exh10-3.htm


    EXHIBIT 10.3

     

    
 

    AMENDMENT NO. 2 TO CREDIT
AGREEMENT AND AMENDMENT NO. 1 TO REGISTRATION RIGHTS
AGREEMENT

     

    This
AMENDMENT NO. 2 TO CREDIT
AGREEMENT AND AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT (this
“Amendment”)
dated as of June 4, 2009 (the “Effective Date”), by
and among CADIZ INC. and
CADIZ REAL ESTATE LLC,
as borrowers (the “Borrowers”), the
lenders from time to time party hereto (the “Lenders”) and LC CAPITAL MASTER FUND, LTD.,
as administrative agent (“LC Capital” or, in
such capacity, the “Agent”).

    


    RECITALS

     

    WHEREAS, the Borrowers entered
into that certain Credit Agreement, dated as of June 26, 2006, by and among
the Borrowers, the lenders party thereto and Peloton Partners LLP, as
administrative agent, as amended pursuant to that certain Amendment No. 1 to
Credit Agreement dated as of September 29, 2006, and by and among Borrowers, the
lenders party thereto and Peloton Partners LLP, as administrative agent (and as
the same has been further amended and supplemented from time to time prior to
the Effective Date, the “Credit
Agreement”).

    


    WHEREAS, pursuant to that
certain Assignment and Assumption Agreement dated as of April 16, 2008, by and
among Peloton Multi-Strategy Master Fund (“Peloton”) and LC
Capital., LC Capital replaced Peloton as a lender under the Credit Agreement
(the “Loan
Assignment”).

    


    WHEREAS, pursuant to that
certain Resignation and Appointment Agreement dated as of June, 2008 by and
among Peloton Partners LLP and LC Capital, LC Capital replaced Peloton Partners
LLP as Agent under the Loan Documents (“Successor Agent
Appointment”).

    


    WHEREAS, the Borrowers
consented to the Loan Assignment and the Successor Agent Appointment pursuant to
that certain Consent signed by the Borrowers and dated as of April 16,
2008.

    


    WHEREAS, Cadiz Inc. entered
into that certain Registration Rights Agreement dated as of June 26, 2006 by and
among Cadiz Inc. and Peloton Partners LLP as administrative agent on behalf of
each holder of registrable securities (as the same has been amended and
supplemented from time to time prior to the Effective Date, the “Registration Rights
Agreement”).

    


    WHEREAS, the Borrowers, the
Agent and the Lenders have agreed to amend the Credit Agreement and the
Registration Rights Agreement on the terms and conditions set forth
herein.

    


    WHEREAS, defined terms used
herein shall, if not otherwise defined in this Amendment, have the same meaning
as set forth in the Credit Agreement.

    


    NOW, THEREFORE, in
consideration of the foregoing and other good and valid consideration, the
receipt and adequacy of which are hereby expressly acknowledged, the parties
hereby agree as follows:

    


    ARTICLE
I

    Amendments to Credit
Agreement

    


    1.01 The
following definitions in Section 1.1 of the
Credit Agreement are hereby amended by deleting them in their entirety and
replacing them with the following:

     

    ““Accreted Loan Value”
as of the date of determination, the outstanding principal amount of the
applicable Loan, Plus all accreted interest, if any, added to such Loan as of
the calendar day immediately prior to such date of determination.”

    


    ““Maturity Date” (a)
the seventh anniversary of the Closing Date or (b) the ninth anniversary of the
Closing Date if the Two Year Extension Period applies pursuant to Section
9.6(a).”

    


    ““Tranche A Conversion
Price” with respect to the Tranche A-1 Term Loan, the Tranche A-1
Conversion Price, and with respect to the Tranche A-2 Term Loan, the Tranche A-2
Conversion Price.  The Tranche A Conversion Price shall be subject to
anti-dilution protection as described in Section 2.7(f) hereof.”

    


    ““Tranche B Conversion
Price” $35 per common share.  The Tranche B Conversion Price
shall be subject to anti-dilution protection as described in Section 2.7(f)
hereof.”

