CADIZ INC (Form: 10-K, Received: 03/15/2013 17:27:26)

united states

Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-K

[√] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the fiscal year ended December 31, 2012

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 2934

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.)

550 S. Hope Street, Suite 2850
Los Angeles, CA	90071
(Address of principal executive offices)	(Zip Code)

(213) 271-1600

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share	The NASDAQ Global Market
(Title of Each Class)	(Name of Each Exchange on Which Registered)

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in rule 405 under the Securities Act of 1933.

Yes ___ No √

Indicate by a check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ___ No √

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 √ No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes √ No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§220.405 of this chapter) is not contained herein, and will not be contained to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Exchange Act Rule 12b-2).

Large accelerated filer ___ Accelerated filer √ Non-accelerated filer ___ Smaller Reporting Company ___

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes ___ No √

The aggregate market value of the common stock held by nonaffiliates as of June 30, 2012 was approximately $101,889,708 based on 14,131,721 shares of common stock outstanding held by nonaffiliates and the closing price on that date. Shares of common stock held by each executive officer and director and by each entity that owns more than 5% of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 8, 2013, the Registrant had 15,452,756 shares of common stock outstanding.

Documents Incorporated by Reference

Portions of the Registrant’s definitive Proxy Statement to be filed for its 2013 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report. The Registrant is not incorporating by reference any other documents within this Annual Report on Form 10-K except those footnoted in Part IV under the heading “Item 15. Exhibits, Financial Statement Schedules”.

Cadiz Inc.

Table of Contents

Part I

Item 1.	Business	1

Item 1A.	Risk Factors	12

Item 1B.	Unresolved Staff Comments	14

Item 2.	Properties	14

Item 3.	Legal Proceedings	16

Item 4.	Mine Safety Disclosures	17

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities	18

Item 6.	Selected Financial Data	20

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 8.	Financial Statements and Supplementary Data	37

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	38

Item 9A.	Controls and Procedures	38

Item 9B.	Other Information	38

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	39

Item 11.	Executive Compensation	39

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	39

Item 13.	Certain Relationships and Related Transactions, and Director Independence	39

Item 14.	Principal Accounting Fees and Services	39

Part IV

Item 15.	Exhibits, Financial Statement Schedules	40

Cadiz Inc.

PART I

ITEM 1. Business

This Form 10-K contains forward-looking statements with regard to financial projections, proposed transactions such as those concerning the further development of our land and water assets, information or expectations about our business strategies, results of operations, products or markets, or otherwise makes statements about future events. Such forward-looking statements can be identified by the use of words such as “intends”, “anticipates”, “believes”, “estimates”, “projects”, “forecasts”, “expects”, “plans” and “proposes”. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. These include, among others, the cautionary statements under the caption “Risk Factors”, as well as other cautionary language contained in this Form 10-K. These cautionary statements identify important factors that could cause actual results to differ materially from those described in the forward-looking statements. When considering forward-looking statements in this Form 10-K, you should keep in mind the cautionary statements described above.

Overview

We are a land and water resource development company with 45,000 acres of land in three areas of eastern San Bernardino County, California. Virtually all of this land is underlain by high-quality, naturally recharging groundwater resources, and is situated in proximity to the Colorado River and the Colorado River Aqueduct (“CRA”), the major source of imported water for Southern California. Our main objective is to realize the highest and best use of these land and water resources in an environmentally responsible way.

For more than 20 years, we have maintained an agricultural development at our 34,000-acre property in the Cadiz Valley, relying upon groundwater from the underlying aquifer system for irrigation. In 1993, we secured permits to develop agriculture on up to 9,600 acres of the Cadiz Valley property and withdraw more than one million acre-feet of groundwater from the underlying aquifer system. Since that time, we have maintained various levels of agriculture at the property and this operation has provided our principal source of revenue.

In addition to our sustainable agricultural operations, we believe that the long-term value of our land assets can best be derived through the development of a combination of water supply and storage projects at our properties. The primary factors that drive the value of such projects are continued population growth and sustained pressure on water supplies throughout California, including environmental restrictions and regulatory shortages on each of the State’s three primary water sources: the State Water Project, the Colorado River and the Los Angeles Aqueduct. Southern California’s water providers rely on these imported sources for a majority of their water supplies, but deliveries from all three systems have been below capacity over the last several years. Availability of supplies in California also differs greatly from year to year due to natural hydrological variability. For example, State Water Project deliveries are presently limited to just 40% of capacity for 2013 due to ongoing environmental restrictions and below average precipitation. With the region’s population expected to continue to grow, Southern California water providers are seeking new, reliable supply solutions to address anticipated limitations of traditional water supplies and to plan for long-term water needs.

At present, our water development efforts are primarily focused on the Cadiz Valley Water Conservation, Recovery and Storage Project (“Water Project” or “Project”), which will capture and conserve millions of acre-feet of native groundwater currently being lost to evaporation from the aquifer system beneath our Cadiz Valley property and deliver it to water providers throughout Southern California (see “Water Resource Development”) . We believe that the ultimate implementation of this Water Project will create the primary source of our future cash flow and, accordingly, our working capital requirements relate largely to the development activities associated with this Water Project.

We also continue to explore additional uses of our land and water resource assets, including additional agricultural opportunities, renewable energy power generation opportunities, and the development of a land conservation bank on our properties outside the Water Project area.

In addition to these development efforts, we will also pursue strategic investments in complementary business or infrastructure to meet our objectives. We cannot predict with certainty when or if these objectives will be realized.

(a) General Development of Business

We are a Delaware corporation formed in 1992 to act as the surviving corporation in a Delaware reincorporation merger with Pacific Agricultural Holdings, Inc., a California corporation formed in 1983.

As part of our historical business strategy, we have conducted our land acquisition, water development activities, agricultural operations, and land development initiatives to maximize the long-term value of our properties and future prospects (see “Narrative Description of Business”).

Our initial focus was on the acquisition of land and the assembly of contiguous land holdings through property exchanges to prove the quantity and quality of water resources in the Mojave Desert region of eastern San Bernardino County. We subsequently established agricultural operations on our properties in the Cadiz Valley and sought to develop the water resources underlying that site. In 1993, we secured permits to develop up to 9,600 acres of agriculture in the Cadiz Valley and withdraw more than one million acre-feet of groundwater from the underlying aquifer system. The agricultural operations include vineyards, citrus orchards and seasonal vegetables.

The agricultural development demonstrated that the geology and hydrology of the property is also uniquely suited and able to support a project that could offer additional water supplies and water storage opportunities in Southern California.

In 1997, we entered into the first of a series of agreements with the Metropolitan Water District of Southern California (“Metropolitan”), the largest water wholesaler in the region and owner of the nearby Colorado River Aqueduct (“CRA”), to jointly design, permit, and build such a project (the “Water Project” or “Project”). Between 1997 and 2002, we and Metropolitan received substantially all of the state and federal approvals required for the permits necessary to construct and operate the Project, including a Record of Decision (“ROD”) from the U.S. Department of the Interior, which approved the Project and offered a right-of-way for construction of Project facilities, including a 35-mile water conveyance pipeline from the Cadiz Valley property to the CRA across federal lands. In October 2002, Metropolitan’s staff brought the right-of-way matter before its Board of Directors. By a very narrow margin, the Metropolitan Board voted not to accept the right-of-way grant nor proceed with the Project.

Following Metropolitan’s decision, we began to pursue new partnerships and redesigned the Project to meet the changing needs of Southern California’s water providers. We invested in significant scientific and technical analysis of the groundwater resources at the Project area as part of this effort, and focused on the safe and sustainable management of the aquifer system beneath the Cadiz Valley property with the goal of providing a reliable, annual water supply for the region. Between 2010 and 2011 six Southern California water providers entered option agreements to participate in the redesigned Project. The Arizona & California Railroad Company, which owns the right-of-way within which the Project’s conveyance pipeline will be constructed, is also participating in the Project to receive water for a variety of critical railroad purposes.

In accordance with the California Environmental Quality Act (“CEQA”), we began a new environmental review and permitting process for the Project in 2011 led by Santa Margarita Water District (“SMWD”), one of the Project participants (see “Water Resource Development”, below, for a full description of the Water Project). After an extensive review process, the SMWD Board of Directors certified the Final Environmental Impact Report on July 31, 2012 and became the first participating agency to convert its option agreement to a Water Purchase and Sale Agreement for firm supplies from the Project. On October 1, 2012, San Bernardino County, a Responsible Agency under CEQA, also adopted CEQA findings and approved the Project’s Groundwater Monitoring, Management and Mitigation Plan (‘GMMMP”, “Plan”) and the withdrawal of 50,000 AF of water per year for 50 years. Following these critical approvals, Project development has transitioned from the environmental entitlement phase to pre-construction development and planning.

We are presently focused on completing the Project’s pre-construction phase, including additional Purchase and Sale Agreements with participating agencies, an agreement with Metropolitan regarding conveyance of Project water in the CRA, resolution of pending litigation challenging the CEQA approvals, final design engineering plans, and construction financing arrangements.

In December 2012, we also entered into a new agreement with El Paso Natural Gas (“EPNG”) securing the Company’s ownership of a 96-mile segment of an existing, idle underground natural gas pipeline extending from the Cadiz Valley to Barstow, California. (See “Existing Pipeline Asset”). The 96-mile pipeline segment has excellent potential to be utilized by the Water Project in Phase II to access the northern and central California water delivery network and provide a new means for exchange, storage and transfer of water supplies in the region. We are presently evaluating plans for further environmental review of Phase II of the Project and the incorporation of the 96-mile pipeline asset into our overall business plans.

(b) Financial Information about Industry Segments

Our primary business is to acquire and develop land and water resources. Our agricultural operations are confined to limited farming activities at the Cadiz Valley property. As a result, our financial results are reported in a single segment. See Consolidated Financial Statements. See also Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Our business strategy is to pursue the development of our landholdings for their highest and best uses. At present, our development activities include water resource, land and agricultural development.

W ater Resource Development

Our portfolio of water resources is located in proximity to the Colorado River and the Colorado River Aqueduct (“CRA”), the principal source of imported water for Southern California, and provides us with the opportunity to participate in a variety of water supply, water storage, and conservation programs with public agencies and other partners.

The Cadiz Valley Water Conservation, Recovery and Storage Project

We own approximately 34,000 acres of land and the subsurface strata, inclusive of the unsaturated soils and appurtenant water rights in the Cadiz and Fenner valleys of eastern San Bernardino County (the “Cadiz/Fenner Property”). The aquifer system underlying this property is naturally recharged by precipitation (both rain and snow) within a watershed of approximately 1,300 square miles. See Item 2, “Properties – The Cadiz/Fenner Valley Property”.

The Cadiz Valley Water Conservation, Recovery and Storage Project (the “Water Project” or “Project”) is designed to supply, capture and conserve billions of gallons of renewable native groundwater currently being lost annually to evaporation from the aquifer system underlying our Cadiz/Fenner Property, and provide a reliable water supply to water users in Southern California. By implementing established groundwater management practices, the Water Project will create a new, sustainable water supply for Project participants without adversely impacting the aquifer system or the desert environment. The total quantity of groundwater to be recovered and conveyed to Project participants will not exceed a long-term annual average of 50,000 acre-feet per year for 50 years. The Project also offers participants the ability to carry-over their annual supply, and store it in the groundwater basin from year to year. A second phase of the Project, Phase II, will offer approximately one million acre-feet of storage capacity that can be used to store imported water supplies.

Water Project facilities required for Phase I of the Project primarily include, among other things:

·	High yield wells designed to efficiently recover available native groundwater from beneath the Water Project area;

·	A 43-mile water conveyance pipeline to deliver water from the well field to the CRA; and

·	An energy source to provide power to the well-field, pipeline and pumping plant;

If an imported water storage component of the project is ultimately implemented in Phase II, the following additional facilities would be required, among other things:

·	A pumping plant to pump water through the conveyance pipeline from the CRA to the Project well-field; and

·	Spreading basins, which are shallow settling ponds that will be configured to efficiently percolate water from the ground surface down to the water table using subsurface storage capacity for the storage of water.

