Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-Q
[] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
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. Employer
incorporation or organization) Identification No.)
100 Wilshire Boulevard, Suite 1600
Santa Monica, CA 90401-1111
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (310) 899-4700
Securities Registered Pursuant to Section 12(b) of the Act: None
---------------------------------
Name of Each Exchange
Title of Each Class on Which registered
------------------- --------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of each of the Registrant's
classes of Common Stock at August 12, 1999 was 35,007,411
shares of Common Stock, par value $0.01.
CADIZ INC.
INDEX
For the Six Months Ended June 30, 1999 Page
PART I - FINANCIAL INFORMATION
I. Consolidated Financial Statements
A. Statement of Operations
For the Three Months Ended June 30, 1999
and 1998..............................................3
B. Statement of Operations
For the Six Months Ended June 30, 1999 and 1998........4
C. Balance Sheet............................................5
D. Statement of Cash Flows..................................6
E. Statement of Stockholders' Equity........................7
F. Notes....................................................8
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................9
3. Quantitative and Qualitative Disclosures about Market
Risk......................................................20
PART II - OTHER INFORMATION.....................................20
CADIZ INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
For the Three Months Ended June 30, 1999 1998
---- ----
($ in thousands except per share data)
Revenues $ 26,193 $ 22,264
Income from partnership - 355
------- -------
Total revenues 26,193 22,619
------- -------
Costs and expenses:
Cost of sales 18,565 16,955
General and administrative 3,220 2,669
Special litigation 245 333
Depreciation and amortization 1,462 1,269
------- -------
Total costs and expenses 23,492 21,226
------- -------
Operating profit 2,701 1,393
Interest expense, net 4,609 4,458
------- -------
Net loss $(1,908) $(3,065)
======= =======
Net loss per common share $ (.06) $ (.09)
======== ========
Weighted average shares outstanding 34,600 33,131
======= =======
See accompanying notes to the consolidated financial statements.
CADIZ INC.
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
for the Six Months Ended June 30, 1999 1998
---- ----
($ in thousands except per share data)
Revenues $ 32,753 $ 27,317
Income from partnership - 786
-------- -------
Total revenues 32,753 28,103
------- -------
Costs and expenses:
Cost of sales 24,214 21,968
General and administrative 6,171 5,274
Special litigation 472 646
Depreciation and amortization 2,202 2,013
------- -------
Total costs and expenses 33,059 29,901
------- -------
Operating loss (306) (1,798)
Interest expense, net 9,023 8,457
------- -------
Net loss $ (9,329) $(10,255)
======== ========
Net loss per common share $ (.27) $ (.31)
======== ========
Weighted average shares outstanding 34,279 32,961
======= =======
See accompanying notes to the consolidated financial statements.
CADIZ INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, December 31
1999 1998
---- ----
($ in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 3,107 $ 13,635
Accounts receivable, net 25,264 6,295
Inventories 34,308 15,019
Prepaid expenses and other 683 992
------- -------
Total current assets 63,362 35,941
Investment in partnerships 1,169 1,169
Property, plant, equipment and
water programs, net 169,487 166,022
Other assets 11,269 11,227
------- -------
$ 245,287 $ 214,359
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,123 $ 8,753
Accrued liabilities 6,380 6,846
Revolving credit facility 21,050 -
Long-term debt, current portion 11,144 613
------- -------
Total current liabilities 59,697 16,212
Long-term debt 132,329 142,317
Deferred income taxes 5,392 5,447
Other liabilities 627 673
Commitments and contingencies
Stockholders' equity:
Common stock - $.01 par value;
45,000,000 shares authorized;
shares issued and outstanding -
35,005,911 at June 30, 1999 and
33,592,261 at December 31, 1998 350 336
Additional paid-in capital 134,509 127,662
Accumulated deficit (87,617) (78,288)
------- -------
Total stockholders' equity 47,242 49,710
------- -------
$ 245,287 $ 214,359
======== ========
See accompanying notes to the consolidated financial statements.
CADIZ INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended June 30, 1999 1998
---- ----
($ in thousands)
Cash flows from operating activities:
Net loss $ (9,329) $(10,255)
Adjustments to reconcile net
loss from operations to cash used
for operating activities:
Depreciation and amortization 3,289 2,800
Issuance of shares for services - 262
Gain on sale of assets (46) (20)
Share of partnership operations - (786)
Changes in operating assets
and liabilities:
Increase in accounts receivable (18,969) (15,191)
Increase in inventories (17,115) (15,253)
Decrease in prepaid expenses and other 309 418
Increase in accounts payable 12,370 7,663
Increase in accrued liabilities 276 529
(Decrease) Increase in other
liabilities (102) 184
------- -------
Net cash used for operating activities (29,317) (29,649)
------- -------
Cash flows from investing activities:
Additions to property, plant and
equipment (3,974) (2,465)
Proceeds from disposal of property,
plant and equipment 88 56
Additions to water programs (1,544) (674)
Additions to developing crops (2,176) (1,502)
Partnership distributions - 510
Increase in other assets (721) (605)
------- -------
Net cash used for investing activities (8,327) (4,680)
------- -------
Cash flows from financing activities:
Net proceeds from issuance of stock 6,262 432
Proceeds from issuance of long-term debt - 10,000
Principal payments on long-term debt (196) (395)
Net proceeds from short-term debt 21,050 19,700
------- -------
Net cash provided by financing activities 27,116 29,737
------- -------
Net decrease in cash and cash equivalents (10,528) (4,592)
Cash and cash equivalents, beginning
of period 13,635 5,298
------- -------
Cash and cash equivalents, end of period $ 3,107 $ 706
======= =======
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
For the Six Months Ended June 30, 1999
($ in thousands)
Additional Total
Common Stock Paid-inAccumulatedStockholders'
Shares Amount Capital Deficit Equity
Balance as
of December 31, 1998 33,592,261 $ 336 $ 127,662 $ (78,288) $ 49,710
Exercise of
stock options 1,394,900 14 6,248 - 6,262
Issuance of
warrants to a lender - - 449 - 449
Stock issued for
services 18,750 - 150 - 150
Net loss - - - (9,329) (9,329)
------- ---- ------ ------- -------
Balance as of
June 30, 1999 35,005,911 $ 350 $ 134,509 $ (87,617) $ 47,242
========== ==== ======== ======== ========
See accompanying notes to the consolidated financial
statements.
CADIZ INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
- - ------------------------------
The Consolidated Financial Statements have been
prepared by the Company without audit and should be read in
conjunction with the Consolidated Financial Statements and
notes thereto included in the Company's latest Form 10-K for
the year ended December 31, 1998. The foregoing
Consolidated Financial Statements include all adjustments,
consisting only of normal recurring adjustments which the
Company considers necessary for a fair presentation. The
results of operations for the six months ended June 30, 1999
are not necessarily indicative of the results to be expected
for the full fiscal year.
See Note 2 to the Consolidated Financial Statements
included in the Company's latest Form 10-K for a discussion
of the Company's accounting policies.
NOTE 2 - INVENTORIES
- - --------------------
Inventories consist of the following (dollars in
thousands):
June 30,December 31,
1999 1998
----- ----
Growing crops $ 25,957 $ 11,208
Pepper seed 1,173 1,344
Harvested product 2,753 360
Materials and supplies 4,425 2,107
------- -------
$ 34,308 $ 15,019
======= ========
NOTE 3 - DEBT
- - -------------
In February 1999, Sun World renewed its seasonal
revolving credit facility for an additional year and
increased the facility to $30 million from $25 million.
Amounts borrowed under the facility accrue interest at prime
plus 1.0% or LIBOR plus 2.5% at the Company's election.
Effective April 30, 1999, the Company obtained a one-
year extension of its senior term bank loan totaling $10.3
million (including $0.5 million of accrued but unpaid
interest). Pursuant to the extension agreement, the loan
will accrue interest at LIBOR plus 2% and the Company will
issue certain warrants.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
RESULTS OF OPERATIONS
The financial statements set forth herein as of and for
the six months ended June 30, 1999 and 1998 reflect the
results of operations for the Company and its wholly-owned
subsidiary, Sun World International, Inc. ("Sun World").
A summary of the Sun World elements which management of
the Company believes is essential to an analysis of the
results of operations for such periods is presented below.
For purposes of this summary, the term Sun World will be
used, when the context so requires, with respect to the
operations and activities of the Company's Sun World
subsidiary, and the term Cadiz will be used, when the
context so requires, with respect to those operations and
activities of the Company not involving Sun World.
The Company's net income or loss in future fiscal
periods will be largely reflective of (a) the operations of
the Company's water development activities including the
Cadiz Groundwater Storage and Dry-Year Supply Program (the
"Program") and (b) the operations of Sun World. Sun World
conducts its operations through four operating divisions:
farming, packing, marketing and proprietary product
development. Net income from farming operations varies from
year to year primarily due to yield and pricing fluctuations,
which can be significantly influenced by weather conditions,
and are, therefore, generally subject to greater annual
variation than Sun World's other divisions. However, the
geographic distribution of Sun World's farming operations
and the diversity of its crop mix makes it unlikely that
adverse weather conditions would affect all of Sun World's
properties or all of its crops in any single year.
Nevertheless, net profit from Sun World's packing, marketing
and proprietary product development operations tends to be
more consistent from year to year than net profit from Sun
World's farming operations. Sun World has entered into
agreements internationally to license selected proprietary
fruit varieties and continues to pursue additional domestic
and international licensing opportunities.
The following discussion contains trend analysis and
other forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results could differ materially from those
projected in the forward-looking statements throughout this
document. Specific factors that may cause such a difference
include, but are not limited to, price and yield
fluctuations in the agricultural operations, seasonality,
timing and terms of various approvals required to complete
the Program. See additional discussions under the heading
"Certain Trends and Uncertainties" in Item 7 of the
Company's latest Form 10-K.
Three Months Ended June 30, 1999 Compared to Three Months
- - ------------------------------------------------------------
Ended June 30, 1998
- - -------------------
The Company's agricultural operations are impacted by
the general seasonal trends that are characteristic of the
agricultural industry. Sun World has historically received
the majority of its net income during the months of June to
October following the harvest and sale of its table grape
and stonefruit crops. Due to this concentrated activity,
Sun World has historically incurred losses with respect to
its agricultural operations during the other months of the
year.
The table below sets forth, for the periods indicated,
the results of operations for the Company's four main
operating divisions (before elimination of any
interdivisional charges) as well as the categories of costs
and expenses incurred by the Company which are not included
within the divisional results ($ in thousands):
Three Months Ended
June 30,
1999 1998
---- ----
Divisional net income (loss):
Farming $ 3,567 $ 1,774
Packing 2,028 2,189
Marketing 1,740 1,085
Proprietary product development (102) 367
------- -------
7,233 5,415
General and administrative 2,825 2,420
Special litigation 245 333
Depreciation and amortization 1,462 1,269
Interest expense 4,609 4,458
------- -------
Net loss $ (1,908) $ (3,065)
======= =======
FARMING OPERATIONS. Net income from farming operations
totaled $3.6 million for the three months ended June 30,
1999 compared to $1.8 million for the three months ended
June 30, 1998. Operating results during the second quarter
of 1999 and 1998 were derived primarily from the harvest of
table grapes, peppers and watermelons from the Coachella
Valley operations and the beginning of the stonefruit
harvest from the San Joaquin Valley operations. During the
quarter ended June 30, 1999, the improved farming resulted
primarily from increased yields from certain developing
table grape crops reaching commercial production, strong
F.O.B. pricing for table grapes and improved yields for
peppers. Farming results were unfavorably impacted by soft
market conditions for watermelon due to excessive supplies,
causing a significant decline in F.O.B. prices. Revenues from
farming operations totaled $20.8 million for the 1999
quarter compared to $17.1 million for the 1998 quarter.
Farming expenses totaled $17.2 million in the 1999 quarter
compared to $15.3 million in the 1998 quarter.
PACKING OPERATIONS. For the quarter ended June 30,
1999, Sun World's packing and handling facilities
contributed revenues of $6.1 million offset by $4.1 million
of expenses for net income of $2.0 million compared to net
income of $2.2 million for the quarter ended June 30, 1998.
Packing revenues were $6.3 million and expenses were $4.1
million in the 1998 quarter. Units packed during the
quarter totaled 1.2 million in 1999 compared to 1.4 million
in 1998. The reduced units packed and reduced revenues
during the quarter were primarily due to the removal of certain
underperforming peach and nectarine acreage at the
conclusion of the 1998 season offset by increased third
party citrus packing volume at the Coachella facilities.
MARKETING OPERATIONS. Marketing revenues of $2.9
million were offset by marketing expenses of $1.1 million
resulting in net income of $1.8 million for the second
quarter of 1999. Marketing revenues of $2.1 million were
offset by marketing expenses of $1.0 million for net income
of $1.1 million for the second quarter of 1998. The increase
in marketing net income was primarily due to a 15% increase
in average marketing commissions per unit during the quarter
compared to 1998, due to higher F.O.B. prices experienced
for Coachella table grapes and third party citrus, and an
increase in units marketed for Coachella table grapes, third
party citrus and peppers from Mexico. During the three
months ended June 30, 1999, the Company sold 3.0 million
units, consisting primarily of Company-farmed table grapes,
peppers and stonefruit as well as citrus from domestic third
party growers in Coachella compared to 2.5 million units
sold during the three months ended June 30, 1998.
PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a long
history of product innovation, and its research and
development center maintains a fruit breeding program that
has introduced many proprietary fruit varieties during the
past five years. During the three months ended June 30,
1999, net loss from proprietary product development
was $0.1 million consisting of net research and development
expenses. During the three months ended June 30, 1998, net
income from proprietary product development was $0.4 million
consisting primarily of profits from the Company's 50%
partnership interest in American SunMelon. American
SunMelon sold substantially all of its assets and
distributed the majority of the proceeds to the partners in
the fourth quarter of 1998.
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses during the three months ended June
30, 1999 totaled $2.8 million compared to $2.4 for the three
months ended June 30, 1998. This increase primarily
resulted from additional administrative costs incurred due
to activity associated with the implementation of the
Program.
SPECIAL LITIGATION. The Company is engaged in lawsuits
seeking monetary damages arising from activities adverse to
the Company in connection with a landfill, which until its
defeat by the voters of San Bernardino County in 1996, was
proposed to be located adjacent to the Company's
Cadiz/Fenner Valley properties. See "Item 1 - Legal
Proceedings" within Part II - Other Information. During the
three months ended June 30, 1999, expenses including
litigation costs and professional fees totaled $0.2 million
as compared to $0.3 million during the 1998 period.
DEPRECIATION AND AMORTIZATION. Depreciation and
amortization expense for the three months ended June 30,
1999 totaled $1.5 million compared to $1.3 million during
the same period in 1998. The increase is primarily
attributable to an increase in the relief of depreciation
costs from inventory due to the timing of the 1999 harvests
compared to 1998.
INTEREST EXPENSE, NET. Net interest expense totaled
$4.6 million during the three months ended June 30, 1999,
compared to $4.5 million during the same period in 1998.
The following table summarizes the components of net
interest expense for the two periods (in thousands):
Three Months Ended
June 30,
1999 1998
---- ----
Interest on outstanding debt - Sun World $ 3,781 $ 3,743
Interest on outstanding debt - Cadiz 425 295
Amortization of financing costs 525 479
Interest income (122) (59)
------- -----
$ 4,609 $ 4,458
======= =======
The increase in interest expense to $4.6 million during
the first quarter of 1999 from $4.5 million in 1998 is
primarily due to increased borrowings on the $15.0 million
Cadiz Revolver (as defined below). Financing costs, which
include legal fees and warrants, are amortized over the life
of the debt agreements.
Six Months Ended June 30, 1999 Compared to Six Months Ended
- - ------------------------------------------------------------
June 30, 1998
- - -------------
The table below sets forth, for the periods indicated,
the results of operations for the Company's four main
operating divisions (before elimination of any
interdivisional charges) as well as the categories of costs
and expenses incurred by the Company which are not included
within the divisional results (in thousands):
Six Months Ended
June 30
1999 1998
---- ----
Divisional net income (loss):
Farming $ 4,671 $ 2,544
Packing 1,829 1,768
Marketing 1,307 708
Proprietary product development (14) 606
------- -------
7,793 5,626
General and administrative expense 5,425 4,765
Special litigation 472 646
Depreciation and amortization expense 2,202 2,013
Interest expense, net 9,023 8,457
------- -------
Net loss $ (9,329) $(10,255)
======= =======
FARMING OPERATIONS. Net income from farming operations
totaled $4.7 million for the six months ended June 30, 1999
compared to $2.5 million for the six months ended June 30,
1998. Farming revenues were $25.3 million and farming
expenses were $20.6 million for the six months ended June
30, 1999. For the six months ended June 30, 1998, the
Company had farming revenues of $20.2 million, farming
expenses of $17.7 million and net income from farming
operations of $2.5 million. The improved farming results in
1999 compared to 1998 were primarily due to increased yields
from certain developing table grape crops reaching
commercial production, significantly improved F.O.B. pricing
for table grapes, and favorable yields for peppers from the
Coachella Valley operations. Additionally, farming results
were favorably impacted by increased yields coupled with
strong pricing for Southern lemons, due to lower industry
volumes resulting from the December 1998 freeze in the San
Joaquin Valley. Farming results were unfavorably impacted
by lower watermelon income due to reduced F.O.B. prices
resulting from an excessive supply in the marketplace. The
Company's proprietary table grape and stonefruit products
have allowed Sun World to continue to command a price
premium to the overall market which has helped overall
profitability.
PACKING OPERATIONS. Sun World's packing and handling
facilities contributed $1.8 million in profit during the six
months ended June 30, 1999 and 1998. The Company packed 1.6
million units during the six months ended June 30, 1999
compared to 1.7 million during the same period in 1998. The
reduction in units packed is due primarily to reduced
stonefruit volumes resulting from the removal of certain
underperforming peach and nectarine acreage at the
conclusion of the 1998 season. Units packed and handled
during the first half of 1999 primarily consisted of Company-
grown table grapes, peppers and seedless watermelons in the
Coachella Valley; table grapes and citrus products packed
for third party growers; and the beginning of the stonefruit
harvest in the San Joaquin Valley. Packing and handling
revenue for these operations of $7.9 million was offset by
$6.1 million of expenses for the six months ended June 30,
1999. Revenues totaled $7.8 million offset by expenses of
$6.0 million for the six months ended June 30, 1998.
MARKETING OPERATIONS. During the six months ended June
30, 1999, a total of 3.8 million units were sold consisting
primarily of Company-grown table grapes, peppers and
watermelons from the Coachella Valley; table grapes,
watermelons and citrus from domestic third party growers;
peppers from Mexico; and Company-grown stonefruit from the
San Joaquin Valley. These unit sales resulted in marketing
revenue of $3.5 million. Marketing expenses totaled $2.2
million for the six months ended June 30, 1999 resulting in
net income from marketing operations of $1.3 million.
During the six months ended June 30, 1998, 3.3 million units
were marketed resulting in revenues of $2.7 million offset
by expenses of $2.0 million for net income of $0.7 million.
The increase in units sold, revenues and net income from
marketing operations from 1998 to 1999 is primarily
attributable to higher F.O.B. prices, particularly for table
grapes, resulting in higher commissions coupled with
increased volumes of product marketed for third party
growers. Average per unit commissions were 13% higher for
the six months ended June 30, 1999 compared to the same
period in 1998.
PROPRIETARY PRODUCT DEVELOPMENT. During the six
months ended June 30, 1999, net income from proprietary
product development was break even consisting of $0.4
million of international royalties primarily related to the
Company's licensing agreement of Sugraone table grapes in
South Africa offset by $0.4 million of net research and
development expenses. Net profit in 1998 of $0.6 million
consisted of the Company's share of partnership income in
American SunMelon totaling $0.8 million offset by $0.2
million in net research and development expenses. American
SunMelon sold substantially all of its assets and
distributed the majority of the proceeds to the partners in
the fourth quarter of 1998.
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses, for the six months ended June 30,
1999 totaled $5.4 million compared to $4.8 million for the
six months ended June 30, 1998. The $0.6 million increase
in general and administrative costs resulted primarily from
additional administrative costs incurred due to activity
associated with the implementation of the Program.
SPECIAL LITIGATION. The Company is engaged in lawsuits
seeking monetary damages arising from activities adverse to
the Company in connection with a landfill, which until its
defeat by the voters of San Bernardino County in 1996, was
proposed to be located adjacent to the Company's
Cadiz/Fenner Valley properties. See "Item 1 - Legal
Proceedings" within Part II - Other Information. During the
six months ended June 30, 1999, expenses including
litigation costs and professional fees totaled $0.5 million
as compared to $0.6 million during the 1998 period.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation
and amortization expense for the six months ended June 30,
1999 totaled $2.2 million compared to $2.0 million for the
same period in 1998. The increase is primarily attributable
to relief of depreciation from inventory resulting from the
timing of the harvests.
INTEREST EXPENSE, NET. Net interest expense totaled
$9.0 million during the six months ended June 30, 1999,
compared to $8.5 million during the same period in 1998.
The following table summarizes the components of net
interest expense for the two periods (in thousands):
Six Months Ended
June 30
1999 1998
---- ----
Interest on outstanding debt - Sun World $ 7,220 $ 7,173
Interest on outstanding debt - Cadiz 916 624
Amortization of financing costs 1,087 785
Interest income (200) (125)
------- -------
$ 9,023 $ 8,457
======= =======
The increase in interest on outstanding debt during the
1999 period is primarily due to (a) increased borrowings on
the $15.0 million Cadiz Revolver (as defined below) compared
to 1998 and (b) amortization of warrants issued for the
Cadiz Revolver and extension of the Cadiz term loan
facility. Financing costs, which include legal fees, loan
fees and warrants, are amortized over the life of the debt
agreement.
LIQUIDITY AND CAPITAL RESOURCES
General Discussion of Liquidity and Capital Resources
- - ------------------------------------------------------
Based on the cash on hand at June 30, 1999 and the
revolving credit facilities in place for both Cadiz and Sun
World, as further discussed below, the Company believes it
will be able to meet its working capital needs over the next
year without looking to additional outside funding sources,
although no assurances can be made. See "Current Financing
Arrangements" below.
Under Sun World's historical working capital cycle,
working capital is required primarily to finance the costs
of growing and harvesting crops, which generally occur from
January through September with a peak need in June. Sun
World harvests and sells the majority of its crops during
the period from June through October, when it receives the
majority of its revenues. In order to bridge the gap
between incurrence of expenditures and receipt of revenues,
large cash outlays are required each year, which are
financed through a revolving credit agreement. In April
1998, Sun World entered into a $25 million one year facility
(the "Sun World Revolver"). In February 1999, Sun World
increased the Sun World Revolver to a $30 million facility
in conjunction with a one year renewal of the facility. See
"Current Financing Arrangements - Sun World" below.
Current Financing Arrangements
- - ------------------------------
CADIZ OBLIGATIONS
As Cadiz has not received significant revenues from its
water resource activity to date, Cadiz has been required to
obtain financing to bridge the gap between the time water
resource development expenses are incurred and the time that
revenue will commence. Historically, Cadiz has addressed
these needs primarily through secured debt financing
arrangements with its lenders, private equity placements and
the exercise of outstanding stock options.
As of June 30, 1999, Cadiz was obligated for
approximately $10.3 million under a senior term loan
facility. Effective April 30, 1999, the Company extended the
facility for one year. The Company issued certain warrants
in conjunction with the extension. Currently, the term
lender holds a senior deed of trust on substantially all of
Cadiz' non-Sun World related property.
Additionally, Cadiz has a $15 million revolving credit
facility (the "Cadiz Revolver") which is secured by a second
lien on substantially all of the non-Sun World assets of the
Company. Principal is due on December 31, 2000. The
Company had $15.0 million outstanding under the Cadiz
Revolver at June 30, 1999.
As the Company continues to actively pursue its
business strategy, additional financing specifically in
connection with the Company's water programs may be
required. Responsibility for funding the design,
construction and program implementation costs of the capital
facilities for the Cadiz Groundwater Storage and Dry-Year
Supply Program will, under currently developed principles
and terms, be shared equally by the Company and the
Metropolitan Water District of Southern California
("Metropolitan"). The Company is analyzing various
alternatives for funding its share of the estimated $125
million to $150 million cost of the program capital
facilities. These funding alternatives include (a) long-
term financing arrangements or (b) utilization of monies to
be received from Metropolitan for its initial purchase of
indigenous groundwater which are expected to be sufficient
to fund the Company's share of these capital costs. Based
upon the results of analyses performed by investment banking
firms retained by the Company, management believes that
several alternative long-term financing arrangements are
available to the Company.
SUN WORLD OBLIGATIONS
The First Mortgage Notes (the "Sun World Notes") were
issued in the principal amount of $115 million on April 16,
1997 and will mature on April 15, 2004. The Sun World Notes
will be redeemable at the option of Sun World, in whole or
in part, at any time on or after April 15, 2001. Interest
accrues at the rate of 11-1/4% per annum and is payable semi-
annually on April 15th and October 15th of each year. The
Sun World Notes are secured by a first lien (subject to
certain permitted liens) on substantially all of the assets
of Sun World and its subsidiaries, other than crop
inventories and accounts receivable and proceeds thereof,
which secure the Sun World Revolver, and certain real
property pledged to third parties. The Sun World Notes are
also secured by the guarantee of Cadiz and the pledge by
Cadiz of all of the stock of Sun World.
Commencing October 14, 1997, Sun World offered to
exchange (the "Exchange Offer") up to $115.0 million
aggregate principal amount of its 11-1/4% Series B First
Mortgage Notes (the "Exchange Notes") for $115.0 million
aggregate principal amount of the Sun World Notes. The
Exchange Notes are registered under the Securities Act of
1933 and have the same terms as the Sun World Notes. The
exchange of all of the Sun World Notes was completed on
November 12, 1997.
