from warrants and deferred beneficial conversion feature - - - - (1,600) - (1,600)Issuance of Series F convertible preferred stock 100,000 1 - - 4,999 - 5,000Net loss - - - - - (11,536) (11,536) ------- ---- --------- ---- --------- --------- ---------Balance as of December 31, 2003 100,000 $ 1 6,471,385 $ 65 $ 184,974 $(168,823) $ 16,217 ======= ==== ========= ==== ========= ========= =========See accompanying notes to the consolidated financial statements. Page 66 CADIZ INC. NOTES TO THE CONSOLIDATE FINANCIAL STATEMENTS =============================================NOTE 1 - DESCRIPTION OF BUSINESS-------------------------------- The Company had agricultural operations through its wholly-owned subsidiary, Sun World International, Inc. and itssubsidiaries, collectively referred to as "Sun World," and isSource: CADIZ INC, 10-K, November 02, 2004Powered 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. developing the water resource segment of its business. With SunWorld's filing of voluntary petitions for relief under Chapter 11of the Bankruptcy code as further described below, the primarybusiness of the Company is to acquire and develop waterresources. The Company has created a complementary portfolio ofassets encompassing undeveloped land with high-qualitygroundwater resources and/or storage potential, locatedthroughout central and southern California with valuable waterrights, and other contractual water rights. Management believesthat, with both the increasing scarcity of water supplies inCalifornia and an increasing population, the Company's access towater could provide it with a competitive advantage as a supplierof water. The Company's primary asset consists of three blocks of largelycontiguous land in eastern San Bernardino County, California.This land position totals approximately 45,000 acres. Virtuallyall of this land is underlain by high-quality groundwaterresources with demonstrated potential for various applications,including water storage and supply programs, and agricultural,municipal, recreational and industrial development. Two of thethree blocks of land are located in proximity to the ColoradoRiver Aqueduct, the major source of imported water for southernCalifornia. The third block of land is located near the ColoradoRiver. The value of this asset arises from a combination ofconsiderable population increases and limited water suppliesthroughout southern California. In addition, most of thepopulation centers in southern California are not located wheresignificant precipitation occurs requiring the importation ofwater from other parts of the state. The Company thereforebelieves that a competitive advantage exists for those companiesthat possess or can provide high quality, reliable and affordablewater to major population centers. Therefore, notwithstanding certain actions taken in 2002 bythe Metropolitan Water District of Southern California("Metropolitan"), as described below, the Company continues toexpect to be able to use its water resources to participate in abroad variety of water storage and supply, transfer, exchange andconservation programs with public agencies and other parties. In 1997, the Company commenced discussions with Metropolitanin order to develop principles and terms for a long-termagreement for a joint venture water storage and supply program onand under its desert properties, sometimes referred to as the"Cadiz Program". Following extensive negotiations with theCompany, in April 2001 Metropolitan's Board of Directors approveddefinitive economic terms and responsibilities, which were toserve as the basis for a final agreement to be executed betweenthe Company and Metropolitan, subject to the then-ongoingenvironmental review process. The Cadiz Program would have provided Metropolitan with avaluable increase in water supply during periods of drought orother emergencies, as well as greater reliability and flexibilityin operation of its Colorado River Aqueduct. During wet years,surplus water from the Colorado River would be stored in theaquifer system underlying Cadiz' land. When needed, Page 67the stored water, together with indigenous groundwater, would be returned to the Colorado River Aqueduct for distribution to Metropolitan's member agencies throughout six southern California counties. On August 29, 2002, the U.S. Department of Interior approvedthe Final Environmental Impact Statement for the Cadiz Programand issued its Record of Decision, the final step in the federalenvironmental review process for the Cadiz Program. The Record ofDecision amends the California Desert Conservation Area Plan foran exception to the utility corridor element and offered toMetropolitan a right-of-way grant necessary for the constructionSource: CADIZ INC, 10-K, November 02, 2004Powered 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 operation of the Cadiz Program. On October 8, 2002, Metropolitan's Board consideredacceptance of the Record of Decision and the terms and conditionsof the right-of-way grant. The Board voted not to adoptMetropolitan staff's recommendation to approve the terms andconditions of the right-of-way grant issued by the Department ofthe Interior for the Cadiz Program by a vote of 47.11% in favorand 47.36% against the recommendation. Instead, the Board votedfor an alternative motion to reject the terms and conditions ofthe right-of-way grant and to not proceed with the Cadiz Programby a vote of 50.25% in favor and 44.22% against. Irrespective of Metropolitan's actions, SouthernCalifornia's need for water storage and supply programs has notabated. The Company believes there are several differentscenarios to maximize the value of this water resource, all ofwhich are under current evaluation. The Company believes there are a variety of scenarios underwhich the value of the Cadiz Program may be realized.Exploratory discussions have been initiated with representativesof governmental organizations, water agencies, and private waterusers with regard to their expressed interest in implementationof the Cadiz Program. Several such discussions have been heldwith water agencies that are independently seeking reliability ofsupply. Other discussions have focused on the possibility ofexchanging water stored at the Cadiz Program with watercontractors in other regions in California. In addition, thecurrent drought within the Colorado River watershed has served asan impetus to cooperative discussions between states, with thegoal that interstate exchanges and transfers may also becomefeasible in the future. Because of the Company's long-term relationship withMetropolitan, the Company also intends to pursue discussions withthe agency in an effort to determine whether there are termsacceptable to both parties under which the Cadiz Program could beimplemented. With the recent finalization of the QuantificationSettlement Agreement (QSA), an agreement between the Secretary ofthe Interior, the State of California, Metropolitan and threeother southern California water agencies quantifying the amountof water California's Colorado River users could expect on anannual basis, Metropolitan's Colorado River supplies are nowspecified and limited only by the variable volume of flow on theriver. To meet the growing needs of its service area,Metropolitan must take advantage of all opportunities to storeavailable Colorado River water during periods of surplus. Withvirtually all environmental permits and approvals in place forthe Cadiz Program, except for those dependent upon Metropolitan'scertification of the Environmental Impact Report (EIR), theCompany believes a partnership with Metropolitan could be renewedin a timely manner if terms acceptable to both parties were to benegotiated. Page 68 Sun World is a large vertically integrated agriculturalcompany that owns more than 18,000 acres of land, primarilylocated in two major growing areas of California: the San JoaquinValley and the Coachella Valley. Fresh produce, including tablegrapes, stonefruit, citrus, peppers and watermelons, is marketedand shipped to food wholesalers and retailers throughout theUnited States and to more than 30 foreign countries. Sun Worldowns three cold storage and/or packing facilities in California,of which two are operated and one is leased to a third party. On January 30, 2003, Sun World and certain of itssubsidiaries (Sun Desert Inc., Coachella Growers, and SunWorld/Rayo) filed voluntary petitions for relief under Chapter 11of the Bankruptcy Code. The filing was made in the United StatesBankruptcy Court, Central District of California, RiversideDivision. Sun World sought bankruptcy protection in order toaccess a seasonal financing package of up to $40 million toprovide working capital through the 2003-2004 growing seasons.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Under the protection of Chapter 11, the Company is managing itsaffairs and operating its business as a debtor-in-possessionwhile it develops its Plan of Reorganization. Liabilitiessubject to compromise at December 31, 2003 are summarized asfollows (dollars in thousands): Accounts payable $ 4,311 Interest payable 3,795 Due to parent company 13,500 Unsecured notes payable 5,000 Secured notes payable 115,000 --------- Total $ 141,606 ========= As a debtor-in-possession, Sun World is authorized tocontinue to operate as an ongoing business, but may not engage intransactions outside the ordinary course of business without theapproval of the Bankruptcy Court. Under the Bankruptcy Code,actions to collect pre-petition indebtedness, as well as mostother pending litigation, are stayed and other contractualobligations against Sun World may not be enforced. In addition,under the Bankruptcy Code, Sun World may assume or rejectexecutory contracts, including lease obligations. Partiesaffected by these rejections may file claims with the Court inaccordance with the reorganization process. Absent an order ofthe Court, substantially all pre-petition liabilities are subjectto settlement under a plan of reorganization to be voted upon bycreditors and equity holders and approved by the BankruptcyCourt. The four Sun World entities are the joint proponents of theDebtors' Joint Plan of Reorganization Dated November 24, 2003(the "Plan"). Under the Plan, which is subject to amendment andmodification, the Reorganized Sun World will continue to operateas a going concern on and after the Plan's effective date. ThePlan provides for the restructuring of Sun World's balance sheetby providing for Sun World to issue equity interests in theReorganized Company to the holders of its First Mortgage Notes infull satisfaction of their mortgage note claims; for the paymentin full of convenience claims and trade claims; and for Sun Worldto issue equity interests in the reorganized company to entitiesholding certain other unsecured claims in full satisfaction ofthose claims. Exit financing to be provided by an exit lenderunder Page 69the Plan should meet the Company's need for seasonalfinancing following the effective date. The hearing to considerthe adequacy of the disclosure statement accompanying the Plan,most recently scheduled for June 11, 2004, has been subject toseveral postponements and no hearing date is currently scheduled. In Sun World's filings with the Bankruptcy Court, Sun World hasreported that it believes that the Plan likely cannot be confirmedabsent the acceptance of the holders of the First Mortgage Notes, in their capacity as secured creditors. Sun World has further reportedto the Bankruptcy Court that the holders of the First Mortgage Noteshave not reached a consensus with respect to certain corporate governanceissues relating to the reorganized company, and that they have beenunable to finalize a shareholder agreement term sheet. In the meantime,Sun World has, with Bankruptcy Court approval, expanded the scope of its engagement with Ernst & Young Corporate Finance LLC to include servicesrelated to (i) a sale of substantially all of its assets pursuant to amotion or a plan or reorganization, and (ii) obtaining an equity investorand financing under a plan of reorganization and is actively pursuing thesales/investment process. Sun World has chosen to delay the preparationof an amended Plan and disclosure statement and the scheduling of adisclosure statement hearing date pending the outcome of these most recentdevelopments. Sun World's exclusivity period (i.e. the period during whichonly Sun World may file a plan of reorganization) currently expires onDecember 31, 2004. The Company cannot predict at this time what changes, Source: CADIZ INC, 10-K, November 02, 2004Powered 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. if any, will be made to the Plan as a result of the foregoing or whetheror not the Plan, as amended, will be approved. At January 30, 2003, due to the Company's loss of controlover the operations of Sun World, the financial statements are nolonger consolidated with those of Cadiz. Instead, Cadiz accountsfor its investment in Sun World on the cost basis of accounting. Asa result, the Company wrote off its net investment in Sun World of$195 thousand at the Chapter 11 filing date because it does notanticipate being able to recover its investment.NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES---------------------------------------------------BASIS OF PRESENTATION The financial statements of the Company have been preparedusing accounting principles applicable to a going concern, whichassumes realization of assets and settlement of liabilities inthe normal course of business. The Company incurred losses of$11.5 million and $22.2 million in 2003 and 2002, respectively,had working capital of $1.3 million at December 31, 2003, andused cash in operations of $6.6 million and $10.1 million in 2003and 2002, respectively. In addition, Sun World filed forreorganization under Chapter 11 of the Bankruptcy Code. Thefinancial statements of the Company do not purport to reflect orto provide for all of the consequences of an ongoing Chapter 11reorganization. Specifically, but not all-inclusive, thefinancial statements of the Company do not present: (a) therealizable value of assets on a liquidation basis or theavailability of such assets to satisfy liabilities, (b) theamount which will ultimately be paid to settle liabilities andcontingencies which may be allowed in the Chapter 11reorganization, or (c) the effect of changes which may be maderesulting from a Plan of Reorganization. The appropriateness ofusing the going-concern basis is dependent upon, Page 70among other things, confirmation of a Plan of Reorganization, futureprofitable operations, the ability to comply with provisions offinancing agreements and the ability to generate sufficient cashfrom operations to meet obligations. During the quarter ended June 30, 2003, the Company raised$1.7 million cash and during the quarter ended December 31, 2003,$8.6 million in cash through private sales of common stock. Basedon current forecasts, the Company believes it has sufficientresources to fund normal operations until May 2005. There isno assurance that additional financing (public or private) willbe available on acceptable terms or at all. If the Company issuesadditional equity securities to raise funds, the ownershippercentage of the Company's existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior tothose of existing holders of common stock. If the Company cannotraise needed funds, it might be forced to make furthersubstantial reductions in its operating expenses, which couldadversely affect its ability to implement its current businessplan and ultimately its viability as a company. These financialstatements do not include any adjustments that might result fromthese uncertainties.PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accountsof the Company and those of Sun World until January 30, 2003, atwhich date Sun World and certain of its subsidiaries (Sun DesertInc., Coachella Growers, and Sun World/Rayo) filed voluntarypetitions for relief under Chapter 11 of the Bankruptcy Code. Asof that date, due to the Company's loss of control over theoperations of Sun World, the financial statements of Sun Worldare no longer consolidated with those of Cadiz, but instead,Cadiz accounts for its investment in Sun World on the cost basisof accounting. As a result of changing to the cost basis ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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. accounting on January 31, 2003, the Company had a net investmentin Sun World of $195,000 consisting of loans and other amounts due from Sun World of $13,500,000 less losses in excess of investment in Sun World of $13,305,000. The Company wrote off its net investment in Sun World during the quarter ended March 31, 2003 because it does not anticipate being able to recoverits investment.ONE-FOR-25 REVERSE STOCK SPLIT In December 2003, the Company effected a one-for-25 reversestock split. All share and per share information in theaccompanying financial statements have been retroactivelyrestated to reflect the effect of this stock split.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 Page 71amounts of assets and liabilities and disclosure of contingent assets and liabilities 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 thevaluation of inventory, goodwill and other long-lived assets, anddeferred tax assets. Actual results could differ from thoseestimates.REVENUE RECOGNITION Sun World 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 fees are recorded when earnedunder the terms of the related agreement. Revenues attributable to one national retailer totaled $0.1million (2.2%) in 2003, $9.6 million (8.4%) in 2002 and $7.9million (8.5%) in 2001. Revenues attributable to another nationalretailer totaled $.05 million (16.6%) in 2003. Export sales accounted for approximately 6.1%, 12.1% and 8.4% of the Company's revenues for the years ended December 31, 2003, 2002 and 2001, respectively. Services and license revenues were less than 10% of total revenues foreach of the years in the three-year period ended December 31,2003.RESEARCH AND DEVELOPMENT Sun World incurs costs to research and develop new varietiesof proprietary products. Research and development costs areexpensed as incurred. Such costs were approximately $183,000for the month ended January 31, 2003, $2,424,000 for the yearended December 31, 2002, and $2,023,000 for the year endedDecember 31, 2001.NET LOSS PER COMMON SHARE Basic Earnings Per Share (EPS) is computed by dividing thenet loss, after deduction for preferred dividends either accruedor imputed, if any, by the weighted-average common sharesoutstanding. Options, deferred stock units, warrants, andparticipating and redeemable preferred stock convertible into orexercisable for certain shares of the Company's common stock,Source: CADIZ INC, 10-K, November 02, 2004Powered 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. were not considered in the computation of diluted EPS becausetheir inclusion would have been antidilutive. Had theseinstruments been included, the fully diluted weighted averageshares outstanding would have increased by approximately 125,000 shares (including the effect of the convertible Series F preferred stock issued December 15, 2003), 333,000 shares, and 92,000 shares for the years ended December 31, 2003, 2002 and 2001, respectively.STOCK-BASED COMPENSATION As permitted under Statement of Financial AccountingStandards No. 123 ("SFAS 123"), "Accounting for Stock-BasedCompensation", the Company has elected to follow AccountingPrinciples Board Opinion No. 25, "Accounting for Stock Issued toEmployees" in accounting for its stock options and other stock-based employee awards. Pro forma information regarding net lossand loss per share, as calculated under the provisions of SFAS123, are disclosed in the Page 72table below. The Company accounts for equity securities issued to non-employees in accordance with the provision of SFAS 123 and Emerging Issues Task Force 96-18. Had compensation cost for these plans been determined usingfair value the Company's net loss and net loss per common sharewould have increased to the following pro forma amounts (dollarsin thousands except per share amounts): YEAR ENDED DECEMBER 31, 2003 2002 2001 ---- ---- ----Net loss applicable to common stock: As reported $ (14,054) $ (24,334) $ (26,754) Expense under SFAS 123 (150) (648) (949) --------- --------- --------- Pro forma $ (14,204) $ (24,982) $ (27,703) ========= ========= =========Net loss per common share: As reported $ (6.39) $ (16.76) $ (18.66) Expense under SFAS 123 (0.07) (0.45) (0.66) --------- --------- --------- Pro forma $ (6.46) $ (17.21) $ (19.32) ========= ========= =========CASH AND CASH EQUIVALENTS The Company considers all short-term deposits with anoriginal 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.RESTRICTED CASH At the closing of the secured term lending, the Companydeposited into the lender's cash collateral account the sum of$2,142,000. The deposit represented collateral for futureinterest payments on the Company's credit facility accruing atthe rate of 4% per annum from October 1, 2003 until March 31,2005. This amount is shown on the balance sheet as RestrictedCash.INVENTORIES Growing crops, harvested crops, and materials and suppliesare stated at the lower of cost or market, on a first-in, first-out (FIFO) basis. Growing and harvested crop inventory includesSource: CADIZ INC, 10-K, November 02, 2004Powered 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. direct costs and an allocation of indirect costs.PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS Property, plant, equipment and water programs are stated atcost. The Company capitalizes direct and certain indirect costs ofplanting and developing orchards and vineyards during thedevelopment period, which varies by crop and generally Page 73ranges from three to seven years. Depreciation commences in the yearcommercial production is achieved. 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 rights and water storage and supply programs arestated at cost. All costs directly attributable to thedevelopment of such programs are being capitalized by theCompany. These costs, which are expected to be recovered throughfuture revenues, consist of direct labor, drilling costs,consulting fees for various engineering, hydrological,environmental and feasibility studies, and other professional andlegal fees.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 estimatedfair value. As a result of the actions taken by Metropolitan inthe fourth quarter of 2002 as described in Note 1, the Company,with the assistance of an independent valuation firm, evaluatedthe carrying value of its water program and determined that theasset was not impaired and that the costs will be recoveredthrough implementation of the Cadiz Program either with othergovernment organizations, water agencies and private water users,or through implementation of the Cadiz Program on termsacceptable to both Cadiz and Metropolitan. During the years ended December 31, 2002 and 2001, theCompany incurred costs to remove certain underperforming crops,primarily stonefruit, citrus, and wine grapes. The Companyrecorded a charge of $4,514,000 and $736,000 in 2002 and 2001,respectively, in connection with the removal costs and write offof capitalized costs related to these crops which is shown underthe heading "Removal of underperforming crops" on theConsolidated Statement of Operations.GOODWILL AND OTHER ASSETS As a result of a merger in May 1988 between two companies,which eventually became known as Cadiz Inc., goodwill in theamount of $7,006,000 was recorded. This amount was beingamortized on a straight-line basis over thirty years.Accumulated amortization was $3,193,000 at December 31, 2001. InJune 2001, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standards No. 142, ("SFAS No.142") "Goodwill and Other Intangible Assets". Under SFAS No. 142goodwill and intangible assets deemed to have indefinite livesare no longer amortized but will be subject to annual impairmentSource: CADIZ INC, 10-K, November 02, 2004Powered 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. tests in accordance with the Statement. Upon adoption of SFASNo. 142, effective at the Page 74beginning of fiscal 2002, the Company performed a transitional fair value based impairment test and determined that its goodwill was not impaired. In addition, cessation of amortization of goodwill upon adoption of SFAS No. 142 did not have a material impact upon the Company's financial position or results of operations. Goodwill is tested for impairment annually in the first quarter, or earlier if events occur which require an impairment analysis be performed. As a result of the actions taken by Metropolitan in the fourth quarterof 2002 as described in Note 1, the Company, with the assistanceof an independent valuation firm, performed an impairment test ofits goodwill and determined that its goodwill was not impaired.In addition, in the first quarter of 2003, the Company, with theassistance of an independent appraisal firm, performed its annualimpairment test of goodwill and determined its goodwill was notimpaired. Amortization expense on goodwill was $234,000 for the yearended December 31, 2001. As required by SFAS No. 142, theresults for the prior years have not been restated. Had theCompany applied the non-amortization provisions related togoodwill under SFAS No. 142 for all periods presented, theCompany's net loss and net loss per share would have been asfollows (in thousands, except per share amounts): 2003 2002 2001 ---- ---- ----Reported net loss applicable to common stock $ (14,054) $ (24,334) $ (26,754)Goodwill amortization, net of tax - - 234 --------- --------- ---------Adjusted net loss $ (14,054) $ (24,334) $ (26,520) ========= ========= =========Basic and diluted net loss per share: As reported $ (6.39) $ (16.76) $ (18.66) Goodwill amortization - - 0.16 --------- --------- ---------Adjusted basic and diluted net loss per share (6.39) $ (16.76) $ (18.50) ========= ========= ========= Capitalized loan fees represent costs incurred to obtaindebt financing. Such costs are amortized over the life of therelated loan. At December 31, 2003, the majority of capitalizedloan fees relate to costs incurred in connection with theextension of the debt with ING described in Note 10. At December31, 2002, the majority of capitalized loan fees relate to theissuance of the First Mortgage Notes described in Note 10. Trademark development costs represent legal costs incurredto obtain and defend patents and trademarks related to theCompany's proprietary products throughout the world. Such costsare capitalized and amortized over their estimated useful life,which range from 10 to 20 years. In October 1999, Sun World entered into a managementagreement with Kingdom Agricultural Development Company (KADCO)to develop and manage up to 100,000 acres of agricultural land insouthern Egypt called the Tushka project. KADCO is controlled byHis Royal Highness Prince Alwaleed Bin Talal Bin AbdulazizAlsuad. As compensation for project development and management,Sun World earns a quarterly fee of $312,500 based upon meetingdevelopmental milestones to be paid through an equity interest inKADCO. The Page 75Source: CADIZ INC, 10-K, November 02, 2004Powered 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. management agreement expired on September 30, 2003.Sun World will receive licensing revenues from KADCO in thefuture based upon planting of proprietary varieties at the Tushkaproject. KADCO is currently engaged in a private placement toraise the required funds to develop the project. Sun Worldanticipated receiving shares in KADCO for payment of its projectdevelopment and management fee in connection with the completionof the private placement. The amount of shares to be receivedwill be the current per share price used for the privateplacement divided into the total amount of management fee earnedwhich is shown under the heading, "Receivable from KADCO to bepaid in common shares" in Note 7.INCOME TAXES Income taxes are provided for using an asset and liabilityapproach which requires the recognition of deferred tax assetsand liabilities for the expected future tax consequences oftemporary differences between the financial statement and taxbases of assets and liabilities at the applicable enacted taxrates. A valuation allowance is provided when it is more likelythan not that some portion or all of the deferred tax assets willnot be realized.SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest during the years ended December 31,2003, 2002 and 2001 was $3,913,000, $15,262,000, and $16,020,000,respectively. Cash paid for income taxes during the years endedDecember 31, 2003, 2002 and 2001 was $0, $71,000 and $57,000,respectively.NEW ACCOUNTING PRONOUNCEMENTS In April 2002, the Financial Accounting Standards Board(FASB) issued Statement of Financial Accounting Standard (SFAS)No. 145, which rescinds FASB Statement No. 4, Reporting Gains andLosses from Extinguishment of Debt, FASB Statement No. 44,Accounting for Intangible Assets of Motor Carriers, and FASBStatement No. 64, Extinguishments of Debt Made to Satisfy SinkingFund Requirements as well as amends FASB No. 13, to make varioustechnical various corrections. The Statement is effective forfinancial statements issued after May 15, 2002. The adoption ofthis standard did not have a material impact on the Company'sfinancial position or results of operations. In June 2002, the FASB issued Statement of FinancialAccounting Standards No. 146, Accounting for Costs Associatedwith Exit or Disposal Activities ("SFAS 146"), which addressesfinancial accounting and reporting for costs associated with exitor disposal activities and supersedes Emerging Issues Task Force("EITF") Issue 94-3, Liability Recognition for Certain EmployeeTermination Benefits and Other Costs to Exit an Activity(including Certain Costs Incurred in a Restructuring). SFAS 146requires that a liability for a cost associated with an exit ordisposal activity be recognized when the liability is incurred.Under EITF Issue 94-3, a liability for an exit cost as defined inEITF Issue 94-3 was recognized at the date of an entity scommitment to an exit plan. SFAS 146 also establishes that theliability should initially be measured and recorded at fairvalue. The Company adopted the provisions of SFAS 146 effectiveJanuary 1, 2003 and such adoption did not have a material impacton the consolidated financial statements. Page 76 In November 2002, the FASB issued Interpretation No. 45,Guarantor s Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees and Indebtedness ofOthers ("FIN 45"). FIN 45 elaborates on the disclosures to bemade by the guarantor in its interim and annual financialstatements about its obligations under certain guarantees that ithas issued. It also requires that a guarantor recognize, at theinception of a guarantee, a liability for the fair value of theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. obligation undertaken in issuing the guarantee. The Companyadopted the disclosure provisions of FIN 45 during the fourthquarter of 2002 and the recognition provisions of FIN 45effective January 1, 2003. Such adoption did not have a materialimpact on the consolidated financial statements. In December 2002, the FASB issued SFAS No. 148, Accountingfor Stock-Based Compensation-Transition and Disclosure-anamendment of SFAS No. 123. This Statement amends FASB StatementNo. 123, Accounting for Stock-Based Compensation, to providealternative methods of transition for a voluntary change to thefair value based method of accounting for stock-based employeecompensation. In addition, this Statement amends the disclosurerequirements of Statement 123 to require prominent disclosures inboth annual and interim financial statements about the method ofaccounting for stock-based employee compensation and the effectof the method used on reported results. The amendments toStatement 123 in paragraphs 2(a)-2(e) of this Statement shall beeffective for financial statements for fiscal years ending afterDecember 15, 2002. Earlier application of the transitionprovisions in paragraphs 2(a)-2(d) is permitted for entities witha fiscal year ending prior to December 15, 2002, provided thatfinancial statements for the 2002 fiscal year have not beenissued as of the date this Statement is issued. Early applicationof the disclosure provisions in paragraph 2(e) is encouraged. Theamendment to Statement 123 in paragraph 2(f) of this Statementand the amendment to Opinion 28 in paragraph 3 shall be effectivefor financial reports containing condensed financial statementsfor interim periods beginning after December 15, 2002. Theadoption of SFAS No. 148 did not have a material impact on itsfinancial position or results of its operations. In January 2003, FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities ("FIN 46"). Ingeneral, a variable interest entity is a corporation,partnership, trust or any other legal structure used for businesspurposes that either (a) does not have equity investors withvoting rights or (b) has equity investors that do not providesufficient financial resources for the entity to support itsactivities. FIN 46 requires certain variable interest entities tobe consolidated by the primary beneficiary of the entity if theinvestors do not have the characteristics of a controllingfinancial interest or do not have sufficient equity at risk forthe entity to finance its activities without additionalsubordinated financial support from other parties. Theconsolidation requirements of FIN 46 apply immediately tovariable interest entities created after January 31, 2003. TheCompany adopted the provisions of FIN 46 effective February 1,2003 and such adoption did not have an impact on its consolidatedfinancial statements since it currently has no variable interestentities. In December 2003, the FASB issued FIN 46R with respectto variable interest entities created before January 31, 2003,which among other things, revised the implementation date to thefirst year or interim period ending after March 15, 2004, withthe exception of Special Purpose Entities ( SPE). Theconsolidation requirements apply to all SPE s in the first yearor interim period ending after December 15, 2003. The Company'sadoption of the provisions of FIN 46R is not expected to have amaterial impact on its consolidated financial statements. Page 77 In April 2003, FASB issued Statement of Financial AccountingStandards No. 149, Amendment of Statement 133 on DerivativeInstruments and Hedging Activities ("SFAS 149"). SFAS 149 amendsand clarifies accounting for derivative instruments, includingcertain derivative instruments embedded in other contracts, andfor hedging activities under SFAS 133. SFAS 149 is effective forcontracts and hedging relationships entered into or modifiedafter June 30, 2003. The Company adopted the provisions of SFAS149 effective June 30, 2003 and such adoption did not have animpact on its consolidated financial statements since the Companyhas not entered into any derivative or hedging transactions. In May 2003, FASB issued Statement of Financial AccountingSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Standards No. 150, Accounting for Certain Financial Instrumentswith Characteristics of Both Liabilities and Equity ("SFAS 150").SFAS 150 establishes standards for how an issuer classifies andmeasures certain financial instruments with characteristics ofboth debt and equity and requires an issuer to classify thefollowing instruments as liabilities in its balance sheet: * a financial instrument issued in the form of shares that is mandatorily redeemable and embodies an unconditional obligation that requires the issuer to redeem it by transferring its assets at a specified or determinable date or upon an event that is certain to occur; * a financial instrument, other than an outstanding share, that embodies an obligation to repurchase the issuer s equity shares, or is indexed to such an obligation, and requires the issuer to settle the obligation by transferring assets; and * a financial instrument that embodies an unconditional obligation that the issuer must settle by issuing a variable number of its equity shares if the monetary value of the obligation is based solely or predominantly on (1) a fixed monetary amount, (2) variations in something other than the fair value of the issuer s equity shares, or (3) variations inversely related to changes in the fair value of the issuer's equity shares. In November 2003, FASB issued FASB Staff Position No. 150-3which deferred the effective dates for applying certainprovisions of SFAS 150 related to mandatorily redeemablefinancial instruments of certain non-public entities and certainmandatorily redeemable non-controlling interests for public andnon-public companies. For public entities, SFAS 150 is effectivefor mandatorily redeemable financial instruments entered into ormodified after May 31, 2003 and is effective for all otherfinancial instruments as of the first interim period beginningafter June 15, 2003. For mandatorily redeemable non-controllinginterests that would not have to be classified as liabilities bya subsidiary under the exception in paragraph 9 of SFAS 150, butwould be classified as liabilities by the parent, theclassification and measurement provisions of SFAS 150 aredeferred indefinitely. The measurement provisions of SFAS 150 arealso deferred indefinitely for other mandatorily redeemable non-controlling interests that were issued before November 4, 2003.For those instruments, the measurement guidance for redeemableshares and non-controlling interests in other literature shallapply during the deferral period. The Company adopted theprovisions of SFAS 150 effective June 30, 2003, and such adoptiondid not have an impact on our consolidated financial statements. Page 78 In March 2004, the consensus of Emerging Issues Task Force (EITF)Issue No. 03-06, Participating Securities and the Two-Class Methodunder FASB Statement 128, was published. EITF Issue No. 03-06 addresses the computations of earnings per share by companies that have issued securities other than common stock that contractuallyentitle the holder to participate in dividends and earnings of thecompany. Further guidance on the application and allocations of thetwo-class method of calculating earnings per share is also included.The provisions of EITF Issue No. 03-06 will be effective for reportingperiods beginning after March 31, 2004. The adoption of this guidanceis not expected to have significant impact on the Company's financialresults of operations and financial position.NOTE 3 - NOTE RECEIVABLE FROM OFFICER------------------------------------- On July 5, 2002, the chief executive officer ("CEO") of theCompany issued a promissory note to the Company for a loan of upto $1,000,000 to be made by the Company to the CEO. Under theterms of the promissory note, the principal and unpaid interest,at 6% per annum, was due and payable on July 5, 2003. The notewas collateralized by a pledge of shares of common stock,Source: CADIZ INC, 10-K, November 02, 2004Powered 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. restricted stock and deferred stock units so that the aggregatefair market value of the pledged collateral was equal to orgreater than 133% of the outstanding principal and accruedinterest due on the note. On July 5, 2003, the Company and CEO entered into an"Agreement Regarding Satisfaction of Note Obligation" (the"Agreement"). Under the terms of the Agreement, the Companydetermined that it was obligated to pay the CEO effectiveFebruary 1, 2003, $800,000 as a termination payment under apreviously existing employment agreement. This overallsettlement with Mr. Brackpool was made effective July 5, 2003, byway of a corresponding reduction in Mr. Brackpool's obligationsto Cadiz under the loan. This reduction, along with cashpayments by Mr. Brackpool in the amount of $181,013 and anapplication of $50,000 of accrued but unpaid compensation owed byCadiz to Mr. Brackpool under his post February 1, 2003 employmentarrangements with Cadiz, resulted in the settlement in full byMr. Brackpool of his obligations under this loan. The Agreement of Employment dated July 5, 2003, has aninitial term of February 1, 2003, through September 30, 2003;provides for a fixed amount of monthly compensation; and allowsfor a new employment agreement to be negotiated, if mutuallyagreeable, upon expiration of the term of the agreement.Although the initial term of the agreement has expired, the CEOcontinues to provide services to the Company under the terms ofthe agreement. Page 79NOTE 4 - ACCOUNTS RECEIVABLE---------------------------- Accounts receivable at December 31, 2002, consisted of thefollowing (dollars in thousands): DECEMBER 31, 2002 ---- Trade receivables $ 4,303 Due from unaffiliated growers 24 Other 2,952 --------- 7,279 Less allowance for doubtful accounts (547) --------- $ 6,732 ========= Substantially all trade receivables in 2002 are from largedomestic national and regional supermarket chain stores andproduce brokers and are unsecured. Amounts due from unaffiliatedgrowers represent receivables for harvest advances and forservices (harvest, haul and pack) provided on behalf of growersunder agreement with Sun World 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 5 - INVENTORIES-------------------- Inventories at December 31, 2002, consisted of the following(dollars in thousands): DECEMBER 31, 2002 ---- Growing crops $ 10,702Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Materials and supplies 2,525 Harvested product 286 --------- $ 13,513 ========= Page 80NOTE 6 - PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS------------------------------------------------------ Property, plant, equipment and water programs consist of thefollowing (dollars in thousands): DECEMBER 31, 2003 2002 ---- ---- Land and land improvements $ 22,010 $ 66,372 Permanent crops 6,494 61,994 Developing crops 192 11,624 Water programs 14,274 16,859 Buildings 1,408 22,620 Machinery and equipment 3,590 20,818 --------- --------- 47,968 200,287 Less accumulated depreciation (8,454) (45,359) --------- --------- $ 39,514 $ 154,928 ========= ========= Depreciation expense during the years ended December 31,2003, 2002 and 2001 was $683,000, $7,178,000 and $7,699,000respectively. Permanent crops and developing crops shown as Cadiz assetsare leased to Sun World and an unaffiliated third party as Cadiz does not conduct agricultural operations.NOTE 7 - OTHER ASSETS--------------------- Other assets consist of the following (dollars inthousands): DECEMBER 31, 2003 2002 ---- ---- Deferred loan costs, net $ 387 $ 1,156 Long-term receivables - 327 Capitalized trademark development, net - 1,934 Receivable from KADCO to be paid in common shares - 4,063 --------- --------- $ 387 $ 7,480 ========= ========= Amortization expense of deferred loan costs was $641,000,$5,761,000 and $3,748,000 in 2003, 2002, and 2001, respectively,and is included in interest expense in the statement ofoperations. Amortization expense for capitalized trademarkdevelopment was $60,000, $302,000, and $219,000 in 2003, 2002,and 2001, respectively. Page 81NOTE 8 - ACCRUED LIABILITIES---------------------------- Accrued liabilities consist of the following (dollars inSource: CADIZ INC, 10-K, November 02, 2004Powered 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. thousands): DECEMBER 31, 2003 2002 ---- ---- Interest $ 1,073 $ 2,934 Payroll, bonus, and benefits 248 2,731 Consulting fee 150 - Preferred stock dividends - 561 Other 74 590 --------- --------- $ 1,545 $ 6,816 ========= =========NOTE 9 - REVOLVING CREDIT FACILITY---------------------------------- In November 2002, Sun World was notified by its seasonalrevolving lender that it would not renew Sun World's revolvingCredit Facility for the 2003 growing season. The seasonalrevolver expired on November 30, 2002. Sun World sought andobtained extensions from its lender through January 31, 2003.During the extension period, Sun World sought to obtain seasonalfinancing from several different lenders. Each of these lenderswanted to have a first position on all of Sun World's assets inorder to lend outside of a Chapter 11 proceeding. This requiredthe holders of the First Mortgage Notes to modify their agreementwith Sun World. As outlined in Note 1, Sun World was unable toprocure the financing with the consent of all parties. OnJanuary 30, 2003, Sun World and certain of its subsidiaries fileda voluntary petition for Chapter 11. On January 31, 2003, theBankruptcy Court approved an interim $15 million dollar debtor-in-possession ("DIP") financing facility. On March 3, 2003, theBankruptcy Court approved an additional $25 million with the samelender for a final approved DIP financing facility of $40million. The DIP financing expires on November 30, 2004, bearsinterest at the greater of Prime plus 4% or 8.25% , and issecured by substantially all of Sun World's assets. Borrowingavailability is determined based on the lesser of (1) eligiblepercentages of inventory and accounts receivable plus a specifiedamount starting at $15 million and reduced by $150,000 per month;(2) certain multiples of trailing 12 months EBITDA as defined inthe credit agreement; or (3) eligible percentage of the currentvalue of all real property. Sun World is required to meet certainfinancial covenants. At December 31, 2002, $4.4 million was outstanding under SunWorld's Revolving Credit Facility that was subsequently paid offwith proceeds from the DIP financing on January 30, 2003. Page 82NOTE 10 - LONG-TERM DEBT------------------------ At December 31, 2003 and December 31, 2002, the carryingamount of the Company's outstanding debt is summarized as follows(dollars in thousands): DECEMBER 31, 2003 2002 ---- ---- Cadiz obligations: Senior term bank loan, interest payable semi-annually, interest per annum at 4% in cash and 8% paid in kind, due March 31, 2005. $ 35,000 $ - Senior term bank loan, interest payable quarterly, variable interest rate based upon LIBOR plus 3% (4.35% at December 31, Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 2002), due January 31, 2003 - 10,095 $25 million revolving line of credit, interest payable quarterly, variable interest rate based upon LIBOR plus 3% (4.35% at December 31, 2002), due January 31, 2003 - 25,000 Debt discount (4,747) (326) --------- --------- 30,253 34,769 --------- --------- Sun World obligations: Series B First Mortgage Notes, interest payable semi-annually with principal due in April 2004, interest at 11.25% - 115,000 Senior unsecured term loan, interest payable quarterly, due December 31, 2002, interest at (LIBOR plus 5% - 6.35% at December 31, 2002 and LIBOR plus 3% - 5.60% at December 31, 2001) - 5,000 Note payable to bank, quarterly principal installments of $72 plus interest payable monthly, due December 31, 2003, interest at prime(4.25% at December 31, 2002 and 4.75% at December 31, 2001) - 856 Note payable to insurance company, quarterly installments of $120 (including interest), due January 1, 2005, interest at 7.75% - 654 Other - 187 --------- --------- - 121,697 --------- --------- 30,253 156,466 Less current portion - (41,019) --------- --------- $ 30,253 $ 115,447 ========= ========= Pursuant to the Company's loan agreement, annual maturity oflong-term debt outstanding (in thousands), excluding $4,747,000representing the unamortized portion of debt Page 83discount, on December 31, 2003 is as follows: 2005 - $35,000.CADIZ OBLIGATIONS The senior term bank loan is secured by substantially all ofthe Company's non-Sun World related property. During 2001,pursuant to the loan agreement, the Company repriced certainwarrants previously issued. In February 2002, the Companycompleted an amendment to the loan that extended the maturitydate of the obligation to January 31, 2003. The interest rate isLIBOR plus 300 basis points, payable quarterly. The revolving credit facility was fully drawn at December31, 2002 and 2001, and was secured by a second lien onsubstantially all of the non-Sun World assets of the Company.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. During 2001, pursuant to the loan agreement, the Company repricedcertain warrants previously issued. In February 2002, theCompany completed an amendment to the facility that extended thematurity date of the obligation to January 31, 2003. Theinterest rate can either be LIBOR plus 300 basis points if paidin cash or LIBOR plus 700 basis points if paid in common stock.In March 2002, the revolving credit facility was increased from$15 million to $25 million, with $10 million of the $25 millionrevolver convertible into 1,250,000 of the Company's common stockany time prior to January 2003 at the election of the lender. Inconnection 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 theremaining term of the loan. On February 13, 2003, the lender of both the Company'ssenior term loan and $25 million revolving credit facilitydelivered to the Company a Notice of Default and Demand forPayment. On December 15, 2003, the Company entered into an amendmentof its senior term loan and revolving credit facility to extendthe maturity date through March 31, 2005 and can obtain furtherextensions through September 30, 2006, by maintaining sufficientbalances, among other conditions, in a cash collateral accountwith the lender. The maximum aggregate amount to be outstandingunder the amended credit facilities is $35 million. Theamendment of these credit facilities did not constitute atroubled debt restructuring and was accounted for as a debtmodification under EITF 96-19. In connection with thisamendment, the Company; * paid the lender $2,425,034 representing; (i) accrued interest through September 30, 2003 of $1,412,457 at the non default interest rate; (ii) accrued interest through September 30, 2003 of $612,577 at the default rate of interest; and (iii) $400,000 in fees; * issued to the lender 100,000 shares of series F Preferred stock initially convertible into 1,728,955 shares of common stock; and * deposited $2,142,280 in the cash collateral account with the lender representing prepaid interest through March 31, 2005. Page 84 The estimated value of the Series F preferred stock of $5million was recorded as a debt discount and is being amortizedover the initial term of the note through March 31, 2005. Interest under the amended credit facilities is payablesemiannually at the Company's option in either cash at 8% perannum, or in cash and paid in kind ("PIK"), at 4% per annum forthe cash portion and 8% per annum for the PIK portion. The PIKportion will be added to the outstanding principal balance. The terms of the amended loan facilities also requirecertain mandatory prepayments from the cash proceeds of futureequity issuances by the Company.SUN WORLD OBLIGATIONS In April 1997, Sun World 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 Sun World and its subsidiaries other than growingSource: CADIZ INC, 10-K, November 02, 2004Powered 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. crops, crop inventories and accounts receivable and proceedsthereof, which secure the Revolving Credit Facility. With theentering into the DIP Facility as described in Note 9, the noteholders now have a second position on substantially all of theCompany's assets for so long as the DIP Facility is outstanding.The First Mortgage Notes mature April 15, 2004, but areredeemable at the option of Sun World, in whole or in part, atany time prior to the maturity date. The First Mortgage Notesinclude covenants that do not allow for the payment of dividendsby the Company other than out of cumulative net income. As aresult of Sun World's Chapter 11 filing discussed in Note 2,principal payment on the First Mortgage Notes was suspended untila final plan of reorganization is approved. 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 Cadiz. Cadiz alsopledged all of the stock of Sun World as collateral for itsguarantee. The guarantees by the Sun World Subsidiary Guarantorsare full, unconditional, and joint and several. Sun World andthe Sun World Subsidiary Guarantors comprise all of the directand indirect subsidiaries of the Company other thaninconsequential subsidiaries. Additionally, management believesthat the direct and indirect non-guarantor subsidiaries of Cadizand Sun World Subsidiary Guarantors are inconsequential, bothindividually and in the aggregate, to the financial statements ofthe Company for all periods presented. In December 2000, Sun World entered into a two-year $5million senior unsecured term loan. In connection with obtainingthe loan, the Company issued 2,000 shares of the Cadiz' commonstock as well as certain warrants to purchase shares of the Cadizcommon stock were issued. The fair value of the stock and thewarrants were recorded as a debt discount and were fullyamortized over the life of the loan through December 31, 2002.At December 31, 2002, Sun World did not repay the loan and thus,Sun World was in default. With the default, pursuant to theterms of the agreement, the interest rate was increased by 2%.In connection with Sun Page 85World's Chapter 11 filing, all principal and interest on this obligation have been suspended.CONDENSED CONSOLIDATING FINANCIAL INFORMATION Condensed consolidating financial information as of December31, 2003 and 2002 and for the three years ended December 31, 2003for the Company is as follows (in thousands):CONSOLIDATING STATEMENTOF OPERATIONS INFORMATIONYEAR ENDED DECEMBER 31, 2003 CADIZ SUN WORLD ELIMINATIONS CONSOLIDATED ----- --------- ------------ ------------Revenues $ 303 $ 3,005 $ (146) $ 3,162 --------- --------- --------- ---------Costs and expenses: Cost of sales 333 2,653 (21) 2,965 General and administrative 4,653 707 (125) 5,235 Write off of investment in subsidiary 195 - - 195 Reorganization costs - 655 - 655 Depreciation and amortization 553 190 - 743 --------- --------- --------- --------- Total costs and Source: CADIZ INC, 10-K, November 02, 2004Powered 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. expenses 5,734 4,205 (146) 9,793 --------- --------- --------- ---------Operating loss (5,431) (1,200) - (6,631)Loss from subsidiary (2,469) - 2,469 -Interest expense, net 3,636 1,269 - 4,905 --------- --------- --------- ---------Loss before income taxes (11,536) (2,469) 2,469 (11,536)Income tax expense - - - - --------- --------- --------- --------- Net loss (11,536) (2,469) 2,469 (11,536)Less: Preferred stock dividends (918) - - (918) Imputed dividend on preferred stock (1,600) - - (1,600) --------- --------- --------- ---------Net loss applicable to common stock $ (14,054) $ (2,469) $ 2,469 $ (14,054) ========= ========= ========= ========= Page 86CONSOLIDATING BALANCE SHEET INFORMATIONDECEMBER 31, 2003 CADIZ SUN WORLD ELIMINATIONS CONSOLIDATED ----- --------- ------------ ------------ASSETSCurrent assets: Cash and cash equivalents $ 3,422 $ - $ - $ 3,422 Accounts receivable, net - - - - Prepaid expenses and other 248 - - 248 --------- --------- --------- --------- Total current assets 3,670 - - 3,670Property, plant, equipment and water programs, net 39,514 - - 39,514Goodwill 3,813 - - 3,813Restricted cash 2,142 - - 2,142Other assets 387 - - 387 --------- --------- --------- --------- $ 49,526 $ - $ - $ 49,526 ========= ========= ========= =========LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 857 $ - $ - $ 857 Accrued liabilities 1,545 - - 1,545 --------- --------- --------- ---------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Total current liabilities 2,402 - - 2,402Long-term debt 30,253 - - 30,253Other liabilities 654 - - 654Stockholders' equity:Series F convertible preferred stock 1 - - 1Common stock 65 - - 65Additional paid-in capital 184,974 - - 184,974Accumulated deficit (168,823) - - (168,823) --------- --------- --------- --------- Total stockholders' equity 16,217 - - 16,217 --------- --------- --------- --------- $ 49,526 $ - $ - $ 49,526 ========= ========= ========= ========= Page 87CONSOLIDATING STATEMENT OFCASH FLOW INFORMATIONYEAR ENDED DECEMBER 31, 2003 CADIZ SUN WORLD ELIMINATIONS CONSOLIDATED ----- --------- ------------ ------------Net cash used for operating activities $ (4,881) $ (1,703) $ - $ (6,584) --------- --------- --------- ---------Cash flows from investing activities: Disposal of subsidiary - (1,019) - (1,019) Additions to property, plant and equipment - (140) - (140) Additions to developing crops (34) (197) - (231) Payment of loan to officer 181 - - 181 Increase in restricted cash (2,142) - - (2,142) (Increase) decrease in other assets 5 (109) - (104) --------- --------- --------- ---------Net cash (used for) provided by investing activities (1,990) (1,465) - (3,455) --------- --------- --------- ---------Cash flows from financing activities: Proceeds from issuance of long- term debt - 135 - 135 Net proceeds from issuance of stock 10,304 - - 10,304Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Financing costs (400) - - (400) Proceeds from convertible note payable 200 - - 200 Principal payments on long-term debt - (7) - (7) --------- --------- --------- ---------Net cash provided by financing activities 10,104 128 - 10,232 --------- --------- --------- ---------Net increase (decrease) in cash and cash equivalents 3,233 (3,040) - 193Cash and cash equivalents, beginning of period 189 3,040 - 3,229 --------- --------- --------- ---------Cash and cash equivalents, end of period $ 3,422 $ - $ - $ 3,422 ========= ========= ========= ========= Page 88CONSOLIDATING STATEMENTOF OPERATIONS INFORMATIONYEAR ENDED DECEMBER 31, 2002 CADIZ SUN WORLD ELIMINATIONS CONSOLIDATED ----- --------- ------------ ------------Revenues $ 2,067 $ 114,234 $ (2,051) $ 114,250 --------- --------- --------- ---------Costs and expenses: Cost of sales 103 86,880 (627) 86,356 General and administrative 7,500 10,953 (1,500) 16,953 Removal of underperforming crops 1,017 3,497 - 4,514 Depreciation and amortization 1,022 6,458 - 7,480 --------- --------- --------- --------- Total costs and expenses 9,642 107,788 (2,127) 115,303 --------- --------- --------- ---------Operating profit (loss) (7,575) 6,446 76 (1,053)Loss from subsidiary (9,540) - 9,540 -Interest expense, net 5,108 16,299 (235) 21,172 --------- --------- --------- ---------Loss before income taxes (22,223) (9,853) 9,851 (22,225)Income tax expense 2 (2) - - --------- --------- --------- --------- Net loss (22,225) (9,851) 9,851 (22,225)Less: Preferred Source: CADIZ INC, 10-K, November 02, 2004Powered 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 dividends (1,125) - - (1,125) Imputed dividend on preferred stock (984) - - (984) --------- --------- --------- ---------Net loss applicable to common stock $ (24,334) $ (9,851) $ 9,851 $ (24,334) ========= ========= ========= ========= Page 89CONSOLIDATING BALANCE SHEET INFORMATIONDECEMBER 31, 2002 CADIZ SUN WORLD ELIMINATIONS CONSOLIDATED ----- --------- ------------ ------------ASSETSCurrent assets: Cash and cash equivalents $ 189 $ 3,040 $ - $ 3,229 Accounts receivable, net - 6,732 - 6,732 Net investment in and advances and loans to subsidiary 1,739 - (1,739) - Note receivable from officer 1,022 - - 1,022 Inventories - 13,638 (125) 13,513 Prepaid expenses and other 323 843 - 1,166 --------- --------- --------- --------- Total current assets 3,273 24,253 (1,864) 25,662Property, plant, equipment and water programs, net 40,076 114,852 - 154,928Other assets 3,981 7,312 - 11,293 --------- --------- --------- --------- $ 47,330 $ 146,417 $ (1,864) $ 191,883 ========= ========= ========= =========LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 1,142 $ 6,252 $ - $ 7,394 Accrued liabilities 987 5,829 - 6,816 Due to parent company - 13,546 (13,546) - Revolving credit facility - 4,400 - 4,400 Long-term debt, current portion 34,769 6,250 - 41,019 --------- --------- --------- --------- Total current liabilities 36,898 36,277 (13,546) 59,629Long-term debt - 115,447 - 115,447Deferred income taxes - 5,447 - 5,447Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Other liabilities 611 928 - 1,539Series D redeemable preferred stock 4,536 - - 4,536Series E-1 and E-2 redeemable preferred stock 6,406 - - 6,406Stockholders' equity:Common stock 15 - - 15Additional paid-in capital 156,151 38,508 (38,508) 156,151Accumulated deficit (157,287) (50,190) 50,190 (157,287) --------- --------- --------- --------- Total stockholders' equity (1,121) (11,682) 11,682 (1,121) --------- --------- --------- --------- $ 47,330 $ 146,417 $ (1,864) $ 191,883 ========= ========= ========= ========= Page 90CONSOLIDATING STATEMENT OFCASH FLOW INFORMATIONYEAR ENDED DECEMBER 31, 2002 CADIZ SUN WORLD ELIMINATIONS CONSOLIDATED ----- --------- ------------ ------------Net cash provided by (used for) operating activities $ (7,910) $ (4,205) $ 1,982 $ (10,133) --------- --------- --------- ---------Cash flows from investing activities: Additions to property, plant and equipment (138) (500) - (638) Additions to water programs (643) - - (643) Additions to developing crops (24) (2,152) - (2,176) Proceeds from disposal of property, plant and equipment 3 2,460 - 2,463 Loan to officer (1,000) - - (1,000) (Increase) decrease in other assets 124 (219) - (95) --------- --------- --------- ---------Net cash (used for) provided by investing activities (1,678) (411) - (2,089) --------- --------- --------- ---------Cash flows from financing activities: Net proceeds from issuance of stock 764 - - 764 Net proceeds from short-term borrowings 10,000 4,400 - 14,400 Borrowings from intercompany Source: CADIZ INC, 10-K, November 02, 2004Powered 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. revolver (977) 2,959 (1,982) - Principal payments on long-term debt - (761) - (761) Bank overdraft (410) - - (410) --------- --------- --------- ---------Net cash (used for) provided by financing activities 9,377 6,598 (1,982) 13,993 --------- --------- --------- ---------Net (decrease) increase in cash and cash equivalents (211) 1,982 - 1,771Cash and cash equivalents, beginning of period 400 1,058 - 1,458 --------- --------- --------- ---------Cash and cash equivalents, end of period $ 189 $ 3,040 $ - $ 3,229 ========= ========= ========= ========= Page 91CONSOLIDATING STATEMENTOF OPERATIONS INFORMATIONYEAR ENDED DECEMBER 31, 2001 CADIZ SUN WORLD ELIMINATIONS CONSOLIDATED ----- --------- ------------ ------------Revenues $ 1,903 $ 92,399 $ (1,900) $ 92,402Special litigation recovery 7,929 - - 7,929 --------- --------- --------- --------- Total revenues and 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)Loss from subsidiary (22,342) - 22,342 -Interest expense, net 3,718 15,598 235 19,551 --------- --------- --------- ---------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Loss before income taxes (25,722) (22,050) 22,107 (25,665)Income tax expense - 57 - 57 --------- --------- --------- --------- Net loss (25,722) (22,107) 22,107 (25,722)Less: Preferred stock dividends 591 - - 591 Imputed dividend on preferred stock 441 - - 441 --------- --------- --------- ---------Net loss applicable to common stock $ (26,754) $ (22,107) $ 22,107 $ (26,754) ========= ========= ========= ========= Page 92CONSOLIDATING STATEMENT OFCASH FLOW INFORMATIONYEAR ENDED DECEMBER 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 issuance of preferred stock 7,500 - - 7,500 Borrowings from intercompany Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 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 93NOTE 11 - INCOME TAXES---------------------- Deferred taxes are recorded based upon differences betweenthe financial statement and tax bases of assets and liabilitiesand available carryforwards. Temporary differences andcarryforwards which gave rise to a significant portion ofdeferred tax assets and liabilities as of December 31, 2003 and2002 are as follows (in thousands): DECEMBER 31, 2003 2002 ---- ---- Deferred tax liabilities: Fixed asset basis difference $ - $ 8,792 Other - 48 --------- --------- Total deferred tax liabilities - 8,840 --------- --------- Deferred tax assets: Net operating losses 36,663 56,840 Fixed asset basis difference 6,759 6,849 State taxes - 1,855 Reserves and accruals 35 1,508 Other 303 1,359 --------- --------- Total deferred tax assets 43,760 (68,411) Valuation allowance for deferred tax assets (43,760) (65,018) --------- --------- Net deferred tax liability $ - $ 5,447 ========= ========= The valuation allowance increased (decreased) by$(21,258,000) in 2003 primarily due to the deconsolidation of SunWorld, and $5,613,000, and $11,756,000 in 2002 and 2001, respectively. As of December 31, 2003, the Company had net operating lossSource: CADIZ INC, 10-K, November 02, 2004Powered 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. (NOL) carryforwards of approximately $109.0 million for federalincome tax purposes. Such carryforwards expire in varyingamounts through the year 2023. At December 31, 2003, the Companyhas state NOL carryforwards of $5.0 million. These NOLcarryforwards expire in varying amounts through the year 2013. Due to the fact that it is more likely than not that theCompany will not realize its net deferred tax assets, it hasrecorded a full valuation allowance against these assets.Accordingly, no deferred tax asset has been recorded in theaccompanying balance sheet. Section 382 of the Internal Revenue Code imposes an annuallimitation on the utilization of net operating loss carryforwardsbased on a statutory rate of return (usually the "applicablefederal funds rate", as defined in the Internal Revenue Code) andthe value of the corporation at the time of a "change ofownership" as defined by Section 382. Due to past equityissuances and equity issuances in 2003, and due to the Chapter 11filing by Sun World, the Company's ability to utilize net operating loss carryforwards may be limited. Page 94 A reconciliation of the income tax benefit to the statutoryfederal income tax rate is as follows (dollars in thousands): YEAR ENDED DECEMBER 31, 2003 2002 2001 ---- ---- ---- Expected federal income tax benefit at 34% $ (3,922) $ (7,557) $ (8,726) Loss with no tax benefit provided 3,900 7,440 8,541 Feberal AMT refund - (73) - State income tax 2 5 6 Foreign withholding taxes - 68 51 Amortization - - 79 Other non-deductible expenses 20 117 106 --------- --------- --------- Income tax expense (benefit) $ - $ - $ 57 ========= ========= =========NOTE 12 - 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 upto $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 leastone year of service and (iii) have worked at least 1,000 hoursper year. Contributions are 2% of each covered employee'ssalary. For those hourly employees covered under a collectivebargaining agreement, contributions are made to a multi-employerpension plan in accordance with negotiated labor contracts andare generally based on the number of hours worked. The Companycontributed $12,000, $322,000 and $300,000 to the plans forfiscal years 2003, 2002 and 2001, respectively.NOTE 13 - PREFERRED AND COMMON STOCK------------------------------------SERIES F CONVERTIBLE PREFERRED STOCK The Company has an authorized class of 100,000 shares of$0.01 par value Series F Convertible Preferred Stock ("Series FPreferred Stock"). On December 15, 2003, the Company issued100,000 shares of Series F Preferred Stock in conjunction withthe extension of the Company's senior term loan's maturity date.The 100,000 preferred shares are initially convertible intoSource: CADIZ INC, 10-K, November 02, 2004Powered 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. 1,728,955 shares of Common Stock of the Company. The number ofcommon shares received upon conversion may adjust if additionalcommon shares are used by the Company. The holders of thePreferred Stock are entitled to receive dividends as if theshares had been converted to Common Stock if dividends are paidon the Company's common stock. The Series F Preferred Stock may not be redeemed by the Company. The estimated value of the Series F Preferred Stock was recorded as a debt discount and is being amortized over the initial term of the senior term loans through March 31, 2005. Page 95SERIES 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 DPreferred Stock") for $5,000,000. The holders of the PreferredStock were entitled to receive dividends, payable semi-annually,at a rate of 7% if paid in cash or 9% if paid in the Company'scommon stock. The Series D Preferred Stock was initiallyconvertible into 25,000 shares of the Company's common stock anytime prior to July 2004 at the election of the holder. TheCompany also had the right to convert the Series D PreferredStock, but only when the closing price of the Company's commonstock had exceeded $300 per share for 30 consecutive tradingdays. Holders were entitled to a liquidation preference equal tothe initial purchase of $1,000 per share plus any accrued andunpaid dividends. The Series D Preferred Stock would beredeemable in July 2004 if still outstanding. In 2003, alloutstanding shares of Series D preferred stock were exchanged forcommon stock as further described below. The Company issued certain warrants to purchase shares ofthe Company's common stock in connection with the issuance of theSeries D Preferred Stock. The fair market value of the Company'scommon stock at the time of issuance was above the accountingconversion price resulting in an imputed dividend (beneficialconversion feature). The estimated fair value of the warrantsissued (calculated using the Black Scholes option pricing model)and the imputed dividend totaled $1,050,000 which was recorded asa discount to the Series D Preferred Stock. The discount isbeing amortized through the redemption date of the stock andtreated as a reduction to earnings for earnings per sharecalculations. Upon exchange of the Series D Preferred Stock forcommon stock in October 2003, the unamortized beneficialconversion feature was charged against paid in capital.SERIES E-1 AND E-2 CONVERTIBLE PREFERRED STOCK During the fourth quarter of 2001, the Company issued 3,750shares of Series E-1 Convertible Preferred Stock and 3,750 sharesof Series E-2 Convertible Preferred Stock (the "Series EPreferred Stock") for an aggregate of $7,500,000. The holders ofthe Series E Preferred Stock are entitled to receive dividends,payable semi-annually, at a rate of 7% if paid in cash or 9% ifpaid in the Company's common stock. The Series E Preferred Stockwas convertible into 40,000 shares of the Company's common stockany time prior to July 2004 at the election of the holder. TheCompany also had the right to convert the Series E PreferredStock, but only when the closing price of the Company's commonstock had exceeded $262 per share for 30 consecutive tradingdays. Holders were entitled to a liquidation preference equal tothe initial purchase of $1,000 per share plus any accrued andunpaid dividends. The Series E Preferred Stock would beredeemable in July 2004 if still outstanding. In 2003, alloutstanding shares of Series E preferred stock were exchanged forcommon stock as further described below. The Company issued 1,600 shares of the Company's commonstock and certain warrants to purchase shares of the Company'scommon stock in connection with the issuance of the Series EPreferred Stock. The fair market value of the Company's commonstock at the Source: CADIZ INC, 10-K, November 02, 2004Powered 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 96time 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 $1,614,000 which was recorded as adiscount to the Series E-1 and Series E-2 Preferred Stock. Thediscount is being amortized through the redemption date of thestock and treated as a reduction to earnings for earnings pershare calculations. Upon exchange of the Series E Preferred Stockfor common stock in October 2003, the unamortized beneficialconversion feature was charged against paid in capital. On October 15, 2002, the Company and preferred stockholdersagreed to amend the Certificates of Designations of Series D,Series E-1 and Series E-2 Preferred Stock to (i) reduce theconversion price from $200 per share for the Series D PreferredStock and from $187.50 per share for Series E Preferred Stock to$131.25 per share for both Series D and Series E Preferred Stock;and (ii) extend the redemption date to July 16, 2006. With theassistance of an independent valuation firm, the Companydetermined that the additional value associated with thereduction in the conversion price was offset by the extension ofthe redemption date and that there was no loss or gainattributable to the amendment to the Certificates ofDesignations. On October 20, 2003, the Company and the preferredstockholders entered into an agreement to (i) exchange alloutstanding shares of Series D Preferred Stock, plus accrued andunpaid dividends, for an aggregate of 320,000 shares of commonstock; and (ii) exchange all outstanding shares of series EPreferred Stock, plus accrued and unpaid dividends, for anaggregate of 80,000 shares of common stock. In connection withthis conversion, the Company recorded a charge of $42,000 againstpaid in capital as an inducement to convert. At this time theCompany also recorded the unamortized beneficial conversionfeature of the Series D and Series E Preferred Stock as a chargeagainst paid in capital.NOTE 14 - 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 OptionPlan (the "1998 Plan") approved by the Board of Directors inFebruary 1998. The Company also grants stock awards pursuant toits 2000 Stock Award Plan described below. Collectively, theplans provide for the granting of up to 160,000 shares. AtDecember 31, 2003, the Company has approximately 35,756 sharesremaining that can be granted under the plans. All options aregranted at a price approximating fair market value at the date ofgrant, have vesting periods ranging from issuance date to fiveyears, have maximum terms ranging from five to seven years andare issued to directors, officers, consultants and employees ofthe Company. Compensation cost for stock options is measured as theexcess, if any, of the quoted market price of the Company's stockat the date of the grant over the amount an employee must pay toacquire the stock. The Company has adopted the disclosure-only provisions ofStatement of Financial Page 97Accounting Standards No. 123, ("SFAS 123"), "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock-based compensation other than Source: CADIZ INC, 10-K, November 02, 2004Powered 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 non-employees. The fair value of each option granted during the periodsreported was estimated on the date of grant using the BlackScholes option pricing model based on the weighted-averageassumptions of: risk-free interest rate of 4.08% for 2002, and4.54% for 2001; expected volatility of 57.2% for 2002, and 40.0%for 2001; expected life of three years for 2002 and 2001; and anexpected dividend yield of zero for both years. No options weregranted in 2003. The following table summarizes stock option activity for theperiods noted. All options listed below were issued to officers,directors, employees and consultants. WEIGHTED- AVERAGE AMOUNT EXERCISE PRICE ------ --------------Outstanding at December 31, 2000 120,424 $ 161.25 Granted 10,650 $ 240.50 Expired or canceled (43,840) $ 119.00 Exercised (13,204) $ 119.50 ------- Outstanding at December 31, 2001 74,030 $ 201.25 Granted 3,700 $ 183.75 Expired or canceled (10,280) $ 189.25 Exercised (5,740) $ 132.75 ------- Outstanding at December 31, 2002 61,710 $ 207.43 Granted - - Expired or canceled (7,760) $ 207.43 Exercised - - ------- Outstanding at December 31, 2003 53,950(a) $ 207.43 ======= Options exercisable at December 31, 2001 57,870 $ 198.50 ======= Options exercisable at December 31, 2002 54,690 $ 196.50 ======= Options exercisable at December 31, 2003 53,150 $ 115.80 ======= Weighted-average years of remaining contractual life of options outstanding at December 31, 2003 0.95 ======= (a) Exercise prices vary from $165.75 to $292.50 and expiration dates vary from January 2004 to February 2007. The weighted-average fair value of options granted duringthe years 2002 and 2001 Page 98were $83.22, and $86.00, respectively. The Company accounts for equity securities issued to non-employees in accordance with the provisions of SFAS 123 andEmerging Issues Task Force 96-18. During the years endedDecember 31, 2002 and 2001, the Company issued 64,000, and 8,600warrants with weighted-average exercise prices of $50.75, and$189.75, respectively. No warrants expired or were canceledduring any of the three periods discussed. During 2002, inconnection with the loan amendments for the Cadiz obligationsdescribed in Note 10, the Company repriced certain warrantspreviously issued resulting in a reduction in the weighted-average exercise price. At December 31, 2002, there were 113,600Source: CADIZ INC, 10-K, November 02, 2004Powered 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. warrants outstanding with a weighted-average exercise price of$58.50 per share, which expire through 2006. In connection with the Company's default in February 2003 onits senior term loan and $25 million revolving credit facility,as described in Note 10; (i) warrants held by the lender topurchase 40,000 shares of the Company's common stock vested at anexercise price of $0.25 per share; and (ii) the exercise price onwarrants held by the lender to purchase 57,000 shares of theCompany's common stock was automatically reset to $0.25 pershare. In December 2003, warrants to purchase 94,000 shares ofcommon stock were exercised for $23,500 in total cash proceeds.At December 31, 2003, warrants to purchase 8,600 shares of commonstock of the Company at a weighted average exercise price of$190.00 per share remained outstanding.2000 STOCK AWARD PLAN The Cadiz Inc. 2000 Stock Award Plan ("Stock Award Plan")was approved by the Company's shareholders in May 2000. Underthe Stock Award Plan, the Company may issue various forms ofstock awards including restricted stock and deferred stock unitsto attract, retain and motivate key employees or other eligiblepersons. As of December 31, 2003, the Company had outstanding2,752 deferred stock units granted under the Stock Award Plan.Each of the units entitle the holder to receive one share of theCompany's common stock for each deferred stock unit three yearsfrom the date of grant. During the year ended December 31, 2003,26,027 stock units were exchanged for shares of the Company'scommon stock. The Company charged $152,000, $579,000 and$566,000 to expense during the years ended December 31, 2003,2002 and 2001, respectively, in connection with the Stock AwardPlan.MANAGEMENT EQUITY INCENTIVE PLAN In December 2003, concurrently with the completion of therestructuring of our financing arrangements with ING, theCompany's board of directors authorized the adoption of aManagement Equity Incentive Plan (the "Incentive Plan"). Underthe Incentive Plan, a total of 1,472,051 shares of common stockmay be granted to key personnel. The Board has formed an initialallocation committee to direct the initial allocation of 717,373of these shares. The Board has authorized the initial allocationcommittee to award all or part of the initial allocation sharesto key personnel (including members of such committee) withoutfurther approval of the Board. Any initial allocation of sharesso granted will be subject to vesting conditions. One-third ofthe shares granted will vest Page 99on the date of the grant. The remaining two-thirds will vest in two equal installments on December 11, 2004 and December 11, 2005 (subject to continued status of the recipient as an employee or consultant to Cadiz as of the respective vesting date, but also subject to immediate vesting in full of any theretofore unvested shares upon any termination without cause). The 754,678 shares covered by the Incentive Plan which arenot part of the initial allocation are issuable pursuant to thedirection of, and upon such vesting and other conditions as maybe established by, the Compensation Committee. No shares have been granted or issued under the Incentive Plan.NON-RECURRING COMPENSATION EXPENSE In 2001, the Company issued 22,567 deferred stock units tocertain senior managers of Cadiz and Sun World. These deferredstock units were issued in exchange for the cancellation of42,200 fully vested options to purchase the Company's commonstock held by senior managers. In accordance with the terms ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Option Exchange Agreements, the number of the deferredstock units issued was calculated based on the average closingprice for the 10 business days following the filing of theCompany's Annual Report on Form 10-K for the year ended December31, 2000 on March 29, 2001. Each deferred stock unit isexchangeable for one share of the Company's common stock at theend of the deferral period elected by the holder. The Companyrecorded a one-time charge of $5,537,000 in 2001 and no cash wasexpended in connection with the issuance of the deferred stockunits.NOTE 15 - SEGMENT INFORMATION------------------------------- With Sun World's filing of voluntary petitions for reliefunder Chapter 11 of the Bankruptcy code as further described inNote 1, the primary business of the Company is to acquire anddevelop water resources. The Company had two reportable segments; water resources(Cadiz) and agriculture (Sun World). The accounting policies ofthe segments are the same as those described in the summary ofsignificant accounting polices. The Company's operations arereported in the following business segments: Financial information by reportable business segment isreported in the following tables: 2003 2002 2001 ---- ---- ---- ($ in thousands)External sales: Water Resources $ 157 $ 16 $ 3 Agricultural 3,005 114,234 92,399 --------- --------- ---------Consolidated $ 3,162 $ 114,250 $ 92,402 ========= ========= ========= Page 100Inter-segment sales: Water Resources $ 146 $ 2,051 $ 1,900 Agricultural (146) (2,051) (1,900) --------- --------- ---------Consolidated $ - $ - $ - ========= ========= =========Total sales: Water Resources $ 303 $ 2,067 $ 1,903 Agricultural 3,005 114,234 92,399 Other (146) (2,051) (1,900) --------- --------- ---------Consolidated $ 3,162 $ 114,250 $ 92,402 ========= ========= =========Profit (loss) before income taxes: Water Resources $ (5,236) $ (7,575) $ 338 Agricultural (1,200) 6,446 (6,452) Other (195) 76 - Interest expense (4,905) (21,172) (19,551) --------- --------- ---------Consolidated $ (11,536) $ (22,225) $ (25,665) ========= ========= =========Assets: Water Resources $ 49,526 $ 45,591 $ 46,309 Agricultural - 146,417 152,168 Other - (125) (202) --------- --------- ---------Consolidated $ 49,526 $ 191,883 $ 198,275Source: CADIZ INC, 10-K, November 02, 2004Powered 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. ========= ========= =========Capital expenditures: Water Resources $ 34 $ 805 $ 1,556 Agricultural 337 2,652 4,510 --------- --------- ---------Consolidated $ 371 $ 3,457 $ 6,066 ========= ========= =========Depreciation and amortization: Water Resources $ 553 $ 1,022 $ 1,137 Agricultural 190 6,458 7,014 --------- --------- ---------Consolidated $ 743 $ 7,480 $ 8,151 ========= ========= =========Interest expense, net: Water Resources $ 3,636 $ 5,108 $ 3,718 Agricultural 1,269 16,299 15,598 Other - (235) 235 --------- --------- ---------Consolidated $ 4,905 $ 21,172 $ 19,551 ========= ========= ========= Page 101NOTE 16 - CONTINGENCIES----------------------- In December 1995, the Company filed an action relative tothe proposed construction and operation of a landfill (the "Rail-Cycle Project") which was to be located adjacent to the Company'sCadiz property 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-CycleProject and sought compensatory damages. In September 1998, theCourt granted defendants' motion for summary judgment. TheCompany appealed this decision and in August 2000, the CaliforniaCourt of Appeals granted, in part, the Company's appeal. TheCourt's decision revoked all environmental and land-useapprovals, and thus effectively terminated the Rail-CycleProject, as proposed. The Company filed other civil actions against WasteManagement, Inc., which asserted claims arising from allegedcriminal and fraudulent conduct against the Company engaged in byWaste Management in 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 WasteManagement in all of the outstanding civil actions. Pursuant tothe Settlement Agreement, Waste Management paid the Company $6million in cash and granted to the Company an exclusive option toreceive, at no cost to the Company, up to approximately 7,000acres of real property in eastern San Bernardino County primarilyadjacent to the Cadiz Program property. In April 2001, theCompany exercised the option and has acquired the subjectproperty. Net proceeds from the settlement are included in theCompany's statement of operations under the caption "SpecialLitigation Recovery". 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'sSource: CADIZ INC, 10-K, November 02, 2004Powered 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. financial statements. Page 102NOTE 17 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)---------------------------------------------------(In thousands except per share data) Quarter Ended March 31, June 30, September 30, December 31, 2003 2003 2003 2003 ---- ---- ---- ----Revenues $ 3,046 $ 97 $ 19 $ -Gross profit (loss) 367 47 (154) (63)Net loss applicable to common stock (5,171) (1,951) (3,013) (3,919)Net loss per common share $ (3.53) $ (0.92) $ (1.32) $ (1.17) Quarter Ended March 31, June 30, September 30, December 31, 2002 2002 2002 2002 ---- ---- ---- ----Revenues $ 7,750 $ 23,063 $ 64,280 $ 19,157Gross profit (loss) 1,497 6,215 16,820 3,362Net loss applicable to common stock (7,800) (5,962) (950) (9,622)Net loss per common share $ (5.40) $ (4.11) $ (0.65) $ (6.60) Page 103 CADIZ INC. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT-------------------------------------------------------------------- December 31,BALANCE SHEET ($ in thousands): 2003 2002--------------------------------------------------------------------ASSETSCurrent assets: Cash and cash equivalents $ 3,422 $ 189 Net investment in and advances to subsidiary - 1,739 Note receivable from officer - 1,022 Prepaid expenses and other 248 323 --------- --------- Total current assets 3,670 3,273Property, plant, equipment and water programs, net 39,514 40,076Goodwill 3,813 3,813Restricted cash 2,142 -Other assets 387 168 --------- --------- $ 49,526 $ 47,330 ========= =========LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 857 $ 1,142 Accrued liabilities 1,545 987 Long-term debt, current portion - 34,769 --------- ---------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Total current liabilities 2,402 36,898Long-term debt 30,253 -Other liabilities 654 611ContingenciesSeries D redeemable convertible preferred stock - $0.01 par value: 5,000 shares authorized; shares issued and outstanding - none at December 31, 2003 and 5,000 at December 31, 2002 - 4,536Series E-1 and E-2 redeemable convertible preferred stock - $0.01 par value: 7,500 shares authorized; shares issued and outstanding - none at December 31, 2003 and 7,500 at December 31, 2002 - 6,406Stockholders' equity: Series F convertible preferred stock - $.01 par value: 100,000 shares authorized, shares issued and outstanding - 100,000 at December 31, 2003 1 - Common stock - $0.01 par value; 70,000,000 shares authorized; shares issued and outstanding 6,471,384 at December 31, 2003 and 1,458,659 at December 31, 2002 65 15Additional paid-in capital 184,974 156,151Accumulated deficit (168,823) (157,287) --------- --------- Total stockholders' equity 16,217 (1,121) --------- --------- $ 49,526 $ 47,330 ========= ========= Page 104 CADIZ INC. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT--------------------------------------------------------------------STATEMENT OF OPERATIONS Year Ended December 31,($ in thousands) 2003 2002 2001--------------------------------------------------------------------Revenues $ 303 $ 2,067 $ 1,903Special litigation recovery - - 7,929 --------- --------- ---------Total revenues and special litigation recovery 303 2,067 9,832 --------- --------- ---------Costs and expenses: Cost of sales 333 103 118 General and administrative 4,653 7,500 5,433 Non-recurring compensation expense - - 2,584 Removal of underperforming crops - 1,017 222 Write off of investment in subsidiary 195 - - Depreciation and amortization 553 1,022 1,137 --------- --------- ---------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Total costs and expenses 5,734 9,642 9,494 --------- --------- ---------Operating profit (loss) (5,431) (7,575) 338Loss from subsidiary (2,469) (9,540) (22,342)Interest expense, net 3,636 5,108 3,718 --------- --------- ---------Net loss before income taxes (11,536) (22,223) (25,722)Income taxes - 2 - --------- --------- ---------Net loss (11,536) (22,225) (25,722)Less: Preferred stock dividends 918 1,125 591 Imputed dividend on preferred stock 1,600 984 441 --------- --------- ---------Net loss applicable to common stock $ (14,054) $ (24,334) $ (26,754) ========= ========= ========= Page 105 CADIZ INC. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT-------------------------------------------------------------------------- Year Ended December 31,STATEMENT OF CASH FLOWS ($ in thousands) 2003 2002 2001--------------------------------------------------------------------------Cash flows from operating activities: Net loss $ (11,536) $ (22,225) $ (25,722) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 1,336 5,181 3,521 Write off of investment in subsidiary 195 - - Stock issued for services 550 - - Compensation paid through settlement of note receivable from officer 841 - - Interest paid in common stock 12 - - Loss from subsidiary 2,470 9,540 22,342 (Gain) loss on disposal of assets 43 (3) 5 Removal of underperforming crops - 1,017 222 Land received from litigation settlement - - (2,000) Compensation charge for deferred stock units 126 272 271 Non-recurring compensation expense - - 2,584 Accrued interest on note receivable from officer - (22) - Changes in operating assets and liabilities: Increase in due to subsidiary - (1,360) - Decrease (increase) in prepaid expenses and other 75 (112) 8 Increase in accounts payable (155) (189) 121 Increase (decrease) in accrued liabilities 1,117 (9) 97 Increase (decrease) in due to affiliate 45 - - Decrease in other liabilities - - (7) --------- --------- --------- Net cash provided by (used for) operating activities (4,881) (7,910) 1,442 --------- --------- ---------Source: CADIZ INC, 10-K, November 02, 2004Powered 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 flows from investing activities: Additions to property, plant and equipment - (138) (88) Additions to developing crops - (24) (109) Additions to water programs (34) (643) (1,359) Proceeds from disposal of property, plant and equipment - 3 2 Loan to officer 181 (1,000) - Increase in restricted cash (2,142) - - Increase in other assets 5 124 (575) --------- --------- --------- Net cash used for investing activities (1,990) (1,678) (2,129) --------- --------- ---------Cash flows from financing activities: Net proceeds from issuance of stock 10,304 764 1,583 Financing costs (400) - - Proceeds from convertible note payable 200 - - Net proceeds from short-term borrowings - 10,000 - Proceeds from issuance of preferred stock - - 7,500 Intercompany revolver with subsidiary - (977) (11,254) Principal payments on long-term debt - - (251) Bank overdraft - (410) 410 --------- --------- --------- Page 106 Net cash (used for) provided by financing activities 10,104 9,377 (2,012) --------- --------- ---------Net decrease in cash and cash equivalents 3,233 (211) (2,699)Cash and cash equivalents, beginning of period 189 400 3,099 --------- --------- ---------Cash and cash equivalents, end of period $ 3,422 $ 189 $ 400 ========= ========= ========= Page 107 CADIZ INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS-------------------------------------------------------------------------------For the years ended December 31, 2003, 2002 and 2001 ($ in thousands)------------------------------------------------------------------------------- BALANCE AT ADDITIONS CHARGED TO BALANCEYEAR ENEDED BEGINNING COSTS AND OTHER AT ENDDECEMBER 31, 2003 OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD----------------- --------- -------- -------- ---------- ---------Allowance for doubtful accounts $ 547 $ - $ 547 $ - $ - ========= ========= ========= ========= =========Tax valuation allowance $ 65,018 $ - $ (21,258) $ - $ (43,760) ========= ========= ========= ========= =========YEAR ENDEDDECEMBER 31, 2002-----------------Allowance for doubtful accounts $ 506 $ 200 $ - $ 159 $ 547Source: CADIZ INC, 10-K, November 02, 2004Powered 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. ========= ========= ========= ========= =========Tax valuation allowance $ 59,405 $ - $ 5,613 $ - $ 65,018 ========= ========= ========= ========= =========YEAR ENDEDDECEMBER 31, 2001-----------------Allowance for doubtful accounts $ 522 $ - $ - $ 16 $ 506 ========= ========= ========= ========= =========Tax valuation allowance $ 47,649 $ - $ 11,756 $ - $ 59,405 ========= ========= ========= ========= ========= Page 108REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo 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 deficit 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, 2003 and 2002 and the results oftheir operations and their cash flows for each of the three yearsin the period ended December 31, 2003 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 with thestandards of the Public Company Accounting Oversight Board(United States). These standards require that we plan andperform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements,assessing the accounting principles used and significantestimates made by management, and evaluating the overallfinancial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion. As discussed in Note 1 to the accompanying financialstatements, Sun World International, Inc. and certain of itssubsidiaries filed voluntary petitions for reorganization underChapter 11 of the United States Bankruptcy Code on January 30,2003. Management continues to operate the Company as a debtor-in-possession until a Plan of Reorganization is approved by itscreditors and confirmed by the Bankruptcy Court. The Company'sobjectives in regard to this matter are also discussed in Note 1.The accompanying financial statements have been prepared usingaccounting principles applicable to a going concern, whichassumes realization of assets and settlement of liabilities inthe normal course of business. The uncertainties inherent in thebankruptcy process raise substantial doubt about the Company'sability to continue as a going concern. The financial statementsdo not include any adjustments that might result from the outcomeof this uncertainty./s/ PricewaterhouseCoopers LLP-------------------------------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Los Angeles, CaliforniaMarch 5, 2004, except for Note 17 for which the date is September 17, 2004 Page 109SUN WORLD INTERNATIONAL, INC.(DEBTOR-IN-POSSESSION)(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)CONSOLIDATED STATEMENT OF OPERATIONS----------------------------------------------------------------------- Year Ended December 31,($ in thousands) 2003 2002 2001-----------------------------------------------------------------------Revenues $ 100,938 $ 114,583 $ 91,973 --------- --------- ---------Costs and expenses: Cost of sales 86,989 86,880 79,390 General and administrative 8,889 9,243 8,980 Non-recurring compensation expense - - 2,953 Unusual items (Note 15) - 1,710 - Removal of underperforming crops 926 3,497 514 Depreciation and amortization 6,873 6,458 7,014 --------- --------- --------- 103,677 107,788 98,851 --------- --------- ---------Operating income (loss) (2,739) 6,795 (6,878)(Gain) loss on sale of property (387) 349 (426)Interest expense, net (contractual interest for fiscal year 2003 was $17,041) 2,932 16,299 15,598 --------- --------- ---------Loss before reorganization items and income taxes (5,284) (9,853) (22,050)Reorganization items: Debt issuance costs 912 - - Professional fees 3,770 - - --------- --------- ---------Total reorganization items 4,682 - - --------- --------- ---------Net loss before income taxes (9,966) (9,853) (22,050)Income tax (benefit) expense 102 (2) 57 --------- --------- ---------Net loss $ (10,068) $ (9,851) $ (22,107) ========= ========= =========See accompanying notes to the consolidated financial statements. Page 110SUN WORLD INTERNATIONAL, INC.(DEBTOR-IN-POSSESSION)(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)CONSOLIDATED BALANCE SHEET--------------------------------------------------------------------- December 31,Source: CADIZ INC, 10-K, November 02, 2004Powered 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 thousands) 2003 2002---------------------------------------------------------------------ASSETSCurrent assets: Cash and cash equivalents $ 1,548 $ 3,040 Accounts receivable, net 7,031 6,732 Inventories 12,851 13,638 Prepaid expenses and other 1,817 843 --------- --------- Total current assets 23,247 24,253Property, plant, and equipment, net 107,812 112,293Intangible assets 1,903 1,934Other assets 6,568 7,937 --------- --------- Total assets $ 139,530 $ 146,417 ========= =========LIABILITIES AND STOCKHOLDER'S DEFICITCurrent liabilities: Accounts payable $ 5,689 $ 6,252 Accrued liabilities 2,280 5,829 Due to parent company - 13,546 Revolving credit facility 4,423 4,400 Long-term debt, current portion 125 6,250 --------- --------- Total current liabilities 12,517 36,277Long-term debt 730 115,447Deferred income taxes 5,447 5,447 Other liabilities 365 928 --------- --------- Total liabilities not subject to compromise 19,059 158,099 --------- ---------Liabilities subject to compromise under reorganization proceedings 141,606 - --------- ---------Contingencies (Note 16)Stockholder's deficit: Common stock, $0.01 par value, 300,000 shares authorized; 42,000 shares issued and outstanding - - Additional paid-in capital 39,123 38,508Accumulated deficit (60,258) (50,190) --------- --------- Total stockholder's deficit (21,135) (11,682) --------- --------- Total liabilities and stockholder's deficit $ 139,530 $ 146,417 ========= =========See accompanying notes to the consolidated financial statements. Page 111SUN WORLD INTERNATIONAL, INC.(DEBTOR-IN-POSSESSION)(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)CONSOLIDATED STATEMENT OF CASH FLOWS------------------------------------------------------------------------Source: CADIZ INC, 10-K, November 02, 2004Powered 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) 2003 2002 2001------------------------------------------------------------------------Cash flows from operating activities:Net loss $ (10,068) $ (9,851) $ (22,107)Adjustments to reconcile net loss to netcash used for operating activities: Depreciation and amortization 6,987 8,295 8,143 Write off of debt issuance costs 912 - - Valuation allowance 1,500 - - Loss (gain) on disposal of assets (387) 349 (426) Removal of underperforming crops 926 3,497 514 Shares of KADCO stock earned for services (938) (1,250) (1,250) Compensation charge for deferred stock units 211 307 296 Non-recurring compensation expense - - 2,953 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (299) (406) 1,553 Decrease (increase) in inventories 246 (1,039) 1,830 Increase in prepaid expenses and other (974) (265) (160) Increase (decrease) in accounts payable 3,143 (4,176) 3,734 Increase (decrease) in accrued liabilities 247 687 (647) (Decrease) increase in due to parent - (668) 1,983 (Decrease) increase in other liabilities (159) 315 58 --------- --------- ---------Net cash provided by (used for) operating activities before reorganization items 1,347 (4,205) (3,526)Increase in liabilities subject to compromise under reorganization proceedings 559 - - --------- --------- --------- Net cash provided by (used for) operating activities 1,906 (4,205) (3,526) --------- --------- ---------Cash flows from investing activities:Additions to property, plant, and equipment (2,831) (500) (1,495)Additions to developing crops (1,963) (2,152) (3,015)Proceeds from disposal of property, plant and equipment 2,754 2,460 450(Increase) decrease in other assets (539) (219) 494 --------- --------- --------- Net cash used for investing activities (2,579) (411) (3,566) --------- --------- ---------Cash flows from financing activities:Proceeds from issuance of long-term debt 136 - - Principal payments on long-term debt (978) (762) (1,313)Net proceeds from short-term borrowings 23 4,400 -Intercompany revolver with parent - 2,960 9,271 --------- --------- --------- Net cash (used for) provided by financing activities (819) 6,598 7,958 --------- --------- ---------Net increase (decrease) in cash and cash equivalents (1,492) 1,982 866Cash and cash equivalents at beginning of period 3,040 1,058 192Source: CADIZ INC, 10-K, November 02, 2004Powered 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 at end of period $ 1,548 $ 3,040 $ 1,058 ========= ========= =========See accompanying notes to the consolidated financial statements. Page 112SUN WORLD INTERNATIONAL, INC.(DEBTOR-IN-POSSESSION)(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT) ($ in thousands)-------------------------------------------------------------------------------- ADDITIONAL TOTAL COMMON STOCK PAID-IN ACCUMULATED STOCKHOLDER'S SHARES AMOUNT CAPITAL DEFICIT EQUITY(DEFICIT) ------ ------ ------- ------- ---------------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)Revaluation of derivative for warrants issued by parent - - 235 - 235Net loss - - - (9,851) (9,851) ------- ------ -------- --------- ---------Balance as of December 31, 2002 42,000 - 38,508 (50,190) (11,682)Exchange of deferred stock units for parent's common stock - - 615 - 615Net loss - - - (10,068) (10,068) ------- ------ -------- --------- ---------Balance as of Source: CADIZ INC, 10-K, November 02, 2004Powered 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, 2003 42,000 - $ 39,123 $ (60,258) $ (21,135) ======= ====== ======== ========= =========See accompanying notes to the consolidated financial statements. Page 113SUN WORLD INTERNATIONAL, INC.(DEBTOR-IN-POSSESSION)(A WHOLLY-OWNED SUBSIDIARY OF CADIZ INC.)NOTES OF CONSOLIDATED FINANCIAL STATEMENTS==========================================NOTE 1 - NATURE OF OPERATIONS AND REORGANIZATION UNDER CHAPTER 11----------------------------------------------------------------- Founded in 1975, Sun World International, Inc. ("SWII" or"Sun World") and its subsidiaries (collectively, the "Company")operate as the agricultural segment of Cadiz Inc. ("Cadiz"). TheCompany is an integrated agricultural operation that ownsapproximately 17,100 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, packedand shipped to food wholesalers and retailers located throughoutthe United States and to more than 30 foreign countries. TheCompany owns and operates three cold storage and/or packingfacilities located in California, of which two are operated andone is leased to a third party. On January 30, 2003 (the "Petition Date"), SWII and certainof its subsidiaries (Sun Desert Inc., Coachella Growers, and SunWorld/Rayo) filed voluntary petitions for relief under Chapter 11of the Bankruptcy Code. The filing was made in the United StatesBankruptcy Court, Central District of California, RiversideDivision ("Bankruptcy Court"). Included in the ConsolidatedFinancial Statements are subsidiaries operated outside the UnitedStates, which have not commenced Chapter 11 cases or othersimilar proceedings elsewhere, and are not debtors. The assetsand liabilities of such non-filing subsidiaries are notconsidered material to the Consolidated Financial Statements.SWII sought bankruptcy protection in order to access a seasonalfinancing package of up to $40 million to provide working capitalthrough the 2003-2004 growing seasons. As a debtor-in-possession, Sun World is authorized tocontinue to operate as an ongoing business, but may not engage intransactions outside the ordinary course of business without theapproval of the Bankruptcy Court. Under the Bankruptcy Code,actions to collect pre-petition indebtedness, as well as mostother pending litigation, are stayed and other contractualobligations against Sun World may not be enforced. In addition,under the Bankruptcy Code, Sun World may assume or rejectexecutory contracts, including lease obligations. Partiesaffected by these rejections may file claims with the Court inaccordance with the reorganization process. Absent an order ofthe Court, substantially all pre-petition liabilities are subjectto settlement under a plan of reorganization to be voted upon bycreditors and equity holders and approved by the BankruptcyCourt. The four Sun World entities are the joint proponents of theDebtors' Joint Plan of Reorganization Dated November 24, 2003(the "Plan"). Under the Plan, which is subject to amendment andmodification, the Reorganized Sun World will continue to operateas a going concern on and after the Plan's effective date. ThePlan provides for the restructuring of Sun World's balance sheetby providing for Sun World to issue equity interests in theReorganized Company to the holders of its First Mortgage Notes infull satisfaction of their mortgage note claims; for the paymentin full of convenience claims and trade claims; and for Sun Worldto issue equity interests in the Reorganized Company to entitiesSource: CADIZ INC, 10-K, November 02, 2004Powered 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. holding certain other unsecured claims in full satisfaction ofthose claims. Exit financing to be provided by an exit lenderunder the Plan should meet the Company's need for seasonalfinancing following the effective date. The hearing to considerthe adequacy of the disclosure statement accompanying the Planand to approve solicitation procedures for the voting bycreditors on the Plan is scheduled for May 7, Page 1142004, but may be continued. See Note 16, Subsequent Events. The financial statements of the Company have been preparedusing accounting principles applicable to a going concern, whichassumes realization of assets and settlement of liabilities inthe normal course of business and in accordance with Statement ofPosition 90-7, "Financial Reporting by Entities in ReorganizationUnder the Bankruptcy Code". Accordingly, all pre-petitionliabilities subject to compromise have been segregated in theConsolidated Balance Sheet and classified as "Liabilities subjectto compromise under reorganization proceedings", at the estimatedamount of allowable claims. The financial statements of theCompany do not purport to reflect or to provide for all of theconsequences of an ongoing Chapter 11 reorganization.Specifically, but not all-inclusive, the financial statements ofthe Company do not present: (a) the realizable value of assets ona liquidation basis or the availability of such assets to satisfyliabilities, (b) the amount which will ultimately be paid tosettle liabilities and contingencies which may be allowed in theChapter 11 reorganization, or (c) the effect of changes which maybe made resulting from a Plan of Reorganization. Theappropriateness of using the going-concern basis is dependentupon, among other things, confirmation of a Plan ofReorganization, future profitable operations, the ability tocomply with debtor-in-possession financing agreements and theability to generate sufficient cash from operations to meetobligations. Inherent in a successful Plan of Reorganization is a capitalstructure that permits the Company to generate cash flows afterreorganization to meet its restructured obligations and fund thecurrent operations of the Company. The Company's objective inthe Chapter 11 proceeding is to achieve the highest possiblerecovery for all creditors and shareholders consistent with theCompany's ability to pay and the continuation of its business.There can be no assurance that the Company will be able to attainthese objectives or reorganize successfully. Because of theongoing nature of the reorganization case, the financialstatements contained herein are subject to materialuncertainties. 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.BANKRUPTCY ACCOUNTING Since the Chapter 11 bankruptcy filing, the Company hasapplied the provisions of SOP 90-7, which does not significantlychange the application of accounting principles generallyaccepted in the United States of America; however, it doesrequire that the financial statements for periods including andsubsequent to filing the Chapter 11 petition distinguishtransactions and events that are directly associated with thereorganization from the ongoing operations of the business. Asdisclosed in the Consolidated Statement of Operations,reorganization items consist of the write off of unamortized debtissuance costs as of the Petition Date of Source: CADIZ INC, 10-K, November 02, 2004Powered 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 115$912,000 and professional fees directly associated with the reorganization of $3,770,000. Of the professional fees incurred, approximately $3,139,000 had been paid as of December 31, 2003.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 and risk of loss to customers. Packingrevenues and marketing commissions from third party growers arerecognized when the related services are provided. Proprietaryproduct development revenues are recognized based upon productsales by licensees. Project development and management fees arerecorded when earned under the terms of the related agreement. Revenues attributable to one national retailer totaled $11.1million in 2003, $9.6 million in 2002 and $7.9 million in 2001.Revenue for another national retailer totaled $11.6 million in2003. Export sales accounted for approximately 12.4%, 12.1% and8.4%, of the Company's revenues for the years ended December 31,2003, 2002 and 2001, respectively. Service revenues and licenserevenues were less than 10% of total revenues for each of theyears in the three-year period ended December 31, 2003.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$2,791,000 for the year ended December 31, 2003, $2,424,000 forthe year ended December 31, 2002 and $2,023,000 for the yearended December 31, 2001 and are included in general andadministrative expenses in the Consolidated Statement ofOperations. CASH AND CASH EQUIVALENTS The Company considers all short-term deposits with anoriginal 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. Page 116At times these deposits exceed federally insured limits. Such investments are stated at cost, which approximates fair value, and are considered cash equivalents for purposes of reporting cash flows.INVENTORIES Growing crops, harvested crops, and materials and suppliesare stated at the lower of cost or market, on a first-in, first-out (FIFO) basis. Growing and harvested crops inventory includesSource: CADIZ INC, 10-K, November 02, 2004Powered 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. direct costs and an allocation of indirect costs.PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are stated at 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. 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.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 2003, 2002 and 2001, theCompany incurred costs to remove certain underperforming crops,primarily stonefruit, citrus, and wine grapes. The Companyrecorded charges of $926,000, $3,497,000 and $514,000 in 2003,2002 and 2001, respectively, in connection with the removal ofthese crops which is shown under the heading "Removal ofunderperforming crops" on the Consolidated Statement ofOperations.INTANGIBLE AND OTHER ASSETS Water programs are stated at cost. All costs directlyattributable to the development of such programs are beingcapitalized by the Company. Capitalized loan fees represent costs incurred to obtain debtfinancing. Such costs Page 117are amortized over the life of the related loan. 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, whichranges from 10 to 20 years. In October 1999, the Company entered into a managementagreement with Kingdom Agricultural Development Company (KADCO)to develop and manage up to 100,000 acres of agricultural land insouthern Egypt called the Tushka project. KADCO is controlled byHis Royal Highness Prince Alwaleed Bin Talal Bin AbdulazizAlsaud. As compensation for project development and management,the Company earns a quarterly fee of $312,500 based upon meetingdevelopmental milestones to be paid through an equity interest inKADCO. The management agreement expired on September 30, 2003.The Company will receive licensing revenues from KADCO in thefuture based upon plantings of proprietary varieties at theTushka project. KADCO is currently engaged in a privateplacement to raise the required funds to develop the project.The Company anticipates receiving shares in KADCO for payment ofits project development and management fee in connection with theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. completion of the private placement. The amount of shares to bereceived will be the current per share price used for the privateplacement divided into the total amount of management fee earnedwhich is shown under the heading, "Receivable from KADCO to bepaid in common shares" in Note 6.INCOME TAXES The Company is included in the consolidated federal andcombined state tax returns of Cadiz. The Company's current taxliability 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 consideredmore likely than not that some portion or all of the deferred taxassets will not be realized.SUPPLEMENTAL CASH FLOW INFORMATION Cash payments for interest for the years ended December31, 2003, 2002 and 2001 were $1,748,000, $14,484,000 and$14,660,000, respectively.RECENT ACCOUNTING PRONOUNCEMENTS In June 2002, the Financial Accounting Standards Board(FASB) issued Statement of Financial Accounting Standard (SFAS)No. 146, Accounting for Costs Associated with Exit or DisposalActivities. This Statement addresses financial reporting forcosts associated with exits or disposal activities and nullifiesEmerging Issues Task Force (EITF) Issue No. 94-3, LiabilityRecognition for Certain Employee Termination Benefits and OtherCosts to Exit an Activity (including Certain Costs in aRestructuring). The provisions of this Statement are effectivefor exit or disposal activities initiated after December 31,2002. The adoption of this standard did not have a materialimpact on the Company's financial position or results ofoperations. Page 118 In December 2002, the FASB issued SFAS No. 148,Accounting for Stock-Based Compensation-Transition and Disclosure- an amendment of SFAS No. 123. This Statement amends FASBStatement No. 123, Accounting for Stock-Based Compensation, toprovide alternative methods of transition for a voluntary changeto the fair value based method of accounting for stock-basedemployee compensation. In addition, this Statement amends thedisclosure requirements of SFAS No. 123 to require prominentdisclosure in both annual and interim financial statements aboutthe method of accounting for stock-based employee compensationand the effect of the method used on reported results. TheStatement is effective for fiscal years ending after December 15,2002. The adoption of this standard did not have a materialimpact on the Company's financial position or results ofoperations. In November 2002, the FASB issued FASB InterpretationNumber 45, or FIN 45, Guarantor's Accounting and DisclosureRequirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others (an interpretation of SFAS No. 5, 57, and107 and recission of FIN 34). FIN 45 clarifies the requirementsof SFAS No. 5, Accounting for Contingencies, relating to aguarantor's accounting for, and disclosure of, the issuance ofcertain types of guarantees. FIN 45 is effective January 1, 2003and its adoption did not have a material impact on the Company'sfinancial position or results of operations. In January 2003, the FASB issued FIN 46, Consolidationof Variable Interest Entities, and Interpretation of ARB 51. Theprimary objectives of FIN 46 are to provide guidance on theidentification of variable interest entities (VIE) for whichSource: CADIZ INC, 10-K, November 02, 2004Powered 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. control is achieved through means other than through votingrights and to determine when and which business enterprise shouldconsolidate the VIE. The consolidated requirements of FIN 46apply immediately to variable interest entities created afterJanuary 31, 2003. The Company adopted the provisions of FIN 46effective February 1, 2003 and such adoption did not have amaterial impact on the Company's financial position or results ofoperations. In December 2003, the FASB issued FIN 46R withrespect to VIE's created before January 31, 2003, which amongother things, revised the implementation date to the first fiscalyear or interim period ending after March 15, 2004, with theexception of Special Purpose Entities (SPE). The consolidationrequirements apply to all SPE's in the first fiscal year orinterim period beginning after December 15, 2003. The adoptionof the provisions of FIN 46R is not expected to have a materialimpact on the Company's financial position or results ofoperations since it currently has no SPE's. In April 2003, the FASB issued SFAS 149, Amendment ofStatement 133 on Derivative Instruments and Hedging Activities.SFAS 149 amends and clarifies accounting for derivativeinstruments, including certain derivative instruments embedded inother contracts, and for hedging activities under SFAS 133. SFAS149 is effective for contracts and hedging relationships enteredinto or modified after June 30, 2003. The adoption of thisstandard did not have a material impact on the Company'sfinancial position or results of operations. In May 2003, the FASB issued SFAS 150, Accounting forCertain Financial Instruments with Characteristics of BothLiabilities and Equity. SFAS 150 establishes standards for howan issuer classifies and measures certain financial instrumentswith characteristics of both debt and equity and requires anissuer to classify certain instruments as liabilities in itsbalance sheet. For public entities, SFAS 150 is effective formandatorily redeemable financial instruments entered into ormodified after May 31, 2003 and is effective for all otherfinancial instruments as of the first interim period beginningafter June 15, 2003. The adoption of this standard did not havea material impact on the Company's financial position or resultsof operations. Page 119NOTE 3 - ACCOUNTS RECEIVABLE---------------------------- Accounts receivable consist of the following (dollars inthousands): December 31, 2003 2002 ---- ---- Trade receivables $ 4,054 $ 4,303 Other 3,447 2,976 --------- --------- 7,501 7,279 Less allowance for doubtful accounts (470) (547) --------- --------- $ 7,031 $ 6,732 ========= ========= Substantially all trade receivables are from large domesticnational and regional supermarket chain stores and producebrokers and are unsecured. Other receivables primarily includejuice grape and raisin sales, proceeds due from third partymarketers, receivables for international licensing, and othermiscellaneous receivables.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 4 - INVENTORIES-------------------- Inventories consist of the following (dollars in thousands): December 31, 2003 2002 ---- ---- Growing crops $ 10,427 $ 10,702 Materials and supplies 2,235 2,525 Harvested product 189 411 --------- --------- $ 12,851 $ 13,638 ========= ========= Depreciation related to permanent crops and related farmingequipment included in growing crop inventory totaled $1,833,$2,131 and $1,848 at December 31, 2003, 2002 and 2001,respectively. Page 120NOTE 5 - PROPERTY, PLANT, AND EQUIPMENT--------------------------------------- Property, plant, and equipment consist of the following(dollars in thousands): December 31, 2003 2002 ---- ---- Land $ 44,325 $ 46,482 Permanent crops 56,218 55,500 Developing crops 9,413 11,466 Buildings 21,780 21,212 Machinery and equipment 16,531 14,927 --------- --------- 148,267 149,587Less accumulated depreciation (40,455) (37,294) --------- --------- $ 107,812 $ 112,293 ========= ========= Depreciation expense for 2003, 2002 and 2001 was $6,521,$6,156 and $6,795, respectively.NOTE 6 - INTANGIBLE AND OTHER ASSETS------------------------------------ Intangible and other assets consist of the following(dollars in thousands): December 31, 2003 2002 ---- ---- Water programs $ 2,559 $ 2,559 Deferred loan costs, net 7 988 Long-term receivables 502 327 Capitalized trademark development, net 1,903 1,934 Receivable from KADCO to be paid in common shares 5,000 4,063 --------- --------- 9,971 9,871 Valuation allowance (1,500) -Source: CADIZ INC, 10-K, November 02, 2004Powered 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. --------- --------- $ 8,471 $ 9,871 ========= ========= Amortization expense of deferred loan costs was $113, $802and $793 in 2003, 2002 and 2001, respectively, and is included ininterest expense in the statement of operations. Amortizationexpense for capitalized trademark development was $352, $302 and$219 in 2003, 2002, and 2001, respectively. Future amortizationof capitalized trademark development is as follows (inthousands): $285 - 2004; $285 - 2005; $286 - 2006; $278 - 2007;$769 - 2008 and thereafter. Page 121NOTE 7 - ACCRUED LIABILITIES---------------------------- Accrued liabilities consist of the following (dollars inthousands): December 31, 2003 2002 ---- ---- Interest $ 35 $ 2,695 Payroll and benefits 1,931 2,587 Other 314 547 --------- --------- $ 2,280 $ 5,829 ========= =========NOTE 8 - REVOLVING CREDIT FACILITIES------------------------------------Pre-petition financing: In November 2002, Sun World was notified by its seasonalrevolving lender that it would not renew the Revolving CreditFacility for the 2003 growing season. The seasonal revolverexpired on November 30, 2002. The Company sought and obtainedextensions from its lender through January 31, 2003. During theextension period, the Company sought to obtain seasonal financingfrom several different lenders. Each of these lenders wanted tohave a first position on all of the Company's assets in order tolend outside of a Chapter 11 proceeding. This required theholders of the First Mortgage Notes to modify their agreementwith the Company. As outlined in Note 1, the Company was unableto procure the financing with the consent of all parties. OnJanuary 30, 2003, Sun World and certain of its subsidiaries fileda voluntary petition for Chapter 11. At December 31, 2002, $4.4 million was outstanding under theRevolving Credit Facility that was subsequently paid off withproceeds from the DIP financing on January 31, 2003.Debtor-In-Possession (DIP) financing: On January 31, 2003, the Bankruptcy Court approved an interim$15 million dollar DIP financing facility. On March 3, 2003, theBankruptcy Court approved a final DIP financing facilityagreement with the same lender. The DIP financing, as amended,provides for varying commitment levels based upon the Company'sseasonal borrowing requirements with a peak commitment level of$35 million during the June through August time frame. The DIPfinancing expires on November 30, 2004, bears interest at thegreater of Prime plus 4% or 8.25%, and is secured bysubstantially all of the Company's assets. Borrowingavailability is determined based on the lesser of: (1) eligiblepercentages of inventory and accounts receivable plus a specifiedamount starting at $15 million in March 2003 and reduced bySource: CADIZ INC, 10-K, November 02, 2004Powered 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. $150,000 per month thereafter; (2) certain multiples of trailing12 months EBITDA as defined in the credit agreement; or (3)eligible percentage of the current value of all real property.The Company is required to meet certain financial and othercustomary covenants. Page 122Approximately $4.4 million was outstanding under the DIP financing facility at December 31, 2003.NOTE 9 - LONG-TERM DEBT----------------------- At December 31, 2003 and December 31, 2002, the carryingamount of the Company's outstanding debt is summarized as followsbased upon the original contractual maturities (dollars inthousands): December 31, 2003 2002 ---- ---- Amounts classified under Long-term debt: Series B First Mortgage Notes, interest payable semi-annually, with principal due in April 2004, interest at 11.25% (default interest at 12.25%) $ 115,000 $ 115,000 Unsecured term loan, interest payable quarterly, due December 31, 2002, default interest at LIBOR plus 5% 5,000 5,000 Note payable to bank, quarterly principal installments of $72 plus interest payable monthly, due December 31, 2003, interest at prime - 856 Note payable to insurance company, quarterly installments of $120 (including interest), due January 1, 2005, interest at 7.75% 654 654 Other 201 187 --------- --------- 120,855 121,697 Less: Current portion (125) (6,250) Amounts subject to compromise under reorganization proceedings (120,000) - --------- --------- $ 730 $ 115,447 ========= ========= Pursuant to the Company's various loan agreements, thecontractual maturities of long-term debt outstanding (inthousands) at December 31, 2003 are as follows: 2004 - $120,778,2005 - $73, and 2006 - $4. Included in these amounts aresignificant pre-petition obligations for which payments have beensuspended as a result of the Chapter 11. Therefore, thecommitments shown above will not reflect actual cash outlays inthe future period. Page 123 As a result of the Chapter 11, all required principalpayments on pre-petition debt were suspended other than forobligations classified as "Other" above. For the periodsubsequent to the Petition Date, interest on the debt classifiedSource: CADIZ INC, 10-K, November 02, 2004Powered 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. under "Liabilities subject to compromise under reorganizationproceedings" was not paid or accrued in accordance with SOP 90-7.Contractual interest on these debt instruments at the defaultrate for the year ending December 31, 2003 was $13.2 million inexcess of recorded interest of $1.1 million included in theConsolidated Income Statement for these debt instruments. 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. Prior to the Chapter 11, the First MortgageNotes were secured by a first lien (subject to certain permittedliens) on substantially all of the assets of the Company and itssubsidiaries other than growing crops, crop inventories andaccounts receivable and proceeds thereof, which secured theRevolving Credit Facility. With the entering into the DIPFacility as described in Note 8, the note holders now have asecond position on substantially all of the Company's assets forso long as the DIP Facility is outstanding. 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 Cadiz. Cadiz alsopledged all of the stock of Sun World as collateral for itsguarantee. See Note 13 for additional discussion of Cadizguarantee. In December 2000, Sun World entered into a two-year $5million senior unsecured term loan. In connection with obtainingthe loan, 50,000 shares of Cadiz' common stock as well as certainwarrants to purchase shares of Cadiz' common stock were issued.The fair value of the stock and the warrants were recorded as adebt discount and were fully amortized over the life of the loanthrough December 31, 2002. At December 31, 2002, the Company didnot repay the loan and thus, the Company was in default. Withthe default, pursuant to the terms of the agreement, the interestrate was increased by 2%. In connection with the Company'sChapter 11 filing, all principal and interest payments on thisobligation have been suspended. NOTE 10 - LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS---------------------------------------------------------------- Under bankruptcy law, actions by creditors to collectindebtedness Sun World owed prior to the Petition Date are stayedand certain other pre-petition contractual obligations may not beenforced against the Company. The Company has received approval from the Bankruptcy Court to pay certain pre-petition liabilitiesincluding employee salaries and wages, benefits, other employeeobligations, and certain grower liabilities entitled to trustprotection under the Perishable Agricultural Commodities Act(PACA). Except for certain secured debt obligations, all pre-petition liabilities have been classified as "Liabilities subjectto compromise under reorganization proceedings" in theConsolidated Balance Sheet. Adjustments to the claims may resultfrom negotiations, payments authorized by Bankruptcy Court order,rejection of executory Page 124contracts including leases, or other events. Pursuant to an order of the Bankruptcy Court, Sun Worldmailed notices to all known creditors that the deadline forfiling proofs of claim with the Court was August 29, 2003. Anestimated 340 claims were filed as of August 29, 2003. Amountsthat Sun World has recorded are in many instances different fromamounts filed by our creditors. Differences between amountsscheduled by Sun World and claims by creditors are beinginvestigated and resolved in connection with our claimsresolution process. Until the process is complete, the ultimateSource: CADIZ INC, 10-K, November 02, 2004Powered 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 and amount of allowable claims cannot be ascertained. Theultimate resolution of these claims will be based upon the finalplan of reorganization. Liabilities subject to compromise under reorganizationproceedings are summarized as follows (dollars in thousands): December 31, 2003 ---- Accounts payable $ 4,311 Interest payable 3,795 Due to parent company (see note 13) 13,500 Long-term debt (see note 9) 120,000 --------- Total $ 141,606 =========NOTE 11 - INCOME TAXES---------------------- Significant components of the Company's deferred income taxassets and liabilities as of December 31, 2003 and 2002 are asfollows (dollars in thousands): December 31, 2003 2002 ---- ---- Deferred tax liabilities: Net fixed assets basis difference $ 9,111 $ 8,792 Other 48 48 --------- --------- Total deferred tax liabilities 9,159 8,840 --------- --------- Deferred tax assets: Net operating losses 28,079 23,551 State taxes 1,853 1,854 Reserves and accruals 748 1,473 Other 989 943 --------- --------- Total deferred tax assets 31,669 27,821 Valuation allowance for deferred tax assets (27,957) (24,428) --------- --------- Net deferred tax liability $ 5,447 $ 5,447 ========= ========= Page 125 As of December 31, 2003, the Company has net operating loss(NOL) carryforwards of approximately $71.2 million for federalincome tax purposes. Such carryforwards expire in varyingamounts through the year 2023. As of December 31, 2003, theCompany has state NOL carryforwards of approximately $43.9million. These NOL carryforwards expire in varying amountsthrough the year 2014. A reconciliation of the income tax (benefit) expense to thestatutory federal income tax rate is as follows (dollars inthousands): Year Ended December 31, 2003 2002 2001 ---- ---- ---- Expected federal income tax benefit at 34% $ (3,388) $ (3,350) $ (7,497) Loss with no tax benefit provided 2,696 3,322 7,531Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Federal AMT refund - (73) - State income tax 2 3 6 Foreign withholding taxes 100 68 51 Restructuring costs 661 - - Other non-deductible expenses 31 28 (34) --------- ---------- --------- Income tax (benefit) expense $ 102 $ (2) $ 57 ========= ========== =========NOTE 12 - EMPLOYEE BENEFIT PLANS-------------------------------- The Company participates in the Cadiz Inc. 401(k) Plan for itsemployees. Employees must work 1,000 hours annually and havecompleted one year of service to be eligible to participate inthis plan. The Company matches 100% of the first three percentdeferred by an employee and 50% of the next two percent deferred.For those hourly employees covered under a collective bargainingagreement, contributions are made to a multi-employer pensionplan in accordance with negotiated labor contracts and aregenerally based on the number of hours worked. Total Companycontributions to these plans (in thousands) totaled $296,000 in 2003,$266,000 in 2002 and $243,000 in 2001.NOTE 13 - RELATED PARTY TRANSACTIONS------------------------------------ In September 1996, the Company and Cadiz entered into a 10-year services agreement which had three separate components: (1)the services agreement itself under which Cadiz providedmanagement and financial services to the Company in exchange foran annual management fee of $1.5 million and reimbursement ofcertain other expenses incurred on behalf of the Company; (2) anagricultural lease of Cadiz-owned irrigated farmland in SanBernardino County consisting primarily of citrus and grapes forwhich the Company paid annual land rent of $250,000; and (3) atax sharing agreement which provided for Cadiz and Sun World tofile a consolidated tax return with Sun World paying to Cadiz anamount equal to its current tax liability as though Sun Worldfiled its own returns. Additionally, the Company had anintercompany revolving credit agreement whereby the Company couldborrow from Cadiz as Page 126needed. As of December 31, 2002, $12.2 million was owed to Cadiz under the intercompany revolving credit agreement and $1.3 million was payable to Cadiz under the services agreement. Effective July 1, 2003, the Company and Cadiz agreed to anamended agricultural lease approved by the Bankruptcy Courtwhereby the Company would lease approximately 370 acres of lemonsand table grapes for the 2004 harvest season with rent equal to50% of the net farming profit from the sale of the crops. In November 2003, the Company, Cadiz and holders of themajority of the First Mortgage Notes entered into a settlementagreement with respect to the various claims between the partieswhich was approved by the Bankruptcy Court. The settlementagreement provided for the following: (1) Cadiz would be alloweda general unsecured claim of $13.5 million in full and finalsettlement of all of its claims against the Company; (2) theCompany and Cadiz consented to the termination of all contractsand agreement to which Cadiz and the Company are partiesincluding the services agreement described above but excludingthe agricultural lease; (3) Cadiz waived any contention that itwas entitled to a recovery on account of its equity interest inSun World. In addition, pursuant to the settlement agreement, Cadizagreed to assign its $13.5 million claim to a trust for thebenefit of those holders of First Mortgage Notes who elect toreceive their prorata share of this trust. Further, Cadiz agreedSource: CADIZ INC, 10-K, November 02, 2004Powered 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 pledge its equity ownership in the Company to the trust. The$13.5 million claim is classified under the caption "Liabilitiessubject to compromise under reorganization proceedings" on theConsolidated Balance Sheet at December 31, 2003. The Company made payments to Cadiz of $0.3 million for 2003,$1.9 million for 2002, and $0 for 2001, pursuant to the servicesagreement (including the agricultural lease) described above. NOTE 14 - NON-RECURRING COMPENSATION EXPENSE-------------------------------------------- In 2001, Cadiz issued 12,034 deferred stock units to certainsenior managers of Sun World. These deferred stock units wereissued in exchange for the cancellation of 22,600 fully vestedoptions 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 bythe 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 127NOTE 15 - UNUSUAL ITEMS----------------------- The Company is involved with various litigation proceedingsboth domestically and internationally to protect its proprietaryfruit varieties from unauthorized use. The Company is currentlyinvolved in proceedings with domestic growers to enjoin theirunauthorized production of one of the Company's proprietarygrapevines, the Sugraone table grape. During 2002, a Californiastate court issued a ruling adverse to Sun World in one of theseproceedings. In March 2003, the appeals court upheld thedecision reached by the California state court. The Company wroteoff capitalized legal costs related to defending its intellectualproperty rights to this variety as of December 31, 2002 resultingin a charge of $1,097,000. The unfavorable outcome in this mattercould have an adverse impact on the Company's future financialperformance. As described in Note 1, the Company tried unsuccessfully torestructure its debt and ultimately filed for Chapter 11 onJanuary 30, 2003. In connection with these efforts, the Companyincurred $614,000 of professional fees. As a result of theunsuccessful debt restructuring, these costs have been writtenoff as of December 31, 2002.NOTE 16 - 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 various other legal andadministrative proceedings and claims. In the opinion ofmanagement, the ultimate outcome of each proceeding or all suchproceedings combined will not have a material adverse impact onthe Company's financial statements.NOTE 17 - SUBSEQUENT EVENTS---------------------------Source: CADIZ INC, 10-K, November 02, 2004Powered 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 hearing to consider the adequacy of the disclosure statementaccompanying the Plan, most recently scheduled for June 11, 2004, hasbeen subject to several postponements and no hearing date iscurrently scheduled. In Sun World's filings with the BankruptcyCourt, Sun World has reported that it believes that the Plan likelycannot be confirmed absent the acceptance of the holders of the FirstMortgage Notes, in their capacity as secured creditors. Sun Worldhas further reported to the Bankruptcy Court that the holders of theFirst Mortgage Notes have not reached a consensus with respect tocertain corporate governance issues relating to the reorganizedcompany, and that they have been unable to finalize a shareholderagreement term sheet. In the meantime, Sun World has, with BankruptcyCourt approval, expanded the scope of its engagement with Ernst & Young Corporate Finance LLC to include services related to (i) a saleof substantially all of its assets pursuant to a motion or a plan ofreorganization, and (ii) obtaining an equity investor and financingunder a plan of reorganization Page 128and is actively pursuing the sales/investment process. Sun World has chosen to delay the preparation of an amended Plan and disclosure statement and the scheduling of a disclosure statement hearing date pending the outcome of these most recent developments. Sun World's exclusivity period (i.e. the period during which only Sun World may file a plan of reorganization) currently expires on December 31, 2004. Sun World cannot predict at this time what changes, if any, will be made to the Plan as a result of the foregoing or whether or not the Plan, as amended, will be approved. Page 129Source: CADIZ INC, 10-K, November 02, 2004Powered 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. STATEMENT PURSUANT TO SECTION 906 THE SARBANES-OXLEY ACT OF 2002BY PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER I, Keith Brackpool, herby certify that, to myknowledge, that: 1. the accompanying Annual Report on Form 10-K ofCadiz Inc. for the year ended December 31, 2003 (the"Report") fully complies with the requirements of Section13(a) or 15(d), as applicable, of the Securities andExchange Act of 1934, as amended; and 2. the information contained in the Report fairlypresents, in all material respects, the financial conditionand results of operations of Cadiz Inc. IN WITNESS WHEREOF, the undersigned has executed thisStatement as of the date first written above.Dated: November 1, 2004 /s/ Keith Brackpool ---------------------------------- Keith Brackpool Chairman, Chief Executive Officer and Chief Financial OfficerSource: CADIZ INC, 10-K, November 02, 2004Powered 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 3.4 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CADIZ INC. Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware Cadiz Inc. (the "Corporation"), a corporation organized and existing byvirtue of the General Corporation Law of the State of Delaware, as amended (the"DGCL"), by its duly authorized officers, hereby certifies as follows: FIRST: That the Board of Directors of the Corporation has duly adopteda resolution authorizing the Corporation to reclassify and change each 25outstanding shares of the Corporation's Common Stock, par value one cent ($0.01)per share, into one (1) share of Common Stock, par value one cent ($0.01) pershare. SECOND: That, pursuant to authorization by the affirmative vote, inaccordance with the provisions of the DGCL, of the holders of a majority of theoutstanding voting shares of Common Stock and Preferred Stock of the Corporationentitled to vote thereon at a special meeting of stockholders of the Corporationheld on August 21, 2003, the Certificate of Incorporation of the Corporation beamended by adding a new paragraph to Article FOURTH to read as follows: "C. Each 25 shares of the Common Stock, par value one cent ($0.01) per share, of the Corporation issued and outstanding or held in treasury as of 12:01 a.m. Los Angeles time on December 15, 2003 (the "Effective Time") shall be reclassified as and changed into one share of Common Stock, par value one cent ($0.01) per share, of the Corporation, without any action by the holders thereof. Each stockholder who, immediately prior to the Effective Time, owns a number of shares of Common Stock which is not evenly divisible by 25 shall, with respect to such fractional interest, be entitled to receive from the Corporation cash in an amount equal to such fractional interest multiplied by the average of the high and low sales prices (as adjusted to reflect the reverse stock split) of the Common Stock as last reported in the OTC U.S. Market immediately prior to the Effective Time." THIRD: That the amendment to the Corporation's Certificate ofIncorporation set forth herein has been duly adopted in accordance with theprovisions of Section 242 of the DGCL. IN WITNESS WHEREOF, the Corporation has caused this certificate to beexecuted on its behalf by Keith Brackpool, its Chairman and Chief ExecutiveOfficer, on this 15th day of December, 2003. By: /s/ Keith Brackpool ---------------------------------- Chief Executive OfficerATTEST:By: /s/ Jennifer Hankes Painter ----------------------------------- SecretarySource: CADIZ INC, 10-K, November 02, 2004Powered 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 3.5 CERTIFICATE OF ELIMINATION OF SERIES D PREFERRED STOCK, SERIES E-1 PREFERRED STOCK AND SERIES E-2 PREFERRED STOCK OF CADIZ INC. (PURSUANT TO SECTION 151(G) OF THE DELAWARE GENERAL CORPORATION LAW) Cadiz Inc., a corporation organized and existing under the GeneralCorporation Law of the State of Delaware (the "Corporation") does hereby certifythat the following resolutions respecting the Corporation's Series D PreferredStock, Series E-1 Preferred Stock and Series E-2 Preferred Stock were dulyadopted by the Corporation's Board of Directors: WHEREAS, no shares of the Corporation's Series D Preferred Stock are outstanding and no shares of Series D Preferred Stock will be issued subject to the certificate of designations previously filed with respect to the Series D Preferred Stock; and WHEREAS, no shares of the Series E-1 Preferred Stock are outstanding and no shares of Series E-1 Preferred Stock will be issued subject to the certificate of designations previously filed with respect to the Series E-1 Preferred Stock; and WHEREAS, no shares of the Corporation's Series E-2 Preferred Stock are outstanding and no shares of Series E-2 Preferred Stock will be issued subject to the certificate of designations previously filed with respect to the Series E-2 Preferred Stock. NOW, THEREFORE, IT IS HEREBY RESOLVED, that the officers of the Corporation be, and each of them is hereby, authorized, empowered and directed to cause a certificate of elimination with respect to the Corporation's Series D Preferred Stock, Series E-1 Preferred Stock and Series E-2 Preferred Stock to be executed and filed with the Secretary of the State of Delaware pursuant to Section 151(g) of the Delaware General Corporation Law in order to eliminate from the Corporation's certificate of incorporation all matters set forth in the certificate of designations with respect to each of the Series D Preferred Stock, the Series E-1 Preferred Stock, and the Series E-2 Preferred Stock, respectively. IN WITNESS WHEREOF, the Corporation has caused this Certificate to besigned by its duly authorized officer this 15th day of December, 2003. CADIZ INC. By: /s/Jennifer Hainkes Painter ----------------------------------- SecretarySource: CADIZ INC, 10-K, November 02, 2004Powered 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. CERTIFICATE OF ELIMINATION OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK, OF CADIZ INC. (PURSUANT TO SECTION 151(G) OF THE DELAWARE GENERAL CORPORATION LAW) Cadiz Inc., a corporation organized and existing underthe General Corporation Law of the State of Delaware (the"Corporation") does hereby certify that the followingresolutions respecting the Corporation's Series A JuniorParticipating Preferred Stock were duly adopted by theCorporation's Board of Directors: WHEREAS, no shares of the Corporation's Series A Junior Participating Preferred Stock are outstanding and no shares of Series A Junior Participating Preferred Stock will be issued subject to the certificate of designations previously filed with respect to the Series A Junior Participating Preferred Stock; NOW, THEREFORE, IT IS HEREBY RESOLVED, that the officers of the Corporation be, and each of them is hereby, authorized, empowered and directed to cause a certificate of elimination with respect to the Corporation's Series A Junior Participating Preferred Stock to be executed and filed with the Secretary of the State of Delaware pursuant to Section 151(g) of the Delaware General Corporation Law in order to eliminate from the Corporation's certificate of incorporation all matters set forth in the certificate of designations with respect to the Series A Junior Participating Preferred Stock. IN WITNESS WHEREOF, the Corporation has caused thisCertificate to be signed by its duly authorized officer thisday of March, 2004. CADIZ INC. By: ------------------------------ Jennifer Hankes Painter SecretarySource: CADIZ INC, 10-K, November 02, 2004Powered 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 3.7 CERTIFICATE OF DESIGNATIONS OF SERIES F PREFERRED STOCK OF CADIZ INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware CADIZ INC., a corporation organized and existing under theGeneral Corporation Law of the State of Delaware (the "CORPORATION"), herebycertifies that, pursuant to (i) the authority conferred upon the Board ofDirectors by the Certificate of Incorporation of the Corporation and (ii) theprovisions of Section 151 of said General Corporation Law, the Board ofDirectors duly adopted a resolution on December 11, 2003, which resolution is asfollows: RESOLVED, that pursuant to the authority vested in the Boardof Directors of the Corporation by the Certificate of Incorporation, the Boardof Directors does authorize for issuance One Hundred Thousand (100,000) sharesof Preferred Stock, par value $.01 per share, of the Corporation, to bedesignated "SERIES F PREFERRED STOCK" of the presently authorized shares ofPreferred Stock. The voting powers, designations, preferences, and other rightsof the Series F Preferred Stock authorized hereunder and the qualifications,limitations and restrictions of such preferences and rights are as follows: 1. RANKING. The Series F Preferred Stock shall, with respect tothe payment of dividends and upon liquidation, dissolution, or winding up, ranksenior and prior to all other capital stock issued by the Corporation. No otherclass of capital stock of the Corporation, preferred or otherwise, shall at anytime rank pari passu with the Series F Preferred Stock. 2. DIVIDENDS. (a) In the event any dividends are declared or paid or any otherdistribution is made on or with respect to the common stock, par value $.01 pershare ("COMMON STOCK") of the Corporation, the holders of the Series F PreferredStock as of the record date established by the Board of Directors for suchdividend or distribution on the Common Stock shall be entitled to receive asadditional dividends (the "ADDITIONAL DIVIDENDS") an amount (whether in the formof cash, securities or other property) equal to the amount (and in the form) ofthe dividends or distribution that such holders would have received had theSeries F Preferred Stock been converted into Common Stock as of the dateimmediately prior to the record date of such dividend or distribution on theCommon Stock, such Additional Dividends to be payable on the same payment dateas the payment date for the dividend on the Common Stock established by theBoard of Directors; provided, however, that if the Corporation declares and paysa dividend or makes a distribution on the Common Stock consisting in whole or inpart of Common Stock, then no such dividend or distribution shall be payable inrespect of the Series F Preferred Stock on account of the portion of suchdividend or distribution on the Common Stock payable in Common Stock and in lieuthereof the anti-dilution adjustment in Section 5(c)(ii) below shall apply. Therecord date for any such Additional Dividends shall be the record date for theapplicable dividend or distribution on the Common Stock, and any such AdditionalDividends shall be payable to the individual, entity or group (a "PERSON") inwhose name the Series F Preferred Stock is registered at the close of businesson the applicable record date. (b) No dividend shall be paid or declared on any share of CommonStock (other than dividends payable in Common Stock for which an adjustment ismade pursuant to Section 5(c)(ii) hereof), unless a dividend, payable in thesame consideration and manner, is simultaneously paid or declared, as the casemay be, on each share of Series F Preferred Stock in an amount determined as setforth in paragraph (a) above. For purposes hereof, the term "DIVIDENDS" shallinclude any pro rata distribution by the Corporation, out of funds of theCorporation legally available therefor, of cash, property, securities(including, but not limited to, rights, warrants or options) or other propertyor assets to the holders of the Common Stock, whether or not paid out ofcapital, surplus or earnings.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (c) Upon the conversion of any shares of Series F Preferred Stockto shares of Common Stock pursuant to Section 5, the Corporation willimmediately pay such holder who converted shares of Series F Preferred Stockinto shares of Common stock all dividends which the holder of such shares as ofthe record date for such dividends would have received had that holder held theCommon Stock for the applicable period to the extent not already received bythat holder. 3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up ofthe Corporation, either voluntary or involuntary, the holders of Series FPreferred Stock shall be entitled to receive (x) prior and in preference to anydistribution of any of the assets or surplus funds of the Corporation to theholders of the Common Stock or to any other series or class of capital stock ofthe Corporation, all accrued or declared but unpaid dividends on such shares and(y) after the payment referred to in the foregoing clause (x) has been received,such assets in amount equal to the amount (and in the form) of the assets thatsuch holders would have received had the Series F Preferred Stock been convertedinto Common Stock as of the date immediately prior to the distribution of assetsof the Corporation pursuant to the liquidation, dissolution of winding up of theCorporation sharing parri passu (on a pro rata basis) with all holders of CommonStock. 4. VOTING. (a) Except as otherwise provided by applicable law and in additionto any voting rights provided by law, for so long as the Series F PreferredStock is outstanding, the holders of outstanding shares of the Series FPreferred Stock: (i) shall be entitled to vote together with the holders of the Common Stock as a single class on all matters submitted for a vote of holders of Common Stock, including, without limitation, the election of directors; (ii) shall have such other voting rights as are specified in the Certificate of Incorporation or as otherwise provided by Delaware law; and 2 (iii) shall be entitled to receive notice of any stockholders' meeting in accordance with the Certificate of Incorporation and By-laws of the Corporation. For purposes of the voting rights set forth in this Section 4(a), eachshare of Series F Preferred Stock shall entitle the holder thereof to cast onevote for each whole vote that such holder would be entitled to cast had suchholder converted its Series F Preferred Stock into shares of Common Stock as ofthe date immediately prior to the record date for determining the stockholdersof the Corporation eligible to vote on any such matter. (b) From the date this certificate is filed until the thirdanniversary thereof, the holders of the Series F Preferred Stock shall have theexclusive right, voting separately as a single class, to elect two (2) membersof the Board of Directors of the Corporation (each such member elected by theholders of Series F Preferred Stock, a "SERIES F PREFERRED DIRECTOR"). Followingthe third anniversary of the filing of this certificate, the holders of theSeries F Preferred Stock will be entitled to the following number of Series FDirectors (all to be elected pursuant to the terms of the previous sentence): Ifthe then outstanding Series F Preferred Stock is convertible into greater than10% of the common stock (on a Fully-Diluted Basis) there shall be 2 Series FDirectors, if the outstanding Series F Preferred Stock is convertible into5%-10% of the common stock on a Fully Diluted Basis, there will be one Series FDirector and, if the outstanding Series F Preferred Stock is convertible intoless than 5% of the common stock on a Fully-Diluted Basis, there shall be noSeries F Directors. The initial Series F Preferred Directors shall be asdesignated by written notice to the Corporation from a majority-in-interest ofthe Series F Preferred Stock and they shall be elected to serve for so long asthe shares of Series F Preferred Stock are outstanding. The Series F PreferredSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Directors shall have the right to nominate their successors upon theirresignation from the Board of Directors of the Corporation. A Series F PreferredDirector may only be removed by the written consent or affirmative vote of atleast a majority-in-interest of the Series F Preferred Stock. The holders of atleast a majority-in-interest of the Series F Preferred Stock shall have theright to appoint the successor to any Series F Preferred Director who is removedfrom the Board of Directors of the Corporation. At the option of at least amajority-in-interest of the Series F Preferred Stock, the Series F PreferredDirectors shall be seated on any and/or all of the audit, nominating and/orcompensation committees of the Corporation, subject to any restrictions underapplicable law or the rules and requirements of any securities exchange uponwhich any of the Corporation's securities may be listed; provided, however, thatthe Corporation shall not list its securities on any securities exchange withoutthe consent of at least one of the Series F Preferred Directors. Any Series FPreferred Director seated on any committee pursuant to the terms of this Section4(b) may not be removed from any such committee without the consent oraffirmative vote of at least a majority-in-interest of the Series F PreferredStock. (c) For so long as the Series F Preferred Stock is outstanding,the Board of Directors of the Corporation shall not take any action to increaseor decrease the number of directors of the Corporation (or the number of membersof any committee of the Board of Directors of the Corporation) without theconsent or affirmative vote of at least a majority-in-interest of the Series FPreferred Stock; provided, however, that immediately upon full repayment of theNew Note, the number of directors of the Corporation may be increased to notmore than seven (7) without the consent or affirmative vote of the holders ofthe Series F Preferred Stock; provided further that such increase shall notresult in the removal of either of the 3Series F Preferred Directors from the Board of Directors of the Corporation orany committee thereof. (d) For so long as the Series F Preferred Stock is outstanding,the Corporation shall not, without the written consent or affirmative vote of atleast one of the Series F Preferred Directors, create, authorize or issue anyclass, series or shares of Preferred Stock or any other class of capital stock. 5. CONVERSION. The holders of Series F Preferred Stock shall haveconversion rights as follows: (a) The shares of Series F Preferred Stock shall, immediatelyafter issuance, be convertible into 1,728,955 shares of Common Stock of theCorporation which represents, as of the date of filing of this Certificate, 25%of the Common Stock of the Corporation, on a Fully-Diluted Basis. (b) The outstanding shares of Series F Preferred Stock shallthereafter be convertible from time to time, on a pro-rata basis, into suchnumber of shares of Common Stock of the Corporation as is calculated as of thedate of any such conversion by: (i) First, calculating the number of shares of Common Stock of the Corporation which, at the applicable time of conversion, represents 25% of the Common Stock of the Corporation on a Fully-Diluted Basis, and (ii) Second, multiplying the number obtained under subsection (i) above by a fraction, the numerator of which is the number of shares of Series F Preferred Stock outstanding as of the date of such calculation and the denominator of which is the sum of (x) the number of shares of Series F Preferred Stock outstanding as of the date of such calculation plus (y) number of shares of Series F Preferred Stock which had previously been issued by the Corporation but converted into shares of Common Stock prior to the date of such calculation (the result so calculated, the "Conversion Number"); provided, however, that at such time that is three years after the payment in full of the New Note, the shares of Series F Preferred Stock outstanding as of such date shall not be adjusted pursuant to this Section 5(b) but shall continue to be adjusted pursuant to Section 5(c) below. (c) Reorganization, Reclassification, Consolidation, Merger orSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Sale, etc. (i) If the Corporation at any time subdivides (by any stock split, stock dividend (other than stock dividends as to which a dividend is simultaneously paid or declared with respect to Series F Preferred Stock pursuant to Section 2(b) hereof) recapitalization or otherwise) its outstanding shares of its Common Stock into a greater number of shares, the Conversion Number in effect immediately prior to such subdivision will be proportionately increased, and if the Corporation at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of its Common Stock, the Conversion Number in effect immediately prior to such combination will be proportionately decreased concurrently with the effectiveness of such event. 4 (ii) In case the Corporation shall declare a dividend or make any other distribution upon any stock of the Corporation payable in Common Stock or options to purchase shares of Commons Stock or securities convertible into shares of Common Stock for no consideration without making a ratable distribution thereof to holders of Series F Preferred Stock (based upon the number of shares of Common Stock into which such Series F Preferred Stock would be convertible, assuming conversion of the Series F Preferred Stock), then the Conversion Number in effect immediately prior to the declaration of such dividend or distribution shall be proportionately increased, concurrently with the effectiveness of such declaration. (iii) Any capital reorganization, reclassification, consolidation, merger or sale of all or substantially all of the Corporation's assets to another Person which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an "Organic Change." Prior to the consummation of any Organic Change, the Corporation will make appropriate provisions to insure that each of the holders of Series F Preferred Stock will thereafter have the right to acquire and receive such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Series F Preferred Stock into shares of Common Stock immediately prior to such Organic Change. The Corporation will not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor corporation (if other than the Corporation) resulting from consolidation or merger or the Corporation purchasing such assets assumes by written instrument the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. (d) No fractional shares of Common Stock shall be issued uponconversion of the shares of Series F Preferred Stock. In lieu of any fractionalshares to which the holder of Series F Preferred Stock would otherwise beentitled, the Corporation shall pay cash equal to such fraction multiplied bythe then effective fair market value of the Common Stock (which shall bedetermined in good faith by the Board of Directors if there is then no currentmarket for the Common Stock). Conversion of the shares of Series F PreferredStock shall be effected by delivery, to the office of the Corporation or to anytransfer agent for such shares, of duly endorsed certificates for the sharesbeing converted and of written notice to the Corporation that the holder electsto convert such shares. Conversion of the shares of Series F Preferred Stockshall be deemed to occur immediately prior to the close of business on the datethe latter of the shares and the notice are delivered. Holders of Series FPreferred Stock entitled to receive Common Stock upon conversion of the Series FPreferred Stock shall be treated for all purposes as the record holders of suchshares of Common Stock on the date conversion is deemed to occur. TheCorporation shall not be obligated to issue certificates evidencing shares ofCommon Stock issuable upon conversion of the Series F Preferred Stock unless thecertificates evidencing such shares of Series F Preferred Stock being convertedare either delivered to the Corporation or its transfer agent as provided above,or the holder notifies the Corporation or its transfer agent that suchcertificates have been lost, stolen or destroyed and executes an agreement, andSource: CADIZ INC, 10-K, November 02, 2004Powered 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 the Corporation's election provides a surety bond or other security,satisfactory to the Corporation to indemnify the Corporation from any lossincurred by it in connection with such certificates. The 5Corporation shall, as soon as practicable after such delivery, or such agreementand indemnification in the case of a lost certificate, issue and deliver at suchoffice a certificate or certificates for the number of shares of Common Stock towhich the holder of Series F Preferred Stock is entitled and a check payable tothe holder of Series F Preferred Stock for any cash due with respect tofractional shares. (e) The issuance of certificates for shares of Common Stock uponconversion of the Series F Preferred Stock shall be made without charge to theholders thereof for any issuance tax in respect thereof, provided that theCorporation shall not be required to pay any income or similar taxes of a holderarising in connection with a conversion or any tax that may be payable inrespect of any transfer involved in the issuance and delivery of anycertificates in a name other than that of the holder of the Series F PreferredStock which is being converted. (f) The Corporation will not, by amendment of its Certificate ofIncorporation or through any reorganization, transfer of assets, consolidation,merger, dissolution, issue or sale of securities or any other voluntary action,avoid or seek to avoid the observance or performance of any of the terms to beobserved or performed hereunder by the Corporation but will at all times in goodfaith assist in the carrying out of all the provisions of this Section 5 and inthe taking of all such action as may be necessary or appropriate in order toprotect the conversion rights of the holders of the Series F Preferred Stockagainst impairment. (g) In the event of any taking by the Corporation of a record ofthe holders of any class of securities of the Corporation for the purpose ofdetermining the holders thereof who are entitled to receive any dividend ordistribution, the Corporation shall mail to each holder of Series F PreferredStock at least ten (10) days prior to the date specified therein, a noticespecifying the date on which any such record is to be taken for the purpose ofsuch dividend or distribution. (h) The Corporation shall reserve and keep available out of itsauthorized but unissued Common Stock such number of shares of Common Stock asshall from time to time be sufficient to effect conversion of the Series FPreferred Stock and the issuance of Common Stock to the holders of the Series FPreferred Stock. (i) No shares of the Series F Preferred Stock acquired by theCorporation by reason of purchase, conversion or otherwise shall be reissued,and all such shares shall be cancelled, retired and eliminated from the sharesof capital stock which the Corporation shall be authorized to issue. 6. NO RIGHT OF REDEMPTION. The Corporation shall have no rightwhatsoever to redeem all or any number of the outstanding shares of the Series FPreferred Stock at any time. 7. PREEMPTIVE RIGHTS. (a) Subject to paragraphs (c) and (d), for so long as any sharesof the Series F Preferred Stock are outstanding, the Corporation shall not,subsequent to the completion of the New Equity Financing (as defined in Section8(f)), issue, sell, or exchange, or agree to issue, sell, 6or exchange, to any Person or entity, whether from treasury shares, from theissuance of authorized but unissued shares, or otherwise, any equity securities(or any securities convertible into or excercisable or exchangeable therefor)(any of which, the "CORPORATION EQUITY SECURITIES"), unless the Corporationshall have first offered to sell (the "CORPORATION OFFER") to holders of SeriesSource: CADIZ INC, 10-K, November 02, 2004Powered 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. F Preferred Stock such number of securities at the same price and on the sameterms (the "CORPORATION OFFER SALE PRICE") and in such quantity as will enableholders of Series F Preferred Stock to maintain their percentage ownership ofCommon Stock of the Corporation on a Fully-Diluted Basis. The Corporation Offerby its terms shall remain open and irrevocable for a period of thirty (30) daysfrom the date it is delivered by the Corporation to holders of Series FPreferred Stock (the "PREEMPTIVE RIGHTS OFFER PERIOD"). (b) Notice of the intention of the holders of the Series FPreferred Stock to accept a Corporation Offer made pursuant to this Section 7shall be evidenced by a writing signed by holders of Series F Preferred Stockand delivered to the Corporation prior to the end of the Preemptive Rights OfferPeriod, setting forth the portion of the Corporation Equity Securities which theholders of Series F Preferred Stock elect to purchase (the "NOTICE OFACCEPTANCE"). (c) In the event that a Notice of Acceptance is not given byholders of Series F Preferred Stock in respect of all or any part of theCorporation Equity Securities, the Corporation shall have sixty (60) days fromthe expiration of the Preemptive Rights Offer Period to sell or enter into anagreement to sell all or the part of the Corporation Equity Securities set forthin the Corporation Offer not purchased by the holders of Series F PreferredStock, as the case may be, to any other person or persons, on terms andconditions, including, without limitation, price, which are no more favorable tosuch other person or persons or less favorable to the Corporation or the holdersof Series F Preferred Stock than the Corporation Offer Sale Price. Upon theearlier of (i) sixty (60) days from delivery of a Notice of Acceptance or (ii)the closing of the sale of the securities not accepted in the Notice ofAcceptance, the Corporation shall sell to the holders of Series F PreferredStock the Corporation Equity Securities in respect of which a Notice ofAcceptance was delivered to the Corporation by the holders of Series F PreferredStock, and which were not sold to any other person, on the terms specified inthe Notice of Acceptance. (d) Any Corporation Equity Securities not purchased by the holdersof Series F Preferred Stock or other person or persons in accordance withparagraph (c) above may not be sold or otherwise disposed of until they areagain offered to the holders of Series F Preferred Stock under the proceduresspecified in paragraphs (a), (b) and (c). (e) The rights of holders of Series F Preferred Stock underparagraphs (a), (b), (c) and (d) shall not apply to the following securities: (i) Corporation Equity Securities issued in any transaction described in Section 5(c); (ii) Corporation Equity Securities issued by the Corporation upon the conversion of any securities which are convertible or exchangeable into capital stock of the Corporation and which are outstanding as of the date hereof; 7 (iii) Corporation Equity Securities issued by the Corporation upon the conversion of any securities which (x) are convertible or exchangeable into capital stock of the Corporation and (y) were issued under the procedures specified in paragraphs (a), (b) and (c); (iv) Corporation Equity Securities issued by the Corporation under the Management Incentive Plan; (v) Corporation Equity Securities issued by the Corporation to any officer, director or employee of the Corporation as remuneration for services rendered to the Corporation; provided, however, that at least one of the Series F Preferred Directors voted to authorize such issuance; (vi) Corporation Equity Securities issued by the Corporation to any consultant pursuant to compensation procedures approved by the Board of Directors of the Corporation including the consent of at least one of the Series F Preferred Directors;Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (vii) Corporation Equity Securities issued in connection with the acquisition of all or part of another entity or in connection with a joint venture or such other strategic investment, which transaction is approved by at least one of the Series F Preferred Directors; (viii) Corporation Equity Securities issued pursuant to the conversion of the Series F Preferred Stock pursuant to the terms hereof; and (ix) Corporation Equity Securities to the extent that such Corporation Equity Securities (and/or any Common Stock issued or issuable with respect to such Corporation Equity Securities) are included within the calculation of "Fully-Diluted Basis" as defined in Section 8(d) hereof (i.e., do not meet the requirements for exclusion from such calculation as set forth in the final paragraph of Section 8(d)). (f) Without limitation of the foregoing, if the Corporation sellsany Corporation Equity Securities to any person or persons and if, after givingeffect to such transaction and after giving effect to any election by theholders of the Series F Preferred Stock to exercise the preemptive rightsgranted herein, the Conversion Number would be less than such number of sharesof Common Stock of the Corporation as is calculated as of the applicable dateby: (i) First, calculating the number of shares of Common Stock of the Corporation which, at the applicable date represents 12.5% of the Common Stock of the Corporation on a Fully-Diluted Basis, and (ii) Second, multiplying the number obtained under subsection (i) above by a fraction, the numerator of which is the number of shares of Series F Preferred Stock outstanding as of the date of such calculation and the denominator of which is the sum of (x) the number of shares of Series F Preferred Stock outstanding as of the date of such calculation plus (y) number of shares of Series F Preferred Stock which had previously 8 been issued by the Corporation but converted into shares of Common Stock prior to the date of such calculation (the number so calculated, the "MINIMUM CONVERSION NUMBER");then the Conversion Number shall automatically be adjusted as of the applicabledate so that it is equal to the Minimum Conversion Number. 8. DEFINITIONS: (a) "BANK" means ING Capital, LLC, a Delaware limited liabilitycompany. (b) "CASH COLLATERAL ACCOUNT" means an interest-bearing cashcollateral account established under the terms of the New Note. (c) "CRE" means Cadiz Real Estate LLC, a Delaware limitedliability Corporation. (d) "FULLY-DILUTED BASIS" means, with respect to the calculationof the number of shares of Common Stock into which the Series F Preferred Stockis convertible, the sum of (i) all Common Stock outstanding at the time of suchdetermination (including all Common Stock issued pursuant to the first $4million of New Equity Financing), (ii) all Common Stock issuable upon theexchange, exercise or conversion of all warrants, options, convertiblesecurities or other such instruments then outstanding (whether or not suchinstruments are then exercisable) including, but not limited to, the equitysecurities issued under the Management Equity Incentive Plan, but excluding (x)16,600 shares of Common Stock issuable upon exercise of outstanding warrantswith an exercise price in excess of $25, (y) shares of Common Stock issuable55,550 outstanding stock options with an exercise price in excess of $25, and(z) 20,000 shares of Common Stock conditionally issuable to a consultant to theCompany upon achievement of certain financial targets, and (iii) all otherCommon Stock issuable as a result of any anti-dilution adjustments andSource: CADIZ INC, 10-K, November 02, 2004Powered 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. pre-emptive or similar rights granted to any other holder of the Corporation'sCommon Stock; provided, however, that such calculation shall not include: (A) the issuance by the Corporation of the next $4.6 million in Corporation Equity Securities after the issuance by the Corporation of the first $4 million of Corporation Equity Securities pursuant to its New Equity Financing; provided further that the $4.6 million of Corporation Equity Securities shall be issued on terms no less favorable to the Corporation than the first $4 million of New Equity Financing; and (B) the issuance by the Corporation of any Corporation Equity Securities subsequent to the consummation of the New Equity Financing; (C) the issuance by the Corporation of any Corporation Equity Securities pursuant to the conversion of the Series F Preferred Stock pursuant to the terms hereof; or 9 (D) the issuance by the Corporation of any Corporation Equity Securities concurrently with the New Equity Financing in settlement of third party claims; andprovided that in each issuance of Corporation Equity Securities referred to in(B) above, cash in the amount of at least 35% of the net proceeds from suchissuance of Corporation Equity Securities shall have been either paid directlyto the Bank on account of the New Note or deposited into the Cash CollateralAccount, which cash may be used by the Corporation or CRE to pay interestpayments next due on the New Note in their order of maturity or to prepayprincipal outstanding under the New Note, provided further that the Corporationshall not deposit cash into the Cash Collateral Account if, as a result of suchdeposit, the amount on deposit would exceed 8% of the then-outstanding principalbalance on the New Note times the number of years from the date of such depositthrough September 30, 2006. (e) "MANAGEMENT EQUITY INCENTIVE PLAN" means that certain planpursuant to which continuing employees of the Corporation shall be issued CommonStock and/or granted securities convertible into Common Stock in an aggregateamount of up to 15% of the outstanding capital of the Corporation, on afully-diluted basis, after giving effect to the issuance of the Series FPreferred Stock and after the issuance by the Corporation of $8.6 million inCommon Stock in the New Equity Financing. (f) "NEW EQUITY FINANCING" means at least $8.6 million equityfinancing raised by the Corporation concurrently with or immediately prior tothe issuance of the New Note. (g) "NEW NOTE" means that certain new note or new notes in theprincipal amount of (i) $35 million, plus (ii) any remaining balance not fullypaid of the Bank' out-of-pocket expenses (including reasonable attorneys' fees)incurred in connection with the restructuring of the Corporation's debtobligations owed to the Bank. 9. TRANSFERABILITY. All outstanding shares of the Series FPreferred Stock may be transferred to any one person or entity at any time andit shall be the obligation of the Company to recognize and effectuate suchtransfer. In the event that any holder of Series F Preferred Stock desires totransfer less than 100% of the then outstanding Series F Preferred Stock, suchholder may only do so by first converting such shares of Series F PreferredStock to be sold into common stock pursuant to Section 5 hereof. 10 IN WITNESS WHEREOF, CADIZ INC. has caused this Certificate to be signedby Keith Brackpool, its Chief Executive Officer, and attested by Jennifer HankesPainter, its Secretary, this __ day of December, 2003.