In general, several elements are needed to implement such a project: (1) a water conveyance pipeline right-of-way from the Water Project area to a delivery system; (2) storage and supply agreements with one or more public water agencies or private water utilities; (3) environmental/regulatory permits; and (4) construction and working capital financing. As described below, the first three elements have been progressed on a concurrent basis. The fourth is dependent on actions arising from the completion of the first three.

(1)	A Water Conveyance Pipeline Right-of-Way from the Water Project Area to a Delivery System

In September 2008, we secured a right-of-way for the Water Project’s water conveyance pipeline by entering into a lease agreement with the Arizona & California Railroad Company (“ARZC”). The agreement allows for the use of a portion of the railroad’s right-of-way to construct and operate a water conveyance pipeline for a period up to 99 years. The pipeline would be used to convey water between our Cadiz Valley property and the CRA in Rice, California. As part of the lease agreement, the ARZC would also receive water from the Project for a variety of railroad purposes, including fire suppression and other safety and maintenance uses.

We are also exploring the potential to utilize an unused natural gas pipeline (as described in “Overview” above) that exists in the Project area, to which we hold an ownership right, as a means to access additional distribution systems. Initial feasibility studies indicate that this pipeline could be used as a component of the Project to distribute water to Project participants or import water for storage at the Project area in Phase II. The potential use of this pipeline by the Project was preliminarily analyzed as part of the Project’s Environmental Impact Report (“EIR”) (see “Other Development Opportunities”).

(2)	Storage and Supply Agreements with One or More Public Water Agencies or Private Water Utilities

In 2010 and 2011, we entered into option and environmental cost sharing agreements with six water providers: Santa Margarita Water District (“SMWD”), Golden State Water Company (a wholly-owned subsidiary of American States Water [NYSE: AWR]), Three Valleys Municipal Water District, Suburban Water Systems (a wholly owned subsidiary of SouthWest Water Company), Jurupa Community Services District and California Water Service Company, the third largest investor-owned American water utility. The six water providers serve more than one million customers in cities throughout California’s San Bernardino, Riverside, Los Angeles, Orange and Ventura Counties.

Under the terms of the agreements with the six water providers, upon completion of the Water Project’s CEQA review and certification of the Final Environmental Impact Report (“Final EIR”), which occurred on July 31, 2012, each agency has the right to acquire an annual supply of 5,000 acre-feet of water at a pre-determined formula competitive with their incremental cost of new water. In addition, the agencies have options to acquire storage rights in the Water Project to allow them to manage their supplies to complement their other water resources.

Following CEQA certification, SMWD was the first participant to adopt resolutions approving a Water Purchase and Sale Agreement for 5,000 acre-fee of water. The structure of the SMWD purchase agreement calls for an annually adjusted water supply payment of up to $500/AF including identified income streams, plus their pro rata portion of the capital recovery charge and operating and maintenance costs. The capital recovery charge is calculated by amortizing the total capital investment by the Company over a 30 year term.

Approximately 80% of the water to be conserved annually by the Project is now either under a Water Purchase and Sale Agreement or remains under option. We are currently working with the other participating agencies to convert their option agreements to definitive economic agreements. We are also in discussions with additional water providers interested in acquiring rights to the remaining available Project supplies, as well as with third parties regarding the imported storage aspect of this Project.

(3)	Environmental Permits

In order to properly develop and quantify the sustainability of the Water Project, and prior to initiating the formal permitting process for the Water Project, we commissioned environmental consulting firm CH2M HILL to complete a comprehensive study of the water resources at the Project area. Following a year of analysis, CH2M HILL released its study of the aquifer system in February 2010. Utilizing new models produced by the U.S. Geological Survey in 2006 and 2008, the study estimated the total groundwater in storage in the aquifer system to be between 17 and 34 million acre-feet, a quantity on par with Lake Mead, the nation’s largest surface reservoir. The study also identified a renewable annual supply of native groundwater in the aquifer system currently being lost to evaporation. CH2M HILL’s findings, which were peer reviewed by leading groundwater experts, confirmed that the aquifer system could sustainably support the Water Project.

Further, and also prior to beginning the formal environmental permitting process, we entered into a Memorandum of Understanding (“MOU”) with the Natural Heritage Institute (“NHI”), a leading global environmental organization committed to protecting aquatic ecosystems, to assist with our efforts to sustainably manage the development of our Cadiz/Fenner Property. As part of this “Green Compact”, we will follow stringent plans for groundwater management and habitat conservation, and create a groundwater management plan for the Water Project.

As discussed in (2), above, we have entered into environmental cost sharing agreements with all participating water providers. The environmental cost sharing agreements created a framework for funds to be committed by each participant to share in the costs associated with the CEQA review work. SMWD served as the lead agency for the review process. ESA Associates, a leading environmental consulting firm, prepared the Water Project’s environmental review documentation.

The CEQA process began in February 2011 with the issuance of a Notice of Preparation (“NOP”) of a Draft Environmental Impact Report (“Draft EIR”) by SMWD. SMWD held two public scoping meetings in March 2011 and released the Draft EIR in December 2011. The Draft EIR analyzed potential impacts to environmental resources at the Project area, including critical resources of the desert environment such as vegetation, mountain springs, and water and air quality. The analysis of the Project considered peer-reviewed technical reports, independently collected data, existing reports and the Project’s state of the art Groundwater Management, Monitoring and Mitigation Plan (“GMMMP”).

SMWD conducted a 100-day public comment period for the Draft EIR, hosting two public comment meetings and an informational workshop in January and February 2012. The public comment period concluded in March 2012. In May 2012, we entered into a Memorandum of Understanding with the County and SMWD, creating the framework for finalizing the GMMMP in accordance with the County’s desert groundwater ordinance.

At the beginning of July 2012, SMWD released the Final EIR and responses to public comments. The Final EIR summarized that, with the exception of unavoidable short-term construction emissions, by implementing the measures developed in the GMMMP, the Project will avoid significant impacts to desert resources. A public hearing was held on July 25, 2012 by the SMWD Board of Directors to take public testimony and consider certification of the Final EIR. On July 31, 2012, the SMWD Board of Directors certified the Final EIR.

Following SMWD’s certification of the Final EIR, the San Bernardino County Board of Supervisors voted on October 1, 2012 to approve the GMMMP for the Project and adopted certain findings under CEQA, becoming the first Responsible Agency to take an approving action pursuant to the certified EIR. San Bernardino County served as a Responsible Agency in the CEQA review process as the local government entity responsible for oversight over groundwater resources in the Cadiz Valley.

Metropolitan, also a Responsible Agency, will take action under CEQA prior to construction regarding the terms and conditions of the Project’s use of the CRA. Project water supplies will enter Metropolitan’s CRA in accordance with its published engineering and design standards and subject to all applicable fees and charges routinely established by Metropolitan for the conveyance of water within its service territory.

(4)	Construction and Working Capital

As part of the Water Purchase and Sale Agreement with SMWD referred to in (2), above, SMWD is further authorized to continue next steps with the Company, which includes final permitting, design and construction.

As described above, construction of Phase I of the Project would primarily consist of wellfield facilities at the Water Project site, a conveyance pipeline extending approximately 43 miles along the right-of-way described in (1), above, from the wellfield to the CRA, and an energy source to pump water through the conveyance pipeline between the Project well-field and the CRA. The construction of these facilities will require capital financing, which is expected to be entirely provided with lower-cost senior debt, secured by the new facility assets. The March 2013 refinancing of the Company’s corporate term debt (see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources) now provides us the flexibility to incorporate Water Project construction financing within our current debt structure.

Existing wells at the Cadiz Valley property currently in use for our agricultural operations will be integrated into the Water Project well-field, reducing the number of wells that must be constructed prior to Project implementation. These wells will be upgraded from diesel power to natural gas power over the next 12 months to advance the overall construction timeline.

Existing Pipeline Asset

As described above (see “General Development of the Business”), we currently hold ownership rights to a 96-mile existing idle natural gas pipeline from the Cadiz Valley to Barstow, California that would be converted for the transportation of water.

In September 2011, we entered into two separate agreements with El Paso Natural Gas (“EPNG”), a subsidiary of Kinder Morgan Inc., and Questar Corporation (“Questar”) providing us with options to purchase approximately 300-miles of idle, natural gas pipelines for $50 million. The Questar agreement granted us rights to purchase an 80-mile line in Riverside County for $10 million. Based on our evaluation of these lines we allowed the option agreement with Questar to expire and we pursued plans for the EPNG line as described below.

The option agreement with EPNG granted us rights to purchase a 220-mile pipeline between Bakersfield and Cadiz, California for $40 million. Initial feasibility studies indicated that upon conversion the 30-inch line could transport between 20,000 and 30,000 acre-feet of water per year between the Water Project area and various points along the Central and Northern California water transportation network. In February 2012, we made a $1 million payment to EPNG to extend our option to purchase the 220-mile line until April 2013.

In December 2012, we entered into a new agreement with EPNG dividing the 220-mile pipeline in Barstow, California, with the Company gaining ownership rights to the 96-mile eastern segment between Barstow and the Cadiz Valley and returning to EPNG rights to the 124-mile western segment for its own use. The 96-mile eastern portion from the Cadiz Valley to Barstow was identified as the most critical segment of the line for accessing the state’s water transportation infrastructure. The Barstow area serves as a hub for water delivered from northern and central California to communities in Southern California’s High Desert.

In consideration of the new agreement, EPNG reduced the purchase price of the 96-mile eastern segment to a nominal amount of $1 (one dollar), plus previous option payments totaling $1.07 million already made by Cadiz. The remaining purchase price of $1 (one dollar) is payable before expiration of the option period in April 2014. In addition, if EPNG files for regulatory approval of any new use of the 124-mile western segment by December 2015, EPNG will make an additional payment to the Company of $10 million, payable on the date the application for regulatory approval is filed.

The 96-mile Cadiz-Barstow creates significant opportunities for our water resource development efforts. Once converted to water use, the pipeline can be used to directly connect the Cadiz area to northern and central California water sources, serving a growing need for additional locations for storage of water south of the Bay Delta region. In addition, the 96-mile pipeline creates new opportunities to deliver water, either directly or via exchange, to potential customers in San Bernardino and Kern Counties, areas which do not currently have an interconnection point with the Project. When both the 96-mile line and the 43-mile pipeline to the CRA become operational, Cadiz would link the two major water delivery systems in California providing flexible opportunities for both supply and storage.

The entire EPNG pipeline was evaluated in the Water Project’s EIR during the CEQA process at a programmatic level. Any use of the line would be conducted in conformity with the Project’s GMMMP and is subject to further CEQA evaluation (see “Cadiz Valley Water Conservation, Recovery and Storage Project” above).

Agricultural Development

Within the Cadiz/Fenner Property, 9,600 acres have been zoned for agriculture. The infrastructure currently includes seven wells that are interconnected within a portion of this acreage, with total annual production capacity of approximately 13,000 acre-feet of water. Additionally, there are housing and kitchen facilities that support up to 300 employees. If the entire 9,600 acres were developed and irrigated, total water usage would be approximately 40,000 – 50,000 acre-feet per year depending on the crop mix. The underlying groundwater, fertile soil, and desert temperatures are well suited for a wide variety of fruits and vegetables.

Permanent crops currently include 160 acres of vineyard used to produce dried-on-the-vine raisins and 440 acres of lemon orchards. Both of these crops are farmed using sustainable agricultural practices.

We currently derive our agricultural revenues through the sale of our products in bulk or through independent packing facilities. We incur all of the costs necessary to produce and harvest our organic raisin crop. These raisins are then sold in bulk to a raisin processing facility. We also incur all of the costs necessary to produce our lemon crop. Once harvested, the lemons are shipped in bulk to a packing and sales facility.

In 2009, we entered into a lease agreement with a third party to develop 500 additional acres of lemon orchards; approximately one-half of the new orchard acreage has been planted to date. We expect to receive lease income once the new lemon orchards reach commercial production through a profit sharing agreement within the lease.

Agricultural revenues will continue to vary from year to year based on the number of acres in development, crop yields, and prices. We do not expect that our agricultural revenues are likely to be material to our overall results of operations once the Water Project is fully operational. However, our agricultural operations are expected to be maintained in complement with the Water Project to provide added value to Project operations.

Additional Eastern Mojave Properties

We also own approximately 11,000 acres outside of the Cadiz/Fenner Valley area in other parts of the Mojave Desert in eastern San Bernardino County.