In April 1998, Sun World entered into the Sun World
Revolver which is guaranteed by Cadiz. To meet its working
capital needs for 1999, Sun World renewed the Sun World
Revolver for an additional year including an increase in the
facility to $30 million. As of June 30, 1999, $21.1 million
was outstanding under the Sun World Revolver. Additionally,
Sun World has an intercompany revolving credit agreement
with Cadiz for seasonal working capital needs as needed.
CASH USED FOR OPERATING ACTIVITIES. Cash used for
operating activities totaled $29.3 million for the six
months ended June 30, 1999, as compared to cash used for
operating activities of $29.7 million for the six months
ended June 30, 1998. The decrease in cash used for operating
activities is primarily due to (a) increased inventory
balances in 1999 resulting from an increase in acreage
farmed in 1999 compared to 1998 due to the acquisition of
two citrus ranches during the last half of 1998; (b) an
increase in accounts receivable resulting from increased
sales offset by (c) increased accounts payable resulting
from higher amounts owed to third party growers resulting
from increased product volumes and increased farming
activity in 1999 resulting from the increased acreage noted
above.
CASH USED FOR INVESTING ACTIVITIES. Cash used for
investing activities totaled $8.3 million for the six months
ended June 30, 1999 compared to cash used for investing
activities of $4.7 million for the same period in 1998. The
increase is primarily due to increased capital expenditures
during the six months ended June 30, 1999 compared to 1998
resulting from costs associated with implementation of the
Program at Cadiz, 442 acres of new crop plantings at Sun
World, and exercise of the purchase option for 2,439 acres
of land with significant water resources in the Piute Valley
of California. During the six months ended June 30, 1999,
the Company invested $2.2 million in developing crops, $1.5
million in water programs, and $4.0 million for the purchase
of property, plant and equipment.
CASH PROVIDED BY FINANCING ACTIVITIES. Cash provided
by financing activities totaled $27.1 million for the six
months ended June 30, 1999, consisting primarily of $21.1
million in borrowings by Sun World for seasonal working
capital compared to $19.7 million in 1998. Principal
payments on long-term debt totaled $0.2 million for the six
months ended June 30, 1999 compared to $0.4 million for the
six months ended June 30, 1998. Net proceeds from the
exercise of stock options totaled $6.3 million during the
six months ended June 30, 1999 compared to $0.4 million
during the six months ended June 30, 1998.
OUTLOOK
The Company is actively pursuing the development of its
water resources. Specifically, in July 1998, the Company
and Metropolitan approved the principles and terms for
agreement for the Cadiz Groundwater Storage and Dry-Year
Supply Program. The principles and terms for agreement
provide that Metropolitan will, during wet years or periods
of excess supply, store surplus water from its Colorado
River Aqueduct in the Company's groundwater basin. During
dry years or times of reduced allocations from the Colorado
River, the previously imported water, together with
additional existing groundwater, will be extracted and
delivered, via a conveyance pipeline, back to the aqueduct.
The principles and terms for agreement provide that
over the 50 year term of the agreement, Metropolitan will
store a minimum of 500,000 acre-feet of Colorado River
Aqueduct water in the Company's groundwater basin and
purchase a minimum of 1,100,000 acre-feet of existing
groundwater for transfer during dry-years. The Program will
have the capacity to convey, either for storage or transfer,
up to 150,000 acre-feet in any given year.
During storage operations, Metropolitan will pay a fee
per acre-foot for put of water into storage and a fee per
acre-foot for return of water from storage, and a storage
fee per acre-foot every year that water is stored in the
groundwater basin. On the transfer of water, Metropolitan
will pay a base rate of approximately $230 per acre-foot,
which will be adjusted according to a water price formula.
Additionally, recognizing that delivery of the Company's
high-quality, indigenous groundwater to the aqueduct
provides a significant water quality benefit, Metropolitan
will pay the Company a water quality fee for both
transferred and returned water.
The Program facilities, including spreading basins,
extraction wells, conveyance pipeline and a pumping plant,
are estimated to cost between $125 and $150 million, and
both parties will share these costs. All operational costs
of the Program, including annual operations, maintenance and
energy costs, will be an obligation of Metropolitan.
The principles and terms for agreement call for the
establishment of a comprehensive independent groundwater
monitoring and management plan to ensure long-term
protection of the groundwater basin. The parties have
commenced the environmental review process, which will
include compliance with California Environmental Quality Act
and National Environmental Protection Act requirements. The
final agreement may reflect adjustments to these principles
and terms in order to reflect information identified during
this review and will be presented to the respective Boards
of both parties for approval. The Program is anticipated to
be operational by the year 2001.
In addition to the development of its water resources,
the Company is actively involved in further agricultural
development and reinvestment in its landholdings. Such
development will be systematic and in furtherance of the
Company's business strategy to provide for maximization of
the value of its assets. The Company also continually
evaluates acquisition opportunities, which are complimentary
to its current portfolio of water and agricultural
resources. With the acquisition of two citrus ranches in
1998, the Company will grow, pack and market additional
boxes of citrus from December through March, which is contra-
seasonal to the Company's primary farming operations. This
acquisition helps to further diversify the Company's
portfolio and enables the Company to utilize its Bakersfield
packing facility during a previous period of limited
utilization.
In June 1999, Sun World was appointed by Kingdom
Agricultural Development Company (KADCO), a company
currently 100% controlled by His Royal Highness Prince
Alwaleed Bin Talal Bin Abdulaziz Alsaud, to develop and
manage up to 100,000 acres of agricultural land in southern
Egypt, called the Tushka Project. In addition to Sun World's
role in Tushka, Cadiz and KADCO also agreed to form an
entity to pursue the development and management of water
resources in the region.
As compensation for project development and management
of the Tushka Project, Sun World will earn annually an
equity interest in KADCO and has been granted an option to
purchase additional shares. The combined equity interest
will equate to approximately 10% ownership of KADCO. In
addition, Sun World will receive marketing and licensing
fees. No capital investment is required by Sun World, and
KADCO will reimburse Sun World for all expenses incurred.
The first term of the management agreement will be for four
years with an option to extend for multiple further terms.
The Company and KADCO are currently negotiating the terms of
the final contract.
The Company believes that, based upon current levels of
operations and anticipated growth, Sun World can adequately
service its indebtedness and meet its seasonal working
capital needs utilizing available internal cash, the Sun
World Revolver and, if necessary, through an intercompany
revolver with Cadiz. Cadiz expects to be able to meet its
ordinary working capital needs, in the short-term, through a
combination of cash on hand, quarterly management fee
payments from Sun World, payments from Sun World under an
agricultural lease whereby Sun World now operates the
Company's 1,600 acres of developed agricultural property at
Cadiz, California, and the possible exercise of outstanding
stock options. Except for the foregoing, additional
intercompany cash payments between Sun World and Cadiz are
subject to certain restrictions under its current lending
arrangements.
YEAR 2000
The year 2000 ("Y2K") issue is the result of computer
programs using two digits rather than four to define the
applicable year. Such software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could
result in system failures or miscalculations leading to
disruptions in the Company's activities and operations. If
the Company or its significant suppliers or customers fail
to make necessary modifications, conversions, and
contingency plans on a timely basis, the Y2K issue could
have a material adverse effect on the Company's business,
operations, cash flows, and financial condition. The impact
of the Y2K issue cannot be quantified at this time because
the Company cannot accurately estimate the magnitude,
duration, or ultimate impact of noncompliance by suppliers,
customers, and third parties that have no direct
relationship to the Company.
The Company has established a corporate-wide project
team to identify and mitigate all Y2K issues. The team has
identified three categories of software and systems that
require attention:
(1) Information technology ("IT") systems, such
as mini mainframes, PCs, and networks;
(2) Non-IT systems, such as equipment, machinery,
climate control, and security systems, which
may contain microcontrollers with embedded
technology; and
(3) Partner (supplier and customer) IT and non-IT
systems.
For each category, the project team is utilizing the
following steps to identify and resolve Y2K issues: (1)
inventory the systems, (2) assess risks and impact of each
system, (3) prioritize projects, (4) fix, replace, or
develop contingency plans for non-compliant systems, and (5)
test Y2K compliance.
The status of each of the major categories as of July 1999
is as follows:
Information Technology
-----------------------
The Company's assessments have identified three major
internal IT remediation projects: (1) AS400 Applications,
(2) PC Based Accounting and Payroll Systems, and (3) PC
Based Network Servers and Desktop Computers.
YEAR 2000 COMPLIANCE FOR AS/400 APPLICATIONS
The IBM AS/400 hardware, operating systems and core
business applications are year 2000 compliant. The Company
utilizes AS/400 applications for its sales/order entry,
accounts receivable, produce inventory, and grower
accounting systems.
YEAR 2000 COMPLIANCE FOR PC BASED ACCOUNTING AND PAYROLL
SYSTEMS
The Company utilizes commercial PC based accounting
systems for its general ledger, accounts payable, project
costing, purchasing, non-produce inventory, payroll and
human resource systems. As of January 1999, all required
service packs to make these applications Year 2000 compliant
have been installed and tested.
YEAR 2000 COMPLIANCE ON PC BASED NETWORK SERVERS AND
DESKTOP COMPUTERS
The Company has contacted all significant PC based
desktop and server system manufacturers to ascertain Year
2000 compliance. All significant PC based systems are
Year 2000 compliant with required ROM upgrades made in April
1999.
Non-IT Systems
---------------
Although no other areas of the business are expected to
create Year 2000 issues, the project team is continuing to
review all areas of the business to determine Year 2000
compliance. Management believes that given the agricultural
nature of the Company's business, the project team will not
encounter any major Y2K issues which cannot be corrected or
would have a material adverse affect on the Company,
although no absolute assurances can be given.
Suppliers and Customers IT and Non-IT Systems
---------------------------------------------
The Company has identified all significant suppliers
and customers and has sent surveys and is conducting formal
communications to determine the extent to which it may be
affected by those third parties' Y2K preparedness plans. In
the absence of adequate responses and disclosures from major
suppliers and customers, the Company will attempt to make
independent assessments. However, a compliance failure by a
major supplier or customer, or one of their suppliers or
customers, could have a material adverse effect on the
Company's business or financial condition. As a result, in
some cases the Company will develop contingency plans for
suppliers and customers determined to be at risk of
noncompliance or business disruption. Such plans could
include finding alternative suppliers or manual intervention
where necessary.
Costs related to the Y2K issue are funded through
operating cash flows. The Company presently believes that
the total costs to obtain Y2K compliant systems will not
exceed $250,000, which consists mostly of internal labor for
programming and testing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
--------------------------------------------------
MARKET RISK
-----------
Information about market risks for the six months ended
June 30, 1999 does not differ materially from that discussed
under Item 7A of the registrant's Annual Report on Form 10-K
for 1998.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
------------------
See "Item 3. Legal Proceedings" included in the
Company's latest Form 10-K for a complete discussion.
CADIZ LAND COMPANY, INC. V. WASTE MANAGEMENT, INC.,
ET. AL., Case No. CV 97-7827 WMB (MANx) (the "federal
action") and CADIZ LAND COMPANY, INC. V. WASTE
MANAGEMENT, INC., Civil Action No. SC 05743 (the
"State Court Action"). In the Federal Action,
briefing has been concluded in the Ninth Circuit
Court of Appeals on the Company's appeal from the
dismissal of the Company's claims for stock
manipulation pursuant to Section 10(b) of the
Exchange Act. The court has not yet set a date for
oral argument.
In the State Court Action, the Company received a
favorable ruling from the Los Angeles County Superior
Court, on July 13, 1999, on the discovery issues
referenced in the Company's Form 10-Q for the period
ended March 31, 1999. The WMI defendants have filed
a petition for writ of mandate with the California
Court of Appeal, Second Appellate District, Division
Seven, requesting appellate review of this decision.
The Court of Appeal has yet to decide whether it will
consider the petition on its merits.
In the criminal case pending in San Bernardino
County, 12 felony counts remain pending against WMI,
certain of its affiliates, and two of its past or
present employees. Nine felony counts of stock fraud
were dismissed on July 28, 1999, after the Superior
Court concluded that the evidence presented to the
grand jury was insufficient to support these charges.
The District Attorney has publicly announced his
intention to refile stock fraud charges based upon
additional evidence not previously presented to the
grand jury. Trial in the criminal case is set for
January 10, 2000.
Item 2. Changes in Securities and Use of Proceeds
----------------------------------------
During the quarter ended June 30, 1999, the Company
issued warrants to purchase 100,000 shares of the
Company's common stock at an exercise price of $8.00
per share. These warrants were issued to the
Company's primary lender as consideration for an
extension of the maturity date of the Company's term
obligations to such lender. The issuance of the
warrants was not registered under the Securities Act
of 1933, as amended (the "Securities Act"). The
Company believes that this transaction was exempt
from the registration requirements of the Securities
Act by virtue of Section 4(2) thereof as a
transaction not involving a public offering.
Item 3. Defaults Upon Senior Securities
--------------------------------
Not applicable.