    


    1.02 The
following definitions are hereby added to Section 1.1 of the
Credit Agreement in their proper alphabetical order:

     

    ““Present Market Value”
the average of the daily closing sale price on NASDAQ of a share of the public
common stock of Cadiz over the twenty (20) consecutive NASDAQ trading days
ending five (5) Business Days prior to the Borrowers giving notice of prepayment
pursuant to Section 2.3(b) hereof.”

    


    ““Second Amendment”
that certain Amendment No. 2 to Credit Agreement and Amendment No. 1 to
Registration Rights Agreement by and among the Borrowers, the Agent and the
Lenders, and dated as of Second Amendment Effective Date.”

    


    ““Second Amendment Effective
Date” June 4, 2009.”

     

    ““Tranche A-1 Conversion
Price” $7 per common share.”

    


    ““Tranche A-1 Prepayment
Amount” the greater of (a) $4,550,000 in cash and (b) an amount of shares
of the public common stock of Cadiz equal to 110% of the quotient of 4,550,000
divided by the Tranche A-1 Conversion Price or an amount in cash equal to the
Present Market Value multiplied by 110% of the quotient of 4,550,000 divided by
the Tranche A-1 Conversion Price. ”

    


    ““Tranche A-1 Term
Loan” with respect to each Lender, such Lender’s pro rata share (based on
the principal amount of such Lender’s Tranche A Term Loan immediately prior to
the Second Amendment Effective Date) of $4,550,000 in principal of the Tranche A
Term Loan.”

    


    ““Tranche A-2 Conversion
Price” $35 per common share.”

    


    ““Tranche A-2 Term
Loan” with respect to each Lender, (a) such Lender’s pro rata share
(based on the principal amount of such Lender’s Tranche A Term Loan immediately
prior to the Second Amendment Effective Date) the principal amount of the
Tranche A Term Loan, determined as of the Second Amendment Effective Date, in
excess of the principal amount of Tranche A-1 Term Loan, plus (b) all of the
interest accrued on the Tranche A Term Loan of such Lender pursuant to Section
2.4 from the Closing Date through but excluding the Second Amendment Effective
Date, plus (c) all of the interest accruing on the Tranche A-1 Term Loan of such
Lender and such Lender’s share of the principal amount described in clause (a)
of this definition pursuant to Section 2.4 from the Second Amendment Effective
Date through but excluding the Maturity Date, the date of prepayment or
conversion thereof or such other date upon which such amounts become due and
payable (including by reason of acceleration thereof).”

    


    ““Two Year Extension
Period” as defined in Section
9.6(a).”

    


    1.03 The
following definitions in Section 1.1 of the
Credit Agreement are hereby deleted in their entirety:

     

    “Adjusted Tranche A
Conversion Price,”

    


    “Adjusted Tranche B
Conversion Price” and

    


    “Reference
Price.”

    


    1.04 Section 2.3(a) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

     

    “(a)           The
Borrowers may prepay (i) each of the Tranche A-2 Term Loan and the Tranche B
Term Loan in cash, solely in accordance with Section 2.3(b), in an amount equal
to the Accreted Loan Value of such Loans as of the day prior to the date of such
prepayment and (ii) the Tranche A-1 Term Loan in cash or in stock, at the option
of the Lender, solely in accordance with Sections 2.3(b) and 2.3(c), in an
amount equal to the Tranche A-1 Prepayment Amount, as of the date of such
prepayment.  In no event, may any Loan be prepaid during the Two Year
Extension Period.  The Agent shall deliver any prepayment notice it
receives from the Borrowers under this Section 2.3 to the Lenders within three
(3) Business Days.”