Our primary landholding outside of the Cadiz area is approximately 9,000 acres in the Piute Valley. This landholding is located approximately 15 miles from the resort community of Laughlin, Nevada, and about 12 miles from the Colorado River town of Needles, California. Extensive hydrological studies, including the drilling and testing of a full-scale production well, have demonstrated that this landholding is underlain by high-quality groundwater. The aquifer system underlying this property is naturally recharged by precipitation (both rain and snow) within a watershed of approximately 975 square miles and could be suitable for a water supply project, agricultural development or solar energy production. Certain of these properties are located in or adjacent to areas designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas and are also suitable candidates for preservation and conservation.

Additionally, we own acreage located near Danby Dry Lake, approximately 30 miles southeast of our Cadiz/Fenner Valley properties. The Danby Dry Lake property is located approximately 10 miles north of the CRA. Initial hydrological studies indicate that the area has excellent potential for a water supply project. Certain of the properties in this area may also be suitable for agricultural development and/or preservation and conservation.

Land Conservation Bank

As stated above, approximately 10,000 acres of our properties not currently being developed are located within areas designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas. We are currently exploring the potential to make certain of these properties available in a land mitigation or conservation bank, which would provide credits that can be acquired by entities that must acquire land to mitigate or offset impactful development in other areas. For example, this bank could potentially service the mitigation requirements of numerous utility-scale solar development projects being considered throughout Riverside and San Bernardino Counties, including projects within the recently approved federal Riverside-East Solar Energy Zone.

Other Opportunities

Over the longer-term, we believe the population of Southern California, Nevada and Arizona will continue to grow, and that, in time, the economics of commercial and residential development or solar energy generation at our properties may become attractive. Moreover, other opportunities in business or infrastructure complementary to our current objectives could provide new opportunities for our business.

We remain committed to the sustainable use of our land and water assets, and will continue to explore all opportunities for environmentally responsible development of these assets. We cannot predict with certainty which of these various opportunities will ultimately be utilized.

Seasonality

Our water resource development activities are not seasonal in nature.

Our farming operations are limited to the cultivation of lemons and grapes/raisins and spring and fall plantings of vegetables on the Cadiz Valley properties. These operations are subject to the general seasonal trends that are characteristic of the agricultural industry.

Competition

We face competition for the acquisition, development and sale of our properties from a number of competitors. We may also face competition in the development of water resources and siting of renewable energy facilities associated with our properties. Since California has scarce water resources and an increasing demand for available water, we believe that location, price and reliability of delivery are the principal competitive factors affecting transfers of water in California.

Employees

As of December 31, 2012, we employed 10 full-time employees (i.e. those individuals working more than 1,000 hours per year). We believe that our employee relations are good.

Regulation

Our operations are subject to varying degrees of federal, state and local laws and regulations. As we proceed with the development of our properties, including the Water Project, we will be required to satisfy various regulatory authorities that we are in compliance with the laws, regulations and policies enforced by such authorities. Groundwater development, and the export of surplus groundwater for sale to entities such as public water agencies, is subject to regulation by specific existing statutes, in addition to general environmental statutes applicable to all development projects. Additionally, we must obtain a variety of approvals and permits from state and federal governments with respect to issues that may include environmental issues, issues related to special status species, issues related to the public trust, and others. Because of the discretionary nature of these approvals and concerns, which may be raised by various governmental officials, public interest groups and other interested parties during both the development and the approval process, our ability to develop properties and realize income from our projects, including the Water Project, could be delayed, reduced or eliminated.

Access to Our Information

Our annual, quarterly and current reports, proxy statements and other information are filed with the Securities and Exchange Commission (“SEC”) and are available free of charge through our web site, www.cadizinc.com , as soon as reasonably practical after electronic filing of such material with the SEC.

Our SEC filings are also available to the public at the SEC website at www.sec.gov . You may also read and copy any document we file at the SEC’s public reference room located at 100 F Street N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room.

ITEM 1A. Risk Factors

Our business is subject to a number of risks, including those described below.

Our Development Activities Have Not Generated Significant Revenues

At present, our development activities include water resource, agricultural and solar energy development at our San Bernardino County properties. We have not received significant revenues from our development activities to date and we do not know when, if ever, we will receive operating revenues sufficient to offset the costs of our development activities. As a result, we continue to incur a net loss from operations.

We May Never Generate Significant Revenues or Become Profitable Unless We Are Able to Successfully Implement Programs to Develop Our Land Assets and Related Water Resources

We do not know the terms, if any, upon which we may be able to proceed with our water and other development programs. Regardless of the form of our water development programs, the circumstances under which supplies or storage of water can be developed and the profitability of any supply or storage project are subject to significant uncertainties, including the risk of variable water supplies and changing water allocation priorities. Additional risks include our ability to obtain all necessary regulatory approvals and permits, litigation by environmental or other groups, unforeseen technical difficulties, general market conditions for water supplies, and the time needed to generate significant operating revenues from such programs after operations commence.

The Development of Our Properties Is Heavily Regulated, Requires Governmental Approvals and Permits That Could Be Denied, and May Have Competing Governmental Interests and Objectives

In developing our land assets and related water resources, we are subject to local, state, and federal statutes, ordinances, rules and regulations concerning zoning, resource protection, environmental impacts, infrastructure design, subdivision of land, construction and similar matters. Our development activities are subject to the risk of adverse interpretations or changes to U.S. federal, state and local laws, regulations and policies. Further, our development activities require governmental approvals and permits. If such permits were to be denied or granted subject to unfavorable conditions or restrictions, our ability to successfully implement our development programs would be adversely impacted.

The opposition of government officials may adversely affect our ability to obtain needed government approvals and permits upon satisfactory terms in a timely manner. In this regard, federal government appropriations currently preclude spending for any proposal to store water for the purpose of export or for any activities associated with the approval of rights-of-way on lands managed by the Needles Field Office of the U.S. Bureau of Land Management (the “BLM”). Federal government appropriations also direct the U.S. Department of the Interior (the “DOI”) to confirm that the Water Project’s proposed use of a portion of ARZC’s for its conveyance pipeline is within the scope of ARZC’s right-of-way. According to existing federal law and direction from the DOI in Memorandum Opinion M-23075 a railroad has the authority to grant third party uses within its rights-of-way without BLM approval if those uses will serve a railroad purpose. The Project and pipeline will further numerous railroad purposes, including fire suppression and access to water for railroad business operations, and the ARZC has provided information regarding these purposes to the BLM. As a result, we do not believe federal right-of-way approval is required to implement the Project; however, this may be subject to challenge.

Additionally, the statutes, regulations and ordinances governing the approval processes provide third parties the opportunity to challenge proposed plans and approvals. Opposition from third parties will cause delays and increase the costs of our development efforts or preclude such development entirely. In California, third parties have the ability to file litigation challenging the approval of a project, which they usually do by alleging inadequate disclosure and mitigation of the environmental impacts of the project. We are currently named as a real party in interest in eight lawsuits challenging the various Water Project approvals granted to date and expect to be party to various legal proceedings arising in the general course of our business related to the development of the Water Project. While we have worked with representatives of various environmental and third party interests and agencies to minimize and mitigate the impacts of our planned projects, certain groups may remain opposed to our development plans.

Our Failure to Make Timely Payments of Principal and Interest on Our Indebtedness May Result in a Foreclosure on Our Assets

As of December 31, 2012, we had indebtedness outstanding to our senior secured lenders of approximately $65.26 million. This debt was refinanced in March 2013 (see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources), and remains secured by our assets. To the extent that we do not make principal and interest payments on the indebtedness when due in 2016, or if we otherwise fail to comply with the terms of agreements governing our indebtedness, we may default on our obligations.

The Conversion of Our Outstanding Convertible Bonds into Common Stock Would Dilute the Percentage of Our Common Stock Held by Current Stockholders

In connection with our debt refinance (see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources), we issued approximately $53.5 million in bonds (the “Convertible Bonds”) Principal and accrued interest under the Convertible Bonds can be converted into common stock at $8.05 per share at the election of our lenders. An election by our lenders to convert all or a portion of principal and accrued interest under these Convertible Bonds into common stock will dilute the percentage of our common stock held by current stockholders up to 6.64 million shares as of March 5, 2013, and up to an additional 2.8 million shares if held to maturity.

We May Not Be Able To Obtain the Financing We Need To Implement Our Asset Development Programs

Based upon our current and anticipated usage of cash resources, we have sufficient funds to meet our expected working capital needs until mid 2014. We will continue to require additional working capital to meet our cash resource needs until such time as our asset development programs produce revenues. If we cannot raise funds if and when needed, we might be forced to make substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company. We cannot assure you that our current lenders, or any other lenders, will give us additional credit should we seek it. If we are unable to obtain additional credit, we may engage in further financings. Our ability to obtain financing will depend, among other things, on the status of our asset development programs and general conditions in the capital markets at the time funding is sought. Although we currently expect our capital sources to be sufficient to meet our near term liquidity needs, there can be no assurance that our liquidity requirements will continue to be satisfied. Any further equity or convertible debt financings would result in the dilution of ownership interests of our current stockholders.

The Issuance of Equity Securities Under Management Equity Incentive Plans Will Impact Earnings

Our compensation programs for management emphasize long-term incentives, primarily through the issuance of equity securities and options to purchase equity securities. It is expected that plans involving the issuance of shares, options, or both will be submitted from time to time to our stockholders for approval. In the event that any such plans are approved and implemented, the issuance of shares and options under such plans may result in the dilution of the ownership interest of other stockholders and will, under currently applicable accounting rules, result in a charge to earnings based on the value of our common stock at the time of issue and the fair value of options at the time of their award. The expense would be recorded over the vesting period of each stock and option grant.

ITEM 1B. Unresolved Staff Comments

Not applicable at this time.

ITEM 2. Properties

Following is a description of our significant properties.

The Cadiz/Fenner Valley Property

Since 1983, we have acquired approximately 34,000 acres of largely contiguous land in the Cadiz and Fenner valleys of eastern San Bernardino County, California (the “Cadiz/Fenner Property”). This area is located approximately 30 miles north of the Colorado River Aqueduct (“CRA”). In 1984, we conducted investigations of the feasibility of agricultural development of this land. These investigations confirmed the availability of high-quality groundwater in quantities appropriate for agricultural development.

Additional independent geotechnical and engineering studies conducted since 1985 have confirmed that the Cadiz/Fenner Property overlies an aquifer system that is ideally suited for the conservation, recovery and delivery of indigenous groundwater, as well as the storage of conserved or imported water, as contemplated by the Water Project. See Item 1, “Business – Narrative Description of Business – Water Resource Development”.

Other Eastern Mojave Properties

In addition to the Cadiz/Fenner Valley property, we also own approximately 11,000 additional acres in the eastern Mojave Desert portion of San Bernardino County, California at two separate properties.

The first property consists of approximately 9,000 acres in the Piute Valley. This landholding is located approximately 15 miles from the resort community of Laughlin, Nevada, and about 12 miles from the Colorado River town of Needles, California. Extensive hydrological studies, including the drilling and testing of a full-scale production well, have demonstrated that this landholding is underlain by high-quality groundwater. The aquifer system underlying this property is naturally recharged by precipitation (both rain and snow) within a watershed of approximately 975 square miles and could be suitable for a water supply project, agricultural development or solar energy production. Certain of these properties are also suitable candidates for preservation and conservation.

Additionally, we own nearly 2,000 acres near Danby Dry Lake, approximately 30 miles southeast of our Cadiz/Fenner landholdings. Our Danby Dry Lake property is located approximately 10 miles north of the Colorado River Aqueduct. Initial hydrological studies indicate that it has excellent potential for water supply, agricultural development and related uses.

Executive Offices

We lease approximately 7,200 square feet of office space in Los Angeles, California for our executive offices. The lease terminates in January 2016. Current base rent under the lease is approximately $13,600 per month.

Cadiz Real Estate

In December 2003, we transferred substantially all of our assets (with the exception of our office sublease, and certain office furniture and equipment) to Cadiz Real Estate LLC, a Delaware limited liability company (“Cadiz Real Estate”). We hold 100% of the equity interests of Cadiz Real Estate and, therefore, we continue to hold 100% beneficial ownership of the properties that we transferred to Cadiz Real Estate. The Board of Managers of Cadiz Real Estate currently consists of two managers appointed by us.