Item 4. Submission of Matter to a Vote of Security Holders
----------------------------------------------------
A. The annual meeting of the stockholders of the
Company was held on May 10, 1999. The stockholders
took the following action at the meeting:
1.Elected Dwight W. Makins, Keith Brackpool, Anthony Coelho,
Murray H. Hutchison, Mitt Parker and Timothy J. Shaheen
to the Company's Board of Directors. Mr. Makins
was elected by the vote of 21,123,606 in favor and
638,814 withheld and no broker non-votes. Mr.
Brackpool was elected by 21,123,606 and 638,814
withheld and no broker non-votes. Mr. Coelho was
elected by 21,189,166 in favor and 573,254
withheld and no broker non-votes. Messrs.
Hutchison, Parker and Shaheen were each elected by
the vote of 21,190,906 in favor and 571,514
withheld and no broker non-votes.
2.Approved the proposal to increase the number of
shares subject to the Company's 1996 Stock Option
Plan from 3,000,000 to 4,000,000 by the vote of
20,729,923 in favor and 998,432 against, with 12,465
abstaining and 21,600 broker non-votes.
3.Ratified the selection by the Company's Board of
Directors of PricewaterhouseCoopers LLP (formerly Price
Waterhouse LLP) to continue as the Company's
independent auditors for fiscal 1999 by the vote
of 21,746,890 in favor and 5,790 against, with
9,740 abstaining and no broker non-votes.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. EXHIBITS
1. Exhibit 27.1 - Financial Data Schedule
2. Exhibit 3.1 - Bylaws of the Company, as amended
3. Exhibit 10.1 - Amendment to the Company's 1996 Stock
Option Plan
B. REPORTS ON FORM 8-K
1. Report on Form 8-K dated May 10,1999
summarizing the Stockholder Rights Plan adopted
by the Company's Board of Directors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
Cadiz Inc.
By: /s/ Keith Brackpool August 13, 1999
---------------------- ---------------
Keith Brackpool, Date
President and
Chief Executive Officer
and Director
By: /s/ Stanley E. Speer August 13, 1999
----------------------- ---------------
Stanley E. Speer Date
Chief Financial Officer
EXHIBIT 27.1
------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,107
<SECURITIES> 0
<RECEIVABLES> 25,520
<ALLOWANCES> (256)
<INVENTORY> 34,308
<CURRENT-ASSETS> 63,362
<PP&E> 194,699
<DEPRECIATION> (25,212)
<TOTAL-ASSETS> 245,287
<CURRENT-LIABILITIES> 59,697
<BONDS> 143,473
0
0
<COMMON> 350
<OTHER-SE> 46,892
<TOTAL-LIABILITY-AND-EQUITY> 245,287
<SALES> 32,753
<TOTAL-REVENUES> 32,753
<CGS> 24,214
<TOTAL-COSTS> 33,059
<OTHER-EXPENSES> 8,845
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,023
<INCOME-PRETAX> (9,329)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,329)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,329)
<EPS-BASIC> (0.27)
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 3.1
------------
BYLAWS OF CADIZ, INC.
ARTICLE I
CORPORATE OFFICES
1.1 Registered Office.
------------------
The registered office of the corporation shall be
Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, State of Delaware 19801. The
name of the registered agent of the corporation at such
location shall be the Corporation Trust Company.
1.2 Principal Offices.
-----------------
The Board of Directors shall fix the location of the
principal executive office of the corporation at any place
within or outside the State of Delaware. If the principal
executive office is located outside this State and the
corporation has one or more business offices in this State, the
Board of Directors shall likewise fix and designate a principal
business office in the State of Delaware.
1.3 Other Offices.
-------------
The Board of Directors may at any time establish other
offices at any place or places where the corporation is
qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings.
-----------------
Meetings of stockholders shall be held at any place,
within or outside the State of Delaware as designated by the
Board of Directors. In the absence of any such designation,
stockholders' meetings shall be held at the principal executive
office of the corporation.
2.2 Annual Meeting.
--------------
The Annual Meeting of Stockholders shall be held each year
on a date and at a time designated by the Board of Directors.
At the meeting, directors shall be elected and any other proper
business may be transacted.
2.3 Special Meeting.
---------------
A special meeting of the stockholders may be called only
(a) by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is
presented to the Board for adoption) or (b) by the Chief
Executive Officer or the President. Special meetings may not
be called by any other person or persons. Business transacted
at each special meeting shall be confined to the purpose or
purposes stated in the notice of such meetings.
2.4 Notice of Stockholders' Meetings.
---------------------------------
Notices of meeting with stockholders shall be in writing
and shall be sent or otherwise given in accordance with Section
2.5 of these Bylaws not less than ten (10) nor more than sixty
(60) days before the date of the meeting to each stockholder
entitled to vote at such meeting. The notice shall specify the
place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting
is called.
2.5 Manner of Giving Notice; Affidavit of Notice.
--------------------------------------------
Written notice of any meeting of stockholders, if mailed,
is given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it
appears on the records of the corporation, unless he shall have
filed with the Secretary of the corporation a written request
that notices be mailed to some other address, in which case it
shall be directed to the stockholder at such other address. An
affidavit of the Secretary or an assistant secretary or of the
transfer agent of the corporation that the notice has been
given shall be, in the absence of fraud, prima facie evidence
of the facts stated therein.
2.6 Quorum.
------
The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings
of the stockholders for the transaction of business except as
otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either the
chairman of the meeting of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum
is present or represented. At such adjourned meeting at which a
quorum is present or represented, any business may be
transacted that might have been transacted at the meeting as
originally noticed.
When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon
which, by provision of the statutes or of the Certificate of
Incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of the
questions.
2.7 Adjourned Meeting; Notice.
-------------------------
When a meeting is adjourned to another time or place,
unless these Bylaws otherwise require, notice need not be given
of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any
business that might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days,
or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the
meeting.
2.8 Conduct of Business.
-------------------
At each meeting of stockholders, the Chairman of the
Board, the President and Chief Operating Officer or a Vice
President, as determined by the Board of Directors or, if not
so determined, in the order referred to and by seniority if
there be more than one officer of any rank so referred to, or
in the absence of any such officer, a chairman chosen by the
vote of the stockholders present in person or represented by
proxy at the meeting and entitled to cast a majority of the
votes which might be cast at such meeting for the election of
directors or, if in the case of a special meeting at which
directors are not to be elected, the other matter(s) to be
voted on at the meeting, shall act as chairman. The Secretary,
or in his or her absence an Assistant Secretary, or in the
absence of the Secretary and all Assistant Secretaries, a
person whom the Chairman of the meeting shall appoint, shall
act as Secretary of the meeting and keep a record of the
proceedings thereof. The Board of Directors of the corporation
shall be entitled to make such rules or regulations for the
conduct of meetings of stockholders as it shall deem necessary,
appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the Chairman of
the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts
as, in the judgment of such Chairman, are necessary,
appropriate or convenient to the proper conduct of the meeting,
including without limitation, establishing an agenda or order
for business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those
present, limitations on participation in such meeting to
stockholders of record of the corporation and their duly
authorized and constituted proxies and such other persons as
the Chairman shall permit, restrictions on entry to the meeting
after the time fixed for the commencement thereof, limitations
on the time allotted to questions or comments by participants
and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot.
Unless, and except to the extent determined by the Board of
Directors or the Chairman of the meeting, meetings of
stockholders shall not be required to be held in accordance
with rules of parliamentary procedure.
2.9 Voting.
------
A stockholder may vote in person or by proxy. Except as
otherwise provided by law, the Certificate of Incorporation or
these Bylaws, any corporate action to be taken by a vote of the
stockholders shall be authorized by the affirmative vote of the
majority of shares present in person or represented by proxy at
the meeting and entitled to vote thereon.
Except as may be otherwise provided in the Certificate of
Incorporation, each stockholder shall be entitled to one vote
for each share of capital stock held by such stockholder.
2.10 Waiver of Notice.
----------------
Whenever notice is required to be given under any
provision of the General Corporation Law of Delaware, the
Certificate of Incorporation or these Bylaws, a written waiver
thereof, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders
need to be specified in any written waiver of notice unless so
required by the Certificate of Incorporation or these Bylaws.
2.11 Record Date for Stockholder Notice; Voting; Giving Consents.
------------------------------------------------------------
In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive
payment of any dividend or other distribution or allotment of
any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting,
nor more than sixty (60) nor less than ten (10) days prior to
any other action. If the Board of Directors does not so fix a
record date:
a. The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be
at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting
is held.
b. The record date for determining stockholders for any
other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution thereto.
A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the
Board of Directors may fix a new record date for the adjourned
meeting.
2.12 Proxies.
-------
Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another
person or persons to act for him by a written proxy, signed by
the stockholder and filed with the Secretary of the
corporation, but no such proxy shall be voted or acted upon
after three (3) years from its date, unless the proxy provides
for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission or otherwise)
by the stockholder or the stockholder's attorney-in-fact.
2.13 Stockholder Action by Written Consent Not Authorized.
----------------------------------------------------
Any election or other action by stockholders must be
effected at an annual or special meeting of stockholders, and
may not be effected by written consent without a meeting.
2.14 List of Stockholders.
--------------------
The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder
who is present. Such list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting
and the number of shares held by each of them.
2.15 Inspectors of Election.
-----------------------
Before any meeting of stockholders, the Board of Directors
may appoint any persons to act as inspectors of election at the
meeting or its adjournment. If no inspectors of election are
appointed, the Chairman of the meeting may, and on the request
of any stockholder or his proxy shall, appoint inspectors of
election of the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a
meeting on the request of one (1) or more stockholders or
proxies, the holders of a majority of shares or their proxies
present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment by the Board of Directors
before the meeting, or by the Chairman at the meeting.
The duties of the inspectors of election shall be as
follows:
a. Determine the number outstanding and the voting power
of each, the number of shares represented at the meeting, the
existence of a quorum and the authenticity, validity and effect
of proxies;
b. Receive votes or ballots;
c. Hear and determine all challenges and questions in
any way arising in connection with the right to vote;
d. Count and tabulate all votes;
e. Determine the election result; and
f. Do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
2.16 Notice of Stockholder Business
------------------------------
At an annual meeting of stockholders, only such business
shall be conducted as shall have been properly brought before
the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of the meeting (or
any supplement thereto) given by or at the direction of the
Board of Directors, (b) otherwise properly brought before the
meeting by or at the direction of the Board of Directors or (c)
otherwise properly brought before the meeting by a stockholder.
For business to be properly brought before an annual meeting by
a stockholder, a stockholder must have given timely notice in
writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation,
not less than 90 days prior to the meeting. A stockholder's
notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the
meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the Corporation
which are beneficially owned by the stockholder and (d) any
material interest of the stockholder in such business.
Notwithstanding anything to the contrary, no business shall be
conducted at an annual meeting except in accordance with the
provisions of this Section 2.16. The Chairman of an annual
meeting shall, if the facts warrant, determine and declare to
the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this Section,
and if he or she should so determine, he or she shall so
declare to the meeting and any such business not properly
brought before such meeting shall not be transacted.
ARTICLE III
DIRECTORS
3.1 Powers.
------
Subject to the provisions of the General Corporation Law
of Delaware and any limitations in the Certificate of
Incorporation or these Bylaws relating to action required to be
approved by the stockholders or by the outstanding shares, the
business and affairs of the corporation shall be managed and
all corporate powers shall be exercised by or under the
direction of the Board of Directors.
Without prejudice to such general powers, but subject to
the same limitations, it is hereby expressly declared that the
Board of Directors shall have the power and authority to:
a. Select and remove all officers, agents and employees
of the corporation, prescribe such powers and duties for them
as may not be inconsistent with law, with the Certificate of
Incorporation or these Bylaws, fix their compensation and
require from them security for faithful service.
b. Change the principal executive office or the
principal business office in the State of Delaware, if any,
from one location to another; cause the corporation to be
qualified to do business in any other State, territory,
dependency or foreign country, and conduct business within or
without the State; designate any place within or without the
State for the holding of any stockholders' meeting or meetings,
including annual meetings; adopt, make and use a corporate
seal, and prescribe the forms of certificates of stock, and
alter the form of such seal and of such certificates from time
to time as in their judgment they may deem best, provided that
such forms shall at all times comply with the provisions of
law.
c. Authorize the issuance of shares of stock of the
corporation from time to time, upon such terms as may be
lawful.
d. Borrow money and incur indebtedness for the purposes
of the corporation, and cause to be executed and delivered
therefor, in the corporate name, promissory notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecations
or other evidences of debt and securities therefor.
3.2 Number of Directors.
--------------------
This Board of Directors shall consist of seven (7)
persons, and thereafter shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such
resolution is presented to the Board for adoption).
No reduction of the authorized number of directors shall
have the effect of removing any director before that director's
term of office expires.
3.3 Election, Qualification and Term of Office of Directors.
-------------------------------------------------------
Directors need not be stockholders unless so required by
the Certificate of Incorporation or these Bylaws, wherein other
qualifications for directors may be prescribed. Each director,
including a director elected to fill a vacancy, shall hold
office until his successor is elected and qualified or until
his earlier resignation or removal.