    


    1.05 Section 2.3(b) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

     

    “(b)           The
Borrowers may prepay in whole, but not in part,  (i) either or both of
the Tranche A-2 Term Loan and the Tranche B Term Loan and (ii) subject to
Section 2.3(c) below and  only upon concurrent payment of both the
Tranche A-2 Term Loan and the Tranche B Term Loan, the Tranche A-1 Term Loan, in
each case on no less than thirty (30) days’ prior written notice to the
Agent.  It shall not be a condition to the delivery by the Borrowers
of such prepayment notice that the Borrowers have sufficient available funds to
make such prepayment.  The Lenders shall, following delivery of notice
thereof from the Agent and prior to any prepayment under this Section 2.3(b),
have the right to convert any portion of the Loans into the Conversion Shares at
the applicable Conversion Price, subject to the terms and provisions of Section
2.7.”

    


    1.06 Section 2.3(c) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

     

    “(c)  Notwithstanding
the foregoing, any Lender shall have the right to refuse a prepayment made by
the Borrowers with respect to the portion of the Tranche A-1 Term Loan held by
such Lender.  In the event that a Lender so refuses, (i) the Agent
shall automatically release all of the Collateral securing the repayment of the
Tranche A-1 Term Loan and (ii) such Lender’s right to repayment, with respect to
the Tranche A-1 Term Loan, pursuant to this Agreement shall be subordinated to
all financial indebtedness for borrowed money incurred by the Borrowers after
the date prepayment of the Tranche A-1 Term Loan is refused.”

    


    1.07 Section 2.4 of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

     

    2.4           Interest Rates and Payment
Dates.  (a)  Prior to prepayment of the Tranche A-2
Term Loan, interest on the Tranche A-1 Term Loan shall accrete to the principal
amount of the Tranche A-2 Term Loan and after prepayment of the Tranche A-2 Term
Loan, interest on the Tranche A-1 Term Loan shall be payable, in cash, to each
Lender on the first Business Day of each month following the prepayment of the
Tranche A-2 Term Loan.  Interest on each of the Tranche A-2 Term Loan
and the Tranche B Term Loan shall at all times accrete to the principal amount
of the Tranche A-2 Term Loan and the Tranche B Term Loan,
respectively.

    


    (b)  In
each case, interest shall accrete on the principal amount of any Loan (including
additional principal amount added pursuant to this Agreement), or be paid in
cash as applicable pursuant to Section 2.4(a), at the rate of 5.0% per annum
from and including the Closing Date until and including the third anniversary of
the Closing Date, and 6.0% thereafter.  If all or a portion of the
principal amount of any Loan shall not be paid when due (whether at stated
maturity, by acceleration or otherwise), all outstanding Loans (whether or not
overdue) shall bear interest at a rate per annum equal to the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
Section plus
2%.

    


    1.08 Section 2.8(a) of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

     

    “(a)           Each
Lender shall have the right, at such Lender’s option, pursuant to an offer
(subject only to conditions required by applicable law, if any) by Cadiz (the
“Change Of Control
Offer”) communicated to the Agent, to require Cadiz to repay the Tranche
A-2 Term Loan and the Tranche B Term Loan, in cash, in an amount equal to the
Accreted Loan Value of such Loan.”

    


    1.09 Section 3.16(c) of
the Credit Agreement is hereby amended by deleting the reference to Section 2.8(a)(ii)
therein.

     

    1.10 Section 9.6(a)(i)(z)
of the Credit Agreement is hereby amended and restated to read in its entirety
as follows:

     

    “(z)           if
more than 50% of the principal amount of the Loans is transferred without the
Borrowers’ prior written consent, such consent not to be unreasonably withheld,
then the Maturity Date shall automatically be extended for an additional 2 years
(the “Two Year
Extension Period”); provided, however, that if the Borrowers’ consent for
such a transfer is sought and unreasonably withheld, then no such Two Year
Extension Period shall be implemented.”

    


    1.11 Table 1 to the Credit
Agreement is hereby deleted in its entirety.

     

    ARTICLE
II

    Amendments to Registration
Rights Agreement

    


    2.01 The
Registration Rights Agreement is hereby amended by replacing each instance of
“Peloton Partners LLP” with “LC Capital Master Fund, Ltd.” and replacing each
instance of “Peloton” with “LC Capital.”