Cadiz Real Estate is a co-obligor under our senior secured term loan, for which assets of Cadiz Real Estate have been pledged as security.

Because the transfer of our properties to Cadiz Real Estate has no effect on our ultimate beneficial ownership of these properties, we refer throughout this Report to properties owned of record either by Cadiz Real Estate or by us as “our” properties.

Debt Secured by Properties

Our assets have been pledged as collateral for $30 million of senior secured debt outstanding as of March 5, 3013. Information regarding interest rates and principal maturities is provided in Note 6 and Note 15 to the Consolidated Financial Statements.

ITEM 3. Legal Proceedings

CEQA Claims Challenging Water Project Approvals

As noted under Item 1A, Risk Factors, third parties have the ability in California to file litigation challenging the approval of a project. We are currently named as a real party in interest in eight (8) lawsuits related to the Water Project approvals granted last year by the Santa Margarita Water District and County of San Bernardino in accordance with the California Environmental Quality Act (“CEQA”). The eight lawsuits have been brought by four plaintiffs and challenge the following three (3) separate Project approvals:

(1)	MOU Approval – two cases challenging the May 2012 approvals of the Memorandum of Understanding between Cadiz, SMWD and the County related to the Project’s Groundwater Management, Monitoring & Mitigation Plan (GMMMP):

i.	Tetra Technologies v. Santa Margarita Water District (filed May 25, 2012); and

ii.	Tetra Technologies v. San Bernardino County (filed June 13, 2012).

(2)	EIR Approval – four cases challenging the adequacy of the EIR certified by SMWD on July 31, 2012:

i.	Tetra Technologies v. Santa Margarita Water District (filed August 28, 2012);

ii.	Citizens and Ratepayers Opposing Water Nonsense v. Santa Margarita Water District (filed August 31, 2012);

iii.	Center for Biological Diversity,et. al. v. San Bernardino County (filed August 31, 2012); and

iv.	Rodrigo Briones, et. al, v. Santa Margarita Water District (filed August 31, 2012.)

(3)	GMMMP Approval – two cases challenging the approval of the GMMMP by the County Board of Supervisors on October 1, 2012:

i.	Delaware Tetra Technologies, Inc. v. County of San Bernardino , et al (filed October 30, 2012); and

ii.	Center for Biological Diversity, et al. v. County of San Bernardino , et al (filed November 1, 2012).

All cases named above have been coordinated in Orange County Superior Court. The cases seek various forms of relief, but are primarily focused on causing a reconsideration of the environmental documents and limitation of the Project approvals. The cases are expected to proceed to administrative trial later this year. We cannot predict the outcome of any of the proceedings.

Other Proceedings

There are no other material legal proceedings pending to which we are a party or of which any of our property is the subject.

ITEM 4. Mine Safety Disclosures

Not Applicable.

PART II

ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

Our common stock is currently traded on The NASDAQ Global Market ("NASDAQ") under the symbol "CDZI." The following table reflects actual sales transactions for the dates that we were trading on NASDAQ, as reported by Bloomberg LP.

	High		Low
Quarter Ended	Sales Price		Sales Price

2011:
March 31	$	12.20	$	11.82
June 30	$	10.89	$	10.52
September 30	$	8.67	$	7.90
December 31	$	9.71	$	9.43

2012:
March 31	$	9.44	$	9.12
June 30	$	7.33	$	7.12
September 30	$	10.12	$	9.68
December 31	$	8.10	$	7.50

On March 7, 2013, the high, low and last sales prices for the shares, as reported by Bloomberg, were $6.92, $6.69, and $6.82, respectively.

As of December 31, 2012, the number of stockholders of record of our common stock was 119.

To date, we have not paid a cash dividend on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Our senior secured term loan has covenants that prohibit the payment of dividends.

All securities sold by us during the three years ended December 31, 2012, which were not registered under the Securities Act of 1933, as amended, have been previously reported in accordance with the requirements of Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

STOCK PRICE PERFORMANCE

The stock price performance graph below compares the cumulative total return of Cadiz Inc. common stock against the cumulative total return of the Standard & Poor’s Small Cap 600 NASDAQ U.S. index and the Russell 2000 ® index for the past five fiscal years. The graph indicates a measurement point of December 31, 2007, and assumes a $100 investment on such date in Cadiz Inc. common stock, the Standard & Poor’s Small Cap 600 and the Russell 2000 ® indices. With respect to the payment of dividends, Cadiz Inc. has not paid any dividends on its common stock, but the Standard & Poor’s Small Cap 600 and the Russell 2000 ® indices assume that all dividends were reinvested. The stock price performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report on Form 10-K into any filing under the Securities Act of 1933, as amended, except to the extent that Cadiz Inc. specifically incorporates this graph by reference, and shall not otherwise be deemed filed under such acts.

ITEM 6. Selected Financial Data

The following selected financial data insofar as it relates to the years ended December 31, 2012, 2011, 2010, 2009, and 2008 has been derived from our audited financial statements. The information that follows should be read in conjunction with the audited consolidated financial statements and notes thereto for the period ended December 31, 2012 included in Part IV of this Form 10-K. See also Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".

($ in thousands, except for per share data)

	Year Ended December 31,
	2012			2011			2010			2009			2008
Statement of Operations Data:
Total revenues	$	362		$	1,019		$	1,023		$	808		$	992
Net loss		(19,574	)		(16,837	)		(15,899	)		(14,399	)		(15,909	)
Net loss applicable to common stock	$	(19,574	)	$	(16,837	)	$	(15,899	)	$	(14,399	)	$	(15,909	)
Per share:
Net loss (basic and diluted)	$	(1.27	)	$	(1.20	)	$	(1.16	)	$	(1.13	)	$	(1.32	)
Weighted-average common shares outstanding		15,438			14,082			13,672			12,722			12,014

	Year Ended December 31,
	2012			2011			2010			2009			2008
Balance Sheet Data:
Total assets	$	50,518		$	57,998		$	48,936		$	50,319		$	47,412
Long-term debt		63,250			52,032			44,403			36,665			33,975

Common stock and additional paid-in capital		301,193			300,317			282,496			276,884			263,658
Accumulated deficit		(317,961	)		(298,387	)		(281,550	)		(265,651	)		(251,252	)
Stockholders' equity	$	(16,768	)	$	1,930		$	946		$	11,233		$	12,406

Common shares issued and outstanding have increased from 12,453,210 in 2008 to 15,438,961 in 2012. The increase is primarily due to the issuance of shares to investors in private placements, the issuance of shares to investors upon the conversion of preferred stock and warrant exercises, and the issuance of shares to employees, vendors and lenders.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the following discussion contains trend analysis and other forward-looking statements. Forward-looking statements can be identified by the use of words such as "intends", "anticipates", "believes", "estimates", "projects", "forecasts", "expects", "plans" and "proposes". Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. These include, among others, our ability to maximize value from our land and water resources and our ability to obtain new financings as needed to meet our ongoing working capital needs. See additional discussion under the heading "Risk Factors” above.

Overview

In addition to our sustainable agricultural operations, we believe that the long-term value of our land assets can best be derived through the development of a combination of water supply and storage projects at our properties. The primary factors that drive the value of such projects are continued population growth and sustained pressure on water supplies throughout California, including environmental restrictions and regulatory shortages on each of the State’s three primary water sources: the State Water Project, the Colorado River and the Los Angeles Aqueduct. Southern California’s water providers rely on these imported sources for a majority of their water supplies, but deliveries from all three systems have been below capacity over the last several years. Availability of supplies in California also differs greatly from year to year due to natural hydrological variability. For example, State Water Project deliveries are presently limited to just 40% of capacity from 2013 due to ongoing environmental restrictions and below average precipitation. With the region’s population expected to continue to grow, Southern California water providers are seeking new, reliable supply solutions to address anticipated limitations of traditional water supplies and to plan for long-term water needs.

W ater Resource Development

The Water Project is designed to supply, capture and conserve billions of gallons of renewable native groundwater currently being lost annually to evaporation from the aquifer system underlying our Cadiz/Fenner Property, and provide a reliable water supply to water users in Southern California. By implementing established groundwater management practices, the Water Project will create a new, sustainable water supply for Project participants without adversely impacting the aquifer system or the desert environment. The total quantity of groundwater to be recovered and conveyed to Project participants will not exceed a long-term annual average of 50,000 acre-feet per year for 50 years. The Project also offers participants the ability to carry-over their annual supply and store it in the groundwater basin from year to year. A second phase of the Project, Phase II, will offer approximately one million acre-feet of storage capacity that can be used to store imported water supplies.

Water Project facilities required for Phase I of the Project primarily include, among other things:

·	High yield wells designed to efficiently recover available native groundwater from beneath the Water Project area;

·	A 43-mile water conveyance pipeline to deliver water from the well field to the CRA; and

·	An energy source to provide power to the well-field, pipeline and pumping plant.

If an imported water storage component of the project is ultimately implemented in Phase II, the following additional facilities would be required, among other things:

·	A pumping plant to pump water through the conveyance pipeline from the CRA to the Project well-field; and

·	Spreading basins, which are shallow settling ponds that will be configured to efficiently percolate water from the ground surface down to the water table using subsurface storage capacity for the storage of water.

(1)	A Water Conveyance Pipeline Right-of-Way from the Water Project Area to a Delivery System

(2)	Storage and Supply Agreements with One or More Public Water Agencies or Private Water Utilities

Approximately 80% of the water to be conserved annually by the Project is now either under a Water Purchase and Sale Agreement or remains under option. We are currently working with other participating agencies to convert their option agreements to definitive economic agreements. We are also in discussions with additional water providers interested in acquiring rights to the remaining available Project supplies, as well as with third parties regarding the imported storage aspect of this Project.

(3)	Environmental Permits

Further, and also prior to beginning the formal environmental permitting process, we entered into a Memorandum of Understanding with the Natural Heritage Institute (“NHI”), a leading global environmental organization committed to protecting aquatic ecosystems, to assist with our efforts to sustainably manage the development of our Cadiz/Fenner property. As part of this “Green Compact”, we will follow stringent plans for groundwater management and habitat conservation, and create a groundwater management plan for the Water Project.

Metropolitan Water District of Southern California (“Metropolitan”), also a Responsible Agency, will take action under CEQA prior to construction regarding the terms and conditions of the Project’s use of the CRA. Project water supplies will enter Metropolitan’s CRA in accordance with its published engineering and design standards and subject to all applicable fees and charges routinely established by Metropolitan for the conveyance of water within its service territory.

(4)	Construction and Working Capital

As part of the Water Purchase and Sale Agreement with SMWD referred to in (2), above, SMWD further authorized to continue next steps with the Company, which includes final permitting, design and construction.

As described above, construction of Phase I of the Project would primarily consist of well-field facilities at the Water Project site, a conveyance pipeline extending approximately 43 miles along the right-of-way described in (1), above, from the well-field to the CRA, and an energy source to pump water through the conveyance pipeline between the Project well-field and the CRA. The construction of these facilities will require capital financing, which is expected to be entirely provided with lower-cost senior debt, secured by the new facility assets. The March 2013 refinancing of our corporate term debt (see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources), now provides us the flexibility to incorporate Water Project construction financing within our current debt structure.

Existing Pipeline Asset

We currently hold ownership rights to a 96-mile existing idle natural gas pipeline from the Cadiz Valley to Barstow, California that would be converted for the transportation of water.

Agricultural Development

Additional Eastern Mojave Properties

We also own approximately 11,000 acres outside of the Cadiz/Fenner Valley area in other parts of the Mojave Desert in eastern San Bernardino County.

Our primary landholding outside of the Cadiz area is approximately 9,000 acres in the Piute Valley. This landholding is located approximately 15 miles from the resort community of Laughlin, Nevada, and about 12 miles from the Colorado River town of Needles, California. Extensive hydrological studies, including the drilling and testing of a full-scale production well, have demonstrated that this landholding is underlain by high-quality groundwater. The aquifer system underlying this property is naturally recharged by precipitation (both rain and snow) within a watershed of approximately 975 square miles and could be suitable for a water supply project, agricultural development or solar energy production. Certain of these properties are located in or adjacent to areas designated by the federal government as Critical Desert Tortoise Habitat and/or Desert Wilderness Areas and are suitable candidates for preservation and conservation.