3.4 Resignation and Vacancies.
-------------------------
Any director may resign at any time effective upon written
notice to the attention of the Secretary of the corporation
unless the notice specifies a later date for the effectiveness
of such resignation, in which case such resignation shall be
effective at the time specified. Unless such resignation
specified otherwise, its acceptance by the corporation shall
not be necessary to make it effective. When one or more
directors so resigns and the resignation is effective at a
future date, a majority of the directors then in office, though
less than quorum, including those who have so resigned, or the
sole remaining directors, shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each
director so chosen shall hold office as provided in this
section in the filling of other vacancies.
Unless otherwise provided in the Certificate of
Incorporation or these Bylaws:
a. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors,
elected by all of the stockholders having the right to vote as
a single class, may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole
remaining director.
b. Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors
by the provisions of these Bylaws, vacancies and newly created
directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes
or series thereof then in office, or by a sole remaining
director so elected.
c. A director elected or appointed to fill a vacancy
shall serve until the next election of the class for which such
director shall have been chosen, and until a successor shall be
elected and qualified.
3.5 Place of Meetings; Meetings by Telephone.
----------------------------------------
The Board of Directors of the corporation may hold
meetings, both regular and special, either within or outside
the State of Delaware.
Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board, may
participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participating in a meeting shall constitute presence in person
at the meeting.
3.6 Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from
time to time be determined by the Board. In the absence of
such determination, regular meetings shall be held at the
principal executive office of the corporation.
3.7 Special Meetings; Notice.
------------------------
Special meetings of the Board of Directors for any
purposes may be called at any time by the Chairman of the
Board, the President, any vice president, the Secretary or any
two (2) directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent
by first-class mail or telegram or other facsimile
transmission, charges prepaid, addressed to each director at
that director's address as it is shown on the records of the
corporation. If the notice is mailed, it shall be deposited in
the United States mail at least four (4) days before the time
of the holding of the meeting. If the notice is delivered
personally or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegraph company at least
forty-eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may
be communicated either to the director or to a person at the
office of the director who the person giving the notice has
reason to believe will promptly communicate it to the director.
The notice need not specify the place of the meeting if the
meeting is to be held at the principal executive office of the
corporation.
3.8 Annual Meetings.
---------------
Immediately following each annual meeting of stockholders,
the Board of Directors shall hold a regular meeting for the
purpose of transacting other business. Notice of this meeting
shall not be required.
3.9 Quorum; Adjournment.
-------------------
At all meetings of the Board of Directors, a majority of
the authorized number of directors shall constitute a quorum
for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute, by the Certificate
of Incorporation or these Bylaws. If a quorum is not present
at any meeting of the Board of Directors, then the directors
present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum is present. Notice of the time and place of holding an
adjourned meeting need not be given, unless the meeting is
adjourned for more than twenty-four (24) hours, in which case
notice of such time and place shall be given prior to the time
of the adjourned meeting, in the manner specified in Section
3.7 of this Article III, to the directors who were not present
at the time of the adjournment.
3.10 Waiver of Notice.
----------------
Whenever notice is required to be given under any
provision of the General Corporation Law of Delaware, the
Certificate of Incorporation or these Bylaws, a written waiver
thereof, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, except when the
person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the directors, or
members of a committee of directors, need to be specified in
any written waiver or notice unless so required by the
Certificate of Incorporation or these Bylaws.
3.11 Board Action by Written Consent Without a Meeting.
-------------------------------------------------
Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent
thereto in writing or writings are filed with the minutes of
proceedings of the Board or committee.
3.12 Fees and Compensation of Directors.
----------------------------------
Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, the Board of Directors shall
have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving
compensation therefor. Members of a special or standing
committee may be allowed compensation for attending committee
meetings.
3.13 Approval of Loans to Officers.
-----------------------------
The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiary, including any
officer or employee who is a director of the corporation or its
subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other
assistance may be with or without interest and may be
unsecured, or secured in such manner as the Board of Directors
shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing contained in this
section shall be deemed to deny, limit or restrict the powers
of guaranty or warranty of the corporation at common law or
under any statute.
3.14 Removal of Directors.
--------------------
Unless otherwise allowed by statute, the Certificate of
Incorporation or these Bylaws, any director or the entire Board
of Directors may be removed only for cause by the holders of a
majority of the shares voting and entitled to vote in an
election of directors.
ARTICLE IV
COMMITTEES
4.l Committees of Directors.
-----------------------
The Board of Directors may, by resolution passed by a
majority of the Board, designate one or more committees, with
each committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to
the extent provided in the resolution of the Board of Directors
establishing such committee or in the Bylaws of the
corporation, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may
require it, but no such committee shall have the power or
authority to (i) amend the Certificate of Incorporation (except
that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors, fix any of the
preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of
the corporation, (ii) adopt an agreement of merger or
consolidation, (iii) recommend to the stockholders the sale,
lease or exchange of all of the corporation's property and
assets, (iv) recommend to the stockholders a dissolution of
the corporation or a revocation of a dissolution or (v) amend
the Bylaws if the corporation; and, unless the Board resolution
establishing the Committee, the Bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize
the issuance of stock or to adopt a certificate of ownership
and merger.
4.2 Committee Minutes.
-----------------
Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
4.3 Meetings and Actions of Committees.
-----------------------------------
Meetings and actions of committees shall be governed by,
and held and taken in accordance with the provisions of Article
III of these Bylaws, Section 3.5 (place of meetings by
telephone), Section 3.6 (regular meetings), Section 3.7
(special meetings and notice), Section 3.9 (quorum), Section
3.l0 (waiver of notice), and Section 3.ll (Board action by
written consent without a meeting), with such changes in the
context of those Bylaws as are necessary to substitute the
committee and its members of the Board of Directors and its
members; provided, however, that the time of regular meetings
of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees
shall also be given to all alternate members, who shall have
right to attend all meetings of the committee. The Board of
Directors may adopt rules for the government of any committee
not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
5.l Officers.
--------
The officers of the corporation shall be a Chairman of the
Board, a President, a Secretary, and a Chief Financial Officer.
The corporation may also have, at the discretion of the Board
of Directors, a Chief Executive Officer, one or more vice
presidents, a treasurer, one or more assistant secretaries, one
or more assistant treasurers, and any such other officer as may
be appointed in accordance with the provisions of Section 5.3
of these Bylaws. Any number of offices may be held by the same
person.
5.2 Election of Officers.
--------------------
The officers of the corporation, except such officers as
may be appointed in accordance with the provisions of Sections
5.3 or 5.5 of these Bylaws, shall be chosen by the Board of
Directors.
5.3 Subordinate Officers.
--------------------
The Board of Directors may appoint, or empower the
President to appoint such other officers and agents as the
business of the corporation may require, each of whom shall
hold office for such period, have such authority, and perform
such duties as are provided in these Bylaws or as the Board of
Directors may from time to time determine.
5.4 Removal and Resignation of Officers.
-----------------------------------
Any officer may be removed, whether with or without cause,
by the Board of directors at any regular or special meeting of
the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written
notice to the Secretary of the corporation. Any resignation
shall take effect at the date of the receipt of that notice or
at any later time specified in that notice; and unless
otherwise specified in that notice, the acceptance of the
resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party.
5.5 Vacancies in Offices.
--------------------
Any vacancy occurring in any office because of death,
resignation, removal, disqualification or any other cause shall
be filled in the manner prescribed in these Bylaws for regular
appointments to that office.
5.6 Chairman of the Board.
----------------------
The Chairman of the Board shall, if present, preside at
meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be
assigned to him by the Board of Directors or as may be
prescribed by these Bylaws. If there is no President or Chief
Executive Officer, then the Chairman of the Board shall also be
the chief executive office of the corporation and shall have
the powers and duties prescribed in Section 5.7 of these
Bylaws.
5.7 Chief Executive Officer.
------------------------
Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board,
the Chief Executive Officer of the corporation shall, subject
to the control of the Board of Directors, have general
supervision, direction, and control of the business and the
officers of the corporation. He shall preside at all meetings
of the stockholders and, in the absence or nonexistence of a
Chairman of the Board, at all meetings of the Board of
Directors. He shall have the general powers and duties of
management usually vested in the chief executive officer of a
corporation and shall have such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
5.8 President.
---------
Subject to such powers as may be given by these Bylaws or
the Board of Directors to the Chairman of the Board or the
Chief Executive Officer, if there be such officers, the
President shall have general supervision, direction and control
of the business and other officers of the corporation. He
shall have the general powers and duties of management usually
vested in the president of a corporation, and such other powers
and duties as may be prescribed by the Board of Directors or
these Bylaws. In the absence or disability of the Chairman of
the Board, the President shall perform all the duties of the
Chairman of the Board, and when so acting shall have all of the
powers of, and be subject to all of the restrictions upon, the
Chairman of the Board.
5.9 Vice Presidents.
----------------
In the absence or disability of the president, the vice
presidents, if any, in order of their rank as fixed by the
Board of Directors, or, if not ranked, a vice president
designated by the Board of Directors, shall perform all of the
duties of the President and Chairman of the Board and when so
acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the President or the Chairman
of the Board.
5.l0 Secretary.
---------
The Secretary shall keep or use to be kept, at the
principal executive offices of the corporation or such other
place as the Board of Directors may direct, a book of minutes
of all meetings and actions of directors, committees of
directors, and stockholders. The minutes shall show the time
and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of
those present at directors' meetings or committee meetings, the
number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the
principal executive offices of the corporation or at the office
of the corporation's transfer agent or registrar, as determined
by resolution of the Board of Directors, a share register, or a
duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such
shares, and the number and date of cancellation of every
certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of
all meetings of the stockholders and of the Board of Directors
required to be given by law or by these Bylaws. He shall keep
the seal of the corporation, if one be adopted, in safe custody
and shall have such other powers and perform such other duties
as may be prescribed by the Board of Directors or by these
Bylaws.
5.ll Chief Financial Officer.
------------------------
The Chief Financial Officer shall keep and maintain, or
cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions
of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at
all reasonable times be open to inspection by any director.
The Chief Financial Officer shall deposit all money and
other valuables in the name and to the credit of the
corporation with such depositories as may be designated by the
Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall
render to the President and directors, whenever they request
it, an account of all of his transactions as Chief Financial
Officer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these Bylaws.
5.l2 Representation of Shares of Other Corporations.
-----------------------------------------------
The Chairman of the Board, the Chief Executive Officer,
the President, any vice president, the Chief Financial Officer,
the Secretary or assistant secretary of this corporation, or
any other person authorized by the Board of Directors, the
Chief Executive Officer, the President or a Vice President, is
authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this
corporation. The authority granted herein may be exercised by
any other person authorized to do so by proxy or power of
attorney duly executed by such persons having the authority.
ARTICLE VI
INDEMNITY
6.l Third Party Actions.
-------------------
The corporation shall indemnify and hold harmless to the
fullest extent authorized by Delaware General Corporation Law,
as the same exists and as hereafter amended (but, in the case
of any such amendment, only to the extent that such amendment
permits the corporation to provide broader indemnification
rights than said Delaware General Corporation Law permitted the
corporation to provide prior to such amendment) any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that he is or was a director or officer of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise, or was a director, officer,
employee or agent of a foreign or domestic corporation which
was a predecessor corporation of this corporation or of another
enterprise at the request of such predecessor corporation
(collectively, "Agent") against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct
was unlawful. Such indemnification right shall be a contract
right between the Agent and the corporation.
6.2 Action By or in the Right of the Corporation.
--------------------------------------------
The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was an Agent of the corporation or serving
at the request of the corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with such defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the
corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless
and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall
determine upon application that despite the adjudication of
liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court
shall deem proper.
6.3 Successful Defense; Service as a Witness.
To the extent that an Agent of the corporation has been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Sections 6.1 or 6.2 of this
Article VI, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection therewith.
To the extent any person who is or was a director or
officer of the corporation has served or prepared to serve as a
witness in any action, suit or proceeding (whether civil,
criminal, administrative or investigative in nature), or in any
investigation by the corporation or the Board of Directors
thereof or a committee thereof or by any securities exchange on
which securities of the corporation are or were quoted or
listed, by reason of, or in connection with, such person's
services as a director or officer of the corporation or as a
director or officer of any affiliate or predecessor of the
corporation (other than in a suit commenced by such person),
the corporation shall indemnify such person against expenses
(including attorneys' fees and disbursements) and costs
actually and reasonably incurred by such person in connection
therewith within thirty (30) days after the receipt by the
corporation from such person of a statement requesting such
indemnification, averring such service and reasonably
evidencing such costs and expenses. The corporation may
indemnify any employee or agent of the corporation to the same
extent as, or to a lesser extent than, it may indemnify any
director or officer of the corporation pursuant to the
foregoing sentence of this Section 6.3 of this Article.