     

    2.02 The
following definitions are hereby added to Section 1 of the
Registration Rights Agreement in their proper alphabetical order:

     

    ““LC Capital” means LC
Capital Master Fund, Ltd., in its capacity as Agent under the Credit
Agreement.”

    


    ““Loans” means the
principal amount of loans (including any additional principal amount added
pursuant to the Credit Agreement) outstanding to the Company under the Credit
Agreement.”

    


    ““Second Amendment”
means that certain Amendment No. 2 to Credit Agreement and Amendment No. 1 to
Registration Rights Agreement by and among the Company, the Agent and the
lenders party thereto, and dated as of Second Amendment Effective
Date.”

    


    ““Second Amendment Effective
Date” June 4, 2009.”

     

    2.03 The
definition of “New
Note” in Section 1 of the
Registration Rights Agreement is hereby deleted in its entirety.

     

    2.04 Section 8 of the
Registration Rights Agreement and the definition of “Registerable
Securities” in Section 1 of the
Registration Rights Agreement are hereby amended by replacing each instance of
“New Note” with “Loans.”

     

    2.05 Section 2(a) of the
Registration Rights Agreement is hereby amended and restated to read in its
entirety as follows:

     

    “(a)           Any
Holder may, subject to the terms hereof, request the Company in writing (each
such request, a “Demand”) to effect a
registration with the SEC under and in accordance with the provisions of the
Securities Act of all or part of the Registrable Securities Beneficially Owned
by such Holder (a “Demand
Registration”).  The Demand shall specify the aggregate number
of shares of Registrable Securities requested to be so registered on behalf of
such Holder.  For purposes of this Agreement, Holders shall be deemed
to have made a Demand, effective as of the Second Amendment Effective Date, with
respect to all of the Registrable Securities (the “Closing
Demand”).  Any request received by the Company from a Holder as
provided in this Section 2(a) shall be deemed to be a “Demand” for purposes
of this Agreement, unless the Company, in accordance with the terms of this
Agreement, shall have notified such Holder in writing, prior to its receipt of
such request from such Holder, of its intention to register securities with the
SEC, in which case the request from such Holder shall be governed by
Section 3 hereof, not this Section 2.  All Demands to be
made by a Holder pursuant to this Section 2(a) and any notifications by the
Company pursuant to the preceding sentence must be based upon a good faith
intent of such Holder or the Company, as the case may be, to effect the sale of
securities pursuant to such registrations as promptly as practicable after the
date of the Demand or notification, as the case may be, in accordance with the
terms of this Agreement.”

    


    2.06 Section 2(b) of the
Registration Rights Agreement is hereby amended and restated to read in its
entirety as follows:

     

    “(b)           After
receipt of a Demand from a Holder, the Company shall use its best efforts to
prepare and file a Registration Statement for the Registrable Securities so
requested to be registered.  With respect to the Closing Demand, the
Company shall use its best efforts to prepare and file a Registration Statement
for the Registrable Securities within 60 days and use its best efforts
to cause such Registration Statement to become effective (i) 90 days, in the
event that the Registration Statement consists of an amendment to an existing
S-3 previously filed by the Company (or 120 days in the event such
amendment to an existing Registration Statement is reviewed by the SEC) or (ii)
120 days, in the event that the Registration Statement consists of a newly filed
S-3 (or 150 days in the event such newly filed Registration Statement
is reviewed by the SEC).  With respect to any other Demand, the
Company shall use its best efforts to prepare and file a Registration Statement
for the Registrable Securities within 60 days and use its reasonable
best efforts to cause such Registration Statement to become effective
within 120 days (or 150 days in the event the Registration
Statement is reviewed by the SEC).”

    


    2.07 Section 2(c)(v) of
the Registration Rights Agreement is hereby amended and restated to read in its
entirety as follows:

     

    “(v)           if
the Company shall have, on or after the Second Amendment Effective Date,
previously effected four (4) Demand Registrations pursuant to the terms of
this Agreement;”

    


    2.08 Section 8 of the
Registration Rights Agreement is hereby amended by replacing “payee” with
“lender.”

     

    2.09 Section 16 of the
Registration Rights Agreement is hereby amended by deleting the notice
information for Peloton Partners LLP and replacing it with the
following:

     

    “if to LC
Capital:

    


    LC
Capital Master Fund, Ltd.