Land Conservation Bank

Other Opportunities

Results of Operations

(a) Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

We have not received significant revenues from our water resource and real estate development activity to date. Our revenues have been limited to our agricultural operations. As a result, we continue to incur a loss from operations. We had revenues of $0.4 million for the year ended December 31, 2012, and $1.0 million for the year ended December 31, 2011. The net loss totaled $19.6 million for the year ended December 31, 2012, compared with a net loss of $16.8 million for the year ended December 31, 2011. The higher 2012 loss was primarily due to additional legal and consulting fees related to water development efforts in connection with the certification of the Final Environmental Impact Report, litigation costs and due diligence costs associated with the feasibility of converting the natural gas pipelines, which we currently have an ownership right, to water transportation facilities (see “Existing Pipeline Asset” above).

Our primary expenses are our ongoing overhead costs (i.e., general and administrative expense) and our interest expense. We will continue to incur non-cash expenses in connection with our management and director equity incentive compensation plans.

Revenues. Revenue totaled $0.4 million during the year ended December 31, 2012, compared to $1.0 million during the year ended December 31, 2011. 2012 revenues included $0.1 million of revenues related to citrus crop sales, which were down $0.8 million from the prior year due to significant weather related damage to citrus crops in the 2012 growing season, and $0.3 million of revenues related to raisin sales, which were up $0.2 million from the prior year primarily due to a larger raisin crop in 2012 in comparison to the 2011 raisin crop.

Cost of Sales. Cost of sales totaled $0.5 million during the year ended December 31, 2012, compared with $1.4 million during the year ended December 31, 2011. The lower cost of sales for the year ended December 31, 2012, related largely to the lower lemon harvesting related to the smaller size of the 2012 lemon crop which was due to significant weather-related damage.

General and Administrative Expenses. General and administrative expenses during the year ended December 31, 2012, totaled $12.6 million compared with $10.4 million for the year ended December 31, 2011. Non-cash compensation costs related to stock and option awards are included in general and administrative expenses.

Compensation costs from stock and option awards for the year ended December 31, 2012, totaled $0.4 million compared with $2.4 million for the year ended December 31, 2011. The expense reflects the vesting schedules of the stock and option awards under the 2009 Equity Incentive Plan.

Other general and administrative expenses, exclusive of stock-based compensation costs, totaled $12.2 million in the year ended December 31, 2012, compared with $8.1 million for the year ended December 31, 2011. The increase in general and administrative expenses in 2012 was primarily due to additional legal and consulting fees related to water development efforts in connection with the certification of the Final Environmental Impact Report, litigation costs and due diligence costs associated with the feasibility of converting the natural gas pipelines, which we currently have an ownership right, to water transportation facilities (see “Existing Pipeline Asset” above).

Depreciation. Depreciation expenses totaled $0.4 million for the year ended December 31, 2012, compared to $0.4 million for 2011.

Interest Expense, net . Net interest expense totaled $6.8 million during the year ended December 31, 2012, compared to $5.7 million during 2011. The following table summarizes the components of net interest expense for the two periods (in thousands):

	Year Ended December 31,
	2012			2011

Interest on outstanding debt	$	3,589		$	3,261
Amortization of debt discount		3,123			2,372
Amortization of deferred loan costs		108			72
Interest income		(3	)		(1	)

	$	6,817		$	5,704

The interest on outstanding debt increased from $3.3 million to $3.6 million due to the increase in debt outstanding under our new working capital facility in 2012.

Prior Debt Refinancings. Deferred loan costs, which are primarily legal fees, are amortized over the life of each loan agreement. In June 2006, we refinanced our term loan with ING Capital LLC (“ING”) with a new senior secured convertible term loan with a different lender. As a result, $408 thousand of legal fees was capitalized and is amortized over the 7-year life of the loan agreement. An additional $73.5 thousand of lender fees was capitalized when the term loan was modified in October 2010. These fees are amortized over the remaining life of the term loan. In June 2009 and October 2010, the term loan was modified as to certain of its conversion features. As a result of these convertible debt arrangements, the change in conversion value between the original and modified instrument totaled approximately $3.2 million, which was recorded as additional debt discount with a corresponding amount recorded as additional paid-in capital. Such debt discount is accreted to the redemption value of the instrument over the remaining term of the loan as additional interest expense. In connection with the modification transaction in October 2010, we recorded a derivative liability related to the conversion option. The fair value of the derivative liability was marked-to-market at the end of each reporting period with the associated change in fair value recorded as other income (expense). On July 25, 2011, we entered into an amendment to the facility eliminating the availability to the Company of the unused $3 million portion of the facility. As a result, the conversion option related to the unused portion of the facility no longer exists and a derivative liability is no longer being recorded. On October 30, 2012, we increased the capacity of the term loan with an additional $5 million facility. As a result of this transaction, an additional $42 thousand of lender fees was capitalized and is amortized over the remaining term of the loan. Concurrently with the funding of the facility, we issued warrants to the lenders to purchase shares of common stock. The value of the warrants totaled approximately $533 thousand and was recorded as additional debt discount with a corresponding amount recorded as additional paid-in capital.

(b) Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

We had revenues of $1.0 million for the year ended December 31, 2011, and $1.0 million for the year ended December 31, 2010. The net loss totaled $16.8 million for the year ended December 31, 2011, compared with a net loss of $15.9 million for the year ended December 31, 2010. The higher 2011 loss was primarily due to additional legal and consulting fees related to water development efforts and higher net interest expense, partially offset by lower stock based non-cash compensation costs related to options issued under the 2009 Equity Incentive Plan.

Revenues. Revenue totaled $1.0 million during the year ended December 31, 2011, compared to $1.0 million during the year ended December 31, 2010. 2011 revenues included $0.9 million of revenues related to citrus crop sales, which were up $0.2 million from the prior year primarily due to the larger and longer 2010-2011 lemon harvest season in comparison to the 2009-2010 lemon harvest season, and $0.1 million of revenues related to raisin sales, which were down $0.2 million from the prior year primarily due to a smaller raisin crop in 2011 in comparison to the 2010 raisin crop.

Cost of Sales. Cost of sales totaled $1.4 million during the year ended December 31, 2011, compared with $0.9 million during the year ended December 31, 2010. The higher cost of sales for the year ended December 31, 2011, related largely to the higher lemon harvesting related to the larger size of the 2010-2011 lemon crop and the earlier timing of the 2011-2012 lemon crop, which incurred substantially all costs in 2011.

General and Administrative Expenses. General and administrative expenses during the year ended December 31, 2011, totaled $10.4 million compared with $10.8 million for the year ended December 31, 2010. Non-cash compensation costs related to stock and option awards are included in general and administrative expenses.

Compensation costs from stock and option awards for the year ended December 31, 2011, totaled $2.4 million compared with $4.0 million for the year ended December 31, 2010. The expense reflects the vesting schedules of the stock and option awards under the 2009 Equity Incentive Plan.

Other general and administrative expenses, exclusive of stock-based compensation costs, totaled $8.1 million in the year ended December 31, 2011, compared with $6.8 million for the year ended December 31, 2010. The higher 2011 expenses were primarily due to additional legal and consulting fees related to water development efforts.

Depreciation. Depreciation expenses totaled $0.4 million for the year ended December 31, 2011, compared to $0.3 million for 2010.

Interest Expense, net . Net interest expense totaled $5.7 million during the year ended December 31, 2011, compared to $4.7 million during 2010. The following table summarizes the components of net interest expense for the two periods (in thousands):

	Year Ended December 31,
	2011			2010

Interest on outstanding debt	$	3,261		$	2,782
Amortization of debt discount		2,372			1,918
Amortization of deferred loan costs		72			42
Interest income		(1	)		(8	)

	$	5,704		$	4,734

The interest on outstanding debt increased from $2.8 million to $3.3 million due to the increase in interest rate from 5% to 6% per annum on the senior secured convertible term loan and the increase in debt outstanding under the new working capital facility. 2011 interest income decreased to $1 thousand from $8 thousand in the prior year due to lower short-term interest rates and a more conservative investment policy.

Liquidity and Capital Resources

(a) Current Financing Arrangements

As we have not received significant revenues from our development activities to date, we have been required to obtain financing to bridge the gap between the time water resource and other development expenses are incurred and the time that revenue will commence. Historically, we have addressed these needs primarily through secured debt financing arrangements, private equity placements and the exercise of outstanding stock options and warrants. We have also worked with our secured lenders to structure our debt in a way which allows us to continue development of the Water Project and minimize the dilution of the ownership interests of common stockholders.

We refinanced our term debt in March 2013. See Note 15 to the Consolidated Financial Statements – “Subsequent Events”. The major components of the refinancing included:

1.	A $30 million senior term loan secured by the underlying assets of the Company that will accrue interest at 8% per annum and require no principal or interest payments before maturity in March 2016; and

2.	A $53.5 million convertible bond that will accrue interest at 7% per annum with no principal or interest payments required before maturity in March 2018; and

3.	Approximately $17.5 million in new working capital provided as part of the convertible bond issuance.

We believe that by breaking our debt into two components, we now have the flexibility to incorporate project financing for the Water Project, as necessary, into our current debt structure. While the new $30 million senior term loan would be required to be taken out by any necessary project financing, the $53.5 million convertible bond has been designed to allow project financing to be placed ahead of it in terms of priority. The $17.5 million of new working capital provides us with the resources to continue to move through our pre-construction phase, including resolution of outstanding administrative CEQA litigation, facility engineering and design, and the finalization of water supply purchase agreements with all Water Project participants.

The new financing replaced a term loan that was first entered into in June 2006, consisting of a $36.4 million five-year zero coupon senior secured convertible term loan with Peloton Partners LLP (through an affiliate) and another lender (the “Term Loan”). On April 16, 2008, we were advised that Peloton had assigned its interest in the Term Loan to an affiliate of Lampe Conway & Company LLC (“Lampe Conway”), and Lampe Conway subsequently replaced Peloton as administrative agent of the loan. During the period the Term Loan was outstanding, it was expanded and modified and consisted of the following tranches as of December 31, 2012:

Tranche	Principal Amount (in thousands)		Conversion Price (per share)		Potential Number of Shares Issuable

Tranche A-1	$	4,550	$	7.00		650,000
Tranche A-2a		2,411	$	35.00		68,889
Tranche A-2b		7,419		Non-Convertible		-
Tranche B-1		2,856	$	13.50		211,565
Tranche B-2		2,190	$	12.50		175,239
Tranche B-3a		6,810	$	35.00		194,558
Tranche B-3b		26,072		Non-Convertible		-
Tranche C-1		5,712	$	13.50		423,130
Tranche C-2		2,190	$	12.50		175,239
Tranche D		5,052		Non-Convertible		-
	$	65,262				1,898,620

Both the new senior secured loan and the convertible bond contain representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit our ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person. However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on our ability to issue additional common stock to fund future working capital needs. The debt covenants associated with the new loans were negotiated by the parties with a view towards our operating and financial condition as it existed at the time the agreements were executed. At December 31, 2012, we were in compliance with our debt covenants.

As a result of the modifications of the convertible debt arrangement in June 2009 and October 2010, the change in conversion value between the original and modified instrument totaling approximately $3.2 million was recorded as additional debt discount with a corresponding amount recorded as additional paid-in capital. Such debt discount is accreted to the redemption value of the instrument over the remaining term of the loan as additional interest expense. In connection with the modification transaction in October 2010, we recorded a derivative liability related to the conversion option. The fair value of the derivative liability was marked-to-market at the end of each reporting period with the associated change in fair value recorded as other income (expense). On July 25, 2011, we entered into an amendment to the facility eliminating the availability to the Company of the unused $3 million portion of the facility. As a result, the conversion option related to the unused portion of the facility no longer exists and a derivative liability is no longer being recorded. In connection with the October 2012 additional debt facility, we issued warrants to the lenders to purchase shares of common stock. The value of the warrant totaled approximately $533 thousand and was recorded as additional debt discount with a corresponding amount recorded as additional paid in capital.