6.4 Determination of Conduct.
------------------------
Subject to any rights under any contract between this
corporation and any Agent, any indemnification (unless ordered
by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification
of the Agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Sections 6.1 or
6.2 of this Article VI. Such determination shall be made (1)
by the Board of Directors (or by an executive committee
thereof) by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable, or, even if obtainable, if
a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
Notwithstanding the foregoing, an Agent of the corporation
shall be able to contest any determination that the director or
officer has not met the applicable standard of conduct, set
forth in Section 6.1 or 6.2 of this Article VI, by petitioning
a court of appropriate jurisdiction.
6.5 Payment of Expenses in Advance.
------------------------------
Expenses incurred in defending or settling a civil or
criminal action, suit or proceeding by an individual who may be
entitled to indemnification pursuant to Section 6.1 or 6.2 of
this Article VI shall be paid by the corporation in advance of
the final disposition of such action, suit or proceeding as
authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in
this Article VI. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any,
as the Board of Directors deems appropriate.
6.6 Indemnity Not Exclusive.
------------------------
The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subparagraphs of this
Article VI shall not be deemed exclusive of, and shall be
subject to, any other rights to which those seeking
indemnification or advancement of expenses may be entitled
under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office.
6.7 Insurance Indemnification.
-------------------------
The corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was an
Agent of the corporation, or is or was serving at the request
of the corporation as an Agent against any liability asserted
against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this Article VI.
6.8 Indemnification Contracts.
-------------------------
The Board of Directors is authorized to enter into a
contract with any director, officer, employee or agent of the
corporation, or any person serving at the request of the
corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing for
indemnification rights equivalent to or, if the Board of
Directors so determines, greater than, those provided for in
this Article VI.
6.9 Indemnity Fund.
--------------
Upon resolution passed by the Board of Directors, the
Board of Directors may establish a trust or other designated
account, grant a security interest or use other means
(including, without limitation, a letter of credit), to ensure
the payment of any or all of its obligations arising under this
Article and/or agreements which may be entered into between the
corporation and its officers from time to time.
6.10 Indemnification of Other Parties.
--------------------------------
The provisions of this Article VI shall not be deemed to
preclude the indemnification of any person who is not an Agent,
but whom the corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law
of the State of Delaware or otherwise. The corporation may, in
its sole discretion, indemnify an employee, trustee or other
agent as permitted by the General Corporation Law of the State
of Delaware. The corporation shall indemnify an employee,
trustee or other agent where required by law.
6.11 Accrual of Claims; Successors.
------------------------------
The indemnification provided or permitted under this
Article VI shall apply in respect of any expense, cost,
judgment, fine, penalty or amount paid in settlement, whether
or not the claim or cause of action in respect thereof accrued
or arose before or after the effective date of this Article.
The right of any person who is or was a director or officer of
the corporation to indemnification and expense advances under
this Article shall continue after such person shall have ceased
to be a director or officer and shall inure to the benefit of
the heirs, distributees, executors, administrators and other
legal representatives of such person.
6.12 Effect of Amendment.
-------------------
Any amendment, repeal or modification of any provision of
this Article VI by the stockholders and the director of the
corporation shall not adversely affect any right or protection
of a director or officer of the corporation existing at the
time of such amendment, repeal or modification.
6.13 Settlement of Claims.
--------------------
The corporation shall not be liable to indemnify any
director or executive officer under this Article VI: (i) for
any amounts paid in settlement of any action or claim effected
without the corporation's written consent, which consent shall
not be unreasonably withheld or (ii) for any judicial award, if
the corporation was not given a reasonable and timely
opportunity, at its expense, to participate in the defense of
such action.
6.14 Subrogation.
-----------
In the event of payment under this Article VI, the
corporation shall be subrogated to the extent of such payment
to all of the rights of recovery of the indemnified party who
shall execute all papers required and shall do everything that
may be necessary to enable the corporation effectively to bring
suit to enforce such rights.
6.15 No Duplication of Payments.
--------------------------
The corporation shall not be liable under this Article VI
to make any payment in connection with any claim made against a
director or executive officer to the extent such director or
officer has otherwise actually received payment (under any
insurance policy, agreement, vote, or otherwise) of the amounts
otherwise indemnifiable hereunder.
6.16 The Corporation.
---------------
For purposes of this Article VI, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger, so that any person which is or was an Agent of such
constituent corporation, or is or was serving at the request of
such constituent corporation as an Agent, shall stand in the
same position under the provisions of this Article VI
(including, without limitation, the provisions of Section 6.4
of this Agreement) with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
6.17 Employee Benefit Plans.
----------------------
For purposes of this Article VI, references to "other
enterprises" shall include employee benefit plans; references
to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the
corporation which imposes duties on, or involved services by,
such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article VI.
6.18 Savings Clause.
---------------
If this Article or any portion thereof shall be
invalidated on any ground by any court of competent
jurisdiction, then the corporation shall nevertheless indemnify
each Agent against expense (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to
any action, suit, proceeding or investigation, whether civil,
criminal or administrative, and whether internal or external,
including a grand jury proceeding and an action or suit brought
by or in the right of the corporation, to the full extent
permitted by any applicable portion of this Article that shall
not have been invalidated or by any other applicable law.
ARTICLE VII
RECORDS AND REPORTS
7.1 Maintenance and Inspection of Share Register.
---------------------------------------------
The Secretary of the corporation shall prepare and make,
or cause to be made, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours,
for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof,
and may be inspected by any stockholder who is present. The
willful neglect or refusal of the directors to produce such a
list at any meeting for the election of directors, shall make
such directors ineligible for election to any office at such
meeting.
The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list
of stockholders required under this Section 7.1 of Article VII
or the books of the corporation, or to vote in person or by
proxy at any meeting of stockholders.
Any stockholder, in person or by attorney or other agent,
shall, upon five (5) days written demand under oath stating the
purpose thereof, have the right during the usual hours for
business to inspect for any proper purpose the corporation's
stock ledger, a list of its stockholders, and its other books
and records, and to make copies or extracts therefrom. A
proper purpose shall mean a purpose reasonably related to such
person's interest as a stockholder. In every instance where an
attorney or other agent shall be the person who seeks the right
to inspection, the demand under oath shall be accompanied by a
power of attorney or such other writing which authorizes the
attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at
its registered office in this State or at its principal place
of business.
If the corporation or an officer or agent thereof refuses
to permit an inspection sought by a stockholder or attorney or
other agent acting for the stockholder pursuant to this
Section 7.1 or does not reply to the demand within five (5)
business days after the demand has been made, the stockholder
may apply to the Court of Chancery for an order to compel such
inspection.
Any director shall have the right to examine the
corporation's stock ledger, a list of its stockholders and its
other books and records for a purpose reasonably related to his
position as a director. The Court of Chancery is hereby vested
with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought.
7.2 Maintenance and Inspection of Bylaws.
-------------------------------------
The corporation shall keep at its principal executive
office, or if its principal executive office is not in this
State at its principal business office in this State, if any,
the original or a copy of the Bylaws as amended to date, which
shall be open to inspection by the stockholders at all
reasonable times during office hours. If the principal
executive office of the corporation is outside this State and
the corporation has no principal business office in this State,
the Secretary shall, upon the written request of any
stockholder, furnish to such stockholder a copy of the Bylaws
as amended to date.
7.3 Maintenance and Inspection of Other Corporate Records.
-------------------------------------------------------
The accounting books and records and minutes of
proceedings of the stockholders and the board of directors and
any committee or committees of the board of directors shall be
kept at such place or places designed by the board of
directors, or, in the absence of such designation, at the
principal executive office of the corporation. The minutes
shall be kept in written form and the accounting books and
records shall be kept either in written form or in any other
form capable of being converted into written form. Such
minutes and accounting books and records shall be open to
inspection upon the written demand of any stockholder or holder
of a voting trust certificate, at any reasonable time during
usual business hours, for a purpose reasonably related to such
holder's interests as a stockholder or as the holder of a
voting trust certificate. Such inspection may be made in
person or by an agent or attorney, and shall include the right
to copy and make extracts.
Except as otherwise provided in Section 7.1 of this
Article VII, every director shall have the absolute right at
any reasonable time to inspect and copy all books, records and
documents of every kind and to inspect the physical properties
of the corporation and any subsidiary of the corporation in
person or by agent or attorney and the right of inspection
includes the right to copy and make extracts. The foregoing
rights of inspection shall extend to the records of each
subsidiary of the corporation.
7.4 Financial Statements.
---------------------
A copy of any annual financial statement and any income
statement of the corporation for each quarterly period of each
fiscal year, and any accompanying balance sheet of the
corporation as of the end of each such period, that has been
prepared by the corporation shall be kept on file in the
principal executive office of the corporation for twelve (12)
months and each such statement shall be exhibited at all
reasonable times to any stockholder demanding an examination of
any such statement or a copy shall be mailed to any such
stockholder.
The corporation also shall, upon the written request of
any stockholder, mail to the stockholder a copy of the last
annual, semiannual and quarterly income statement which it has
prepared and a balance sheet as to the end of such period.
ARTICLE VIII
GENERAL MATTERS
8.1 Checks.
-------
From time to time, the Board of Directors shall determine
by resolution which person or persons may sign or endorse all
checks, drafts, other orders for payment of money, notes or
other evidences of indebtedness that are issued in the name of
or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2. Execution of Corporate Contracts and Instruments.
-----------------------------------------------------
The Board of Directors, except as otherwise provided in
these Bylaws, may authorize any officer or officers, or agent
or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so
authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
8.3 Stock Certificates; Partly Paid Shares
---------------------------------------
The shares of the corporation shall be represented by
certificates, provided that the Board of Directors of the
corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be
uncertified shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is
surrendered to the corporation. Notwithstanding the adoption
of such a resolution by the Board of Directors, every holder of
stock represented by certificates and upon request every holder
of uncertified shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the Chairman of
the Board, or the President or Vice President, and by the Chief
Financial Officer, or the Secretary or an assistant secretary
of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures
on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar, before such
certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its
shares as partly paid and subject to call for the remainder of
the consideration to be paid therefor. Upon the face or back
of each stock certificate issued to represent any such partly
paid shares, upon the books and records of the corporation in
the case of uncertified partly paid shares, the total amount of
the consideration to be paid therefor and the amount paid
thereon shall be stated. Upon the declaration of any dividend
on fully paid shares, the corporation shall declare a dividend
upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid
thereon.
8.4 Special Designation on Certificates.
------------------------------------
If the corporation is authorized to issue more than
one class of stock or more than one series of any class, then
the powers, the designations, the preferences, and the
relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of
the certificate that the corporation shall issue to represent
such class or series of stock; provided, however, that, except
as otherwise provided in Section 202 of the General Corporation
Law of Delaware, in lieu of the foregoing requirements there
may be set forth on the face or back of the certificate that
the corporation shall issue to represent such class or series
of stock a statement that the corporation will furnish without
charge to each stockholder who so requests such a statement of
the powers, the designations, the preferences, and the
relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 Lost Certificates.
------------------
The Board of Directors may direct a new certificate or
certificates or uncertified shares to be issued in place of any
certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or
certificates or uncertified shares, the Board of Directors may,
in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to
give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
8.6 Annual Statement.
-----------------
The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear
statement of the business and condition of the corporation.
8.7 Construction; Definitions.
--------------------------
Unless the context requires otherwise, the general
provisions, rules of construction, and definitions in the
Delaware General Corporation Law shall govern the construction
of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural
number includes the singular, and the term "person" includes
both a corporation and a natural person.
8.8 Dividends.
---------
The Board of Directors of the corporation, subject to any
restrictions contained in the General Corporation Law of
Delaware or the Certificate of Incorporation, may declare and
pay dividends upon the shares of its capital stock. Dividends
may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any
of the funds of the corporation available for dividends a
reserve or reserves for any proper purpose and many abolish any
such reserve. Such purposes shall include but not be limited
to equalizing dividends, repairing or maintaining any property
of the corporation, and meeting contingencies.
8.9 Fiscal Year.
------------
The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors and may be changed by the
Board of Directors.
8.10 Seal.
-----
The corporation may adopt and may subsequently alter the
corporation seal and it may use the same by causing it or a
facsimile thereof to be impressed or affixed or reproduced or
otherwise.
8.11 Transfer of Stock.
-----------------
Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or
authority to transfer, it shall be the duty of the corporation
to issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction in its
books.
8.12 Stock Transfer Accounts.
-----------------------
The corporation shall have the power to enter into and
perform any agreement with any number of stockholders of any
one or more classes of stock of the corporation to restrict the
transfer of shares of stock of the corporation of any one or
more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.13 Registered Stockholders.
-----------------------
The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner
of shares, and shall not be bound to recognize any equitable or
other claim to or interest is such share or shares on the part
of another person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws
of Delaware.
8.14 Ratification.
-------------
Any transaction questioned in any lawsuit on the ground of
lack of authority, defective or irregular execution, adverse
interest of director, officer or stockholder, nondisclosure,
miscomputation or the application of improper principles or
practices of accounting may be ratified, before or after
judgment, by the Board of Directors or the stockholders and, if
so ratified , shall have the same force and effect as if the
questioned transaction had been originally duly authorized.
Such ratification shall be binding upon the corporation and its
stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned
transaction.