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. CADIZ INC. By: /s/ Keith Brackpool ----------------------------------- Name: Keith Brackpool Title: Chief Executive Officer ATTEST: By: /s/ Jennifer Hankes Painter ----------------------------------- Name: Jennifer Hankes Painter Title: Secretary 11Source: CADIZ INC, 10-K, November 02, 2004Powered 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 4.4 PREFERRED STOCK EXCHANGE AGREEMENT This Preferred Stock Exchange Agreement ("Agreement") is made andentered into effective as of the 20th day of October 2003, by and among CadizInc., a Delaware corporation ("Cadiz"), OZ Master Fund, Ltd. ("OZ Master Fund")and OZF Credit Opportunities Master Fund, Ltd. ("OZF") and is made withreference to the following facts: RECITALS A. WHEREAS, OZ Master Fund is the record and beneficial holder of (i)4,500 shares of the issued and outstanding Series D Preferred Stock of Cadiz,(ii) 2,500 shares of the issued and outstanding Series E-1 Preferred Stock ofCadiz, (iii) 2,500 shares of the issued and outstanding Series E-2 PreferredStock of Cadiz and (iv) warrants to purchase 340,834 of the authorized butunissued shares of common stock, par value $.01 per share (the "Common Stock")of Cadiz, as described on Appendix A hereto (the "OZ Warrants"); B. WHEREAS, OZF is the record and beneficial holder of (i) 500 sharesof the issued and outstanding Series D Preferred Stock of Cadiz, (ii) 1,250shares of the issued and outstanding Series E-1 Preferred Stock of Cadiz, and(iii) 1,250 shares of the issued and outstanding Series E-2 Preferred Stock ofCadiz and (iv) warrants to purchase 74,166 shares of the Common Stock of Cadiz,as described on Appendix A hereto (the "OZF Warrants"); C. WHEREAS, the parties wish to provide for the exchange of all of theshares of Series D Preferred Stock currently owned by OZ Master Fund and OZF foran aggregate of 8,000,000 shares of heretofore authorized but unissued shares ofthe Common Stock of Cadiz, all upon the terms and conditions set forth herein; D. WHEREAS, the parties wish to provide for the exchange of all of theshares of Series E-1 Preferred Stock and Series E-2 Preferred Stock currentlyowned by OZ Master Fund and OZF (collectively, the "Series E Preferred Stock")for an aggregate of 2,000,000 shares of heretofore authorized but unissuedshares of the Common Stock of Cadiz, all upon the terms and conditions set forthherein; AGREEMENT NOW, THEREFORE, in consideration of the mutual benefits to be derivedherefrom and of the mutual agreements hereinafter set forth, the parties heretoagree as follows: ARTICLE I THE PREFERRED STOCK EXCHANGE 1.1. EXCHANGE OF STOCK. Upon the terms and subject to theconditions contained herein, each of OZ Master Fund and OZF (individually, a"Preferred Stockholder" and collectively, the "Preferred Stockholders") willcontribute, convey, transfer, assign and deliver to Cadiz at the Closing (asdefined below), and Cadiz will accept from each Preferred Stockholder all of itsPreferred Stock, and in exchange therefore (the "Exchange"), Cadiz shall issueanddeliver to the Preferred Stockholders (i) a total of 8,000,000 shares of dulyauthorized, validly issued, fully paid and nonassessable shares of Common Stockin exchange for the Series D Preferred Stock (the "Series D Exchange Shares"),with such Series D Exchange Shares to be divided between the PreferredStockholders on the basis of One Thousand, Six Hundred (1,600) Series D ExchangeShares for each share of Series D Preferred Stock exchanged (the "Series DExchange Ratio"), (ii) a total of 1,000,000 shares of duly authorized, validlyissued, fully paid and nonassessable shares of Common Stock in exchange for theSeries E-1 Preferred Stock (the "Series E-1 Exchange Shares"), with such SeriesE-1 Exchange Shares to be divided between the Preferred Stockholders on thebasis of Two Hundred and Sixty Six and two-thirds (266 2/3) Series E-1 ExchangeShares for each share of Series E-1 Preferred Stock exchanged (the "Series E-1Exchange Ratio"), and (iii) a total of 1,000,000 shares of duly authorized,Source: CADIZ INC, 10-K, November 02, 2004Powered 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. validly issued, fully paid and nonassessable shares of Common Stock in exchangefor the Series E-2 Preferred Stock (the "Series E-2 Exchange Shares"), with suchSeries E-2 Exchange Shares to be divided between the Preferred Stockholders onthe basis of Two Hundred and Sixty Six and two-thirds (266 2/3) Series E-2Exchange Shares for each share of Series E-2 Preferred Stock exchanged (the"Series E-2 Exchange Ratio"). The Series D Exchange Shares, Series E-1 ExchangeShares and Series E-2 Exchange Shares shall be referred to collectively hereinas the "Exchange Shares". Upon consummation of the Exchange, the Exchange Sharesshall be deemed to have been issued in full satisfaction of any and all rights(whether or not accrued) of the Preferred Stockholders pertaining to thePreferred Stock, including, without limitation, any rights of the PreferredStockholders to accrued but unpaid dividends as of the Closing Date. 1.2. CLOSING. Subject to acceleration upon transfer of thePreferred Stock pursuant to Section 4.3 hereof, the closing of the Exchange (the"Closing") shall take place on the ninetieth (90th) day following the datehereof. The date on which the Exchange is effected is hereinafter referred to asthe "Closing Date". At the Closing, Cadiz will execute and deliver to eachPreferred Stockholder, or its respective representative, a stock certificate orcertificates dated as of the Closing Date, registered in the name of suchPreferred Stockholder, representing the Exchange Shares being issued to suchPreferred Stockholder pursuant to the Exchange, and (ii) each PreferredStockholder shall deliver to Cadiz a stock certificate or certificatesregistered in the name of such Preferred Stockholder (or duly endorsed fortransfer to such Preferred Stockholder), representing the Preferred Stock ownedby such Preferred Stockholder (which certificates shall be duly endorsed fortransfer to Cadiz). To the extent that (i) the Series D Exchange Shares, SeriesE-1 Exchange Shares and/or Series E-2 Exchange Shares may be issued withoutrestrictive legend in reliance upon Rule 144(k) promulgated under the SecuritiesAct of 1933, as amended, and (ii) Cadiz receives from such Preferred Stockholder(or its assignee) representations as to such Series of Exchange Shares as setforth in Appendix B hereto, then stock certificate(s) representing the ExchangeShares being issued to such Preferred Stockholders with respect to such Seriesshall be issued without restrictive legend. Otherwise, such stockcertificates(s) shall bear an investment legend as set forth in Section 3.5below. 1.3. ADJUSTMENT FOR STOCK SPLIT, RECAPITALIZATION, ETC. In theevent that, subsequent to the effective date of this Agreement but prior to theClosing Date, Cadiz shall (A) pay a dividend or make a distribution on itsshares of Common Stock in shares of Common Stock, (B) subdivide or reclassifyits outstanding Common Stock into a greater number of shares, (C) combine orreclassify its outstanding Common Stock into a smaller number of shares, or (D)issue by capital reorganization or reclassification of its shares of CommonStock or otherwise (other than a subdivision or combination of its sharesprovided for above) any shares of capital stock of Cadiz, 2then the total number of Exchange Shares issuable pursuant to this Agreement andthe Series D Exchange Ratio, Series E-1 Exchange Ratio and/or Series E-2Exchange Ratio, as applicable, in effect immediately prior to such action shallbe adjusted so that each Preferred Stockholder shall be entitled to receive,upon consummation of the Exchange, the number of shares of capital stock ofCadiz which such Preferred Stockholder would have received immediately followingsuch action had the Exchange been consummated immediately prior thereto. Anadjustment made pursuant to this subparagraph shall become effectiveretroactively immediately after the record date in the case of a dividend ordistribution and shall become effective immediately after the effective date inthe case of a subdivision, combination or reclassification. If, as a result ofan adjustment made pursuant to this subparagraph, any Preferred Stockholdershall become entitled to receive shares of two or more classes of capital stockof Cadiz in the Exchange, the Board of Directors of Cadiz shall determine ingood faith the allocation of the adjusted Series D Exchange Ratio, Series E-1Exchange Ratio or Series E-2 Exchange Ratio between or among shares of suchclasses of capital stock, which allocation must be reasonably acceptable to thePreferred Stockholder. Such adjustment shall be made successively whenever anyevent listed above shall occur. 1.4 TERMINATION OF EXCHANGE. Notwithstanding anything in thisAgreement to the contrary, the Exchange may be terminated, and the transactionscontemplated thereby may be abandoned at any time prior to 5:00 P.M. PacificSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Standard Time on the fourth business day following the effective date of thisAgreement (the "OZ Optional Termination Date") by the Preferred Stockholders intheir sole discretion upon written notification. If the Exchange is soterminated by the Preferred Stockholders, the Exchange will forthwith becomenull and void and there will be no liability or obligation on the part of thePreferred Stockholders (or any of their respective representatives oraffiliates) with respect to such Exchange. 1.5 TEMPORARY WAIVER OF EXERCISABILITY OF WARRANTS. In order thatCadiz shall have sufficient authorized but unissued shares of Common Stockavailable to issue all of the Exchange Shares pursuant to the Exchange, each ofOZ Master Fund and OZF hereby waives, for a period commencing as of the date ofthis Agreement and ending 91 days from the date of this Agreement, anyaffirmative obligation of Cadiz to reserve for issuance a sufficient quantity ofCommon Stock as may be required for issuance and delivery upon any exercise byOZ Master Fund or OZF of the OZ Warrants or the OZF Warrants. ARTICLE II REPRESENTATIONS AND WARRANTIES OF CADIZ Cadiz represents and warrants to each Preferred Stockholder that as ofthe date hereof and again as of the Closing Date: 2.1. ORGANIZATION, GOOD STANDING. Cadiz is a corporation dulyorganized, validly existing and in good standing under the laws of the State ofDelaware, and is duly qualified and authorized to do business and in goodstanding in each other jurisdiction in which it is required to be qualified orwhere it owns any material property or conducts any material operations. Cadizhas all requisite corporate power and authority to own, lease, and operate itsassets and to carry on its business as now being conducted. 3 2.2 AUTHORIZATION. Cadiz has the corporate power and authority toenter into this Agreement and to consummate the transactions contemplatedhereby. All actions on the part of Cadiz necessary for the authorization,execution, delivery and performance of this Agreement and the consummation ofthe transactions contemplated hereby have been or will be taken prior to theClosing Date, and this Agreement constitutes the legal, valid and bindingobligation of Cadiz, enforceable against it in accordance with its terms, exceptas enforceability may be restricted, limited or delayed by applicablebankruptcy, insolvency, fraudulent conveyance, or other laws affectingcreditor's rights generally, and except as enforceability is subject to generalprinciples of equity. 2.3 NO VIOLATION OF OTHER AGREEMENTS; NO CONFLICTS. (a) Neither this Agreement nor any of the transactionscontemplated hereunder violates, conflicts with or results in a breach of, orshall violate, conflict with or result in a breach of any lease, contract,document or agreement to which Cadiz is a party or by which it may be bound. (b) Neither the execution and delivery of this Agreementnor the consummation or performance of the transactions contemplated herein,will, directly or indirectly (with or without the giving of notice, or lapse oftime, or both): (i) contravene, conflict with, or result in aviolation of any provision of the organizational documents of Cadiz; (ii) contravene, conflict with, or result in aviolation of any order, judgment or decree to which Cadiz may be subject; or (iii) contravene, conflict with or result in aviolation of any of the terms or requirements, or give any governmental body theright to revoke, withdraw, suspend, cancel, terminate or modify, anygovernmental authorization that is held by Cadiz. 2.4 CADIZ CAPITAL STRUCTURE. The authorized capital stock of Cadizconsists of 70,000,000 shares of common stock, $.01 par value per share, ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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 57,316,939 shares are issued and outstanding as of the date hereof, and100,000 shares of preferred stock, $.01 par value per share. Of the 100,000authorized shares of preferred stock, 5,000 have been designated as Series DPreferred Stock, 3,750 have been designated as Series E-1 Preferred Stock, and3,750 have been designated as Series E-1 Preferred Stock. As of the date hereof,5,000 shares of Series D Preferred Stock, 3,750 shares of Series E-1 PreferredStock, and 3,750 shares of Series E-1 Preferred Stock have been issued and areoutstanding. Pursuant to a Stockholders Rights Plan adopted by the Company onMay 10, 1999 (the "Plan"), each holder of Common Stock also holds one preferredshare purchase right, as defined in the Plan. Upon issuance and delivery in themanner herein described, the Exchange Shares will be duly authorized and validlyissued, fully paid and nonassessable and free of preemptive rights. 2.5 LEGAL PROCEEDINGS. There is no pending legal or administrativeproceeding ("Proceeding"), and, to the knowledge of Cadiz, no person hasthreatened to commence any 4Proceeding, that challenges, or that may have the effect of preventing,delaying, making illegal, or otherwise interfering with, any of the transactionscontemplated hereby. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PREFERRED STOCKHOLDERS Each Preferred Stockholder represents and warrants severally, and notjointly, to Cadiz that as of the date hereof and again as of the Closing Date: 3.1 AUTHORIZATION. The Preferred Stockholder has the corporatepower and authority to enter into this Agreement and to consummate thetransactions contemplated hereby. All actions on the part of the PreferredStockholder necessary for the authorization, execution, delivery and performanceof this Agreement and the consummation of the transactions contemplated herebyhave been or will be taken prior to the Closing Date, and this Agreementconstitutes the legal, valid and binding obligation of the PreferredStockholder, enforceable against it in accordance with its terms, except asenforceability may be restricted, limited or delayed by applicable bankruptcy,insolvency, fraudulent conveyance, or other laws affecting creditor's rightsgenerally, and except as enforceability is subject to general principles ofequity. 3.2 NO VIOLATION OF OTHER AGREEMENTS; NO CONFLICTS. (a) Neither this Agreement nor any of the transactionscontemplated hereunder violates, conflicts with or results in a breach of, orshall violate, conflict with or result in a breach of any lease, contract,document or agreement to which the Preferred Stockholder is a party or by whichit may be bound. (b) Neither the execution and delivery of this Agreementnor the consummation or performance of the transactions contemplated herein,will, directly or indirectly (with or without the giving of notice, or lapse oftime, or both): (i) contravene, conflict with, or result in aviolation of any provision of the organizational documents of the PreferredStockholder; (ii) contravene, conflict with, or result in aviolation of any order, judgment or decree to which the Preferred Stockholdermay be subject; or (iii) contravene, conflict with or result in aviolation of any of the terms or requirements, or give any governmental body theright to revoke, withdraw, suspend, cancel, terminate or modify, anygovernmental authorization that is held by the Preferred Stockholder. 3.3 LEGAL PROCEEDINGS. There is no pending legal or administrativeproceeding ("Proceeding"), and, to the knowledge of such Preferred Stockholder,Source: CADIZ INC, 10-K, November 02, 2004Powered 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. no person has threatened to commence any Proceeding, that challenges, or thatmay have the effect of preventing, delaying, making illegal, or otherwiseinterfering with, any of the transactions contemplated hereby. 5 3.4 TITLE TO PREFERRED STOCK AND WARRANTS. Such PreferredStockholder is the record and beneficial holder of all the Preferred Stock whichis subject to the Exchange and all of the Warrants which are subject to thetemporary waiver set forth in Section 1.5, in each case free and clear of allpledges, security interests, liens, charges, encumbrances, equities, claims andoptions of whatever nature. No Preferred Stockholder nor any individual,corporation, entity or person having or claiming any interest in, or withrespect to, any of the Preferred Stock owned by such Preferred Stockholder will,at or after the Closing Date, have any such claim or interest, or have any rightto claim or receive any other payment or consideration with respect to suchPreferred Stock against or from Cadiz at or after the Closing Date. 3.5 RESTRICTIONS ON TRANSFER. Each Preferred Stockholder has beenadvised that: (a) the offer and sale of the Exchange Shares to suchPreferred Stockholder has not been, and will not be, registered under theSecurities Act of 1933, as amended, and the rules and regulations thereunder(the "Act"), and such Preferred Stockholder may not sell or otherwise transferthe Exchange Shares unless the transfer is registered under the Act and underapplicable state laws or an exemption from such registration, such as Rule144(k), is available; (b) the Exchange Shares that such Preferred Stockholderis acquiring are "restricted securities," as that term is defined in Rule 144promulgated under the Act, unless and until the requirements of Rule 144 havebeen met with respect to such shares; and (c) any and all certificates representing Exchange Sharesshall bear an investment legend restricting the transfer of such Exchange Sharesunless or until the requirements of Rule 144 have been met as to such shares tothe reasonable satisfaction of Cadiz and its counsel. 3.6 DISCLOSURE. Each Preferred Stockholder has heretofore receivedand reviewed Cadiz' press releases, public filings with the Securities andExchange Commission (the "SEC") through July 22, 2003, and exhibits attachedthereto (the "Disclosure Documents"). In addition to the foregoing, eachPreferred Stockholder has had the opportunity to speak directly with officers ofCadiz concerning Cadiz' business plan and operations. 3.7 NO WARRANTY. Each Preferred Stockholder represents andwarrants that it never has been represented, guaranteed, or warranted to them byany officer or director of Cadiz, their agents or employees or any other personin connection with Cadiz, expressly or by implication, any of the following: (a) The approximate or exact length of time that thePreferred Stockholder will be required to remain as the owner of the ExchangeShares; (b) The exact amount of profit and/or amount or type ofconsideration, profits or losses (including tax benefits) to be realized, ifany, by Cadiz; and (c) That the past performance or experience of theofficers and directors of Cadiz, or any other person connected with Cadiz canpredict the results of the ownership of the Exchange Shares or the overallsuccess of Cadiz. 6 3.8 SIGNIFICANT RISKS. Each Preferred Stockholder understands thefollowing:Source: CADIZ INC, 10-K, November 02, 2004Powered 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) There are a number of risks relating to an investmentin Cadiz as set forth herein, as further described in the Disclosure Documentsand in the Preferred Stockholder's direct communications with Cadiz. (b) Each Preferred Stockholder may lose its entireinvestment in the Exchange Shares and Cadiz. (c) No federal or state agency, or any other regulatorybody, has passed upon the Exchange Shares, or an investment therein, or made anyfinding or determination as to the fairness of an investment in the ExchangeShares. (d) If a bankruptcy petition is filed by or against Cadizfollowing the execution of this Agreement but prior to the Closing Date, therights of the Preferred Stockholders under this Agreement may be subject torejection and/or cancellation in accordance with applicable bankruptcy law. 3.9 RELIANCE. Each Preferred Stockholder has relied solely uponthis Agreement, the Disclosure Documents and independent investigations made bythe Preferred Stockholder or the Preferred Stockholder's representatives withrespect to the Preferred Stockholder's investment in the Exchange Shares, and nooral or written representations inconsistent with the contents of the DisclosureDocuments have been made to the Preferred Stockholder by Cadiz or any of itsrepresentatives. 3.10 NO REPRESENTATION REGARDING INDIVIDUAL SEC REPORTINGREQUIREMENTS. Cadiz has made no representations to such Preferred Stockholderregarding its reporting requirements with the SEC related to its ownership inCadiz, and such Preferred Stockholder acknowledges and agrees that it is thePreferred Stockholder's responsibility to ensure that it complies with anydisclosure and reporting requirements of the SEC. 3.11 KNOWLEDGE OF LATE SEC REPORTING. Cadiz has informed suchPreferred Stockholder that (i) Cadiz has not yet filed required periodic reportswith the SEC after March 21, 2003, including its Annual Report on Form 10-K forthe year ended December 31, 2002 and its Quarterly Reports for the quartersended March 31, 2003 and June 30, 2003, and therefore the Disclosure Documentsdo not provide disclosure regarding developments concerning Cadiz for theperiods that would be covered by those reports or any subsequent period, (ii)Cadiz is currently in default on its senior secured loan obligations, (iii)Cadiz is a guarantor of the $115 million 11 1/4% First Mortgage Bonds of itswholly-owned subsidiary, Sun World International, Inc., which filed a voluntarypetition under Chapter 11 of the Bankruptcy Code on January 30, 2003 and is indefault of its obligations under such bonds, and (iv) such Preferred Stockholdermust rely upon its own independent investigations with respect to such PreferredStockholder's investment in the Exchange Shares and on discussions with officersof Cadiz with respect to any developments subsequent to reports that Cadiz hasfiled with the SEC. 3.12 RELIANCE ON OWN COUNSEL AND ADVISERS. In evaluating the meritsand risks of an investment in the Exchange Shares, such Preferred Stockholderhas not relied upon Cadiz or 7Cadiz' attorneys or advisers for legal or tax advice, and has, if desired, inall cases sought the advice of the undersigned's own personal legal counsel andtax advisers. ARTICLE IV ASSIGNMENT; THIRD PARTY BENEFICIARIES 4.1. ASSIGNMENT. This Agreement and all of the provisions hereofshall be binding upon and shall inure to the benefit of the parties and theirrespective heirs (as applicable), legal representatives, and permittedsuccessors and assigns. Without limitation of the foregoing, the partiesexpressly agree that this Agreement and the rights, interests and obligations ofthe Preferred Stockholders hereunder shall immediately and automatically beassigned by any Preferred Stockholder to any purchaser or transferee ofPreferred Stock from such Preferred Stockholder with respect to the shares ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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 so sold or transferred and such Preferred Stockholder shall haveno further obligations hereunder with respect to such shares of Preferred Stockso sold or transferred; provided, however, that any such sale or transfer be incompliance with all applicable state and federal securities laws and/or thesecurities laws of any other applicable jurisdiction and provided further thatthe transferee explicitly acknowledge and assume the obligations of thetransferor hereunder with respect to the shares of Preferred Stock so sold ortransferred. Any assignment or delegation in contravention of this Section shallbe null and void. Upon any such assignment or transfer, the term "PreferredStockholder," as used herein, shall mean, when the context so requires, theassignee or transferee of such shares of Preferred Stock. 4.2. NOTICE OF TRANSFER. Not later than two (2) business daysfollowing the effectuation of any transfer of Preferred Stock, the transferorand the transferee of the Preferred Stock shall provide joint written notice toCadiz of such transfer substantially in the form of Exhibit A hereto (the"Transfer Notice"), which notice shall specify (i) the identity of thetransferor, (ii) the identity of the transferee, (iii) the number of shares ofeach Series of Preferred Stock transferred, (iv) the effective date of transfer,(iv) an acknowledgment by the transferee of applicability of this ExchangeAgreement to the shares of Preferred Stock transferred, and (vi) if applicableas to any Series of Preferred Stock transferred, Rule 144(k) representations inthe form of Exhibit B hereto. Such Transfer Notice shall be accompanied by astock certificate or certificates duly endorsed for transfer to the transferee,representing the Preferred Stock so transferred (which certificates shall beduly endorsed for transfer to Cadiz), in accordance with the requirements ofSection 1.2 above. 4.3. ACCELERATION OF CLOSING DATE. Upon any transfer or assignmentof Preferred Stock satisfying the requirements of this Article IV, the ClosingDate (with respect to the shares of Preferred Stock so transferred and to thoseshares of Preferred Stock only) shall automatically be accelerated to theeffective date of such transfer. Not later than the later to occur of (i) theeffective date of transfer or (ii) the seventh business day following receipt byCadiz of the Transfer Notice and share certificates pursuant to Section 4.2above, Cadiz will execute and deliver to the transferee, or its respectiverepresentative, a stock certificate or certificates, registered in the name ofsuch transferee, representing the Exchange Shares being issued to suchtransferee pursuant to the Exchange. 8 4.4. THIRD PARTY BENEFICIARY AGREEMENT. Any person acquiringPreferred Stock from a Preferred Stockholder in a manner satisfying therequirements of this Article IV shall be deemed to be a third party beneficiaryfor purposes of this Agreement and shall be entitled to assert any right, claimor remedy provided under this Agreement with respect to the shares of PreferredStock so acquired (including, without limitation, the obligation of Cadiz toissue Exchange Shares in exchange for such shares of Preferred Stock inaccordance with the terms of this Agreement). ARTICLE V CLOSING CONDITIONS 5.1. CONDITIONS TO THE OBLIGATIONS OF THE PREFERRED STOCKHOLDERS.The obligations of each Preferred Stockholder to effect the transactionscontemplated hereby shall be subject to the fulfillment at or prior to theClosing Date of the following conditions, which may be waived only by theapproval of such Preferred Stockholder: (a) Cadiz shall have performed and complied in allmaterial respects with the covenants and agreements contained in this Agreementrequired to be performed and complied with by it at or prior to the ClosingDate, and the representations and warranties of Cadiz set forth in thisAgreement shall be true and correct in all material respects as of the date ofthis Agreement and as of the Closing Date as though made at and as of theClosing Date. (b) Since the date of this Agreement, there must not havebeen commenced or threatened against Cadiz or the Preferred Stockholder anySource: CADIZ INC, 10-K, November 02, 2004Powered 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. proceeding (i) involving any challenge to, or seeking damages or other relief inconnection with, any of the transactions contemplated hereby, or (ii) that mayhave the effect of preventing, delaying, making illegal, or otherwiseinterfering with any of the transactions contemplated hereby. 5.2. CONDITIONS TO THE OBLIGATIONS OF CADIZ. The obligations ofCadiz to effect the transactions contemplated hereby, as to any PreferredStockholder, shall be subject to the fulfillment at or prior to the Closing Dateof the following conditions, which may be waived only by the approval of Cadiz: (a) Such Preferred Stockholder shall have performed andcomplied in all material respects with the covenants and agreements contained inthis Agreement required to be performed and complied with by it at or prior tothe Closing Date, and the representations and warranties of such PreferredStockholder set forth in this Agreement shall be true and correct in allmaterial respects as of the date of this Agreement and as of the Closing Date asthough made at and as of the Closing Date. (b) Since the date of this Agreement, there must not havebeen commenced or threatened against Cadiz or the Preferred Stockholder anyproceeding (i) involving any challenge to, or seeking damages or other relief inconnection with, any of the transactions contemplated hereby, or (ii) that mayhave the effect of preventing, delaying, making illegal, or otherwiseinterfering with any of the transactions contemplated hereby. 9 ARTICLE VI INJUNCTIVE RELIEF 6.1 INJUNCTIVE RELIEF. It is understood and agreed that the remedyat law for the breach of any provision of this Agreement will be inadequate andthat any party hereto shall be entitled to injunctive relief without bond. Suchinjunctive relief shall not be exclusive, but shall be in addition to any otherrights or remedies the non-breaching party may have for such breach, and thenon-breaching party shall be entitled to recover all costs and expenses,including reasonable attorneys' fees incurred by reason of any breach. ARTICLE VII MISCELLANEOUS 7.1 ENTIRE AGREEMENT. This Agreement (with Exhibits) constitutesthe entire agreement between the parties with respect to the subject matterhereof, supersedes all other and prior agreements on the same subject, whetherwritten or oral, and contains all of the covenants and agreements between theparties with respect to the subject matter hereof. 7.2 COUNTERPARTS. This Agreement, and any amendments thereto, maybe executed in counterparts, each of which shall constitute an originaldocument, but which together shall constitute one and the same instrument.Facsimile signatures of the parties shall be as effective to bind the parties asoriginal manual signatures. 7.3 HEADINGS. The section headings contained in this Agreement areinserted for convenience only and shall not affect in any way the meaning orinterpretation of this Agreement. 7.4 AMENDMENT. This Agreement may be amended at any time byagreement of the parties, provided that any amendment shall be in writing andexecuted by all parties. 7.5 NO WAIVER. No waiver of any term, provision or condition ofthis Agreement, whether by conduct or otherwise, in any one or more instances,shall be deemed to be or be construed as a further or continuing waiver of anysuch term, provision or condition or as a waiver of any other term, provision orcondition of this Agreement. 7.6 NOTICES. Any notices required or permitted to be givenhereunder by any party to the other shall be in writing and shall be deemedSource: CADIZ INC, 10-K, November 02, 2004Powered 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. delivered upon personal delivery; twenty-four (24) hours following deposit witha courier for overnight delivery; or five (5) business days hours followingdeposit in the U.S. Mail, registered or certified mail, postage prepaid, return-receipt requested, addressed to the parties at the following addresses or tosuch other addresses as the parties may specify in writing: 10 If to Cadiz: Cadiz Inc. 777 South Figueroa Street, Suite 4250 Los Angeles, California 90017 Attn: Keith Brackpool, Chief Executive Officer With a copy to: Miller & Holguin 1801 Century Park East, Seventh Floor Los Angeles, California 90067 Attn: Howard J. Unterberger, Esq. If to OZ Master Fund: OZ Master Fund, Ltd. c/o Och Ziff Capital Management 9 West 57th Street 39th Floor New York, New York 10019 With a copy to: Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, New York 10005 Attention: Roland Hlawaty, Esq. Facsimile: 212-822-5530 If to OZF: OZF Credit Opportunities Master Fund Ltd. c/o Och Ziff Capital Management 9 West 57th Street 39th Floor New York, New York 10019 With a copy to: Milbank, Tweed, Hadley & McCloy LLP One Chase Manhattan Plaza New York, New York 10005 Attention: Roland Hlawaty, Esq. Facsimile: 212-822-5530 7.7 GOVERNING LAW. This Agreement shall be governed by andconstrued in accordance with the laws of the State of California. 7.8 SEVERABILITY. If any provision of this Agreement is held by acourt of competent jurisdiction to be invalid or unenforceable, the remainingprovisions will nevertheless continue in full force and effect, unless suchinvalidity or unenforceability would defeat an essential business purpose ofthis Agreement. 7.9 FEES AND EXPENSES. Except as otherwise explicitly set forthherein, each party shall bear its own expenses including, without limitation,attorneys' and accountants' fees in connection with the preparation of thisAgreement and the transactions contemplated hereby. 11 7.10 TIME OF ESSENCE. Time is expressly made of the essence of thisAgreement and each and every provision hereof of which time of performance is afactor. 7.11 ATTORNEYS' FEES. Should any party institute any action orprocedure to enforce this Agreement or any provision hereof, the prevailingparty in any such action or proceeding shall be entitled to receive from theother party all costs and expenses, including without limitation reasonableattorneys' fees, incurred by the prevailing party in connection with such actionor proceeding.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 7.12 FURTHER ASSURANCES. The parties shall take such actions andexecute and deliver such further documentation as may reasonably be required inorder to give effect to the transaction contemplated by this Agreement and theintentions of the parties hereto. 7.13 CONSTRUCTION. Whenever in this Agreement the context sorequires, references to the masculine shall be deemed to include the feminineand the neuter, reference to the neuter shall be deemed to include the masculineand feminine, references to the plural shall be deemed to include the singularand the singular to include the plural and references to the words "and" and"or" shall be deemed to include the inclusive usage "and/or." [REST OF PAGE INTENTIONALLY BLANK] 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement tobecome effective on the day and year first hereinabove written. CADIZ INC. By: /s/ Jennifer Hankes Painter ------------------------------------ Name: Jennifer Hankes Painter Title: VP, General Counsel OZ MASTER FUND LTD. OZ Management, LLC as investment manager By: /s/ Daniel S. Och ------------------------------------ Daniel S. Och Senior Managing Member OZF CREDIT OPPORTUNITIES MASTER FUND, LTD. OZ Management, LP as investment manager OZ Managemer, LLC managing member By: /s/ Daniel S. Och ------------------------------------ Daniel S. Och Senior Managing Member 13 EXHIBIT A NOTICE OF TRANSFERCadiz Inc.777 South Figueroa Street, Suite 4250Los Angeles, California 90017Attention: Chief Executive OfficerLadies and Gentlemen:Please be advised that _______________________ ("Transferor") has transferred: (i) _________ shares of the Series D Preferred Stock of Cadiz Inc. (the "Company"); (ii) _________ shares of the Series E-1 Preferred Stock of theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Company; and/or (iii) _________ shares of the Series E-2 Preferred Stock of the Company; (collectively, the "Securities") to _________________________________ ("Transferee") as of __________________________, 2003 (the "Effective Date").In connection with such transfer, we hereby represent, warrant and certify asfollows:1. The offer of the Securities was made without any general solicitation or advertising;2. The Transferee represents and warrants for the benefit of the Company that (a) the Transferee is an accredited investor and is acquiring the Securities solely for the Transferee's own account, for investment, and not with a view to distribution of the Securities, and (b) the Transferee is capable, by reason of knowledge and experience in financial and business matters in general, and investments in particular, of evaluating the merits and risks of an investment in the Securities;3. The Transferee hereby acknowledges the applicability to the Transferee and to the Securities of that certain Preferred Stock Exchange Agreement dated as of October _____, 2003 by and among the Company, OZ Master Fund, Ltd. and OZF Credit Opportunities Master Fund, Ltd (the "Exchange Agreement"). In particular, the Transferee acknowledges that, as of the effective date of the transfer of the Securities, the Transferee (a) is subject to and bound by those certain representations and warranties set forth in Article III of the Exchange Agreement as though such representations and warranties had been made directly by the Transferee to the Company and (b) has assumed all obligations of the Transferor under the Exchange Agreement with respect to the Securities;4. The Closing Date of the Exchange with respect to the Securities transferred, as calculated in accordance with Section 4.3 of the Exchange Agreement, shall be ____________________, 2003. 145. The undersigned are requesting that the shares of Common Stock to be issued in exchange for the [CHECK AS APPLICABLE] [____] Series D Preferred Stock [____] Series E-1 Preferred Stock [____] Series E-2 Preferred Stock (collectively, the "Rule 144(k) Preferred Stock") be issued without restrictive legend in reliance upon Rule 144(k) promulgated under the Securities Act of 1933, as amended. In order that such shares of Common Stock be issued without restrictive legend, the Transferor and Transferee represent that: (a) Neither Transferee nor Transferor is an affiliate of Cadiz and neither has been an affiliate of Cadiz in the last three months. (b) Transferor fully paid all consideration for, was the beneficial owner of and bore the full risk of ownership of all of the Rule 144(k) Preferred Stock at least two years prior to the date hereof. (c) Transferor and Transferee are familiar with Rule 144(k) and agree that in preparing a legal opinion with respect to the matters set forth above, Cadiz and its counsel may rely upon the representations set forth herein.Dated: __________________ , 2003 Very truly yours,"TRANSFEROR" "TRANSFEREE"-------------------------------- ------------------------------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (Name of Transferor) (Name of Transferee)By: ____________________________ By: __________________________ (Authorized Signature) (Authorized Signature) 15 APPENDIX A WARRANTSOZ WARRANTS(1) NUMBER OF CANCELLATION ORNAME OF WARRANT WARRANT SHARES EXPIRATION DATESeries D Initial Warrant - A 45,000 12/29/03Term Loan First Warrant - A 135,000 12/29/03Term Loan Second Warrant - A 67,500 12/31/04Series E Initial Warrant - A 46,667 12/22/04Series E Commitment Exercise Warrant - A 46,667 11/28/04 -------Total: 340,834OZF WARRANTS(2) NUMBER OF CANCELLATION ORNAME OF WARRANT WARRANT SHARES EXPIRATION DATESeries D Initial Warrant - B 5,000 12/29/03Term Loan First Warrant - B 15,000 12/29/03Term Loan Second Warrant - B 7,500 12/31/04Series E Initial Warrant - B 23,333 12/22/04Series E Commitment Exercise Warrant - B 23,333 11/28/04 -------Total: 74,166--------------------------------------------------------------------------------(1) Does not include 95,000 Warrants previously granted which have expired or been cancelled(2) Does not include 30,000 Warrants previously granted which have expired or been cancelled 16 APPENDIX B FORM OF RULE 144(K) REPRESENTATIONS RULE 144(K) REPRESENTATIONS REGARDING SERIES [ ] PREFERRED STOCK Inorder that the Series [__] Exchange Shares be issued on the Closing Date withoutrestrictive legend in reliance upon Rule 144(k) promulgated under the SecuritiesAct of 1933, as amended, the Preferred Stockholder represents that: (a) Such Preferred Shareholder is not an affiliate of Cadizand has not been an affiliate of Cadiz in the last three months. (b) Such Preferred Shareholders fully paid all considerationfor, was the beneficial owner of and bore the full risk of ownership of all ofthe securities represented by the Series [__] Preferred Stock at least two yearsprior to the date hereof. (c) Such Preferred Shareholder is familiar with Rule 144(k)and agrees that in preparing a legal opinion with respect to the matters setforth above, Cadiz and its counsel may rely upon the representations set forthherein.Source: CADIZ INC, 10-K, November 02, 2004Powered 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) Such Preferred Shareholder shall advise Cadiz immediatelyif any of the representations set forth herein ceases to be true and accurateprior to the Closing Date. 17Source: CADIZ INC, 10-K, November 02, 2004Powered 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. ================================================================================ SIXTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 15, 2003 for Credit Agreement originally executed as of November 25, 1997 among CADIZ INC., and CADIZ REAL ESTATE LLC, as Borrowers The Lenders Party Hereto, as Lenders and ING CAPITAL, LLC, as Administrative Agent================================================================================ TABLE OF CONTENTS PAGE ---- ARTICLE I DefinitionsSECTION 1.01. Defined Terms................................................2SECTION 1.02. [Intentionally Omitted].....................................20SECTION 1.03. Terms Generally.............................................20SECTION 1.04. Accounting Terms; GAAP......................................20 ARTICLE II The CreditsSECTION 2.01. Commitments.................................................20SECTION 2.02. Loans and Borrowings........................................21SECTION 2.03. [Intentionally Omitted].....................................22SECTION 2.04. [Intentionally Omitted].....................................22SECTION 2.05. [Intentionally Omitted].....................................22SECTION 2.06. [Intentionally Omitted].....................................22SECTION 2.07. Conversion Rights for Holders of Tranche B Loans............22SECTION 2.08. Security....................................................22SECTION 2.09. Termination and Reduction of Commitments....................22SECTION 2.10. Repayment of Loans; Evidence of Debt........................23SECTION 2.11. Prepayment of Loans; Reborrowings...........................24SECTION 2.12. Fees........................................................24SECTION 2.13. Interest....................................................25SECTION 2.14. Interest Rate Election......................................25SECTION 2.15. Increased Costs.............................................27SECTION 2.16. Cash Collateral Account.....................................28SECTION 2.17. Taxes.......................................................28SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs..............................................29SECTION 2.19. Mitigation Obligations; Replacement of Lenders..............31SECTION 2.20. Break Funding Payments......................................31SECTION 2.21. Certain Mandatory Prepayments...............................32Source: CADIZ INC, 10-K, November 02, 2004Powered 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 2.22. Registration Rights.........................................33SECTION 2.23. Joint and several Liability.................................33SECTION 2.24. Obligations Absolute........................................34SECTION 2.25. Waiver of Suretyship Defenses...............................34SECTION 2.26. Payments received on Account of Any of Borrowers' Assets or Property Rights................................34SECTION 2.27. Extension of Maturity Date upon Satisfaction of Certain Conditions.......................................35 i ARTICLE III Representations and WarrantiesSECTION 3.01. Organization; Powers........................................36SECTION 3.02. Authorization; Enforceability...............................36SECTION 3.03. Governmental Approvals; No Conflicts........................36SECTION 3.05. Properties..................................................36SECTION 3.06. Litigation and Environmental Matters........................37SECTION 3.07. Compliance with Laws and Agreements.........................37SECTION 3.08. Investment and Holding Company Status.......................37SECTION 3.09. Taxes.......................................................37SECTION 3.10. ERISA.......................................................37SECTION 3.11. Disclosure..................................................38SECTION 3.12. Security Interests..........................................38SECTION 3.13. Participating Subsidiaries..................................38SECTION 3.14. Inactive Subsidiaries.......................................38SECTION 3.15. Excluded Items..............................................39SECTION 3.16. Equity Acquisition Assets...................................39SECTION 3.17. Rolling Stock...............................................39SECTION 3.18. Equity Issuances............................................39SECTION 3.19. Certain Acknowledgements....................................39SECTION 3.20. No Satisfaction.............................................40 ARTICLE IV ConditionsSECTION 4.01. Restructuring Effective Date................................40SECTION 4.02. Conditions Subsequent.......................................45 ARTICLE V Affirmative CovenantsSECTION 5.01. Financial Statements and Other Information..................46SECTION 5.02. Notices of Material Events..................................48SECTION 5.03. Existence; Conduct of Business..............................48SECTION 5.04. Payment of Obligations......................................48SECTION 5.05. Maintenance of Properties; Insurance........................48SECTION 5.06. Books and Records; Inspection Rights........................49SECTION 5.07. Compliance with Laws........................................49SECTION 5.08. Loans to Affiliates.........................................49SECTION 5.09. New Subsidiaries............................................49SECTION 5.10. Acquisitions by Borrower....................................49 iiSECTION 5.11. Acquisitions with Proceeds of Loans.........................50SECTION 5.12. Conversion Shares for Revolving Credit Agreement Warrants.................................................50SECTION 5.13. Conversion Shares for Cadiz Series F Preferred Stock Certificate........................................50SECTION 5.14. Expressions of Interest.....................................51Source: CADIZ INC, 10-K, November 02, 2004Powered 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. ARTICLE VI Negative CovenantsSECTION 6.01. Indebtedness................................................51SECTION 6.02. Liens.......................................................52SECTION 6.03. Fundamental Changes.........................................53SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions.............................................53SECTION 6.05. Hedging Agreements..........................................54SECTION 6.06. Restricted Payments.........................................54SECTION 6.07. Transactions with Affiliates................................54SECTION 6.08. Restrictive Agreements......................................54SECTION 6.09. No Amendment to CRE LLC Agreement and Related Documents................................................55SECTION 6.10. Limitations on Management Incentive Plans...................55 ARTICLE VII Events Of Default ARTICLE VIII The Administrative AgentSECTION 8.01. Appointment, Powers and Immunities..........................58SECTION 8.02. Administrative Agent in its Individual Capacity.............58SECTION 8.03. Nature of Duties of Administrative Agent....................58SECTION 8.04. Certain Rights of Administrative Agent......................59SECTION 8.05. Reliance by Administrative Agent............................59SECTION 8.06. Sub-Agents..................................................60SECTION 8.07. Resignation by Administrative Agent.........................60SECTION 8.08. Non-Reliance on Administrative Agent and Other Lenders..................................................60SECTION 8.09. Security Documents..........................................60 ARTICLE IX MiscellaneousSECTION 9.01. Notices.....................................................61SECTION 9.02. Waivers; Amendments.........................................63SECTION 9.03. Expenses; Indemnity; Damage Waiver..........................64 iiiSECTION 9.04. Successors and Assigns......................................65SECTION 9.05. Survival....................................................67SECTION 9.06. Counterparts; Integration; Effectiveness....................68SECTION 9.07. Severability................................................68SECTION 9.08. Right of Setoff.............................................68SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process...............................................68SECTION 9.10. WAIVER OF JURY TRIAL........................................69SECTION 9.11. Headings....................................................69SECTION 9.12. Confidentiality.............................................69SECTION 9.13. Foreclosure of Cadiz/Sun World Lease........................70SECTION 9.14. Waiver of Anti-Deficiency Protection........................70SECTION 9.15. Costs Borne by Non-Prevailing Party.........................71SECTION 9.16. Interest Rate Limitation....................................71SECTION 9.17. Status of ING...............................................71SECTION 9.18. General Release.............................................71SCHEDULES:Schedule 2.01 -- CommitmentsSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Schedule 3.06 -- Litigation DisclosureSchedule 3.13 -- Borrower's Participating SubsidiariesSchedule 3.14 -- Borrower's Inactive SubsidiariesSchedule 6.01 -- Existing IndebtednessSchedule 6.02 -- Existing LiensSchedule 6.08 -- Existing RestrictionsEXHIBITS:Exhibit A Assignment and AcceptanceExhibit B Cadiz Series F Preferred Stock CertificateExhibit C Consent to the Cadiz/Sun World LeaseExhibit D New Cadiz/Sun World LeaseExhibit E Cash Collateral Account AgreementExhibit F CRE Grant DeedExhibit G CRE LLC AgreementExhibit H Preferred Stock Certificate of DesignationsExhibit I Purchaser CertificateExhibit J Registration Rights AgreementExhibit K Sun World SettlementExhibit L Tranche A NoteExhibit M Tranche B NoteExhibit N Fifth Modification of the Pledge and Security AgreementExhibit O Fifth Modification of the Revolver Deed of TrustExhibit P Fifth Modification of the Revolver SWFG Deed of TrustExhibit Q Fifth Modification of the Revolver Piute Deed of Trust ivExhibit R Pledge And Security Agreement For Joint Cadiz/CVDC 1995 NoteExhibit S Form of Opinion of Borrower's CounselExhibit T Chart Setting Forth Equity Interests (as annexed to Term Sheet dated as of November 1, 2003) v SIXTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 15,2003, among CADIZ INC. (f/k/a Cadiz Land Company, Inc.) and CADIZ REAL ESTATELLC, as co-borrowers, the LENDERS party hereto, and ING CAPITAL, LLC (f/k/a INGBaring (U.S.) Capital LLC and ING Baring (U.S.) Capital Corporation), asAdministrative Agent. W I T N E S S E T H: WHEREAS, pursuant to that certain Revolving Credit Agreement, dated asof November 25, 1997 (the "1997 Revolving Credit Agreement"), among CadizBorrower, the Lenders party thereto and the Administrative Agent, as agent forsuch Lenders, such Lenders agreed to provide a revolving credit facility toCadiz Borrower; WHEREAS, pursuant to that certain First Amendment to Credit Agreement,dated as of September 28, 1999, by and between Cadiz Borrower, Lenders and theAdministrative Agent (the "First Amendment Agreement"), the parties agreed toamend certain terms of the 1997 Revolving Credit Agreement; WHEREAS, pursuant to that certain Second Amendment to Credit Agreement,dated as of December 22, 1999, by and between Cadiz Borrower, Lenders and theAdministrative Agent (the "Second Amendment Agreement"), and the other SecondAmendment Documents, as defined in the Second Amendment Agreement (collectively,the "Second Amendment Documents"), the parties agreed to amend certain terms ofthe 1997 Revolving Credit Agreement, as amended and in effect at that time; WHEREAS, pursuant to that certain Third Amendment to Credit Agreement,dated as of December 22, 2000, by and between Cadiz Borrower, Lenders and theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Administrative Agent (the "Third Amendment Agreement"), as amended by thatcertain First Amendment to Third Amendment to Credit Agreement dated as ofOctober 22, 2001 between Borrower, Lenders and the Administrative Agent, and theother Third Amendment Documents, as defined in the Third Amendment Agreement(collectively, the "Third Amendment Documents"), the parties agreed to amendcertain terms of the 1997 Revolving Credit Agreement, as amended and in effectat that time; WHEREAS, pursuant to that certain Fourth Amendment to Credit Agreement,dated as of January 31, 2002, by and between Cadiz Borrower, Lenders and theAdministrative Agent (the "Fourth Amendment Agreement"), and the other FourthAmendment Documents, as defined in the Fourth Amendment Agreement (collectively,the "Fourth Amendment Documents"), the parties agreed to amend certain terms ofthe 1997 Revolving Credit Agreement, as amended and in effect at that time; WHEREAS, pursuant to that certain Fifth Amended and Restated CreditAgreement, dated as of March 7, 2002, by and between Cadiz Borrower, Lenders andthe 1Administrative Agent (the "Fifth Amendment Agreement"), and the other documentsexecuted or delivered in connection therewith (collectively, the "FifthAmendment Documents"), the parties agreed to amend certain terms of the 1997Revolving Credit Agreement, as amended and in effect at that time; WHEREAS, the Cadiz Borrower has requested that the 1997 RevolvingCredit Agreement, as amended and in effect at this time, be amended and restatedin its entirety to reflect the restructuring of the Loan Obligations on theterms set forth herein; WHEREAS, the Lenders and the Administrative Agent are willing to amendand restate the 1997 Revolving Credit Agreement, as amended and in effect atthis time, in its entirety on the terms and subject to the conditions andrequirements set forth in this Agreement and the other documents executed ordelivered in connection herewith to, among other things, (a) confirm theobligations of Cadiz Borrower in favor of Lenders and Administrative Agent underthe 1997 Credit Agreement, as amended and in effect at this time; (b) consent tothe creation of a new special purpose entity, the CRE Borrower, that is beingassigned the assets of the Cadiz Borrower and is becoming a co-borrower withCadiz Borrower hereunder, and (c) provide for the issuance of new preferredstock to ING; (d) amend the interest rate on the Loan Obligations to either (atthe election of the Borrowers as provided herein): (i) 8% per annum in cash or(ii) 4% per annum in cash plus 8% per annum in kind; and (e) provide for thefurther extension of the Maturity Date of the Notes and other modificationsthereof, all of the foregoing upon the terms and conditions set forth herein andin the other Loan Documents; and WHEREAS, The parties acknowledge that the Borrowers have previouslyfully drawn on the Revolving Loans and availability provided hereunder and thatthere are no undrawn Commitments hereunder. NOW THEREFORE, in consideration of the premises and mutual covenantscontained herein, the parties to this Agreement hereby agree to amend andrestate the 1997 Revolving Credit Agreement, as amended and in effect at thistime, in its entirety as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINED TERMS. As used in this Agreement, the followingterms have the meanings specified below: "ADMINISTRATIVE AGENT" means ING Capital, LLC, in its capacity asadministrative agent for the Lenders hereunder. "ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire inSource: CADIZ INC, 10-K, November 02, 2004Powered 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 form supplied by the Administrative Agent. 2 "AFFILIATE" means, with respect to a specified Person, another Personthat directly, or indirectly through one or more intermediaries, Controls or isControlled by or is under common Control with the Person specified. "AGREEMENT" means this Sixth Amended and Restated Credit Agreement,dated as of the date set forth above, among Borrowers, the Lenders party hereto,and the Administrative Agent. "APPLICABLE INTEREST RATE" means, with respect to any Borrowing for anyInterest Period, either (a) if the Borrowers do not elect the PIK&Cash PaymentElection, the Cash Payment Rate, or (b) if the Borrowers elect the PIK&CashPayment Election, the PIK&Cash Payment Rate. "APPLICABLE PERCENTAGE" means, with respect to any Lender, thepercentage of the total Commitments represented by such Lender's Commitment. Ifthe Commitments have terminated or expired, the Applicable Percentages shall bedetermined based upon the Commitments most recently in effect, giving effect toany assignments. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance enteredinto by a Lender and an assignee (with the consent of any party whose consent isrequired by Section 9.04), and accepted by the Administrative Agent, in the formof Exhibit A or any other form approved by the Administrative Agent. "AVAILABILITY PERIOD" means the period from and including theRestructuring Effective Date to but excluding the earlier of the Maturity Dateand the date of termination of the Commitments. "BOARD" means the Board of Governors of the Federal Reserve System ofthe United States of America.. "BORROWERS" means, collectively, each of the Cadiz Borrower and the CREBorrower, and each a "BORROWER". "BORROWING" means Loans of a Lender made, converted or continued on thesame date. "BUSINESS DAY" means any day that is not a Saturday, Sunday or otherday on which commercial banks in New York City are authorized or required by lawto remain closed. "CADIZ BORROWER" means Cadiz Inc., a Delaware corporation, a borrowerhereunder. "CADIZ/CRE MANAGEMENT AGREEMENT" means the Management Agreement asdefined in the CRE LLC Agreement. "CADIZ REAFFIRMATION AGREEMENT" means the agreement evidencing CadizBorrower's assumption and reaffirmation of all liabilities and obligations ofCadiz Valley Development Corporation, dated as of November 25, 1997. 3 "CADIZ SERIES F PREFERRED STOCK CERTIFICATE" means the certificate ofSeries F Preferred Stock issued by Cadiz Borrower to the Lenders pursuant to theTransactions with the rights, privileges and preferences as set forth in thePreferred Stock Certificate of Designations in the form as attached hereto inExhibit B. "CADIZ/SUN WORLD SERVICES AGREEMENT" means that certain ServicesAgreement between Cadiz Borrower and Sun World, dated September 13, 1996, asamended by that certain Amendment dated as of April 16, 1997, as further amendedfrom time to time. "CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of suchSource: CADIZ INC, 10-K, November 02, 2004Powered 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 to pay rent or other amounts under any lease of (or other arrangementconveying the right to use) real or personal property, or a combination thereof,which obligations are required to be classified and accounted for as capitalleases on a balance sheet of such Person under GAAP, and the amount of suchobligations shall be the capitalized amount thereof determined in accordancewith GAAP. "CASH COLLATERAL ACCOUNT" means that certain account established at INGCapital, LLC, not in its capacity as Lender hereunder, but in its capacity asthe cash collateral bank under the Cash Collateral Account Agreement, whichaccount is being assigned and pledged as of the Restructuring Effective Date forthe benefit of the Lenders. "CASH COLLATERAL ACCOUNT AGREEMENT" means that certain agreementbetween Cadiz Borrower and the financial institution party thereto, in form andsubstance consented to by the Administrative Agent evidencing Cadiz Borrower'sestablishment of a debt service account assigned and pledged for the benefit ofthe Lenders, in substantially the form as attached hereto in Exhibit E. This isthe same agreement that is required to be delivered by the Cadiz Borrower underthe Sixth Global Amendment Agreement. "CASH EQUIVALENT" has the meaning assigned to such term in the SunWorld Indenture. "CASH PAYMENT AMOUNT" has the meaning set forth in Section 2.14 hereof. "CASH PAYMENT ELECTION" has the meaning set forth in Section 2.14hereof. "CASH PAYMENT RATE" means eight percent (8%). "CASH PORTION" has the meaning set forth in Section 2.14 hereof. "CASH PORTION RATE" means four percent (4%). "CHANGE IN CONTROL" means (a) the acquisition of ownership, directly orindirectly, beneficially or of record, by any Person or group (within themeaning of the Securities Exchange Act of 1934 and the rules of the Commissionthereunder as in effect on the date hereof), of shares representing more than35% of the aggregate ordinary voting power represented by the issued andoutstanding capital stock of either Borrower; (b) occupation of a majority ofthe seats (other than vacant seats) on the board of directors of the CadizBorrower by Persons who were neither (i) nominated by the board of directors ofthe Cadiz Borrower nor 4(ii) appointed by directors so nominated; or (c) the acquisition of direct orindirect Control of the Borrowers by any Person or group. "CHANGE IN LAW" means (a) the adoption of any law, rule or regulationafter the date of this Agreement, (b) any change in any law, rule or regulationor in the interpretation or application thereof by any Governmental Authorityafter the date of this Agreement or (c) compliance by any Lender (or, forpurposes of Section 2.15(b), by any lending office of such Lender or by suchLender's holding company, if any) with any request, guideline or directive(whether or not having the force of law) of any Governmental Authority made orissued after the date of this Agreement. "CHARGES" has the meaning ascribed to such term in Section 9.16 hereof. "CLOSING PRICE" means the last sale price per share of Common Stockregular way or, in the case no such reported sale takes place on such day, theaverage of the last reported bid and asked prices regular way, in either case onthe principal national securities exchange on which the Common Stock is admittedto trading on such exchange, the average of the last reported bid and askedprices as reported by Nasdaq, or other similar organization if Nasdaq is nolonger reporting such information, or if not so available, the fair marketprice, as determined in good faith by the Administrative Agent. "CODE" means the Internal Revenue Code of 1986, as amended from time totime.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. "COMMISSION" means the Securities and Exchange Commission. "COMMITMENT" means, with respect to each Lender, the sum of suchLenders' Tranche A Commitments and Tranche B Commitments, as such commitmentsmay be modified in accordance with the terms hereof from time to time. Theaggregate amount of all of the Lenders' Commitments on the RestructuringEffective Date will be $25,000,000. "COMMON STOCK" means authorized common stock, $0.01 par value, of theBorrower. "CONSENT TO CADIZ/SUN WORLD LEASE" means the consent by theAdministrative Agent and the Lenders to the New Cadiz/Sun World Lease, insubstantially the form annexed hereto as Exhibit C. "CONSENT TO SUN WORLD SETTLEMENT" means that certain consent of theAdministrative Agent and the Lenders to the Sun World Settlement. "CONTROL" means the possession, directly or indirectly, of the power todirect or cause the direction of the management or policies of a Person, whetherthrough the ability to exercise voting power, by contract or otherwise."CONTROLLING" and "CONTROLLED" have meanings correlative thereto. "CRE BORROWER" means Cadiz Real Estate LLC, a Delaware limitedliability company, a borrower hereunder. 5 "CRE GRANT DEED" means that certain grant deed of trust conveying thereal property ING Collateral held by the Cadiz Borrower to the CRE Borrower insubstantially the form as attached hereto in Exhibit F. "CRE LLC AGREEMENT" means that certain Limited Liability CompanyAgreement of CRE between the Cadiz Borrower and M. Solomon & Associates, Inc.,as the independent member, in substantially the form as attached hereto inExhibit G. "DEFAULT" means any event or condition which constitutes an Event ofDefault or which upon notice, lapse of time or both would, unless cured orwaived, become an Event of Default. "DISCLOSED MATTERS" means the actions, suits and proceedings and theenvironmental matters disclosed in any periodic and other reports, proxystatements and other materials filed by the Cadiz Borrower or any Subsidiarywith the Commission that are publicly available. "DOLLARS" or "$" refers to lawful money of the United States ofAmerica. "EIGHTH WARRANT CERTIFICATE" means the Eight Warrant Certificate issuedin connection with the Fourth Amendment Agreement. "ELEVENTH WARRANT CERTIFICATE" means the Eleventh Warrant Certificateissued in connection with the Fourth Amendment Agreement. "ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes,ordinances, orders, decrees, judgments, injunctions, notices or bindingagreements issued, promulgated or entered into by any Governmental Authority,relating in any way to the environment, preservation or reclamation of naturalresources, the management, release or threatened release of any HazardousMaterial 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 or indemnities), of either Borrower or any Subsidiary directly orindirectly resulting from or based upon (a) violation of any Environmental Law,(b) the generation, use, handling, transportation, storage, treatment ordisposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,(d) the release or threatened release of any Hazardous Materials into theenvironment or (e) any contract, agreement or other consensual arrangementpursuant to which liability is assumed or imposed with respect to any of theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. foregoing. "EQUITY ACQUISITION ASSET" has the meaning set forth in Section 5.10(c)hereof. "EQUITY ACQUISITION THRESHOLD" has the meaning set forth in Section5.10(c) hereof. "EQUITY ISSUANCE" has the meaning set forth in Section 2.21 hereof. 6 "ERISA" means the Employee Retirement Income Security Act of 1974, asamended from time to time. "ERISA AFFILIATE" means any trade or business (whether or notincorporated) that, together with either Borrower, is treated as a singleemployer under Section 414(b) or (c) of the Code or, solely for purposes ofSection 302 of ERISA and Section 412 of the Code, is treated as a singleemployer under Section 414 of the Code. "ERISA EVENT" means (a) any "reportable event", as defined in Section4043 of ERISA or the regulations issued thereunder with respect to a Plan (otherthan an event for which the 30-day notice period is waived); (b) the existencewith respect to any Plan of an "accumulated funding deficiency" (as defined inSection 412 of the Code or Section 302 of ERISA), whether or not waived; (c) thefiling pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of anapplication for a waiver of the minimum funding standard with respect to anyPlan; (d) the incurrence by either Borrower or any of their Affiliates of anyliability under Title IV of ERISA with respect to the termination of any Plan;(e) the receipt by either Borrower or any ERISA Affiliate from the PBGC or aplan administrator of any notice relating to an intention to terminate any Planor Plans or to appoint a trustee to administer any Plan; (f) the incurrence byeither Borrower or any of its ERISA Affiliates of any liability with respect tothe withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g)the receipt by either Borrower or any ERISA Affiliate of any notice, or thereceipt by any Multiemployer Plan from either Borrower or any ERISA Affiliate ofany notice, concerning the imposition of Withdrawal Liability or a determinationthat a Multiemployer Plan is, or is expected to be, insolvent or inreorganization, within the meaning of Title IV of ERISA. "EVENT OF DEFAULT" has the meaning assigned to such term in ArticleVII. "EXCHANGE ACT" has the meaning set forth in Section 9.17 hereof. "EXCLUDED ITEM" has the meaning set forth in Section 5.10(b) hereof. "EXCLUDED ITEMS/ROLLING STOCK THRESHOLD" has the meaning set forth inSection 5.10(b) hereof. "EXCLUDED TAXES" means, with respect to the Administrative Agent, anyLender, any other recipient of any payment to be made by or on account of anyobligation of either Borrower hereunder, (a) income or franchise taxes imposedon (or measured by) its net income by the United States of America, or by thejurisdiction under the laws of which such recipient is organized or in which itsprincipal office is located or, in the case of any Lender, in which itsapplicable lending office is located, (b) any branch profits taxes imposed bythe United States of America or any similar tax imposed by any otherjurisdiction in which either Borrower is located and (c) in the case of aForeign Lender (other than an assignee pursuant to a request by the eitherBorrower under Section 2.19(b)), any withholding tax that is imposed on amountspayable to such Foreign Lender at the time such Foreign Lender becomes a partyto this Agreement (or designates a new lending office) or is attributable tosuch Foreign Lender's failure to comply with Section 2.17(e), except to theextent that such Foreign Lender (or its assignor, if any) was 7Source: CADIZ INC, 10-K, November 02, 2004Powered 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. entitled, at the time of designation of a new lending office (or assignment), toreceive additional amounts from the Borrowers with respect to such withholdingtax pursuant to Section 2.17(a). "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates onovernight Federal funds transactions with members of the Federal Reserve Systemarranged by Federal funds brokers, as published on the next succeeding BusinessDay by the Federal Reserve Bank of New York, or, if such rate is not sopublished for any day that is a Business Day, the average (rounded upwards, ifnecessary, to the next 1/100 of 1%) of the quotations for such day for suchtransactions received by the Administrative Agent from three Federal fundsbrokers of recognized standing selected by it. "FEE WARRANT CERTIFICATE" means the three-year warrants that vested onAugust 1, 2002 for the purchase up to 100,000 shares of Cadiz's common stockwith an exercise price equal to the average closing price for all trading daysin July 2002, that entitles the holder thereof to purchase up to 100,000 sharesbased upon the terms and conditions set forth therein. "FIFTH AMENDMENT DOCUMENTS" has the meaning ascribed to such term inthe recitals hereto. "FINANCIAL OFFICER" means the chief financial officer, principalaccounting officer, treasurer or controller of, as applicable, the CadizBorrower or the CRE Borrower. "FIRST AMENDMENT AGREEMENT" has the meaning ascribed to such term inthe recitals hereto. "FIRST EXTENSION REQUIREMENTS" shall have the meaning ascribed to suchterm in Section 2.27(a) hereof. "FIXED RATE" means, with respect to any Borrowing for any InterestPeriod, either (a) if the Borrowers do not elect the PIK&Cash Payment Election,the Cash Payment Rate or (b) if the Borrowers elect the PIK&Cash PaymentElection, the PIK&Cash Payment Rate. "FOREIGN LENDER" means any Lender that is organized under the laws of ajurisdiction other than that in which the Borrowers are located. For purposes ofthis definition, the United States of America, each State thereof and theDistrict of Columbia shall be deemed to constitute a single jurisdiction. "FOURTH AMENDMENT AGREEMENT" has the meaning ascribed to such term inthe recitals hereto. "FOURTH AMENDMENT DOCUMENTS" has the meaning ascribed to such term inthe recitals hereto. "GAAP" means generally accepted accounting principles in the UnitedStates of America. 8 "GOVERNMENTAL AUTHORITY" means the government of the United States ofAmerica, any other nation or any political subdivision thereof, whether state orlocal, and any agency, authority, instrumentality, regulatory body, court,central bank or other entity exercising executive, legislative, judicial,taxing, regulatory or administrative powers or functions of or pertaining togovernment. "GUARANTEE" of or by any Person (the "GUARANTOR") means any obligation,contingent or otherwise, of the guarantor guaranteeing or having the economiceffect of guaranteeing any Indebtedness or other obligation of any other Person(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, andincluding any obligation of the guarantor, direct or indirect, (a) to purchaseor pay (or advance or supply funds for the purchase or payment of) suchIndebtedness or other obligation or to purchase (or to advance or supply fundsfor the purchase of) any security for the payment thereof, (b) to purchase orlease property, securities or services for the purpose of assuring the owner ofsuch Indebtedness or other obligation of the payment thereof, (c) to maintainworking capital, equity capital or any other financial statement condition orSource: CADIZ INC, 10-K, November 02, 2004Powered 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. liquidity of the primary obligor so as to enable the primary obligor to pay suchIndebtedness or other obligation or (d) as an account party in respect of anyletter of credit or letter of guaranty issued to support such Indebtedness orobligation; provided, that the term Guarantee shall not include endorsements forcollection or deposit in the ordinary course of business. "HAZARDOUS MATERIALS" means all explosive or radioactive substances orwastes and all hazardous or toxic substances, wastes or other pollutants,including petroleum or petroleum distillates, asbestos or asbestos containingmaterials, polychlorinated biphenyls, radon gas, infectious or medical wastesand all other substances or wastes of any nature regulated pursuant to anyEnvironmental Law. "HEDGING AGREEMENT" means any interest rate protection agreement,foreign currency exchange agreement, commodity price protection agreement orother interest or currency exchange rate or commodity price hedging arrangement. "INACTIVE SUBSIDIARIES" means all Subsidiaries of the Cadiz Borrower,excluding Sun World Entities, that (a) do not conduct any business activitiesand (b) hold no assets or properties (either tangible or intangible). "INDEBTEDNESS" of any Person means, without duplication, (a) allobligations of such Person for borrowed money or with respect to deposits oradvances of any kind, (b) all obligations of such Person evidenced by bonds,debentures, notes or similar instruments, (c) all obligations of such Personupon which interest charges are customarily paid, (d) all obligations of suchPerson under conditional sale or other title retention agreements relating toproperty acquired by such Person, (e) all obligations of such Person in respectof the deferred purchase price of property or services (excluding currentaccounts payable incurred in the ordinary course of business), (f) allIndebtedness of others secured by (or for which the holder of such Indebtednesshas an existing right, contingent or otherwise, to be secured by) any Lien onproperty owned or acquired by such Person, whether or not the Indebtednesssecured thereby has been assumed, (g) all Guarantees by such Person ofIndebtedness of others, (h) all Capital Lease Obligations of such Person, (i)all obligations, contingent or otherwise, of such Person as an 9account party in respect of letters of credit and letters of guaranty and (j)all obligations, contingent or otherwise, of such Person in respect of bankers'acceptances. The Indebtedness of any Person shall include the Indebtedness ofany other entity (including any partnership in which such Person is a generalpartner) to the extent such Person is liable therefor as a result of suchPerson's ownership interest in or other relationship with such entity, except tothe extent the terms of such Indebtedness provide that such Person is not liabletherefor. "INDEMNIFIED TAXES" means Taxes other than Excluded Taxes. "INDEMNITEE" has the meaning ascribed to such term in Section 9.03(b)hereof. "ING" means ING Capital, LLC, a Delaware company. "ING COLLATERAL" means the collateral security granted, pledged orhypothecated to the Administrative Agent or the Lenders under the SecurityDocuments (but excluding the collateral specifically released under the Consentto Sun World Settlement) to secure the payment and satisfaction of theobligations hereunder and under the other Loan Documents, including theRevolving Loan Obligations. "INTEREST PAYMENT DATE" means the last day of the Interest Periodapplicable to the Borrowing of which such Loan is a part. "INTEREST PERIOD" means, from and after September 30, 2003, eachsemi-annual period ending on March 31 and September 30 thereafter through andincluding the Maturity Date, provided, that (i) except as provided in clauses(ii) and (iii) below, if any Interest Period would end on a day other than aBusiness Day, such Interest Period shall be extended to the next succeedingBusiness Day, (ii) any Interest Period that commences on the last Business Dayof a calendar month (or on a day for which there is no numerically correspondingSource: CADIZ INC, 10-K, November 02, 2004Powered 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. day in the last calendar month of such Interest Period) shall end on the lastBusiness Day of the last calendar month of such Interest Period, and (iii) ifany Interest Period would end after the Maturity Date, such Interest Periodshall end on the Maturity Date. "LENDERS" means the Person or Persons, as the case may be, listed onSchedule 2.01 and any other Person that shall have become a party heretopursuant to an Assignment and Acceptance, other than any such Person that ceasesto be a party hereto pursuant to an Assignment and Acceptance. "LIEN" means, with respect to any asset, (a) any mortgage, deed oftrust, lien, pledge, hypothecation, encumbrance, charge or security interest in,on or of such asset, (b) the interest of a vendor or a lessor under anyconditional sale agreement, capital lease or title retention agreement (or anyfinancing lease having substantially the same economic effect as any of theforegoing) relating to such asset and (c) in the case of securities, anypurchase option, call or similar right of a third party with respect to suchsecurities. "LOAN DOCUMENTS" means this Agreement, each Security Document, eachNote, the First Amendment Agreement, the Second Amendment Documents, the ThirdAmendment Documents, the Fourth Amendment Documents, the Fifth AmendmentDocuments and the Sixth 10Amendment Documents, and any other document, instrument or agreement delivered,executed or to be executed under or in connection with any of the foregoing. "LOAN OBLIGATIONS" means collectively, the Revolving Loan Obligationsand the Term Loan Obligations. "LOANS" or "REVOLVING LOANS" means, collectively, the Tranche A Loansand the Tranche B Loans, each as made pursuant to Section 2.03 or 2.04 hereof. "MANDATORY EQUITY PREPAYMENT" shall have the meaning ascribed to suchterm in Section 2.21(a) hereof "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) thebusiness, assets, operations, prospects or condition, financial or otherwise, ofeither Borrower and their Subsidiaries taken as a whole, (b) the ability ofeither Borrower to perform any of its obligations under this Agreement or anyother Loan Document, (c) the rights of or benefits available to the Lendersunder this Agreement or any other Loan Document, or (d) the Transactions. "MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans), orobligations in respect of one or more Hedging Agreements, of any one or more ofthe Borrower and its Subsidiaries, but excluding PSWRI, in an aggregateprincipal amount exceeding $500,000. For purposes of determining MaterialIndebtedness, the "principal amount" of the obligations of the Borrower or anySubsidiary in respect of any Hedging Agreement at any time shall be the maximumaggregate amount (giving effect to any netting agreements) that the Borrower orsuch Subsidiary would be required to pay if such Hedging Agreement wereterminated at such time. "MATURITY DATE" means March 31, 2005, provided, however, that if theFirst Extension Requirements are satisfied, then the Maturity Date shall beextended to September 30, 2005; provided, further, that if the Second ExtensionRequirements are satisfied, then the Maturity Date shall be extended to March31, 2006; provided, further, that if the Third Extension Requirements aresatisfied, then the Maturity Date shall be extended to September 30, 2006. "MAXIMUM CASH COLLATERAL AMOUNT" means, with respect to any EquityIssuance, the amount obtained by multiplying the amount of the outstanding LoanObligations, by 8%, and multiplying the product thereof by the number of years(rounded upward to the nearest half year) between the date of such on which theproceeds of any Equity Issuance was received by either of the Borrowers andSeptember 30, 2006 (computed on the basis of a year of 360 days). "MAXIMUM RATE" has the meaning ascribed to such term in Section 9.16hereof.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. "MOODY'S" means Moody's Investors Service, Inc. "MORTGAGES" means, collectively, (a) any mortgage agreement or deed oftrust dated as of either November 26, 1997 or the Restructuring Effective Datefor the benefit of Mortgagee pursuant to Section 2.08 and (b) each othermortgage granted to Mortgagee pursuant to Sections 2.08, 5.10 and 5.11, eachsubstantially in the form as annexed to the 1997 Revolving Credit Agreement. 11 "MORTGAGEE" means, with respect to any Mortgage, the AdministrativeAgent as mortgagee or beneficiary thereof, for itself and on behalf of theLenders, under such Mortgage. "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section4001(a)(3) of ERISA. "NEW CADIZ/SUN WORLD LEASE" means that certain Agricultural Lease byand between Cadiz Borrower (OR CRE BORROWER AS ASSIGNEE OF CADIZ BORROWER), aslessor, and Sun World, as lessee, in substantially the form annexed hereto asExhibit D. "1997 REVOLVING CREDIT AGREEMENT" has the meaning ascribed to such termin the recitals hereto. "NINTH WARRANT CERTIFICATE" means the Ninth Warrant Certificate issuedin connection with the Fourth Amendment Agreement. "NON-ADVERSE AMENDMENT" has the meaning set forth in Section 9.19hereof. "NOTES" means, collectively, the Tranche A Notes and the Tranche BNotes. "OBLIGORS" has the meaning assigned to such term in the Pledge andSecurity Agreement. "OTHER TAXES" means any and all present or future stamp or documentarytaxes or any other excise or property taxes, charges or similar levies arisingfrom any payment made hereunder or from the execution, delivery or enforcementof, or otherwise with respect to, this Agreement. "PARTICIPANTS" has the meaning ascribed to such term in Section 9.04(e)hereof. "PARTICIPATING SUBSIDIARIES" means the Subsidiaries excluding (a) theInactive Subsidiaries, and (b) the Sun World Entities. "PAST DUE EXPENSE DEFICIENCY" means the amount of $20,000,corresponding to the amount that Lender's and Revolving Lenders' reasonableout-of-pocket expenses on and prior to the Restructuring Effective Date,including the reasonable fees, charges and disbursements of counsel, exceed$400,000. "PAST DUE PAYMENT" means a Cash payment of $2,425,034.62 made by Cadizto ING and/or its nominees that is comprised of (a) all accrued and unpaidinterest due under the Term Loan Documents and the Loan Documents for the periodthrough September 30, 2003 at the non-default rate in the amount of$1,412,457.21, (b) all accrued and unpaid interest due under the Term LoanDocuments and the Loan Documents at the default rate for the period throughSeptember 30, 2003 in the amount of $612,577.40, and (c) $400,000 ofAdministrative Agent's and the Lenders' out-of-pocket expenses (includingreasonable attorneys' fees) under the Term Loan Documents and the Loan Documentsfor the period through the Restructuring Effective Date, provided that the PastDue Expense Deficiency shall be capitalized and included as part of theprincipal outstanding under the Tranche A Notes. 12Source: CADIZ INC, 10-K, November 02, 2004Powered 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. "PBGC" means the Pension Benefit Guaranty Corporation referred to anddefined in ERISA and any successor entity performing 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 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 Liensecuring Indebtedness. "PERMITTED INVESTMENTS" means: (a) Cash Equivalents; and (b) transactions permitted pursuant to the provisions of Sections 5.10 and 5.11 hereof. 13 "PERSON" means any natural person, corporation, limited liabilitycompany, trust, joint venture, association, company, partnership, GovernmentalAuthority or other entity. "PIK PORTION" has the meaning set forth in Section 2.14 hereof. "PIK PORTION RATE" means eight percent (8%). "PIK&CASH PAYMENT ELECTION" has the meaning set forth in Section 2.14hereof. "PIK&CASH PAYMENT ELECTION DEADLINE" has the meaning set forth inSection 2.14 hereof. "PIK&CASH PAYMENT ELECTION REQUEST" means a request by the Borrowers tomake a payment of accrued interest for an Interest Period through the remittanceof both (A) the Cash Portion plus (B) the PIK PortionSource: CADIZ INC, 10-K, November 02, 2004Powered 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. "PIK&Cash Payment Rate" means twelve percent (12%), comprised of thesum of the PIK Portion Rate and the Cash Portion Rate. "PLAN" means any employee pension benefit plan (other than aMultiemployer Plan) subject to the provisions of Title IV of ERISA or Section412 of the Code or Section 302 of ERISA, and in respect of which the Borrower orany ERISA Affiliate is (or, if such plan were terminated, would under Section4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) ofERISA. "PLEDGE AND SECURITY AGREEMENTS" means, collectively, (a) any securityagreement dated as of the Restructuring Effective Date for the benefit of theAdministrative Agent, for itself and on behalf of the Lenders, pursuant toSection 2.08, (b) any stock pledge agreement pursuant to which the shares ofcapital stock of each Participating Subsidiary are pledged to the AdministrativeAgent, and (c) each other security agreement executed pursuant to Sections 2.08,5.10 and 5.11, each substantially (to the extent applicable) in the form asannexed to the 1997 Revolving Credit Agreement, as amended from time to timethereafter. "PREPAYMENT DATE" has the meaning set forth in Section 2.11 hereof. "PREFERRED STOCK CERTIFICATE OF DESIGNATIONS" means that certainCertificate of Designations of Series F Preferred Stock of the Cadiz Borrower,in form and substance acceptable to the Administrative Agent and the Lenders, insubstantially the form as attached hereto in Exhibit H, that, inter alia, setsforth the rights, privileges and preferences of such preferred stock. "PSWRI" means P.S.W.R.I. Limited, a Guernsey corporation. "PURCHASER CERTIFICATE" means the Purchaser Certificate in the form asattached hereto in Exhibit I. "REGISTER" has the meaning set forth in Section 9.04. 14 "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreementagreed to by Cadiz Borrower in favor of ING in the form attached hereto asExhibit J. "RELATED PARTIES" means, with respect to any specified Person, suchPerson's Affiliates and the respective directors, officers, employees, agentsand advisors of such Person and such Person's Affiliates. "RELEASED PARTIES" has the meaning ascribed to such term in Section9.19 hereof. "REQUIRED LENDERS" means, at any time, Lenders having Revolving CreditExposures and unused Commitments representing at least 66 2/3% of the sum of thetotal Revolving Credit Exposures and unused Commitments at such time. "RESTRICTED PAYMENT" means any dividend or other distribution (whetherin cash, securities or other property) with respect to any shares of any classof capital stock of either Borrower or any Subsidiary, or any payment (whetherin cash, securities or other property), including any sinking fund or similardeposit, on account of the purchase, redemption, retirement, acquisition,cancellation or termination of any such shares of capital stock or equityinterest of either Borrower or any option, warrant or other right to acquire anysuch shares of capital stock or equity interests of either Borrower, PROVIDED,HOWEVER, that transfers solely between the two Borrowers shall not be consideredRestricted Payments if such transfers do not conflict with the organizationaldocuments for both of the Borrowers. "RESTRUCTURING EFFECTIVE DATE" means the date on which the conditionsspecified in Section 4.01 are satisfied (or waived in accordance with Section9.02). "REVISED AND RESTATED ADDITIONAL DRAW WARRANT CERTIFICATE" means theRevised and Restated Additional Draw Certificate issued in connection with theFourth Amendment Agreement.