In 2011, we raised a total of $15.1 million in working capital through three equity issuances. On July 8, 2011, we sold 363,636 shares of Common Stock at a price of $11 per share for total proceeds of $4 million. On November 30, 2011, we raised $6 million in a private placement of 666,667 shares of Common Stock at a price of $9 per share. For every three (3) shares of Common Stock issued, we issued (1) Common Stock purchase warrant entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share. On December 14, 2011, we sold 570,000 shares of Common Stock at a price of $9 per share for total proceeds of $5.1 million.

As we continue to actively pursue our business strategy, additional financing may continue to be required. See “Outlook”, below. The covenants in the term debt do not prohibit our use of additional equity financing and allow us to retain 100% of the proceeds of any equity financing. We do not expect the loan covenants to materially limit our ability to finance our water development activities.

At December 31, 2012, we had no outstanding credit facilities other than the Convertible Term Loan.

Cash Used for Operating Activities . Cash used for operating activities totaled $11.4 million for the year ended December 31, 2012, and $7.5 million for the year ended December 31, 2011. The cash was primarily used to fund: (i) general and administrative expenses related to our water development efforts, including the certification of the Final Environmental Impact Report; (ii) litigation costs; (iii) due diligence costs associated with exploring the feasibility of converting the natural gas pipelines, which we currently have an option to purchase, to water transportation facilities; and (iv) $1.0 million in cash payments related to the extension of an option agreement with El Paso Natural Gas (see “Other Development Opportunities”).

Cash Used For Investing Activities . Cash used for investing activities in the year ended December 31, 2012, was $3.3 million, compared with $4.1 million for the year ended December 31, 2011. The 2011 period included additional investments in well-field and environmental work.

Cash Provided by Financing Activities . Cash provided by financing activities totaled $5.0 million for the year ended December 31, 2012, compared with $17.1 million for the year ended December 31, 2011. The 2012 results include $5.0 million in proceeds received under our working capital facility. The 2011 results include $2.0 million in proceeds received under our working capital facility, $9.1 million in proceeds from the issuance of shares under a shelf takedown offering, and $6.0 million in proceeds from a private placement. See “Current Financing Arrangements” above.

(b) Outlook

Short-Term Outlook. The $17.5 million in proceeds from the issuance of long-term debt in March 2013 provides us with sufficient funds to meet our expected working capital needs until mid 2014. Should we require additional working capital to fund operations, we expect to continue our historical practice of structuring our financing arrangements to match the anticipated needs of our development activities. See “Long-Term Outlook”. No assurances can be given, however, as to the availability or terms of any few financing.

Long-Term Outlook . In the longer term, we will need to raise additional capital to finance working capital needs, capital expenditures and any payments due under our new term debt at maturity in March 2016 or our new convertible bond at maturity in March 2018 (see “Current Financing Arrangements” above).

Our future working capital needs will depend upon the specific measures we pursue in the entitlement and development of our water resources and other developments. Future capital expenditures will depend primarily on the progress of the Water Project.

We will evaluate the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis. We may meet any future cash requirements through a variety of means, including equity or debt placements, or through the sale or other disposition of assets. Equity placements would be undertaken only to the extent necessary, so as to minimize the dilutive effect of any such placements upon our existing stockholders. Limitations on our liquidity and ability to raise capital may adversely affect us. Sufficient liquidity is critical to meet our resource development activities. Although we currently expect our sources of capital to be sufficient to meet our near-term liquidity needs, there can be no assurance that our liquidity requirements will continue to be satisfied. If the Company cannot raise needed funds, it might be forced to make substantial reductions in its operating expenses, which could adversely affect its ability to implement its current business plan and ultimately its viability as a company.

As discussed in Note 2 to our Consolidated Financial Statements, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements based on all relevant information available at the time and giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Management has concluded that the following critical accounting policies described below affect the most significant judgments and estimates used in the preparation of the consolidated financial statements.

(1) Intangible and Other Long-Lived Assets . Property, plant and equipment, intangible and certain other long-lived assets are depreciated or amortized over their useful lives. Useful lives are based on management’s estimates of the period over which the assets will generate revenue.

(2) Goodwill. As a result of a merger in May 1988 between two companies, which eventually became known as Cadiz Inc., goodwill in the amount of $7,006,000 was recorded. Approximately $3,193,000 of this amount was amortized until the adoption of Accounting Standards Codification 350, “Intangibles – Goodwill and Other” (“ASC 350”) on January 1, 2002.

(3) Valuation of Goodwill and Long-Lived Assets. The Company assesses long-lived assets, excluding goodwill, for recoverability whenever events or changes in circumstances indicate that their carrying value may not be recoverable through the estimated undiscounted future cash flows resulting from the use of the assets. If it is determined that the carrying value of long-lived assets may not be recoverable, the impairment is measured by using the projected discounted cash-flow method. The Company reevaluates the carrying value of its water program annually.

The Company tests goodwill for impairment annually as of December 31, or more frequently if events or circumstances indicate carrying values may not be recoverable, using the market method, as well as the discounted cash-flow method.

The Company uses a two-step impairment test to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any) for the Company. The step 1 calculation, used to identify potential impairment, compares the estimated fair value of the Company to its net carrying value (book values), including goodwill, on the measurement date. If the fair value of the Company is less than its carrying value, step 2 of the impairment test is required to measure the amount of the impairment loss (if any).

The step 2 calculation of the impairment test compares the implied fair value of the goodwill to the carrying value of goodwill. The implied fair value of goodwill represents the excess of the estimated fair value above the fair value of the Company's identified assets and liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess (not to exceed the carrying value of goodwill). The determination of the fair value of its assets and liabilities is performed as of the measurement date using observable market data before and after the measurement date (if that subsequent information is relevant to the fair value on the measurement date).

(4) Deferred Tax Assets and Valuation Allowances. To date, the Company has not generated significant revenue from its water development programs, and it has a history of net operating losses. As such, the Company has generated significant deferred tax assets, including large net operating loss carry forwards for federal and state income taxes for which it has recorded a full valuation allowance. Management is currently working on water storage, water supply, agriculture and solar energy development projects, including the Water Project, that are designed to generate future taxable income, although there can be no guarantee that this will occur. If taxable income is generated in future years, some portion or all of the valuation allowance will be reversed, and an increase in net income would consequently be reported.

(5) Stock-Based Compensation. The Company applies the Black-Scholes valuation model in determining the fair value of options granted to employees and consultants. For employees, the fair value is then charged to expense on the straight-line basis over the requisite service period. For consultants, the fair value is remeasured at each reporting period and recorded as a liability until the award is settled.

(d) New Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies”.

(e) Off Balance Sheet Arrangements

The Company does not have any off balance sheet arrangements at this time.

(f) Certain Known Contractual Obligations

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years

Long term debt obligations	$	65,313	$	65,273	$	23	$	17	$	-

Interest payable		1,972		1,972		-		-		-

Operating leases		582		219		363		-		-
	$	67,867	$	67,464	$	386	$	17	$	-
* The above table does not reflect unrecognized tax benefits of $3.3 million, the timing of which is uncertain. See Note 7 to the Consolidated Financial Statements, “Income Taxes”.

Long-term debt included in the table above primarily reflects the Convertible Term Loan, which is described above in Item 7, ”Management’s Discussion and Analysis of Financial Condition and Results of Operation; Liquidity and Capital Resources”. Operating leases include the lease of the Company’s executive offices, as described in Item 2, “Properties”.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

As of December 31, 2012, all of our indebtedness bore interest at fixed rates; therefore, we are not exposed to market risk from changes in interest rates on long-term debt obligations.

ITEM 8. Financial Statements and Supplementary Data

The information required by this item is submitted in response to Part IV below. See the Index to Consolidated Financial Statements.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

ITEM 9A. Controls and Procedures

Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information related to the Company, including its consolidated entities, is accumulated and communicated to senior management, including Chief Executive Officer (the “Principal Executive Officer”) and Chief Financial Officer (the “Principal Financial Officer”) and to our Board of Directors. Based on their evaluation as of December 31, 2012, our Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and such information is accumulated and communicated to management, including the principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the criteria in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2012. The effectiveness of our internal control over financial reporting as of December 31, 2012, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control Over Financial Reporting

In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in the Company's internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B. Other Information

Not applicable.

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which we intend to file with the SEC pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days after December 31, 2012.

ITEM 11. Executive Compensation

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

ITEM 14. Principal Accounting Fees and Services

PART IV

ITEM 15. Exhibits, Financial Statement Schedules

Financial Statements. See Index to Consolidated Financial Statements.

Financial Statement Schedule. See Index to Consolidated Financial Statements.

Exhibits.

The following exhibits are filed or incorporated by reference as part of this Form 10-K.

3.1

Cadiz Certificate of Incorporation, as amended (1)

3.2

Amendment to Cadiz Certificate of Incorporation dated November 8, 1996 (2)

3.3

Amendment to Cadiz Certificate of Incorporation dated September 1, 1998 (3)

3.4

Amendment to Cadiz Certificate of Incorporation dated December 15, 2003 (4)

3.5

Certificate of Elimination of Series D Preferred Stock, Series E-1 Preferred Stock and Series E-2 Preferred Stock of Cadiz Inc. dated December 15, 2003 (4)

3.6

Certificate of Elimination of Series A Junior Participating Preferred Stock of Cadiz Inc., dated March 25, 2004 (4)

3.7

Amended and Restated Certificate of Designations of Series F Preferred Stock of Cadiz Inc. (5)

3.8

Cadiz Bylaws, as amended (6)

3.9

Second Amended and Restated Certificate of Designations of Series F Preferred Stock of Cadiz Inc. dated June 30, 2006, as corrected by Certificate of Correction dated March 14, 2007 (13)

3.10

Certificate of Elimination of Series F Preferred Stock of Cadiz Inc. (as filed August 3, 2007) (15)

4.1

Form of Subscription Agreement used for issuance of shares and warrants in December 2011 (7)

4.2

Form of Warrant Agreement (7)

10.1

Limited Liability Company Agreement of Cadiz Real Estate LLC dated December 11, 2003 (4)

10.2

Amendment No. 1, dated October 29, 2004, to Limited Liability Company Agreement of Cadiz Real Estate LLC (8)

10.3

Amendment No. 2 dated March 5, 2013, to Limited Liability Company Agreement of Cadiz Real Estate LLC

10.4

Settlement Agreement dated as of August 11, 2005 by and between Cadiz Inc., on the one hand, and Sun World International, Inc., Sun Desert, Inc., Coachella Growers and Sun World/Rayo, on the other hand (9)

10.5

$36,375,000 Credit Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and Peloton Partners LLP, as Administrative Agent, dated as of June 26, 2006 (10)

10.6

Amendment No. 1 dated September 29, 2006 to the $36,375,000 Credit Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto and Peloton Partners LLP, as Administrative Agent, dated as of June 26, 2006 (11)

10.7

Outside Director Compensation Plan (12)

10.8

2007 Management Equity Incentive Plan (14)

10.9

Amendment No. 2 dated October 1, 2007 to Reorganization Plan and Agreement for Purchase and Sale of Assets dated as of February 18, 1998 among Cadiz Inc. and Mark A. Liggett in his capacity as successor in interest to Exploration Research Associates, Incorporated., a California corporation (“ ERA ”) and in his individual capacity as former sole shareholder of ERA and as the successor in interest to ERA (16)

10.10

Longitudinal Lease Agreement dated September 17, 2008 between Arizona & California Railroad Company and Cadiz Real Estate, LLC (17)

10.11

Amended and Restated Employment Agreement between Keith Brackpool and Cadiz Inc. dated May 22, 2009 (18)

10.12

Employment Agreement between Timothy J. Shaheen and Cadiz Inc. dated May 22, 2009 (18)

10.13

Amendment No. 2 to the Credit Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and LC Capital Master Fund Ltd., as Administrative Agent, dated as of June 4, 2009 (19)

10.14

2009 Equity Incentive Plan (20)

10.15

Services and Exclusivity Agreement with Layne Christensen Company dated November 2, 2009, as amended by amendments dated January 4, 2010, January 27, 2010 (21)

10.16

Form of Option Agreement with Santa Margarita Water District (23)

10.17

Form of Environmental Processing and Cost Sharing Agreement with Santa Margarita Water District (22)

10.18

Form of Environmental Processing and Cost Sharing Agreement with Three Valleys Municipal Water District (22)

10.19

Option Agreement with Golden State Water Company dated June 25, 2010 (22)