ARTICLE IX
AMENDMENTS
9.1 Amendment by Stockholders.
--------------------------
Subject to the provisions of the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed
at any regular meeting of the stockholders (or at a special
meeting duly called for that purpose) by the approval of at
least a majority of the outstanding shares entitled to vote at
such meeting; provided that in the notice of such special
meeting, notice of such purpose shall be given.
9.2 Amendment by Directors.
----------------------
Subject to the laws of the State of Delaware, the
Certificate of Incorporation and these Bylaws, the Board of
Directors may, by the majority vote of the entire Board of
Directors, amend these Bylaws or enact such other bylaws as in
their judgment may be advisable for the regulation of the
conduct of the affairs of the corporation.
EXHIBIT 10.1
------------
CADIZ INC.
1996 STOCK OPTION PLAN
TABLE OF CONTENTS
1. PURPOSE 1
2. SHARES SUBJECT TO THE PLAN 1
2.1 Number of Shares Available 1
2.2 Adjustment of Shares. 1
3. ELIGIBILITY 1
3.1 Eligibility of Employees, Consultants
and Independent Contractors 1
4. ADMINISTRATION. 1
4.1 Committee Authority 1
4.2 Committee Discretion 2
4.3 Composition of Committee 2
5. GRANT AND EXERCISE OF OPTIONS 2
5.1 Grant of Options 2
5.1.1 Form of Option Grant 2
5.1.2 Date of Grant 2
5.1.3 Exercise Period 3
5.1.4 Exercise Price 3
5.1.5 Method of Exercise 3
5.1.6 Termination 3
5.1.7 Limitations on Exercise 3
5.1.8 Limitations on ISOs 3
5.1.9 Modification, Extension or Renewal 4
5.1.10 No Disqualification 4
5.2 Accelerated Vesting 4
6. PAYMENT FOR SHARE PURCHASES 4
6.1 Payment 4
7. WITHHOLDING TAXES 5
7.1 Withholding Generally 5
8. PRIVILEGES OF STOCK OWNERSHIP 5
8.1 Voting and Dividends 5
8.2 Financial Statements 5
9. TRANSFERABILITY 5
10. CERTIFICATES 5
11. EXCHANGE AND BUYOUT OF OPTIONS 5
12. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE 6
13. NO OBLIGATION TO EMPLOY 6
14. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE 6
15. ADOPTION AND STOCKHOLDER APPROVAL 7
16. TERM OF PLAN 7
17. AMENDMENT OR TERMINATION OF PLAN 7
18. NONEXCLUSIVITY OF THE PLAN 7
19. GOVERNING LAW 8
20. DEFINITIONS 8
CADIZ INC.
1996 STOCK OPTION PLAN
1. PURPOSE
-------
The purpose of the Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company and its
Subsidiaries and Affiliates, by offering them an opportunity to
participate in the Company's future performance through awards of
Options.
Capitalized terms not defined in the text are defined in
Section 20.
2. SHARES SUBJECT TO THE PLAN
--------------------------
2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and
14, the total number of Shares reserved and available for grant
and issuance pursuant to the Plan shall be 4,000,000 Shares,
provided however, that the maximum number of Shares that may be
issued under the Plan to each Participant shall be limited to
1,000,000 Shares. Subject to Sections 2.2 and 14, Shares
reserved for issuance pursuant to Options granted under this Plan
shall again be available for grant and issuance, in connection
with future Options under the Plan, that: (a) are subject to
issuance upon exercise of an Option, but cease to be subject to
such Option for any reason other than exercise of such Option, or
(b) are subject to an Option that otherwise terminates without
such Shares being issued and for which the participant did not
receive any benefits of ownership.
2.2 ADJUSTMENT OF SHARES. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a
stock dividend, recapitalization, stock split, reverse stock
split, subdivision, combination, reclassification or similar
change in the capital structure of the Company without
consideration, then: (a) the number of Shares reserved for
issuance under the Plan, and (b) the Exercise Prices of and
number of Shares subject to outstanding Options, shall be
proportionately adjusted, subject to any required action by the
Board or the stockholders of the Company and compliance with
applicable securities laws; provided, however, that fractions of
a Share shall not be issued, but shall either be paid in cash at
Fair Market Value or shall be rounded up to the nearest Share, as
determined by the Committee; and provided, further, that the
Exercise Price of any Option may not be decreased to below the
par value of the Shares.
3. ELIGIBILITY
------------
3.1 ELIGIBILITY OF EMPLOYEES, CONSULTANTS AND INDEPENDENT
CONTRACTORS. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also
employees) of the Company or of a Subsidiary of the Company.
NQSOs may be granted to employees, officers, consultants,
independent contractors and advisers of the Company or any
Subsidiary or Affiliate of the Company; provided, however, that
such consultants, contractors and advisers render bona fide
services not in connection with the offer and sale of securities
in a capital-raising transaction. A person may be granted both
ISOs and NQSOs under the Plan.
4. ADMINISTRATION.
--------------
4.1 COMMITTEE AUTHORITY. The Plan shall be
administered by the Committee or the Board acting as the
Committee. Subject to the purposes, terms and conditions of the
Plan, and to the direction of the Board, the Committee shall have
full power to implement and carry out the Plan. The Committee
shall have the authority to:
(a) construe and interpret the Plan, any Option
Agreement and any other agreement or document executed
pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations
relating to the Plan;
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares or other
consideration subject to Options
(f) determine whether Options will be granted singly,
in combination or in tandem with, in replacement of, or as
alternatives to, other Options under the Plan or any other
incentive or compensation plan of the Company or any
Subsidiary or Affiliate of the Company;
(g) grant waivers of Plan or Option conditions;
(h) determine the vesting, exercisability and
payment of Options and to accelerate the vesting and/or
exercisability of Options, as provided herein;
(i) correct any defect, supply any omission, or
reconcile any inconsistency in the Plan, any Option or any
Option Agreement;
(j) determine whether an Option has been earned; and
(k) make all other determinations necessary or
advisable for the administration of the Plan.
4.2 COMMITTEE DISCRETION. Any determination permitted to
be made by the Committee under the Plan with respect to any
Option shall be made in its sole discretion at the time of grant
of the Option or, unless in contravention of any express term of
the Plan or Option, at any later time, and such determination
shall be final and binding on the Company and all persons having
an interest in any Option under the Plan.
4.3 COMPOSITION OF COMMITTEE. The Committee shall be
comprised of either (i) at least two members of the Board, all of
whom are both Outside Directors and Nonemployee Directors; or
(ii) the Board acting as the Committee. It is the intent of the
Company that the Plan and Options hereunder satisfy and be
interpreted in a manner, that, in the case of Participants who
are or may be Insiders, satisfies the applicable requirements of
Rule 16b-3 (or its successor) of the Exchange Act. If any
provision of the Plan or of any Option would otherwise conflict
with the intent expressed in this Section 4.3, that provision, to
the extent possible, shall be interpreted and deemed amended so
as to avoid such conflict.
5. GRANT AND EXERCISE OF OPTIONS
-----------------------------
5.1 GRANT OF OPTIONS. Except as otherwise limited herein,
the Committee may grant Options to eligible persons pursuant to
this Section 5.1 and shall determine whether such Options shall
be Incentive Stock Options within the meaning of the Code
("ISOs") or Nonqualified Stock Options ("NQSOs"), the number of
Shares subject to the Option, the Exercise Price of the Option,
the period during which the Option may be exercised, and all
other terms and conditions of the Option, subject to the
following:
5.1.1 FORM OF OPTION GRANT. Each Option granted
shall be evidenced by an Option Agreement, which shall
expressly identify the Option as an ISO or NQSO ("Stock
Option Agreement"), and be in such form and contain such
provisions (which need not be the same for each Participant
receiving an Option) as the Committee shall from time to
time approve, and which shall comply with and be subject to
the terms and conditions of the Plan. The Committee may in
its discretion include in any NQSO granted under the Plan a
condition that the Participant shall agree to remain in the
employ of, and to render services to, the Company or any of
its Subsidiaries for a period of time (specified in the
agreement) following the date the NQSO is granted.
5.1.2 DATE OF GRANT. The date of grant of an
Option shall be the date on which the Committee makes the
determination to grant such Option. The Stock Option
Agreement and a copy of the Plan will be delivered to the
Participant within a reasonable time after the granting of
such Option.
5.1.3 EXERCISE PERIOD. Options shall be
exercisable within the times or upon the events determined
by the Committee as set forth in the Stock Option Agreement;
provided, however:
(a) no Option shall be exercisable after the
expiration of ten (10) years from the date the Option
is granted;
(b) no ISO granted to a person who directly
or by attribution owns more than Ten Percent (10%) of
the total combined voting power of all classes of stock
of the Company or any Subsidiary of the Company ("Ten
Percent Stockholder") shall be exercisable after the
expiration of five (5) years from the date the Option
is granted.
5.1.4 EXERCISE PRICE. The Exercise Price shall be
determined by the Committee when an Option is granted and
may be not less than (i) 100% of the Fair Market Value of
the Shares on the date of grant, or (ii) the par value of
the Shares; provided, however, that the Exercise Price of
any ISO granted to a Ten Percent Stockholder shall not be
less than 110% of the Fair Market Value of the Shares on the
date of grant. Payment for the Shares purchased may be made
in accordance with Section 6 of the Plan.
5.1.5 METHOD OF EXERCISE. Options may be exercised
only by delivery to the Company of a written stock option
exercise agreement (the "Exercise Agreement") in a form
approved by the Committee (which need not be the same for
each Participant receiving an Option pursuant to the Plan),
stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such
representations and agreements regarding Participant's
investment intent, access to information and other matters,
if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with
payment in full of the Exercise Price for the number of
Shares being purchased.
5.1.6 TERMINATION. Notwithstanding the exercise
periods set forth in the Stock Option Agreement, exercise of
an Option shall always be subject to the following:
(a) If the Participant is Terminated for any reason
except death or Disability, then the Participant may
exercise such Participant's Options, only to the extent
that such Options would have been exercisable upon the
Termination Date, no later than ninety (90) days after
the Termination Date, but in any event, no later than
the expiration date of the Options.
(b) If the Participant is terminated because of death
or Disability, then the Participant's Options which are
ISO's may be exercised, only to the extent that such
Options would have been exercisable by Participant on
the Termination Date, and must be exercised by
Participant (or Participant's legal representative or
authorized assignee) no later than one hundred eighty
(180) days after the Termination Date, but in any event
no later than the expiration date of the Options.
5.1.7 LIMITATIONS ON EXERCISE. The Committee may
specify a reasonable minimum number of Shares that may be
purchased on any exercise of an Option, provided that such
minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is
then exercisable.
5.1.8 LIMITATIONS ON ISOs. The aggregate Fair
Market Value (determined as of the date of grant) of Shares
with respect to which ISOs are exercisable for the first
time by a Participant during any calendar year (under the
Plan or under any other incentive stock option plan of the
Company or any Affiliate or Subsidiary of the Company) shall
not exceed $100,000. If the Fair Market Value of Shares on
the date of grant with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year
exceeds $100,000, the Options for the first $100,000 worth
of Shares to become exercisable in such calendar year shall
be ISOs and the Options for the amount in excess of $100,000
that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations
promulgated thereunder are amended after the Effective Date
of the Plan to provide for a different limit on the Fair
Market Value of Shares permitted to be subject to ISOs, such
different limit shall be automatically incorporated herein
and shall apply to any Options granted after the effective
date of such amendment.
5.1.9 MODIFICATION, EXTENSION OR RENEWAL. The
Committee may modify, extend or renew outstanding Options,
provided that any such action may not, without the written
consent of a Participant, impair any of such Participant's
rights under any Option previously granted, and provided
further, that the Committee may not reduce the Exercise
Price of outstanding Options. Any outstanding ISO that is
modified, extended, renewed or otherwise altered shall be
treated in accordance with Section 424(h) of the Code.
5.1.10 NO DISQUALIFICATION. Notwithstanding any
other provision in the Plan, no term of the Plan relating to
ISOs shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised,
so as to disqualify the Plan under Section 422 of the Code
or, without the consent of the Participant affected, to
disqualify any ISO under Section 422 of the Code.
5.2 Accelerated Vesting.
-------------------
5.2.1 Notwithstanding Sections 5.1.3(b), the
Committee shall have the authority to accelerate the
exercisability of Options granted pursuant to the terms of
this Plan, provided however, that the acceleration of
exercisability shall be conditioned upon inclusion in the
Option agreements with Participants of such provisions and
restrictions as are necessary to permit stock issued upon
exercise of such Options to continue to qualify for the
exception from Section 16(b) of the Securities Act as is
provided under Rule 16(b)(3)(a),(b) and (c).
5.2.2 Notwithstanding anything herein to the
contrary, if a Change in Control of the Company occurs or if
the Committee determines in its sole discretion that an
Acceleration Event has occurred, then all Options shall
become fully exercisable as of the date such Change in
Control occurred or the Committee determines that an
Acceleration Event has occurred, provided however, that the
acceleration of exercisability shall be subject to the
imposition of such restrictions on transferability of shares
of Common Stock subject to such Options, as are necessary to
permit stock issued upon exercise of such Options to
continue to qualify for the exception from Section 16(b) of
the Securities Act as is provided under Rule 16(b)(3)(a),(b)
and (c).