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. "REVISED AND RESTATED INITIAL DRAW CERTIFICATE" means the Revised andRestated Initial Draw Certificate issued in connection with the Fourth AmendmentAgreement. "REVOLVER DEED OF TRUST" means that certain Deed of Trust, Assignmentof Rents, Security Agreement, Financing Statement and Fixture Filing, datedNovember 25, 1997, as amended from time to time, executed by Cadiz Borrower infavor of the Administrative Agent for the benefit of itself and the Lenders,which was recorded on November 26, 1997, as Instrument No. 19970434910 in theOfficial Records of San Bernardino County California. "REVOLVER (PIUTE) DEED OF TRUST" means that certain Deed of Trust,Assignment of Rents, Security Agreement, Financing Statement and Fixture Filing,dated as of July 1, 1999, as amended from time to time, executed by CadizBorrower in favor of the Administrative Agent for the benefit of itself and theLenders, which was recorded on December 23, 1999, as Instrument No. 524213 inthe Official Records of San Bernardino County California. "REVOLVER (SWFG) DEED OF TRUST" means that certain Deed of Trust,Assignment of Rents, Security Agreement, Financing Statement and Fixture Filing,dated October 30, 1998, as amended from time to time, executed by Cadiz Borrowerin favor of the Administrative Agent 15for the benefit of itself and the Lenders, which was recorded on November 4,1998, as Instrument No. 19980473321 in the Official Records of San BernardinoCounty California. "REVOLVER DEEDS OF TRUST" means, collectively, the Revolver Deed ofTrust, the Revolver (Piute) Deed of Trust, the Revolver (SWFG) Deed of Trust andany and all mortgages and deeds of trust delivered pursuant to Sections 5.10 and5.11 hereof. "REVOLVING CREDIT EXPOSURE" means, with respect to any Lender at anytime, the sum of the outstanding principal amount of such Lender's Tranche ALoans and Tranche B Loans. "REVOLVING CREDIT AGREEMENT WARRANTS" collectively, the Revised andRestated Initial Draw Warrant Certificate, the Revised and Restated AdditionalDraw Warrant Certificate, the Eighth Warrant Certificate, the Ninth WarrantCertificate, the Tenth Warrant Certificate, the Eleventh Warrant Certificate andthe Fee Warrant Certificate, each as revised, restated and in effect from timeto time. "REVOLVING LOAN OBLIGATIONS" means the obligations of Borrowers to theAdministrative Agent and/or the Lenders under the Loan Documents, as amended andin effect from time to time. "ROLLING STOCK": has the meaning assigned to such term in the Pledgeand Security Agreement. "S&P" means Standard & Poor's. "SECOND AMENDMENT AGREEMENT" has the meaning ascribed to such term inthe recitals hereto. "SECOND AMENDMENT DOCUMENTS" has the meaning ascribed to such term inthe recitals hereto. "SECOND EXTENSION REQUIREMENTS" shall have the meaning ascribed to suchterm in Section 2.27(b) hereof. "SECURITIES ACT" has the meaning set forth in Section 9.17 hereof. "SECURITY DOCUMENTS" means, collectively, the Mortgages, the Pledge andSecurity Agreement and the Cash Collateral Account Agreement. "SIXTH AMENDMENT DOCUMENTS" has the meaning ascribed to such term inthe recitals hereto.Source: CADIZ INC, 10-K, November 02, 2004Powered 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" means, with respect to any Person (the "PARENT") at anydate, any corporation, limited liability company, partnership, association orother entity the accounts of which would be consolidated with those of theparent in the parent's consolidated financial statements if such financialstatements were prepared in accordance with GAAP as of such date, as well as anyother corporation, limited liability company, partnership, association or other 16entity (a) of which securities or other ownership interests representing morethan 50% of the equity or more than 50% of the ordinary voting power or, in thecase of a partnership, more than 50% of the general partnership interests are,as of such date, owned, controlled or held, or (b) that is, as of such date,otherwise Controlled, by the parent or one or more subsidiaries of the parent orby the parent and one or more subsidiaries of the parent. "SUBSIDIARY" means any subsidiary of either of the Borrowers, but shallexclude Sun World and its subsidiaries during the pendency of the bankruptcycase for Sun World pending as of the Restructuring Effective Date. "SUN WORLD" means Sun World International, Inc., a Subsidiary of theCadiz Borrower. "SUN WORLD DOCUMENTS" has the meaning assigned to such term in the TermSixth Global Amendment Agreement. "SUN WORLD ENTITIES" means Sun World and its subsidiaries. "SUN WORLD INDENTURE" means that certain Indenture, dated as of April16, 1997, among Sun World, Cadiz Borrower, the Subsidiary Guarantors thereto,and the Sun World Trustee, as amended by that certain Amendment to Indenture,dated as of October 9, 1997, as further amended by any Non-Adverse Amendments. "SUN WORLD SETTLEMENT" means the settlement relating to claims betweenthe Cadiz Borrower and Sun World, and the related release of certain collateralrelating to Sun World implementing the settlement described in the term sheet,as annexed hereto in Exhibit K, which documents evidencing the settlement are inform and substance reasonably satisfactory to the Cadiz Borrower, theAdministrative Agent and the Lenders. "SUN WORLD TRUSTEE" means The Bank of New York, in its capacity as thesuccessor trustee under the Sun World Indenture and any successor trusteethereunder. "TAXES" means any and all present or future taxes, levies, imposts,duties, deductions, charges or withholdings imposed by any GovernmentalAuthority. "TENTH WARRANT CERTIFICATE" means the Tenth Warrant Certificate issuedin connectionwith the Fourth Amendment Agreement. "TERM LOAN OBLIGATIONS" means the obligations of Borrowers to ING underthe Term Loan Documents. "TERM LOAN DOCUMENTS" means collectively, the Credit Documents (asdefined in the Term Sixth Global Amendment Agreement), each as amended andmodified from time to time. "TERM FIFTH GLOBAL AMENDMENT AGREEMENT" means that certain Fifth GlobalAmendment Agreement, dated as of January 31, 2002, between Cadiz, as borrower,and ING, as lender, as amended and modified from time to time. 17 "TERM SIXTH GLOBAL AMENDMENT AGREEMENT" means that certain Sixth GlobalAmendment Agreement, dated as of December 15, 2003, between Cadiz and CRE, asSource: CADIZ INC, 10-K, November 02, 2004Powered 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. borrowers, and ING, as lender, as amended and modified from time to time. "THRESHOLD" has the meaning assigned to such term in Section 2.11(c). "THIRD AMENDMENT AGREEMENT" has the meaning ascribed to such term inthe recitals hereto. "THIRD AMENDMENT DOCUMENTS" has the meaning ascribed to such term inthe recitals hereto. "THIRD EXTENSION REQUIREMENTS" shall have the meaning ascribed to suchterm in Section 2.27(c) hereof. "TITLE POLICIES" has the meaning ascribed to such term in Section4.01(r) hereof. "TRANCHE A COMMITMENT" means, with respect to each Lender, thecommitment of such Lender to make Tranche A Loans, expressed as an amountrepresenting the maximum aggregate amount of such Lender's Tranche A RevolvingCredit Exposure hereunder, as such commitment may be (a) reduced from time totime pursuant to Section 2.09 and (b) reduced or increased from time to timepursuant to assignments by or to such Lender pursuant to Section 9.04. Theinitial amount of each Lender's Tranche A Commitment is set forth on Schedule2.01, or in the Assignment and Acceptance pursuant to which such Lender shallhave assumed its Tranche A Commitment, as applicable. The aggregate amount ofthe Tranche A Commitments on the Restructuring Effective Date will be$15,000,000, which amount has been fully drawn and is outstanding. "TRANCHE A LENDERS" means the Lenders listed on Schedule 2.01 who havea Tranche A Commitment greater than zero set forth under their names, subject tothe provisions of Section 9.04 hereof pertaining to Persons becoming or ceasingto be Lenders; "Tranche A Lender" shall mean any one of them. "TRANCHE A LOANS" shall have the meaning ascribed to such term inSection 2.01(a) hereof. "TRANCHE A NOTE" means each of the Fifth Amended and Restated Tranche ARevolver Notes issued by Borrowers and payable by the Borrowers to the order ofthe Lenders, as evidence of the joint and several obligation of the Borrowers topay the aggregate unpaid principal amount, interest thereon, and relatedobligations of the Tranche A Loans made to them by the Lenders (and anypromissory note or notes that may be issued from time to time in substitution,renewal, extension, replacement or exchange therefor), each in the form ofExhibit L hereto, and any extensions, renewals, modifications or replacementsthereof or therefore, with all blanks properly completed, either as originallyexecuted or as the same may from time to time be supplemented, modified,amended, renewed, extended or refinanced. 18 "TRANCHE A REVOLVING CREDIT EXPOSURE" means, with respect to anyTranche A Lender at any time, the sum of the outstanding principal amount ofsuch Lender's Tranche A Loans. "TRANCHE B COMMITMENT" means, with respect to each Lender, thecommitment of such Lender to make Tranche B Loans, expressed as an amountrepresenting the maximum aggregate amount of such Lender's Tranche B RevolvingCredit Exposure hereunder, as such commitment may be (a) reduced from time totime pursuant to Section 2.09 and (b) reduced or increased from time to timepursuant to assignments by or to such Lender pursuant to Section 9.04. Theinitial amount of each Lender's Tranche B Commitment is set forth on Schedule2.01, or in the Assignment and Acceptance pursuant to which such Lender shallhave assumed its Tranche B Commitment, as applicable. The aggregate amount ofthe Tranche B Commitments on the Restructuring Effective Date will be$10,000,000. "TRANCHE B LENDERS" means the Lenders listed on Schedule 2.01 who havea Tranche B Commitment greater than zero set forth opposite their names, subjectto the provisions of Section 9.04 hereof pertaining to Persons becoming orceasing to be Lenders; "Tranche B Lender" shall mean any one of them. "TRANCHE B LOANS" shall have the meaning ascribed to such term inSource: CADIZ INC, 10-K, November 02, 2004Powered 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 2.01(b) hereof. "TRANCHE B NOTES" means each of the Amended Revised and RestatedTranche B Notes issued by Borrowers and payable by the Borrowers to the order ofthe Lenders, as evidence of the joint and several obligation of the Borrowers topay the aggregate unpaid principal amount, interest thereon, and relatedobligations of the Tranche B Loans made to them by the Lenders (and anypromissory note or notes that may be issued from time to time in substitution,renewal, extension, replacement or exchange therefor), each in the form ofExhibit M hereto, and any extensions, renewals, modifications or replacementsthereof or therefore, with all blanks properly completed, either as originallyexecuted or as the same may from time to time be supplemented, modified,amended, renewed, extended or refinanced. "TRANCHE B REVOLVING CREDIT EXPOSURE" means, with respect to anyTranche B Lender at any time, the sum of the outstanding principal amount ofsuch Lender's Tranche B Loans. "TRANSACTIONS" means the execution, delivery and performance by theBorrowers of this Agreement, the other Loan Documents, the transactionscontemplated herein and therein, the borrowing of Loans, and the use of theproceeds thereof. "WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as aresult of acomplete or partial withdrawal 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 any Person, anycorporation, partnership, or other entity of which all of the equity securitiesor other ownership interests (other than, in the case of a corporation,directors' qualifying shares) are directly or indirectly owned or controlled bysuch Person or one or more Wholly Owned Subsidiaries of such Person or by suchPerson and one or more Wholly Owned Subsidiaries of such Person. 19 SECTION 1.02. [INTENTIONALLY OMITTED] SECTION 1.03. TERMS GENERALLY. The definitions of terms herein shallapply equally to the singular and plural forms of the terms defined. Wheneverthe context may require, any pronoun shall include the corresponding masculine,feminine and neuter forms. The words "include", "includes" and "including" shallbe 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 anyagreement, instrument or other document herein shall be construed as referringto such agreement, instrument or other document as from time to time amended,supplemented or otherwise modified (subject to any restrictions on suchamendments, supplements or modifications set forth herein), (b) any referenceherein to any Person shall be construed to include such Person's successors andassigns, (c) the words "herein", "hereof" and "hereunder", and words of similarimport, shall be construed to refer to this Agreement in its entirety and not toany particular provision hereof, (d) all references herein to Articles,Sections, Exhibits and Schedules shall be construed to refer to Articles andSections of, and Exhibits and Schedules to, this Agreement and (e) the words"asset" and "property" shall be construed to have the same meaning and effectand 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 expresslyprovided herein, all terms of an accounting or financial nature shall beconstrued in accordance with GAAP, as in effect from time to time; PROVIDEDthat, if either Borrower notifies the Administrative Agent that such Borrowerrequests an amendment to any provision hereof to eliminate the effect of anychange occurring after the date hereof in GAAP or in the application thereof onthe operation of such provision (or if the Administrative Agent notifies theBorrowers that the Required Lenders request an amendment to any provision hereoffor such purpose), regardless of whether any such notice is given before orafter such change in GAAP or in the application thereof, then such provisionshall be interpreted on the basis of GAAP as in effect and applied immediatelybefore such change shall have become effective until such notice shall have beenSource: CADIZ INC, 10-K, November 02, 2004Powered 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. withdrawn or such provision amended in accordance herewith. ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS. (a) TRANCHE A LOANS. The parties hereby acknowledge and agree thateach Lender has made loans (the "Tranche A Loans") to the Borrowers from time totime during the Availability Period in an aggregate principal amount equal toeach Lender's Tranche A Commitment. The parties hereby further acknowledge andagree that prior to the Restructuring Effective Date, the Borrowers haveborrowed the principal amount of $15,000,000 of Tranche A Loans from theLenders, which Tranche A Loans remain outstanding on the Restructuring 20Effective Date. Each Lender's Tranche A Loans are the joint and severalobligation of the Borrowers to repay such Tranche A Loans and are evidenced by arevised and restated Tranche A Loan Note payable to the order of such Lender,and, as of the Restructuring Effective Date, has been duly and validly executedand delivered by the Borrowers, payable to the order of such Lender, whichTranche A Loan Note shall replace the Tranche A Loan Note issued in connectionwith the Fifth Amendment Agreement. Each Revolving Loan Note shall be dated asof the Restructuring Effective Date (or the later date of any Assignment andAcceptance). The Borrowers acknowledge and agree that the principal amount ofTranche A Loans outstanding on the Restructuring Effect Date is equal to (a)$15,000,000 plus (b) the Past Due Deficiency Amount of $20,000. The partiesfurther agree that the Tranche A Loan Note issued on the Restructuring EffectiveDate may be adjusted upon agreement of the parties, which agreement may not beunreasonably withheld, within sixty (60) days after the Restructuring EffectiveDate solely to reflect any adjustment of the Past Due Deficiency Amount, inwhich case the Borrowers shall re-issue a new Tranche A Note and theAdministrative Agent shall mark the replaced Tranche A Note void. (b) TRANCHE B LOANS. S The parties hereby acknowledge and agreethat each Lender has made loans (the "Tranche B Loans") to the Borrowers fromtime to time during the Availability Period in an aggregate principal amountequal to each Lender's Tranche B Commitment. The parties hereby furtheracknowledge and agree that prior to the Restructuring Effective Date, theBorrowers have borrowed the principal amount of $10,000,000 of Tranche B Loansfrom the Lenders, which Tranche B Loans remain outstanding on the RestructuringEffective Date. Each Lender's Tranche B Loans are the joint and severalobligation of the Borrowers to repay such Tranche B Loans and are evidenced by arevised and restated Tranche B Loan Note payable to the order of such Lender,and, as of the Restructuring Effective Date, has been duly and validly executedand delivered by the Borrowers, payable to the order of such Lender, whichTranche B Loan Note shall replace the Tranche B Loan Note issued in connectionwith the Fifth Amendment Agreement. Each Note shall be dated as of theRestructuring Effective Date (or the later date of any Assignment andAcceptance). The Borrowers acknowledge and agree that the principal amount ofTranche B Loans outstanding on the Restructuring Effect Date is equal to$10,000,000. SECTION 2.02. LOANS AND BORROWINGS. (a) Each Tranche A Loan shall bemade as part of a Borrowing consisting of Tranche A Loans made by the Lendersratably in accordance with their respective Tranche A Commitments. The failureof any Lender to make any Tranche A Loan required to be made by it shall notrelieve any other Lender of its obligations hereunder; PROVIDED that the TrancheA Commitments of the Lenders are several and no Lender shall be responsible forany other Lender's failure to make Tranche A Loans as required. (b) Each Tranche B Loan shall be made as part of a Borrowingconsisting of Tranche B Loans made by the Lenders ratably in accordance withtheir respective Tranche B Commitments. The failure of any Lender to make anyTranche B Loan required to be made by it shall not relieve any other Lender ofits obligations hereunder; provided that the Tranche B Commitments of theLenders are several and no Lender shall be responsible for any other Lender'sfailure to make Tranche B Loans as required.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 21 SECTION 2.03. [INTENTIONALLY OMITTED] SECTION 2.04. [INTENTIONALLY OMITTED] SECTION 2.05. [INTENTIONALLY OMITTED] SECTION 2.06. [INTENTIONALLY OMITTED] SECTION 2.07. CONVERSION RIGHTS FOR HOLDERS OF TRANCHE B LOANS. Theparties hereby agree that, from and after the Restructuring Effective Date, theTranche B Loans shall no longer have conversion rights. SECTION 2.08. SECURITY. The Borrowers's obligations under thisAgreement shall be secured in accordance with and/or have the benefit of thePledge and Security Agreement, the Mortgages, any other Security Document, andeach other mortgage, security interest, pledge agreement or other documentgranted pursuant to Sections 5.09, 5.10 and 5.11. SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS. (a) Unlesspreviously terminated, the Commitments shall terminate on the Maturity Date. (b) The Borrowers may at any time terminate, or from time to timereduce, the Tranche A Commitments; provided that (i) each reduction of theTranche 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 Borrowers shall not terminateor reduce the Tranche A Commitments if, after giving effect to any concurrentprepayment of the Loans in accordance with Section 2.11, the sum of the TrancheA Revolving Credit Exposures would exceed the total Tranche A Commitments. (c) The Borrowers may at any time terminate, or from time to timereduce, the Tranche B Commitments; provided that (i) each reduction of theTranche B Commitments shall be in an amount that is an integral multiple of$500,000 and not less than $2,500,000, (ii) the Borrowers shall not terminate orreduce the Tranche B Commitments unless the Tranche A Commitments have beenreduced to zero and all other Loan Obligations (excluding the principal of theTranche B Loans) have been repaid in full, and (iii) the Borrower shall notterminate or reduce the Tranche B Commitments if, after giving effect to anyconcurrent prepayment of the Loans in accordance with Section 2.11, the sum ofthe Tranche B Revolving Credit Exposures would exceed the total Tranche BCommitments. (d) Except to the extent that the Past Due Expense Deficiency andany PIK Portion increases the aggregate outstanding principal amount of all ofthe outstanding Loans, if at any time the aggregate outstanding principal amountof all of the Loans made by any Lender shall exceed the amount of the Commitmentof such Lender, the Borrowers shall immediately upon receipt of notice thereoffrom the Administrative Agent or such Lender, or immediately upon theBorrowers's acquiring actual knowledge thereof, prepay the Loans of such Lenderto the extent necessary to eliminate such excess. (e) Except to the extent that any PIK Portion increases theaggregate outstanding principal amount of all of the outstanding Loans,notwithstanding anything herein to the contrary, the sum of the aggregateoutstanding principal balance of all Loans made by all 22Lenders at any one time shall not exceed the aggregate amount of all Commitmentsas then in effect. If at any time the aggregate outstanding principal balance ofthe Loans exceeds the applicable limit stated in the immediately precedingsentence, the Borrowers shall immediately upon receipt of notice thereof fromthe Administrative Agent or such Lender, or immediately upon the Borrowers'sacquiring actual knowledge thereof, prepay the Loans to the extent necessary toeliminate such excess. (f) Any reduction of the Commitments under this Section 2.09 shallapply as a proportional and permanent reduction of the Commitments of each ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Lenders. If the aggregate outstanding principal balance of the Loans exceedsany applicable limit specified hereunder after giving effect to any suchreduction of the Commitments, Borrowers shall immediately prepay such Loans tothe extent necessary to eliminate such excess. (g) In the event any reduction in the Commitments is made inaccordance with this Section 2.09, the Administrative Agent will issue to theBorrowers and each Lender a revised Schedule 2.01 to this Agreement reflectingsuch reduction, which revised Schedule 2.01 shall supersede and replace theprior version thereof and shall be substituted by each party in lieu thereof. SECTION 2.10. REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) Each Borrowerhereby unconditionally promises to pay to the Administrative Agent for theaccount of each Lender the then unpaid principal amount of each Loan on theMaturity Date. (b) Each Lender shall maintain in accordance with its usualpractice an account or accounts evidencing the indebtedness of the Borrowers tosuch Lender resulting from each Loan made by such Lender, including the amountsof principal and interest payable and paid to such Lender from time to timehereunder. (c) The Administrative Agent shall maintain accounts in which itshall record (i) the amount of each Loan made hereunder and the Interest Periodapplicable thereto, (ii) the amount of any principal or interest due and payableor to become due and payable from the Borrowers to each Lender hereunder and(iii) the amount of any sum received by the Administrative Agent hereunder forthe account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant toparagraph (b) or (c) of this Section shall be PRIMA FACIE evidence of theexistence and amounts of the obligations recorded therein; PROVIDED that thefailure of any Lender or the Administrative Agent to maintain such accounts orany error therein shall not in any manner affect the obligation of the Borrowersto repay the Loans in accordance with the terms of this Agreement. (e) To further evidence the existence and amounts of theBorrowers's obligations to pay principal and interest on each Loan made by aLender hereunder, (i) with respect to each Tranche A Loan, the Borrowers shallexecute and deliver to that Lender a Tranche A Note payable to the Lender, withall blanks therein appropriately filled, with the face amount equal to theprincipal amount of such Lender's Tranche A Commitment, and (ii) with respect toeach Tranche B Loan, the Borrowers shall execute and deliver to that Lender aTranche B Note payable to the Lender, with all blanks therein appropriatelyfilled, with the face 23amount equal to the principal amount of such Lender's Tranche B Commitment. TheBorrowers shall prepare, execute and deliver each such Note payable to the orderof such Lender (or, if requested by such Lender, to such Lender and itsregistered assigns). Thereafter, the Loans evidenced by such Note and interestthereon 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 namedtherein (or, if such Note is a registered note, to such payee and its registeredassigns). SECTION 2.11. PREPAYMENT OF LOANS; REBORROWINGS. (a) Subject to Section2.11(d) hereof, the Borrowers shall have the right at any time and from time totime to prepay any Borrowing in whole or in part, subject to prior notice inaccordance with paragraph (b) of this Section; PROVIDED that unless alloutstanding amounts are being repaid or otherwise mandated under the terms ofthis Agreement or the other Loan Documents, each prepayment of Borrowing shallbe in an amount that is an integral multiple of $100,000 and not less than$2,500,000.00. (b) The Borrowers shall notify the Administrative Agent bytelephone (confirmed by telecopy) of any prepayment hereunder not later than 1p.m., New York City time, (the following date, as applicable, the "PrepaymentDate") (i) with respect to Tranche A Loans, six Business Days before the date ofprepayment or (ii) with respect to Tranche B Loans, ten (10) Business Daysbefore the date of prepayment. Each such notice shall be irrevocable and shallSource: CADIZ INC, 10-K, November 02, 2004Powered 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. specify the prepayment date and the principal amount of each Borrowing orportion thereof to be prepaid; PROVIDED that, if a notice of prepayment is givenin connection with a conditional notice of termination of the Commitments ascontemplated by Section 2.09, then such notice of prepayment may be revoked ifsuch notice of termination is revoked in accordance with Section 2.09. Promptlyfollowing receipt of any such notice relating to a Borrowing, the AdministrativeAgent shall advise the Lenders of the contents thereof. Each partial prepaymentof any Borrowing shall be in an amount that would be permitted in the case of anadvance of a Borrowing as provided in Section 2.02. Each prepayment of aBorrowing shall be applied ratably to the Loans included in the prepaidBorrowing. Prepayments shall be accompanied by accrued interest to the extentrequired by Section 2.13 and Section 2.14. (c) The Borrowers may not reborrow any principal amount of anyLoans prepaid or repaid in any manner. (d) Notwithstanding any other provision of this Agreement, anyprovision in any other Loan Documents or any provision of the Term LoanDocuments, no prepayment or repayments of the Tranche B Loans may be made untilall other Loan Obligations (excluding the outstanding principal of the Tranche BLoans) have been paid in full to the Lenders and the Administrative Agent.Mandatory or optional prepayments by Borrowers shall first apply to currentlyoutstanding Tranche A Loans or the Term Loan Obligations (excluding theprincipal of the Tranche B Loans) (as allocated between such Loan Obligationswithin the sole discretion of the Administrative Agent). SECTION 2.12. FEES. All fees payable hereunder shall be paid on thedate due to the Administrative Agent for distribution to the Lenders. Fees paidshall not be refundable under any circumstances. 24 SECTION 2.13. INTEREST. (a) The Loans comprising each Borrowing shallbear interest at a rate per annum equal to the Applicable Interest Rate for theInterest Period in effect for such Borrowing. On the first Interest Payment Dateafter the Restructuring Effective Date, the Borrowers shall be obligated to pay(or satisfy) interest accruing on the Loans from and after September 30, 2003though such Interest Payment Date. (b) Notwithstanding the foregoing, if any principal of or intereston any Loan or any fee or other amount payable by the Borrowers hereunder is notpaid when due, whether at stated maturity, upon acceleration or otherwise, suchoverdue amount shall bear interest, after as well as before judgment, at a rateper annum equal to (i) in the case of overdue principal of any Loan, 2% plus therate otherwise applicable to such Loan as provided in the preceding paragraph ofthis Section or (ii) in the case of any other amount, 2% plus the rateapplicable to Loans as provided in paragraph (a) of this Section. (c) Accrued interest on each Loan shall be payable in arrears oneach Interest Payment Date for such Loan and upon termination of theCommitments; PROVIDED that (i) interest accrued pursuant to paragraph (b) ofthis Section shall be payable on demand and (ii) in the event of any repaymentor prepayment of any Loan, accrued interest on the principal amount repaid orprepaid shall be payable on the date of such repayment or prepayment. (d) All interest hereunder shall be computed on the basis of ayear of 360 days, and shall be payable for the actual number of days elapsed(including the first day but excluding the last day). SECTION 2.14. INTEREST RATE ELECTION. (a) In its sole discretion, asprovided in this section, Borrowers may elect to pay accrued interest on aBorrowing on an Interest Payment Date (or, in the case of a prepayment underSection 2.11, on the Prepayment Date) for such Borrowing either: (i) at the PIK&Cash Payment Rate through the remittance of both (A) the Cash Portion, which is a payment in cash corresponding to an interest rate of 4% per annum plus (B) the PIK Portion corresponding to an interest rate of 8% per annum(such election, a "PIK&Cash Payment Election"); or (ii) at the Cash Payment Rate through the remittance ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Cash Payment Amount, which is a payment on cash corresponding to an interest rate of 8% (such election, a "Cash Payment Election"). (b) To make a PIK&Cash Payment Election pursuant to this Section2.14 with respect to any Borrowing for any Interest Period (or in the case of aprepayment under Section 2.11, the portion of an Interest Period ending on thePrepayment Date), the Borrowers shall notify the Administrative Agent of suchelection by facsimile or 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 aprepayment under Section 2.11, six (6) Business Days before the Prepayment Date)for the current Interest Period for such Borrowing (the "PIK&CASH PAYMENTELECTION DEADLINE"). Each telephonic PIK&Cash Payment Election Request shall beirrevocable and shall be confirmed promptly by hand delivery or telecopy to theAdministrative Agent of a written 25PIK&Cash Payment Election Request in a form approved by the Administrative Agentand signed by the Borrowers. Promptly upon receipt of the written PIK&CashPayment Election Request, the Administrative Agent shall give notice of suchPIK&Cash Payment Election Request to the Lenders. (c) Each telegraphic and written PIK&Cash Payment Election Requestshall specify the Borrowing to which such PIK&Cash Payment Election Requestapplies; (d) Following receipt of a PIK&Cash Payment Election Request, (i)the Administrative Agent shall advise each Lender and the Borrowers by 11 a.m.,New York time, on the Interest Payment Date (or, in the case of a prepaymentunder Section 2.11, on the Prepayment Date) relating to such PIK&Cash PaymentElection Request of the details thereof, including the Administrative Agent'sdetermination of the Cash Payment Portion and the PIK Portion (including itscalculation thereof) as determined pursuant to Subsection hereof, (2) within ten(10) Business Days after the PIK&Cash Payment Election Deadline, the Borrowersshall deliver to the Administrative Agent, for the benefit of the Lenders, a newnote in substantially the form hereof for the PIK Portion relating to suchPIK&Cash Payment Election Request, provided, however, that the failure todeliver any such PIK Portion note shall not affect the Borrowers' obligationsrelating to the PIK Portion (or interest thereon) from and after the InterestPayment Date giving rise thereto. (e) Subject to Section 2.14(f) hereof, if the Borrowers fail todeliver a timely PIK&Cash Payment Election Request with respect to any Borrowingprior to the PIK&Cash Payment Election Deadline for an Interest Period and inaccordance with requirements of this section, then (i) the Borrowers shall bedeemed to have made the Cash Payment Election for that Borrowing for thatInterest Period and (ii) the Applicable Interest Rate for that Borrowing forthat Interest Period shall be the Cash Payment Rate. (f) Notwithstanding any other provision of this Agreement, theBorrowers shall not be entitled to make the PIK&Cash Payment Election if aDefault or an Event of Default has occurred and is continuing (unless thisrequirement is waived by the Required Lenders). If the Borrowers are notentitled to make the PIK&Cash Payment Election for any Interest Period withrespect to a Borrowing, then the Interest Rate for that Interest Period for suchBorrowing shall be the Cash Payment Rate. (g) With respect to any Borrowing for which a PIK&Cash PaymentElection has been made (or deemed to have been made) in accordance with thisSection 2.14, the PIK Portion shall mean the principal amount that has a valueequal to the amount of accrued interest at the PIK Portion Rate for thatBorrowing for the Interest Period (or, in the case of a prepayment under Section2.11, the portion of an Interest Period ending on the Prepayment Date) for whichthe PIK&Cash Payment Election has been made (the "PIK Portion"). The PIK Portionshall not be paid in cash but shall automatically and without further action onthe part of any party be added to the outstanding principal amount of theRevolving Loan Obligations on the Interest Payment Date for such Interest Period(or, in the case of a prepayment under Section 2.11, the portion of an InterestPeriod ending on the Prepayment Date) and shall be considered as outstandingprincipal under the Revolving Loans. Further, with respect to any Borrowing forSource: CADIZ INC, 10-K, November 02, 2004Powered 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 a PIK&Cash Payment Election has been made in accordance with this Section2.14, (1) 26interest shall accrue on the Revolving Loan Obligations with respect to suchBorrowing for such Interest Period (or, in the case of a prepayment underSection 2.11, the portion of such Interest Period ending on the Prepayment Date)at the PIK&Cash Payment Rate, and (2) the Cash Portion shall mean the amount ofaccrued interest at the Cash Portion Rate for that Borrowing for the InterestPeriod (or, in the case of a prepayment under Section 2.11, the portion of anInterest Period ending on the Prepayment Date) for which the PIK&Cash PaymentElection has been made (the "Cash Portion"). The Cash Portion shall be payablein immediately available funds on the Interest Payment Date for such InterestPeriod (or, in the case of a prepayment under Section 2.11, the portion of anInterest Period ending on the Prepayment Date) in accordance with section 2.18hereof. (h) With respect to any Borrowing for which a Cash PaymentElection has been made in accordance with this Section 2.14, (1) interest shallaccrue on the Revolving Loan Obligations with respect to such Borrowing for suchInterest Period (or, in the case of a prepayment under Section 2.11, the portionof such Interest Period ending on the Prepayment Date) at the Cash Payment Rate,and (2) the Cash Payment Amount shall mean the amount of accrued interest at theCash Payment Rate for that Borrowing for the Interest Period (or, in the case ofa prepayment under Section 2.11, the portion of an Interest Period ending on thePrepayment Date) for which the Cash Payment Election has been made (the "CashPayment Amount"). The Cash Payment Amount shall be payable in immediatelyavailable funds on the Interest Payment Date for such Interest Period (or, inthe case of a prepayment under Section 2.11, the portion of an Interest Periodending on the Prepayment Date) in accordance with section 2.18 hereof 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 the cost to suchLender of making or maintaining any Applicable Interest Rate Loan (or ofmaintaining its obligation to make any such Loan) or to increase the cost tosuch Lender or to reduce the amount of any sum received or receivable by suchLender hereunder (whether of principal, interest or otherwise), then theBorrowers will pay to such Lender such additional amount or amounts as willcompensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regardingcapital requirements has or would have the effect of reducing the rate of returnon such Lender's capital or on the capital of such Lender's holding company, ifany, as a consequence of this Agreement or the Loans made by such Lender to alevel below that which such Lender or such Lender's holding company could haveachieved but for such Change in Law (taking into consideration such Lender'spolicies and the policies of such Lender's holding company with respect tocapital 27adequacy), then from time to time the Borrower will pay to such Lender suchadditional amount or amounts as will compensate such Lender or such Lender'sholding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amountsnecessary to compensate such Lender or its holding company, as the case may be,as specified in paragraph (a) or (b) of this Section shall be delivered to theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Borrowers and shall be conclusive absent manifest error. The Borrowers shall paysuch Lender the amount shown as due on any such certificate within 10 days afterreceipt thereof. (d) Failure or delay on the part of any Lender to demandcompensation pursuant to this Section 2.15 shall not constitute a waiver of suchLender's right to demand such compensation; PROVIDED that the Borrowers shallnot be required to compensate a Lender pursuant to this Section 2.15 for anyincreased costs or reductions incurred more than 270 days prior to the date thatsuch Lender notifies the Borrowers of the Change in Law giving rise to suchincreased costs or reductions and of such Lender's intention to claimcompensation therefor; PROVIDED further that, if the Change in Law giving riseto such increased costs or reductions is retroactive, then the 270-day periodreferred to above shall be extended to include the period of retroactive effectthereof. SECTION 2.16. CASH COLLATERAL ACCOUNT. In accordance with Section 4.01,the Cadiz Borrower has agreed to establish the Cash Collateral Account and togrant to Lenders perfected first priority security interests therein, all uponthe terms and subject to the terms and conditions of the Cash Collateral AccountAgreement. In connection therewith, the Cadiz Borrower shall deposit with$2,142,280 in the Cash Collateral Account, with the amounts in such accountsubject to the Cash Collateral Account Agreement. In accordance with the termsthereof, the Cadiz Borrower may utilize amounts held in the Cash CollateralAccount solely to pay the interest payments (at the rate specified in (b)(iii)above elected by Cadiz) next due on the Loan Obligations, and, if all interestdue and owing has been paid, then on the Maturity Date, Cadiz Borrower mayutilize any remaining cash in the Cash Collateral Account to repay principal onthe Loan Obligations. SECTION 2.17. TAXES. (a) Any and all payments by or on account of anyobligation of the Borrowers hereunder shall be made free and clear of andwithout deduction for any Indemnified Taxes or Other Taxes; PROVIDED that if theBorrowers shall be required to deduct any Indemnified Taxes or Other Taxes fromsuch payments, then (i) the sum payable shall be increased as necessary so thatafter making all required deductions (including deductions applicable toadditional 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 receivedhad no such deductions been made, (ii) the Borrowers shall make such deductionsand (iii) the Borrowers shall pay the full amount deducted to the relevantGovernmental Authority in accordance with applicable law. (b) In addition, the Borrowers shall pay any Other Taxes to therelevant Governmental Authority in accordance with applicable law. 28 (c) The Borrowers jointly and severally agree to protect,indemnify, pay and save the Administrative Agent and each Lender, within 10 daysafter written demand therefor, for the full amount of any Indemnified Taxes orOther 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 theBorrowers hereunder (including Indemnified Taxes or Other Taxes imposed orasserted on or attributable to amounts payable under this Section) and anypenalties, interest and reasonable expenses arising therefrom or with respectthereto, whether or not such Indemnified Taxes or Other Taxes were correctly orlegally imposed or asserted by the relevant Governmental Authority. Acertificate as to the amount of such payment or liability delivered to theBorrowers by a Lender, or by the Administrative Agent on its own behalf or onbehalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxesor Other Taxes by the Borrowers to a Governmental Authority, the Borrowers shalldeliver to the Administrative Agent the original or a certified copy of areceipt issued by such Governmental Authority evidencing such payment, a copy ofthe return reporting such payment or other evidence of such payment reasonablysatisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from orreduction of withholding tax under the law of the jurisdiction in which eitherBorrower is located, or any treaty to which such jurisdiction is a party, withrespect to payments under this Agreement shall deliver to the Borrowers (with aSource: CADIZ INC, 10-K, November 02, 2004Powered 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. copy to the Administrative Agent), at the time or times prescribed by applicablelaw, such properly completed and executed documentation prescribed by applicablelaw or reasonably requested by the Borrowers as will permit such payments to bemade without withholding or at a reduced rate. SECTION 2.18. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OFSET-OFFS. (a) The Borrowers shall make each payment required to be made by ithereunder (whether of principal, interest, fees or reimbursements, or of amountspayable under Sections 2.15, 2.17 or 2.20, or otherwise) prior to 2:00 p.m., NewYork City time, on the date when due, in immediately available funds (or withrespect to the PIK Portion for a Borrowing for which the Borrowers have made thePIK&Cash Payment Election in accordance with Section 2.14, additional Loanprincipal, without set-off or counterclaim. Any amounts received after such timeon any date may, in the discretion of the Administrative Agent, be deemed tohave been received on the next succeeding Business Day for purposes ofcalculating interest thereon. All such payments shall be made to theAdministrative Agent at its offices at c/o ING Capital, LLC, 135 East 57thStreet, New York, New York 10022 Attention: Joan Chiappe, Vice President, exceptthat payments pursuant to Sections 2.15, 2.17, 2.20 and 9.03 shall be madedirectly to the Persons entitled thereto. The Administrative Agent shalldistribute any such payments received by it for the account of any other Personto the appropriate recipient promptly following receipt thereof. If any paymenthereunder shall be due on a day that is not a Business Day, the date for paymentshall be extended to the next succeeding Business Day, and, in the case of anypayment accruing interest, interest thereon shall be payable for the period ofsuch extension. All payments hereunder shall be made in dollars. (b) If at any time insufficient funds or property are received byand available to the Administrative Agent to pay fully all amounts of principal,interest and fees then due 29hereunder, such funds or property shall be applied (i) first, towards payment ofinterest and fees then due hereunder, ratably among the parties entitled theretoin 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 duehereunder, ratably among the parties entitled thereto in accordance with theamounts of principal then due to such parties, and (iii) third, towards paymentof principal on the Tranche B Loans then due hereunder, ratably among theparties entitled thereto in accordance with the amounts of principal then due tosuch parties. (c) If any Lender shall, by exercising any right of set-off orcounterclaim or otherwise, obtain payment in respect of any principal of orinterest on any of its Loans resulting in such Lender receiving payment of agreater proportion of the aggregate amount of its Loans and accrued interestthereon than the proportion received by any other Lender, then the Lenderreceiving such greater proportion shall purchase (for cash at face value)participations in the Loans of other Lenders to the extent necessary so that thebenefit of all such payments shall be shared by the Lenders ratably inaccordance with the aggregate amount of principal of and accrued interest ontheir respective Loans; PROVIDED that (i) if any such participations arepurchased and all or any portion of the payment giving rise thereto isrecovered, such participations shall be rescinded and the purchase pricerestored to the extent of such recovery, without interest, and (ii) theprovisions of this paragraph shall not be construed to apply to any payment madeby the Borrowers pursuant to and in accordance with the express terms of thisAgreement or any payment obtained by a Lender as consideration for theassignment of or sale of a participation in any of its Loans to any assignee orparticipant, other than to the Borrowers or any Subsidiary or Affiliate thereof(as to which the provisions of this paragraph shall apply). Each Borrowerconsents to the foregoing and agrees, to the extent it may effectively do sounder applicable law, that any Lender acquiring a participation pursuant to theforegoing arrangements may exercise against such Borrower rights of set-off andcounterclaim with respect to such participation as fully as if such Lender werea direct creditor of such Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received noticefrom the Borrowers prior to the date on which any payment is due to theAdministrative Agent for the account of the Lenders hereunder that the Borrowerswill not make such payment, the Administrative Agent may assume that theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Borrowers have made such payment on such date in accordance herewith and may, inreliance upon such assumption, distribute to the Lenders the amount due. In suchevent, if the Borrowers have not in fact made such payment, then each of theLenders severally agrees to repay to the Administrative Agent forthwith ondemand the amount so distributed to such Lender with interest thereon, for eachday from and including the date such amount is distributed to it to butexcluding the date of payment to the Administrative Agent, at the greater of theFederal Funds Effective Rate and a rate determined by the Administrative Agentin accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to bemade by it to the Administrative Agent pursuant to the terms of this Agreement,then the Administrative Agent may, in its discretion (notwithstanding anycontrary provision hereof), apply any amounts thereafter received by theAdministrative Agent for the account of such Lender to satisfy such Lender'sobligations under such Sections until all such unsatisfied obligations are fullypaid. 30 SECTION 2.19. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS. (a) Ifany Lender requests compensation under Section 2.15, or if the Borrowers arerequired to pay any additional amount to any Lender or any GovernmentalAuthority for the account of any Lender pursuant to Section 2.17, then suchLender shall use reasonable efforts to designate a different lending office forfunding or booking its Loans hereunder or to assign its rights and obligationshereunder to another of its offices, branches or affiliates, if, in the judgmentof such Lender, such designation or assignment (i) would eliminate or reduceamounts payable pursuant to Section 2.15 or 2.17, as the case may be, in thefuture and (ii) would not subject such Lender to any unreimbursed cost orexpense and would not otherwise be disadvantageous to such Lender. Each Borrowerhereby agrees to pay all reasonable costs and expenses incurred by any Lender inconnection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15, or ifthe Borrowers are required to pay any additional amount to any Lender or anyGovernmental 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 theBorrowers may, at its sole expense and effort, upon notice to such Lender andthe Administrative Agent, require such Lender to assign and delegate, withoutrecourse (in accordance with and subject to the restrictions contained inSection 9.04), all its interests, rights and obligations under this Agreement toan assignee that shall assume such obligations (which assignee may be anotherLender, if a Lender accepts such assignment); PROVIDED that (i) the Borrowersshall have received the prior written consent of the Administrative Agent, whichconsent shall not unreasonably be withheld, (ii) such Lender shall have receivedpayment of an amount equal to the outstanding principal of its Loans, accruedinterest thereon, accrued fees and all other amounts payable to it hereunder,from the assignee (to the extent of such outstanding principal and accruedinterest and fees) or the Borrowers (in the case of all other amounts) and (iii)in the case of any such assignment resulting from a claim for compensation underSection 2.15 or payments required to be made pursuant to Section 2.17, suchassignment will result in a reduction in such compensation or payments. A Lendershall not be required to make any such assignment and delegation if, priorthereto, as a result of a waiver by such Lender or otherwise, the circumstancesentitling the Borrowers to require such assignment and delegation cease toapply. SECTION 2.20. BREAK FUNDING PAYMENTS. In the event of (a) the paymentof any principal of any Loan other than on the last day of an Interest Periodtherefor (including as a result of an Event of Default), or (b) the failure toborrow, continue or prepay any Loan on the date specified in any noticedelivered pursuant hereto, then, in such event, the Borrowers shall compensateeach Lender for the loss, cost and expense attributable to such event. In thecase of any Loan, the loss to any Lender attributable to any such event shall bedeemed 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 depositequal to the principal amount of such Loan for the period from the date of suchpayment to the last day of the then current Interest Period for such Loan if theinterest rate payable on such deposit were equal to the Cash Payment Rate forsuch Interest Period, over (ii) the amount of interest that such Lender wouldearn on such principal amount for such period if such Lender were to invest suchSource: CADIZ INC, 10-K, November 02, 2004Powered 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. principal amount for such period at the interest rate that would be bid by suchLender (or an affiliate of such Lender) for deposits from other banks in theeurocurrency market at the commencement of such period. A certificate of anyLender setting forth any amount or amounts that such Lender is entitled toreceive 31pursuant to this Section shall be delivered to the Borrowers and shall beconclusive absent manifest error. The Borrowers shall pay such Lender the amountshown as due on any such certificate within 10 days after receipt thereof. SECTION 2.21. CERTAIN MANDATORY PREPAYMENTS. In addition to any otherprepayments required under the Loan Documents, prepayments of the LoanObligations shall be required as follows (any prepayment of the Revolver LoanObligations set forth in (a) and (b) of this Subsection shall be effected ineach case in the manner and to the extent specified in Subsection (c) of thisSection 2.21). (a) CERTAIN MANDATORY PREPAYMENTS FOR EQUITY CONTRIBUTION. Subjectto Section 2.21(b) below, to the extent, if any, that either Borrower raises,collects, or receives, proceeds from any Equity Issuance in any manner after theRestructuring Effective Date, then the Borrowers shall prepay the LoanObligations in an aggregate amount equal to 35% of such cumulative proceeds toprepay the Lender's outstanding Loan Obligations (such amount of proceeds, the"MANDATORY EQUITY PREPAYMENT") (as allocated between the Revolving LoanObligations and the Term Loan Obligations as determined by Administrative Agentin its sole discretion); PROVIDED, HOWEVER, that if and to the extent that theamount of Cash in the Cash Collateral Account is less than the Maximum CashCollateral Amount, then such Borrower may deposit all or a portion of theMandatory Equity Prepayment in the Cash Collateral Account subject to the CashCollateral Account Agreement. (b) CASHLESS EQUITY ISSUANCES TO THIRD PARTIES. If there is anEquity Issuance after the Restructuring Effective Date involving Persons notaffiliated with the Borrowers or their Affiliates and who are not "insiders" (asdefined in section 101 of title 11 of the United States Code), employee or agentof any such entities under which there are no cash or other liquid proceedsthereof (a "CASHLESS EQUITY ISSUANCE"), then the Cadiz Borrower must provide allholders of the Cadiz Series F Preferred Stock with anti-dilution protections asprovided in the Cadiz Series F Preferred Stock Certificate and the PreferredStock Certificate of Designations. (c) APPLICATION. Prepayments to the Revolving Loan Obligationsdescribed in the above subsections of Section 2.21 and allocated, in accordancewith subsections 2.21(a) and (b) for the prepayment of Revolving LoanObligations, shall be applied in the following order: (i) the then due and payable interest under the Revolving Loan Documents (ii) to the extent included in the Past Due Payment, the then due and payable interest and fees under the Revolving Loan Documents; and (iii) then the principal amounts outstanding under the Tranche A Loans, and (iv) then the principal amounts outstanding under the Tranche B Loans, and (v) then all other Revolving Loan Obligations and other amounts due under the Revolving Loan Documents. (d) For purposes of this Agreement, the following term shall havethe following meaning: 32Source: CADIZ INC, 10-K, November 02, 2004Powered 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. "EQUITY ISSUANCE" shall mean (a) any issuance or sale by either of the Borrowersor any of their respective Subsidiaries after the Restructuring Effective Dateof (i) any capital stock, partnership (limited or general) or limited liabilitycompany membership interests (certificated or otherwise), (ii) any warrants oroptions exercisable in respect of capital stock (other than any warrants oroptions issued to directors, officers or employees of the Borrowers or any oftheir Subsidiaries pursuant to employee benefit plans established in theordinary course of business and any capital stock of the Borrower issued uponthe exercise of such warrants or options) or (iii) any other security orinstrument representing an equity interest (including a limited or generalpartnership or limited liability company membership interest (certificated orotherwise) (or the right to obtain any equity interest upon exercise, exchangeor conversion thereof), in either of the Borrowers or any of their respectiveSubsidiaries, or (b) the receipt by either Borrower or any of their respectiveSubsidiaries after the Restructuring Effective Date of any capital contribution(whether or not evidenced by any equity security issued by the recipient of suchcontribution); provided that Equity Issuance shall not include (x) any suchissuance or sale by any Subsidiary of either Borrower to either of the Borroweror any Subsidiary of the Borrowers, or (y) any capital contribution by eitherBorrower or any Wholly Owned Subsidiary of either Borrower to any Subsidiary ofeither Borrower. SECTION 2.22. REGISTRATION RIGHTS. As applicable, Cadiz Borrower herebyagrees that all Common Stock of such Borrower, each of the Revolving CreditAgreement Warrants and their respective underlying shares issued at any time,along with all Common Stock of the Cadiz Borrower issued at any time upon theconversion of the any Cadiz Series F Preferred Stock, in each case whetherbefore or after the date hereof, under any of the Loan Documents, includingstock issued hereunder, shall be accorded registration rights by Cadiz Borroweras set forth in the Registration Rights Agreement. SECTION 2.23. JOINT AND SEVERAL LIABILITY. (a) JOINT AND SEVERAL LIABILITY. The Loan Obligations. shallconstitute one joint and several direct and general obligation of all of theBorrowers. Notwithstanding anything to the contrary contained herein, each ofthe Borrowers shall be jointly and severally, with each other Borrower, directlyand unconditionally liable to the Administrative Agent and the Lenders for allRevolving Loan Obligations and shall have the obligations of co-maker withrespect to the Loans, the Notes and the Loan Obligations, it being agreed thatthe advances to each Borrower inure to the benefit of all Borrowers, and thatthe Administrative Agent and the Lenders are relying on the joint and severalliability of the Borrowers as co-makers in extending and continuing theextension of the Revolving Loans hereunder. Each Borrower hereby unconditionallyand irrevocably agrees that upon default in the payment when due (whether atstated maturity, by acceleration or otherwise) of any principal of, or intereston, any Loan or other obligation payable to the Administrative Agent or anyLender, it will forthwith pay the same, without notice or demand. (b) NO REDUCTION IN OBLIGATIONS. No payment or payments made byany of the Borrowers or any other Person or received or collected by theAdministrative Agent or any Lender from any of the Borrowers or any other Personby virtue of any action or proceeding or any setoff or appropriation orapplication at any time or from time to time in reduction of or in 33payment of the Loan Obligations shall be deemed to modify, reduce, release orotherwise affect the liability of each Borrower under this Agreement, whichshall remain liable for the Loan Obligations until the Loan Obligations are paidin full and the Commitments are terminated. SECTION 2.24. OBLIGATIONS ABSOLUTE. Each Borrower agrees that the LoanObligations will be paid strictly in accordance with the terms of the LoanDocuments, regardless of any law, regulation or order now or hereafter in effectin any jurisdiction affecting any of such terms or the rights of theAdministrative Agent or any Lender with respect thereto. All Loan Obligationsshall be conclusively presumed to have been created in reliance hereon. Theliabilities under this Agreement shall be absolute and unconditionalirrespective of: (a) any lack of validity or enforceability of any LoanDocuments or any other agreement or instrument relating thereto; (b) any changein the time, manner or place of payments of, or in any other term of, all or anySource: CADIZ INC, 10-K, November 02, 2004Powered 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. part of the Loan Obligations, or any other amendment or waiver thereof or anyconsent to departure therefrom, including any increase in the Loan Obligationsresulting from the extension of additional credit to any Borrower or otherwise;(c) any taking, exchange, release or non-perfection of any ING Collateral, orany release or amendment or waiver of or consent to departure from any guarantyfor all or any of the Loan Obligations; (d) any change, restructuring ortermination of the corporate structure or existence of any Borrower; or (e) anyother circumstance which might otherwise constitute a defense available to, or adischarge of, any Borrower. This Agreement shall continue to be effective or bereinstated, as the case may be, if at any time any payment of any of the LoanObligations is rescinded or must otherwise be returned by the AdministrativeAgent or any Lender upon the insolvency, bankruptcy or reorganization of anyBorrower otherwise, all as though such payment had not been made. SECTION 2.25. WAIVER OF SURETYSHIP DEFENSES. Each Borrower agrees thatthe joint and several liability of the Borrowers provided for in Section 2.23shall not be impaired or affected by any modification, supplement, extension oramendment of any contract or agreement to which the other Borrowers mayhereafter agree (other than an agreement signed by the Administrative Agent andthe Lenders specifically releasing such liability), nor by any delay, extensionof time, renewal, compromise or other indulgence granted by the AdministrativeAgent or any Lender with respect to any of the Loan Obligations, nor by anyother agreements or arrangements whatever with the other Borrowers or withanyone else, each Borrower hereby waiving all notice of such delay, extension,release, substitution, renewal, compromise or other indulgence, and herebyconsenting to be bound thereby as fully and effectually as if it had expresslyagreed thereto in advance. The liability of each Borrower is direct andunconditional as to all of the Loan Obligations, and may be enforced withoutrequiring the Administrative Agent or any Lender first to resort to any otherright, remedy or security. Each Borrower hereby expressly waives promptness,diligence, notice of acceptance and any other notice (except to the extentexpressly provided for herein or in another Loan Document) with respect to anyof the Loan Obligations, the Notes, this Agreement or any other Loan Documentand any requirement that the Administrative Agent or any Lender protect, secure,perfect or insure any Lien or any property subject thereto or exhaust any rightor take any action against any Borrower or any other Person or any INGCollateral. SECTION 2.26. PAYMENTS RECEIVED ON ACCOUNT OF ANY OF BORROWERS' ASSETSOR PROPERTY RIGHTS. In addition to any other prepayment requirements containedin the Term Loan Documents and the Loan Documents, each Borrower herebycovenants and agrees that it shall 34remit directly to Lender all payments or proceeds that such Borrower receives(or obtains the benefit of) with respect to, on account of, or related to suchBorrower's assets or rights to assets as a mandatory repayments of the Term LoanObligations and the Revolving Loan Obligations, which repayments shall beapplied in order, and subject to the limitations, contained in Section 7(N) ofthe Term Sixth Global Amendment Agreement. SECTION 2.27. EXTENSION OF MATURITY DATE UPON SATISFACTION OF CERTAINCONDITIONS. (a) THE FIRST EXTENSION. If each of the following conditions aresatisfied (collectively, the "FIRST EXTENSION REQUIREMENTS"): (i) the Borrowershave paid and satisfied to the Administrative Agent and the Lenders all LoanObligations, including all interest due on or before the Interest Payment Datethat falls on the original Maturity Date, but excluding principal payments, (ii)no Defaults or Events of Default have occurred and are continuing as of theoriginal Maturity Date (unless such Default or Event of Default has been waivedin writing by the Administrative Agent), and (iii) after the payment of theinterest due on the Interest Payment Date that falls on the Maturity Date, theamount in the Cash Collateral Account is at least equal to 4.0% of theoutstanding Loan Obligations (including both the Revolving Loan Obligations andthe Term Loan Obligations); then the Maturity Date shall be extended from March31, 2005 to September 30, 2005. (b) THE SECOND EXTENSION. If each of the following conditions aresatisfied (collectively, the "SECOND EXTENSION REQUIREMENTS"): (i) the MaturityDate has been extended to September 30, 2006 pursuant to Section 2.27(a), (ii)the Borrowers have paid and satisfied to the Administrative Agent and theLenders all Loan Obligations, including all interest due on or before theSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Payment Date that falls on the Maturity Date as extended under Section2.27(a), but excluding principal payments, (ii) no Defaults or Events of Defaulthave occurred and are continuing as of such extended Maturity Date (unless suchDefault or Event of Default has been waived in writing by the AdministrativeAgent), and (iii) after the payment of the interest due on the Interest PaymentDate that falls on such extended Maturity Date, the amount in the CashCollateral Account is at least equal to 4.0% of the then outstanding principalamount of Loan Obligations (including both the Revolving Loan Obligations andthe Term Loan Obligations); then the Maturity Date shall be further extendedfrom September 30, 2005 to March 31, 2006. (c) THE THIRD EXTENSION. If each of the following conditions aresatisfied (collectively, the "THIRD EXTENSION REQUIREMENTS"): (i) the MaturityDate has been extended to March 31, 2006 pursuant to Section 2.27(b), (ii) theBorrowers have paid and satisfied to the Administrative Agent and the Lendersall Loan Obligations, including all interest due on or before the InterestPayment Date that falls on the Maturity Date as extended under Section 2.27(b)above, but excluding principal payments, (ii) no Defaults or Events of Defaulthave occurred and are continuing as of such extended Maturity Date (unless suchDefault or Event of Default has been waived in writing by the AdministrativeAgent), and (iii) after the payment of the interest due on the Interest PaymentDate that falls on the Maturity Date as extended under 2.27(b), the amount inthe Cash Collateral Account is at least equal to 4.0% of the then outstandingprincipal amount of Loan Obligations (including both the Revolving LoanObligations and the Term Loan Obligations) as of such date; then the MaturityDate shall be further extended from March 31, 2006 to September 30, 2006. 35 ARTICLE III REPRESENTATIONS AND WARRANTIES Each Borrower represents and warrants to the Lenders that the followingrepresentations and warranties are true and correct on the date hereof as ifmade on the date hereof (except, to the extent any such representations andwarranties specifically refer to an earlier date, in which case, suchrepresentations or warranties are represented and warranted to be true andcorrect as of such earlier specified date): SECTION 3.01. ORGANIZATION; POWERS. Each Borrower and its ParticipatingSubsidiaries is duly organized, validly existing and in good standing under thelaws of the jurisdiction of its organization, has all requisite power andauthority to carry on its business as now conducted and, except where thefailure to do so, individually or in the aggregate, could not reasonably beexpected to result in a Material Adverse Effect, is qualified to do business in,and is in good standing in, every jurisdiction where such qualification isrequired. SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions arewithin the Borrower's corporate powers and have been duly authorized by allnecessary corporate and, if required, stockholder action. This Agreement hasbeen duly executed and delivered by the Borrower and constitutes a legal, validand binding obligation of the Borrower, enforceable in accordance with itsterms, subject to applicable bankruptcy, insolvency, reorganization, moratoriumor other laws affecting creditors' rights generally and subject to generalprinciples of equity, regardless of whether considered in a proceeding in equityor at law. The Cadiz Borrower further represents and warrants that it hasauthorized, and holds sufficient reserves of Common Stock for the conversion ofthe Cadiz Series F Preferred Convertible Certificates and all other securitiesthat are held by Lenders that are convertible to Cadiz Common Stock. SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. The Transactions(a) do not require any consent or approval of, registration or filing with, orany other action by, any Governmental Authority, except such as have beenobtained or made and are in full force and effect, (b) will not violate anyapplicable law or regulation or the charter, by-laws or other organizationaldocuments of either Borrower or any of their respective Subsidiaries or anyorder of any Governmental Authority, (c) will not violate or result in a defaultunder any indenture, agreement or other instrument binding upon the Borrower orany of its Subsidiaries or its assets, or give rise to a right thereunder torequire any payment to be made by the Borrower or any of its Subsidiaries, andSource: CADIZ INC, 10-K, November 02, 2004Powered 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) will not result in the creation or imposition of any Lien on any asset ofthe Borrower or any of its Subsidiaries (except those imposed by the LoanDocuments). SECTION 3.04. PROPERTIES. (a) Each Borrower and its ParticipatingSubsidiaries has good title to, or valid leasehold interests in, all its realand personal property material to its business, except for PermittedEncumbrances and minor defects in title that do not interfere with its abilityto conduct its business as currently conducted or to utilize such properties fortheir intended purposes. (b) Each Borrower and its Participating Subsidiaries owns, or islicensed to use, all trademarks, tradenames, copyrights, patents and otherintellectual property material to its 36business, and the use thereof by the Borrower and its Participating Subsidiariesdoes not infringe upon the rights of any other Person, except for any suchinfringements that, individually or in the aggregate, could not reasonably beexpected to result in a Material Adverse Effect.SECTION 3.05. LITIGATION AND ENVIRONMENTAL MATTERS. (a)There are no actions,suits or proceedings by or before any arbitrator or Governmental Authoritypending against or, to the knowledge of each Borrower, threatened against oraffecting such Borrower or any of its Subsidiaries (i) as to which there is areasonable possibility of an adverse determination and that, if adverselydetermined, could reasonably be expected, individually or in the aggregate, toresult in a Material Adverse Effect (other than the Disclosed Matters or mattersspecifically identified on Schedule 3.06 hereto) or (ii) that involve thisAgreement or the Transactions. (b) Except for the Disclosed Matters and exceptwith respect to any other matters that, individually or in the aggregate, couldnot reasonably be expected to result in a Material Adverse Effect, neither theBorrower nor any of its Subsidiaries (i) has failed to comply with anyEnvironmental Law or to obtain, maintain or comply with any permit, license orother approval required under any Environmental Law, (ii) has become subject toany Environmental Liability, (iii) has received notice of any claim with respectto any Environmental Liability or (iv) knows of any basis for any EnvironmentalLiability. SECTION 3.06. COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the Borrowerand the Participating Subsidiaries is in compliance with all laws, regulationsand orders of any Governmental Authority applicable to it or its property andall indentures, agreements and other instruments binding upon it or itsproperty, except where the failure to do so, individually or in the aggregate,could not reasonably be expected to result in a Material Adverse Effect. Aftergiving effect to the transactions evidenced by this Agreement and the SixthGlobal Amendment Agreement, no Default has occurred and is continuing. SECTION 3.07. INVESTMENT AND HOLDING COMPANY STATUS. Neither theBorrower nor any of its Subsidiaries is (a) an "investment company" as definedin, 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 PublicUtility Holding Company Act of 1935. SECTION 3.08. TAXES. Except for taxes that will be paid on or beforeDecember 22, 2003 in accordance with Section 4.02 hereof, each Borrower and itsParticipating Subsidiaries has timely filed or caused to be filed all taxreturns and reports required to have been filed and has paid or caused to bepaid all Taxes required to have been paid by it, except (a) Taxes that are beingcontested in good faith by appropriate proceedings and for which the Borrower orsuch Participating Subsidiary, as applicable, has set aside on its booksadequate reserves or (b) to the extent that the failure to do so could notreasonably be expected to result in a Material Adverse Effect. SECTION 3.09. ERISA. No ERISA Event has occurred or is reasonablyexpected to occur that, when taken together with all other such ERISA Events forwhich liability is reasonably expected to occur, could reasonably be expected toresult in a Material Adverse Effect. The present value of all accumulatedbenefit obligations under each Plan (based on the assumptions used for purposesof Statement of Financial Accounting Standards No. 87) did not, Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 37as 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 underfundedPlans (based on the assumptions used for purposes of Statement of FinancialAccounting Standards No. 87) did not, as of the date of the most recentfinancial statements reflecting such amounts, exceed by more than $500,000 thefair market value of the assets of all such underfunded Plans. SECTION 3.10. DISCLOSURE. The Borrower has disclosed to theAdministrative Agent all agreements, instruments and corporate or otherrestrictions to which it or any of its Subsidiaries is subject, and all othermatters known to it, that, individually or in the aggregate, could reasonably beexpected to result in a Material Adverse Effect. None of the reports, financialstatements, certificates or other information furnished by or on behalf of theBorrower to the Administrative Agent or any Lender in connection with thenegotiation of this Agreement or delivered hereunder (as modified orsupplemented by other information so furnished) contains any materialmisstatement of fact or omits to state any material fact necessary to make thestatements therein, in the light of the circumstances under which they weremade, not misleading; PROVIDED that, with respect to projected financialinformation, the Borrower represents only that such information was prepared ingood faith based upon assumptions believed to be reasonable at the time. SECTION 3.11. SECURITY INTERESTS. Except for (a) the filing of UCCfinancing statements in respect of the ING Collateral covered by the SecurityDocuments in the States of Delaware and California and such other applicablejurisdictions in the United States of America and (b) filing and recording ofMortgages in respect of the real property collateral in the county in which thereal property is located, which filings shall have been made and be in effect on(or simultaneously with) the Restructuring Effective Date, the taking ofpossession by the Administrative Agent of the certificates representing theshares of capital stock of the Participating Subsidiaries and variousinstruments pledged to it pursuant to the Pledge and Security Agreement, and thedelivery of notice of the security interests granted in the accounts covered bythe Pledge and Security Agreement to the bank or banks whereat such accounts aremaintained and receipt of acknowledgements of such notices by such banks (whichactions shall be effected as of or promptly following the RestructuringEffective Date), no further filing or recording of any document and no otheraction is necessary or advisable in the States of Delaware or California or anyother applicable jurisdiction in the United States of America in order toestablish and perfect, under the laws of Delaware or California or such otherapplicable jurisdiction in the United States of America, the AdministrativeAgent's security interest in such ING Collateral, to the extent required by theapplicable Security Documents, on behalf of the Lenders. SECTION 3.12. PARTICIPATING SUBSIDIARIES. The Borrower has noParticipating Subsidiaries except as set forth on Schedule 3.13 hereto. SECTION 3.13. INACTIVE SUBSIDIARIES. The Borrower has no InactiveSubsidiaries except as set forth on Schedule 3.14 hereto. The InactiveSubsidiaries (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 ornature. 38 SECTION 3.14. EXCLUDED ITEMS. The aggregate acquisition cost of (i) allExcluded Items plus (ii) all Rolling Stock (in existence as of November 25, 1997thereafter acquired) for which the Borrower or other Obligor, as the case maybe, has not granted Liens in favor of the Administrative Agent, for itself andon behalf of the Lenders, is not more than $2,000,000. SECTION 3.15. EQUITY ACQUISITION ASSETS. The aggregate acquisition costof all Equity Acquisition Assets for which the Borrower or other Obligor, as thecase may be, has not granted Liens in favor of the Administrative Agent, foritself and on behalf of the Lenders, is not more than $2,000,000.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 3.16. ROLLING STOCK. The aggregate acquisition cost of allRolling Stock for which the Borrower, without the consent of the AdministrativeAgent, has not granted Liens in favor of the Administrative Agent, for itselfand on behalf of the Lenders, is not more than $2,000,000. SECTION 3.17. EQUITY ISSUANCES Except for (a) Equity Issuances reflected on Exhibit T hereto, whichchart is the same annex as attached to the term sheet setting forth the terms ofthe Transactions, dated as of November 1, 2003 and (b) Equity Issuances issuedin connection with the settlement of litigation as decribed in that certaine-mail correspondence from Howard Unterberger, as counsel for Cadiz Borrower, toMichael Edelman, counsel for Administrative Agent, dated December 10, 2003, noEquity Issuances have occurred (or for which the terms have been agreed upon andare pending occurrence) during the three months prior to the RestructuringEffective Date. SECTION 3.18. CERTAIN ACKNOWLEDGEMENTS. The Borrower hereby expresslyacknowledges and agrees that as of the Restructuring Effective Date, theoutstanding principal of the Revolving Loans is in the amount of $25,020,000.00,representing the full Tranche A Commitments, Tranche B Commitments and the PastDue Expense Deficiency. The foregoing amount does not include accrued and unpaidinterest from and after September 30, 2003. Further, the Borrower herebyconfirms that (a) the following documents remain valid and binding agreementsand/or instruments, and (b) the Borrower and, as applicable, its ParticipatingSubsidiaries remain bound by the terms and provisions of the followingdocuments: (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 Initial Draw Warrant Certificate; (iii) the Additional Draw Warrant Certificate; (iv) the Eighth Warrant Certificate; (v) the Ninth Warrant Certificate; 39 (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 3.19. NO SATISFACTION. The Borrower hereby expresslyrepresents, warrants, acknowledges and agrees that nothing in this Agreement orin any document or instrument executed in connection with or pursuant to thisAgreement shall constitute a satisfaction of or a novation as to all or anyportion of Borrower's indebtedness under the Loan Documents. Borrower herebyunconditionally reaffirms, reconfirms and restates its obligation to pay in fullthe Revolving Loan Obligations arising under the Loan Documents and all otherLoan Obligations to the Administrative Agent and/or the Lenders, as the case maybe and such obligations constitute allowed, legal, valid, binding, enforceableand non-avoidable obligations of the Borrowers, and are not subject to anyoffset, defense, counterclaim, avoidance, or subordination pursuant to theBankruptcy Code or any other applicable law; PROVIDED, HOWEVER, that, subject tothe occurrence of the Restructuring Effective Date, ING has agreed to reduce theoutstanding principal amount under the Term Loan Obligations by $95,068.21.Borrower hereby further acknowledges and agrees that it has no defenses to theenforcement of the Revolving Loan Obligations (or any portion thereof), or theother Loan Obligations, nor any counter-claims or claims of offset whatsoeverand that neither this Agreement nor the consummation of the transactionscontemplated herein will give rise to any such defenses, counter-claims orSource: CADIZ INC, 10-K, November 02, 2004Powered 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. claims of offset. ARTICLE IV CONDITIONS SECTION 4.01. RESTRUCTURING EFFECTIVE DATE. The obligations of theLenders to make Loans hereunder shall not become effective until the date onwhich each of the following conditions is satisfied (or waived in accordancewith Section 9.02): 40 (a) ING shall have received the Past Due Payment; (b) The CRE Borrower has been duly formed and is validly existingby Cadiz in accordance with the CRE LLC Agreement; (c) The Cadiz Borrower shall have transferred substantially all ofits assets, rights and interests in Cadiz' property that constitutes INGCollateral for the Administrative Agent and the Lenders to its CRE BorrowerSubsidiary, subject to the Liens and obligations arising under the Term LoanDocuments and the Loan Documents in favor of the Administrative Agent and theLenders; (d) to the extent required in the CRE LLC Agreement, the CadizBorrower and the CRE Borrower shall have executed the Cadiz/CRE ManagementAgreement, which agreement shall be binding and in effect; (e) The Administrative Agent shall have received budget andprojections that are reasonably satisfactory to the Administrative Agent; (f) The Administrative Agent shall have received the followingoriginal documents, each in form and substance satisfactory to theAdministrative Agent , duly executed and delivered by all the parties thereto: (i) this Agreement; (ii) Each Borrower filed or registered certificate of incorporation or organization, as amended, modified, restated or supplemented to the date hereof and certified as of the Restructuring Effective Date as being a true and correct copy thereof by an officer or manager of such Borrower; (iii) a copy, certified as of the Restructuring Effective Date of the resolutions of the board of directors or manager, as the case may be, of each Borrower duly authorizing the execution, delivery and performance by such 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 such Borrower pursuant to this Agreement; (iv) a certificate, dated the Restructuring Effective Date and signed by the President, a Vice President or a Financial Officer or Manager of each Borrower, confirming compliance with the conditions set forth in paragraphs (q) and (r) of this Section 4.01; (v) Tranche A Note. (vi) Tranche B Note. (vii) Fifth Modification of the Pledge and Security Agreement, in the form as attached hereto in Exhibit N; (viii) Fifth Modification of the Revolver Deed of Trust, in the form as attached hereto in Exhibit O; (ix) Fifth Modification of the Revolver SWFG Deed of Trust, in the form as attached hereto in Exhibit P; (x) Fifth Modification of the Revolver Piute Deed of Trust, in the form as attached hereto in Exhibit Q;Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (xi) Pledge And Security Agreement For Joint Cadiz/CVDC 1995 Note, in the form as attached hereto in Exhibit R; 41 (xii) the Cash Collateral Account Agreement; (xiii) the Registration Rights Agreement; (xiv) the Purchaser Certificate; (xv) a copy of the CRE LLC Agreement; (xvi) a copy of the Preferred Stock Certificate of Designations evidencing to the satisfaction of the Lenders that such document has been properly filed with the Secretary of State of the State of Delaware; (xvii) the Cadiz Series F Preferred Stock Certificate; (xviii) the certificate of cancellation with respect to series D, E-1 and E-2 preferred stock of the Cadiz Borrower; (xix) the Consent to Cadiz/Sun World Settlement; (xx) the Consent to New Cadiz/Sun World Lease; (xxi) the certificate of formation for CRE; (xxii) the CRE Assignment and Assumption Agreement; (xxiii) the CRE Grant Deed; (g) Each Borrowers, to the extent that it is a party thereto,shall have confirmed in writing that the following documents remain valid andbinding agreements and/or instruments, which written confirmation is in form andsubstance satisfactory to the Administrative Agent, in its sole discretion, andthat Borrowers and, as applicable, their Participating Subsidiaries remain boundby 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; 42 (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. (h) The Administrative Agent shall have received an opinion, insubstantially the form annexed hereto as Exhibit S, from each Borrower's counselin form and substance satisfactory to the Administrative Agent (A) that suchBorrower is in good standing in the States of Delaware and California, (B) as toSource: CADIZ INC, 10-K, November 02, 2004Powered 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 due authorization, execution and delivery of this Agreement and the otherLoan Documents, (C) that this Agreement and the other Loan Documents constitutevalid, binding and enforceable obligations of such Borrower, and (D) as to suchother matters as the Administrative Agent shall reasonably request, whichopinion is supported by a certification from each Borrower's restructuringcounsel stating that such counsel knows of no error or inaccuracy in and knowsof no reason why the Administrative Agent and the Lenders should not rely uponthe opinion of Borrower's counsel, both in form and substance reasonablysatisfactory to such Borrower, the Administrative Agent, and the Lender. (i) The Administrative Agent shall have received certified copiesof the resolutions (in form and content satisfactory to Administrative Agent) ofthe Board of Directors of Cadiz Borrower approving and authorizing thisAgreement and the other documents executed and/or delivered in connectionherewith (including each of the exhibits hereto), and the effectuation of thetransactions contemplated herein and/or therein, as the case may be, and any andall actions to be taken by Cadiz Borrower in furtherance and in connection withthis Agreement and/or the other documents executed and/or delivered inconnection herewith. (j) The Administrative Agent shall have received from the DelawareSecretary of State a Certificate of Good Standing with respect to CadizBorrower, a certificate evidencing the formation of the CRE Borrower as alimited liability company in the State of Delaware, and a certificate evidencingthat each Borrower is qualified to do business in California, all of whichcertificates must be in form and content satisfactory to Administrative Agent. (k) The Administrative Agent shall have received certificates (inform and content satisfactory to Administrative Agent) of the Secretary of eachBorrower, certifying as to the names and signatures of the officers authorizedto sign this Agreement and the other documents to be executed and delivered onits behalf pursuant to this Agreement. 43 (l) Except as provided in Section 3.09 (or as provided for under4.02 hereof), to the best of each Borrower's knowledge, all real property taxeswith respect to the property encumbered by any of the ING Collateral, as well asall real property taxes affecting the property encumbered by any and all deedsof trust pledged or assigned to Administrative Agent as security for theRevolving Loan Obligations (or any of them), shall have been paid prior to thedate any fine, penalty, interest, late-charge or loss may be added to such taxesor charged against such real property or other ING Collateral for thenon-payment or late-payment of such taxes. (m) Each Borrower shall have caused appropriate officers ofBorrower to execute and deliver to Administrative Agent such additionalcertificates with respect to matters relating to the transactions contemplatedherein as Administrative Agent may reasonably require. (n) Each Borrower shall have executed and delivered or caused theappropriate third parties to execute and/or deliver (in recordable form, whereappropriate, and otherwise in form and content satisfactory to AdministrativeAgent) such other documents, instruments, agreements and writings asAdministrative Agent may reasonably require in connection with the creation orcontinuation of any security interest(s) granted to Administrative Agent infurtherance of the transactions contemplated by this Agreement or asAdministrative Agent may otherwise require in connection with the consummationof such transactions (including, without limitation, estoppel certificates,guaranty waivers, security agreements, pledges, assignments, subordinationagreements, endorsements, certificates, certifications, reports, and studies). (o) As of the date hereof, or as soon as practicable hereafter,but in no event later than ten (10) days hereafter (provided that AdministrativeAgent has made such a request within four (4) days hereafter), UniformCommercial Code financing statements covering all the security interests createdby or pursuant to the Pledge and Security Agreements in the ING Collateralpledged pursuant thereto, shall have been executed and delivered by eachBorrower to the Administrative Agent and such financing statements, or otherstatements or documents to the same purposes, shall have been duly filed in allother applicable jurisdictions in the United States of America necessary ordesirable to perfect said security interests and there shall have been taken allSource: CADIZ INC, 10-K, November 02, 2004Powered 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. other action as the Administrative Agent or any Lender through theAdministrative Agent may reasonably request or as shall be necessary to perfectsuch security interests to the extent required by the applicable SecurityDocuments. (p) [Intentionally omitted]. (q) The representations and warranties of each Borrower set forthin this Agreement and each other Loan Document shall be true and correct on andas of the Restructuring Effective Date of such Borrowing. (r) No Default shall have occurred and be continuing after givingeffect to the transactions set forth in this Agreement and the Sixth GlobalAmendment Agreement. (s) After giving effect to the transactions set forth in thisAgreement and the Sixth Global Amendment Agreement, each Borrower shall haveperformed or observed and be continuing to perform each term, covenant oragreement contained in any Loan Document. 