10.20

Option Agreement with Suburban Water Systems dated October 4, 2010 (24)

10.21

Amendment No. 3 to the Credit Agreement and Amendment No. 2 to the Registration Rights Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and LC Capital Master Fund Ltd., as Administrative Agent, dated as of October 19, 2010 (25)

10.22

Amendment No. 3 to the Services and Exclusivity Agreement with Layne Christensen Company dated April 8, 2010 (26)

10.23

Letter agreement with Scott S. Slater dated April 12, 2011 (27)

10.24

Amendment No. 4 to the Credit Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and LC Capital Master Fund Ltd., as Administrative Agent, dated July 25, 2011 (28)

10.25

Option Agreement with California Water Service Company dated December 1, 2011 (29)

10.26

Option Agreement with Questar Southern Trails Pipeline Company dated August 12, 2011 (30)

10.27

Option Agreement for Purchase of Line No. 1904 Facilities with El Paso Natural Gas Company dated September 8, 2011, as amended by amendment dated February 8, 2012 (30)

10.28 Addendum to Employment Agreement between Timothy J. Shaheen and Cadiz Inc. dated February 14, 2012 (30)

10.29

Form of Memorandum of Understanding by and among Cadiz Inc., County of San Bernardino and Santa Margarita Water District (31)

10.30

First Amended Agreement to Option Agreement with Questar Southern Trails Pipeline Company dated June 29, 2012 (32)

10.31

Amendment No. 5 to Credit Agreement and Amendment No. 3 to Registration Rights Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and LC Capital Master Fund Ltd., as Administrative Agent, dated as of August 8, 2012 (32)

10.32

Water Purchase and Sale Agreement among Cadiz Inc., Cadiz Real Estate LLC, Fenner Valley Mutual Water Company and Santa Margarita Water District dated July 31, 2012 (33)

10.33

Groundwater Management, Monitoring, and Mitigation Plan for the Cadiz Valley Groundwater Conservation, Recovery and Storage Project approved by the Santa Margarita Water District and the County of San Bernardino Board of Supervisors effective October 1, 2012 (33)

10.34

Amendment No. 6 to Credit Agreement and Amendment No. 4 to the Registration Rights Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and LC Capital Master Fund Ltd., as Administrative Agent, dated as of October 30, 2012 (33)

10.35

Second Amended Option Agreement with El Paso Natural Gas Company dated December 7, 2012 (34)

10.36

Notice of Termination of Option Agreement between Cadiz Inc. and Questar Southern Trails Pipeline Company, dated August 12, 2011, and as amended June 29, 1012, by Questar Southern Trails Pipeline Company dated October 26, 2012

10.37

Revised Terms of Engagement with Brownstein Hyatt Farber and Schreck dated January 9, 2013

10.38

Letter agreement with Scott Slater dated January 10, 2013

10.39

Amended and Restated Credit Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties hereto, and LC Capital Master Fund, Ltd., as Administrative Agent, dated as of March 5, 2013

10.40

Indenture among Cadiz Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of March 5, 2013

10.41

Private Placement Purchase Agreement among Cadiz Inc. and Purchasers (as defined therein) dated as of March 4, 2013

10.42

Exchange Agreement among Cadiz Inc. and Holders (as defined therein) dated March 4, 2013

10.43

Placement Agent Agreement with B. Riley & Co. LLC dated March 4, 2013

21.1

Subsidiaries of the Registrant

23.1

Consent of Independent Registered Public Accounting Firm

31.1

Certification of Scott Slater, Chief Executive Officer of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Timothy J. Shaheen, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Scott Slater, Chief Executive Officer of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Timothy J. Shaheen, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

________________________________________________________________________

(1)

Previously filed as an Exhibit to our Registration Statement of Form S-1 (Registration No. 33-75642) declared effective May 16, 1994 filed on February 23, 1994

(2)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 filed on November 14, 1996

(3)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 filed on November 13, 1998

(4)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003 filed on November 2, 2004

(5)

Previously filed as an Exhibit to our Current Report on Form 8-K dated November 30, 2004 filed on December 2, 2004

(6)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 filed on August 13, 1999

(7)

Previously filed as an Exhibit to our Registration Statement on Form S-3 (Registration No. 333-180403) filed on April 12, 2012

(8)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed on March 31, 2005

(9)		Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed on November 14, 2005
(10)		Previously filed as an Exhibit to our registration statement on Form S-3 (Registration no. 333-136117) filed on July 28, 2006

(11)		Previously filed as an Exhibit to our Current Report on Form 8-K dated October 4, 2007 and filed on October 4, 2006
(12)		Previously filed as Appendix B to our definitive proxy dated October 10, 2006 and filed October 10, 2006

(13)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 filed on March 16, 2007

(14)

Previously filed as Appendix A to our definitive proxy dated April 27, 2007 and filed April 27, 2007

(15)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 6, 2007

(16)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 filed on March 14, 2008

(17)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 on November 10, 2008

(18)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, filed on August 10, 2009

(19)

Previously filed as an Exhibit to the Post-Effective Amendment No. 1 to our Registration Statement on Form S-3 (Registration No. 333-136117) filed on August 3, 2009

(20)

Previously filed as Appendix A to our definitive proxy dated November 3, 2009, and filed on November 5, 2009

(21)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed on March 15, 2010

(22)

Previously filed as an Exhibit to our Current Report on Form 8-K dated June 23, 2010 and filed on June 24, 2010

(23)

Previously filed as an Exhibit to our Current Report on Form 8-K dated June 25, 2010 and filed on June 30, 2010

(24)

Previously filed as an Exhibit to our Current Report on Form 8-K dated October 4, 2010 and filed on October 7, 2010

(25)

Previously filed as an Exhibit to our Current Report on Form 8-K dated October 19, 2010 and filed on October 20, 2010

(26)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed on March 16, 2011

(27)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed on May 9, 2011

(28)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed on August 8, 2011

(29)

Previously filed as an Exhibit to our Current Report on Form 8-K dated December 1, 2011, and filed on December 7, 2011

(30)

Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 15, 2012

(31)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed on May 9, 2012

(32)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed on August 9, 2012

(33)

Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed on November 8, 2012

(34)

Previously filed as an Exhibit to our Current Report on Form 8-K dated December 7, 2012, and filed on December 12, 2012

CADIZ INC. CONSOLIDATED FINANCIAL STATEMENTS

	Page

Report of Independent Registered Public Accounting Firm	47

Consolidated Statements of Operations for the three years ended December 31, 2012	49

Consolidated Balance Sheets as of December 31, 2012 and 2011	50

Consolidated Statements of Cash Flows for the three years ended December 31, 2012	51

Consolidated Statements of Stockholders’ (Deficit) Equity for the three years ended December 31, 2012	52

Notes to the Consolidated Financial Statements	53

Financial Statement Schedule	76

(Schedules other than those listed above have been omitted since they are either not required, inapplicable, or the required information is included on the financial statements or notes thereto.)

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Cadiz Inc:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Cadiz Inc. and its subsidiaries at December 31, 2012 and December 31, 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

March 15, 2013

Cadiz Inc.

Consolidated Statements of Operations

	Year Ended December 31,
(In thousands, except per share data)	2012			2011			2010

Total revenues	$	362		$	1,019		$	1,023

Costs and expenses:
Cost of sales (exclusive of depreciation shown below)		521			1,441			927
General and administrative		12,559			10,447			10,801
Depreciation		350			365			344

Total costs and expenses		13,430			12,253			12,072

Operating loss		(13,068	)		(11,234	)		(11,049	)

Interest expense, net		(6,817	)		(5,704	)		(4,734	)
Other Income (expense), net		-			108			(110	)

Loss before income taxes		(19,885	)		(16,830	)		(15,893	)

Income tax (benefits) expense		(311	)		7			6

Net loss and comprehensive loss	$	(19,574	)	$	(16,837	)	$	(15,899	)

Basic and diluted net loss per share	$	(1.27	)	$	(1.20	)	$	(1.16	)

Weighted-average shares outstanding		15,438			14,082			13,672

See accompanying notes to the consolidated financial statements.

Cadiz Inc.

Consolidated Balance Sheets

	December 31,
($ in thousands)	2012			2011

ASSETS

Current assets:
Cash and cash equivalents	$	1,685		$	11,370
Accounts receivable		260			139
Prepaid expenses and other		404			604
Total current assets		2,349			12,113

Property, plant, equipment and water programs, net		44,074			41,886
Goodwill		3,813			3,813
Other assets		282			186

Total assets	$	50,518		$	57,998

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	957		$	1,069
Accrued liabilities		1,395			1,049
Tax liability		-			321
Current portion of long term debt		11			4

Total current liabilities		2,363			2,443

Long-term debt		63,250			52,032
Deferred revenue		750			670
Other long-term liabilities		923			923

Total liabilities		67,286			56,068

Commitments and contingencies (Note 12)

Stockholders' (deficit) equity:
Common stock - $0.01 par value; 70,000,000 shares
authorized; shares issued and outstanding: 15,438,961 at
December 31, 2012, and 15,429,541 at December 31, 2011		154			154

Additional paid-in capital		301,039			300,163
Accumulated deficit		(317,961	)		(298,387	)
Total stockholders' (deficit) equity		(16,768	)		1,930

Total liabilities and stockholders' equity	$	50,518		$	57,998

See accompanying notes to the consolidated financial statements.

Cadiz Inc.

Consolidated Statements of Cash Flows

	Year Ended December 31,
( $ in thousands)	2012			2011			2010

Cash flows from operating activities:
Net loss	$	(19,574	)	$	(16,837	)	$	(15,899	)
Adjustments to reconcile net loss to net cash
Used for operating activities:
Depreciation		350			365			344
Amortization of deferred loan costs		108			72			42
Amortization of debt discount		3,123			2,372			1,918
Interest added to loan principal		3,589			3,261			2,782
Unrealized (gain) loss on derivative liability		-			(108	)		110
Compensation charge for stock awards and share options		383			2,376			4,009
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(121	)		138			(102	)
Decrease (increase) in prepaid expenses and other		200			(305	)		63
(Increase) decrease in other assets		(109	)		63			220
Increase (decrease) in accounts payable		128			304			(141	)
Increase (decrease) in accrued liabilities		273			285			(107	)
Increase in deferred revenue		250			500			-

Net cash used for operating activities		(11,400	)		(7,514	)		(6,761	)

Cash flows from investing activities:
Additions to property, plant and equipment		(3,226	)		(4,140	)		(1,184	)
Other Assets (restricted cash)		(63	)		-			-

Net cash used for investing activities		(3,289	)		(4,140	)		(1,184	)

Cash flows from financing activities:
Net proceeds from issuance of common stock		-			15,129			-
Proceeds from issuance of long-term debt		5,014			2,000			5,000
Principal payments on long-term debt		(10	)		(16	)		(22	)

Net cash provided by financing activities		5,004			17,113			4,978

Net increase (decrease) in cash and cash equivalents		(9,685	)		5,459			(2,967	)

Cash and cash equivalents, beginning of period		11,370			5,911			8,878

Cash and cash equivalents, end of period	$	1,685		$	11,370		$	5,911

See accompanying notes to the consolidated financial statements.

Cadiz Inc.

Consolidated Statements of Stockholders’ (Deficit) Equity

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			(Deficit) Equity

Balance as of December 31, 2009		13,500,997	$	135	$	276,749	$	(265,651	)	$	11,233

Issuance of shares pursuant to stock awards		176,775		2		-		-			2
Convertible term loan conversion option		-		-		1,603		-			1,603
Stock compensation expense		-		-		4,007		-			4,007
Net loss		-		-		-		(15,899	)		(15,899	)
Balance as of December 31, 2010		13,677,772		137		282,359		(281,550	)		946

Issuance of shares pursuant to stock awards		151,466		1		-		-			1
Issuance of shares pursuant to Private Placement and Shelf Takedown		1,600,303		16		15,113		-			15,129
Convertible term loan conversion option		-		-		343		-			343
Stock compensation expense		-		-		2,348		-			2,348
Net Loss		-		-		-		(16,837	)		(16,837	)
Balance as of December 31, 2011		15,429,541		154		300,163		(298,387	)		1,930

Issuance of shares pursuant to stock awards		9,420		-		-		-			-
Stock compensation expense		-		-		343		-			343
Issuance of warrants		-		-		533		-			533
Net loss		-		-		-		(19,574	)		(19,574	)
Balance as of December 31, 2012		15,438,961	$	154	$	301,039	$	(317,961	)	$	(16,768	)

See accompanying notes to the consolidated financial statements.