6. PAYMENT FOR SHARE PURCHASES
---------------------------
6.1 PAYMENT. Payment for Shares purchased pursuant to the
Plan may be made in cash (by check or equivalent) or, where
expressly approved by the Committee and permitted by law by:
(a)by cancellation of indebtedness of the Company to
the Participant;
(b)by surrender of shares of the Company's Common Stock
that either: (1) have been owned by Participant for more
than six (6) months and have been paid for within the
meaning of Rule 144 of the Securities Act; or were obtained
by Participant in the public market; and, (2) are clear of
all liens, claims, encumbrances or security interests;
(c)by waiver of compensation due or accrued to
Participant for services rendered;
(d)provided that a public market for the Company's
stock exists and subject to the ability of the Participant
to sell Shares in compliance with applicable securities
laws:
(i) through a "same day sale" commitment
from the Participant and a broker-dealer that is a
member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased in order to pay the
Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(ii) through a "margin" commitment from the
Participant and an NASD Dealer whereby Participant
irrevocably elects to exercise the Option and to pledge
the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in
the amount of the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(e) by any combination of the foregoing.
Notwithstanding the foregoing, the Exercise Price of an
Option held by a director who is not an employee shall be paid
either (i) in cash; or (ii) pursuant to subsection (a) of this
Section 6.1, or (iii) by any combination of the foregoing (i) and
(ii).
7. WITHHOLDING TAXES
-----------------
7.1 WITHHOLDING GENERALLY. Whenever Shares are to be
issued in satisfaction of Options granted under the Plan, the
Company may require the Participant to remit to the Company an
amount sufficient to satisfy federal, state and local withholding
tax requirements prior to the delivery of any certificate or
certificates for such Shares.
8. PRIVILEGES OF STOCK OWNERSHIP
----------------------------
8.1 VOTING AND DIVIDENDS. No Participant shall have any of
the rights of a stockholder with respect to any Shares until the
Shares are issued to the Participant. After Shares are issued to
the Participant, the Participant shall be a stockholder and have
all the rights of a stockholder with respect to such Shares,
including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares.
8.2 FINANCIAL STATEMENTS. The Company shall provide
financial statements to each Participant annually during the
period such Participant has Options outstanding, provided,
however, that the Company shall not be required to provide such
financial statements to Participants whose services in connection
with the Company assure them access to equivalent information.
9. TRANSFERABILITY
---------------
Options granted under the Plan, and any interest therein,
shall not be transferable or assignable by Participant, and may
not be made subject to execution, attachment or similar process,
otherwise than by will or by the laws of descent and distribution
or as consistent with the specific Plan and Option Agreement
provisions relating thereto. During the lifetime of the
Participant, an Option shall be exercisable only by the
Participant, and any elections with respect to an Option, may be
made only by the Participant.
10. CERTIFICATES
------------
All certificates for Shares or other securities delivered
under the Plan shall be subject to such stock transfer orders,
legends and other restrictions as the Committee may deem
necessary or advisable, including restrictions under any
applicable federal, state or foreign securities law, or any
rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may
be listed.
11. EXCHANGE AND BUYOUT OF OPTIONS
------------------------------
The Committee may, at any time or from time to time,
authorize the Company, with the consent of the respective
Participants, to issue new Options in exchange for the surrender
and cancellation of any or all outstanding Options. The Committee
may at any time buy from a Participant an Option previously
granted with payment in cash, Shares or other consideration,
based on such terms and conditions as the Committee and the
Participant shall agree.
12. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE
-----------------------------------------------
An Option shall not be effective unless such Option is in
compliance with all applicable federal and state securities laws,
rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed, as they are in effect
on the date of grant of the Option and also on the date of
exercise or other issuance. Notwithstanding any other provision
in the Plan, the Company shall have no obligation to issue or
deliver certificates for Shares under the Plan prior to: (a)
obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable, and/or (b)
completion of any registration or other qualification of such
Shares under any state or federal law or ruling of any
governmental body that the Company determines to be necessary or
advisable. The Company shall be under no obligation to register
the Shares with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system,
and the Company shall have no liability for any inability or
failure to do so.
13. NO OBLIGATION TO EMPLOY
------------------------
Nothing in the Plan or any Option granted under the Plan
shall confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other
relationship with, the Company, or any Subsidiary or Affiliate
of the Company or limit in any way the right of the Company or
any Subsidiary or Affiliate of the Company to terminate
Participant's employment or other relationship at any time, with
or without cause.
14. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
------------------------------------------
The existence of outstanding Options shall not affect in any
way the right or power of the Company or its stockholders to make
or authorize all adjustments, recapitalizations, reorganizations
or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Common Stock or the rights thereof, or
the dissolution or liquidation of the Company, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
If the Company shall effect a subdivision or consolidation
of shares or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares
of its Common Stock outstanding, without receiving compensation
therefor in money, services or property, then (i) the number,
class, and per share price of Shares subject to outstanding
Options hereunder shall be appropriately adjusted in such a
manner as to entitle a Participant to receive upon exercise
thereof (and, if relevant, for the same aggregate cash
consideration), the same total number and class of shares as such
Participant would have received had such Participant exercised
such Option in full immediately prior to such event; and (ii) the
number and class of shares with respect to which Options may be
granted under the Plan shall be adjusted by substituting for the
total number of shares of Common Stock then reserved that number
and class of shares of stock that would have been received by the
owner of an equal number of outstanding shares of Common Stock as
the result of the event requiring the adjustment.
After a merger of one or more corporations into the Company,
or after a consolidation of the Company and one or more
corporations in which the Company shall be the surviving
corporation, each holder of an outstanding Option shall, at no
additional cost, be entitled to receive upon exercise of such
Option (subject to any required action by stockholders of the
Company) in, lieu of the number of Shares as to which such Option
shall then be so exercisable, the number and class of shares of
stock or other securities to which such holder would have been
entitled pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such merger or
consolidation, such holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares as
to which such Option shall be so exercised.
If the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the
surviving corporation, or if the Company is liquidated, or sells
or otherwise disposes of substantially all its assets to another
corporation while unexercised Options remain outstanding under
the Plan, (i) subject to the provisions of clause (ii) below,
after the effective date of such merger, consolidation or sale,
as the case may be, each holder of an outstanding Option shall be
entitled to receive upon exercise of such Option in lieu of
shares of Common Stock, shares of such stock or other securities,
cash or property as the holders of shares of Common Stock
received pursuant to the terms of the merger, consolidation or
sale; or (ii) all outstanding Options may be canceled by the
Board as of the effective date of any such merger, consolidation,
liquidation or sale provided that: (x) notice of such
cancellation shall be given to each holder of an Option, and (y)
each holder of an Option shall have the right to exercise such
Option to the extent that the same is then exercisable or, if the
Board shall have accelerated the time for exercise of all
unexercised and unexpired Options, in full during the 30-day
period preceding the effective date of such merger,
consolidation, liquidation or sale.
Except as expressly provided above, the issue by the Company
of shares of stock of any class, securities convertible into
shares of stock of any class, for cash, property or services,
either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of Shares then
subject to outstanding Options.
15. ADOPTION AND STOCKHOLDER APPROVAL
----------------------------------
The Plan shall become effective on the date that it is
adopted by the Board (the "Effective Date"). The Company shall
submit the Plan for approval by the stockholders of the Company
at the next annual meeting of stockholders of the Company to
obtain the advantages under NASD, IRS, Securities and Exchange
Commission and other regulations that approval of stockholders
may bestow, provided however, that Options granted under the Plan
shall be conditioned upon stockholder approval of the Plan within
one year of adoption by the Board.
16. TERM OF PLAN
-------------
The Plan will terminate ten (10) years from the Effective
Date.
17. AMENDMENT OR TERMINATION OF PLAN
--------------------------------
The Board may at any time terminate or amend the Plan in any
respect, including without limitation amendment of any form of
Option Agreement or instrument to be executed pursuant to the
Plan; provided, however, that:
(a) the Board shall not, without the approval of the
stockholders of the Company, amend the Plan in any manner that
requires such stockholder approval pursuant to the Code or the
regulations promulgated thereunder as such provisions apply to
ISO plans or pursuant to the Exchange Act or Rule 16b-3 (or its
successor), as amended, thereunder; and
(b) the terms and conditions of any awards of Options to
Directors and the category of persons eligible to be awarded such
shares under the Plan shall not be amended more than once every
six months, other than to comply with changes in the Code or
ERISA, or the rules and regulations thereunder.
18. NONEXCLUSIVITY OF THE PLAN
--------------------------
Neither the adoption of the Plan by the Board, the
submission of the Plan to the stockholders of the Company for
approval, nor any provision of the Plan shall be construed as
creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable,
including, without limitation, the granting of stock options and
bonuses otherwise than under the Plan, and such arrangements may
be either generally applicable or applicable only in specific
cases.
19. GOVERNING LAW
-------------
The Plan and all agreements, documents and instruments
entered into pursuant to the Plan shall be governed by and
construed in accordance with the internal laws of the State of
California, excluding that body of law pertaining to conflict of
laws.
20. DEFINITIONS
------------
As used in the Plan, the following terms shall have the
following meanings:
"Acceleration Event" means but is not limited to, any Change
of Control of the Company or other event determined in the
discretion of the Committee.
"Affiliate" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, another
corporation, where "control" (including the terms "controlled by"
and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management
and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Board" means the Board of Directors of the Company.
"Change in Control" means the occurrence of any of the
following events:
(a) when the Company acquires actual knowledge that any
person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the beneficial owner (as
defined in Rule 13d-3 of the Exchange Act) directly or
indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then-
outstanding securities;
(b) upon the first purchase of Common Stock pursuant
to a tender or exchange offer (other than a tender or
exchange offer made by the Company);
(c) upon the approval by the Company's shareholders
of: (i) a merger or consolidation of the Company with or
into another corporation, which does not result in any
capital reorganization or reclassification or other change
in the Company's then-outstanding shares of Common Stock),
(ii) a sale or disposition of all or substantially all of
the Company's assets, or (iii) a plan of liquidation or
dissolution of the Company;
(d) if during any period of two consecutive years, the
individuals who at the beginning of such period constitute
the Board of Directors of the Company cease for any reason
to constitute at least a majority thereof, unless the
election, or the nomination for election by the Company's
shareholders, of each new director is approved by a vote of
at least two-thirds of the directors then still in office
who were directors at the beginning of the period; or
(e) if the Board of Directors or any designated
committee determines, in its sole discretion, that any
person (such as that term is used in Sections 13(d) and
14(d) of the Exchange Act) directly or indirectly exercises
a controlling influence over the management or policies of
the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"Company" means Cadiz Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
"Disability" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section
22(e)(3) of the Code, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Price" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the
Option, but in no event shall such price be less than the par
value of the Common Stock.
"Fair Market Value" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market System, its last reported sale price on the
Nasdaq National Market or, if no such reported sale takes
place on such date, the average of the closing bid and asked
prices;
(b) if such Common Stock is publicly traded and is
then listed on a national securities exchange, the last
reported sale price or, if no such reported sale takes place
on such date, the average of the closing bid and asked
prices on the principal national securities exchange on
which the Common Stock is listed or admitted to trading;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or admitted
to trading on a national securities exchange, the average of
the closing bid and asked prices on such date, as reported
by the Wall Street Journal, for the over-the-counter market;
or
(d) if none of the foregoing is applicable, by the
Board of Directors of the Company in good faith.
"Insider" means an officer or director of the Company or
other person whose transactions in the Company's Common Stock are
subject to Section 16 of the Exchange Act.
"Nonemployee Director" means an director of the Company
defined in Rule 16b-3(b)(i) of the Exchange Act.
"Option" means an option to purchase Shares of Common Stock
of the Company pursuant to Section 5.
"Option Agreement" means, with respect to each Option, the
signed written agreement between the Company and the Participant
setting forth the terms and conditions of the Option.
"Outside Director" means any outside director as defined in
Section 162(m) of the Code and the regulations issued thereunder.
"Participant" means a person who receives an Option under
the Plan.
"Plan" means this Cadiz Inc., 1996 Stock Option Plan, as
amended from time to time.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shares" means shares of the Company's Common Stock, $0.01
par value, reserved for issuance under the Plan, as adjusted
pursuant to Sections 2 and 14, and any security issued in respect
thereto or in replacement therefor.
"Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company
if, at the time of granting of the Option, each of the
corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
"Termination" or "Terminated" means, for purposes of the
Plan with respect to a Participant, that the Participant has
ceased to provide services as an employee, director, consultant,
independent contractor or adviser, to the Company or a Subsidiary
or Affiliate of the Company, except in the case of sick leave,
military leave, or any other leave of absence approved by the
Committee, provided, that such leave is for a period of not more
than ninety (90) days, or reinstatement upon the expiration of
such leave is guaranteed by contract or statute. The Committee
shall have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the
Participant ceased to provide services (the "Termination Date").