44 (t) The Administrative Agent shall have received all fees,preferred stock and other amounts due and payable on or prior to theRestructuring Effective Date, including, to the extent invoiced, reimbursementor payment of all out-of-pocket expenses required to be reimbursed or paid bythe Borrowers hereunder. (u) All governmental and third party approvals necessary or, inthe discretion of the Administrative Agent, advisable in connection with theTransaction, the financing contemplated hereby and the continuing operations ofthe Borrowers shall have been obtained and be in full force and effect, and allapplicable waiting periods shall have expired without any action being taken orthreatened by any competent authority which would restrain, prevent or otherwiseimpose adverse conditions on the Transactions or the financing thereof. (v) The Lender shall have received confirmation, in form andsubstance satisfactory to the Lender, that (i) Borrowers have paid (a) allpremiums for the endorsements to the Title Policies required pursuant to Section4.02(a)(i) hereof, (b) all recording and filing fees relating to the recordingof the CRE Grant Deed and the amendments to the Revolver Deeds of Trust requiredto be delivered pursuant to this Section 4.01 and 4.02 of this Agreement, and(c) amounts sufficient to satisfy all real property taxes with respect to theproperty encumbered by the Revolver Deeds of Trust and Mortgages, along with anyfine, penalty, interest, late charge or similar fine or penalty with respect tothe payment of such taxes, to Chicago Title Insurance Company with instructionsto utilize such funds to pays such taxes, fines, penalties, interest, latecharges or similar fines or penalties, and (ii) the CRE Grant Deed and allamendments to the Revolver Deeds of Trust and Mortgages required to be deliveredpursuant to this Section 4.01 of this Agreement, each in form and substancesatisfactory to Administrative Agent and as executed and ready for recordation,have been duly delivered to Chicago Title Insurance Company. (w) The "Restructuring Effective Date" as defined in the TermSixth Global Amendment Agreement shall have occurred. (x) The Administrative Agent shall have received such otherdocuments as the Administrative Agent may reasonably request.The Administrative Agent shall notify the Borrowers and the Lenders of theRestructuring Effective Date, and such notice shall be conclusive and binding. SECTION 4.02. CONDITIONS SUBSEQUENT. (a) Not later than the December22, 2003, Borrowers shall cause the following conditions subsequent to besatisfied: (i) the Lender 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 Cadiz Deeds of Trust, and the CVDC Deeds of Trust, which endorsements shall (i) beSource: CADIZ INC, 10-K, November 02, 2004Powered 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. issued by the Chicago Title Insurance Company for the benefit of the Lender and its successors and assigns, (ii) insure the amendments to the Cadiz Deeds of Trust and the CVDC Deeds of Trust required to be delivered pursuant to Section 5 of this Agreement and the continued priority of the Cadiz Deeds of Trust and the CVDC Deeds of Trust granted to the Lender, (iii) confirm that all real property taxes with respect to the property encumbered by the 45 Cadiz Deeds of Trust and the CVDC Deeds of Trust have been paid prior to the date of the Title Policies, along with any fine, penalty, interest, late charge or similar fine or penalty with respect to the payment of such taxes, (iv) be otherwise in form and substance satisfactory to the Lender in its sole discretion; (ii) all real property taxes with respect to the property encumbered by the Cadiz Deeds of Trust and the CVDC Deeds of Trust have been paid prior to the date of the Title Policies, along with any fine, penalty, interest, late charge or similar fine or penalty with respect to the payment of such taxes, and (iii) the delivery to the Administrative Agent (or its counsel) by each Borrower of any Uniform Commercial Code financing statements covering all the security interests created by or pursuant to the Pledge and Security Agreements in the ING Collateral pledged pursuant thereto, as executed by each Borrower to the Lender, along with such financing statements, or other statements or documents to the same purposes, within the time period required under Section 4.01(o) hereof. (b) Any failure to satisfy the conditions subsequent set forth inSection 4.02(a)(i) and (ii) on or before December 22, 2003, or the conditionsubsequent set forth in Section 4.02(a)(iii) by the date required therein, shallconstitute an Event of Default. ARTICLE V AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and the principalof and interest on each Loan and all fees payable hereunder shall have been paidin full, each Borrower covenants and agrees with the Lenders that: SECTION 5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrowerwill furnish to the Administrative Agent and each Lender: (a) as applicable, within 15 days following Borrower's filing eachAnnual Report on Form 10-K with the Commission, its audited consolidated balancesheet and related statements of operations, stockholders' equity and cash flowsas of the end of and for such year, setting forth in each case in comparativeform the figures for the previous fiscal year, all reported on byPricewaterhouseCoopers LLP or other independent public accountants of recognizednational standing to the effect that such consolidated financial statementspresent fairly in all material respects the financial condition and results ofoperations of the Borrower and its consolidated Subsidiaries on a consolidatedbasis in accordance with GAAP consistently applied; (b) within 15 days following Borrower's filing each QuarterlyReport on Form 10-Q with the Commission, its consolidated balance sheet andrelated statements of operations, stockholders' equity and cash flows as of theend of and for such fiscal quarter and the then elapsed portion of the fiscalyear, setting forth in each case in comparative form the figures for thecorresponding period or periods of (or, in the case ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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. 46the balance sheet, as of the end of) the previous fiscal year, all certified byone of its Financial Officers as presenting fairly in all material respects thefinancial condition and results of operations of the Borrower and itsconsolidated Subsidiaries on a consolidated basis in accordance with GAAPconsistently applied, subject to normal year-end audit adjustments and theabsence of footnotes; (c) concurrently with any delivery of financial statements underSubsection (a) or (b) above, a certificate of a Financial Officer of theBorrower (i) certifying as to whether a Default has occurred and, if a Defaulthas occurred, specifying the details thereof and any action taken or proposed tobe taken with respect thereto, and (ii) stating whether any change in GAAP or inthe application thereof has occurred since the date of the audited financialstatements referred to in Section 3.04 and, if any such change has occurred,specifying the effect of such change on the financial statements accompanyingsuch certificate; (d) to the extent that the Cadiz Borrower or any Subsidiary eitheris not subject to, or is not in compliance with, the disclosure and reportingrequirements with the Commission, the items and information that would be havebeen Disclosed Matters if Cadiz Borrower or any Subsidiary, were subject to, orin compliance with, the disclosure and reporting requirements with theCommission; (e) promptly after the same become publicly available, copies ofall periodic and other reports, proxy statements and other materials filed bythe Borrower or any Subsidiary with the Commission, or any GovernmentalAuthority succeeding to any or all of the functions of said Commission, or withany national securities exchange, or distributed by the Borrower to itsshareholders generally, as the case may be; (f) as soon as available, but in any event no later than thirty(30) days prior to the end of each fiscal quarter of Cadiz Borrower (or, in thecase of the first such report, within thirty (30) days of the RestructuringEffective Date), an operating budget for Cadiz Borrower and its Subsidiaries forthe following fiscal quarter (on a monthly basis), in the form customarilyprepared by management of Cadiz Borrower and reasonably acceptable to theAdministrative Agent (such budget, the "APPROVED BUDGET"), together with aprojection of the outstanding balance of each Loan for each such period and astatement of the assumptions upon which such budget was prepared; whichdocuments shall be complete and correct in all material respects, as certifiedby an officer of Cadiz Borrower; (g) as soon as available, but in any event no later than thirty(30) days after the end of each calendar quarter commencing with the firstcalendar quarter in 2004, summary financial statements, as certified by anofficer of Cadiz Borrower, that present fairly, and shall be complete andcorrect, in all material respects, the financial position and results ofoperations and cash flows of the Borrower and its consolidated Subsidiaries asof such dates and for such periods, which summary financial statements do notneed to be certified or prepared in accordance with GAAP; and 47 (h) promptly following any request therefor, such otherinformation regarding the operations, business affairs and financial conditionof the Borrower or any Subsidiary, or compliance with the terms of thisAgreement, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02. NOTICES OF MATERIAL EVENTS. The Borrower will furnish tothe 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 proceedingby or before any arbitrator or Governmental Authority against or affecting theBorrower or any Affiliate thereof that, if adversely determined, couldSource: CADIZ INC, 10-K, November 02, 2004Powered 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. reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together withany other ERISA Events that have occurred, could reasonably be expected toresult in a Material Adverse Effect; and (d) any other development that results in, or could reasonably beexpected to result in, a Material Adverse Effect.Each notice delivered under this Section 5.02 shall be accompanied by astatement of a Financial Officer or other executive officer of the Borrowersetting forth the details of the event or development requiring such notice andany action taken or proposed to be taken with respect thereto. SECTION 5.03. EXISTENCE; CONDUCT OF BUSINESS. The Borrower will, andwill cause each of its Subsidiaries (but excluding Borrower's InactiveSubsidiaries) to, do or cause to be done all things necessary to preserve, renewand 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 causeeach of its Subsidiaries to, pay its obligations, including tax liabilities,that, if not paid, could result in a Material Adverse Effect before the sameshall become delinquent or in default, except where (a) the validity or amountthereof is being contested in good faith by appropriate proceedings, (b) theBorrower or such Subsidiary has set aside on its books adequate reserves withrespect thereto in accordance with GAAP and (c) the failure to make paymentpending such contest could not reasonably be expected to result in a MaterialAdverse Effect. SECTION 5.05. MAINTENANCE OF PROPERTIES; INSURANCE. The Borrower will,and will cause each of its Participating Subsidiaries to, (a) keep and maintainall property material to the conduct of its business in good working order andcondition, ordinary wear and tear excepted, and (b) maintain, with financiallysound and reputable insurance companies, insurance in such amounts and againstsuch risks as are customarily maintained by companies engaged in the same orsimilar businesses operating in the same or similar locations. Further, withinten 48(10) Business Days after the Restructuring Effective Date, the Borrower shallprovide evidence to the Administrative Agent of the insurance required to becarried pursuant to the foregoing sentence, which evidence shall be in form andsubstance satisfactory to, in form and substance satisfactory the AdministrativeAgent. SECTION 5.06. BOOKS AND RECORDS; INSPECTION RIGHTS. The Borrower will,and will cause each of its Subsidiaries to, keep proper books of record andaccount in which full, true and correct entries are made of all dealings andtransactions in relation to its business and activities. The Borrower will, andwill cause each of its Subsidiaries to, permit any representatives designated bythe Administrative Agent or any Lender, upon reasonable prior notice, to visitand inspect its properties, to examine and make extracts from its books andrecords, and to discuss its affairs, finances and condition with its officersand independent accountants, all at such reasonable times and as often asreasonably requested. SECTION 5.07. COMPLIANCE WITH LAWS. The Borrower will, and will causeeach of its Subsidiaries to, comply with all laws, rules, regulations and ordersof any Governmental Authority applicable to it or its property, except where thefailure to do so, individually or in the aggregate, could not reasonably beexpected to result in a Material Adverse Effect. SECTION 5.08. LOANS TO AFFILIATES. To the extent that the Borrowerstransfer any funds to any of its Affiliates, such transfer must be a loanevidenced by a note and as properly authorized unanimously by the Board ofDirectors of the Cadiz Borrower and the board of directors for such Affiliate;or, in the case of CRE, in accordance with the CRE LLC Agreement, which noteshall be pledged to the Administrative Agent and constitute ING Collateral.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 5.09. NEW SUBSIDIARIES. In the event that any Person shallbecome a Participating Subsidiary of Borrower after the date hereof, Borrowershall execute (or cause such other Participating Subsidiary as may be the directparent company of the new Participating Subsidiary to execute) a Pledge andSecurity Agreement, as the case may be, sufficient to subject all of the capitalstock of such new or additional Participating Subsidiary to a Lien in favor ofthe Administrative Agent, on behalf of the Lenders, and any other documents asthe Administrative Agent may reasonably request from time to time in order toperfect or maintain the perfection of the Administrative Agent's Liensthereunder, each in form and substance reasonably satisfactory to theAdministrative Agent. SECTION 5.10. ACQUISITIONS BY BORROWER. (a) In the event that after thedate of this Agreement the Borrower acquires ownership of any additional real orpersonal property of any type or nature (including, but not limited to, notes orother obligations from a Subsidiary or Affiliate to Borrower), the Borrowershall promptly give written notice of such acquisition to the AdministrativeAgent, and if requested by the Administrative Agent at the direction of theRequired Lenders, Borrower shall execute and deliver any and all SecurityDocuments or collateral assignments, security agreements, mortgages, deeds oftrust, pledge agreements, financing statements, fixture filings, notice filingsor other documents as the Administrative Agent may reasonably request from timeto time in order for the Administrative Agent to acquire 49a Lien on the property so acquired by Borrower as additional security for theobligations under this Agreement or to perfect or maintain the perfection ofsuch Lien. (b) Notwithstanding paragraph (a) of this Section 5.10, so long asno Event of Default is then in existence, Borrower shall not be required todeliver to the Administrative Agent any Security Documents or collateralassignments, security agreements, mortgages, deeds of trust, pledge agreements,financing statements, fixture filings, notice filings or other documents for anyitem of real or personal property acquired by Borrower on or after the March 25,1997 if both (i) the acquisition cost of each such item of real or personalproperty (including, but not limited to, Rolling Stock) is less than $250,000and (ii) the aggregate acquisition cost of (A) all such real or personalproperty (including, but not limited to, Rolling Stock) in which no Lien hasbeen granted in favor of the Administrative Agent pursuant to this paragraph (b)of this Section (collectively, the "Excluded Items") plus (B) Rolling Stock inexistence as of the March 25, 1997 is not more than $2,000,000. To the extentthat the aggregate acquisition cost of (i) all Excluded Items plus (ii) RollingStock in existence as of March 25, 1997 is more than $2,000,000 (the "ExcludedItems/Rolling Stock Threshold"), Borrower will, and will cause its Subsidiariesto, grant (and such Liens shall be deemed immediately to have been granted)Liens on such assets to the extent in excess of the Excluded Items/Rolling StockThreshold in favor of the Administrative Agent, for itself and on behalf of theLenders. SECTION 5.11. ACQUISITIONS WITH PROCEEDS OF LOANS. In the event thatafter the date of this Agreement, a Subsidiary or Borrower's Affiliate acquiresreal or personal property of any type or nature, Borrower shall promptly givewritten notice of such acquisition to the Administrative Agent, and if requestedby the Administrative Agent at the direction of the Required Lenders, Borrowershall cause such Subsidiary or Borrower's Affiliate to execute and deliverSecurity Documents or collateral assignments, security agreements, mortgages,deeds of trust, pledge agreements, financing statements, fixture filings, noticefilings or other documents the Administrative Agent may reasonably request fromtime to time in order for the Administrative Agent to acquire a Lien on theproperty so acquired by the Subsidiary or Borrower's Affiliate as the case maybe, as additional security for the obligations under this Agreement or toperfect or maintain the perfection of such Lien. SECTION 5.12. CONVERSION SHARES FOR REVOLVING CREDIT AGREEMENTWARRANTS. The Cadiz Borrower shall keep available for issuance upon exercise ofthe Revolving Credit Agreement Warrants a sufficient quantity of Common Stock tosatisfy the exercise in full of the Revolving Credit Agreement Warrants fromtime to time outstanding. The Cadiz Borrower will comply in all respects withits obligations under the Revolving Credit Agreement Warrants and shall take allSource: CADIZ INC, 10-K, November 02, 2004Powered 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. steps as shall be necessary to insure that the Lenders and any subsequentholders of the Revolving Credit Agreement Warrants receive all of the benefitswhich they are intended to receive thereunder. All shares of Common Stock issuedpursuant to the exercise of the Revolving Credit Agreement Warrants shall beduly authorized, validly issued, fully paid, non-assessable, and free and clearof all Liens and other encumbrances. SECTION 5.13. CONVERSION SHARES FOR CADIZ SERIES F PREFERRED STOCKCERTIFICATE. On the date hereof, the Cadiz Borrower shall issue the Cadiz SeriesF Preferred Stock Certificate and the Purchaser Certificate. The Cadiz Series FPreferred Stock Certificate shall be duly executed and registered in such nameas the Lenders shall have notified the 50Borrower. The Cadiz Borrower shall keep available for issuance a sufficientquantity of Common Stock to satisfy, at all times, the exercise in full by anyLender of Lenders' conversion rights for its Cadiz Series F Preferred Stock. Allshares of Common Stock issued pursuant to the exercise of conversion rightsrelating to the Cadiz Series F Preferred Stock shall be duly authorized, validlyissued, fully paid, non-assessable, and free and clear of all Liens and otherencumbrances. The Borrower will comply in all respects with its obligationsunder the Cadiz Series F Preferred Stock Certificate and the Preferred StockCertificate of Designations and shall take all steps as shall be necessary toinsure that the Lenders and any subsequent holders of the Cadiz Series FPreferred Stock Certificate receive all of the benefits which they are intendedto receive under the Cadiz Series F Preferred Stock Certificate and thePreferred Stock Certificate of Designations. SECTION 5.14. EXPRESSIONS OF INTEREST. Each Borrower shall promptlyprovide the Administrative Agent with written notification of any offers orwritten indications of interest concerning or relating to the purchase, directlyor indirectly, of any of the ING Collateral or any of Borrowers' businesses assoon as practicable with all relevant information concerning any such offer orindication of interest. ARTICLE VI NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal ofand interest on each Loan and all fees payable hereunder have been paid in full,each Borrower covenants and agrees with the Lenders that: SECTION 6.01.INDEBTEDNESS. The Borrower will not, and will not permit any ParticipatingSubsidiary to, create, incur, assume or permit to exist any Indebtedness ofBorrower or the Participating Subsidiaries, except: (a) Indebtedness created hereunder; (b) Indebtedness existing on November 25, 1997 and set forth inSchedule 6.01 and extensions, renewals and replacements of any such Indebtednessthat do not increase the outstanding principal amount thereof; (c) Indebtedness of the Borrower to any Subsidiary and of anySubsidiary to the Borrower or any other Subsidiary; (d) Guarantees by the Borrower of Indebtedness of any Subsidiary(or guarantees of Sun World Indebtedness in existence as of November 25, 1997)and by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary; (e) Indebtedness of the Borrower or any Subsidiary incurred tofinance the acquisition, construction or improvement of any assets, includingCapital Lease Obligations and any Indebtedness assumed in connection with theacquisition of any such assets or secured by a Lien on any such assets prior tothe acquisition thereof, and 51extensions, renewals and replacements of any such Indebtedness that do notSource: CADIZ INC, 10-K, November 02, 2004Powered 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. increase the outstanding principal amount thereof; PROVIDED that (i) suchIndebtedness is incurred prior to or within 90 days after such acquisition orthe completion of such construction or improvement and (ii) the aggregateprincipal amount of Indebtedness permitted by this Subsection (e) shall notexceed $135 million at any time outstanding; (f) Indebtedness of the Borrower or any Subsidiary as an accountparty in respect of trade letters of credit; (g) intercompany loans payable to the Borrower that evidences theintercompany transfer of the proceeds of the Loans to affiliates of theBorrower, PROVIDED, HOWEVER, that any such intercompany loan is evidenced by anote that is pledged by Borrower to and for the benefit of the AdministrativeAgent for account of the Lenders. SECTION 6.02. LIENS. The Borrower will not, and will not permit anySubsidiary to, create, incur, assume or permit to exist any Lien on any propertyor asset now owned or hereafter acquired by it, or assign or sell any income orrevenues (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 anySubsidiary 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 ofthe Borrower or any Subsidiary and (ii) such Lien shall secure only thoseobligations which it secured on November 25, 1997 and extensions, renewals andreplacements thereof that do not increase the outstanding principal amountthereof; (c) any Lien existing on any property or asset prior to theacquisition thereof by the Borrower or any Subsidiary or existing on anyproperty or asset of any Person that becomes a Subsidiary after the date hereofprior to the time such Person becomes a Subsidiary; PROVIDED that (i) such Lienis not created in contemplation of or in connection with such acquisition orsuch Person becoming a Subsidiary, as the case may be, (ii) such Lien shall notapply 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 dateof such acquisition or the date such Person becomes a Subsidiary, as the casemay be and extensions, renewals and replacements thereof that do not increasethe outstanding principal amount thereof; (d) Liens on assets acquired, constructed or improved by theBorrower or any Subsidiary; PROVIDED that (i) such security interests secureIndebtedness permitted by Subsection (e) of Section 6.01, (ii) such securityinterests and the Indebtedness secured thereby are incurred prior to or within90 days after such acquisition or the completion of such construction orimprovement, (iii) the Indebtedness secured thereby does not exceed 90% of thecost of acquiring, constructing or improving such assets and (iv) such security 52interests shall not apply to any other property or assets of the Borrower or anySubsidiary; (e) Liens on the Excluded Items or any portion thereof;notwithstanding the foregoing, the Borrower will not, and will not permit anySubsidiary to, create, incur, assume or permit to exist any Lien on any EquityAcquisition Asset now owned or hereafter acquired, or any proceeds thereof. SECTION 6.03. FUNDAMENTAL CHANGES. (a) Except for the transfers fromthe Cadiz Borrower to the CRE Borrower being effected on the RestructuringEffective Date in accordance with the terms of this Agreement, the Borrower willnot, and will not permit any Subsidiary to, merge into or consolidate with anyother 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 aseries of transactions) any substantial part of its assets, or all orsubstantially all of the stock of any of its Subsidiaries (in each case, whethernow owned or hereafter acquired), or liquidate or dissolve, except that, if atthe time thereof and immediately after giving effect thereto no Default shallSource: CADIZ INC, 10-K, November 02, 2004Powered 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. have occurred and be continuing (i) any Subsidiary/Person may merge into theBorrower in a transaction in which the Borrower is the surviving corporation,(ii) any Subsidiary/Person may merge into any Subsidiary in a transaction inwhich the surviving entity is a Subsidiary, (iii) any Subsidiary may sell,transfer, lease or otherwise dispose of its assets to the Borrower or to anotherSubsidiary and (iv) any Subsidiary may liquidate or dissolve if the Borrowerdetermines in good faith that such liquidation or dissolution is in the bestinterests of the Borrower and is not materially disadvantageous to the Lenders;PROVIDED that any such merger involving a Person that is not a wholly ownedSubsidiary immediately prior to such merger shall not be permitted unless alsopermitted by Section 6.04. (b) The Borrower will not, and will not permit any of itsSubsidiaries to, engage to any material extent in any business other thanbusinesses of the type conducted by the Borrower and its Subsidiaries on thedate of execution of this Agreement and businesses reasonably related thereto. (c) The Borrowers may not change any of their organizationaldocuments without the express written consent of the Administrative Agent; (d) Unless an Inactive Subsidiary shall comply with each and everyobligation that Participating Subsidiaries (either directly or indirectly) havehereunder or under any of the Loan Documents, (a) the Borrower will not permitsuch Inactive Subsidiary to engage in any business of any type or nature, (b)the Borrower will not permit the Inactive Subsidiaries, and will cause theInactive Subsidiaries to refrain from, obtaining any assets or properties of anytype or nature, (c) the Borrower will not permit any Inactive Subsidiary to,create, incur, assume or permit to exist any Indebtedness, and (d) the Borrowerwill not permit any Inactive Subsidiary to, create, incur, assume or permit toexist 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 ANDACQUISITIONS. Except for the transfers between the Borrowers as contemplatedunder the Loan Documents and 53the Term Loan Documents that are permitted under the formation documents for theBorrowers, the Borrower will not, and will not permit any of its Subsidiariesto, purchase, hold or acquire (including pursuant to any merger with any Personthat was not a wholly owned Subsidiary prior to such merger) any capital stock,evidences of indebtedness or other securities (including any option, warrant orother right to acquire any of the foregoing) of, make or permit to exist anyloans or advances to, Guarantee any obligations of, or make or permit to existany investment or any other interest in, any other Person, or purchase orotherwise acquire (in one transaction or a series of transactions) any assets ofany other Person constituting a business unit, except: (a) Permitted Investments; (b) investments by the Borrower existing on the date hereof in thecapital stock, other securities or equity interests of its Subsidiaries; (c) loans or advances made by the Borrower to any Subsidiary andmade by any Subsidiary to the Borrower or any other Subsidiary; (d) Guarantees constituting Indebtedness permitted by Section6.01; and (e) assets acquired by Borrower solely in exchange for the equityinterests of the Borrower. SECTION 6.05. HEDGING AGREEMENTS. The Borrower will not, and will notpermit any of its Subsidiaries to, enter into any Hedging Agreement, other thanHedging Agreements entered into in the ordinary course of business to hedge ormitigate risks to which the Borrower or any Subsidiary is exposed in the conductof its business or the management of its liabilities. SECTION 6.06. RESTRICTED PAYMENTS. The Borrower will not, and will notpermit any of its Subsidiaries to, declare or make, or agree to pay or make,directly or indirectly, any Restricted Payment.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 6.07. TRANSACTIONS WITH AFFILIATES. Except for the transfersbetween the Borrowers as contemplated under the Loan Documents and the Term LoanDocuments that are permitted under the formation documents for the Borrowers,the Borrower will not, and will not permit any of its Subsidiaries to, sell,lease or otherwise transfer any property or assets to, or purchase, lease orotherwise acquire any property or assets from, or otherwise engage in any othertransactions with, any of its Affiliates, except (a) in the ordinary course ofbusiness at prices and on terms and conditions not less favorable to theBorrower or such Subsidiary than could be obtained on an arm's-length basis fromunrelated third parties, (b) transactions between or among the Borrower and itsSubsidiaries not involving any other Affiliate, and (c) any Restricted Paymentpermitted by Section 6.06. SECTION 6.08. RESTRICTIVE AGREEMENTS. Except for the transactionsbetween the Borrowers as contemplated under the Loan Documents and the Term LoanDocuments that are permitted under the formation documents for the Borrowers,the Borrower will not, and will not permit any of its Subsidiaries to, directlyor indirectly, enter into, incur or permit to exist any agreement or otherarrangement that prohibits, restricts or imposes any condition upon (a) theability 54of the Borrower or any Subsidiary to create, incur or permit to exist any Lienupon any of its property or assets, or (b) the ability of any Subsidiary to paydividends or other distributions with respect to any shares of its capital stockor to make or repay loans or advances to the Borrower or any other Subsidiary orto Guarantee Indebtedness of the Borrower or any other Subsidiary; PROVIDED that(i) the foregoing shall not apply to restrictions and conditions imposed by lawor by this Agreement or any other Loan Document, (ii) the foregoing shall notapply to restrictions and conditions existing on November 25, 1997 identified onSchedule 6.08 (but shall apply to any amendment or modification expanding thescope of any such restriction or condition), (iii) except as may be requiredpursuant to Section 5.10 hereof, the foregoing shall not apply to customaryrestrictions and conditions contained in agreements relating to the sale of aSubsidiary pending such sale, provided such restrictions and conditions applyonly 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 anyagreement relating to secured Indebtedness permitted by this Agreement if suchrestrictions or conditions apply only to the property or assets securing suchIndebtedness and (v) except as may be required pursuant to Section 5.10 hereof,Subsection (a) of the foregoing shall not apply to customary provisions inleases and other contracts restricting the assignment thereof. SECTION 6.09. NO AMENDMENT TO CRE LLC AGREEMENT AND RELATED DOCUMENTS.Without the express written consent of the Administrative Agent and the LendersThe Borrowers shall not agree to or acquiesce in any modification or amendmentto the CRE LLC Agreement except as permitted in the CRE LLC Agreement as suchCRE LLC Agreement is in effect on the Restructuring Effective Date.SECTION 6.10. LIMITATIONS ON MANAGEMENT INCENTIVE PLANS. Unless ING's equityinterests are protected from dilution, no management or employee stock optionplan of the Common Stock of Cadiz shall be put into place. ARTICLE VII EVENTS OF DEFAULT If any of the following events ("Events of Default") shall occur: (a) Borrowers shall fail to pay any principal of, or interest on,any Loan or any fee or any other amount payable under this Agreement or anyother Loan Document when and as the same shall become due and payable, whetherat 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 onbehalf of the either Borrower or any Subsidiary in or in connection with thisAgreement or any other Loan Document or any amendment or modification hereof orwaiver hereunder, or in any report, certificate, financial statement or otherdocument furnished pursuant to or in connection with this Agreement or any otherSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Loan Document or any amendment or modification hereof or waiver hereunder, shallprove to have been incorrect in any material respect when made or deemed made; 55 (c) either Borrower shall fail to observe or perform any covenant,condition or agreement contained in Sections 5.02 or 5.03 (with respect to theBorrower's existence) or in Article VI; provided, however, that with respect toany such default of the Cadiz Borrower, such default could reasonably beexpected to result in a Material Adverse Effect; (d) either Borrower shall fail to observe or perform any covenant,condition or agreement contained in this Agreement (other than those specifiedin clauses (a), (b) or (c) of this Article), and such failure shall continueunremedied for a period of 30 days after notice thereof from the AdministrativeAgent to the Borrower (which notice will be given at the request of any Lender),provided, however, that with respect to any such default of the Cadiz Borrower,such default could reasonably be expected to result in a Material AdverseEffect; (e) either Borrower or any Subsidiary shall fail to make anypayment (whether of principal or interest and regardless of amount) in respectof any Material Indebtedness, when and as the same shall become due and payable;provided, however, that with respect to any such default of the Cadiz Borrower,such default could reasonably be expected to result in a Material AdverseEffect; (f) any event or condition occurs that results in any MaterialIndebtedness becoming due prior to its scheduled maturity or that enables orpermits (with or without the giving of notice, the lapse of time or both) theholder or holders of any Material Indebtedness or any trustee or agent on its ortheir behalf to cause any Material Indebtedness to become due, or to require theprepayment, repurchase, redemption or defeasance thereof, prior to its scheduledmaturity; PROVIDED that this clause (f) shall not apply to secured Indebtednessthat becomes due as a result of the voluntary sale or transfer of the propertyor assets securing such Indebtedness; PROVIDED, FURTHER, that with respect toany such default of the Cadiz Borrower, such default could reasonably beexpected to result in a Material Adverse Effect; (g) an involuntary proceeding shall be commenced or an involuntarypetition shall be filed seeking (i) liquidation, reorganization or other reliefin respect of the Borrower or any Subsidiary or its debts, or of a substantialpart of its assets, under any Federal, state or foreign bankruptcy, insolvency,receivership or similar law now or hereafter in effect or (ii) the appointmentof a receiver, trustee, custodian, sequestrator, conservator or similar officialfor 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 60days or an order or decree approving or ordering any of the foregoing shall beentered; (h) either Borrower or any Subsidiary shall (i) voluntarilycommence any proceeding or file any petition seeking liquidation, reorganizationor other relief under any Federal, state or foreign bankruptcy, insolvency,receivership or similar law now or hereafter in effect, (ii) consent to theinstitution of, or fail to contest in a timely and appropriate manner, anyproceeding or petition described in clause (g) of this Article, (iii) apply foror consent to the appointment of a receiver, trustee, custodian, sequestrator, 56conservator or similar official for the Borrower or any Subsidiary or for asubstantial part of its assets, (iv) file an answer admitting the materialallegations of a petition filed against it in any such proceeding, (v) make ageneral assignment for the benefit of creditors or (vi) take any action for thepurpose of effecting any of the foregoing; (i) either Borrower or any Subsidiary shall become unable, admitin writing or fail generally to pay its debts as they become due; (j) either Borrower shall be in material breach of any of theirSource: CADIZ INC, 10-K, November 02, 2004Powered 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. organizational documents, bylaws, limited liability agreements, certificate ofincorporation, as the case may be. (k) one or more judgments for the payment of money in excess ofinsurance coverage in an aggregate amount in excess of $500,000 shall berendered against the Borrowers, any Participating Subsidiary or any combinationthereof and the same shall remain undischarged for a period of 30 consecutivedays during which execution shall not be effectively stayed, or any action shallbe legally taken by a judgment creditor to attach or levy upon any assets of theBorrowers or any Participating Subsidiary to enforce any such judgment;provided, however, that with respect to any such default of the Cadiz Borrower,such default could reasonably be expected to result in a Material AdverseEffect; (l) an ERISA Event shall have occurred that, in the opinion of theRequired Lenders, when taken together with all other ERISA Events that haveoccurred, could reasonably be expected to result in a Material Adverse Effect; (m) a Change in Control shall occur aftert the RestructuringEffective Date; (n) any of the Security Documents shall for any reason cease to bea valid perfected security interest in favor of the Administrative Agent, foritself and on behalf of the Lenders, in either Borrower's right, title andinterest in and to the ING Collateral subject thereto (subject only to PermittedEncumbrances), to the extent required by such Security Document, and in the caseof any Mortgage, such cessation continues unremedied for more than 10 days; (o) an Event of Default that exists under the Term Loan Documents; (p) an "Event of Default" shall have occurred and be continuingunder any other Loan Document; (q) the failure by either Borrower to obtain the financingcontemplated under the Approved Budgets; or (r) the failure to satisfy the conditions subsequent set forth inSection 4.02;then, and in every such event (other than an event with respect to eitherBorrower described in clause (g) or (h) of this Article), and at any timethereafter during the continuance of such event, the Administrative Agent may,and at the request of the Required Lenders shall, by notice to the Borrowers, 57take either or both of the following actions, at the same or different times:(i) terminate the Commitments, and thereupon the Commitments shall terminateimmediately, and (ii) declare the Loans then outstanding to be due and payablein whole (or in part, in which case any principal not so declared to be due andpayable may thereafter be declared to be due and payable), and thereupon theprincipal of the Loans so declared to be due and payable, together with accruedinterest thereon and all fees and other obligations of the Borrowers accruedhereunder, shall become due and payable immediately, without presentment,demand, protest or other notice of any kind, all of which are hereby waived bythe Borrowers; and in case of any event with respect to the Borrowers describedin clause (g) or (h) of this Article, the Commitments shall automaticallyterminate and the principal of the Loans then outstanding, together with accruedinterest thereon and all fees and other obligations of the Borrowers accruedhereunder, shall automatically become due and payable, without presentment,demand, protest or other notice of any kind, all of which are hereby waived bythe Borrowers. In addition to any other remedies available to the AdministrativeAgent and the Lenders hereunder or at law or otherwise, if an Event of Defaultshall have occurred and so long as the same shall be continuing unremedied, thenand in every such case, the Administrative Agent and the Required Lenders mayexercise any or all of the rights and powers and pursue any and all of theremedies set forth in any Security Document in accordance with terms thereof. ARTICLE VIII THE ADMINISTRATIVE AGENTSource: CADIZ INC, 10-K, November 02, 2004Powered 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 8.01. APPOINTMENT, POWERS AND IMMUNITIES. Each of the Lendershereby irrevocably appoints the Administrative Agent as its agent and authorizesthe Administrative Agent to take such actions on its behalf and to exercise suchpowers as are delegated to the Administrative Agent by the terms hereof and bythe other Loan Documents, together with such actions and powers as arereasonably incidental thereto. SECTION 8.02. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. TheLender serving as the Administrative Agent hereunder and under the other LoanDocuments shall have the same rights and powers in its capacity as a Lender asany other Lender and may exercise the same as though it were not theAdministrative Agent, and such Lender and its Affiliates may lend money to andgenerally engage in any kind of business with the Borrowers or any Subsidiary orother Affiliate thereof as if it were not the Administrative Agent hereunder. Inthat regard, the terms "Lenders", "Required Lenders", or any similar terms usedherein shall, unless the context clearly otherwise indicates, include theAdministrative Agent in its individual capacity. The Administrative Agent maylend money to, and generally engage in any kind of financial, financial advisoryor other business with the Borrowers or any Affiliate of the Borrowers as if itwere not performing the duties specified herein, and may accept fees and otherconsideration from the Borrowers for services in connection with this Agreementand otherwise without having to account for the same to the Lenders. SECTION 8.03. NATURE OF DUTIES OF ADMINISTRATIVE AGENT. TheAdministrative Agent shall not have any duties or obligations except thoseexpressly set forth herein and in the other Loan Documents. Without limiting thegenerality of the foregoing (a) the Administrative Agent shall not be subject toany fiduciary or other implied duties, regardless of whether a 58Default has occurred and is continuing, (b) the Administrative Agent shall nothave any duty to take any discretionary action or exercise any discretionarypowers, except discretionary rights and powers expressly contemplated herebythat the Administrative Agent is required to exercise in writing by the RequiredLenders (or such other number or percentage of the Lenders as shall be necessaryunder the circumstances as provided in Section 9.02), and (c) except asexpressly set forth herein or in any other Loan Document, the AdministrativeAgent shall not have any duty to disclose, and shall not be liable for thefailure to disclose, any information relating to the Borrowers or any of itsSubsidiaries that is communicated to or obtained by the Lender serving asAdministrative Agent or any of its Affiliates in any capacity. TheAdministrative Agent shall not be liable for any action taken or not taken by itwith the consent or at the request of the Required Lenders (or such other numberor percentage of the Lenders as shall be necessary under the circumstances asprovided in Section 9.02) or in the absence of its own gross negligence orwillful misconduct. The Administrative Agent shall be deemed not to haveknowledge of any Default unless and until written notice thereof is given to theAdministrative Agent by the Borrowers or a Lender, and the Administrative Agentshall not be responsible for or have any duty to ascertain or inquire into (i)any statement, warranty or representation made in or in connection with thisAgreement, (ii) the contents of any certificate, report or other documentdelivered hereunder or in connection herewith, (iii) the performance orobservance of any of the covenants, agreements or other terms or conditions setforth herein, (iv) the validity, enforceability, effectiveness or genuineness ofthis Agreement or any other agreement, instrument or document, or (v) thesatisfaction of any condition set forth in Article IV or elsewhere herein, otherthan to confirm receipt of items expressly required to be delivered to theAdministrative Agent. SECTION 8.04. CERTAIN RIGHTS OF ADMINISTRATIVE AGENT. If theAdministrative Agent shall request instructions from the Required Lenders withrespect to any act or action (including the failure to act) in connection withthis Agreement or any other Credit Document, the Administrative Agent shall beentitled to refrain from such act or taking such action unless and until theAdministrative Agent shall have received instructions from the Required Lenders;and the Administrative Agent shall not incur liability to any Person by reasonof so refraining. Without limiting the foregoing, but subject to the terms ofSection 9.02 hereof, no Lender shall have any right of action whatsoever againstthe Administrative Agent as a result of the Administrative Agent acting orrefraining from acting hereunder in accordance with the instructions of theRequired Lenders.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 8.05. RELIANCE BY ADMINISTRATIVE AGENT. The AdministrativeAgent shall be entitled to rely upon, and shall not incur any liability forrelying upon, any notice, request, certificate, consent, statement, instrument,document or other writing believed by it to be genuine and to have been signedor sent by the proper Person. The Administrative Agent also may rely upon anystatement made to it orally or by telephone and believed by it to be made by theproper Person, and shall not incur any liability for relying thereon. TheAdministrative Agent may consult with legal counsel (who may be counsel for theBorrowers), independent accountants and other experts selected by it, and shallnot be liable for any action taken or not taken by it in accordance with theadvice of any such counsel, accountants or experts. The Administrative Agent maydeem and treat the payee of any Note as the owner thereof for all purposeshereof unless and until a written notice of the assignment or transfer thereofshall have been filed with the Administrative Agent pursuant to Section 9.04below. Any request, authority 59or consent of any Person who, at the time of making such request or giving suchauthority or consent, is the holder of any Note shall be conclusive and bindingon any subsequent holder, transferee or assignee of such Note or any Note issuedin exchange therefor. SECTION 8.06. SUB-AGENTS. The Administrative Agent may perform any andall its duties and exercise its rights and powers by or through any one or moresub-agents appointed by the Administrative Agent. The Administrative Agent andany such sub-agent may perform any and all its duties and exercise its rightsand powers through their respective Related Parties. The exculpatory provisionsof the preceding paragraphs shall apply to any such sub-agent and to the RelatedParties of the Administrative Agent and any such sub-agent, and shall apply totheir respective activities in connection with the syndication of the creditfacilities provided for herein as well as activities as Administrative Agent. SECTION 8.07. RESIGNATION BY ADMINISTRATIVE AGENT. Subject to theappointment and acceptance of a successor Administrative Agent as provided inthis paragraph, the Administrative Agent may resign at any time by notifying theLenders and the Borrowers. Upon any such resignation, the Required Lenders shallhave the right, in consultation with the Borrowers, to appoint a successor. Ifno successor shall have been so appointed by the Required Lenders and shall haveaccepted such appointment within 30 days after the retiring Administrative Agentgives notice of its resignation, then the retiring Administrative Agent may, onbehalf of the Lenders, appoint a successor Administrative Agent. Upon theacceptance of its appointment as Administrative Agent hereunder by a successor,such successor shall succeed to and become vested with all the rights, powers,privileges and duties of the retiring Administrative Agent and the retiringAdministrative Agent shall be discharged from its duties and obligationshereunder and under the other Loan Documents. The fees payable by the Borrowersto a successor Administrative Agent shall be the same as those payable to itspredecessor unless otherwise agreed between the Borrowers and such successor.After the Administrative Agent's resignation hereunder, the provisions of thisArticle and Section 9.03 shall continue in effect for the benefit of suchretiring Administrative Agent, its sub-agents and their respective RelatedParties in respect of any actions taken or omitted to be taken by any of themwhile it was acting as Administrative Agent. SECTION 8.08. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.Each Lender acknowledges that it has, independently and without reliance uponthe Administrative Agent or any other Lender and based on such documents andinformation as it has deemed appropriate, made its own credit analysis anddecision to enter into this Agreement. Each Lender also acknowledges that itwill, independently and without reliance upon the Administrative Agent or anyother Lender and based on such documents and information as it shall from timeto time deem appropriate, continue to make its own decisions in taking or nottaking action under or based upon this Agreement, any related agreement or anydocument furnished hereunder or thereunder. SECTION 8.09. SECURITY DOCUMENTS. (a) Each Lender hereby authorizes theAdministrative Agent to enter into each of the Security Documents and to takeall actions contemplated thereby. All rights and remedies under the SecurityDocuments may be exercised by the Administrative Agent for the benefit of theLenders and the other beneficiaries thereof upon the terms thereof. With theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. consent of the Required Lenders, the Administrative Agent 60may assign its rights and obligations as Administrative Agent under any of theSecurity Documents to any Affiliate of the Administrative Agent, and suchAffiliate thereafter shall be entitled to (i) all the rights of theAdministrative Agent under the applicable Security Document and (ii) all rightshereunder of the Administrative Agent with respect to the applicable SecurityDocument. (b) In each circumstance where, under any provision of anySecurity Document, the Administrative Agent shall have the right to grant orwithhold any consent, exercise any remedy, make any determination or direct anyaction by the Administrative Agent under such Security Document, theAdministrative 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 thedirection of the Required Lenders; PROVIDED, however, that no such consent ofthe 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 consentof or direction from the Required Lenders is required, the Administrative Agentshall send to the Lenders a written notice setting forth a description inreasonable detail of the matter as to which consent or direction is requestedand the Administrative Agent's proposed course of action with respect thereto.In the event the Administrative Agent shall not have received a response fromany Lender within five (5) Business Days after the giving of such notice, suchLender shall be deemed to have agreed to the course of action proposed by theAdministrative Agent. ARTICLE IX MISCELLANEOUS SECTION 9.01. NOTICES. Except in the case of notices and othercommunications expressly permitted to be given by telephone, all notices andother communications provided for herein shall be in writing and shall bedelivered by hand or overnight courier service, mailed by certified orregistered mail or sent by telecopy, as follows: (a) if to the Borrowers, to it at: Cadiz Inc. Attn: Chief Financial Officer 777 S. Figueroa Street Suite 4250 Los Angeles, California 90017 Telephone No.: 213-271-1600 Facsimile No.: 213 271-1614 61 with 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 Capital, LLC 1325 Avenue of the Americas New York, New York 10019 Attention: Joan Chiappe, Vice President, Pam Kaye and Annette Miller-Lewis and Norma CruzSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Reference: Cadiz Telephone No.: 646-424-6000 Facsimile No.: 646- 424 8260 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 Capital, LLC 1325 Avenue of the Americas New York, New York 10019 Attention: Joan Chiappe, Vice President Reference: Cadiz Telephone No.: 646-424-6000 Facsimile No.: 646- 424 8260 62 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.: 212-504-6666Any party hereto may change its address or telecopy number for notices and othercommunications hereunder by notice to the other parties hereto. All notices andother communications given to any party hereto in accordance with the provisionsof this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02. WAIVERS; AMENDMENTS. (a) No failure or delay by theAdministrative Agent or any Lender in exercising any right or power hereundershall operate as a waiver thereof, nor shall any single or partial exercise ofany such right or power, or any abandonment or discontinuance of steps toenforce such a right or power, preclude any other or further exercise thereof orthe exercise of any other right or power. The rights and remedies of theAdministrative Agent and the Lenders hereunder are cumulative and are notexclusive of any rights or remedies that they would otherwise have. No waiver ofany provision of this Agreement or consent to any departure by the Borrowerstherefrom shall in any event be effective unless the same shall be permitted byparagraph (b) of this Section, and then such waiver or consent shall beeffective 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 notbe construed as a waiver of any Default, regardless of whether theAdministrative Agent or any Lender may have had notice or knowledge of suchDefault 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 writingentered into by the Borrowers and the Required Lenders or by the Borrowers andthe Administrative Agent with the consent of the Required Lenders; PROVIDED thatno such agreement shall (i) increase the Commitment of any Lender without thewritten consent of such Lender, (ii) reduce the principal amount of any Loan orreduce the rate of interest thereon, or reduce any fees payable hereunder,without the written consent of each Lender affected thereby, (iii) postpone thescheduled date of payment of the principal amount of any Loan or any interestthereon, or any fees payable hereunder, or reduce the amount of, waive or excuseany such payment, or postpone the scheduled date of expiration of anyCommitment, 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 sharingof 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 "RequiredLenders" or any other provision hereof specifying the number or percentage ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Lenders required to waive, amend or modify any rights hereunder or make anydetermination or grant any consent hereunder, without the written consent ofeach Lender, or (vi) release any security interest in any material INGCollateral for the obligations evidenced by the Loan Documents (except inaccordance with the Loan Documents) without the written consent of each Lender;PROVIDED FURTHER that no such 63agreement shall amend, modify or otherwise affect the rights or duties of theAdministrative Agent hereunder without the prior written consent of theAdministrative Agent. SECTION 9.03. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a)The Borrowersshall pay (i) all reasonable out-of-pocket expenses incurred by theAdministrative Agent and its Affiliates, including the reasonable fees, chargesand disbursements of counsel for the Administrative Agent, in connection withthe syndication of the credit facilities provided for herein, the preparationand administration of this Agreement and the other Loan Documents or anyamendments, modifications or waivers of the provisions hereof (whether or notthe transactions contemplated hereby or thereby shall be consummated), (ii) allreasonable out-of-pocket expenses incurred by the Administrative Agent or anyLender, including the fees, charges and disbursements of any counsel for theAdministrative Agent or any Lender, in connection with the enforcement orprotection of its rights in connection with this Agreement or any other LoanDocument, including its rights under this Section 9.03, or in connection withthe Loans made hereunder, including all such out-of-pocket expenses incurredduring any workout, restructuring or negotiations in respect of such Loans. (b) The Borrowers jointly and severally agree to protect,indemnify, pay and save the Administrative Agent and each Lender, and eachRelated Party of any of the foregoing Persons (each such Person being called an"INDEMNITEE") against, and hold each Indemnitee harmless from, any and alllosses, claims, damages, liabilities and related expenses, including the fees,charges and disbursements of any counsel for any Indemnitee, incurred by orasserted against any Indemnitee arising out of, in connection with, or as aresult of (i) the execution or delivery of this Agreement or any other LoanDocument or any agreement or instrument contemplated therein, the performance bythe parties hereto of their respective obligations hereunder or the consummationof the Transactions or any other transactions contemplated hereby, (ii) any Loanor the use of the proceeds therefrom, (iii) any actual or alleged presence orrelease of Hazardous Materials on or from any property owned or operated by theBorrowers or any of its Subsidiaries, or any Environmental Liability related inany way to the Borrowers or any of its Subsidiaries, or (iv) any actual orprospective claim, litigation, investigation or proceeding relating to any ofthe foregoing, whether based on contract, tort or any other theory andregardless of whether any Indemnitee is a party thereto; PROVIDED that suchindemnity shall not, as to any Indemnitee, be available to the extent that suchlosses, claims, damages, liabilities or related expenses are determined by acourt of competent jurisdiction by final and nonappealable judgment to haveresulted from the gross negligence or willful misconduct of such Indemnitee. (c) To the extent that the Borrowers fail to pay any amountrequired 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 Agentsuch Lender's Applicable Percentage (determined as of the time that theapplicable unreimbursed expense or indemnity payment is sought) of such unpaidamount; provided that the unreimbursed expense or indemnified loss, claim,damage, liability or related expense, as the case may be, was incurred by orasserted against the Administrative Agent in its capacity as such. (d) As an inducement for the Independent Member and IndependentManger to agree to serve in such capacities, each of the Borrowers, theAdministrative Agent and the 64Lenders have agreed to the provisions of this subsection, which provisions shallSource: CADIZ INC, 10-K, November 02, 2004Powered 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 for the express benefit of the Independent Member and the Independent Manger.The Borrowers hereby jointly and severally agree to protect, indemnify, pay andsave the Independent Member and Independent Manger against, and hold each of theIndependent Member and the Independent Manger harmless from, any and all losses,claims, damages, liabilities and related expenses, including the fees, chargesand disbursements of any counsel for the Independent Member and the IndependentManger from and against any claims and demands arising from any acts oromissions or alleged acts or omissions in connection with the affairs of CRE, tothe maximum extent permitted by applicable law (collectively, the "INDEPENDENTCRE INDEMNIFICATION"). Upon the terms and provisions of this subsection, theIndependent CRE Indemnification shall be treated as additional Revolving LoanObligations payable hereunder up to an amount not exceeding the Independent CRELimitation. For purposes of this subsection, the "INDEPENDENT CRE LIMITATION" isdefined as an amount not exceeding the lesser of: (1) at any applicable time,the amount by which the Independent CRE Indemnification has not been paid to theIndependent Member or Independent Manger under any applicable director andofficer insurance policy or similar insurance policy, regardless of whether suchinsurance policy has been obtained, or is for the benefit of, the Borrowers,their Affiliates, the Independent Member and Independent Manager, or otherwise,and (2) $500,000. Up to the Independent CRE Limitation, the Independent Memberand Independent Manager shall share PARI PASSU with the rights of theAdministrative Agent and the Lenders in and to the Collateral and other securityinterests granted to the Administrative Agent and the Lenders under the SecurityDocuments. Each of the parties hereto further agree that the Independent CREIndemnification is in addition to the other Revolving Loan Obligations and shallnot reduce any other amounts or obligations owed by the Borrowers to theAdministrative Agent or the Lenders hereunder or under the other Loan Documentsare the right of the Administrative Agent, which shall remain protected by theCollateral and Security Interests provided by the Security Documents. Inaddition, the rights provided to the Independent Member and Independent Managershall not affect any other rights to indemnification, contribution or otherwiseapplicable contract, equity or at law. (e) To the extent permitted by applicable law, the Borrowers shallnot assert, and hereby waives, any claim against any Indemnitee or IndependentCRE Indemnitee, on any theory of liability, for special, indirect, consequentialor punitive damages (as opposed to direct or actual damages) arising out of, inconnection with, or as a result of, this Agreement or any agreement orinstrument contemplated hereby, the Transactions, any Loan or the use of theproceeds thereof. (f) All amounts due under this Section 9.03 shall be payablepromptly after written demand therefor. SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) The provisions of thisAgreement shall be binding upon and inure to the benefit of the parties heretoand their respective successors and assigns permitted hereby, except that theBorrowers may not assign or otherwise transfer any of its rights or obligationshereunder without the prior written consent of each Lender (and any attemptedassignment or transfer by the Borrowers without such consent shall be null andvoid). Nothing in this Agreement, expressed or implied, shall be construed toconfer upon any Person (other than the parties hereto, their respectivesuccessors and assigns permitted hereby and, to the extent expresslycontemplated hereby, the Related Parties of each of the Administrative Agent 65and the Lenders) any legal or equitable right, remedy or claim under or byreason of this Agreement. (b) Any Lender may assign to one or more assignees all or aportion of its rights and obligations under this Agreement (including all or aportion 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 Borrowers and the Administrative Agent must give their prior writtenconsent 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 Lenderor an assignment of the entire remaining amount of the assigning Lender'sCommitment, the amount of the Commitment of the assigning Lender subject to eachsuch assignment (determined as of the date the Assignment and Acceptance withrespect to such assignment is delivered to the Administrative Agent) shall notbe less than $2,000,000 unless each of the Borrowers and the AdministrativeSource: CADIZ INC, 10-K, November 02, 2004Powered 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 otherwise consents, (iii) each partial assignment shall be made as anassignment of a proportionate part of all the assigning Lender's rights andobligations under this Agreement, (iv) the parties to each assignment shallexecute 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 anAdministrative Questionnaire; PROVIDED further that any consent of the Borrowersotherwise required under this paragraph shall not be required if an Event ofDefault under clause (h) or (i) of Article VII has occurred and is continuing.Subject to acceptance and recording thereof pursuant to paragraph (d) of thisSection, from and after the Restructuring Effective Date specified in eachAssignment and Acceptance the assignee thereunder shall be a party hereto and,to the extent of the interest assigned by such Assignment and Acceptance, havethe rights and obligations of a Lender under this Agreement, and the assigningLender thereunder shall, to the extent of the interest assigned by suchAssignment and Acceptance, be released from its obligations under this Agreement(and, in the case of an Assignment and Acceptance covering all of the assigningLender's rights and obligations under this Agreement, such Lender shall cease tobe a party hereto but shall continue to be entitled to the benefits of Sections2.15, 2.17 and 9.03). Any assignment or transfer by a Lender of rights orobligations under this Agreement that does not comply with this paragraph shallbe treated for purposes of this Agreement as a sale by such Lender of aparticipation in such rights and obligations in accordance with paragraph (e) ofthis Section. (c) The Administrative Agent, acting for this purpose as an agentof the Borrowers, shall maintain at its offices in The City of New York a copyof each Assignment and Acceptance delivered to it and a register for therecordation 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 termshereof from time to time (the "Register"). The entries in the Register shall beconclusive, and the Borrowers, the Administrative Agent and the Lenders maytreat each Person whose name is recorded in the Register pursuant to the termshereof as a Lender hereunder for all purposes of this Agreement, notwithstandingnotice to the contrary. The Register shall be available for inspection by theBorrowers and any Lender, at any reasonable time and from time to time uponreasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptanceexecuted by an assigning Lender and an assignee, the assignee's completedAdministrative 66Questionnaire (unless the assignee shall already be a Lender hereunder), theprocessing and recordation fee referred to in paragraph (b) of this Section andany written consent to such assignment required by paragraph (b) of thisSection, the Administrative Agent shall accept such Assignment and Acceptanceand record the information contained therein in the Register. No assignmentshall be effective for purposes of this Agreement unless it has been recorded inthe Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrowers or theAdministrative Agent, sell participations to one or more banks or otherfinancial institutions (a "Participant") in all or a portion of such Lender'srights and obligations under this Agreement (including all or a portion of itsCommitment and the Loans owing to it); PROVIDED that (i) such Lender'sobligations under this Agreement shall remain unchanged, (ii) such Lender shallremain solely responsible to the other parties hereto for the performance ofsuch obligations and (iii) the Borrowers, the Administrative Agent and the otherLenders shall continue to deal solely and directly with such Lender inconnection with such Lender's rights and obligations under this Agreement. Anyagreement or instrument pursuant to which a Lender sells such a participationshall provide that such Lender shall retain the sole right to enforce thisAgreement and to approve any amendment, modification or waiver of any provisionof this Agreement; PROVIDED that such agreement or instrument may provide thatsuch Lender will not, without the consent of the Participant, agree to anyamendment, modification or waiver described in the first proviso to Section9.02(b) that affects such Participant. Subject to paragraph (f) of this Section,the Borrowers agree that each Participant shall be entitled to the benefits ofSections 2.15 and 2.17 to the same extent as if it were a Lender and hadacquired its interest by assignment pursuant to paragraph (b) of this Section.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 the extent permitted by law, each Participant also shall be entitled to thebenefits of Section 9.08 as though it were a Lender, provided such Participantagrees to be subject to Section 2.18(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greaterpayment under Section 2.15 or 2.17 than the applicable Lender would have beenentitled to receive with respect to the participation sold to such Participant,unless the sale of the participation to such Participant is made with eachBorrower's prior written consent. A Participant that would be a Foreign Lenderif it were a Lender shall not be entitled to the benefits of Section 2.17 unlessthe Borrowers are notified of the participation sold to such Participant andsuch Participant agrees, for the benefit of the Borrowers, to comply withSection 2.17(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a securityinterest in all or any portion of its rights under this Agreement to secureobligations of such Lender, including any pledge or assignment to secureobligations to a Federal Reserve Bank, and this Section 9.04 shall not apply toany such pledge or assignment of a security interest; PROVIDED that no suchpledge or assignment of a security interest shall release a Lender from any ofits obligations hereunder or substitute any such pledgee or assignee for suchLender as a party hereto. SECTION 9.05. SURVIVAL. All covenants, agreements, representations andwarranties made by the Borrowers herein and in the certificates or otherinstruments delivered in connection with or pursuant to this Agreement shall beconsidered to have been relied upon by the other parties hereto and shallsurvive the execution and delivery of this Agreement and the making of anyLoans, regardless of any investigation made by any such other party or on its 67behalf and notwithstanding that the Administrative Agent or any Lender may havehad notice or knowledge of any Default or incorrect representation or warrantyat the time any credit is extended hereunder, and shall continue in full forceand effect as long as the principal of or any accrued interest on any Loan orany fee or any other amount payable under this Agreement is outstanding andunpaid and so long as the Commitments have not expired or terminated. Theprovisions of Sections 2.15, 2.17 and 9.03 and Article VIII shall survive andremain in full force and effect regardless of the consummation of thetransactions contemplated hereby, the repayment of the Loans, the expiration ofthe Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreementmay be executed in counterparts (and by different parties hereto on differentcounterparts), each of which shall constitute an original, but all of which whentaken together shall constitute a single contract. This Agreement and anyseparate letter agreements with respect to fees payable to the AdministrativeAgent constitute the entire contract among the parties relating to the subjectmatter hereof and supersede any and all previous agreements and understandings,oral or written, relating to the subject matter hereof. Except as provided inSection 4.01, this Agreement shall become effective when it shall have beenexecuted by the Administrative Agent and when the Administrative Agent shallhave received counterparts hereof which, when taken together, bear thesignatures of each of the other parties hereto, and thereafter shall be bindingupon and inure to the benefit of the parties hereto and their respectivesuccessors and assigns. Delivery of an executed counterpart of a signature pageof this Agreement by telecopy shall be effective as delivery of a manuallyexecuted counterpart of this Agreement. SECTION 9.07. SEVERABILITY. Any provision of this Agreement held to beinvalid, illegal or unenforceable in any jurisdiction shall, as to suchjurisdiction, be ineffective to the extent of such invalidity, illegality orunenforceability without affecting the validity, legality and enforceability ofthe remaining provisions hereof; and the invalidity of a particular provision ina particular jurisdiction shall not invalidate such provision in any otherjurisdiction. SECTION 9.08. RIGHT OF SETOFF. If an Event of Default shall haveoccurred and be continuing, each Lender and each of its Affiliates is herebyauthorized at any time and from time to time, to the fullest extent permitted bylaw, to set off and apply any and all deposits (general or special, time orSource: CADIZ INC, 10-K, November 02, 2004Powered 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. demand, provisional or final) at any time held and other obligations at any timeowing by such Lender or Affiliate to or for the credit or the account of theBorrowers against any of and all the obligations of the Borrowers now orhereafter existing under this Agreement held by such Lender, irrespective ofwhether or not such Lender shall have made any demand under this Agreement andalthough such obligations may be unmatured. The rights of each Lender under thisSection 9.08 are in addition to other rights and remedies (including otherrights of setoff) which such Lender may have. SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OFPROCESS. (a) This Agreement shall be construed in accordance with and governedby the law of the State of California. (b) Each Borrower hereby irrevocably and unconditionally submits,for itself and its property, to the nonexclusive jurisdiction of (i) the SupremeCourt of the State of New 68York sitting in New York County, (ii) the United States District Court of theSouthern District of New York, (iii) any United States federal court sitting inthe Central District of California, or (iv) any other court of appropriatejurisdiction sitting in the County of Los Angeles, City of Los Angeles, and anyappellate court from any thereof, in any action or proceeding arising out of orrelating to this Agreement, or for recognition or enforcement of any judgment,and each of the parties hereto hereby irrevocably and unconditionally agreesthat all claims in respect of any such action or proceeding may be heard anddetermined in such New York State or California Court or, to the extentpermitted by law, in such Federal court. Each of the parties hereto agrees thata final judgment in any such action or proceeding shall be conclusive and may beenforced in other jurisdictions by suit on the judgment or in any other mannerprovided by law. Nothing in this Agreement shall affect any right that theAdministrative Agent or any Lender may otherwise have to bring any action orproceeding relating to this Agreement against each Borrower or its properties inthe courts of any jurisdiction. (c) Each Borrower hereby irrevocably and unconditionally waives,to the fullest extent it may legally and effectively do so, any objection whichit may now or hereafter have to the laying of venue of any suit, action orproceeding arising out of or relating to this Agreement in any court referred toin paragraph (b) of this Section. Each of the parties hereto hereby irrevocablywaives, to the fullest extent permitted by law, the defense of an inconvenientforum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to serviceof process in the manner provided for notices in Section 9.01. Nothing in thisAgreement will affect the right of any party to this Agreement to serve processin any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TOTHE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIALBY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF ORRELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHERBASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIESTHAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OFLITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT ITAND THE OTHER 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 ofContents used herein are for convenience of reference only, are not part of thisAgreement and shall not affect the construction of, or be taken intoconsideration in interpreting, this Agreement. SECTION 9.12. CONFIDENTIALITY. Each of the Administrative Agent and theLenders agrees to maintain the confidentiality of the Information (as definedbelow), except that Information may be disclosed (a) to its and its Affiliates'directors, officers, employees and agents, including accountants, legal counseland other advisors (it being understood that the Persons to whom such disclosureis made will be informed of the confidential nature of suchSource: CADIZ INC, 10-K, November 02, 2004Powered 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. 69Information and instructed to keep such Information confidential), (b) to theextent requested by any regulatory authority, (c) to the extent required byapplicable 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 anyremedies hereunder or any suit, action or proceeding relating to this Agreementor the enforcement of rights hereunder, (f) subject to an agreement containingprovisions substantially the same as those of this Section, to any assignee ofor Participant in, or any prospective assignee of or Participant in, any of itsrights or obligations under this Agreement, (g) with the consent of theBorrowers or (h) to the extent such Information (i) becomes publicly availableother than as a result of a breach of this Section or (ii) becomes available tothe Administrative Agent or any Lender on a nonconfidential basis from a sourceother than the Borrowers; PROVIDED, HOWEVER, that such information, to theAdministrative Agent's or Lender's knowledge, without any duty of inquiry, hasnot been provided in violation of any obligation owed by the source thereof tothe Borrowers. For the purposes of this Section, "Information" means allinformation received from the Borrowers relating to the Borrowers or itsbusiness, other than any such information that is available to theAdministrative Agent or any Lender on a nonconfidential basis prior todisclosure by the Borrowers; PROVIDED that, in the case of information receivedfrom the Borrowers after the date hereof, such information is clearly identifiedat the time of delivery as confidential. Any Person required to maintain theconfidentiality of Information as provided in this Section shall be consideredto have complied with its obligation to do so if such Person has exercised thesame degree of care to maintain the confidentiality of such Information as suchPerson would accord to its own confidential information. SECTION 9.13. FORECLOSURE OF CADIZ/SUN WORLD LEASE. If, in enforcingremedies hereunder, the Administrative Agent or a Lender forecloses on theproperty subject to that certain Cadiz/Sun World Lease, whether judicially ornon-judicially, or obtains title to such property by deed in lieu offoreclosure, by purchase, or otherwise, then (a) so long as Sun World is not indefault under the Cadiz/Sun World Lease: (i) Sun World and the Sun World Trusteeunder 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) theenforcement of any remedies hereunder that effects a transfer of title to theproperty subject to the Cadiz/Sun World Lease shall not terminate the Cadiz/SunWorld Lease nor terminate nor affect in any manner the lien of the Sun WorldTrustee thereon, nor disturb Sun World in the possession and use of the propertysubject thereto. SECTION 9.14. WAIVER OF ANTI-DEFICIENCY PROTECTION. Each Borrowerhereby waives, as to this Agreement and any and all Loan Documents heretofore orhereafter executed in connection with the Transactions any defense, protectionor 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 70 (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 anydispute with respect to this Agreement or any other Loan Document, theprevailing party shall be entitled to recover from the non-prevailing party allcosts and attorneys' fees.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 9.16. INTEREST RATE LIMITATION. Notwithstanding anything hereinto 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 intereston such Loan under applicable law (collectively the "Charges"), shall exceed themaximum lawful rate (the "Maximum Rate") which may be contracted for, charged,taken, received or reserved by the Lender holding such Loan in accordance withapplicable law, the rate of interest payable in respect of such Loan hereunder,together with all Charges payable in respect thereof, shall be limited to theMaximum Rate and, to the extent lawful, the interest and Charges that would havebeen payable in respect of such Loan but were not payable as a result of theoperation of this Section shall be cumulated and the interest and Chargespayable to such Lender in respect of other Loans or periods shall be increased(but not above the Maximum Rate therefor) until such cumulated amount, togetherwith interest thereon at the Federal Funds Effective Rate to the date ofrepayment, shall have been received by such Lender. SECTION 9.17. STATUS OF ING. ING hereby represents to the Borrowersthat it is not a Foreign Lender. SECTION 9.18. GENERAL RELEASE. In consideration of the amendments,waivers, consents, and the other terms and provisions of this Agreement and theother Loan Documents, each Borrower, on behalf of itself, its agents,successors, assigns, subsidiaries, partners and Affiliates hereby fully releaseand forever discharge the Administrative Agent, the Lenders and each of theiragents, consultants, heirs, successors, assigns, Affiliates, directors,officers, employees, shareholders, executives, servants, attorneys, accountants,representatives and other related persons (collectively, the "Released Parties")from any and all rights, claims, demands, actions, causes of action, costs,losses, suits, liens, debts, damages, judgments, executions and demands of everynature, kind and description whatsoever, whether now known or unknown, either atlaw, in equity or otherwise, which Borrower or any of its agents, successors,assigns, subsidiaries, partners and/or Affiliates ever had or may have againstthe Administrative Agent, the Lenders or the other Released Parties, including,without limitation, all claims arising under or in connection with the LoanDocuments, and/or in connection with the dealings between the parties up to andincluding the closing of the transactions contemplated in this Agreement and allclaims which have arisen or may arise in any other way whatsoever; provided thatnothing herein shall be deemed to release the Administrative Agent, the Lendersor any other Released Party from any liability or obligations arising inconnection with facts or circumstances which occur or arise for the first timeafter the Restructuring Effective Date. 71It is further understood and agreed that the foregoing general release extendsto all claims of every kind and nature whatsoever, known, suspected orunsuspected, liquidated or contingent, foreseen or unforeseen, and each Borrowerand its agents, successors, assigns, subsidiaries, partners and Affiliateshereby waive all rights under Section 1542 of the California Civil Code. Section1542 of the California Civil Code provides as follows:"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW ORSUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IFKNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH DEBTOR." 72 IN WITNESS WHEREOF, the parties hereto have caused thisAgreement to be duly executed by their respective authorized officers as of theday and year first above written. CADIZ INC., a Borrower By: /s/ Keith Brackpool ----------------------------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Name: Keith Brackpool Title: Chief Executive Officer CADIZ REAL ESTATE LLC, a Borrower By: /s/ Richard E. Stoddard ---------------------------- Name: Richard E. Stoddard Title: Manager By: /s/ Geoffrey W. Arens ---------------------------- Name: Geoffrey W. Arens Title: 73 SCHEDULE 2.01 COMMITMENTS1. Lender: ING Capital, LLC 135 E. 57th Street New York, NY 10022-2101 Attention: Joan Chiappe, Vice President Telephone No.: 212-409-1742 Facsimile No.: 212-371-9295 Tranche A Commitment: $15,000,000.00 Tranche B Commitment: $10,000,000.00 Sch. 2.01-1 SCHEDULE 3.06 LITIGATION DISCLOSURE NONE Sch. 3.06-1 SCHEDULE 3.13 BORROWER'S PARTICIPATING SUBSIDIARIESCRE Sch. 3.13-1 SCHEDULE 3.14 BORROWER'S INACTIVE SUBSIDIARIESSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Rancho Cadiz Mutual Water Company, a California mutual water company. Sch. 3.14-1 SCHEDULE 6.01 SCHEDULE OF INDEBTEDNESS FOR BORROWER, PARTICIPATING SUBSIDIARIESThe "Term Loan", as defined in the Pledge and Security Agreement; the Sun WorldIndenture, the Sun World Settlement. Sch. 6.01-1 SCHEDULE 6.02 SCHEDULE OF LIENS ON PROPERTY OF BORROWER AND/OR SUBSIDIARIESLiens granted to secure the "Term Obligations", as defined in the Pledge andSecurity Agreement.Liens described in Title Policy No. 7222428 (the "Title Policy") issued byChicago Title Insurance Company, insuring priority in the Mortgage, and showingCadiz as owner in fee simple absolute and ING as insured.Liens on Rolling Stock existing as of the Restructuring Effective Date.Lien on telephone system at San Bernardino, CA office by Mellon First UnitedLeasing (monthly payment $164.00).Lien on Mita DC-6590 copier at Santa Monica, CA office by Mita FinancialServices (monthly payment $580.00).Lien on Minolta EP 3050 copier at Santa Monica, CA office by GE Capital (monthlypayment $254.08).Lien on Mita 4086 copier at San Bernardino, CA office by Capelco Capital, Inc.