     

    c/o Lampe
Conway & Company LLC

     

    680 Fifth
Avenue, Suite 1202

     

    New York,
New York 10019

     

    Attention:  Steven
G. Lampe

     

    Telecopy:  (212)
581-8999

     

     

    with a copy to:

     

    Milbank,
Tweed, Hadley & McCloy LLP

     

    1850 K
Street, NW, Suite 1100

     

    Washington,
DC 20006

     

    Attention:  Debra
Alligood White

     

    Telecopy:  (202)
263-7516”

     

    


    ARTICLE
III

    Representations and
Warranties

    


    Each of the Borrowers represents and
warrants to the Lenders and the Agent that the representations and warranties
set forth in the Credit Agreement and in each of the other Loan Documents are
true and complete on the Effective Date as if made on and as of the Effective
Date (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, such representation or warranty shall be true
and correct as of such specific date).

     

    ARTICLE
IV

    Conditions
Precedent

    


    This
Amendment shall become effective as of the Effective Date upon satisfaction of
the following conditions:

     

    (a)
receipt by the Agent of counterparts of this Amendment executed by each of the
Borrowers and the Lenders and

     

    (b) the
representations and warranties contained in this Amendment shall be true and
correct and no Default or Event of Default shall have occurred and be
continuing.

     

    ARTICLE
V

    Effect of
Amendment

    


    Except as expressly amended hereby, the
Credit Agreement and the other Loan Documents shall remain in full force and
effect in accordance with their respective terms.  This Amendment is a
Loan Document executed pursuant to the Credit Agreement and shall be construed,
administered and applied in accordance with all of the terms and provisions of
the Credit Agreement, as amended hereby.

    


    ARTICLE
VI

    Counterparts

    


    This Amendment may be executed by one
or more of the parties to this Amendment on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.  Delivery of an executed signature page of
this Amendment by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.  A set of the copies of this
Amendment signed by all the parties shall be lodged with the Borrowers and the
Agent.

     

    ARTICLE
VII

    Severability

    


    Any provision of this Amendment that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

    


    


    ARTICLE
VIII

    Governing
Law

    


    THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.

    


    


    


    [remainder
of page intentionally blank]

     

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2  to Credit Agreement and Amendment No. 1 to Registration Rights
Agreement to be duly executed by their respective authorized representatives as
of the day and year first above written.

     

    


     

    BORROWERS

     

     

    CADIZ
INC., as a Borrower

     

    
      	By: 	/s/ Keith
      Brackpool 
	Name: 	Keith
      Brackpool 
	Title: 	Chief Executive
      Officer 


    

    


     

    CADIZ
REAL ESTATE LLC, as a Borrower

     

    
      	By: 	/s/ Richard E.
      Stoddard 
	Name: 	Richard
      E. Stoddard 
	Title: 	Chief
      Executive Officer 


    

    


     

    LENDER

     

    


    MILFAM II
L.P., as a Lender

    


    By:  Milfam
LLC, as general partner

     

    
      	By: 	/s/
      Lloyd Miller, III 
	Name: 	Lloyd Miller,
      III 
	Title: 	Managing
      Member 


    

    


     

    LENDER

     

    


    LC
CAPITAL MASTER FUND, LTD.

     

    a Cayman
Islands company,

    as a
Lender

     

    
      	By: 	/s/ Richard F.
      Conway 
	Name: 	Richard F.
      Conway 
	Title: 	Director 


    

    


     

    AGENT

     

    


    LC
CAPITAL MASTER FUND, LTD.

    a Cayman
Islands company,

    as the
Agent

     

    
      	By: 	/s/ Richard F.
      Conway 
	Name: 	Richard F.
      Conway 
	Title: 	Director