(monthly payment $240.00). Sch. 6.02-1 SCHEDULE 6.08 SCHEDULE OF RESTRICTIVE AGREEMENTS OF BORROWER AND/OR SUBSIDIARIES (EXCLUDING THE SUN WORLD ENTITIES)Restrictions and conditions arising under and pursuant to the Term Loan, as defined in the Pledge and Security Agreement.Restrictions and conditions arising under and pursuant to the Sun WorldDocuments. Sch. 6.08-1 EXHIBIT A [FORM OF] ASSIGNMENT AND ACCEPTANCE Reference is made to the Sixth Amended and Restated CreditAgreement dated as of December 15, 2003 (as amended and in effect on the datehereof, the "Credit Agreement"), among Cadiz Inc., Cadiz Real Estate LLC, theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Lenders named therein and ING Capital, LLC, as Administrative Agent for theLenders. Terms defined in the Credit Agreement are used herein with the samemeanings. The Assignor named on the reverse hereof hereby sells andassigns, without recourse, to the Assignee named on the reverse hereof, and theAssignee hereby purchases and assumes, without recourse, from the Assignor,effective as of the Assignment Date set forth on the reverse hereof, theinterests set forth on the reverse hereof (the "Assigned Interest") in theAssignor's rights and obligations under the Credit Agreement, including, withoutlimitation, the interests set forth herein in the Commitment of the Assignor onthe Assignment Date and Loans owing to the Assignor which are outstanding on theAssignment Date, held by the Assignor on the Assignment Date, but excludingaccrued interest and fees to and excluding the Assignment Date. The Assigneehereby acknowledges receipt of a copy of the Credit Agreement. From and afterthe Assignment Date (i) the Assignee shall be a party to and be bound by theprovisions of the Credit Agreement and, to the extent of the Assigned Interest,have the rights and obligations of a Lender thereunder and (ii) the Assignorshall, to the extent of the Assigned Interest, relinquish its rights and bereleased from its obligations under the Credit Agreement. This Assignment and Acceptance is being delivered to theAdministrative Agent together with (i) if the Assignee is a Foreign Lender, anydocumentation required to be delivered by the Assignee pursuant to Section2.17(e) of the Credit Agreement, duly completed and executed by the Assignee,and (ii) if the Assignee is not already a Lender under the Credit Agreement, anAdministrative Questionnaire in the form supplied by the Administrative Agent,duly completed by the Assignee. The [Assignee/Assignor] shall pay the feepayable to the Administrative Agent pursuant to Section 9.04(b) of the CreditAgreement. This Assignment and Acceptance shall be governed by andconstrued in accordance with the laws of the State of California.Date of Assignment:Legal Name of Assignor:Legal Name of Assignee:Assignee's Address for Notices: Exh. A-1Restructuring Effective Date of Assignment("ASSIGNMENT DATE")1: --------------- Percentage Assigned of Commitment (set forth, to at least 8 decimals, as a percentage of the Commitments of all Facility Principal Amount Assigned Lenders thereunder)---------------------- ------------------------- -----------------------Commitment Assigned:---------------------- ------------------------- --------------------------------------------- ------------------------- --------------------------------------------- ------------------------- -----------------------The terms set forth above and on the reverse side hereof are hereby agreed to:(a) [NAME OF ASSIGNOR] , as Assignor (1) By: ---------------------------- Name: Title:(b) [NAME OF ASSIGNEE] , as AssigneeSource: CADIZ INC, 10-K, November 02, 2004Powered 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. (1) By: ---------------------------- Name: Title:---------- 1/ Must be at least five Business Days after execution hereof by allrequired parties. Exh. A-2The undersigned hereby consent to the within assignment:2(c) CADIZ INC., (d) ING Capital, LLC, as Administrative Agent a Borrower(1) By: (2) By: -------------------------- -------------------------- Name: Name: Title: Title:(e) Cadiz Real Estate LLC, (f) a Borrower(1) By: (2) By: -------------------------- -------------------------- Name: Name: Title: Title:---------- 2/ Consents to be included to the extent required by Section 9.04(b) of theCredit Agreement. Exh. A-3Source: CADIZ INC, 10-K, November 02, 2004Powered 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 SIXTH GLOBAL AMENDMENT AGREEMENT DATED AS OF DECEMBER 15, 2003 BETWEEN CADIZ INC. AND CADIZ REAL ESTATE LLC AS BORROWERS, AND ING CAPITAL, LLC AS LENDER TABLE OF CONTENTS PAGE ----R E C I T A L S................................................................1SECTION 1. Definitions......................................................6SECTION 2. Certain Acknowledgements........................................17SECTION 3. No Satisfaction.................................................17SECTION 4. Representations and Warranties; Undertakings....................18SECTION 5. Conditions Precedent............................................18SECTION 6. Covenants.......................................................25SECTION 7. Amendments......................................................26SECTION 8. Registration and Investor Rights................................38SECTION 9. General Release.................................................39SECTION 10. Waiver of Anti-Deficiency Protection............................39SECTION 11. Advice of Counsel...............................................40Source: CADIZ INC, 10-K, November 02, 2004Powered 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 12. Notices.........................................................40SECTION 13. Credit Documents Remain Binding Except as Expressly Amended or Modified by Sixth Global Agreement Documents....................................42SECTION 14. Governing Law; Dispute Resolution...............................42SECTION 15. Method of Payments..............................................43SECTION 16. Miscellaneous...................................................43SCHEDULE A: WIRE INSTRUCTIONS FOR ING AS THE LENDER..........................2---------- SCHEDULE B: LENDER'S LOANS...................................................3---------- 2 SIXTH GLOBAL AMENDMENT AGREEMENT SIXTH GLOBAL AMENDMENT AGREEMENT, DATED AS OF DECEMBER 15, 2003 (THE"AGREEMENT" OR THE "SIXTH GLOBAL AMENDMENT AGREEMENT"), BETWEEN Cadiz Inc.(f/k/a Cadiz Land Company, Inc.) and Cadiz Real Estate LLC, as borrowers, theLENDERS party hereto, and ING CAPITAL LLC (f/k/a ING Baring (U.S.) Capital LLCand ING Baring (U.S.) Capital Corporation). R E C I T A L S A. This Agreement refers to: (i) that certain Loan Agreementdated as of March 15, 1995 among Cadiz and its then wholly owned subsidiary,Cadiz Valley Development Corporation ("CVDC"), as borrowers, and Lender, as theassignee of Henry Ansbacher & Co. Limited ("ANSBACHER"), as lender (as amended,modified, or supplemented from time to time, the "1995 LOAN AGREEMENT", andtogether with all other documents executed in connection therewith or relatingthereto and schedules and exhibits thereto, including the 1995 Note referred tobelow, the "1995 CREDIT DOCUMENTS"); (ii) that certain Third Agreement to ModifyLoans dated as of January 11, 1994 among Cadiz and CVDC, as borrowers, andLender, as lender (as amended, modified, or supplemented from time to time, the"1994 LOAN AGREEMENT", and together with all other documents executed inconnection therewith or relating thereto and schedules and exhibits thereto,including the CVDC Note, the Cadiz Note, and the Reimbursement Agreementreferred to below, the "1994 CREDIT DOCUMENTS"); (iii) that certain letter ofconsent dated September 13, 1996 from Cadiz and CVDC and acknowledged and agreedto by Lender (the "CONSENT LETTER"), (iv) that certain Ring Financing andSupplemental and Confirmatory Agreement Relating to Event of Default dated as ofSeptember 13, 1996 among the borrowers and Lender (the "RING FENCINGAGREEMENT"), (v) that certain Global Amendment Agreement dated as of March 31,1997 between Cadiz and CVDC, as borrowers, and ING, as lender (as amended,modified, or supplemented from time to time, the "FIRST GLOBAL AMENDMENTAGREEMENT", and together with all other documents executed in connectiontherewith or relating thereto and the schedules and exhibits thereto, includingthe First Global Amendment Agreement Documents as defined in the First GlobalAmendment Agreement, the "FIRST GLOBAL AGREEMENT DOCUMENTS"), (vi) that certainSecond Global Amendment Agreement dated as of April 30, 1999 between Cadiz, asborrower, and ING, as Lender (as amended, modified or supplemented from time totime, the "SECOND GLOBAL AMENDMENT AGREEMENT", and together with all otherdocuments executed in connection therewith or relating thereto and the schedulesand exhibits thereto, including the Second Global Agreement Documents as definedin the Second Global Amendment Agreement, the "SECOND GLOBAL AGREEMENTDOCUMENTS"), (vii) that certain Third Global Amendment Agreement dated as ofDecember 22, 1999 between Cadiz, as borrower, and ING, as Lender (as amended,modified or supplemented from time to time, the "THIRD GLOBAL AMENDMENTSource: CADIZ INC, 10-K, November 02, 2004Powered 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", and together with all other documents executed in connectiontherewith or relating thereto and the schedules and exhibits thereto, includingthe Third Global Agreement Documents as defined in the Third Global AmendmentAgreement, the "THIRD GLOBAL AGREEMENT DOCUMENTS"), (viii) that certain FourthGlobal Amendment Agreement dated as of December 22, 2000 between Cadiz, asborrower, and ING, as Lender (as amended, modified or supplemented from time totime, including that certain First Amendment to Fourth Global Agreement dated asof October 22, 2001, the "FOURTH GLOBAL AMENDMENT Agreement", and together with all other documents executed in connection therewith orrelating thereto and the schedules and exhibits thereto, including the FourthGlobal Agreement Documents as defined in the Fourth Global Amendment Agreement,the "FOURTH GLOBAL AGREEMENT DOCUMENTS"), and (ix) that certain Fifth GlobalAmendment Agreement dated as of January 31, 2002 between Cadiz, as borrower, andING, as Lender (as amended, modified or supplemented from time to time, the"FIFTH GLOBAL AMENDMENT AGREEMENT", and together with all other documentsexecuted in connection therewith or relating thereto and the schedules andexhibits thereto, including the Fifth Global Agreement Documents as defined inthe Fifth Global Amendment Agreement, the "FIFTH GLOBAL AGREEMENT DOCUMENTS",and along with the 1994 Credit Documents, the 1995 Credit Documents, the ConsentLetter, the First Global Agreement Documents, the Second Global AgreementDocuments, the Third Global Agreement Documents, the Fourth Global AgreementDocuments, the Fifth Global Agreement Documents and the Sixth Global AgreementDocuments (as defined herein), each as amended and in effect, collectively, the"CREDIT DOCUMENTS"). Capitalized terms used herein and not otherwise definedshall have the meanings set forth in the Fifth Global Amendment Agreement. B. Pursuant to the terms and conditions of the 1994 LoanAgreement, CVDC has heretofore executed that certain Secured Promissory Notedated January 11, 1994, in favor of Lender in the original principal sum of$2,546,783.06 (as amended and restated and in effect from time to time, the"CVDC NOTE"). The CVDC Note is secured by (collectively, the "CVDC LOANSECURITY"), INTER ALIA, (i) that certain First Deed of Trust, Assignment ofRents, Security Agreement and Fixture Filing dated January 11, 1994 (as amendedfrom time to time, the "FIRST CVDC DEED OF TRUST"), executed by CVDC in favor ofLender which was recorded on May 23, 1994, as Instrument No. 94233573 in theOfficial Records of San Bernardino County California (the "OFFICIAL RECORDS")and which encumbers the real property (the "CVDC LAND") described in Exhibit "A"attached to the 1995 Loan Agreement and incorporated herein by this reference;and (ii) that certain First Assignment, Pledge and Security Agreement datedJanuary 11, 1994, executed by CVDC in favor of Lender (collectively, the "FIRSTCVDC SECURITY AGREEMENT"). CVDC's obligations under the loan (the "CVDC LOAN")evidenced by the CVDC Note have been guarantied pursuant to that certain Amendedand Restated Guarantee dated January 11, 1994 (the "GUARANTEE"), executed byCadiz (in such capacity, the "GUARANTOR") in favor of Lender. The Guarantee issecured, INTER ALIA, by (x) that certain Second Deed of Trust, Assignment ofRents, Security Agreement and Fixture Filing (Homer/Piute/Hammack) dated January11, 1994 (as amended from time to time, the "CADIZ SECOND DEED OF TRUST"),executed by Cadiz in favor of Lender which was recorded on February 11, 1994, asInstrument No. 94058717 in the Official Records and which encumbers the realproperty (the "CADIZ PROPERTY") described in Exhibit "B" attached to the 1995Loan Agreement and incorporated herein by this reference; and (y) that certainFirst Assignment, Pledge and Security Agreement dated January 11, 1994 (the"CADIZ FIRST ASSIGNMENT"), executed by Cadiz in favor of Lender. C. Also pursuant to the terms and provisions of the 1994 LoanAgreement, Cadiz has heretofore executed that certain Secured Promissory Notedated January 11, 1994 (as amended and restated and in effect from time to time,the "CADIZ NOTE"), in favor of Lender in the original principal amount of$2,397,424.08. The loan evidenced by the Cadiz Note is sometimes referred to inthis Agreement as the "CADIZ LOAN." The Cadiz Note is secured by (collectively,the 2"CADIZ LOAN SECURITY"), among other things, (i) that certain First Deed ofTrust, Assignment of Rents, Security Agreement and Fixture Filing(Homer/Piute/Hammack) dated January 11, 1994 (as amended from time to time, theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. "CADIZ FIRST DEED OF TRUST"), executed by Cadiz in favor of Lender which wasrecorded on February 11, 1994, as Instrument No. 94058716 in the OfficialRecords and which encumbers the Cadiz Property; (ii) that certain Second Deed ofTrust, Assignment of Rents, Security Agreement and Fixture Filing (CVDC) datedJanuary 11, 1994 (as amended from time to time, the "SECOND CVDC DEED OFTRUST"), executed by CVDC in favor of Lender which was recorded on May 23, 1994,as Instrument No. 94233574 in the Official Records and which encumbers the CVDCLand; (iii) that certain Second Assignment, Pledge and Security Agreement datedJanuary 11, 1994, executed by Cadiz in favor of Lender (the "CADIZ SECONDASSIGNMENT"); and (iv) that certain Second Assignment, Pledge and SecurityAgreement dated January 11, 1994 (the "SECOND CVDC SECURITY AGREEMENT"),executed by CVDC in favor of Lender. D. Pursuant to the terms of the 1994 Loan Agreement, Lenderissued a letter of credit (the "LETTER OF Credit") in favor of CooperatieveCentrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" ("RABOBANK") inthe maximum amount of $853,000 with respect to certain interest payable underthat certain promissory note dated January 12, 1994 (the "RABOBANK NOTE"),executed by Cadiz and CVDC in favor of Rabobank in the original principal amountof $8,681,474.03. In conjunction with Lender's issuance of the Letter of Credit,Cadiz executed that certain Reimbursement Agreement dated January 11, 1994 (asamended and restated and in effect from time to time, the "REIMBURSEMENTAGREEMENT"), in favor of Lender. The indebtedness evidenced by the ReimbursementAgreement is sometimes referred to in this Agreement as the "L/C LOAN." Theperformance of Cadiz' obligations under the Reimbursement Agreement is securedby (collectively, the "LETTER OF CREDIT SECURITY"), among other things, (i) thatcertain Third Deed of Trust, Assignment of Rents, Security Agreement and FixtureFiling (Homer/Piute/Hammack) dated January 11, 1994, which was recorded onFebruary 11, 1994 (as amended from time to time, the "CADIZ THIRD DEED OFTRUST"), as Instrument No. 94058718 in the Official Records and which encumbersthe Cadiz Property; (ii) that certain Third Deed of Trust, Assignment of Rents,Security Agreement and Fixture Filing (CVDC) dated January 11, 1994 (as amendedfrom time to time, the "THIRD CVDC DEED OF TRUST"), executed by CVDC in favor ofLender which was recorded on May 23, 1994, as Instrument No. 94233575 in theOfficial Records and which encumbers the CVDC Land; (iii) that certain ThirdAssignment, Pledge and Security Agreement dated January 11, 1994 (the "CADIZTHIRD ASSIGNMENT"), executed by Cadiz in favor of Lender; and (iv) that certainThird Assignment, Pledge and Security Agreement dated January 11, 1994 (the"THIRD CVDC SECURITY AGREEMENT"), executed by CVDC in favor of Lender. Rabobankhas heretofore drawn down the Letter of Credit in full. E. Pursuant to the terms and provisions of the 1995 LoanAgreement, Cadiz and CVDC jointly have heretofore executed that certain SecuredPromissory Note dated March 29, 1995 (as amended and restated and in effect fromtime to time, the "1995 NOTE"), in favor of Lender in the original principalamount of $3,000,000.00. The loan evidenced by the 1995 Note is sometimesreferred to in this Agreement as the "1995 LOAN." The 1995 Note is secured by(collectively, the "1995 SECURITY"), among other things, (i) that certain FourthAssignment, Pledge and Security Agreement dated March 29, 1995 ("CADIZ FOURTHASSIGNMENT"), between 3Cadiz and Lender, pursuant to which Cadiz has granted Lender a fourth prioritysecurity interest in the SWFG Collateral, the Farming Collateral, and EVCOCollateral, as security for the 1995 Note; (ii) that certain Fourth Assignment,Pledge and Security Agreement dated March 29, 1995 (the "FOURTH CVDC SECURITYAGREEMENT"), between CVDC and Lender, pursuant to which CVDC has granted toLender a fourth priority security interest in the PSWR Collateral and theHarweal Collateral as security for the 1995 Note; (iii) that certain Fourth Deedof Trust, Assignment of Rents, Security Agreement and Fixture Filing dated March29, 1995 (the "CADIZ FOURTH DEED OF TRUST"), executed by Cadiz in favor ofLender as security for the 1995 Note, which was recorded on March 31, 1995 asInstrument No. 95-099301 in the Official Records; and (iv) that certain FourthDeed of Trust, Assignment of Rents, Security Agreement and Fixture Filing datedMarch 29, 1995 (the "FOURTH CVDC DEED OF TRUST"), executed by CVDC in favor ofLender as security for the 1995 Note, which was recorded on March 31, 1995 asInstrument No. 95-099300 in the Official Records. F. Pursuant to that certain Assignment Agreement dated as ofMarch 31, 1997 by and between ING and Ansbacher (the "ING/ANSBACHER ASSIGNMENTAGREEMENT"), Ansbacher transferred and assigned to ING all of Ansbacher'sSource: CADIZ INC, 10-K, November 02, 2004Powered 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, title and interests in, to and under the Credit Documents including,without limitation, the right to receive payment on the Lender's Loans and theNotes and the Reimbursement Agreement and all of the benefits of the SecurityDocuments. G. Pursuant to the First Global Amendment Agreement, Cadiz, CVDCand ING amended the Credit Documents. H. Pursuant to the First Global Amendment Agreement, Lenderconsented to the merger of CVDC into Cadiz, PROVIDED, HOWEVER, that Cadiz: (a)expressly assumed all of CVDC's obligations to the Lender under the CreditDocuments, as amended by the First Global Agreement Documents, and (b) executeda reaffirmation agreement relating to such assumption in form and substancesatisfactory to Lender. I. On or about April 14, 1997, Cadiz effected the upstream mergerinto it of CVDC and the assumption of the CVDC's indebtedness. In accordancewith the First Global Amendment Agreement, Cadiz executed and delivered toLender that certain Reaffirmation Agreement, dated as of April 10, 1997,reaffirming its assumption of all of CVDC's obligations to Lender. J. Pursuant to that certain Deed of Trust, Assignment of Rents,Security Agreement, Financing Statement and Fixture Filing (Term Loan), betweenCadiz, as borrower, Commonwealth Land Title Company, as Trustee, and ING,recorded on August 14, 1998 in the Official Records of Tulare County, asInstrument No. 1998-0057196, Cadiz pledged certain real and personal property tosecure the Term Loan Obligations to ING. Pursuant to that certain Consent andWaiver of ING under Term Loan and Revolving Credit Agreement to Sale of VistaVerde Property and Application of Proceeds, dated January 19, 1999 executed byING, and a Substitution of Trustee and Full Reconveyance dated January 19, 1999,the real and personal property granted as security by Cadiz to ING under suchDeed of Trust was released. 4 K. Pursuant to that certain Deed of Trust, Assignment of Rents,Security Agreement, Financing Statement and Fixture Filing between Cadiz, asborrower, Chicago Title Company, as Trustee, and ING, recorded on November 26,1997 in the Official Records of San Bernardino County, as Instrument No.97-434909 (the "CADIZ PSWRI DEED OF Trust" or "CADIZ FIFTH DEED OF TRUST"),Cadiz pledged certain real and personal property to secure the Term LoanObligations to ING. Concurrently therewith, the PSWRI Deed of Trust and PSWRINote (collectively, the "PSWRI COLLATERAL") were extinguished by way of mergerof estates. L. Pursuant to that certain Collateral Substitution Agreementdated November 4, 1998 by and among Cadiz, ING and Southwest Fruit Growers, L.P.("SWFG"), Cadiz granted to ING a security interest in certain property to securethe Lender's Term Loans as set forth in that certain Deed of Trust, Assignmentof Rents, Security Agreement, Financing Statement and Fixture Filing (TermLoan), between Cadiz, Chicago Title Company and ING, recorded on November 4,1998 in the Official Records of San Bernardino County, as Instrument No.19980473320 (the "CADIZ SWFG DEED OF TRUST" or the "CADIZ SIXTH DEED OF TRUST").Concurrently therewith, ING released its security interest in the SWFGCollateral and the Farming Collateral. M. Pursuant to the Second Global Amendment Agreement, Cadiz andING further amended the Credit Documents. N. Pursuant to that certain Deed of Trust, Assignment of Rents,Security Agreement, Financing Statement and Fixture Filing between Cadiz, asborrower, Chicago Title Company, as Trustee, and ING, dated as of July 1, 1999and recorded on December 23, 1999 in the Official Records of San BernardinoCounty (the "Official Records"), as Instrument No. 524212 (the "CADIZ SEVENTHDEED OF TRUST (PIUTE)"), Cadiz pledged certain additional real and personalproperty to secure Cadiz's obligations to ING under the Credit Documents. O. Pursuant to the Third Global Amendment Agreement, Cadiz andING further amended the Credit Documents. P. Pursuant to the Fourth Global Amendment Agreement, Cadiz andING further amended the Credit Documents.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Q. Pursuant to the Fifth Global Amendment Agreement, Cadiz andING further amended the Credit Documents. R. The parties hereto wish to enter into this Agreement and allof the other documents executed in connection herewith or relating hereto andschedules and exhibits hereto (collectively, the "SIXTH GLOBAL AGREEMENTDOCUMENTS") to further amend the Credit Documents to, among other things, (a)confirm the obligations of Cadiz in favor of ING under the Credit Documents; (b)consent to the creation of a new special purpose entity, CRE, that is beingassigned the assets of Cadiz and is becoming a co-borrower with Cadiz hereunder,and (c) provide for the issuance of new preferred stock to ING; (d) amend theinterest rate on the Loan Obligations to either (at the election of theBorrowers as provided herein): (i) 8% per annum in cash or (ii) 4% per annum incash plus 8% per annum in kind; and (e) provide for the 5further extension of the Maturity Date of the Notes and other modificationsthereof, all of the foregoing upon the terms and conditions set forth herein andin the other Sixth Global Agreement Documents. AGREEMENT NOW THEREFORE, in consideration of the mutual covenants andagreements contained herein, parties hereto hereby agrees as follows: SECTION 1. DEFINITIONS. The terms and provisions of section 1.03 of the RevolvingCredit Agreement, as in effect on the Restructuring Effective Date, shall applyto this Agreement. The following terms shall have the following meanings whenused herein (all terms defined in this Section 1 or in other provisions of thisAgreement in the singular shall have the same meaning in the plural and VICEVERSA): ADDITIONAL DRAW WARRANT CERTIFICATES: the Additional Initial DrawWarrant Certificates originally exercisable as of April 13, 1998 and May 8,1998, to purchase, respectively, 112,500 and 37,500 shares of the Company'sCommon Stock, as revised and in effect. AFFILIATE: With reference to any entity, any other entity that, withinthe meaning of Rule 12b-2 promulgated under the Securities Exchange Act of 1934,as amended, "controls," is "controlled by" or is under "common control with"such entity. AGREEMENT shall have the meaning ascribed to such term in the recitalshereto. ANSBACHER shall have the meaning ascribed to such term in the recitalshereto. APPLICABLE INTEREST RATE means, with respect to any Term LoanObligations for any Interest Period, either (a) if the Borrowers do not electthe PIK&Cash Payment Election, the Cash Payment Rate, or (b) if the Borrowerselect the PIK&Cash Payment Election, the PIK&Cash Payment Rate. BANKRUPTCY CODE: Title 11 of the United States Code, as amended, 11U.S.C ss.ss. 101, ET SEQ. BORROWERS means, collectively, each of Cadiz and CRE, and each a"Borrower". BUSINESS DAY means any day that is not a Saturday, Sunday or other dayon which commercial banks in New York City are authorized or required by law toremain closed. CADIZ means Cadiz Inc., a Delaware corporation, a borrower hereunder. "CADIZ/CRE MANAGEMENT AGREEMENT" means the Management Agreement asdefined in the CRE LLC Agreement.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 CADIZ DEEDS OF TRUST: collectively, the Cadiz First Deed of Trust, theCadiz Second Deed of Trust, the Cadiz Third Deed of Trust, the Cadiz Fourth Deedof Trust, the Cadiz PSWRI Deed of Trust, the Cadiz SWFG Deed of Trust and theCadiz Seventh Deed of Trust (Piute), each as amended and modified from time totime. CADIZ FIRST ASSIGNMENT shall have the meaning ascribed to such term inthe recitals hereto. CADIZ FIRST DEED OF TRUST shall have the meaning ascribed to such termin the recitals hereto. CADIZ FOURTH ASSIGNMENT shall have the meaning ascribed to such term inthe recitals hereto. CADIZ FOURTH DEED OF TRUST shall have the meaning ascribed to such termin the recitals hereto. CADIZ LOAN shall have the meaning ascribed to such term in the recitalshereto. CADIZ LOAN SECURITY shall have the meaning ascribed to such term in therecitals hereto. CADIZ NOTE shall have the meaning ascribed to such term in the recitalshereto. CADIZ PROPERTY shall have the meaning ascribed to such term in therecitals hereto. CADIZ PSWRI DEED OF TRUST or CADIZ FIFTH DEED OF TRUST shall have themeaning ascribed to such term in the recitals hereto. "CADIZ REAFFIRMATION AGREEMENT" means the agreement evidencing CadizBorrower's assumption and reaffirmation of all liabilities and obligations ofCadiz Valley Development Corporation, dated as of November 25, 1997. CADIZ SECOND ASSIGNMENT shall have the meaning ascribed to such term inthe recitals hereto. CADIZ SECOND DEED OF TRUST shall have the meaning ascribed to such termin the recitals hereto. CADIZ SERIES F PREFERRED STOCK CERTIFICATE means the certificate ofSeries F Preferred Stock issued by Cadiz to the Lender pursuant to theTransactions with the rights, privileges and preferences as set forth in theCertificate of Designations in the form attached hereto in Exhibit A. This isthe same certificate that is required to be delivered under the Revolving CreditAgreement. CADIZ SEVENTH DEED OF TRUST (PIUTE) shall have the meaning ascribed tosuch term in the recitals hereto. 7 CADIZ SWFG DEED OF TRUST or CADIZ SIXTH DEED OF TRUST shall have themeaning ascribed to such term in the recitals hereto. CADIZ THIRD ASSIGNMENT shall have the meaning ascribed to such term inthe recitals hereto. CADIZ THIRD DEED OF TRUST shall have the meaning ascribed to such termin the recitals hereto. CASH means legal tender of the United States of America.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 COLLATERAL ACCOUNT" means that certain account established at INGCapital, LLC, not in its capacity as Lender hereunder, but in its capacity asthe cash collateral bank under the Cash Collateral Account Agreement, whichaccount is being assigned and pledged as of the Restructuring Effective Date forthe benefit of the Lender. CASH COLLATERAL ACCOUNT AGREEMENT means that certain agreement betweenCadiz and the financial institution party thereto, in form and substanceconsented to by the Lender evidencing Cadiz' establishment of a debt serviceaccount assigned and pledged for the benefit of the Lender, in substantially theform as attached hereto in Exhibit B. This is the same agreement that isrequired to be delivered by the Cadiz Borrower under the Revolving CreditAgreement. CASH PAYMENT AMOUNT has the meaning set forth in Section 7(D) hereof. CASH PAYMENT ELECTION has the meaning set forth in Section 7(D) hereof. CASH PAYMENT RATE means eight percent (8%). CASH PORTION has the meaning set forth in Section 7(D) hereof. CASH PORTION RATE means four percent (4%). CONSENT LETTER shall have the meaning ascribed to such term in therecitals hereto. CONSENT TO CADIZ/SUN WORLD LEASE means the consent by the Lender to theNew Cadiz/Sun World Lease, in substantially the form annexed hereto as ExhibitC. This is the same consent that is required to be delivered under the RevolvingCredit Agreement. CONSENT TO SUN WORLD SETTLEMENT means that certain consent of theLender to the Sun World Settlement in substantially the form annexed hereto asExhibit D. This is the same consent that is required to be delivered under theRevolving Credit Agreement. CRE means Cadiz Real Estate LLC, a Delaware limited liability company,a borrower hereunder. CRE GRANT DEED means that certain grant deed of trust conveying thereal property ING Collateral held by Cadiz to CRE in substantially the form asattached hereto in Exhibit E. 8 CRE LLC AGREEMENT means that certain Limited Liability Agreement of CREbetween the Cadiz and M. Solomon & Associates, Inc., as the independent member,in substantially the form attached hereto in Exhibit F. CREDIT DOCUMENTS shall have the meaning ascribed to such term in therecitals hereto. CVDC shall have the meaning ascribed to such term in the recitalshereto. CVDC DEEDS OF TRUST: collectively, the First CVDC Deed of Trust, theSecond CVDC Deed of Trust, the Third CVDC Deed of Trust, and the Fourth CVDCDeed of Trust, each as amended and modified from time to time. CVDC LAND shall have the meaning ascribed to such term in the recitalshereto. CVDC LOAN shall have the meaning ascribed to such term in the recitalshereto. CVDC LOAN SECURITY shall have the meaning ascribed to such term in therecitals hereto. CVDC NOTE shall have the meaning ascribed to such term in the recitalshereto.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. "DEFAULT" means any event or condition which constitutes an Event ofDefault or which upon notice, lapse of time or both would, unless cured orwaived, become an Event of Default. EIGHTH WARRANT CERTIFICATE: the revised and restated Eighth WarrantCertificate (as defined in the Fifth Global Amendment Agreement) for thepurchase up to 125,000 shares of Cadiz' common stock that vested on February 15,2002, as revised and in effect. ELEVENTH WARRANT CERTIFICATE: the revised and restated Eleventh WarrantCertificate (as defined in the Fifth Global Amendment Agreement) for thepurchase up to 1,000,000 of Cadiz' common stock., as revised and in effect EVENT OF DEFAULT: (a) with respect to this Agreement, such terms hasthe meaning assigned to such term in Section 7(L); and (b) with respect to anyother Credit Document, an Event of Default as defined thereunder. FEE WARRANT CERTIFICATE: the Fee Warrant Certificate, and originallyexercisable as of August 1, 2002, to purchase 100,000 shares of the Company'sCommon Stock, as revised and in effect. FIFTH WARRANT CERTIFICATE: the Fifth Warrant Certificate for 150,000 ofCadiz' common stock that vested as of October 29, 1999, that entitles the holderthereof to purchase 150,000 shares, as revised and in effect. FIFTH GLOBAL AMENDMENT AGREEMENT shall have the meaning ascribed tosuch term in the recitals hereto. 9 FIFTH GLOBAL AGREEMENT DOCUMENTS shall have the meaning ascribed tosuch term in the recitals hereto. FIRST CVDC DEED OF TRUST shall have the meaning ascribed to such termin the recitals hereto. FIRST CVDC SECURITY AGREEMENT shall have the meaning ascribed to suchterm in the recitals hereto. FIRST EXTENSION REQUIREMENTS shall have the meaning ascribed to suchterm in Section 7(J) hereof. FIRST GLOBAL AGREEMENT DOCUMENTS shall have the meaning ascribed tosuch term in the recitals hereto. FIRST GLOBAL AMENDMENT AGREEMENT shall have the meaning ascribed tosuch term in the recitals hereto. FIXED RATE means, with respect to any Borrowing for any InterestPeriod, either (a) if the Borrowers do not elect the PIK&Cash Payment Election,the Cash Payment Rate or (b) if the Borrowers elect the PIK&Cash PaymentElection, the PIK&Cash Payment Rate. FOURTH CVDC DEED OF TRUST shall have the meaning ascribed to such termin the recitals hereto. FOURTH CVDC SECURITY AGREEMENT shall have the meaning ascribed to suchterm in the recitals hereto. FOURTH GLOBAL AMENDMENT AGREEMENT shall have the meaning ascribed tosuch term in the recitals hereto. FOURTH GLOBAL AGREEMENT DOCUMENTS shall have the meaning ascribed tosuch term in the recitals hereto. FOURTH WARRANT CERTIFICATE: the Fourth Warrant Certificate for 100,000shares of Cadiz' common stock that vested as of April 3, 1999, that entitles theholder thereof to purchase 100,000, as revised and in effect. GUARANTEE shall have the meaning ascribed to such term in the recitalshereto.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. GUARANTOR shall have the meaning ascribed to such term in the recitalshereto. ING: ING Capital LLC, a Delaware limited liability company. ING/ANSBACHER ASSIGNMENT AGREEMENT shall have the meaning ascribed tosuch term in the recitals hereto. 10 ING COLLATERAL: the collateral security granted, pledged orhypothecated by the Borrowers to Lender under the Security Documents (butexcluding the collateral specifically released under the Consent to Sun WorldSettlement) to secure the payment and satisfaction of the Term Loan Obligations. INITIAL DRAW WARRANT CERTIFICATE: the Initial Draw Warrant Certificate,and originally exercisable as of November 25, 1997, to purchase 200,000 sharesof the Company's Common Stock. INTEREST PAYMENT DATE means the last day of the Interest Periodapplicable to any Term Loan Obligation. INTEREST PERIOD means, from and after September 30, 2003, eachsemi-annual period ending on March 31 and September 30 thereafter through andincluding the Maturity Date, provided, that (i) except as provided in clauses(ii) and (iii) below, if any Interest Period would end on a day other than aBusiness Day, such Interest Period shall be extended to the next succeedingBusiness Day, (ii) any Interest Period that commences on the last Business Dayof a calendar month (or on a day for which there is no numerically correspondingday in the last calendar month of such Interest Period) shall end on the lastBusiness Day of the last calendar month of such Interest Period, and (iii) ifany Interest Period would end after the Maturity Date, such Interest Periodshall end on the Maturity Date. L/C LOAN shall have the meaning ascribed to such term in the recitalshereto. LENDER shall have the meaning ascribed to such term in the recitalshereto. LENDER'S TERM LOANS: Collectively, the CVDC Loan, the Cadiz Loan, theL/C Loan, and the 1995 Loan of Lender to the Borrowers. LETTER OF CREDIT shall have the meaning ascribed to such term in therecitals hereto. LETTER OF CREDIT SECURITY shall have the meaning ascribed to such termin the recitals hereto. LOAN OBLIGATIONS: collectively, the Revolving Loan Obligations and theTerm Loan Obligations. "MANDATORY EQUITY PREPAYMENT" shall have the meaning ascribed to suchterm in Section 7(A) hereof MATURITY DATE means March 31, 2005, PROVIDED, HOWEVER, that if theFirst Extension Requirements are satisfied, then the Maturity Date shall beextended to September 30, 2005; provided, further, that if the Second ExtensionRequirements are satisfied, then the Maturity Date shall be extended to March31, 2006; provided, further, that if the Third Extension Requirements aresatisfied, then the Maturity Date shall be extended to September 30, 2006. 11 MAXIMUM CASH COLLATERAL AMOUNT means, with respect to any EquityIssuance, the amount obtained by multiplying the amount of the outstanding LoanObligations, by 8%, and multiplying the product thereof by the number of years(rounded upward to the nearest half year) between the date of such on which theproceeds of any Equity Issuance was received by either of the Borrowers andSource: CADIZ INC, 10-K, November 02, 2004Powered 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. September 30, 2006 (computed on the basis of a year of 360 days). NEW CADIZ/SUN WORLD LEASE means that certain Agricultural Lease by andbetween Cadiz (or CRE as assignee of Cadiz), as lessor, and Sun World, aslessee, in substantially the form annexed hereto as Exhibit G. 1995 CREDIT DOCUMENTS shall have the meaning ascribed to such term inthe recitals hereto. 1995 LOAN shall have the meaning ascribed to such term in the recitalshereto. 1995 LOAN AGREEMENT shall have the meaning ascribed to such term in therecitals hereto. 1995 NOTE shall have the meaning ascribed to such term in the recitalshereto. 1995 SECURITY shall have the meaning ascribed to such term in therecitals hereto. 1994 CREDIT DOCUMENTS shall have the meaning ascribed to such term inthe recitals hereto. 1994 LOAN AGREEMENT shall have the meaning ascribed to such term in therecitals hereto. NINTH WARRANT CERTIFICATE: the Ninth Warrant Certificate (as defined inthe Fifth Global Amendment Agreement) for the purchase up to 125,000 shares ofCadiz' common stock that vested on April 1, 2002, as revised and in effect. NOTES: Collectively, the CVDC Note, the Cadiz Note, the ReimbursementAgreement and the 1995 Note, each as amended, restated and in effect from timeto time. OFFICIAL RECORDS shall have the meaning ascribed to such term in therecitals hereto. PAST DUE EXPENSE DEFICIENCY means the amount of $20,000, correspondingto the amount that Lender's and Revolving Lenders' reasonable out-of-pocketexpenses on and prior to the Restructuring Effective Date, including thereasonable fees, charges and disbursements of counsel, exceed $400,000. PAST DUE PAYMENT means a Cash payment of $2,425,034.62 made by Cadiz toING that is comprised of (a) all accrued and unpaid interest due under theCredit Documents and the Revolving Loan Documents for the period throughSeptember 30, 2003 at the non-default rate in the amount of $1,412,457.21, (b)all accrued and unpaid interest due under the Revolving Loan Documents and theCredit Documents at the default rate for the period through September 30, 2003in the amount of $612,577.40, and (c) $400,000 of Revolving Lenders' and theLender's out-of-pocket expenses (including reasonable attorneys' fees) under theRevolving Loan 12Documents and the Credit Documents for the period through the RestructuringEffective Date, provided that the Past Due Expense Deficiency shall becapitalized and included as part of the principal outstanding under the TrancheA Notes (as defined in the Revolving Credit Agreement). PERSON: shall mean any individual, corporation, company, voluntaryassociation, partnership, joint venture, trust, unincorporated organization orgovernment (or any agency, instrumentality or political subdivision thereof). PIK PORTION has the meaning set forth in Section 7(D) hereof. PIK PORTION RATE means eight percent (8%). PIK&CASH PAYMENT ELECTION has the meaning set forth in Section 7(D)hereof. PIK&CASH PAYMENT ELECTION DEADLINE has the meaning set forth in SectionSource: CADIZ INC, 10-K, November 02, 2004Powered 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. 7(D) hereof. PIK&CASH PAYMENT ELECTION REQUEST means a request by the Borrowers tomake a payment of accrued interest for an Interest Period through the remittancethrough the remittance of both (A) the Cash Portion plus (B) the PIK Portion. PIK&CASH PAYMENT RATE means twelve percent (12%), comprised of the sumof the PIK Portion Rate and the Cash Portion Rate. PREFERRED STOCK CERTIFICATE OF DESIGNATIONS means that certainCertificate of Designations of Series F Preferred Stock of Cadiz, in form andsubstance acceptable to Lenders, in substantially the form attached hereto inExhibit H, that, inter alia, sets forth the rights, privileges and preferencesof such preferred stock. This is the same document that is required to bedelivered by the Cadiz under the Revolving Credit Agreement. PSWRI COLLATERAL shall have the meaning ascribed to such term in therecitals hereto. RABOBANK shall have the meaning ascribed to such term in the recitalshereto. RABOBANK NOTE shall have the meaning ascribed to such term in therecitals hereto. REGISTRATION RIGHTS AGREEMENT means the Registration Rights Agreementagreed to by Cadiz in favor of ING in the form attached hereto as Exhibit I.This is the same document that is required to be delivered by the Cadiz underthe Revolving Credit Agreement. REIMBURSEMENT AGREEMENT shall have the meaning ascribed to such term inthe recitals hereto. RESTRUCTURING EFFECTIVE DATE means the date on which the conditionsspecified in Section 5 are satisfied (or waived). 13 RESTATED REVOLVING CREDIT AGREEMENT: the Revolving Credit Agreement, asamended and restated by Cadiz and CRE, as co-borrowers, and ING, asadministrative agent and lender thereunder, dated as of December 15, 2003. REVOLVING CREDIT AGREEMENT: that certain Credit Agreement, dated as ofNovember 25, 1997, among Cadiz, as borrower, and ING, as administrative agentand lender, as amended, restated and/or modified from time to time. REVOLVING LENDERS: means, collectively, the Administrative Agent andthe Lenders, each as defined in the Revolving Credit Agreement. REVOLVING LOAN DOCUMENTS: means the Loan Documents, as defined in theRevolving Credit Agreement, as amended and modified from time to time. REVOLVING LOAN OBLIGATIONS: means the obligations of Cadiz to Lenderunder the Revolving Loan Documents. REVOLVING WARRANTS: means, collectively, the warrants issued under theRevolving Loan Documents, as amended concurrently herewith, comprised of (i) theInitial Draw Warrant Certificate, (ii) the Additional Draw Warrant Certificates,(iii) the Eighth Warrant Certificate, (iv) the Ninth Warrant Certificate, (v)the Tenth Warrant Certificate, (vi) the Eleventh Warrant Certificate, (vii) theTwelfth Warrant Certificate, and (viii) the Fee Warrant Certificate. RING FENCING AGREEMENT shall have the meaning ascribed to such term inthe recitals hereto. SECOND CVDC DEED OF TRUST shall have the meaning ascribed to such termin the recitals hereto. SECOND CVDC SECURITY AGREEMENT shall have the meaning ascribed to suchterm in the recitals hereto. SECOND EXTENSION REQUIREMENTS shall have the meaning ascribed to suchSource: CADIZ INC, 10-K, November 02, 2004Powered 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. term in Section 7(J) hereof. SECOND GLOBAL AGREEMENT DOCUMENTS shall have the meaning ascribed tosuch term in the recitals hereto. SECOND GLOBAL AMENDMENT AGREEMENT shall have the meaning ascribed tosuch term in the recitals hereto. SECOND WARRANT CERTIFICATE: the Second Warrant Certificate (as definedin the First Global Amendment Agreement) for 75,000 shares of Cadiz' commonstock that vested as of April 30, 1998, amended to reflect a change in thestrike price, that entitles the holder thereof to purchase 75,000 shares, asrevised and in effect. 14 SECURITY DOCUMENTS: the CVDC Loan Security, the Cadiz Loan Security,the Letter of Credit Security, and the 1995 Security, the other Cadiz Deeds ofTrust, and any other documents evidencing or securing the Notes and/or the L/CLoan, each as amended and modified from time to time. SIXTH AMENDMENT DOCUMENTS has the meaning ascribed to such term in theRevolving Credit Agreement. SIXTH GLOBAL AMENDMENT AGREEMENT shall have the meaning ascribed tosuch term in the recitals hereto. SIXTH GLOBAL AGREEMENT DOCUMENTS shall have the meaning ascribed tosuch term in the recitals hereto. SEVENTH WARRANT CERTIFICATE: the Seventh Warrant Certificate (asdefined in the Third Global Amendment Agreement) for 100,000 shares of Cadiz'common stock that vested as of October 31, 2000, as revised and in effect. SIXTH WARRANT CERTIFICATE: Second Warrant Certificate (as defined inthe Second Global Amendment Agreement) for 50,000 shares of Cadiz' common stockthat vested as of April 3, 2000, as revised and in effect. SUBSIDIARY: with respect to any Person, any corporation, partnership orother entity of which at least a majority of the securities or other ownershipinterests having by the terms thereof ordinary voting power to elect a majorityof the board of directors or other persons performing similar functions of suchcorporation, partnership or other entity (irrespective of whether or not at thetime securities or other ownership interests of any other class or classes ofsuch corporation, partnership or other entity shall have or might have votingpower by reason of the happening of any contingency) is at the time directly orindirectly owned or controlled by such Person or one or more Subsidiaries ofsuch Person or by such Person and one or more Subsidiaries of such Person. Withrespect to the Borrowers, Subsidiary shall exclude Sun World and itssubsidiaries during the pendency of the bankruptcy case for Sun World pending asof the Restructuring Effective Date. SUN WORLD: Sun World International, Inc., a Wholly Owned Subsidiary ofCadiz. SUN WORLD INDENTURE: that certain Indenture, dated as of April 16,1997, among Sun World, Cadiz, the subsidiary guarantors thereto, and the SunWorld Trustee, as amended by that certain Amendment to Indenture, dated as ofOctober 9, 1997, and that certain Amendment to Indenture, dated as of January23, 1998, as further amended from time to time. SUN WORLD SETTLEMENT: the settlement relating to claims between Cadizand Sun World, and the related release of certain collateral relating to SunWorld implementing the settlement described in the term sheet, as annexed heretoin Exhibit J, which documents evidencing the settlement are in form andsubstance reasonably satisfactory to Cadiz and the Lender. 15Source: CADIZ INC, 10-K, November 02, 2004Powered 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 TRUSTEE: The Bank of New York, in its capacity as thesuccessor trustee under the Sun World Indenture and any successor trusteethereunder. SWFG shall have the meaning ascribed to such term in the recitalshereto. TENTH WARRANT CERTIFICATE: the Tenth Warrant Certificate (as defined inthe Fifth Global Amendment Agreement) for the purchase up to 250,000 shares ofCadiz' common stock that vested on August 1, 2002, as revised and in effect. TERM LOAN OBLIGATIONS: the obligations of Cadiz to Lender under theCredit Documents, as amended by the Sixth Global Agreement Documents. TERM NOTES: collectively, the following notes and agreements evidencingthe Term Loan Obligations: the Cadiz Note, the CVDC Note, the ReimbursementAgreement and the 1995 Note THIRD CVDC DEED OF TRUST shall have the meaning ascribed to such termin the recitals hereto. THIRD CVDC SECURITY AGREEMENT shall have the meaning ascribed to suchterm in the recitals hereto. THIRD EXTENSION REQUIREMENTS shall have the meaning ascribed to suchterm in Section 7(J) hereof. THIRD GLOBAL AMENDMENT AGREEMENT shall have the meaning ascribed tosuch term in the recitals hereto. THIRD GLOBAL AGREEMENT DOCUMENTS shall have the meaning ascribed tosuch term in the recitals hereto. TRANSACTIONS means the execution, delivery and performance by theBorrowers of this Agreement, the other Credit Documents, the Revolving LoanDocuments and the transactions contemplated herein and therein. WARRANT CERTIFICATES: collectively, the Second Warrant Certificate, theFourth Warrant Certificate, the Fifth Warrant Certificate, the Sixth WarrantCertificate, the Seventh Warrant Certificate, the Eighth Warrant Certificate,the Ninth Warrant Certificate, the Tenth Warrant Certificate and the EleventhWarrant Certificate. WHOLLY OWNED SUBSIDIARY: with respect to any Person, any corporation,partnership or other entity of which all of the equity securities or otherownership interests (other than, in the case of a corporation, directors'qualifying shares) are directly or indirectly owned or controlled by such Personor one or more Wholly Owned Subsidiaries of such Person or by such Person andone or more Wholly Owned Subsidiaries of such Person. 16 SECTION 2. CERTAIN ACKNOWLEDGEMENTS. The parties hereby acknowledge and agree that prior to theRestructuring Effective Date, the Borrowers have borrowed the principal amountof $10,095,068.21 of Term Loan Obligations from the Lender. The Borrowers herebyfurther expressly acknowledge and agree that as of December 15, 2003, theoutstanding Term Loan Obligations are in the principal amount (excluding accruedand unpaid interest) of $10,095,068.21, and, as summarized in schedule B hereto,comprise the following indebtedness owed to Lender: (a) the outstandingprincipal balance on Cadiz Loan is $3,103,860.02, (b) the outstanding principalbalance on the CVDC Loan is $3,299,488.32, (c) the outstanding principal balanceon the L/C Loan is $719,494.90, and (d) the outstanding principal balance on the1995 Loan is $2,972,224.97. The foregoing amounts do not include (y) accrued andunpaid interest from and after September 30, 2003, which accrued interestBorrowers remain obligated to repay, or (z) the reduction of $95,068.21 to theprincipal amount of the L/C Loan as set forth in Section 7(E) hereof. Each ofthe Term Loan Obligations (including, but not limited to, the obligations underthe CVDC Note, the Cadiz Note, the Reimbursement Agreement and the 1995 Note arethe joint and several obligations of the Borrowers to repay such Term LoanObligations to the Lender. Each of the CVDC Note, the Cadiz Note, theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Reimbursement Agreement and the 1995 Note shall also be evidenced by amended andrestated notes, which shall be duly and validly executed and delivered by theBorrowers, payable to the order of the Lender, which notes shall replace theexisting CVDC Note, the Cadiz Note, the Reimbursement Agreement and the 1995Note. SECTION 3. NO SATISFACTION. After taking into account the provisions of Section 7(E)hereof, the Borrowers hereby expressly acknowledge and agree that nothing inthis Agreement or in any document or instrument executed in connection with orpursuant to this Agreement shall constitute a satisfaction of or a novation asto all or any portion of Cadiz' indebtedness under the CVDC Loan, the 1995 Loan,the Cadiz Loan, the Guarantee, the Reimbursement Agreement or the 1995 Loan orthe other Loan Obligations. The Borrowers hereby unconditionally reaffirms,reconfirms and restates its obligation to pay in full the indebtedness arisingunder the Cadiz Loan, the Reimbursement Agreement, the Guarantee, the L/C Loan(as adjusted herein) and the 1995 Loan (collectively, the "CADIZ INDEBTEDNESS")to Lender and such obligations constitute allowed, legal, valid, binding,enforceable and non-avoidable obligations of the Borrowers, and are not subjectto any offset, defense, counterclaim, avoidance, or subordination pursuant tothe Bankruptcy Code or any other applicable law. Each Borrower herebyunconditionally reaffirms, reconfirms and restates its obligation to pay in fullthe indebtedness arising under the CVDC Loan and the 1995 Loan (the "CVDCINDEBTEDNESS") to Lender. Each Borrower as to both the Cadiz Indebtedness andCVDC Indebtedness hereby further acknowledges and agrees that (a) it has nodefenses to the enforcement of such obligations (or any portion thereof) or anyof the other Loan Obligations; and (b) it has no counter-claims or claims ofoffset whatsoever with respect to any of the Loan Obligations (or any portionthereof) and that neither this Agreement nor the consummation of thetransactions contemplated herein will give rise to any such defenses,counter-claims or claims of offset. 17 SECTION 4. REPRESENTATIONS AND WARRANTIES; UNDERTAKINGS. Each Borrower hereby represents and warrants to the Lendereach of the representations and warranties that each such Borrower gave to theRevolving Lenders under the Restated Revolving Credit Agreement and the otherRestated Loan Documents mutatis mutandi as if given to the Lender hereunder, allof which shall apply and be enforceable for the benefit of the Lender as iffully set forth herein and made on and as of the date hereof. Each Borrowerfurther represents and warrants that (a) on the date hereof no Event of Defaultor Default (other than those that have been previously cured or will be cured onthe Restructuring Effective Date) under any Credit Document has occurred, (b)the execution and delivery by it of this Agreement and the other Sixth GlobalAgreement Documents has been duly authorized by all requisite corporate action,and it has obtained or will obtain prior to the Effective Date any requiredapprovals of third parties for the execution and delivery of such documents, (c)Lender has performed or complied with all material obligations required to beperformed or complied with by it under the Credit Documents and, as of the datehereof, there are no amounts due and owing by Lender under the Credit Documentsas amended and in effect on the Restructuring Effective Date, and (f) the Lenderhas no obligation to acquire additional notes or to make additional loans orextensions of credit to the Borrowers under the Credit Documents or hereunder,and (g) to such Borrower's knowledge, upon due inquiry, Lender has not engagedin any acts, conduct or omissions that could result in the Lender receiving asmaller distribution on account of the Term Loan Obligations or the Shares (asdefined in the ING/Ansbacher Assignment Agreement) than would otherwise apply.Each of the parties hereto represents and warrants that such party has fullauthority and legal power to execute this Agreement and each of the other SixthGlobal Agreement Documents that it has executed and that this Agreement and eachof the Credit Documents (as amended by the Sixth Global Agreement Documents)constitute valid and binding obligations of such party. As set forth in the 1995Loan Agreement, (x) each Borrower hereby reaffirms its undertaking to use itsbest efforts to substitute direct first, second, third and fourth lien deeds oftrust for the security interests currently held by Lender in the EVCO Collateraland Harweal Collateral; and (y) each Borrower hereby reaffirms its undertakingto provide to Lender all such financial and other information as Lender may fromtime to time require concerning the Water Assets. In addition, each Borrowerwill provide to Lender any documents and information provided to the RevolvingSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Lenders under any Revolving Credit Agreement and the other Revolving LoanDocuments. SECTION 5. CONDITIONS PRECEDENT. A. RESTRUCTURING EFFECTIVE DATE. This Agreement shall becomeeffective on the date (the "RESTRUCTURING EFFECTIVE DATE") on which the Lendershall notify the Borrowers that the following conditions have been satisfied (orwaived in accordance with Section 16(E) hereof), in the Lender's solediscretion: (1) ING shall have received the Past Due Payment (which is the same payment required under the Credit Agreement and should not be paid twice by the Borrowers). 18 (2) CRE has been duly formed and is validly existing by Cadiz in accordance with the CRE LLC Agreement. (3) Cadiz shall have transferred substantially all of its assets, rights and interests in Cadiz' property that constitutes ING Collateral for the Lender to its CRE Subsidiary, subject to the Liens and obligations arising under the Revolving Loan Documents and the Term Loan Documents in favor of ING. (4) to the extent required in the CRE LLC Agreement, Cadiz and CRE shall have executed the Cadiz/CRE Management Agreement, which agreement shall be binding and in effect. (5) The Lender shall have received budget and projections that are reasonably satisfactory to the Lender. (6) The Lender shall have received counterparts of this Agreement and the other Sixth Global Agreement Documents (in recordable form, where appropriate) duly executed and delivered by the Borrowers in form and substance satisfactory to Lender (in Lender's absolute discretion), including, but not limited to, the following: (a) this Agreement; (b) the following documents relating to the CVDC Loan: (A) Sixth Amended and Restated CVDC Note, in the form attached hereto in Exhibit K; (B) Sixth Modification of the First CVDC Deed of Trust, in the form attached hereto in Exhibit L; (C) Sixth Modification of the Cadiz Second Deed of Trust, in the form attached hereto in Exhibit M (D) Sixth Modification of the Cadiz First Assignment, in the form attached hereto in Exhibit N; (c) the following documents relating to the Cadiz Loan: (A) Sixth Amended and Restated Cadiz Note, in the form attached hereto in Exhibit O;Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (B) Sixth Modification of the Cadiz First Deed of Trust, in the form attached hereto in Exhibit P; 19 (C) Sixth Modification of the Second CVDC Deed of Trust, in the form attached hereto in Exhibit Q; (d) the following documents relating to the L/C Loan: (A) Sixth Amended and Restated Reimbursement Agreement duly executed by Cadiz and CRE, in the form attached hereto in Exhibit R; (B) Sixth Modification of the Cadiz Third Deed of Trust, in the form attached hereto in Exhibit S; (C) Sixth Modification of the Third CVDC Deed of Trust, in the form attached hereto in Exhibit T; (D) Sixth Modification of Cadiz Third Assignment, in the form attached hereto in Exhibit U; (E) Sixth Modification of Third CVDC Security Agreement, in the form attached hereto in Exhibit V; (e) the following documents relating to the 1995 Loan: (A) Sixth Amended and Restated 1995 Note, in the form attached hereto in Exhibit W; (B) Sixth Modification of the Cadiz Fourth Deed of Trust, in the form attached hereto in Exhibit X; (C) Sixth Modification of the Fourth CVDC Deed of Trust, in the form attached hereto in Exhibit Y; (D) Pledge and Security Agreement for 1995 Note, in the form attached hereto in Exhibit Z; (f) the Fifth Modification of the Cadiz Deed of Trust (PSWRI), in the form attached hereto in Exhibit AA; (g) the Fifth Modification of the Cadiz Deed of Trust (SWFG), in the form attached hereto in Exhibit BB; (h) the Fourth Modification of the Cadiz Seventh Deed of Trust (Piute), in the form attached hereto in Exhibit CC; (i) the following documents: (A) the Registration Rights Agreement; 20Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (B) the Purchaser Certificate in the form attached hereto in Exhibit DD; (C) the Cash Collateral Account Agreement, which shall be opened in compliance with Section 2.16 of the Revolving Credit Agreement; (D) a copy of the CRE LLC Agreement; (E) a copy of the Certificate of Designations evidencing to the satisfaction of the Lenders that such document has been properly filed with the Secretary of State of the State of Delaware; (F) the Cadiz Series F Preferred Stock Certificate; (G) the certificate of cancellation with respect to series D, E-1 and E-2 preferred stock of Cadiz; (H) the Consent to Cadiz/Sun World Settlement; (I) the certificate of formation for CRE; and (J) the CRE Assignment and Assumption Agreement. (7) Each Borrower, to the extent that it is a party thereto, 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 Borrowers and, as applicable, their Participating Subsidiaries remain bound by the terms and provisions of the following documents: (a) each of the Warrant Certificates; (b) each of the Revolving Warrants; (c) the other Credit Documents, as amended and in effect. (8) the Lender shall have received an opinion from each Borrower's counsel, in substantially the form annexed hereto as Exhibit EE, in form and substance satisfactory to the Lender (A) that each 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 Sixth Global Agreement Documents, (C) that this Agreement and the other Sixth Global Agreement Documents constitute valid, binding and enforceable obligations of Cadiz, and (D) as to such other matters as the Lender shall reasonably request, which opinion is supported by a 21 certification from each Borrower's restructuring counsel stating that such counsel knows of no error or inaccuracy in and knows of no reason why the Lender should not rely upon the opinion of suchSource: CADIZ INC, 10-K, November 02, 2004Powered 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's counsel, both in form and substance reasonably satisfactory to such Borrower and the Lender. (9) the Lender shall have received certified copies of the resolutions (in form and content satisfactory to Lender) of the Board of Directors of Cadiz approving and authorizing this Agreement and the other Sixth Global Agreement Documents, 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 Cadiz in furtherance and in connection with this Agreement and/or the other Sixth Global Agreement Documents; (10) the Lender shall have received from the Delaware Secretary of State a Certificate of Good Standing with respect to Cadiz, a certificate evidencing the formation of the CRE Borrower as a limited liability company in the State of Delaware, and a certificate evidencing that each Borrower is qualified to do business in California, all of which certificates must be in form and content satisfactory to Administrative Agent. (11) the Lender shall have received certificates (in form and content satisfactory to Lender) of the Secretary of each Borrower, certifying as to the names and signatures of the officers authorized to sign this Agreement and the other documents to be executed and delivered on its behalf pursuant to this Agreement. (12) Except as provided in Section 3.09 of the Revolving Creit Agreement (or as provided for under 5(B) hereof), to the best of each 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 Lender as security for the Term 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. (13) Each Borrower shall have caused appropriate officers of such Borrower to execute and deliver to Lender such additional certificates with respect to matters relating to the transactions contemplated herein as Lender may require. (14) Each 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 22 Lender) such other documents, instruments, agreements and writings as Lender may require in connection with the creation or continuation of any security interest(s) granted to Lender in furtherance of the transactions contemplated by this Agreement or as Lender may otherwise require in connection with the consummation of such transactions (including, without limitation, current estoppel certificates relating to the EVCO Collateral and the Harweal Collateral; guaranty waivers, security agreements; pledges; assignments; subordination agreements; endorsements;Source: CADIZ INC, 10-K, November 02, 2004Powered 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. certificates; certifications; reports; and studies). (15) The Lender shall have received such other documents as the Lender may reasonably request. (16) The Lender shall have received confirmation, in form and substance satisfactory to the Lender, that (i) Borrowers have paid (a) all premiums for the endorsements to the Title Policies required pursuant to clause A above and (b) all recording and filing fees relating to the recording of the amendment to the Cadiz Deeds of Trust and the CVDC Deeds of Trust required to be delivered pursuant to Section 5 of this Agreement and (ii) all amendments to the Cadiz Deeds of Trust and the CVDC Deeds of Trust required to be delivered pursuant to Section 5(B) of this Agreement have been duly accepted for recording. (17) As of the date hereof, or as soon as practicable hereafter, but in no event later than ten (10) days hereafter (provided that Lender has made such a request within four (4) days hereafter), Uniform Commercial Code financing statements covering all the security interests created by or pursuant to the Security Documents in the ING Collateral pledged pursuant thereto, shall have been executed and delivered by each Borrower to the Lender 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 Lender may reasonably request or as shall be necessary to perfect such security interests to the extent required by the applicable Security Documents. (18) No Default shall have occurred and be continuing after giving effect to the transactions set forth in the Restated Revolving Credit Agreement and this Agreement. (19) After giving effect to the transactions set forth in this Agreement and the Restated Revolving Credit Agreement, each Borrower shall have performed or observed and be continuing to perform each term, covenant or agreement contained in any Credit Document or Revolving Loan Document. 23 (20) The Administrative Agent shall have received all fees, preferred stock and other amounts due and payable on or prior to the Restructuring Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder. (21) All governmental and third party approvals necessary or, in the discretion of the Lender, advisable in connection with the Transaction, the financing contemplated hereby and the continuing operations of the Borrowers 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. (22) The Lender shall have received confirmation, in formSource: CADIZ INC, 10-K, November 02, 2004Powered 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 substance satisfactory to the Lender, that (i) Borrowers have paid (a) all premiums for the endorsements to the Title Policies required pursuant to Section 5(B)(1)(a) hereof, (b) all recording and filing fees relating to the recording of the CRE Grant Deed and the amendments to the Cadiz Deeds of Trust and CVDC Deeds of Trust required to be delivered pursuant to this Section 5(A) and 5(B) of this Agreement, and (c) amounts sufficient to satisfy all real property taxes with respect to the property encumbered by the Cadiz Deeds of Trust and the CVDC Deeds of Trust, along with any fine, penalty, interest, late charge or similar fine or penalty with respect to the payment of such taxes, to Chicago Title Insurance Company with instructions to utilize such funds to pays such taxes, fines, penalties, interest, late charges or similar fines or penalties, and (ii) the CRE Grant Deed and all amendments to the Cadiz Deeds of Trust and CVDC Deeds of Trust required to be delivered pursuant to this Section 5(A) of this Agreement, each in form and substance satisfactory to Lender and as executed and ready for recordation, have been duly delivered to Chicago Title Insurance Company. (23) the "Restructuring Effective Date" as defined in the Restated Revolving Credit Agreement shall have occurred. Each of the conditions set forth in this Section 5(A) shall be waivable by Lender in its sole and absolute discretion, it being understood and agreed that any such waiver shall only be valid if made in writing by Lender. B. CONDITIONS SUBSEQUENT(1) Not later than the December 22, 2003,Borrowers shall cause the following conditions subsequent to be satisfied: (a) the Lender shall have received a "date down and modification" endorsement to each of the mortgagee title insurance policies 24 (collectively, the "TITLE POLICIES") issued for the benefit of the Lender with respect to the Cadiz Deeds of Trust, and the CVDC 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 Cadiz Deeds of Trust and the CVDC Deeds of Trust required to be delivered pursuant to Section 5 of this Agreement and the continued priority of the Cadiz Deeds of Trust and the CVDC Deeds of Trust granted to the Lender, (iii) confirm that all real property taxes with respect to the property encumbered by the Cadiz Deeds of Trust and the CVDC Deeds of Trust have been paid prior to the date of the Title Policies, along with any fine, penalty, interest, late charge or similar fine or penalty with respect to the payment of such taxes, (iv) be otherwise in form and substance satisfactory to the Lender in its sole discretion; (b) all real property taxes with respect to the property encumbered by the Cadiz Deeds of Trust and the CVDC Deeds of Trust have been paid prior to the date of the Title Policies, along with any fine, penalty, interest, late charge or similar fine or penalty with respect to the payment of such taxes, and (c) the delivery to the Administrative Agent (or its counsel) by each Borrower of any Uniform CommercialSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Code financing statements covering all the security interests created by or pursuant to the Pledge and Security Agreements in the ING Collateral pledged pursuant thereto, as executed by each Borrower to the Lender, along with such financing statements, or other statements or documents to the same purposes, within the time period required under Section 5(A)(17) hereof. (2) Any failure to satisfy the conditions subsequent set forth in Section 5(B)(1)(a) or (b) on or before December 22, 2003, or the condition subsequent set forth in Section 5(B)(1)(c) by the date required therein, shall constitute an Event of Default. SECTION 6. COVENANTS A. AFFIRMATIVE COVENANTS. Until the Term Loan Obligations shallhave been paid in full, each Borrower covenants and agrees with the Lenders toeach of the affirmative covenants agreed to by such Borrower set forth inArticle V of the Restated Revolving Credit Agreement mutatis mutandi as if givento the Lender hereunder, all of which shall apply and be enforceable for thebenefit of the Lender as if fully set forth herein and made a part hereof as iffully set forth herein. 25 B. NEGATIVE COVENANTS. Until the Term Loan Obligations shall havebeen paid in full, each Borrower covenants and agrees with the Lenders to eachof the negative covenants agreed to by such Borrower set forth in Article VI ofthe Restated Revolving Credit Agreement mutatis mutandi as if given to theLender hereunder, all of which shall apply and be enforceable for the benefit ofthe Lender as if fully set forth herein and made a part hereof as if fully setforth herein. SECTION 7. AMENDMENTS. Subject to the satisfaction of the conditionsprecedent specified in Section 5 hereof, but effective as of the date hereof,the Credit Documents shall be amended as follows: A. CERTAIN MANDATORY PREPAYMENTS RELATING TO, INTER ALIA,METROPOLITAN WATER DISTRICT PAYMENTS. The provisions and terms set forth inSection 6(C) of the Fourth Global Amendment Agreement shall cease to be ineffect as of the Restructuring Effective Date. On and after the RestructuringEffective Date, in addition to any other prepayments required under the CreditDocuments, prepayments of the Term Loan Obligations shall be required as follows(any prepayment of the Term Loan Obligations set forth in (a) and (b) of thisSubsection shall be effected in each case in the manner and to the extentspecified in Subsection (3) of this Section 7(A)). (1) CERTAIN MANDATORY PREPAYMENTS FOR EQUITY CONTRIBUTION. Subject to Section 7(A)(2) below, to the extent, if any, that either Borrower raises, collects, or receives, proceeds from any Equity Issuance in any manner after the Restructuring Effective Date, then the Borrowers shall prepay the Loan Obligations in an aggregate amount equal to 35% of such cumulative proceeds to prepay the Lender's outstanding Loan Obligations (such amount of proceeds, the "MANDATORY EQUITY PREPAYMENT") (as allocated between the Revolving Loan Obligations and the Term Loan Obligations as determined by Lender in its sole discretion); PROVIDED, HOWEVER, that if and to the extent that the amount of Cash in the Cash Collateral Account is less than the Maximum Cash Collateral Amount, then such Borrower may deposit all or a portion of the Mandatory Equity Prepayment in the Cash Collateral Account subject to the Cash Collateral Account Agreement. (2) CASHLESS EQUITY ISSUANCES TO THIRD PARTIES. If there is an Equity Issuance after the Restructuring Effective Date involving Persons not affiliated withSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Borrowers or their Affiliates and who are not "insiders" (as defined in section 101 of title 11 of the United States Code), employee or agent of any such entities under which there are no cash or other liquid proceeds thereof (a "CASHLESS EQUITY ISSUANCE"), then the Cadiz Borrower must provide all holders of the Cadiz Series F Preferred Stock with anti-dilution protections as provided in the Cadiz Series F Preferred Stock Certificate and the Preferred Stock Certificate of Designations. (3) APPLICATION. Prepayments to the Term Loan Loan Obligations described in the above subsections of Section 7(A) and allocated, in accordance with 26 subsections 7(A)(1) for the prepayment of Term Loan Obligations, shall be applied, subject to the allocation described in section 2.21 of the Revolving Credit Agreement, in the following order: (a) then due and payable interest and fees under the Credit Documents; and (b) then the principal amounts outstanding under the Notes (as applied to each of the Notes in the Lender's sole discretion); and (c) then all other Term Loan Obligations and other amounts due under the Revolving Loan Documents. (4) For purposes of this Agreement, the following term shall have the following meaning: "Equity Issuance" shall mean (a) any issuance or sale by either of the Borrowers or any of their respective Subsidiaries after the Restructuring Effective Date of (i) any capital stock, partnership (limited or general) or limited liability company membership interests (certificated or otherwise), (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 Borrowers or any of their 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 (including a limited or general partnership or limited liability company membership interest (certificated or otherwise) (or the right to obtain any equity interest upon exercise, exchange or conversion thereof), in either of the Borrowers or any of their respective Subsidiaries, or (b) the receipt by either Borrower or any of their respective Subsidiaries after the Restructuring Effective Date 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 either Borrower to either of the Borrower or any Subsidiary of the Borrowers, or (y) any capital contribution by either Borrower or any Wholly Owned Subsidiary of either Borrower to any Subsidiary of either Borrower. B. JOINT AND SEVERAL LIABILITY. The Loan Obligations shallconstitute one joint and several direct and general obligation of all of theBorrowers. Notwithstanding anything to the contrary contained herein, each ofthe Borrowers shall be jointly and severally, with each other Borrower, directlyand unconditionally liable to the Lender for all Term Loan Obligations and Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 27shall have the obligations of co-maker with respect to the Loans, the Notes andthe Loan Obligations, it being agreed that the advances to each Borrower inureto the benefit of all Borrowers, and that the Lender is relying on the joint andseveral liability of the Borrowers as co-makers in extending and continuing theextension of the Term Loan Obligations hereunder. Each Borrower herebyunconditionally and irrevocably agrees that upon default in the payment when due(whether at stated maturity, by acceleration or otherwise) of any principal of,or interest on, any Note or other Term Loan Obligation payable to the Lender, itwill forthwith pay the same, without notice or demand. C. AMENDED INTEREST RATE. Subject to the satisfaction of theconditions precedent specified in Section 5 hereof, but effective as of the datehereof, as set forth in the other Sixth Global Agreement Documents, the Lenderand the Borrowers have agreed to modify the interest rate with respect to all ofthe Term Loan Obligations as follows: (1) Each Term Loan Obligation shall bear interest at a rate per annum equal to the Applicable Interest Rate for the Interest Period in effect for such Term Loan Obligation. On the first Interest Payment Date after the Restructuring Effective Date, the Borrowers shall be obligated to pay (or satisfy) interest accruing on the Loans from and after September 30, 2003 though such Interest Payment Date. (2) Notwithstanding the foregoing, if any principal of, interest on any Loan Obligation or other Loan Obligation payable by the Borrowers 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 of the Notes, 2% plus the rate otherwise applicable to such Notes as provided in the preceding paragraph of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to Notes as provided in subsection (1) of this Section. (3) Accrued interest on each Term Loan Obligation shall be payable in arrears on each Interest Payment Date for such Term Loan Obligation; PROVIDED that (i) interest accrued pursuant to subsection (2) 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. (4) All interest hereunder shall be computed on the basis of a year of 360 days, and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). D. INTEREST RATE ELECTION. In its sole discretion, as provided inthis section, Borrowers may elect to pay accrued interest on any Note on anInterest Payment Date (or, in the case of a prepayment, on the date of suchprepayment) for such Note either: (A) at the PIK&Cash Payment Rate through theremittance of both (i) the Cash Portion, which is a payment 28in Cash corresponding to an interest rate of 4% per annum plus (ii) the PIKPortion corresponding to an interest rate of 8% per annum (such election, a"PIK&CASH PAYMENT ELECTION"); or (B) at the Cash Payment Rate through theremittance of the Cash Payment Amount, which is a payment on Cash correspondingSource: CADIZ INC, 10-K, November 02, 2004Powered 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 an interest rate of 8% (such election, a "CASH PAYMENT ELECTION"). (1) To make a PIK&Cash Payment Election pursuant to this Section 7(D) with respect to any Note for any Interest Period (or, in the case of a prepayment, on the date of such prepayment, the portion of an Interest Period ending on the prepayment date), the Borrowers shall notify the Lender of such election by facsimile or 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, six (6) Business Days before the prepayment date) for the current Interest Period for such Borrowing (the "PIK&CASH PAYMENT ELECTION DEADLINE"). Each telephonic PIK&Cash Payment Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written PIK&Cash Payment Election Request in a form approved by the Administrative Agent and signed by the Borrowers. (2) Each telegraphic and written PIK&Cash Payment Election Request shall specify the Term Loan Obligation to which such PIK&Cash Payment Election Request applies; (3) Following receipt of a PIK&Cash Payment Election Request, (a) the Lender shall advise the Borrowers by 11 a.m., New York time, on the Interest Payment Date (or, in the case of a prepayment, on the prepayment date) relating to such PIK&Cash Payment Election Request of the details thereof, including the Lender's determination of the Cash Payment Portion and the PIK Portion (including its calculation thereof) as determined pursuant to Subsection (6) hereof, and (b) within ten (10) Business Days after the PIK&Cash Payment Election Deadline, the Borrowers shall deliver to the Lender a new note in substantially the form hereof for the PIK Portion relating to such PIK&Cash Payment Election Request, provided, however, that the failure to deliver any such PIK Portion note shall not affect the Borrowers' obligations relating to the PIK Portion (or interest thereon) from and after the Interest Payment Date giving rise thereto. (4) Subject to Section 7(D)(6) below, if the Borrowers fail to deliver a timely PIK&Cash Payment Election Request with respect to any Note prior to the PIK&Cash Payment Election Deadline for an Interest Period and in accordance with requirements of this section, then (i) the Borrowers shall be deemed to have made the Cash Payment Election for that Note for that 29 Interest Period and (ii) the Applicable Interest Rate for that Note for that Interest Period shall be the Cash Payment Rate. (5) Notwithstanding any other provision of this Agreement, the Borrowers shall not be entitled to make the PIK&Cash Payment Election if a Default or an Event of Default has occurred and is continuing (unless this requirement is waived by the Required Lenders). If the Borrowers are not entitled to make the PIK&Cash Payment Election for any Interest Period with respect to any Note or Term Loan Obligation, then the Interest Rate for that Interest Period for such Note or Term Loan Obligation shall be the Cash Payment Rate.Source: CADIZ INC, 10-K, November 02, 2004Powered 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) With respect to any Borrowing for which a PIK&Cash Payment Election has been made in accordance with this Section 7(D), the PIK Portion shall mean the principal amount that has a value equal to the amount of accrued interest at the PIK Portion Rate for that Term Loan Obligation for the Interest Period (or, in the case of a prepayment, the portion of an Interest Period ending on the prepayment date) for which the PIK&Cash Payment Election has been made (the "PIK PORTION"). The PIK Portion shall not be paid in cash but shall automatically and without further action on the part of any party be added to the outstanding principal amount of the Term Loan Obligations on the Interest Payment Date for such Interest Period (or, in the case of a prepayment, the portion of an Interest Period ending on the Prepayment Date) and shall be considered as outstanding principal under the Notes that shall accrue interest thereon from and after such Interest Payment Date at the Applicable Interest Rate. (7) Further, with respect to any Borrowing for which a PIK&Cash Payment Election has been made in accordance with this Section 7(D), (1) interest shall accrue on the Term Loan Obligation with respect to such Note for such Interest Period (or, in the case of a prepayment, the portion of such Interest Period ending on the repayment date) at the PIK&Cash Payment Rate, and (2) the Cash Portion shall mean the amount of accrued interest at the Cash Portion Rate for that Obligation for the Interest Period (or, in the case of a prepayment, the portion of an Interest Period ending on the Prepayment Date) for which the PIK&Cash Payment Election has been made (the "CASH PORTION"). The Cash Portion shall be payable in immediately available funds on the Interest Payment Date for such Interest Period (or, in the case of a prepayment, the portion of an Interest Period ending on the Prepayment Date). (8) With respect to any Term Loan Obligation for which a Cash Payment Election has been made in accordance with this Section 7(D), (1) interest shall accrue on the Term Loan Obligation with respect to such Term Loan Obligation for such Interest Period (or, in the case of a prepayment, the 30 portion of such Interest Period ending on the Prepayment Date) at the Cash Payment Rate, and (2) the Cash Payment Amount shall mean the amount of accrued interest at the Cash Payment Rate for that Borrowing for the Interest Period (or, in the case of a prepayment under Section 7(A), the portion of an Interest Period ending on the Prepayment Date) for which the Cash Payment Election has been made (the "CASH PAYMENT AMOUNT"). The Cash Payment Amount shall be payable in immediately available funds on the Interest Payment Date for such Interest Period (or, in the case of a prepayment under Section 7(A), the portion of an Interest Period ending on the Prepayment Date) in accordance with section 7(N) hereof. E. REDUCTION IN PRINCIPAL AMOUNT OF THE L/C LOAN; ADJUSTMENTS. Onthe Restructuring Effective Date, the parties agree that principal amountoutstanding on the L/C Loan shall be reduced by $95,068.21 (from $719,494.90 to$624,426.69. After giving effect to this cancellation of debt, the parties agreethat the principal amount outstanding on the Term Notes shall be equal to thesum of $10,000,000. In addition, Borrowers covenant and agree that on theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Restructuring Effective Date any Past Due Expense Deficiency shall becapitalized and included as part of the principal outstanding under the TrancheA Notes (as defined in the Revolving Credit Agreement). F. NO REDUCTION IN OBLIGATIONS. Except to the extent specificallyprovided in 7(E) above, no payment or payments made by any of the Borrowers orany other Person or received or collected by the Administrative Agent or anyLender from any of the Borrowers or any other Person by virtue of any action orproceeding or any setoff or appropriation or application at any time or fromtime to time in reduction of or in payment of the Loan Obligations shall bedeemed to modify, reduce, release or otherwise affect the liability of eachBorrower under this Agreement, which shall remain liable for the LoanObligations until the Loan Obligations are paid in full and the Commitments areterminated. G. OBLIGATIONS ABSOLUTE. Each Borrower agrees that the LoanObligations will be paid strictly in accordance with the terms of the CreditDocuments, regardless of any law, regulation or order now or hereafter in effectin any jurisdiction affecting any of such terms or the rights of theAdministrative Agent or any Lender with respect thereto. All Loan Obligationsshall be conclusively presumed to have been created in reliance hereon. Theliabilities under this Agreement shall be absolute and unconditionalirrespective of: (a) any lack of validity or enforceability of any CreditDocuments or any other agreement or instrument relating thereto; (b) any changein the time, manner or place of payments of, or in any other term of, all or anypart of the Loan Obligations, or any other amendment or waiver thereof or anyconsent to departure therefrom, including any increase in the Loan Obligationsresulting from the extension of additional credit to any Borrower or otherwise;(c) any taking, exchange, release or non-perfection of any collateral, or anyrelease or amendment or waiver of or consent to departure from any guaranty forall or any of the Loan Obligations; (d) any change, restructuring or terminationof the corporate structure or existence of any Borrower; or (e) any othercircumstance which might otherwise constitute a defense available to, or adischarge of, any 31Borrower. This Agreement shall continue to be effective or be reinstated, as thecase may be, if at any time any payment of any of the Loan Obligations isrescinded or must otherwise be returned by the Administrative Agent or anyLender upon the insolvency, bankruptcy or reorganization of any Borrowerotherwise, all as though such payment had not been made. H. WAIVER OF SURETYSHIP DEFENSES. Each Borrower agrees that thejoint and several liability of the Borrowers provided for in Section 7(B) shallnot be impaired or affected by any modification, supplement, extension oramendment of any contract or agreement to which the other Borrowers mayhereafter agree (other than an agreement signed by the Lender specificallyreleasing such liability), nor by any delay, extension of time, renewal,compromise or other indulgence granted by the Lender with respect to any of theLoan Obligations, nor by any other agreements or arrangements whatever with theother Borrowers or with anyone else, each Borrower hereby waiving all notice ofsuch delay, extension, release, substitution, renewal, compromise or otherindulgence, and hereby consenting to be bound thereby as fully and effectuallyas if it had expressly agreed thereto in advance. The liability of each Borroweris direct and unconditional as to all of the Loan Obligations, and may beenforced without requiring the Lender first to resort to any other right, remedyor security. Each Borrower hereby expressly waives promptness, diligence, noticeof acceptance and any other notice (except to the extent expressly provided forherein or in another Loan Document) with respect to any of the Loan Obligations,the Notes, this Agreement or any other Loan Document and any requirement thatthe Lender protect, secure, perfect or insure any Lien or any property subjectthereto or exhaust any right or take any action against any Borrower or anyother Person or any collateral. I. PAYMENTS RECEIVED ON ACCOUNT OF ANY OF BORROWERS' ASSETS ORPROPERTY RIGHTS. In addition to any other prepayment requirements contained inthe Credit Documents and the Revolving Loan Documents, each Borrower herebycovenants and agrees that it shall remit directly to Lender all payments orproceeds that such Borrower receives (or obtains the benefit of) with respectto, on account of, or related to such Borrower's assets or rights to assets as aSource: CADIZ INC, 10-K, November 02, 2004Powered 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. mandatory repayments of the Term Loan Obligations and the Revolving LoanObligations, which repayments shall be applied in order, and subject to thelimitations, contained in Section 7(N) of the Term Sixth Global AmendmentAgreement. J. AMENDED MATURITY DATE. Subject to the satisfaction of theconditions precedent specified in Section 5 hereof, but effective as of the datehereof, as set forth in the other Sixth Global Agreement Documents, the Lenderand the Borrowers have agreed to modify the Credit Documents to provide that allaccrued and unpaid interest and all then unpaid principal on the Term LoanObligations shall be due and payable on the Maturity Date. Extension of Maturity Date upon Satisfaction of Certain Conditions: (1) THE FIRST EXTENSION. If each of the following conditions are satisfied (collectively, the "FIRST EXTENSION REQUIREMENTS"): (i) the Borrowers have paid and satisfied to the Administrative Agent and the Lenders all Loan Obligations, including all interest due on or before the Interest Payment Date that falls on the original Maturity Date, but excluding principal payments, (ii) no Defaults or Events of Default have occurred and are 32 continuing as of the original Maturity Date (unless such Default or Event of Default has been waived in writing by the Administrative Agent), and (iii) after the payment of the interest due on the Interest Payment Date that falls on the Maturity Date, the amount in the Cash Collateral Account is at least equal to 4.0% of the then outstanding principal amount of Loan Obligations (including both the Revolving Loan Obligations and the Term Loan Obligations); then the Maturity Date shall be extended from March 31, 2005 to September 30, 2005. (2) THE SECOND EXTENSION. If each of the following conditions are satisfied (collectively, the "SECOND EXTENSION REQUIREMENTS"): (i) the Maturity Date has been extended to September 30, 2005 pursuant to Section 7(J)(1), (ii) the Borrowers have paid and satisfied to the Administrative Agent and the Lenders all Loan Obligations, including all interest due on or before the Interest Payment Date that falls on the Maturity Date as extended under Section 7(J)(1), but excluding principal payments, (ii) no Defaults or Events of Default have occurred and are continuing as of such extended Maturity Date (unless such Default or Event of Default has been waived in writing by the Administrative Agent), and (iii) after the payment of the interest due on the Interest Payment Date that falls on such extended Maturity Date, the amount in the Cash Collateral Account is at least equal to 4.0% of the then outstanding principal amount of Loan Obligations (including both the Revolving Loan Obligations and the Term Loan Obligations); then the Maturity Date shall be further extended from September 30, 2005 to March 31, 2006. (3) THE THIRD EXTENSION. If each of the following conditions are satisfied (collectively, the "THIRD EXTENSION REQUIREMENTS"): (i) the Maturity Date has been extended to March 31, 2006 pursuant to Section 7(J)(2)), (ii) the Borrowers have paid and satisfied to the Administrative Agent and the Lenders all Loan Obligations, including all interest due on or before the Interest Payment Date that falls on the Maturity Date as extended under Section 7(J)(b)(2) above, but excluding principal payments, (ii) no Defaults orSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Events of Default have occurred and are continuing as of such extended Maturity Date (unless such Default or Event of Default has been waived in writing by the Administrative Agent), and (iii) after the payment of the interest due on the Interest Payment Date that falls on the Maturity Date as extended under 7(J)(2), the amount in the Cash Collateral Account is at least equal to 4.0% of then outstanding principal amount of outstanding Loan Obligations (including both the Revolving Loan Obligations and the Term Loan Obligations) as of such date; then the Maturity Date shall be further extended from March 31, 2006 to September 30, 2006. 33 K. ASSIGNMENTS; PARTICIPATIONS. The Lender may assign orparticipate all or a portion of the Lender's Term Loans to any other person orentity in the same manner, and in accordance with the same terms and procedures,as set forth in the Revolving Credit Agreement. L. EVENTS OF DEFAULT. If any of the following events ("EVENTS OFDEFAULT") shall occur: (1) Any Event of Default that exists under the Revolving Loan Documents; (2) Borrowers shall fail to pay any principal of, or interest on, any Term Loan Obligations or any fee or any other amount payable under this Agreement or any other Credit 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; (3) any representation or warranty made or deemed made by or on behalf of the either Borrower or any Subsidiary in or in connection with this Agreement or any other Credit 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 Credit 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; (4) either Borrower shall fail to observe or perform any covenant, condition or agreement contained in Sections 5.02 or 5.03 of the Revolving Credit Credit (as made applicable to this Agreement by Section 6(A) hereof) (with respect to the Borrower's existence) or in Article VI of the Revolving Credit Credit (as made applicable to this Agreement by Section 6(A) hereof); PROVIDED, HOWEVER, that with respect to any such default of Cadiz, such default could reasonably be expected to result in a Material Adverse Effect; (5) either Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in subclauses (L)((1), (2) or (3) above, 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), provided, however, that with respect to any such default of the Cadiz Borrower, such default could reasonably be expected to result in a Material Adverse Effect; (6) Any material default of the terms of Sixth Global Amendment Agreement or the other Sixth GlobalSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Amendment Documents. 34 M. RIGHTS AND REMEDIES FOR ANY EVENT OF DEFAULT. In addition tothe rights and remedies set forth in the Credit Documents, upon the occurrence,and during the continuation, of an Event of Default, the Lender may do any oneor more of the following: (1) by notice to the Borrowers declare all of the Cadiz Indebtedness and CVDC Indebtedness to be immediately due and payable; (2) settle or adjust disputes and claims directly with account debtors for amounts and upon terms which the Lender considers advisable, and in such cases, the Lender will credit Borrowers' account with only the net amounts received by the Lender in payment of such disputed accounts after deducting all amounts payable by or to the Lender hereunder or under any of the other Credit Documents in connection therewith; (3) without notice to or demand upon either Borrower, make such payments and do such acts as the Lender considers necessary or reasonable in its reasonable discretion to protect its security interests in its collateral agrees to assemble the collateral (other than the real property) if the Lender so requires, and to make the collateral available to the Lender at a place that the Lender may designate which is reasonably convenient to both parties. Borrowers authorize the Lender to enter the premises where any of its collateral is located, to take and maintain possession of the collateral, or any part of it, and to pay, purchase, contest, or compromise any Lien that in the Lender's determination appears to conflict with the Lender's Liens as provided hereunder or under any of the Credit Documents and to pay all reasonable expenses incurred in connection therewith and to charge Borrowers' account therefor. With respect to any of each Borrower's owned or leased premises, each such Borrower hereby grants the Lender a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of the Lender's rights or remedies provided herein, under any other Credit Document, at law, in equity, or otherwise; (4) without notice to either of the Borrowers (such notice being expressly waived), and without constituting a retention of any collateral in satisfaction of an obligation (within the meaning of the Uniform Commericial Code), set off and apply to the Cadiz Indebtedness and CVDC Indebtedness any and all (a) balances and deposits of the Borrower held by the Lender (including any amounts received in any cash management account), or (b) any indebtedness at any time owing to or for the credit or the account of either of the Borrowers by the Lender; (5) to the extent of the Cadiz Indebtedness and CVDC Indebtedness which have become due and payable, hold, as cash collateral, any and all balances and deposits of Borrowers held by the Lender, and any amounts 35 received in any cash management accounts, to secure the full and final repayment of all of the CadizSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Indebtedness and CVDC Indebtedness; (6) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the collateral held by the Lender. The Lender is hereby granted a license or other right to use, without charge, each Borrower's labels, patents, copyrights, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to such collateral, in completing production of, advertising for sale, and selling any collateral and each Borrower's rights under all licenses and all franchise agreements shall inure to the Lender's benefit; (7) sell any of the collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including any of either Borrower's premises) as the Lender determines is commercially reasonable. It is not necessary that any collateral be present at any such sale; (8) the Lender shall give notice of the disposition of the collateral as follows: (A) Lender shall give Borrowers a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of such collateral, the time on or after which the private sale or other disposition is to be made; and (B) the notice shall be personally delivered, or mailed, postage prepaid, to Borrowers as provided in Section 12 hereof, at least 10 days (or, in the case of a mailed notice, 13 days) before the earliest time of disposition set forth in the notice; no notice needs to be given prior to the disposition of any portion of the collateral that is perishable or threatens to decline speedily in value or that is of a type customarily sold on a recognized market; (9) the Lender may credit bid and purchase at any public sale; (10) the Lender may seek the appointment of a receiver or keeper to take possession of all or any portion of the collateral or to operate same and, to the maximum extent permitted by law, may seek the appointment of such a receiver without the requirement of a hearing upon five (5) business days written notice to Borrowers; (11) the Lender shall have all other rights and remedies available at law or in equity or pursuant to any other Credit Document; (12) any deficiency that exists after disposition of the collateral as provided above will be paid immediately by the Borrowers. Any excess will be 36 returned, without interest and subject to the rights of third Persons, by the Lender to Borrowers; and (13) (a) the Lender shall have the right to receive any and all cash dividends paid in respect of any pledged equity interests and make application thereof to the obligations in such order as it may determine and (b) at the request of the Lender, all shares of the pledged collateral shall be registered in the name ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Lender or its nominee, and the Lender or its nominee may thereafter exercise (i) all voting, corporate or other rights pertaining to such shares of any pledged stock at any meeting of shareholders of any of the issuers or otherwise; and (ii) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of any pledged equity interests as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the pledged equity interests upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any of such issuers, or upon the exercise by the Borrowers or the Lender of any right, privilege or option pertaining to such shares of the pledged equity interests, and in connection therewith, the right to deposit and deliver any and all of the pledged equity interests with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Lender shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.The rights and remedies of the Lender under this Agreement, the other CreditDocuments, and all other agreements shall be cumulative. The Lender shall haveall other rights and remedies not inconsistent herewith as provided under theUniform Commercial Code, by law, or in equity. No exercise by the Lender of oneright or remedy shall be deemed an election, and no waiver by the Lender of anyEvent of Default or Additional Event of Default shall be deemed a continuingwaiver. No delay by the Lender shall constitute a waiver, election, oracquiescence by it. Except as expressly provided above in this Section,presentment, demand, protest, notice of intent to accelerate the maturity of theLoan Obligations, notice of acceleration of the maturity of the CadizIndebtedness and CVDC Indebtedness and all other notices of any kind are herebyexpressly waived. The rights of the Lender hereunder shall not be conditioned orcontingent upon the pursuit by the Lender of any right or remedy against theBorrowers or against any other Person which may be or become liable in respectof all or any part of the Cadiz Indebtedness and CVDC Indebtedness or againstany other collateral security therefor, guarantee thereof or right of offsetwith respect thereto. The Lender shall not be liable for any failure to demand,collect or realize upon all or any part of any collateral held on account of theCadiz Indebtedness and CVDC Indebtedness or for any delay in doing so, nor shallit be under any obligation to sell or otherwise dispose of any such collateralupon the request of the Borrowers or any other Person or to take any otheraction whatsoever with regard to such collateral or any part thereof. 37 N. PAYMENTS RECEIVED ON ACCOUNT OF ANY OF EITHER BORROWER'SASSETS OR PROPERTY RIGHTS. In addition to any other prepayment requirementscontained in the Credit Documents and the Revolving Loan Documents, eachBorrower hereby covenants and agrees that it shall remit directly to Lender allpayments or proceeds that such Borrower receives (or obtains the benefit of)with respect to, on account of, or related to such Borrower's assets or rightsto assets as a mandatory repayments of the of Term Loan Obligations and theRevolving Loan Obligations, which repayments shall be applied in the followingorder: (A) then due and payable interest under, the Revolving Loan Obligations; (B) the principal amounts outstanding under, the Revolving Loan Obligations; (C) then due and payable interest in the following order, (i) the L/C Loan, (ii) the 1995 Loan, (iii) the CVDC Loan, and (iv) theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Cadiz Loan; (D) the principal amounts outstanding under, in the following order, (i) the L/C Loan, (ii) the 1995 Loan, (iii) the CVDC Loan, and (iv) the Cadiz Loan; (E) then all other Revolving Loan Obligations and other amounts due under the Revolving Loan Documents; and (F) then all other Term Loan Obligations and other amounts due under the Credit Documents.Amounts so prepaid in respect of the Revolving Loans (as defined in theRevolving Loan Agreement) may not be reborrowed. Any such prepayment of theRevolving Loans shall permanently reduce the Commitments (as defined in theRevolving Loan Agreement). O. CERTAIN COVENANTS REGARDING EXPRESSIONS OF INTEREST. Until allprincipal of and interest on each Loan Obligation and all fees payable hereundershall have been paid in full, each Borrower covenants and agrees with the Lenderthat each Borrower shall promptly provide the Lender with written notificationof any offers or written indications of interest concerning or relating to thepurchase, directly or indirectly, of any of the Collateral or any of Borrowers'businesses as soon as practicable with all relevant information concerning anysuch offer or indication of interest. SECTION 8. REGISTRATION AND INVESTOR RIGHTS. Cadiz hereby agrees that all common stock of Cadiz, each ofthe Warrant Certificates and the Revolving Warrants, the Preferred Certificateof Designation and their respective underlying shares issued at any time, alongwith all Common Stock of the Cadiz Borrower issued at any time upon theconversion of the any Cadiz Series F Preferred Stock, in 38each case, whether before or after the date hereof, under any of the CreditDocuments, the Sixth Global Amendment Agreement, the Sixth Agreement Documents,the Revolving Loan Documents shall be accorded the registration rights by Cadizas set forth in, as the case may be, the Registration Rights Agreement. SECTION 9. GENERAL RELEASE. In consideration of the amendments, waivers, consents, and theother terms and provisions of this Agreement and the other Sixth GlobalAgreement Documents, each Borrower, on behalf of itself, its agents, successors,assigns, subsidiaries, partners and Affiliates hereby fully release and foreverdischarge Lender and Lender's agents, consultants, heirs, successors, assigns,Affiliates, directors, officers, employees, shareholders, executives, servants,attorneys, accountants, representatives and other related persons (collectively,the "RELEASED PARTIES") from any and all rights, claims, demands, actions,causes of action, costs, losses, suits, liens, debts, damages, judgments,executions and demands of every nature, kind and description whatsoever, whethernow known or unknown, either at law, in equity or otherwise, which Cadiz, in itsown capacity and as successor by merger to CVDC, or any of their agents,successors, assigns, subsidiaries, partners and/or Affiliates ever had or mayhave against Lender or the other Released Parties, including, withoutlimitation, all claims arising under or in connection with the Cadiz Loan, CVDCLoan, Reimbursement Agreement, 1995 Loan, the Security Documents, the Guarantee,and/or the other Credit Documents and/or in connection with the dealings betweenthe parties up to and including the closing of the transactions contemplated inthis Agreement and all claims which have arisen or may arise in any other waywhatsoever; provided that nothing herein shall be deemed to release Lender orany other Released Party from any liability or obligations arising in connectionwith facts or circumstances which occur or arise for the first time after theEffective Date of the transaction contemplated by this Agreement. It is further understood and agreed that the foregoing generalrelease extends to all claims of every kind and nature whatsoever, known,Source: CADIZ INC, 10-K, November 02, 2004Powered 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. suspected or unsuspected, liquidated or contingent, foreseen or unforeseen, andCadiz, on behalf of itself and as successor by merger to CVDC, and theirrespective agents, successors, assigns, subsidiaries, partners and Affiliateshereby waive all rights under Section 1542 of the California Civil Code. Section1542 of the California Civil Code provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH DEBTOR." SECTION 10. WAIVER OF ANTI-DEFICIENCY PROTECTION. Cadiz hereby waives, as to this Agreement and any and allCredit Documents heretofore executed in connection with the Cadiz Loan, the CVDCLoan, the Guarantee, the 39Reimbursement Agreement, the 1995 Loan, and/or the Security Documents, and anyand all the Sixth Global Agreement Documents, any defense, protection or rightunder: (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 11. ADVICE OF COUNSEL. Each of the parties acknowledges that it has entered into thisAgreement and the other Sixth Global Agreement Documents voluntarily and that ithas had the full opportunity to obtain and consult with counsel of its ownchoice to advise it in the negotiations for, and in execution of, this Agreementand the documents to be executed pursuant hereto. Each of the parties furtheracknowledges that it has read this Agreement, that it is fully aware of thecontents of this Agreement and the other Sixth Global Agreement Documents andtheir legal effect and that it has not relied upon any advice, representation orwarranty of any kind whatsoever from the other party or its counsel. SECTION 12. NOTICES. All notices, elections, consents, approvals, demands,objections, requests or other communications which the parties may be requiredor desire to give pursuant to, under, or by virtue of this Agreement, the otherSixth Global Agreement Documents, or in the Credit Documents must be in writingand sent by (a) personal delivery, (b) overnight courier service, (c) certifiedmail, return receipt requested, postage prepaid, or (d) telecopy or otherfacsimile transmission (provided that if sent by telecopy or other facsimiletransmission, such must also sent by express mail or courier (for next businessday delivery)), addressed as follows: 40 if to either of the Borrowers, to it at:Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Cadiz Inc. Attn: Chief Financial Officer 777 S. Figueroa Street Suite 4250 Los Angeles, California 90017 Telephone No.: 213-271-1600 Facsimile No.: 213 271-1614 with 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 if to the Lender, to it at: ING Capital, LLC 1325 Avenue of the Americas New York, New York 10019 Attention: Joan Chiappe, Vice President, Pam Kaye and Annette Miller-Lewis and Norma Cruz Reference: Cadiz Telephone No.: 646-424-6000 Facsimile No.: 646- 424 8260 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.: 212-504-6666The parties may designate another addressee or change its address for noticesand other communications hereunder by a notice given to the other parties in themanner provided in this paragraph. A notice or other communication sent incompliance with the provisions of this paragraph shall be deemed given andreceived on the date it is delivered to the other party by telecopy, personaldelivery, overnight courier service, or certified mail. 41 SECTION 13. CREDIT DOCUMENTS REMAIN BINDING EXCEPT AS EXPRESSLY AMENDEDOR MODIFIED BY SIXTH GLOBAL AGREEMENT DOCUMENTS. Except as specifically and expressly provided herein and/or inthe other Sixth Global Agreement Documents, the Credit Documents shall remainunchanged and in full force and effect. Without limiting the obligations of theBorrowers under any of the Credit Documents, as amended by the Sixth GlobalAgreement Documents, each Borrower, jointly and severally, agrees to pay orreimburse the Lender on demand for all reasonable out-of-pocket costs andexpenses of the Lender (including, without limitation, the reasonable fees andexpenses of counsel to the Lender) in connection with the negotiation,preparation, execution and delivery of this Agreement and the Sixth GlobalAgreement Documents. SECTION 14. GOVERNING LAW; DISPUTE RESOLUTION. A. THIS AGREEMENT, THE RIGHTS AND OBLIGATIONS OF THE PARTIESUNDER THIS AGREEMENT, AND ANY CLAIM OR CONTROVERSY DIRECTLY OR INDIRECTLY BASEDUPON OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THISAGREEMENT (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY), INCLUDING ALLMATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL IN ALL RESPECTS BEGOVERNED BY AND INTERPRETED, CONSTRUED AND DETERMINED IN ACCORDANCE WITH, THEINTERNAL LAWS OF THE STATE OF CALIFORNIA (WITHOUT REGARD TO ANY CONFLICTS OF LAWPROVISION THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHERSource: CADIZ INC, 10-K, November 02, 2004Powered 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. JURISDICTION). B. Each of the Borrowers and the Lender submit to and accept theexclusive jurisdiction of any United States federal court sitting in the CentralDistrict of California or any other court of appropriate jurisdiction sitting inthe County of Los Angeles, City of Los Angeles with respect to any action, suitor proceeding arising out of or based upon this Agreement or any matter relatinghereto and waives any objection it may have to the laying of venue in any suchcourt or that such court is an inconvenient forum or does not have personaljurisdiction over it. Each of the Borrowers and the Lender agree that service ofprocess in any such action, suit or proceeding may be validly made upon it bycertified or registered U.S. Mail, postage prepaid, to the address set forth inSection 11. Each of the parties hereto waives any right it may have to trial byjury in any proceeding arising out of this Agreement. The Parties irrevocablyagree that, should either Party institute any legal action or proceeding in anyjurisdiction (whether for an injunction, specific performance, damages orotherwise) in relation to this Agreement, no immunity (to the extent that it mayat any time exist, whether on the grounds of sovereignty or otherwise) from suchaction or proceeding shall be claimed by it or on its behalf, any such immunitybeing hereby irrevocably waived, and each Party irrevocably agrees that it andits assets are, and shall be, subject to such legal action or proceeding inrespect of its obligations under this Agreement. 42 SECTION 15. METHOD OF PAYMENTS. All payments made by either of the Borrowers to the Lender onaccount of the Term Loan Obligations shall be made in the lawful currency of theUnited States of America by wire transfer of immediately available funds to theLender in accordance with the wire instructions set forth on SCHEDULE A hereto. SECTION 16. MISCELLANEOUS. A. SURVIVAL. All representations, warranties, covenants and otherprovisions made by the parties hereto shall be considered to have been reliedupon by the parties hereto and shall survive the execution, performance anddelivery of this Agreement. B. SUCCESSORS AND ASSIGNS. This Agreement and the other SixthGlobal Agreement Documents, including, without limitation, the representations,warranties, covenants and indemnities contained herein or in the other SixthGlobal Agreement Documents, as the case may be, (i) shall inure to the benefitof and be enforceable by the parties hereto and their respective successors andpermitted assigns, and (ii) shall be binding upon and enforceable against theparties hereto and their respective successors and assigns. C. FURTHER ASSURANCES. Each of the parties hereto agrees toexecute and deliver, or to cause to be executed and delivered, all suchinstruments, and to take all such action, as the other party may reasonablyrequest in order to consummate the transactions and transfers contemplatedhereunder and to effectuate the intent and purposes of this Agreement. D. COUNTERPART EXECUTION; TELECOPIES. This Agreement may beexecuted in one or more counterparts, each of which shall be an original but allof which, taken together, shall constitute one agreement binding all of theparties hereto. Transmission by telecopier of an executed counterpart of thisAgreement shall be deemed to constitute due and sufficient delivery of suchcounterpart, and the parties hereto hereby agree to deliver to each other anoriginal of such counterpart promptly after delivery of the facsimile. E. AMENDMENTS; WAIVERS. (1) No amendment of any provision of thisAgreement or any other Sixth Global Agreement Document shall be effective unlessit is in writing and signed by the Lender and the Borrowers and no waiver of anyprovision of this Agreement or any other Sixth Global Agreement Document, norconsent to any departure by the Lender or the Borrowers therefrom, shall beeffective unless it is in writing and signed by the party affected thereby, andthen such waiver or consent shall be effective only in the specific instance andfor the specific purpose for which given. (2) No failure on the part of any party to exercise, andno delay in exercising, any right hereunder or under any other Sixth GlobalSource: CADIZ INC, 10-K, November 02, 2004Powered 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 Document shall operate as a waiver thereof by such party, nor shallany single or partial exercise of any right hereunder or thereunder, as the casemay be, preclude any other or further exercise thereof or the exercise of anyother right. The rights and remedies of each party provided herein or in theother Sixth Global Agreement Documents (x) are cumulative and are in additionto, and not exclusive of, 43any rights or remedies provided by law (except as otherwise expressly set forthherein) and (y) are not conditional or contingent on any attempt by such partyto exercise any of its rights under any other related document against the otherparty or any other entity. F. INTEGRATION. This Agreement and the other Sixth GlobalAgreement Documents constitute the entire agreement and understanding betweenthe parties hereto with respect to the subject matter hereof and supersede allprior agreements, understandings or representations pertaining to the subjectmatter hereof, whether oral or written. G. SEVERABILITY. Any provision of this Agreement that is invalidor unenforceable in any jurisdiction shall, as to such jurisdiction, beineffective to the extent of such invalidity or unenforceability withoutrendering invalid or unenforceable the remaining provisions of this Agreement oraffecting the validity or enforceability of any provisions of this Agreement inany other jurisdiction. H. CONFLICT. In the event that any of the terms and provisions ofthis Agreement conflicts with any of the terms and provisions of the other SixthGlobal Agreement Documents, the terms and provisions of this Agreement shall, asbetween Lender and Borrowers, govern and control. In the event that any of theterms and provisions of the Sixth Global Agreement Documents conflicts with anyof the terms and provisions of the other Credit Documents, the terms andprovisions of the Sixth Global Agreement Documents shall, as between Lender andBorrowers, govern and control. I. COSTS BORNE BY NON-PREVAILING PARTY. In the event of anydispute with respect to this Agreement, the prevailing party shall be entitledto recover from the non-prevailing party all costs and attorneys' fees. J.CAPTIONS; PARAGRAPH HEADINGS. The captions and paragraph headings used hereinare for convenience only and shall not be used to interpret any term hereof. 44 IN WITNESS WHEREOF, the Lender and the Borrowers have executedthis Agreement by their duly authorized officers as of the date first set forthabove. CADIZ INC., as a Borrower By: /s/ Keith Brackpool --------------------------------- Name: Keith Brackpool Title: Chief Executive Officer CADIZ REAL ESTATE LLC, as a Borrower By: /s/ Richard E. Stoddard --------------------------------- Name: Richard E. Stoddard Title: ManagerSource: CADIZ INC, 10-K, November 02, 2004Powered 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. ING CAPITAL, LLC, as Lender By: /s/ Geoffrey W. Arens --------------------------------- Name: Title:SCHEDULE A: WIRE INSTRUCTIONS FOR ING AS THE LENDER JPMorgan Chase Bank New York, New York ABA No.: 021 000 021 Account No.: 066297311 Account Name: ING Capital Attention: J. Chiappe Reference: Cadiz 2SCHEDULE B: LENDER'S LOANS ------------------------------- ------------------------- Term Loan Obligations Principal Balance on December 15, 2003(1) ------------------------------- ------------------------- Cadiz Loan $ 3,103,860.02 CVDC Loan $ 3,299,488.32 L/C Loan $ 719,494.90 1995 Loan $ 2,972,224.97 TOTALS $10,095,068.21 ------------------------------- -----------------------------------(1) This chart does not reflect the reduction, effective as of theRestructuring Effective Date, of $95,068.21 to the principal amount of the L/CLoan as set forth in Section 7(E) hereof. On the Restructuring Effective Date,after giving effect to such reduction, (a) the outstanding principal balance onthe L/C Loan shall be $624,426.69 and (b) principal amount outstanding on theTerm Notes shall be equal to the aggregate amount of $10,000,000. 3 TABLE OF EXHIBITS TO SIXTH GLOBAL AMENDMENT AGREEMENTEXHIBIT A Cadiz Series F Preferred Stock CertificateEXHIBIT B Cash Collateral Account Agreement"EXHIBIT C Consent to Cadiz/Sun World LeaseEXHIBIT D Consent to Sun World SettlementEXHIBIT E CRE Grant DeedEXHIBIT F CRE LLC AgreementEXHIBIT G New Cadiz/Sun World LeaseEXHIBIT H Preferred Stock Certificate of DesignationsEXHIBIT I Registration Rights AgreementEXHIBIT J Sun World SettlementEXHIBIT K Sixth Amended and Restated CVDC NoteEXHIBIT L Sixth Modification of the First CVDC Deed of TrustEXHIBIT M Sixth Modification of the Cadiz Second Deed of TrustEXHIBIT N Sixth Modification of the Cadiz Second Deed of TrustEXHIBIT O Sixth Amended and Restated Cadiz NoteEXHIBIT P Sixth Modification of the Cadiz First Deed of TrustEXHIBIT Q Sixth Modification of the Second CVDC Deed of TrustSource: CADIZ INC, 10-K, November 02, 2004Powered 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 R Sixth Amended and Restated Reimbursement AgreementEXHIBIT S Sixth Modification of the Cadiz Third Deed of TrustEXHIBIT T Sixth Modification of the Third CVDC Deed of TrustEXHIBIT U Sixth Modification of Cadiz Third AssignmentEXHIBIT V Sixth Modification of Third CVDC Security AgreementEXHIBIT W Sixth Amended and Restated 1995 NoteEXHIBIT X Sixth Modification of the Cadiz Fourth Deed of TrustEXHIBIT Y Sixth Modification of the Fourth CVDC Deed of TrustEXHIBIT Z Pledge and Security Agreement for 1995 NoteEXHIBIT AA Fifth Modification of the Cadiz Deed of Trust (PSWRI)EXHIBIT BB Fifth Modification of the Cadiz Deed of Trust (SWFG)EXHIBIT CC Fourth Modification of the Cadiz Seventh Deed of Trust (Piute)EXHIBIT DD Purchaser CertificateEXHIBIT EE Borrowers' Counsel Opinions 4Source: CADIZ INC, 10-K, November 02, 2004Powered 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 10.12 ING CAPITAL, LLC AMENDED AND RESTATED TRANCHE A NOTE$15,020,000.00 Dated as of September 30, 2003 FOR VALUE RECEIVED, each of (a) CADIZ INC. (f/k/a Cadiz Land Company,Inc.) ("CADIZ"), a Delaware corporation and (b) CADIZ REAL ESTATE LLC ("CRE",and along with Cadiz, collectively, the "BORROWERS", and each individually, a"BORROWER"), a Delaware limited liability company, promise to pay, jointly andseverally, to the order of ING CAPITAL, LLC (the "TRANCHE A LENDER") (f/k/a INGBaring (U.S.) Capital LLC, a Delaware limited liability company), as agent forMiddenbank Curacao N.V., at the place and in the currency and manner designatedin the Credit Agreement referred to below, in immediately available funds, theprincipal sum of FIFTEEN MILLION AND TWENTY THOUSAND Dollars ($15,020,000.00),in lawful money of the United States of America, and to pay interest on theunpaid principal amount of such Tranche A Loans at the place and in the currencyand manner designated in the Credit Agreement, for the period commencing onSeptember 30, 2003 until such Tranche A Loan shall be paid in full, at the ratesper annum and on the dates provided in the Credit Agreement. The date, amount, prepayment, interest rate and maturity date of eachTranche A Loan made by the Tranche A Lender to the Borrowers, and each paymentmade on account of the principal thereof, shall be recorded by the Tranche ALender on its books and, prior to any transfer of this Tranche A Note, endorsedby the Tranche A Lender on the schedule attached hereto or any continuationthereof, provided that the failure of the Tranche A Lender to make any suchrecordation or endorsement shall not affect the obligations of the Borrower tomake a payment when due of any amount owing under the Credit Agreement orhereunder in respect of the Tranche A Loans made by the Tranche A Lender. This Tranche A Note is one of the Tranche A Notes referred to in theSixth Amended and Restated Credit Agreement dated as of December 15, 2003 (asmodified, supplemented, amended and restated and in effect from time to time,the "CREDIT AGREEMENT") among Borrowers, the Lenders party thereto, and INGCapital, LLC, as Administrative Agent, and evidences Tranche A Loans made by theTranche A Lender thereunder. Terms used but not defined in this Tranche A Notehave the respective meanings assigned to them in the Credit Agreement. Any holder of this Tranche A Note shall have all rights provided to aTranche A Lender under the Credit Agreement. The Credit Agreement provides for the acceleration of the maturity ofthis Tranche A Note upon the occurrence of certain events and for prepayments ofLoans upon the terms and conditions specified therein. Except as permitted by Section 9.04 of the Credit Agreement, thisTranche A Note may not be assigned by the Tranche A Lender to any other Person. This Tranche A Note includes the indebtedness heretofore evidenced bythat certain Tranche A Note dated November 25, 1997, as amended and in effectprior to the date hereof, made by Cadiz, as Borrower, in favor of Tranche ALender in the principal amount of Fifteen Million and 00/100 Dollars (US$15,000,000.00) (the "PRIOR NOTE") and this Tranche A Note amends and restatesthe Prior Note in its entirety. The obligations of the Borrowers under this Tranche A Note shallconstitute one joint and several direct and general obligation of all of theBorrowers. Notwithstanding anything to the contrary contained herein, each ofthe Borrowers shall be jointly and severally, with the other Borrower, directlyand unconditionally liable to the Tranche A Lender for all obligations hereunderand shall have the obligations of co-maker with respect to this ` Tranche A Noteand the obligations hereunder, it being agreed that the advances to eachBorrower inure to the benefit of all Borrowers, and that the Tranche A Lender isrelying on the joint and several liability of the Borrowers as co-makers inextending and continuing the extension of the Tranche A Note as providedSource: CADIZ INC, 10-K, November 02, 2004Powered 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. hereunder. Each Borrower hereby unconditionally and irrevocably agrees that upondefault in the payment when due (whether at stated maturity, by acceleration orotherwise) of any principal of, or interest on, this Note payable to the TrancheA Lender, it will forthwith pay the same, without notice or demand. 2 This Tranche A Note shall be governed by, and construed in accordancewith, the law of the State of California. EACH PARTY HERETO HEREBY WAIVES, TOTHE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIALBY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF ORRELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ONCONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NOREPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO OR TO THE OR TO THECREDIT AGREEMENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSONOR PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOINGWAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO OR TO THECREDIT AGREEMENT HAVE BEEN INDUCED TO ENTER INTO, AS APPLICABLE, THIS NOTE ANDTHE CREDIT AGREEMENT BY, AMONG OTHER THINGS, THE FOREGOING MUTUAL WAIVERS ANDCERTIFICATIONS. CADIZ INC., a Delaware corporation, as a Borrower By: /s/ Keith Brackpool -------------------------------- Name: Keith Brackpool Title: Chief Executive Officer CADIZ REAL ESTATE LLC, a Delaware limited liability company, as a Borrower By: /s/ Richard E. Stoddard -------------------------------- Name: Richard E. Stoddard Title: Manager 2 SCHEDULE OF TRANCHE A LOANS This Tranche A Note evidences Tranche A Loans made under thewithin-described Credit Agreement to the Borrowers, on the dates, in theprincipal amounts set forth below, subject to the payments and prepayments ofprincipal set forth below: PRINCIPAL AMOUNT UNPAID AMOUNT PAID OR PRINCIPAL NOTATIONDATE OF LOAN PREPAID AMOUNT MADE BY----- ------- ------- ------ -------As of date hereof $15,000,000.00 $0.00 $15,000,000.00 As agreed by all partiesSource: CADIZ INC, 10-K, November 02, 2004Powered 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 10.13 ING CAPITAL, LLC AMENDED AND RESTATED TRANCHE B NOTE$10,000,000.00 Dated as of September 30, 2003 New York, New York FOR VALUE RECEIVED, each of (a) CADIZ INC. (f/k/a Cadiz Land Company,Inc.) ("CADIZ"), a Delaware corporation and (b) CADIZ REAL ESTATE LLC ("CRE",and along with Cadiz, collectively, the "BORROWERS", and each individually, a"BORROWER"), a Delaware limited liability company, promise to pay, jointly andseverally, to the order of ING CAPITAL, LLC (the "TRANCHE B LENDER") (f/k/a INGBaring (U.S.) Capital LLC, a Delaware limited liability company), as agent forMiddenbank Curacao N.V., at the place and in the currency and manner designatedin the Credit Agreement referred to below, in immediately available funds, theprincipal sum of TEN MILLION Dollars ($10,000,000.00), in lawful money of theUnited States of America, and to pay interest on the unpaid principal amount ofsuch Tranche B Loans at the place and in the currency and manner designated inthe Credit Agreement, for the period commencing on September 30, 2003 until suchTranche B Loan shall be paid in full, at the rates per annum and on the datesprovided in the Credit Agreement. The date, amount, prepayment, interest rate and maturity date of eachTranche B Loan made by the Tranche B Lender to the Borrowers, and each paymentmade on account of the principal thereof, shall be recorded by the Tranche BLender on its books and, prior to any transfer of this Tranche B Note, endorsedby the Tranche B Lender on the schedule attached hereto or any continuationthereof, provided that the failure of the Tranche B Lender to make any suchrecordation or endorsement shall not affect the obligations of the Borrower tomake a payment when due of any amount owing under the Credit Agreement orhereunder in respect of the Tranche B Loans made by the Tranche B Lender. This Tranche B Note is one of the Tranche B Notes referred to in theSixth Amended and Restated Credit Agreement dated as of December 15, 2003 (asmodified, supplemented, amended and restated and in effect from time to time,the "CREDIT AGREEMENT") among Borrowers, the Lenders party thereto, and INGCapital, LLC, as Administrative Agent, and evidences Tranche B Loans made by theTranche B Lender thereunder. Terms used but not defined in this Tranche B Notehave the respective meanings assigned to them in the Credit Agreement. Any holder of this Tranche B Note shall have all rights provided to aTranche B Lender under the Credit Agreement. The Credit Agreement provides for the acceleration of the maturity ofthis Tranche B Note upon the occurrence of certain events and for prepayments ofLoans upon the terms and conditions specified therein. Except as permitted by Section 9.04 of the Credit Agreement, thisTranche B Note may not be assigned by the Tranche B Lender to any other Person. This Tranche B Note includes the indebtedness heretofore evidenced bythat certain Tranche B Note dated March 8, 2002, made by Cadiz, as Borrower, infavor of Tranche B Lender in the principal amount of Ten Million and 00/100Dollars (US $10,000,000.00) (the "PRIOR NOTE") and this Tranche B Note amendsand restates the Prior Note in its entirety. The obligations of the Borrowers under this Tranche B Note shallconstitute one joint and several direct and general obligation of all of theBorrowers. Notwithstanding anything to the contrary contained herein, each ofthe Borrowers shall be jointly and severally, with the other Borrower, directlyand unconditionally liable to the Tranche B Lender for all obligations hereunderand shall have the obligations of co-maker with respect to this ` Tranche B Noteand the obligations hereunder, it being agreed that the advances to eachBorrower inure to the benefit of all Borrowers, and that the Tranche B Lender isrelying on the joint and several liability of the Borrowers as co-makers inextending and continuing the extension of the Tranche B Note as providedhereunder. Each Borrower hereby unconditionally and irrevocably agrees that uponSource: CADIZ INC, 10-K, November 02, 2004Powered 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. default in the payment when due (whether at stated maturity, by acceleration orotherwise) of any principal of, or interest on, this Note payable to the TrancheB Lender, it will forthwith pay the same, without notice or demand. 2 This Tranche B Note shall be governed by, and construed in accordancewith, the law of the State of California. EACH PARTY HERETO HEREBY WAIVES, TOTHE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIALBY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF ORRELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ONCONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NOREPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO OR TO THE OR TO THECREDIT AGREEMENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSONOR PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOINGWAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO OR TO THECREDIT AGREEMENT HAVE BEEN INDUCED TO ENTER INTO, AS APPLICABLE, THIS NOTE ANDTHE CREDIT AGREEMENT BY, AMONG OTHER THINGS, THE FOREGOING MUTUAL WAIVERS ANDCERTIFICATIONS. CADIZ INC., a Delaware corporation, as a Borrower By: /s/ Keith Brackpool ----------------------------------- Name: Keith Brackpool Title: Chief Executive Officer CADIZ REAL ESTATE LLC, a Delaware limited liability company, as a Borrower By: /s/ Richard E. Stoddard ----------------------------------- Name: Richard E. Stoddard Title: Manager 3 SCHEDULE OF TRANCHE B LOANS This Tranche B Note evidences Tranche B Loans made under thewithin-described Credit Agreement to the Borrowers, on the dates, in theprincipal amounts set forth below, subject to the payments and prepayments ofprincipal set forth below: PRINCIPAL AMOUNT UNPAID AMOUNT PAID OR PRINCIPAL NOTATIONDATE OF LOAN PREPAID AMOUNT MADE BY----- ------- ------- ------ -------As of date hereof $10,000,000.00 $0.00 $10,000,000.00 As agreed by all partiesSource: CADIZ INC, 10-K, November 02, 2004Powered 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. LIMITED LIABILITY COMPANY AGREEMENT OF CADIZ REAL ESTATE LLC (a Delaware Limited Liability Company) THIS LIMITED LIABILITY COMPANY AGREEMENT is made as ofDecember 11, 2003, by and among Cadiz Inc., a Delawarecorporation and M. Solomon & Associates, Inc., an individual (the"Independent Member"). WHEREAS, the Company was formed as a Delaware limitedliability company pursuant to a Certificate of Formation filed inthe Office of the Secretary of the State of Delaware on November14, 2003 (the "Formation Date"); and WHEREAS, the Persons executing this Agreement desire toform a limited liability company and to establish theirrespective rights and obligations in connection therewith,pursuant to the Limited Liability Company Act of the State ofDelaware. NOW, THEREFORE, in consideration of the foregoingpremises and of the agreements and obligations set forth hereinand for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the partiesexecuting this Agreement hereby agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. In this Agreement, the following terms shall have the meanings set forth below: (a) "Act" shall mean the Limited Liability Company Act of the State of Delaware, Title 6, Chapter 18, 101 et seq. of the Delaware Code, as the same may be amended from time to time. (b) "Affiliate" of any Person shall mean any Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. (c) "Agreement" shall mean this Limited Liability Company Agreement. (d) "Bank" shall mean ING Capital, LLC. (e) "Board of Managers" shall mean the Board of Managers of the Company. (f) "Cadiz" shall mean Cadiz Inc., a Delaware corporation. (g) "Cadiz Manager" shall mean each Manager appointed to the Board of Managers by Cadiz. (h) "Capital Contribution" shall mean all contributions by a Member to the capital of the Company. (i) "Certificate of Formation" shall mean the Certificate of Formation of the Company filed with the Secretary of State of the State of Delaware. (j) "Company" shall mean Cadiz Real Estate LLC, a limited liability company formed under the laws of the State of Delaware.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (k) "Distribution" shall mean any cash and other property paid to a Member from the Company in respect of such Member's Membership Interest in the Company. (l) "Formation Date" shall have the meaning specified in the Recitals hereof. (m) "Independent Member" shall mean M. Solomon Associates, Inc. and, thereafter, a Person that has not been any of the following within the past five years: (i) a direct or indirect legal or beneficial owner of Cadiz or any of its Affiliates; (ii) a creditor, supplier, employee, officer, director, family member, manager, or contractor of Cadiz or any of its Affiliates; or (iii) a person who controls (directly, indirectly, or otherwise) Cadiz or any of its Affiliates, or any creditor, supplier, employee, officer, director, manager, or contractor of Cadiz or its Affiliates. (n) "Independent Manager" shall mean a Person appointed by the Independent Member to the Board of Managers that has not been any of the following within the past five years: (i) a direct or indirect legal or beneficial owner of Cadiz or any of its Affiliates; (ii) a creditor, supplier, employee, officer, director, family member, manager, or contractor of Cadiz or any of its Affiliates; or (iii) a person who controls (directly, indirectly, or otherwise) Cadiz or any of its Affiliates, or any creditor, supplier, employee, officer, director, manager, or contractor of Cadiz or its Affiliates. (o) "Management Agreement" shall mean that certain Management Agreement, between the Company and Cadiz, as agreed to by the Independent Manager pursuant to the terms hereof and as amended thereafter with the consent of the Independent Manager. (p) "Manager" shall mean, collectively, each Cadiz Manager and the Independent Manager. (q) "Member" shall mean each Person executing this Agreement as a Member and each Person who or which may hereafter become a party to this Agreement as provided herein. (r) "Membership Interests" shall mean, with respect to each Member, the percentage interest of such Member in Distributions by the Company. It is understood and agreed that, as of the date hereof, the Cadiz Member shall have a 100% Membership Interest in the Company which Cadiz is receiving in exchange for its capital contribution to the Company. (s) "New Note" shall mean all obligations of any borrower evidenced by, or under, the Sixth Amended and Restated Agreement and the Sixth Global Amendment Agreement, and all documents relating thereto, as such obligations may be amended, modified and restated from time to time). (t) "Person" shall mean any natural person or any corporation, company, governmental authority, limited liability company, partnership, trust, estate, association, unincorporated association, custodian, nominee, or any other individual entity or organization in its own or any representative capacity, or other entity. (u) "Restructuring" shall mean the restructuring of the indebtedness of Cadiz owed to the Bank pursuant to that certain Fifth Amended and Restated Credit Agreement, dated as of March 7, 2002 and that certain Fifth Global Amendment Agreement, dated as of January 31, 2002, all as set forth pursuant to the Sixth Global Amendment Agreement and the Sixth Amended and Restated Credit Agreement. (v) "Sixth Amended and Restated Credit Agreement" means that certain Sixth Amended and Restated Credit Agreement, dated Source: CADIZ INC, 10-K, November 02, 2004Powered 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 of December 15, 2003, among Cadiz and the Company, as co-borrowers, the lenders party thereto, and the Bank, as administrative agent. (w) "Sixth Global Amendment Agreement" shall mean that certain Sixth Global Amendment Agreement, dated as of December 15, 2003, among Cadiz and the Company, as borrowers and ING Capital, LLC, as lender. ARTICLE II ORGANIZATION 2.1 NAME. The name of the Company shall be "Cadiz Real Estate LLC". 2.2 PRINCIPAL PLACE OF BUSINESS AND REGISTERED AGENT. Theaddress of the principal place of business of the Company shallbe 777 S. Figueroa Street, Suite 4250, Los Angeles, CA 90017, andthe name and address of the Company's registered agent in theState of Delaware shall be c/o The Corporation Trust Center, 1209Orange Street, Wilmington, Delaware 19801. 2.3 TERM. The term of the Company shall commence upon the dateof filing of the Certificate of Formation pursuant to Section 18-206 of the Act, and shall continue in full force and effect untildissolution pursuant to Section 8.1 hereof. 2.4 PURPOSES. The Company is formed for the purpose of owningand commercially exploiting assets contributed to it and for suchother actions as may be permitted hereby. ARTICLE III MEMBERS 3.1 MEMBER INTERESTS. (a) Cadiz was admitted to the Company as the initial Member of the Company, effective as of the Formation Date. Cadiz agrees to be bound by all of the terms and provisions of this Agreement and is entitled to exercise all rights and powers conferred upon Members of the Company under this Agreement and the Act. (b) The Company must, at all times, have an Independent Member; provided, however, that the Independent Member shall cease to be a Member at such time as all amounts due under the terms of the New Note are no longer outstanding. The Independent Member shall have no interest in the profits, losses and capital of the Company and shall have no right to receive any Distributions of Company assets. The Independent Member shall be admitted as a Member of the Company within the meaning of the Act upon execution and delivery of this Agreement or a counterpart signature page to this Agreement. (c) The Independent Member may resign, but may not otherwise be removed (other than by the Bank which may remove such Independent Member at any time with or without cause) and shall have the right to name its successor; provided, however, that in the absence of such successor appointment, or in the event of removal by the Bank, the Bank may appoint such Independent Member. 3.2 ADDITIONAL MEMBERS. Any Person may be admitted as a Memberafter the date of this Agreement only upon the affirmative voteor consent of a majority in Membership Interests of the Members,which consent may be given or withheld in each Member's solediscretion, as the case may be; provided, however, that no Personmay be admitted as a Member without the consent of theIndependent Member. 3.3 LIMITATIONS OF LIABILITY. A Member or Manager shall not beSource: CADIZ INC, 10-K, November 02, 2004Powered 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. personally liable for any indebtedness, liability or obligationof the Company, and shall not incur any other liability except asotherwise required by the Act, provided that each Member shallremain personally liable for the payment of its CapitalContribution; provided further that the Independent Member shallhave no liability for Capital Contributions. 3.4 PRIORITY AND RETURN OF CAPITAL. No Member shall havepriority over any other Member, whether for the return of aCapital Contribution or for a Distribution, except as hereinprovided. This Section 3.4 shall not apply to repayment of anyloan or other indebtedness made by a Member to the Company. 3.5 MEETINGS OF MEMBERS. (a) Meetings of Members shall be held at the request of any Member on such date and at such time and place, either within or without the State of Delaware, as agreed upon from time to time by the Members. All such meetings must take place at the principal place of business of the Company set forth in Section 2.2 unless otherwise agreed to by all Members. Written notice stating the place, date, and time of, and the general nature of the business to be transacted at, a meeting of Members, shall be given to each Member, including the Independent Member, in the manner prescribed by Section 9.6, not less than 10 days nor more than 60 days before the date of such meeting. The presence in person of Members holding a majority of the Membership Interests in the Company shall constitute a quorum for the transaction of business at any meeting of Members (assuming compliance with the notice provisions in the preceding sentence). Every matter submitted for a vote or consent of the Members shall be determined by a majority of Membership Interests except as otherwise provided herein or required by the Act; provided, however, that for so long as any amounts due under the terms of the New Note are outstanding, the Members may not take any of the following actions unless any such action has been approved by the Independent Member: (i) institute proceedings to adjudicate the Company bankrupt or insolvent, admit in writing the inability of the Company to pay its debts as they become due, consent to the institution of bankruptcy or insolvency proceedings against the Company, or file or consent to a petition seeking reorganization or relief on behalf of the Company under any applicable federal or state law relating to bankruptcy or insolvency or take any action in furtherance of any such action; (ii) consolidate, merge or combine the Company with, or convert the Company into, any Person; (iii) sell, assign or otherwise dispose of or voluntarily part with (whether in one transaction or in a series of transactions), the control of any of the material assets of the Company to any Person (except for sales or other dispositions in the ordinary course of business); (iv) authorize or incur any indebtedness of the Company; provided, however that the Company is expressly authorized to incur debt pursuant to the New Note and grant collateral as contemplated by the Restructuring; (v) pledge the assets of the Company for the benefit of any Person; provided, however, that the Company is expressly authorized to pledge its assets to secure its obligations under the New Note; or (vi) enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease, or exchange of any property or the rendering of any service) with or for the benefit of any Affiliate Source: CADIZ INC, 10-K, November 02, 2004Powered 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, other than pursuant to the Management Agreement. (b) In lieu of holding a meeting, Members may vote or otherwise take action by a written instrument indicating the consent of Members holding not less than the percentage of Membership Interests that would be necessary to authorize or take such action at a meeting including, with respect to the actions enumerated in Section 3.5(a) hereof, the consent of the Independent Member. In exercising its rights and duties as Independent Member pursuant to this Article III, the Independent Member may consult with counsel of its choice and the reasonable fees and expenses of such counsel shall be the joint and several responsibility of Cadiz and the Company. ARTICLE IV MANAGEMENT 4.1 MANAGEMENT. (a) The management of the Company shall be vested in a Board of Managers. The Board of Managers shall consist of three individuals, one of which shall be the Independent Manager and two of which shall each be Cadiz Managers; provided, however, that the Independent Manager shall cease to be a member of the Board of Managers at such time as all amounts due under the terms of the New Note are no longer outstanding. The Independent Manager may be removed at any time at the sole discretion of the Independent Membe or, if the Independent Member position is vacant, the Bank. In the event of the removal of the Independent Manager, a successor Independent Manager, who shall be any Person the Independent Member may desire, shall be appointed by the Independent Member or, if the Independent Member position is vacant, the Bank. (b) Meetings of the Board of Managers. Meetings of the Board of Managers shall be held at the request of any Manager on such date and at such time and place, either within or without the State of Delaware, as agreed upon from time to time by the Board of Managers. Written notice stating the place, date, and time of, and the general nature of the business to be transacted at, a meeting of the Board of Managers, shall be given to each Manager, including the Independent Manager, in the manner prescribed by Section 9.6, not less than 10 days nor more than 60 days before the date of such meeting. The presence in person of a majority of the Board of Managers shall constitute a quorum for the transaction of business at any meeting of Board of Managers (assuming compliance with the notice provisions in the preceding sentence). All such meetings must take place at the principal place of business of the Company set forth in Section 2.2 unless otherwise agreed to by all Members. (c) Authority of Board of Managers. The Board of Managers shall have full and exclusive right and control (a) over the business and affairs of the Company, (b) to make all decisions affecting the business and affairs of the Company, including, but not limited to, the exclusive right and control to enter into the Management Agreement; provided, however, that for so long as amounts due under the terms of the New Note are outstanding, the Board of Managers may not enter into the Management Agreement without the consent of the Independent Manager; provided further, that the Independent Manager shall be required to approve any amendment to the terms of the Management Agreement and (c) to act for the Company in every capacity under this Agreement and under the Act; provided, however, that for so long as amounts due under the terms of the New Note are outstanding, the Board of Managers may not take any of the actions specified in Section 3.5(a) on behalf of the Company without the consent of the Independent Member. Every matter submitted for a vote or consent of the Board of Managers shall be determined by a majority vote except as otherwise provided herein or required by the Act. In lieu of holding a meeting, the Board of Managers may vote or otherwiseSource: CADIZ INC, 10-K, November 02, 2004Powered 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 action by a written instrument indicating the consent of the Managers that would be necessary to authorize or take such action at a meeting. 4.2 NO EXCLUSIVE DUTY TO COMPANY. The Managers shall not berequired to manage the Company as their sole and exclusivefunction and each Manager may have other business interests andmay engage in other activities in addition to those relating tothe Company. Neither the Company nor any Member shall have anyright pursuant to this Agreement to share in or participate insuch other business interests or activities or to the income orproceeds derived therefrom. No Member or Manager shall incurliability as a result of engaging in any other business interestsor activities. 4.3 AFFIRMATIVE COVENANTS. The Company shall, until such timeas all amounts due under the terms of the New Note are no longeroutstanding, where applicable: (a) consider the interests of its creditors in connection with any bankruptcy or insolvency actions; (b) be qualified as a foreign business under the laws of the State of California; (c) maintain books and records separate from any other Person; (d) conduct its own business solely in its limited liability company name; (e) maintain financial statements separate from any other Person; (f) pay its own liabilities out of its own funds; (g) observe all limited liability company formalities, including the maintenance of current minute books; (h) to the extent the Company's office is located in the offices of any other Person, pay fair market rent for its offices space located in the offices of any other Person and a fair share of any overhead costs, and otherwise fairly and reasonably allocate any shared overhead expenses; (i) use stationary, invoices, and checks separate from any other Person; and (j) hold itself out to the public and all Persons as a legal entity separate from any other Person. 4.4 NEGATIVE COVENANTS. Notwithstanding any contrary provisionof this Agreement, the Company shall not, until such time as allamounts due under the terms of the New Note are no longeroutstanding: (a) institute proceedings to be adjudicated bankrupt or insolvent, admit in writing that it is unable to pay its debts as they become due, consent to the institution of bankruptcy or insolvency proceedings against it, or file or consent to a petition seeking reorganization or relief under any applicable federal or state law relating to bankruptcy or insolvency or take any action in furtherance of any such action, without the unanimous consent of the Board of Managers (including the Independent Manager); (b) consolidate, merge or combine with, or convert into, any Person without the prior written consent of the lenders holding at least 66% of the interests in the New Note or such higher supermajority as may be required pursuant to the terms of the New Note; (c) sell, assign or otherwise dispose of or voluntarily part with (whether in one transaction or in a series of transactions), the control of any of its material assets to any Person (except for sales or other dispositions in the ordinary course ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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. business) without the prior written consent of the lenders holding at least 66% of the interests in the New Note or such higher supermajority as may be required pursuant to the terms of the New Note; (d) commingle assets with those of any other Person; and (e) guarantee or becoming obligated for the debts of any Person or hold out its credit as being available to satisfy the obligations of any Person; provided, however that the Company is expressly authorized to guarantee or become obligated for the debts of any Person or hold out its credit as being available to satisfy the obligations of any Person as contemplated by the Restructuring. 4.5 LIMITATIONS OF LIABILITY. No Member or Manager of theCompany nor any of the directors, officers, partners, members,employees, shareholders, assigns, representatives or agents ofthe foregoing shall be liable to the Company, the Members, or anythird party in damages or otherwise (a) unless a judgment orother final adjudication adverse to him or her establishes thathis or her acts or omissions were in bad faith or involvedintentional misconduct or a knowing violation of the law or thathe or she personally gained in fact a financial profit or otheradvantage to which he or she was not legally entitled, or(b) except as otherwise required by the Act. 4.6 INDEMNIFICATION. The Members, including the IndependentMember, any Manager, including the Independent Manager, and eachofficer and employee of the Company shall be indemnified and heldharmless by the Company from and against any claims and demandsarising from any acts or omissions or alleged acts or omissionsin connection with the affairs of the Company, to the maximumextent permitted by applicable law. The Company and its Members, jointly and severally,release the Independent Member and Independent Manager (each an"Indemnitee") from, and will indemnify each Indemnitee from andagainst, all liability, claims, costs, and expenses (includingreasonable attorney's fees, accounting fees, expert witness fees,costs and expenses) imposed upon, incurred by or asserted againstany Indemnitee or arising out of or in any way relating to anIndemnitee's execution, performance or non-performance of thisAgreement or as a result of or relating to any action, or failureor refusal to act on the part of an Indemnitee with respect tothis Agreement. It is the intention of the parties hereto thatIndemnitees incur no liability, loss, or damage of any kind ornature whatsoever in performing pursuant to this Agreement or inany other way relating to this Agreement, except for the grossnegligence or willful misconduct of such Indemnitee. For so long as any Independent Member and/orIndependent Manager is duly serving, or so long as the Bank hasthe right to appoint either or both pursuant to the terms of thisAgreement, the Company shall maintain Director and Officerinsurance, to the extent such insurance is available uponcommercially reasonable terms, to cover (beginning from theFormation Date) Persons serving in each of and all such positionsand such coverage shall include "runoff" and/or "tail" "coverage"and shall, at all times, be maintained in reasonable amounts andbe subject to reasonable and customary terms and provisions. Theforegoing requirement shall be the joint and several obligationof each of the Company and Cadiz. 4.7 COMPENSATION OF MANAGERS. Each Manager shall be entitled to receive, as compensation for services rendered to the Company asa member of the Board of Managers, (x) reasonable fees and out-of-pocket expenses incurred by each such Manager and (y) othercompensation as agreed to by the Independent Member. It isexpressly understood and agreed that the Independent Managershall, so long as such Independent Manager is duly serving assuch, be entitled to (i) an annual fee in the amount of $25,000,payable in cash quarterly in arrears (the "Annual Fee"), andSource: CADIZ INC, 10-K, November 02, 2004Powered 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. (ii) reasonable fees and expenses of counsel of such IndependentManager's choice in considering any actions as to which suchIndependent Manager's Consent is required pursuant to Section 4.1hereof ("Manager Legal Fees."). The Annual Fee and the ManagerLegal Fees shall be the joint and several obligation of each ofCadiz and the Company. ARTICLE V CAPITAL CONTRIBUTIONS 5.1 Cadiz is admitted as a Member of the Company and shallhereby receive the Membership Interest. Cadiz shall beresponsible for, on the date hereof, an equity contribution tothe Company consisting of certain property as contemplated bySection 5 of the Sixth Global Amendment Agreement. ARTICLE VI DISTRIBUTIONS 6.1 DISTRIBUTIONS. The Board of Managers shall be solelyresponsible for making all determinations of amounts and timingof all Distributions to Members. All Distributions shall be madeto the Members pro rata in proportion to their MembershipInterests. In the sole discretion of the Board of Managers,securities, assets or other property in kind may be distributedto the Members in proportion to their Membership Interests.6.2 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Membershall be entitled to interest on its Capital Contributions or toa return of its Capital Contributions. ARTICLE VII TRANSFERABILITY 7.1 MEMBER TRANSFERS. Subject to (i) Sections 7.2 and 9.8 ofthis Agreement and (ii) for so long as any amounts due under theterms of the New Note are outstanding, any Member may, but onlywith the consent of the Independent Member, sell, assign,transfer, convey or dispose of all or any portion of hisMembership Interest in the Company or any rights or benefits withrespect thereto. 7.2 TRANSFEREE NOT A MEMBER. No Person acquiring an assignment or transfer of an interest in the Company other than a Member shall become a Member except pursuant to Sections 3.2 and 7.1 of this Agreement. If no such approval is obtained, such Person'sinterest in the Company shall only entitle such Person to receivethe Distributions to which the Member from which such Personreceived such interest in the Company would be entitled. NoPerson may be admitted as a Member pursuant to this Article VIIor Article III until such Person executes and delivers to theCompany an agreement, in form and substance satisfactory to theManager, binding such Person to the terms and conditions of thisAgreement as if such Person had been named a Member herein. ARTICLE VIII DISSOLUTION 8.1 DISSOLUTION. For so long as any amounts due under the terms of the New Note are outstanding, the Company shall only bedissolved and its affairs wound up upon the unanimous vote orwritten consent of the Board of Managers (including theIndependent Manager). 8.2 WINDING UP. Upon the dissolution of the Company, the Boardof Managers may, in the name of and for and on behalf of theCompany, prosecute and defend suits, whether civil, criminal oradministrative, sell and close the Company's business, dispose ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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 convey and distribute to the Members any remaining assets ofthe Company, all without affecting the liability of Members.Upon winding up of the Company, the assets shall be distributedas follows: (a) To creditors, including Members and Managers who are creditors, to the extent permitted by law, in satisfaction of liabilities of the Company, whether by payment or by making of reasonable provision for payment thereof, other than liabilities for which reasonable provision for payment has been made and liabilities to Members and former Members for Distributions under Section 18-601 or 18-604 of the Act; (b) To Members and former Members in satisfaction of liabilities for Distributions under Section 18-601 or 18-604 of the Act; and (c) To Members pro rata in proportion to their Membership Interests at the time of such Distribution. 8.3 NONRECOURSE TO OTHER MEMBERS. Except as provided byapplicable law or as expressly provided in this Agreement, upondissolution, each Member shall receive a return of its CapitalContribution solely from the assets of the Company. If theassets of the Company remaining after the payment or discharge ofthe debts and liabilities of the Company are insufficient toreturn any Capital Contribution of any Member, such Member shallhave no recourse against any other Member. 8.4 TERMINATION. Upon completion of the dissolution, windingup, liquidation and distribution of the assets of the Company,the Company shall be deemed terminated. ARTICLE IX GENERAL PROVISIONS 9.1 MERGER AND AMENDMENTS. This Agreement contains the entireagreement among the Members with respect to the subject matterhereof, and supersedes all prior agreements and understandings,written or oral, between the parties with respect thereto,whether or not relied or acted upon. No course of conductpursued or acquiesced in, and no oral agreement or representationsubsequently made, by the Members, and no usage of trade, shallamend this Agreement or impair or otherwise affect any Member'sobligations, rights and remedies pursuant to this Agreement. Forso long as any amounts due under the terms of the New Note areoutstanding, this Agreement may not be modified, amended orotherwise altered without the prior written consent of (i) thelenders holding at least 66% of the interests in the New Note orsuch higher supermajority as may be required pursuant to theterms of the New Note and (ii) the Independent Member. 9.2 HEADINGS. The headings in this Agreement are forconvenience only and shall not be used to interpret or construeany provision of this Agreement. 9.3 WAIVER. No failure of a Member to exercise, and no delay bya Member in exercising, any right or remedy under this Agreementshall constitute a waiver of such right or remedy. No waiver bya Member of any such right or remedy under this Agreement shallbe effective unless made in a writing duly executed by allMembers. 9.4 SEVERABILITY. Whenever possible, each provision of thisAgreement shall be interpreted in such a manner as to beeffective and valid under applicable law. If any provision ofthis Agreement shall be prohibited by or invalid under such law,it shall be deemed modified to conform to the minimumrequirements of such law or, if for any reason it is not deemedso modified, it shall be prohibited or invalid only to the extentof such prohibition or invalidity without the remainder thereofor any other such provision being prohibited or invalid.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 9.5 BINDING. This Agreement shall be binding upon and inure tothe benefit of all Members, and each of the permitted successorsand assignees of the Members. 9.6 INDEPENDENT MANAGER AND MEMBER CONSENTS. All consentsrequired on the part of the Independent Member and/or IndependentManager must be in writing. 9.7 NOTICES AND CONSENTS. All notices, consents and othercommunications hereunder must be in writing, and shall be deemedto have been duly given or made: (i) when delivered in person;(ii) three (3) days after deposited in the United States mail,first class postage prepaid; (iii) in the case of telegraph orovernight courier services, one (1) Business Day after deliveryto the telegraph company or overnight courier service withpayment provided; or (iv) in the case of telex or telecopy orfax, when sent, verification received; in each case addressed asfollows: if to Cadiz: Cadiz Inc. 777 S. Figueroa Street, Suite 4250 Los Angeles, CA 90017 Telephone: (213) 271-1600 Facsimile: (213) 271-1614 Attention: Chief Financial Officer with a copy to: Howard Unterberger, Esq. Miller & Holguin 1801 Century Park East, Seventh Floor Los Angeles, CA 90067 Telephone: (310) 556-1990 Facsimile: (310) 557-2205 if to the Independent Member: M. Solomon & Associates 4314 Marina City Drive #1120 C Marina del Rey, CA 90292 with a copy to: Robert W. Shaffer, Jr. Shaffer, Gold & Rubaum, LLP 12011 San Vicente Blvd, Suite 600 Los Angeles, CA 90049 Telephone: 310-476-9955 Fax (310) 471-0482 9.8 COUNTERPARTS. This Agreement may be executed incounterparts, each of which shall be deemed an original and allof which shall constitute one and the same instrument.9.9 THIRD PARTY BENEFICIARY. This Agreement shall not conferany rights or remedies upon any Person other than the Members andtheir respective successors and permitted assigns.9.10 GOVERNING LAW. This Agreement and any controversy or claimarising out of or relating to this Agreement shall be governed bythe laws of the State of Delaware without giving effect to theprinciples of conflicts of laws. IN WITNESS WHEREOF, the parties hereto have dulyexecuted this Agreement as of the date first above written. CADIZ INC. By: ---------------------------------- Name: Title:Source: CADIZ INC, 10-K, November 02, 2004Powered 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. M. SOLOMON & ASSOCIATES, INC. By: ----------------------------------- Name: Title:Source: CADIZ INC, 10-K, November 02, 2004Powered 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 10.16 EXECUTION VERSION Dated 10/13/03 SUN WORLD-BONDHOLDER-CADIZ TERM SHEET AND AGREEMENT IN PRINCIPLE This Term Sheet and Agreement in Principle sets forth the principalterms and conditions for an overall settlement of outstanding issues among (a)Sun World International, Inc. and its debtor affiliates (collectively, "SunWorld"), (b) Cadiz Inc. ("Cadiz"), and (c) Black Diamond Capital Management,L.L.C. and CFSC Wayland Advisers, Inc. and their respective affiliates(collectively, the "Majority Bondholders"), who are the holders of not less than70% in dollar amount of Sun World's senior secured Notes due 2004 (in theaggregate, the "Notes"; holders of the Notes are referred to herein as"Bondholders"). This Term Sheet and Agreement in Principle contains a bindingand enforceable agreement among the parties. The parties hereto further agree touse their good faith efforts to complete and execute, by November 6, 2003, finaltransactional documentation for the implementation of the agreements containedherein, but any failure to do so shall not affect the enforceability of theagreements contained herein. Nothing herein shall constitute an admission orwaiver of any kind by any party, except as expressly provided herein. I. INITIAL SETTLEMENT A. Sun World will seek and obtain approval from theBankruptcy Court in which its current chapter 11 case is pending (the "Court"),pursuant to Bankruptcy Rule 9019, of a settlement of claims by and against Cadiz(the "Initial Settlement").(1) The Initial Settlement shall be binding on SunWorld's estates and creditors and shall provide that, in full and finalsettlement of all Sun World estates claims and causes of action against Cadiz(including without limitation any possible avoidance actions under Chapter 5 ofthe Bankruptcy Code) and all of Cadiz's claims---------- (1) The Initial Settlement will be sought to be approved by a motion by Sun World which shall be filed and noticed no later than October 14, 2003, and shall be scheduled for hearing at the earliest feasible date, but in no event later than November 7, 2003. Sun World and the Majority Bondholders shall each support the Initial Settlement and use their respective reasonable efforts in good faith to have the Initial Settlement approved by the Court and upheld in connection with any possible appeal.and causes of action against the Sun World estates (including without limitationclaims for rejection damages) (the "Cadiz Claim"), Cadiz shall be granted anallowed, general unsecured claim against Sun World in an amount not less than$13 million(2) (the "Allowed Cadiz Claim"). B. As part of the Initial Settlement and effective onlyupon the Closing (as defined below), (i) Cadiz shall agree that it willaffirmatively support a plan of reorganization for Sun World that provides norecovery on account of any equity interest in Sun World that Cadiz holds andthat is otherwise consistent with this Term Sheet and Agreement in Principle,thus eliminating potential valuation litigation cost and expense for Sun World'sestate which would otherwise result from a Cadiz objection to confirmation inits capacity as the equity holder of Sun World, and (ii) the parties shallconsent to the termination/rejection of all contracts and agreements betweenCadiz and Sun World except as provided in section 1.D. below. C. The motion to approve the Initial Settlement shallprovide full disclosure of the terms of the agreement among Cadiz, Sun World,and the Majority Bondholders. D. The parties' respective rights and obligations underthe Agricultural Lease between Cadiz, as lessor, and Sun World, as lessee,previously assumed (as amended) by Sun World pursuant to an order of the Court,shall not be affected by the Initial Settlement or anything else containedherein. 2. TRANSFER OF CADIZ CLAIM AND EQUITY INTEREST TO BONDHOLDERSource: CADIZ INC, 10-K, November 02, 2004Powered 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. TRUST A. Cadiz agrees that, at a closing (the "Closing") tooccur on or before the fifth business day after the Court's order approving theInitial Settlement becomes final and non-appealable (or prior thereto if soagreed by Cadiz and the Majority Bondholders in their discretion), Cadiz shallassign to a trust or similar legal entity formed for the benefit of allBondholders (the "Bondholder Trust") (i) the Allowed Cadiz Claim and (ii)Cadiz's equity interest in Sun World (provided that the----------(2) To be the largest amount Sun World reasonably and in good faith believes can be allowed based upon the facts, but at a reduced level in accordance with the compromise: the current estimate of the Cadiz Claim is approximately $17.5 million.Bondholder Trust shall not be permitted to vote such shares to exercise controlover Sun World prior to confirmation of a Sun World plan of reorganization orconsummation of a sale of substantially all Sun World assets), in exchange forthe consideration set forth below. The Bondholder Trust shall be administered bythe Majority Bondholders. B. The Bondholder Trust shall receive all distributionsfrom the Sun World estate (under a plan of reorganization or otherwise) onaccount of the Allowed Cadiz Claim. Each Bondholder shall have the right toreceive its ratable share of the assets in the Bondholder Trust if either (i)such Bondholder executes a form (the "Opt-In Form") that provides for the thingsset forth below or (ii) a reorganization plan for Sun World that is accepted bythe class of Bondholders and that contains the provisions set forth in section3.A below is confirmed and becomes effective. The Opt-In Form shall: (i) provide for such Bondholder to waive any rights to recovery from Cadiz on account of the Cadiz guaranty of such Bondholder's claim against Sun World (the "Guaranty"); (ii) provide that such Bondholder will permanently refrain from exercising any rights or remedies against Cadiz on account of either the Guaranty or the existence of such Bondholder's claim against Sun World; (iii) provide that, in the event of a Cadiz bankruptcy, such Bondholder shall affirmatively support any plan or sale transaction proposed by Cadiz whether or not it provides any recovery on account of the Guaranty; and (iv) provide that any transferee of, or other successor in interest to, such Bondholder's claim will be bound by all provisions of the Opt-In Form and that such Bondholder will condition any transfer of its claim upon the transferee's agreement to be bound by all of the provisions of the Opt-In Form. C. The Majority Bondholders shall, at Closing, executethe Opt-In Form. In addition, the Majority Bondholders shall, at Closing, (i)execute anirrevocable instruction to the Indenture Trustee to take no action against Cadizon behalf of Bondholders or on account of the Guaranty, and (ii) execute aconsent to the amendment of the indenture deleting substantially all covenantsand other provisions relating to the Guaranty or remedies against Cadiz asguarantor that may be amended pursuant to the terms of the indenture by theMajority Bondholders, subject to any applicable provisions of the TrustSource: CADIZ INC, 10-K, November 02, 2004Powered 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. Indenture Act. 3. SUN WORLD PLAN RELEASE A. If the Initial Settlement is approved by theBankruptcy Court and the Closing occurs, any plan of reorganization filed orsupported by Sun World and/or the Majority Bondholders shall provide (i) thatthe consideration to Bondholders contemplated under such plan is in fullsatisfaction and settlement of all claims of Bondholders under the indenture,including the Guaranty, (ii) that the indenture for the bonds (including theGuaranty thereunder) shall be deemed cancelled and extinguished as of theeffective date of the plan, and (iii) for all Bondholders to be deemed torelease their Guaranty claims against Cadiz in exchange for the consideration tobe distributed to the Bondholder Trust. B. Sun World and the Majority Bondholders shall each usetheir respective reasonable efforts in good faith to have the provisions setforth in 3A above approved by the Court as part of any plan. 4. EXTENSION OF PLAN FILING DEADLINE/EXCLUSIVITY A. The parties consent to Sun World's filing of a motionon shortened notice to be heard by the Court before October 31, 2003 and to thegranting of the following relief: (i) modifying the "2003 RETENTION ANDSEVERANCE PROGRAM FOR KEY EMPLOYEES" ("Retention Plan") to (x) extend the datesspecified in paragraph 2(a) of the Retention Plan by twenty-four days, and (y)change paragraph 2(b) of the Retention Plan to provide as follows:"Notwithstanding subsection (a) above, no such stay bonus will be payable to keyexecutives in the event that a plan of reorganization is not filed by Sun Worldwith the Bankruptcy Court on or prior to 11/24/03"; and (ii) extending toNovember 24, 2003 and January 23, 2004, respectively, Sun World's exclusivityperiods under Bankruptcy Code sections 1121(b) and 1121(c)(3), provided that ifon or before November 24, 2003 Sun World does not file a plan of reorganizationthat is supported by the Majority Bondholders,then Sun World's exclusivity periods shall be automatically terminated. In theevent that the Court does not approve the relief set forth in clause (ii) above,and Sun World files a plan of reorganization that is not supported by theMajority Bondholders, then upon such filing Sun World shall be deemed to havestipulated with the Majority Bondholders to an automatic termination of SunWorld's exclusivity periods and waived the right to seek further extensions ofthe exclusivity periods. In addition, the parties hereby clarify thatnotwithstanding anything to the contrary in the Retention Plan, if (2) theMajority Bondholders file a plan of reorganization that is not subsequentlymodified in any material respect and is accepted by two-thirds in amount andmore than one-half in number of the Bondholders that cast valid votes to acceptor reject the plan and is supported by the Official Creditors' Committee (suchthat if confirmed such plan would be a "Successful Plan of Reorganization," asdefined in the Retention Plan), and (ii) Sun World has opposed confirmation ofsuch plan, then such plan shall not be deemed a "Successful Plan ofReorganization" for purposes of the Retention Plan. B. Counsel for Sun World will circulate a discussiondraft of a plan of reorganization to counsel for the Majority Bondholders on orbefore October 17, 2003.Accepted and Agreed:Black Diamond, Capital Management, L.L.C. Cadiz Inc.By: /s/ James J. Zenni, Jr. By: /s/ Keith Brackpool ---------------------------- -----------------------------Its:____________________________ Its: President & CEOCFSC Wayland Advisors, Inc. Sun World International, Inc.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 its debtor affiliatesBy: /s/ Blake M. Carlson By: /s/ Tim Shaheen ---------------------------- -----------------------------Its:____________________________ Its: CEOSource: CADIZ INC, 10-K, November 02, 2004Powered 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 NOTEHOLDER TRUST AGREEMENT This Trust Agreement (the "Trust Agreement"), datedas of December __, 2003, by and among Cadiz Inc. ("Cadiz"),as settlor, Logan & Company, as trustee (the "Trustee"),Black Diamond Capital Management, L.L.C. on behalf of itsaffiliates ("Black Diamond"), and CFSC Wayland Advisers, Inc.("CFSC Wayland," and together with Black Diamond, the"Majority Noteholders"), is executed to facilitate theimplementation of the global settlement described in the SunWorld-Bondholder-Cadiz Term Sheet and Agreement in Principleby and among Sun World International Inc. ("Sun World") andits debtor affiliates (collectively, the "Debtors"), Cadiz,corporate parent of the Debtors, and the MajorityNoteholders, dated as of October 13, 2003 (the "GlobalSettlement") that provides for (a) the establishment of theTrust (as defined below) created by this Trust Agreement andthe retention and preservation of the Trust Assets (asdefined below) by the Trustee, all for the benefit of holdersof Sun World's senior secured notes due 2004 (in theaggregate, the "Notes;" holders of the Notes are referred toherein as "Noteholders") and (b) the collection anddistribution of the Trust Recoveries (as defined below). TheTrust is organized for the primary purposes of (x) holdingand preserving the value of the Trust Assets for conversioninto Trust Recoveries, and (y) making distributions of TrustRecoveries to the Opt-In Noteholders (as defined below). TheTrustee's activities, powers and duties are those determinedto be reasonably necessary to, and consistent with,accomplishment of these purposes, subject to the terms andconditions set forth more fully below, and shall only beexercised by the Trustee in connection with the joint writteninstructions of the Majority Noteholders. WHEREAS, the Global Settlement contemplates, amongother things, the creation of a trust to hold the TrustAssets and distribution of the Trust Recoveries to the Opt-InNoteholders, all as described in greater detail in the GlobalSettlement and this Trust Agreement; and WHEREAS, under the terms of the Global Settlement,Cadiz agrees to grant, transfer, convey, and deliver to theTrust, on behalf of, and for the benefit of, the Noteholders,control of, and all its rights, title and interests in andto, the Trust Assets; and WHEREAS, the Trust is established pursuant to theGlobal Settlement, as a liquidating trust in accordance withTreasury Regulation Section 301.7701-4(d) with no objectionto continue or engage in the conduct of a trade or businessexcept, to the extent reasonably necessary to, and consistentwith, the liquidating purpose of the Trust and the GlobalSettlement; and WHEREAS, the Majority Noteholders have jointlydesignated the Trustee; and WHEREAS, the Trust is intended to qualify as a"grantor trust" for U.S. federal income tax purposes,pursuant to Sections 671-677 of the Internal Revenue Code of1986, as amended, with the Opt-In Noteholders treated as thegrantors and owners of the trust. NOW, THEREFORE, in consideration of the premisesand agreements contained herein, the parties hereto agree asfollows: ARTICLE I ESTABLISHMENT OF TRUST SECTION 1.1 CREATION AND NAME. There is hereby created a trust (the "Trust") under the laws of the State of New York which shall be known as the "Sun World Noteholder Trust."Source: CADIZ INC, 10-K, November 02, 2004Powered 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 1.2 DECLARATION OF TRUST. In order to declare the terms and conditions hereof, and in consideration of the execution of the Global Settlement, Cadiz and the Trusteehave executed this Trust Agreement. Effective on the datehereof, Cadiz is concurrently transferring to the Trustee,pursuant to the assignments attached hereto as Exhibit A, allof the right, title and interests of Cadiz in and to theTrust Assets under and subject to the terms and conditionsset forth in this Trust Agreement and in the GlobalSettlement for the benefit of Noteholders and theirsuccessors and assigns as provided for in this TrustAgreement and in the Global Settlement. Subject to Section1.5 of this Trus Agreement, the Trust Recoveries shall bedistributed by the Trustee to the Opt-In Noteholders inaccordance with this Trust Agreement and the GlobalSettlement. SECTION 1.3 PURPOSE OF TRUST; NATURE OF BENEFICIALINTERESTS. The Trust is organized for the primary purpose ofholding and receiving the Trust Recoveries from the TrustAssets transferred to it and distributing the TrustRecoveries to the Opt-In Noteholders with no objective toengage in the conduct of a trade or business. Interests inthe Trust shall be uncertificated. Opt-In Noteholders shallhave no voting rights with respect to such interests. In theevent of any inconsistency between the recitation of theduties and powers of the Trustee as set forth in this TrustAgreement and the Global Settlement, the provisions of theTrust Agreement shall govern. SECTION 1.4 TRUSTEE'S ACCEPTANCE. The Trustee accepts the trust imposed upon it by this Trust Agreement and agrees to observe and perform that trust, on and subject to the terms and conditions set forth in this Trust Agreement. In connection with and in furtherance of the purposes of theTrust, but subject to Section 1.5 of this Trust Agreement,the Trustee hereby expressly accepts the transfer of theTrust Assets and the Trustee hereby further expresslyassumes, undertakes and shall control the distribution of theTrust Recoveries. SECTION 1.5 ACTION BY TRUSTEE; WAIVER OF REMEDIES AGAINST TRUSTEE. Except as ecpressly set forth in Sections 6.3(d), 6.3(e) and 6.11 of this Trust Agreement, the Trustee shall have no obligation to act hereunder unless given writteninstructions jointly executed by the Majority Noteholders.The Trustee shall have no obligations to act hereunder unlessthe Trustee receives, in addition to joint writteninstructions from the Majority Noteholders, writtenassurances satisfactory to the Trustee in its reasonablediscretion that it will be timely compensated in cash otherthan from the Trust Recoveries for its reasonable fees andexpenses incurred in connection with such proposed actions.By executing the Opt-In Form, the Opt-In Noteholders haveagreed to permanently refrain and forbear from exercising, orcausing the exercise of, any rights, remedies or causes ofaction against the Trustee, including without imitation forany action or inaction by the Trustee in the absence of jointwritten instructions executed by the Majority Noteholders;provided, however, that all rights, remedies and causes ofaction against the Trustee shall be preserved in the eventthat the Trustee willfully ignores or materially breaches anyjoint written direction of the Majority Noteholders subjectto the last sentence of this section. The Trustee shall haveno obligation to accept, compute or otherwise consider theOpt-In Forms. The Majority Noteholders shall provide to theTrustee a compiled list of the Opt-In Noteholders and eachOpt-In Noteholder's proportionate share of the TrustRecoveries. The Trustee shall make distributions of the netTrust Recoveries in accordance with such list. As describedmore fully in Section 6.5 of this Trust Agreement, theMajority Noteholders shal defend, hold harmless, andindemnify the Trustee and its principals, officers, employeesand agents for any action or inaction taken by the Trustee atSource: CADIZ INC, 10-K, November 02, 2004Powered 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 joint written direction of the Majority Noteholders. TheTrustee shall determine in its reasonable discretion whetherany joint written instructions from the Majority Noteholdersare clear satisfactory or whether further clarification isrequired from the Majorioty Noteholders. ARTICLE II DEFINITIONS The capitalized terms used but not defined in thisTrust Agreement shall have the meanings given to them in theGlobal Settlement. "Bankruptcy Case" means the voluntary casescommenced by Sun World International, Inc. and its debtoraffiliates under chapter 11 of title 11 of the United StatesCode, which are currently pending in the Bankruptcy Court andbeing jointly administered under Case No. RS-03-11370-DN. "Bankruptcy Court" means the Bankruptcy Court forthe Central District of California, Riverside Division. "Allowed Cadiz Claim" means all general unsecuredclaims of Cadiz against the Debtors which were allowed by theBankruptcy Court in the Initial Settlement Order in theamount of $13,500,000. "Distribution Date" means the date(s) on which theTrustee shall distribute the Trust Recoveries to the Opt-InNoteholders, which date(s) shall be as soon as reasonablypracticable after the Trust receives the Trust Recoveries andspecified in writing by the Majority Noteholders. "Initial Settlement Order" means that certain orderentered by the Bankruptcy Court on November 7, 2003 approvingthe initial settlement by and between the Debtors and Cadizas described more fully in the Global Settlement. "Opt-In Form" means the form to be executed by aNoteholder in which the Noteholder agrees, among otherthings, to be bound by the terms and conditions of this TrustAgreement, substantially in the form attached hereto asExhibit A. "Opt-In Noteholder" means (x) a Noteholder whotimely and properly executes an Opt-In Form within the Opt-InPeriod or (y) all Noteholders if a chapter 11 plan is filedin the Bankruptcy Case and the Noteholders as a class acceptsuch plan and such plan contains the provisions set forth insection 3.A of the Global Settlement, and such plan isconfirmed and becomes effective. "Opt-In Period" means the period during whichNoteholders may execute the Opt-In Form and thereby agreed tobe bound by the terms and conditions of this Trust Agreement,which period shall equal thirty (30) days from the date theOpt-In Form is mailed by overnight delivery to theNoteholders. "Pro Rata" means the proportion that (a) the faceamount of the Notes held by an Opt-In Noteholder bears to (b)the aggregate face amount of all Notes held by all Opt-InNoteholders. "Trust Assets" means the Allowed Cadiz Claim, whichwas assigned by Cadiz to the Trust for the benefit of Opt-InNoteholders. "Trust Recoveries" means any and all distributionsfrom the Sun World estate, whether under a chapter 11 plan,chapter 7 liquidation or otherwise, on account of the TrustAssets. ARTICLE IIISource: CADIZ INC, 10-K, November 02, 2004Powered 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. FUNDING OF THE TRUST AND CHARGING LIEN Subject to Section 1.5 of this Trust Agreement, allcosts and expenses associated with the administration of theSun World Noteholder Trust shall be the sole responsibilityof, and paid by, the Trustee; provided however that, tosecure the repayment of the Trustee, the Trustee shall haveand is hereby granted a first priority lien on all money orproperty held or collected by the Trustee in its capacity asTrustee to the extent of such fees and expenses and shallhave the right to offset such fees and expenses against allsuch monies or properties. Except as expressly set forth inthe Global Settlement, Cadiz shall have no obligation orliability whatsoever to pay any costs or expenses of any kindassociated with the administration of the Sun WorldNoteholder Trust or to make any payment, indemnification, orreimbursement of any kind to the Trustee, the Sun WorldNoteholder Trust, or Opt-In Noteholders. ARTICLE IV TRUST ASSETS SECTION 4.1 PRESERVATION OF TRUST ASSETS. Subject toSection 1.5 of this Trust Agreement, the Trustee shallpreserve and defend the Trust Assets, reduce the Trust Assetsto Trust Recoveries and make distributions of such TrustRecoveries to the Opt-In Noteholders. SECTION 4.2 DISTRIBUTION OF TRUST RECOVERIES.Subject to Section 1.5 of this Trust Agreement, on theDistribution Date, the Trustee shall distribute Pro Rata theTrust Recoveries to the Opt-In Noteholders. ARTICLE V DISTRIBUTION OF TRUST RECOVERIES SECTION 5.1 DELIVERY OF DISTRIBUTIONS AND TAX REPORTING.Subject to Section 1.5 of this Trust Agreement, distributionsfor the Opt-In Noteholders and any tax reporting required byapplicable law with respect thereto shall be made by theTrustee to the Opt-In Noteholdrers. SECTION 5.2 UNDELIVERABLE DISTRIBUTIONS. (a) If any Opt-In Noteholder's distribution is returned to the Trustee as undeliverable, no further distributions to such Opt-In Noteholder shall be made unless and until the Trustee is notified of such Opt-In Noteholder's then current address and has received any necessary tax withholding certificates from such Opt-In Noteholder, at which time all missed distributions shall be made to such Opt-In Noteholder without interest and subject to any applicable withholding taxes. The Trustee shall have no obligation to investigate or pursue of the Opt-In Noteholders for a correct address. (b) If, after ninety (90) days after the return to the Trustee of any undeliverable distributions, the Trustee in not notified of such Opt-In Noteholder's the current address,the claims of such Opt-In Noteholder or successor to such Opt-In Noteholder with respect to such property shall bedischarched and forever barred notwithstanding any federal orstate escheat laws to the contrary. Thereafter, allunclaimed property relating to distributions to be made tosuch Opt-In Noteholder shall revert to the Trust and shall beallocated for Pro Rata redistribution by the Trustee to theother Opt-In Noteholders upon the Trustee's receipt ofrevised distribution list from the Majority Noteholders. ARTICLE VI Source: CADIZ INC, 10-K, November 02, 2004Powered 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. GENERAL POWERS, RIGHTS AND OBLIGATIONS OF THE TRUSTEE SECTION 6.1 APPOINTMENT OF TRUSTEE. The Trustee shallbecome the Trustee on the date this Trust Agreement isexecuted by all signatories thereto. SECTION 6.2 LEGAL TITLE. Subject to section 1.5 hereof,the Trustee shall hold legal titles to all Trust Assets. TheTrustee may upon the receipt of joint written instructionsfrom the Majority Noteholders, cause legal title or evidenceof title to any of the Trust Assets to be held by any nomineeor person, on such terms, in such manner and with such poweras the Trustee may determine advisable. SECTION 6.3 GENERAL POWERS. (a) Except as otherwise provided in this Trust Agreement and subject to section 1.5 hereof and the jurisdiction of the Bankruptcy Court described in Article VII below, but without prior or further Bankruptcy Court authorization, the Trustee may, but is not required to, preserve and defend the TrustAssets to the same extent as if the Trustee were the soleowner of the Trust Assets in its own right. No persondealing with the Trust shall be obligated to inquire into theTrustee's authority in connection with the preservation ofthe Trust Assets. (b) In connection with the preservation of the Trust Assets, and only upon the joint written instructions of the Majority Noteholders (which shall not be implied from the existence of this Trust Agreement itself or the execution of this Trust Agreement by the Majority Noteholders), subject to section 1.5 hereof the Trustee shall have, in addition to any powers conferred on it by any other provision of this TrustAgreement, the power to take any and all actions as arenecessary or advisable to effectuate the purposes of theTrust, including, without limitation, the power andauthority: (i) to accept the assets transferred and provided to the Trust under this Trust Agreement; (ii) to accept and distribute the Trust Recoveries in accordance with the terms of this Trust Agreement; (iii) to engage in all acts that would constitute ordinary course of business in performing the obligations of a trustee under a trust of this type; (iv) to change the state of domicile of the Trust; (v) to establish and maintain funds, reserves and accounts within the Trust as deemed by the Trustee, in its discretion, to be useful in carrying out the purposes of the Trust; (vi) to commence or participate, as a party or otherwise, in any judicial, administrative, arbitration or other proceeding and to settle, compromise, or dismiss any such proceeding; (vii) in accordance with this Trust Agreement, toindemnify the Trustee, and the employees, agents andrepresentatives of the Trust or the Trustee, to the fullestextent that a corporation organized under the laws of theTrust's domicile is from time to time entitled to indemnifyits directors, officers, employees, agents andrepresentatives; and (viii) enter into an agreement to secure the obligations of Cadiz under the Global Settlement. (c) The Trustee shall not at any time, on behalf of the Trust or the Opt-In Noteholders, enter into or engage in any trade or business, and the Trustee shall not use or disposeof any part of the Trust Assets in furtherance of any tradeSource: CADIZ INC, 10-K, November 02, 2004Powered 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 business. (d) The Trustee shall vote to accept or reject (or refrain from voting) on any chapter 11 plan filed in the Bankruptcy Case only as directed jointly in writing by the MajorityNoteholders. In the event that the Majority Noteholders donot agree with one another with respect to such votingdirection, then the Trustee shall complete and submit oneballot for the Allowed Cadiz Claim and vote such claim inproportion to the directions of each individual Opt-InNoteholder that timely provides a written direction inaccordance with instructions to the Opt-In Noteholders fromthe Majority Notholders, based upon each such Opt-InNoteholder's share of the outstanding Notes, as reflected inthe Majority Noteholders' joint list, and regardless ofwhether such ballot will be valid under the Debtors' proposedvoting and solicitation procedures. The Trustee shall haveno obligation to prosecute or defend any action to determinethe validity of any ballot submitted by the Trustee. (e) The Trustee shall provide copies of the executed Opt-In Forms returned to or received by the Trustee to the Debtorsand the Majority Noteholders. (f) Notwithstanding any other provision of this Trust Agreement, the Trustee shall have the right at any time torequest a hearing before the Bankruptcy Court on any and allmatters raised in connection with or related to this TrustAgreement. SECTION 6.4 RETENTION OF ATTORNEYS, ACCOUNTANTS AND OTHERPROFESSIONALS. The Trustee, with the written consent of theMajority Noteholders, shall have the authority to retainprofessionals, whether legal, accountant, financial orotherwise, as the Trustee deems advisable to aid in theperformance of its responsibilities pursuant to the terms ofthe this Trust Agreement, with the payment of the fees andexpenses of such professionals to be made in accordance withArticle III of this Trust Agreement. SECTION 6.5 STANDARD OF CARE; EXCULPATION. Subject toSection 1.5 of this Trust Agreement, the Trustee shallperform the duties and obligations imposed on the Trustee bythis Trust Agreement with reasonable diligence and care underthe circumstances. The Trustee shall not be personallyliable to the Trust or to any third party beneficiary (or anysuccessor of such entities) except for such of its own actsas shall constitute bad faith, willful misconduct, grossnegligence, willful disregard of its duties or materialbreach of this Trust Agreement. The Trustee shall not beobligated to give any bond or surety or other security forthe performance of any of its duties. Notwithstanding anyother provisions of this Trust Agreement, the Trustee and itsprincipals, officers, employees, and agents shall not beliable and shall defended, held harmless, and indemnified bythe Majority Noteholders for any action or inaction taken atthe written direction of the Majority Noteholders. SECTION 6.6 RELIANCE BY TRUSTEE. The Trustee may rely,and shall be fully protected personally in acting upon anyresolution, statement, certificate, instrument, opinion,report, notice, request, consent, order or other instrumentor document that it has no reason to believe to be other thangenuine and to have been signed or presented other than bythe proper party or parties or, in the case of facsimiletransmissions, to have been sent other than by the properparty or parties, in each case without obligation to satisfyitself that the same was given in good faith and withoutresponsibility for errors in delivery, transmission orreceipt. In the absence of its bad faith, willfulmisconduct, gross negligence, willful disregard of its dutiesor material breach of this Trust Agreement, the Trustee mayrely as to the truth of statements and correctness of thefacts and opinions expressed therein and shall be fullyprotected personally in acting thereon. The Trustee maySource: CADIZ INC, 10-K, November 02, 2004Powered 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. consult with legal counsel, accounting, tax, or otherprofessionals within the performance of its duties, and shallbe fully protected in respect of any action taken or sufferedby it in accordance with such advice or opinion. Subject tothe jurisdiction of the Bankruptcy Court described in ArticleVII below, the Trustee may at any time seek instructions fromthe Bankruptcy Court concerning the preservation of the TrustAssets, distribution of the Trust Recoveries or any othermatter pertaining to this Trust Agreement and the GlobalSettlement. SECTION 6.7 INVESTMENT OBLIGATIONS. Subject to Section1.5 of this Trust Agreement, the Trustee may, but shall notbe obligated to, invest and re-invest the liquid Trust Assetsconsistent with the obligations of a trustee under BankruptcyCode 345; provided, that the Trustee shall be limited toinvesting such liquid Trust Assets in demand and timedeposits, such as short-term certificates of deposit, inbanks or other savings institutions or other temporary liquidinvestments such as Treasury bills. The Trustee shall not beliable in any way for any loss or other liability arisingfrom any investment, or the sale or other disposition of anyinvestment, made in accordance with this Section. SECTION 6.8 TAX FILINGS AND NOTICES; WITHHOLDING ANDREPORTING REQUIREMENTS. Subject to Section 1.5 of thisTrust Agreement, The Trustee shall prepare and provide to, orfile with, the appropriate parties such notices, tax returnsand other filings, including all federal, state and local taxreturns for the Trust as a grantor trust pursuant toSection 1.671-1(a) of the Treasury Regulations, as may berequired under the Internal Revenue Code of 1986, as amended(the "Internal Revenue Code"), the Global Settlement, or asmay be required by applicable law of other jurisdictionsincluding, if required under applicable law, notices requiredto report interest, dividends or gross proceeds. Subject toSection 1.5 of this Trust Agreement, the Trustee shall complywith all withholding and reporting requirements imposed byany federal, state, local, or foreign taxing authority, andall distributions made hereunder shall be subject to any suchwithholding and reporting requirements. SECTION 6.9 COMPLIANCE WITH SECURITIES LAWS. Subjectto Section 1.5 of this Trust Agreement, the Trustee shallfile with the Securities and Exchange Commission and otherapplicable federal and state governmental agencies thereports and other documents and take any other actions necessary to comply with federal or state securities laws, if any. SECTION 6.10 TIMELY PERFORMANCE. The Trustee will makecontinuing efforts to make timely distributions of the TrustRecoveries and not unduly prolong the duration of the Trust. SECTION 6.11 RESIGNATION. The Trustee may resign asTrustee by giving written notice of its resignation to theOpt-In Noteholders. The Trustee shall continue to serve astrustee for the shorter of (a) thirty (30) days following thetender of the notice of resignation or (b) until theappointment of a successor Trustee shall become effective inaccordance with Section 6.13 of this Trust Agreement. SECTION 6.12 APPOINTMENT OF SUCCESSOR TRUSTEE. In theevent of the death (in the case of a Trustee that is anatural person), dissolution (in the case of a Trustee thatis not a natural person), resignation, incompetency orremoval of the Trustee, the Majority Noteholders shalljointly designate a person to serve as successor Trustee.Such appointment shall specify the date when such appointmentshall be effective. Every successor Trustee appointedhereunder shall execute, acknowledge and deliver to theBankruptcy Court and to the retiring Trustee an instrumentaccepting the appointment under this Trust Agreement andagreeing to be bound thereto, and thereupon the successorTrustee, without any further act, deed or conveyance, shallbecome vested with all the rights, powers, trusts and dutiesSource: CADIZ INC, 10-K, November 02, 2004Powered 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 retiring Trustee. ARTICLE VII JURISDICTION The parties hereto consent to the jurisdiction ofthe Bankruptcy Court and the Bankruptcy Court shall retainexclusive jurisdiction to hear and determine all mattersarising out of, and related to this Trust Agreement,including without limitation, disputes concerning TrustAssets and Trust Recoveries and disputes arising inconnection with the interpretation, implementation orenforcement of the Trust. If the Bankruptcy Court isdetermined not to have jurisdiction with respect to theforegoing, the Trust will have authority to bring such actionin any other court of competent jurisdiction. ARTICLE VIII TERMINATION The Trust shall continue until the earlier of (i)the date that termination of the Trust is approved by theBankruptcy Court, or (ii) the date that is thirty-five (35)days after the final Distribution Date and no undeliverabledistributions remain in the possession of the Trustee inaccordance with Section 5.2 of this Trust Agreement, unlessextended by the joint direction of the Majority Noteholders;provided however that such extension will not subject theTrust to the Securities Exchange Act of 1934, as amended (the"Exchange Act"). Subject to Section 5.1 of this TrustAgreement, the Trustee shall at all times endeavor toexpeditiously liquidate the Trust Assets into TrustRecoveries, and in no event shall the Trustee unduly prolongthe duration of the Trust. Notwithstanding the foregoing,after the termination of the Trust but subject to Section 1.5of this Agreement, the Trustee shall have the power toexercise all the powers, authorities and discretions hereinconferred solely for the purpose of liquidating and windingup the affairs of the Trust. On distribution of all of theTrust Assets, the Trustee shall retain the books, records andfiles that shall have been delivered to or created by theTrustee. At the Trustee's discretion, all of such recordsand documents may be destroyed at any time after one yearfrom the distribution of all of the Trust Assets. ARTICLE IX MISCELLANEOUS SECTION 9.1 NOTICES. All notices, requests or othercommunications required or permitted to be made in accordancewith this Trust Agreement shall be in writing and shall bedelivered personally or by facsimile transmission or mailedby first-class mail or by overnight delivery service: If to the Trustee, at: Logan & Company 546 Valley Road Upper Montclair, NJ 07043 Attn: Kate Logan With copies to: Stuart Brown, Esquire Buchanan Ingersoll PC 1201 N. Market Street, Suite 1501 Wilmington, DE 19801 If to the Debtors, at: SUN WORLD INTERNATIONAL, INC.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 16350 Driver Road Bakersfield, California 93308 Attention: Chief Financial Officer with copies to: Klee, Tuchin, Bogdanoff & Stern, LLP Fox Plaza, 2121 Avenue of the Stars Thirty-Third Floor Los Angeles, California 90067 Attn: Lee R. Bogdanoff If to Cadiz, at: Cadiz Inc. 777 South Figueroa Street, Suite 4250 Los Angeles, CA 90017 Attn: Keith Brackpool, Chief Executive Officer with copies to: Stutman, Treister & Glatt P.C. 1901 Avenue of the Stars, 12th Floor Los Angeles, CA 90067 Attn: Jeffrey H. Davidson If to Black Diamond, at: Black Diamond Capital Management, LLC on behalf of its affiliates One Conway Park One Field Drive, Suite 100 Lake Forest, Illinois 60045 Attn: Chris Kipley with copies to: Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 West Wacker Drive, Suite 2100 Chicago, Illinois 60606-1285 Attn: Timothy R. Pohl, Esq. If to CFSC Wayland, at: CFSC Wayland Advisers, Inc. 12700 Whitewater Drive Minnetonka, MN 55345 Attn: Blake M. Carlson With copy to: CFSC Wayland Advisers, Inc. 12700 Whitewater Drive Minnetonka, MN 55345 Attn: Susan D. Peterson Notices sent out by facsimile transmission shall bedeemed delivered when actually received, and notices sent byfirst-class mail shall be deemed delivered when received andnotices sent by overnight delivery service shall be deemeddelivered the next business day after mailing. SECTION 9.2 EFFECTIVENESS. This Trust Agreement shallbecome effective on the date it is executed by allsignatories thereto. SECTION 9.3 INTENTION OF PARTIES TO ESTABLISH TRUST. This Trust Agreement is intended to create a trust, and the Trustcreated hereunder shall be governed and construed in allrespects as a trust. SECTION 9.4 INVESTMENT COMPANY ACT. The Trust isorganized as a liquidating entity in the process ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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. liquidation, and therefore should not be considered, and theTrust does not and will not hold itself out as, an"investment company" or an entity "controlled" by an"investment company" as such terms are defined in theInvestment Company Act. SECTION 9.5 TAXATION. For United States federalincome tax purposes, it is intended that the Trust beclassified as a liquidating trust under 301.7701-4 of theTreasury Regulations and as a grantor trust subject to theprovisions of Subchapter J, Subpart E of the Internal RevenueCode that is owned by the Opt-In Noteholders as grantors.Accordingly, the parties hereto intend that, for UnitedStates federal income tax purposes, the Opt-In Noteholders betreated as if they had received a distribution of anundivided interest in the Trust Assets and then contributedsuch interests to the Trust. All Trust earnings shall betaxable to the Opt-In Noteholders. SECTION 9.6 COUNTERPARTS. This Trust Agreement maybe executed in one or more counterparts (via facsimile orotherwise), each of which shall be deemed an original butwhich together shall constitute but one and the sameinstrument. SECTION 9.7 GOVERNING LAW. This Trust Agreementshall be governed by, construed under and interpreted inaccordance with the laws of the State of New York. SECTION 9.8 HEADINGS. Sections, subheadings andother headings used in this Trust Agreement are forconvenience only and shall not affect the construction ofthis Trust Agreement. SECTION 9.9 SEVERABILITY. Any provision of this TrustAgreement which is prohibited or unenforceable in anyjurisdiction shall not invalidate the remaining provisions ofthis Trust Agreement, and any such prohibition orunenforceability in any jurisdiction shall not invalidate orrender unenforceable any such provision in any otherjurisdiction. SECTION 9.10 AMENDMENTS. This Trust Agreement may beamended from time to time by the Trustee to better giveeffect to the purposes of this Trust Agreement or GlobalSettlement upon the written direction of the MajorityNoteholders. The terms of the Trust may be amended by theTrustee at any time to the extent necessary to ensure thatthe Trust will not become subject to the Exchange Act or besubject to taxation for United States federal income taxpurposes as other than a liquidating trust under 301.7701-4of the Treasury Regulations and as a grantor trust of whichthe Opt-In Noteholders are the grantors and owners. ThisTrust Agreement shall not be amended in any manner that inany way creates or increases any burden upon, or eliminatesor reduces any benefit to, the Debtors or Cadiz without theexpress written consent of the Debtors or Cadiz,respectively. SECTION 9.11 THIRD PARTY BENEFICIARIES. No party shall be deemed a third-party beneficiary of this Trust Agreement,including without limitation the Opt-In Noteholders. SECTION 9.12 SUCCESSORS. This Trust Agreement shallbind and inure to the benefit of the parties hereto and theirrespective successors and assigns. SECTION 9.13 NO SUITS BY OPT-IN NOTEHOLDERS. No Opt-InNoteholder shall have any right by virtue of any provision ofthis Trust Agreement to institute any action or proceeding inlaw or in equity against any party other than the Trustee onor under or with respect to the Trust Assets. SECTION 9.14 IRREVOCABILITY. The Trust is irrevocable, but is subject to amendment as provided for herein.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 9.15 TRUST CONTINUANCE. The death, dissolution,resignation, incompetency or removal of the Trustee shall notoperate to terminate the Trust created by this TrustAgreement or to revoke any existing agency created under theterms of this Trust Agreement or invalidate any actiontheretofore taken by the Trustee. In the event of theresignation or removal of the Trustee, the Trustee shallpromptly (a) execute and deliver such documents, instrumentsand other writings as may be requested by the BankruptcyCourt or reasonably requested by a successor Trustee toeffect the termination of the Trustee's capacity under thisTrust Agreement and the conveyance of the Trust Assets thenheld by the Trustee to the successor, (b) deliver to theBankruptcy Court or the successor Trustee all documents,instruments, records and other writings related to the Trustas may be in the possession of the Trustee and (c) otherwiseassist and cooperate in effecting the assumption of itsobligations and functions by such successor Trustee. SECTION 9.16 ENFORCEMENT AND ADMINISTRATION. TheBankruptcy Court shall enforce and administer the provisionsof this Trust Agreement. IN WITNESS WHEREOF, the parties hereto haveexecuted this Trust Agreement or caused this Trust Agreementto be duly executed by their respective officers thereuntoduly authorized as of the date first above written. CADIZ, INC. By: /s/ Keith Brackpool ------------------------------ Name: Keith Brackpool Title: CEO LOGAN & COMPANY, AS TRUSTEE By: /s/ Kathleen M. Logan ------------------------------ Name: Kathleen M. Logan Title: President BLACK DIAMOND CAPITAL MANAGEMENT, L.L.C., on behalf of its affiliates By: /s/ James J. Zenni Jr. ------------------------------ Name: James J. Zenni Jr. Title: President & Managing Partner CFSC WAYLAND ADVISERS, INC. By: /s/ Blake M.Carlson ------------------------------ Name: Blake M. Carlson Title: Authorized SignatorySource: CADIZ INC, 10-K, November 02, 2004Powered 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. ASSIGNMENT OF CLAIMS This ASSIGNMENT OF CLAIMS is executed and delivered this __day of December, 2003, by Cadiz Inc., a Delaware corporation("Cadiz"), and Sun World Noteholder Trust ("Bondholder Trust"),pursuant to the terms of that certain Sun World - Bondholder -Cadiz Term Sheet and Agreement in Principle dated as of October13, 2003 by and among (i) Cadiz, (ii) Sun World International,Inc. ("Sun World") and its debtor affiliates, and (iii) BlackDiamond Capital Management, L.L.C. and CFSC Wayland Advisers,Inc. and their respective affiliates. For good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, Cadiz does herebytransfer, assign and set over unto Bondholder Trust, withoutrepresentation, warranty, or recourse of any kind, all of itsright, title and interest in and to (i) the claims of Cadizagainst Sun World as set forth on Schedule A hereto (the"Claims"), and (ii) the Proofs of Claim with respect to theClaims filed by Cadiz in Sun World's Chapter 11 case on or aboutAugust 28, 2003. IN WITNESS WHEREOF, Cadiz and Bondholder Trust have causedthis instrument to be duly executed and delivered as of the dayand year first above written. CADIZ: CADIZ INC., a Delaware corporation By: /s/ Keith Brackpool ----------------------------- Title: CEO -------------------------- BONDHOLDER TRUST: SUN WORLD NOTEHOLDER TRUST By: Logan & Company, Inc., Trustee By: Kathleen M. Logan ----------------------------- Title: President -------------------------- ACKNOWLEDGED BY SUN WORLD: SUN WORLD INTERNATIONAL, INC. a Delaware corporation By: /s/ Stanley E. Speer ---------------------------------- Title: Chief Financial Officer ------------------------------- SCHEDULE ACLAIM DEBTOR CLAIM AMOUNT DATE CLAIM INCURRED NO.Management Sun World Contingent/ On and 317Services International, Unliquidated after Sept.Agreement Inc. 13, 1996 Tax Sharing Sun World Contingent/ On and 315Agreement International, Unliquidated after Sept. Inc. 13, 1996 Notes and Sun World $13,536,056 Prior to 316Source: CADIZ INC, 10-K, November 02, 2004Powered 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. Advances International, January 30, Inc. 2003Indemnification Sun World Contingent/ On and 313 International, Unliquidated after April Inc. 16, 1997 Indemnification Sun Desert, Contingent/ On and 314 and Inc. Unliquidated after April contribution 16, 1997 Indemnification Coachella Contingent/ On and 311 and Growers Unliquidated after April contribution 16, 1997 Indemnification Sun Contingent/ On and 312 and World/Rayo Unliquidated after April contribution 16, 1997 Source: CADIZ INC, 10-K, November 02, 2004Powered 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. PLEDGE AGREEMENT dated as of November ___, 2003 between CADIZ INC., as Pledgor and SUN WORLD NOTEHOLDER TRUST, as Secured Party TABLE OF CONTENTS PAGESECTION 1. DEFINITIONS; INTERPRETATION; GRANT OF SECURITY. . .-1- 1.1. General Definitions. . . . . . . . . . . . . . -1- 1.2. Definitions; Interpretation. . . . . . . . . . -3- 1.3. Grant of Security. . . . . . . . . . . . . . . -3-SECTION 2. SECURITY FOR OBLIGATIONS; PLEDGOR REMAINS LIABLE. .-3- 2.1. Security for Obligations. . . . . . . . . . . .-3- 2.2. Pledgor Remains Liable . . . . . . . . . . . .-4-SECTION 3. REPRESENTATIONS AND WARRANTIES AND COVENANTS. . . .-5- 3.1. Generally . . . . . . . . . . . . . . . . . . .-5- 3.2. Pledged Equity Interests. . . . . . . . . . . .-8-SECTION 4. FURTHER ASSURANCES. . . . . . . . . . . . . . . . -12- 4.1. [INTENTIONALLY OMITTED]. . . . . . . . . . . .-12- 4.2. Further Assurances. . . . . . . . . . . . . . -12-SECTION 5. SECURED PARTY APPOINTED ATTORNEY-IN-FACT . . . . .-13- 5.1. Power of Attorney. . . . . . . . . . . . . . .-13- 5.2. No Duty on the Part of Secured Party . . . . .-14-SECTION 6. REMEDIES . . . . . . . . . . . . . . . . . . . . .-15- 6.1. Generally. . . . . . . . . . . . . . . . . . .-15- 6.2. Cash Proceeds. . . . . . . . . . . . . . . . .-17- 6.3. Application of Proceeds. . . . . . . . . . . .-17-SECTION 7. CONTINUING SECURITY INTEREST; SUCCESSORS AND ASSIGNS; TRANSFER OF LOANS. . . . . . . . . . . . . . . . .-17-SECTION 8. STANDARD OF CARE; SECURED PARTY MAY PERFORM. . . .-18-SECTION 9. [INTENTIONALLY OMITTED] . . . . . . . . . . . . .-18-SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . .-19- PLEDGE AGREEMENT This PLEDGE AGREEMENT, dated as of November ___, 2003 (this"Agreement"), is between CADIZ INC., a Delaware corporation("Cadiz" or "Pledgor"), and SUN WORLD NOTEHOLDER TRUST, a trustestablished under the laws of the State of New York, as securedparty (in such capacity, the "Secured Party"). RECITALS: WHEREAS, on November 7, 2003, the United States BankruptcyCourt for the Central District of California (the "BankruptcyCourt") entered an order approving the initial settlement (the"Initial Settlement") by and between Sun World International Inc.("Sun World") and its debtor affiliates (collectively, the"Debtors") and Cadiz, corporate parent of the Debtors, by which,among other things, the claims and causes of action held by theDebtors against Cadiz, and the claims and causes of action held byCadiz against the Debtors, were resolved, and Cadiz was granted aSource: CADIZ INC, 10-K, November 02, 2004Powered 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. single allowed general unsecured claim against the Debtors in theamount of $13,500,000 (the "Allowed Cadiz Claim"); WHEREAS, the Initial Settlement is part of a broader,multiparty settlement agreement (the "Global Settlement") by andamong the Debtors, Cadiz, Black Diamond Capital Management, L.L.C.on behalf of its affiliates. ("Black Diamond") and CFSC WaylandAdvisers, Inc. ("CFSC Wayland") (collectively, the "MajorityNoteholders"), who are the holders of not less than 70% in dollaramount of Sun World's senior secured notes due 2004 (in theaggregate, the "Notes;" holders of the Notes are referred toherein as "Noteholders"); WHEREAS, pursuant to the terms of the Global Settlement,Cadiz has agreed to, among other things, pledge all its equityinterest in Sun World to the Sun World Noteholder Trust (providedthat the Sun World Noteholder Trust shall not be permitted to votesuch shares to exercise control over Sun World prior toconfirmation of a Sun World plan of reorganization or consummationof a sale of substantially all Sun World assets) in order tosecure its ongoing obligations under the Global Settlement; and WHEREAS, the secured lender of Cadiz (the "Cadiz Lender") hasreviewed the terms and conditions of the Global Settlement and hasexpressly consented to and authorized Cadiz to fully perform allits obligations under the Global Settlement. NOW, THEREFORE, in consideration of the promises and theagreements, provisions and covenants herein contained, Pledgor andSecured Party agree as follows: SECTION 1. DEFINITIONS; INTERPRETATION; GRANT OF SECURITY. 1.1 GENERAL DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "Agreement" means this Pledge Agreement. "Cash Proceeds" has the meaning assigned in Section 6.2. "Collateral Account" means an account in the name of "SUN WORLD NOTEHOLDER TRUST" as designated by Secured Party from time to time and any successor account or accounts. "Cadiz Pledge Agreement" means that certain agreement, as amended from time to time, dated as of April 16, 1997 between Cadiz and The Bank of New York, whereby Cadiz has pledged shares representing Cadiz's equity interest in the Debtors to The Bank of New York as security for certain obligations of Cadiz, all as more fully described in the Cadiz Pledge Agreement. "Pledged Collateral" has the meaning assigned in Section 1.3. "Pledged Equity Interests" means all equity interests in Sun World and the certificates, if any, representing such equity interests and any interest of Pledgor on the books and records of Sun World or on the books and records of any securities intermediary pertaining to such interest, all claims or rights in respect of such equity interests and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such equity. "Proceeds" means (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Pledged Equity Interests and (iii) whatever is receivable or received when Pledged Collateral or proceeds are sold, exchanged, collected or otherwise disposedSource: CADIZ INC, 10-K, November 02, 2004Powered 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, whether such disposition is voluntary or involuntary. "Secured Obligations" has the meaning assigned in Section 2.1. "UCC" means the Uniform Commercial Code as in effect and amended from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction. 1.2. DEFINITIONS; INTERPRETATION. All capitalized terms usedherein (including the preamble and recitals hereto) and nototherwise defined herein shall have the meanings ascribed theretoin the Global Settlement or, if not defined therein, in the UCC.References to "Sections", "Exhibits" and "Schedules" shall be toSections, Exhibits and Schedules, as the case may be, of thisAgreement unless otherwise specifically provided. If any conflictor inconsistency exists between this Agreement and the GlobalSettlement, the Global Settlement shall govern. 1.3. GRANT OF SECURITY. Pledgor hereby grants to SecuredParty a security interest and continuing lien on all of Pledgor'sright, title and interest in, to and under the following (all ofwhich being hereinafter collectively referred to as the "PledgedCollateral"): (i) the Pledged Equity Interests, and (ii) allProceeds, products, accessions, rents and profits resultingdirectly from the Pledged Equity Interests, in each case whethernow owned or existing or hereafter acquired or arising prior tothe effective date of a plan of reorganization in accordance withthe Global Settlement and wherever locatedSECTION 2. SECURITY FOR OBLIGATIONS; PLEDGOR REMAINS LIABLE. 2.1. SECURITY FOR OBLIGATIONS. This Agreement secures, andthe Pledged Collateral is collateral security for, the prompt andcomplete satisfaction of any and all obligations of Pledgor underthe Global Settlement, including without limitation toaffirmatively support a plan of reorganization for Sun World thatprovides no recovery on account of the equity interest of Cadiz inSun World and that is otherwise consistent with the GlobalSettlement (provided that the Secured Party shall not be permittedto vote such shares to exercise control over Sun World prior toconfirmation of a Sun World plan of reorganization or consummationof a sale of substantially all Sun World assets) (the "SecuredObligations"). 2.2. PLEDGOR REMAINS LIABLE. (a) Anything contained herein to the contrary notwithstanding, Secured Party shall not have any obligation or liability under any organizational documents relating to any Pledged Equity Interests by reason of this Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of Pledgor thereunder. (b) Secured Party shall not be obligated to assume any obligation or liability under any agreement relating to any Pledged Equity Interests unless Secured Party expressly agrees in writing to assume any or all of said obligations. SECTION 3. REPRESENTATIONS AND WARRANTIES AND COVENANTS. 3.1. GENERALLY. Subject to (i) the execution of that certainamendment to the Cadiz Pledge Agreement and related documents ascontemplated in and consistent with the Global Settlement and (ii)the consent of the Cadiz Lender to the Global Settlement: (a) REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and warrants on the Closing that: Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (i) [intentionally omitted] (ii) Pledgor has the corporate power and authority and legal right to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Pledgor of this Agreement and the performance of its obligations hereunder have been duly authorized by proper corporate or other requisite proceedings, Pledgor has duly executed and delivered this Agreement and this Agreement constitutes the legal, valid and binding obligation of Pledgor enforceable against Pledgor in accordance with its terms; (iii) neither the execution and delivery by Pledgor of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Pledgor or its certificate or articles of incorporation or by- laws (or other relevant formation documents) or the provisions of any indenture, instrument or agreement to which Pledgor is a party or is subject, or by which it, or its property, is bound, or conflict with or constitute a default thereunder, or result in the creation or imposition of any Lien in, of or on the property of Pledgor pursuant to the terms of any such indenture, instrument or agreement; (iv) it owns the Pledged Collateral purported to be owned by it or otherwise has the rights it purports to have in each item of Pledged Collateral and, as to all Pledged Collateral whether now existing or hereafter acquired, will continue to own or have such rights in each item of the Pledged Collateral, in each case free and clear of any and all Liens, rights or claims of all other Persons, except for those Liens that may have been granted under the Cadiz Pledge Agreement; (v) upon Secured Party obtaining possession of the Pledged Equity Interests, or the filing of all UCC financing statements and other filings delivered by Pledgor, the security interests granted to Secured Party hereunder constitute valid and perfected first priority Liens on all of the Pledged Collateral, except for those Liens that may have been granted under the Cadiz Pledge Agreement; (vi) [intentionally omitted] (vii) [intentionally omitted] (viii) it has delivered to Secured Party evidence and copies of all required corporate actions and consents, including all filings, notices, registrations and recordings, if any; (ix) [intentionally omitted] (x) [intentionally omitted] (xi) to the best knowledge of Pledgor, all information supplied by Pledgor with respect to any of the Pledged Collateral is accurate and complete in all material respects, including without limitation the information provided in Schedule 3.1; (b) COVENANTS AND AGREEMENTS. Pledgor hereby covenants and agrees that: Source: CADIZ INC, 10-K, November 02, 2004Powered 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. (i) except for the security interest created by this Agreement, it shall not create or suffer to exist any Lien upon or with respect to any of the Pledged Collateral, and Pledgor shall maintain the security interest created hereby as a valid and perfected, first priority security interest in the Pledged Collateral, except for those Liens that may have been granted under the Cadiz Pledge Agreement; (ii) [intentionally omitted] (iii) [intentionally omitted] (iv) it shall not take any action which could impair Secured Party's rights in the Pledged Collateral; (v) it shall not sell, transfer or assign any Pledged Collateral; and (vi) shall comply with the terms and conditions of the Global Settlement. 3.2. PLEDGED EQUITY INTERESTS. Subject to (i) the executionof that certain amendment to the Cadiz Pledge Agreement andrelated documents as contemplated in and consistent with theGlobal Settlement and (ii) the consent of the Cadiz Lender to theGlobal Settlement: (a) REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and warrants on the Closing that: (i) Schedule 3.2 (as such schedule may be amended or supplemented from time to time) sets forth under the heading "Pledged Equity Interests" all of Pledged Equity Interests owned by Pledgor and such Pledged Equity Interests constitute 100% of the issued and outstanding equity interests of Sun World; (ii) it is the record and beneficial owner of the Pledged Equity Interests free of all Liens, rights or claims of other Persons, except for those Liens that may have been granted under the Cadiz Pledge Agreement; (iii) without limiting the generality of Section 3.1(a), no consent of any Person including any other member of Sun World is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of Secured Party in any Pledged Equity Interests or the exercise by Secured Party of the rights provided for in this Agreement or the exercise of remedies in respect thereof, except for those Liens that may have been granted under the Cadiz Pledge Agreement; and (iv) none of the Pledged Equity Interests are or represent interests in issuers that (A) are registered as investment companies, (B) are dealt in or traded on securities exchanges or markets or (C) have opted to be treated as securities under the uniform commercial code of any jurisdiction. (b) COVENANTS AND AGREEMENTS. Pledgor hereby covenants and agrees that: (i) except as expressly permitted under the Global Settlement, without the prior written consent of Secured Party, it shall not vote to enable or take any other action to: (A) amend or terminate any organizational documents in any way that materially changes the rights of Pledgor with respect to any Pledged Equity Interests or adversely affects theSource: CADIZ INC, 10-K, November 02, 2004Powered 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. validity, perfection or priority of Secured Party's security interest, (B) permit Sun World to issue any additional equity interests of any nature or to issue securities convertible into or granting the right of purchase or exchange for any equity interest of any nature of Sun World, (C) other than as permitted under the Global Settlement, permit Sun World to dispose of all or a material portion of its assets, (D) waive any default under or breach of any terms of any organizational document relating to Sun World or (E) cause Sun World to elect or otherwise take any action to cause the Pledged Equity Interests to be treated as securities for purposes of the UCC; provided, however, notwithstanding the foregoing, if Sun World takes any such action in violation of the foregoing clause (E), Pledgor shall promptly notify Secured Party in writing of any such election or action and, in such event, shall take all steps necessary or advisable to establish Secured Party's "control" of the Pledged Equity Interests; (ii) in the event it acquires any Pledged Collateral after the date hereof, Pledgor shall deliver to Secured Party a completed Pledge Supplement, substantially in the form of Exhibit A, together with all Supplements to Schedules thereto, reflecting such new interests. Notwithstanding the foregoing, it is understood and agreed that the security interest of Secured Party shall attach to Pledged Collateral immediately upon Pledgor's acquisition of rights therein and shall not be affected by the failure of Pledgor to deliver a supplement to Schedule 3.2 as required hereby; (iii) in the event Pledgor receives any dividends, interest or distributions on any Pledged Equity Interests, or any securities or other property upon the merger, consolidation, liquidation or dissolution of Sun World, then (A) such dividends, interest or distributions and securities or other property shall be included in the definition of Pledged Collateral without further action and (B) Pledgor shall immediately take all steps, if any, necessary or advisable to ensure the validity, perfection, priority and, if applicable, control of Secured Party over such Pledged Equity Interests (including, without limitation, delivery thereof to Secured Party) and pending any such action Pledgor shall be deemed to hold such dividends, interest, distributions, securities or other property in trust for the benefit of Secured Party and such dividends, interest, distributions, securities or other property shall be segregated from all other property of Pledgor; (iv) [intentionally omitted] (v) without the prior written consent of Secured Party, it shall not cause Sun World to merge or consolidate. (c) DELIVERY AND CONTROL. Pledgor agrees that with respect to any Pledged Equity Interests in which it currently has rights, it shall comply with the provisions of this Section 3.2(c) on or before the Closing and with respect to any Pledged Equity Interests hereafter acquired by Pledgor it shall comply with the provisions of this Section 3.2(c) immediately upon acquiring rights therein, in each case in form and substance satisfactory to Secured Party. Subject to the Cadiz Pledge Agreement, if Pledgor shall, as a result of its ownership of the Pledged Equity Interests, become entitled to receive or shall receive any certificate or instrument (including, without limitation, anySource: CADIZ INC, 10-K, November 02, 2004Powered 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. certificate representing an in-kind dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any equity interests of the Pledged Equity Interests, or otherwise in respect thereof, Pledgor shall accept the same as the agent of Secured Party, hold the same in trust for the benefit of Secured Party and deliver the same forthwith to Secured Party in the exact form received, duly indorsed by Pledgor to Secured Party, if required, together with an undated stock power covering such certificate duly executed in blank by Pledgor, and to be held in the possession of Secured Party, subject to the terms hereof, as collateral security for the Secured Obligations. (d) Voting. (i) Pledgor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Equity Interests or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Global Settlement; provided that Pledgor shall not exercise or refrain from exercising any such right if such action could have a material adverse effect on the value of the Pledged Collateral or any part thereof except as provided in the Global Settlement; and (ii) [intentionally omitted]SECTION 4. FURTHER ASSURANCES. 4.1. [INTENTIONALLY OMITTED]. 4.2. FURTHER ASSURANCES. (a) Pledgor agrees that from time to time, at the expense of the Secured Party, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Secured Party may reasonably request, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted or purported to be granted hereby or to enable Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. (b) In addition, to the extent permitted by applicable law, Pledgor hereby authorizes Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Pledged Collateral without the signature of Pledgor. Pledgor agrees that a carbon, photographic or other reproduction of this Agreement or of a financing statement signed by Pledgor shall be sufficient as a financing statement and may be filed as a financing statement in any and all jurisdictions. Pledgor shall furnish to Secured Party from time to time statements and schedules further identifying and describing the Pledged Collateral and such other reports in connection with the Pledged Collateral as Secured Party may reasonably request, all in reasonable detail. (c) Pledgor hereby authorizes Secured Party to file a Record or Records (as defined in the UCC), including, without limitation, financing statements, in all jurisdictions and with all filing offices as Secured Party may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to Secured Party herein. Such financingSource: CADIZ INC, 10-K, November 02, 2004Powered 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. statements shall describe the Pledged Collateral in substantially the same manner as described herein. (d) Pledgor shall, through the compliance of the covenants contained herein and through any other actions that may be necessary or desirable, continuously maintain from the date made the truthfulness and accuracy of every representation, warranty and certification made herein until the termination of this Agreement by its terms.SECTION 5. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. 5.1. POWER OF ATTORNEY. Pledgor hereby irrevocably appointsSecured Party (such appointment being coupled with an interest) asPledgor's attorney-in-fact, with full authority in the place andstead of Pledgor and in the name of Pledgor, Secured Party orotherwise, from time to time in Secured Party'sdiscretion to take any action and to execute any instrument thatSecured Party may deem reasonably necessary or advisable toaccomplish the purposes of this Agreement, including, withoutlimitation, to prepare, sign and file any UCC financing statementsin the name of Pledgor as debtor. 5.2. NO DUTY ON THE PART OF SECURED PARTY. The powersconferred on Secured Party hereunder are solely to protect theinterests of Secured Party in the Pledged Collateral and shall notimpose any duty upon Secured Party to exercise any such powers.Secured Party shall be accountable only for amounts thatit actually receives as a result of the exercise of such powers,and neither Secured Party nor any of its officers, directors,employees or agents shall be responsible to Pledgor for any act orfailure to act hereunder, except for its own gross negligence orwillful misconduct.SECTION 6. REMEDIES. 6.1. GENERALLY. If any breach by Pledgor under this Agreementshall have occurred and be continuing, all as determined by theSecured Party in its sole and absolute discretion, then SecuredParty may foreclose upon the Pledged Collateral; provided thatsuch foreclosure remedy shall be sole and exclusiveremedy of the Secured Party for a breach of this Agreement,without regard to any other rights and remedies available to it atlaw or in equity, or under the UCC. 6.2. Cash Proceeds. All proceeds of any Pledged Collateralreceived by Pledgor consisting of cash, checks and other near-cashitems (collectively, "Cash Proceeds") shall be held by Pledgor intrust for Secured Party, segregated from other funds of Pledgor,and shall, forthwith upon receipt by Pledgor, unless otherwiseprovided pursuant to Section 3.2(b)(iii), be turned over toSecured Party in the exact form received by Pledgor (duly indorsedby Pledgor to Secured Party, if required) and held by SecuredParty in the Collateral Account.SECTION 7. CONTINUING SECURITY INTEREST; SUCCESSORS AND ASSIGNS; TRANSFER OF LOANS. This Agreement shall create a continuing security interest inthe Pledged Collateral and shall remain in full force and effectuntil the satisfaction in full of all Secured Obligations, bebinding upon Pledgor, its successors and assigns, and inure,together with the rights and remedies of Secured Partyhereunder, to the benefit of Secured Party and its successors,transferees and assigns; provided, however, that, Pledgor may nottransfer, or otherwise assign, any of its obligations hereunderwithout the prior written consent of Secured Party. Upon thesatisfaction in full of all Secured Obligations, the securityinterest granted hereby shall terminate hereunder and of recordand all rights to the Pledged Collateral shall revert to Pledgor.Upon any such termination Secured Party shall, at Pledgor'sexpense, execute and deliver to Pledgor such documents as Pledgor shall reasonably request to evidence such termination.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 8. STANDARD OF CARE; SECURED PARTY MAY PERFORM. The powers conferred on Secured Party hereunder are solely toprotect its interest in the Pledged Collateral and shall notimpose any duty upon it to exercise any such powers. Except forthe exercise of reasonable care in the custody of any PledgedCollateral in its possession and the accounting formoneys actually received by it hereunder, Secured Party shall haveno duty as to any Pledged Collateral or as to the taking of anynecessary steps to preserve rights against prior parties or anyother rights pertaining to any Pledged Collateral. Secured Partyshall be deemed to have exercised reasonable care in the custodyand preservation of Pledged Collateral in its possession if suchPledged Collateral is accorded treatment substantially equal tothat which Secured Party accords its own property. Neither SecuredParty nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Pledged Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any PledgedCollateral upon the request of Pledgor or otherwise. If Pledgorfails to perform any agreement contained herein, Secured Party mayitself perform, or cause performance of, such agreement, and theexpenses of Secured Party incurred in connection therewith shallbe payable by Pledgor.SECTION 9. [INTENTIONALLY OMITTED]SECTION 10. MISCELLANEOUS. (a) All notices and other communications hereunder shall be made at the following addresses: If to the Sun World Noteholder Trust at: Logan & Company 546 Valley Road Upper Montclair, NJ 07043 Attn: Kate Logan with copies to: Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 W. Wacker Drive Chicago, IL 60606 Attn: Timothy R. Pohl If to Cadiz at: Cadiz Inc. 777 South Figueroa Street, Suite 4250 Los Angeles, CA 90017 Attn: Keith Brackpool, Chief Executive Officer with copies to: Stutman, Treister & Glatt P.C. 1901 Avenue of the Stars, 12th Floor Los Angeles, CA 90067 Attn: Jeffrey H. Davidson (b) No failure or delay on the part of Secured Party in exercising any right, power or remedy shall operate as a waiver thereof, and no single or partial exercise of any such right, power or remedy shall preclude any other or further exercise thereof, or the exercise of any other right, power or remedy. (c) No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement shall be effective unless the same shall be in writing and signed and delivered by Secured Party and Pledgor (in the event of an amendment or modification), and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.Source: CADIZ INC, 10-K, November 02, 2004Powered 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) Except as provided in Section 6.1 of this Agreement, all obligations of Pledgor and all rights, powers and remedies of Secured Party expressed herein are in addition to all other rights, powers and remedies possessed by them, including, without limitation, those provided by applicable law or in any other written instrument or agreement relating to any of the Secured Obligations or any security therefore. (e) In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. (f) This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. (g) THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. This Agreement and exhibits constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. (h) The Bankruptcy Court shall retain exclusive jurisdiction to enforce the terms of this Agreement and to decide disputes which may arise or result from, or be connected with, this Agreement or any document or instrument executed in connection with the transactions contemplated herein, any breach or default hereunder or thereunder, or the transactions contemplated hereby. (i) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR THE RELATIONSHIP THAT IS BEING ESTABLISHED. (j) With respect to this Agreement only, no claim (other than claims arising out of the gross negligence or willful misconduct of a Protected Person (as defined below)) shall be made by Pledgor or any of its affiliates against Secured Party or any of its respective affiliates, directors, employees, attorneys or agents (the "Protected Persons") for any special, indirect, consequential or punitive damages in connection with, arising out of or in any way related to the transactions contemplated by this Agreement or any act or omission or event occurring in connection therewith, and Pledgor hereby waives, releases and agrees not to sue upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. (k) Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. (l) All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC. [Remainder of page intentionally left blank.]IN WITNESS WHEREOF, Pledgor and Secured Party have caused thisSource: CADIZ INC, 10-K, November 02, 2004Powered 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 to be duly executed and delivered by their respectiveofficers thereunto duly authorized as of the date first writtenabove.CADIZ INC.By:Name:Title:SUN WORLD NOTEHOLDER TRUSTBy:Name:Title: SCHEDULE 3.1 PLEDGOR INFORMATION(A) Full Legal Name and Chief Executive Office of Pledgor:(1)(B) Jurisdiction of Organization of Pledgor:(C) Other Names (including any Trade-Name or Fictitious Business Name) under which Pledgor has conducted Business for the past Five (5) Years:------------------------(1) If the principal place of business of Pledgor is locatedoutside of the United States, include the address of the majorexecutive office in the United States, if any, of Pledgor. SCHEDULE 3.2 PLEDGED EQUITY INTERESTSPledged Equity Interests:Grantor Stock Class of Certificated Stock Par No. of o/o of Out- Issuer Stock (y/n) Cert. Value Pledged standing No. Units Stock of Stock Issuer EXHIBIT A PLEDGE SUPPLEMENT This PLEDGE SUPPLEMENT, dated as of [mm/dd/yy], is deliveredpursuant to the Pledge Agreement, dated as of November [___], 2003(as it may be from time to time amended, restated, modified orsupplemented, the "Sponsor Pledge Agreement"), between CADIZ INC.,as Pledgor, and SUN WORLD NOTEHOLDER TRUST, as Secured Party.Capitalized terms used herein not otherwise defined herein shallhave the meanings ascribed thereto in the Sponsor PledgeAgreement. Pledgor hereby confirms the grant to Secured Party set forthin the Sponsor Pledge Agreement of, and does hereby grant toSecured Party, a security interest in all of Pledgor's right,title and interest in and to all Pledged Collateral to secure theSecured Obligations, in each case whether now or hereafterexisting or in which Pledgor now has or hereafter acquires aninterest and wherever the same may be located. Pledgor represents andwarrants that the attached Supplements to Schedules accurately andcompletely set forth all additional information required pursuantto the Sponsor Pledge Agreement and hereby agrees that suchSupplements to Schedules shall constitute part of the Schedules tothe Sponsor Pledge Agreement.IN WITNESS WHEREOF, Pledgor has caused this Pledge Supplement toSource: CADIZ INC, 10-K, November 02, 2004Powered 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 duly executed and delivered by its duly authorized officer as of thedate set forth above.CADIZ INC.By:Name:Title: SCHEDULE 3.1 TO PLAN SUPPLEMENT PLEDGOR INFORMATIONAdditional Information:(A) Full Legal Name and Chief Executive Office of Pledgor(1):(B) Jurisdiction of Organization of Pledgor:(C) Other Names (including any Trade-Name or Fictitious Business Name) under which Pledgor has conducted Business for the past Five (5) Years:-------------------(1) If the principal place of business of Pledgor is locatedoutside of the United States, include the address of the majorexecutive office in the United States, if any, of Pledgor. SCHEDULE 3.2 TO PLAN SUPPLEMENT PLEDGED EQUITY INTERESTSAdditional Information:Pledged Equity Interests:Source: CADIZ INC, 10-K, November 02, 2004Powered 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 RE CLOSING OF "SUN WORLD-BONDHOLDER-CADIZ TERM SHEET AND AGREEMENT IN PRINCIPLE" THIS AGREEMENT (the "Closing Agreement") isentered into as of November 24, 2003, by and betweenBlack Diamond Capital Management, L.L.C., on behalf ofits affiliates, and CFSC Wayland Advisers, Inc. and theirrespective affiliates (collectively, the "MajorityBondholders"), and Cadiz Inc. ("Cadiz"), with referenceto the following facts and recitations: A. On October 13, 2003, Sun WorldInternational, Inc. ("SWI") and its debtor affiliates(collectively, "Sun World"), Cadiz, and the MajorityBondholders entered into the "Sun World-Bondholder-CadizTerm Sheet and Agreement in Principle" (the "SettlementAgreement"). B. On November 7, 2003, the United SatesBankruptcy Court for the Central District of California,Riverside Division (the "Bankruptcy Court") entered itsorder (the "Approval Order") approving the InitialSettlement (as defined in the Settlement Agreement). C. On November 14, 2003, an unsecuredcreditor of Sun World filed a notice of appeal from theApproval Order (the "Pending Appeal") D. No stay of the Approval Order has beenrequested or issued. E. Section 2.A of the Settlement Agreementprovides that the Closing (as defined in the SettlementAgreement) shall occur on or before the fifth businessday after the Court's order approving the InitialSettlement becomes final and non-appealable, or priorthereto if so agreed by Cadiz and the MajorityBondholders in their discretion. F. After discussions, Cadiz and the MajorityBondholders have agreed that, notwithstanding the PendingAppeal, the Closing shall occur on the terms andconditions set forth in this Closing Agreement. NOW, THEREFORE, IT IS HEREBY AGREED, by andbetween the parties hereto, as follows: 1. Notwithstanding the Pending Appeal, theClosing of the Settlement Agreement shall take place onDecember __, 2003, at 1:00 PM Pacific Standard Time (the"Scheduled Closing Time"). 2. In the event that the Closing shall nothave occurred, then any party hereto may, at any timethereafter but before the Closing has occurred, elect toterminate this Closing Agreement by providing writtennotice of termination to each other party hereto. Ifthis Closing Agreement is so terminated, it shall be ofno force or effect. 3. Notwithstanding the Closing or thisClosing Agreement, the parties' respective rights andobligations under the Settlement Agreement, the ApprovalOrder, and each of the documents executed by the partiesto implement the Settlement Agreement and the ApprovalOrder shall remain in full force and effect, and nothingcontained herein shall constitute or be construed as awaiver thereof by any party. 4. In the event that the Approval Order shallbe reversed, modified, or set aside or shall otherwisenot be in full force and effect for any reason, thenCadiz and the Majority Bondholders shall each use theirrespective reasonable efforts in good faith to preserveSource: CADIZ INC, 10-K, November 02, 2004Powered 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 benefits of the Settlement Agreement for the partieshereto. Without limitation of the foregoing: (a) theassignment, pursuant to Section 2.A of the SettlementAgreement, of the Allowed Cadiz Claim (as defined in theSettlement Agreement) and the pledge of Cadiz's equityinterest in SWI to the Bondholder Trust (as defined inthe Settlement Agreement) shall remain fully effective;(b) Cadiz's agreement, pursuant to Section 1.B of theSettlement Agreement, that it will affirmatively supporta plan of reorganization for Sun World that provides norecovery on account of Cadiz's equity interest in SWI andthat is otherwise consistent with the SettlementAgreement shall remain fully effective; (c) theBondholder Trust, the Opt-In Forms (as defined in theSettlement Agreement), the Majority Bondholders'irrevocable instructions to the Indenture Trustee (asdefined in the Settlement Agreement) to take no actionagainst Cadiz on behalf of Bondholders (as defined in theSettlement Agreement) or on account of the Guaranty (asdefined in the Settlement Agreement), and the MajorityBondholders' irrevocable consent to the amendment of theindenture deleting substantially all covenants and otherprovisions relating to the Guaranty or remedies againstCadiz as guarantor, each as executed pursuant to Sections2.B. and 2.C. of the Settlement Agreement, shall remainfully effective; (d) the Majority Bondholders' agreement,pursuant to Section 3 of the Settlement Agreement, thatany plan of reorganization filed or supported by SunWorld and /or the Majority Bondholders shall provide (i)that the consideration to Bondholders contemplated undersuch plan is in full satisfaction and settlement of allclaims of Bondholders under the indenture, including theGuaranty, (ii) that the indenture for the bonds(including the Guaranty thereunder) shall be deemedcancelled and extinguished as of the effective date ofthe plan, and (iii) for all Bondholders to be deemed torelease their Guaranty claims against Cadiz in exchangefor the consideration to be distributed to the BondholderTrust, and the obligations of Sun World and the MajorityBondholders to each use their respective reasonableefforts in good faith to have these provisions approvedby the Court as part of any plan shall each remain fullyeffective; and (e) Cadiz and the Majority Bondholdersshall each use their respective reasonable efforts ingood faith to defend against and defeat any objections toclaims and/or avoidance actions which might be broughtseeking to disallow or reduce the Cadiz Claim assigned tothe Bondholder Trust or seeking any recovery from Cadizand, if there is any such recovery from Cadiz, to turnover to Cadiz any net cash proceeds of any avoidanceactions against Cadiz actually distributed to theMajority Bondholders. 5. The parties agree to execute such otherdocuments as may be reasonably necessary or appropriateto effectuate the purposes of the Settlement Agreement,including without limitation additional directions to theIndenture Trustee and consents to additional amendmentsto the indenture consistent with the SettlementAgreement. 6. This Closing Agreement is intended, andshall be construed, to preserve for each party thebenefits of the Settlement Agreement to the maximumfeasible extent.Accepted and Agreed:Black Diamond Capital Management, L.L.C. Cadiz Inc.By: James J. Zinni Jr. By: /s/ Jennifer Hankes Painter --------------------------- -----------------------------Its: President & Managing Partner Its: VP, General Counsel ------------------------------ -------------------------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. CFSC Wayland Advisors, Inc.By: /s/ Blake M. Carlson --------------------------Its: Authorized Signatory --------------------------Source: CADIZ INC, 10-K, November 02, 2004Powered 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. MUTUAL GENERAL RELEASE THIS MUTUAL GENERAL RELEASE (the "Release") is enteredinto by and between Sun World International, Inc., a Delawarecorporation ("SWI"), Sun Desert, Inc., a Delaware corporation,Coachella Growers, a California Agricultural Cooperative, and SunWorld/Rayo, a California corporation, debtors and debtors inpossession (collectively, the "Sun World Entities"), on the onehand; and Cadiz Inc., a Delaware corporation ("Cadiz") on theother hand; with reference to the following facts andrecitations: A. The Sun World Entities are the debtors and debtorsin possession in chapter 11 cases (the "Chapter 11 Cases")pending in the United States Bankruptcy Court for the CentralDistrict of California, Riverside Division (the "BankruptcyCourt") as case numbers RS-03-11370-DN, RS-03-11369-DN, RS-03-11371-DN, and RS-03-11374-DN. The Sun World Entities filed theirrespective Voluntary Petitions commencing the Chapter 11 Cases onJanuary 30, 2003. B. The Sun World Entities have asserted variouspotential claims and causes of action of their respectivebankruptcy estates (collectively, the "Estates") against Cadiz;Cadiz has asserted various potential claims and causes of actionagainst the Estates and has filed seven proofs of claim againstthe Estates. These claims and causes of action are, except asotherwise provided in this Release, denied and disputed. C. The Sun World Entities and Cadiz have undertakensuch investigation of the potential claims and causes of actionas they and their respective counsel deem appropriate andpracticable under the circumstances. D. After negotiations, the Sun World Entities andCadiz have reached a settlement and compromise of the potentialclaims and causes of action on the terms set forth in the "SunWorld-Bondholder-Cadiz Term Sheet and Agreement in Principle"dated October 13, 2003 (the "Settlement Agreement"), which isattached to the "Motion for Order Authorizing Debtors to Enterinto Initial Settlement with Cadiz Inc." (the "Motion") filed inthe Chapter 11 Cases on October 15, 2003 by the Sun WorldEntities. E. The Motion has been granted, and the SettlementAgreement has been duly approved by the Bankruptcy Court in the"Order Authorizing Debtors to Enter into Initial Settlement withCadiz Inc." (the "Settlement Order") entered in the Chapter 11Cases on November 7, 2003. F. In furtherance of the Settlement Agreement and theSettlement Order, this Release is executed effective as of theClosing Date (the "Closing Date"), as defined in the SettlementAgreement. NOW, THEREFORE, in consideration of the foregoing, themutual covenants herein, and other good and valuableconsideration, the parties hereby agree as follows: 1. As of the Closing Date, the Sun World Entities andthe Estates shall be deemed to forever release, relieve, anddischarge Cadiz and (with respect only to matters arising out ofor related to any potential claims and causes of action of theSun World Entities and the Estates against Cadiz) its successorsand assigns, from any and all claims, liabilities, demands,causes of action, debts, obligations, promises, acts, agreements,and damages, of whatever kind or nature, whether known orunknown, suspected or unsuspected, contingent or fixed,liquidated or unliquidated, matured or unmatured, whether at lawor in equity, which the Sun World Entities or the Estates everhad, now have, or may, shall, or can hereafter have, directly orindirectly arising out of or in any way based upon, connectedwith, or related to matters, things, acts, conduct, and/orSource: CADIZ INC, 10-K, November 02, 2004Powered 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. omissions at any time from the beginning of the world through andincluding the Closing Date, including without limitation any andall claims arising under or related to the Bankruptcy Code,including without limitation sections 541, 542, 544, 545, 547,548, 549, and/or 553 thereof. 2. As of the Closing Date, Cadiz shall be deemed toforever release, relieve, and discharge the Sun World Entitiesand the Estates and (with respect only to matters arising out ofor related to any potential claims and causes of action of Cadizagainst the Sun World Entities and the Estates) their successorsand assigns, from any and all claims, liabilities, demands,causes of action, debts, obligations, promises, acts, agreements,and damages, of whatever kind or nature, whether known orunknown, suspected or unsuspected, contingent or fixed,liquidated or unliquidated, matured or unmatured, whether at lawor in equity, which Cadiz ever had, now has, or may, shall, orcan hereafter have, directly or indirectly arising out of or inany way based upon, connected with, or related to matters,things, acts, conduct, and/or omissions at any time from thebeginning of the world through and including the Closing Date. 3. As of the Closing Date, all contracts andagreements between Cadiz and any of the Sun World Entities,whether written or oral, of whatever kind or nature (includingwithout limitation the "Credit Agreement among Sun WorldInternational, Inc., as Borrower, and Cadiz Land Company, Inc.,as Lender, Dated as of March 31, 1998," the "Services Agreement,"as amended, and the "Tax Sharing Agreement"), shall be deemedterminated and rejected, and any and all claims, liabilities,demands, causes of action, debts, obligations, promises, acts,agreements, and damages directly or indirectly arising out of orin any way based upon, connected with, or related to suchcontracts and agreements shall be included in the mattersreleased under paragraphs 1 and 2 above. 4. Notwithstanding paragraphs 1, 2, and 3 above,nothing contained in this Release shall affect or release thefollowing: (a) the allowed, general unsecured non-priority claim of Cadiz in the Chapter 11 Cases in the amount of $13,500,000 which, effective on the Closing Date, shall be assigned by Cadiz to the Sun World Noteholder Trust pursuant to the Settlement Agreement; (b) the equity interest of Cadiz in SWI representing 100% of the outstanding shares of SWI which, effective on the Closing Date, shall be pledged by Cadiz to the Sun World Noteholder Trust pursuant to the Settlement Agreement; (c) the "Amended and Restated Agricultural Lease Agreement" dated June 6, 2003, between Cadiz, as lessor, and SWI, as lessee, previously assumed by SWI pursuant to an order of the Bankruptcy Court, and all of the parties' respective rights and obligations thereunder; and (d) the Settlement Agreement, the Settlement Order, this Release, and other documents executed in furtherance of the Settlement (collectively, the "Settlement Documents") and the parties' respective rights and obligations under the Settlement Documents. 5. On the Closing Date, the Sun World Entities, theEstates, and Cadiz, and each of them, shall be deemed to waiveany and all rights or benefits which they have or may have underSection 1542 of the Civil Code of the State of California, to thefull extent that they may waive such rights and benefits,pertaining to the matters released herein. Section 1542 of theCivil Code of the State of California provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IFSource: CADIZ INC, 10-K, November 02, 2004Powered 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. KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.In connection with such waiver and relinquishment, the partiesacknowledge that they are aware that they may hereafter discoverclaims presently unknown or unsuspected, or facts in addition toor different from those which they know or believe to be true,with respect to the matters released herein. Nevertheless, it isthe intention of the Sun World Entities, the Estates, and Cadizthrough this Release, and with the advice of counsel, fully,finally, and forever to settle and release all such matters, andall claims relative thereto, which do now exist, or heretoforehave existed between the parties. In furtherance of suchintention, the releases herein given shall be and remain ineffect as a full and complete release of such mattersnotwithstanding the discovery or existence of any such additionalor different claims or facts relative thereto. 6. The Sun World Entities, the Estates, and Cadizhereby represent and warrant to, and agree with, each other asfollows: (a) Each party has received independent legal advice from attorneys of its choice with respect to the advisability of executing this Release and making the settlement and releases provided herein. (b) Except as expressly stated in this Release, no party has made any statement or representation to any other party regarding any fact relied upon by that party in entering into this Release, and each party specifically does not rely upon any statement, representation, or promise of the other party in entering into this Release or in making the settlement provided for herein, except as expressly stated in this Release. (c) Each party and its attorneys have made such investigation of the facts pertaining to this Release and all of the matters pertaining thereto as it deems necessary. (d) This Release has been carefully read by, the contents hereof are known and understood by, and it is signed freely by each person executing this Release. (e) Each party covenants and agrees not to bring any claim, action, suit, or proceeding against any other party hereto, directly or indirectly, regarding or related in any manner to the matters released hereby, and further covenants and agrees that this Release is a bar to any such claim, action, suit, or proceeding. 7. Each party represents and warrants to each otherparty that such party has not heretofore assigned or transferred,or purported to assign or transfer, to any person or entity anyclaims or other matters herein released, except (i) Cadizpreviously granted to its lender (the "Cadiz Lender") a securityinterest in Cadiz's claims against the Sun World Entities and(ii) effective as of the Closing, the Cadiz Lender consents tothis Release on terms approved by Sun World. 8. This Release effects the settlement of claimswhich are denied and contested, and nothing contained hereinshall be construed as an admission by any party of any liabilityor fact or a concession by any party of any question of law. 9. This Release shall inure to the benefit of, andshall be binding upon, the successors and assigns of each of theparties hereto, including without limitation any chapter 11trustee, any chapter 7 trustee, any examiner, and any otherrepresentative which may be appointed for any of the Sun WorldEntities or the Estates. 10. All parties hereto agree to bear their own costsand attorneys' fees regarding this Release.Source: CADIZ INC, 10-K, November 02, 2004Powered 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. 11. This Release and the other Settlement Documentsexpress the entire agreement of the parties hereto relative tothe subject matter hereof. No covenants, agreements,representations, or warranties of any kind whatsoever have beenmade by any party hereto, except as specifically set forth inthis Release or in the other Settlement Documents. All priordiscussions and negotiations have been and are merged andintegrated into, and are superseded by, this Release and theother Settlement Documents. 12. This Release shall be construed in accordancewith, and be governed by, the law of the State of California(without reference to conflict of law provisions) and, to theextent applicable, Federal bankruptcy law. The parties consentto the jurisdiction of the Bankruptcy Court to enforce thisRelease and to adjudicate any disputes which may arise under thisRelease. 13. This Release may be executed and delivered in twoor more counterparts, which may be facsimile copies, each ofwhich, when so executed and delivered, shall be deemed anoriginal, but such counterparts together shall constitute but oneand the same instrument. 14. The warranties and representations of this Releaseare deemed to survive the execution and effectiveness hereof.EXECUTED THIS __ DAY OF DECEMBER, 2003.SUN WORLD INTERNATIONAL, INC., a Delaware corporation,SUN DESERT, INC., a Delaware corporation,COACHELLA GROWERS, a California Agricultural Cooperative, andSUN WORLD/RAYO, a California corporation,As Debtors and Debtors in Possession andRepresentatives of their Chapter 11 EstatesBy: /s/ Stanley E. Speer ------------------------------------ Their Chief Financial OfficerCADIZ INC., a Delaware corporationBy: /s/ Keith Brackpool ------------------------------------ Its Chief Executive OfficerSource: CADIZ INC, 10-K, November 02, 2004Powered 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. RESOLUTION THE DIRECTORS OF CADIZ INC. AUTHORIZING THE MANAGEMENT EQUITY INCENTIVE PLAN WHEREAS, it is in the best interests of this Company thatthis Company implement a program to retain key personnel(including both employees and consultants) and to provideadditional incentives to those personnel; and WHEREAS, such a program (the "Management Equity IncentivePlan" or the "Plan") would involve the issuance of equitysecurities of the Company; NOW, THEREFORE, BE IT RESOLVED, that this Board herebyauthorizes the creation by this Company of a Management EquityIncentive Plan; FURTHER RESOLVED, that a total of 1,472,051 shares of thisCorporation's common stock be set aside and reserved for issuanceunder the Plan; FURTHER RESOLVED, that a total of 717,373 shares (the"Initial Allocation Shares") be allocated and issued under thePlan pursuant to the direction of an initial allocation committee(the "Initial Allocation Committee") consisting of KeithBrackpool, Rick Stoddard and the Chairman of the CompensationCommittee of this Board of Directors; FURTHER RESOLVED, that the Initial Allocation Shares soissued under the Plan shall be in the form of shares of commonstock subject to vesting conditions, with 1/3 of any award grantconsisting of common stock vesting immediately, and with theremaining 2/3 of any award subject to vesting in two equalinstallments upon December 11, 2004 and December 11, 2005(subject to continued status as an employee or consultant to thisCompany as of the respective vesting date, but also subject toimmediate vesting in full of any theretofore unvested shares uponany termination without cause); FURTHER RESOLVED, that the Initial Allocation Committeeshall have the right to award all or any part of the shares underthe Plan to members of the Initial Allocation Committee (as wellas other key personnel) without the need for further approval ofthis Board of Directors; and FURTHER RESOLVED, that following the effective date of thePlan, a total of 754,678 shares (the "Subsequent AllocationShares") be issuable under the Plan pursuant to the direction of,and upon such vesting and other conditions as may be establishedby, the Compensation Committee of this Board of Directors; FURTHER RESOLVED, that the Initial Allocation Committee orthe recipients of shares under the Plan may designate such trustsor other nominees to hold such shares as may be reasonablyappropriate for tax planning purposes; FURTHER RESOLVED, that with respect to the InitialAllocation Shares, the Initial Allocation Committee shall havethe authority to prepare, execute and administer anydocumentation with respect to the Plan and the issuance ofsecurities pursuant to the Plan as the Initial AllocationCommittee and/or counsel to the Company may deem necessary ordesirable; FURTHER RESOLVED, that with respect to the SubsequentAllocation Shares, the Compensation Committee shall have theauthority to prepare, execute and administer any documentationwith respect to the Plan and the issuance of securities pursuantto the Plan as the Compensation Committee and/or counsel to theCompany may deem necessary or desirable; FURTHER RESOLVED, that the number of equity securitiesissuable under the Management Equity Incentive Plan be subject toproportionate adjustment in the event that the number ofSource: CADIZ INC, 10-K, November 02, 2004Powered 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. outstanding 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; FURTHER RESOLVED, that any officer of the Company be andhereby is authorized, empowered and directed, for an on behalf ofthis Company, to take such actions as may be necessary orappropriate to effectuate the foregoing resolutions; FURTHER RESOLVED, that any and all actions heretofore takenby any officer of the Company to the foregoing effect and allagreements, documents or writings related thereto, are herebyauthorized, approved, ratified and confirmed in all respects; andany and all actions hereafter taken or to be taken by any suchofficers in furtherance of the objects set forth in any of thepreceding resolutions, and all agreements, documents or writingrelating thereto, are hereby authorized, approved, ratified andconfirmed in all respects.Source: CADIZ INC, 10-K, November 02, 2004Powered 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 COMPANYRancho Cadiz Mutual Water CompanySun World International, Inc.Cadiz Real Estate LLCSource: CADIZ INC, 10-K, November 02, 2004Powered 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. CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I , Keith Brackpool, certify that: 1. I have reviewed this annual report on Form 10-K of Cadiz Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.Dated: November 1, 2004 /s/ Keith BrackpoolSource: CADIZ INC, 10-K, November 02, 2004Powered 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. --------------------------------- Keith Brackpool Chairman, Chief Executive Officer and Chief Financial OfficerSource: CADIZ INC, 10-K, November 02, 2004Powered 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.