Cadiz Inc.

Notes to the Consolidated Financial Statements

NOTE 1 – DESCRIPTION OF BUSINESS

Cadiz Inc. (“Cadiz” or the “Company”) is a land and water resource development company with 45,000 acres of land in three areas of eastern San Bernardino County, California. Virtually all of this land is underlain by high-quality, naturally recharging groundwater resources, and is situated in proximity to the Colorado River and the Colorado River Aqueduct (“CRA”), the major source of imported water for Southern California. The Company’s main objective is to realize the highest and best use of these land and water resources in an environmentally responsible way.

For more than 20 years, the Company has maintained an agricultural development at its 34,000-acre property in the Cadiz Valley, relying upon groundwater from the underlying aquifer system for irrigation. In 1993, Cadiz secured permits to develop agriculture on up to 9,600 acres of the Cadiz Valley property and withdraw more than one million acre-feet of groundwater from the underlying aquifer system. Since that time, the Company has maintained various levels of agriculture at the property and this operation has provided its principal source of revenue.

At present, the Company’s water development efforts are primarily focused on the Cadiz Valley Water Conservation, Recovery and Storage Project (the “Water Project” or the “Project”), which will capture and conserve millions of acre-feet of native groundwater currently being lost to evaporation from the aquifer system beneath the Company’s Cadiz Valley property and deliver it to water providers throughout Southern California . Cadiz believes that the ultimate implementation of this Water Project will create the primary source of its future cash flow and, accordingly, its working capital requirements relate largely to the development activities associated with this Water Project.

The Company also continues to explore additional uses of its land and water resource assets, including additional agricultural opportunities, renewable energy power generation opportunities, and the development of a land conservation bank on its properties outside the Water Project area.

In addition to these development efforts, Cadiz will also pursue strategic investments in complementary business or infrastructure to meet its objectives. The Company cannot predict with certainty when or if these objectives will be realized.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared using accounting principles applicable to a going concern, which assumes realization of assets and settlement of liabilities in the normal course of business. The Company incurred losses of $19.6 million, $16.8 million and $15.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. The Company had a working capital deficit of $14 thousand at December 31, 2012, and used cash in operations of $11.4 million for the year ended December 31, 2012. Currently, the Company’s sole focus is the development of its land and water assets.

Cash requirements during the twelve months ended December 31, 2012, primarily reflect: (i) certain administrative costs related to the Company’s water development efforts, including legal and consulting costs associated with the Final Environmental Impact Report for the Water Project; (ii) litigation costs; (iii) due diligence costs associated with exploring the feasibility of converting the natural gas pipelines, which the Company currently has the option to purchase, to water transportation facilities; and (iv) $1.0 million in cash payments related to the extension of an option agreement with El Paso Natural Gas.

In June 2006, the Company raised $36.4 million through the private placement of a five year zero coupon convertible term loan with Peloton Partners LLP (“Peloton”), as administrative agent, and an affiliate of Peloton and another investor, as lenders (the “Term Loan”). The proceeds of the Term Loan were partially used to repay the Company’s prior term loan facility with ING Capital LLC (“ING”). On April 16, 2008, the Company was advised that Peloton’s interest in the Term Loan had been assigned to an affiliate of Lampe, Conway & Company LLC (“Lampe Conway”), and Lampe Conway subsequently replaced Peloton as administrative agent of the loan. On June 4, 2009, the Company completed arrangements to amend the Term Loan as to certain of its conversion features and extend its maturity to June 2013. This facility was further modified as to certain of its conversion features on October 19, 2010, in connection with a new $10 million working capital facility with the existing lenders.

On October 30, 2012, the Company increased the capacity of its existing Term Loan facility with an additional $5 million facility.

On March 5, 2013, the Company completed arrangements to amend and restate its credit facility with the existing lenders. Under the new terms of the agreement, the existing lenders hold $30 million of non-convertible secured debt, with the balance of the Company’s outstanding debt of approximately $36 million held in a convertible bond instrument. Further, the Company increased the capacity of the convertible bond instrument with an additional $17.5 million to be used for working capital purposes. See Note 15, “Subsequent Events”,

In June 2011, the Company filed a shelf registration statement on Form S-3 registering the sale of up to $50 million of the Company’s common stock in one or more public offerings. The registration statement was declared effective on June 10, 2011. On July 8, 2011, the Company raised $4 million with the sale of 363,636 shares at $11 per share by way of takedown from this shelf registration. The proceeds were used to replace the unutilized portion of its working capital facility and for general corporate purposes.

On November 30, 2011, the Company raised $6 million in a private placement of 666,667 shares of Common Stock at a price of $9 per share. For every three (3) shares of Common Stock issued, the Company issued (1) Common Stock purchase warrant (collectively, the “Warrants”) entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share. These shares were registered for resale through the Company’s filing of a registration statement on Form S-3 on March 28, 2012.

On December 14, 2011, the Company sold 570,000 shares of Common Stock from its existing shelf registration at a price of $9 per share for total proceeds of $5.1 million.

The $17.5 million in proceeds from the issuance of long-term debt in March 2013 provides the Company with sufficient funds to meet its expected working capital needs until mid 2014. Based upon the Company’s current and anticipated usage of cash resources, in connection with pre-construction activities following the approval of the Final Environmental Impact Report, it may require additional working capital during 2014 to meet its cash resource needs from that point forward and to continue to finance its operations until such time as its asset development programs produce revenues. The Company will evaluate the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis. The Company may meet any future cash requirements through a variety of means, including equity or debt placements, or through the sale or other disposition of assets. Equity placements would be undertaken only to the extent necessary, so as to minimize the dilutive effect of any such placements upon our existing stockholders. Limitations on the Company’s liquidity and ability to raise capital may adversely affect it. Sufficient liquidity is critical to meet its resource development activities. Although the Company currently expects its sources of capital to be sufficient to meet its near-term liquidity needs, there can be no assurance that its liquidity requirements will continue to be satisfied. If the Company cannot raise needed funds, it might be forced to make substantial reductions in its operating expenses, which could adversely affect its ability to implement its current business plan and ultimately its viability as a company.

Principles of Consolidation

The consolidated financial statements include the accounts of Cadiz Inc. and all subsidiaries. All significant intercompany transactions and balance have been eliminated in consolidation.

In December 2003, the Company transferred substantially all of its assets (with the exception of an office sublease, certain office furniture and equipment and any Sun World related assets) to Cadiz Real Estate LLC, a Delaware limited liability company (“Cadiz Real Estate”). The Company holds 100% of the equity interests of Cadiz Real Estate, and therefore continues to hold 100% beneficial ownership of the properties that it transferred to Cadiz Real Estate. Because the transfer of the Company’s properties to Cadiz Real Estate has no effect on its ultimate beneficial ownership of these properties, the properties owned of record either by Cadiz Real Estate or by the Company are treated as belonging to the Company.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these financial statements, management has made estimates with regard to goodwill and other long-lived assets, stock compensation and deferred tax assets. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes crop sale revenue upon shipment and transfer of title to customers.

Stock-Based Compensation

General and administrative expenses include $0.4 million, $2.4 million and $4.0 million of stock-based compensation expenses in the years ended December 31, 2012, 2011 and 2010, respectively.

The Company applies the Black-Scholes valuation model in determining the fair value of options granted to employees and consultants. For employees, the fair value is then charged to expense on the straight-line basis over the requisite service period. For consultants, the fair value is remeasured at each reporting period and recorded as a liability until the award is settled.

ASC 718 also requires the Company to estimate forfeitures in calculating the expense related to stock-based compensation as opposed to only recognizing forfeitures and the corresponding reduction in expense as they occur. The remaining vesting periods are relatively short, and the potential impact of forfeitures is not material. The Company is in a tax loss carryforward position and is not expected to realize a benefit from any additional compensation expense recognized under ASC 718. See Note 7, “Income Taxes".

Net Loss Per Common Share

Net loss per share is computed by dividing the net loss by the weighted-average common shares outstanding. Options, deferred stock units, warrants, and the zero coupon term loan convertible into or exercisable for certain shares of the Company’s common stock were not considered in the computation of net loss per share because their inclusion would have been antidilutive. Had these instruments been included, the fully diluted weighted average shares outstanding would have increased by approximately 2,996,000 shares, 2,655,000 shares and 2,423,000 shares for the years ended December 31, 2012, 2011 and 2010, respectively.

Cash and Cash Equivalents

The Company considers all short-term deposits with an original maturity of three months or less to be cash equivalents. The Company invests its excess cash in deposits with major international banks and government agency notes and, therefore, bears minimal risk. Such investments are stated at cost, which approximates fair value, and are considered cash equivalents for purposes of reporting cash flows.

Property, Plant, Equipment and Water Programs

Property, plant, equipment and water programs are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally ten to forty-five years for land improvements and buildings, and five to fifteen years for machinery and equipment. Leasehold improvements are amortized over the shorter of the term of the relevant lease agreement or the estimated useful life of the asset.

Water rights, storage and supply programs are stated at cost. Certain costs directly attributable to the development of such programs have been capitalized by the Company. These costs, which are expected to be recovered through future revenues, consist of direct labor, drilling costs, consulting fees for various engineering, hydrological, environmental and additional feasibility studies, and other professional and legal fees. While interest on borrowed funds is currently expensed, interest costs related to the construction of project facilities will be capitalized at the time construction of these facilities commences.

Goodwill and Other Assets

As a result of a merger in May 1988 between two companies which eventually became known as Cadiz Inc., goodwill in the amount of $7,006,000 was recorded. Approximately $3,193,000 of this amount was amortized prior to the adoption of ASC 350 on January 1, 2002. Since the adoption of ASC 350, there have been no goodwill impairments recorded.

	Amounts
	(in thousands)

Balance at December 31, 2010	$	3,813
Adjustments		-

Balance at December 31, 2011		3,813
Adjustments		-

Balance at December 31, 2012	$	3,813

Deferred loan costs represent costs incurred to obtain debt financing. Such costs are amortized over the life of the related loan. At December 31, 2012, the deferred loan fees relate to the zero coupon secured convertible term loan with Lampe Conway, as described in Note 6, “Long-Term Debt”.

Impairment of Goodwill and Long-Lived Assets

The Company assesses long-lived assets, excluding goodwill, for recoverability whenever events or changes in circumstances indicate that their carrying value may not be recoverable through the estimated undiscounted future cash flows resulting from the use of the assets. If it is determined that the carrying value of long-lived assets may not be recoverable, the impairment is measured by using the projected discounted cash-flow method. The Company reevaluates the carrying value of its water program annually.

Income Taxes

Income taxes are provided for using an asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable enacted tax rates. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Fair Value of Financial Instruments

Financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and accrued liabilities due to their short-term nature. The carrying value of the Company's debt approximates fair value, based on interest rates available to the Company for debt with similar terms. See Note 6, “Long-Term Debt”, for discussion of fair value of debt.

Supplemental Cash Flow Information

No cash payments, including interest, are due on the corporate term debt prior to March 5, 2016, the final maturity date.

The Company recorded non-cash additions to fixed assets of $1,090,000, $1,826,000 and $1,276,000 at December 31, 2012, 2011 and 2010, respectively, which were accrued at the respective year ends, for the costs directly attributable to the development of the Water Project.

Cash payments for income taxes were $10,000, $6,500, and $6,400 in the years ended December 31, 2012, 2011, and 2010, respectively.

Recent Accounting Pronouncements

Fair value measurements and disclosures

Effective January 1, 2012, the Company adopted an update to the accounting rules for fair value measurement. The new accounting principle establishes a consistent definition of fair value in an effort to ensure that the fair value measurement and disclosure requirements between U.S. GAAP and International Financial Reporting Standards ("IFRS") are comparable. This update changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. This update does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use was already required or permitted by other standards within U.S. GAAP or IFRS. This update is effective for interim and annual periods beginning after December 15, 2011, and is applied prospectively. The adoption of this pronouncement did not have a material impact on the Company’s Consolidated Financial Statements and accompanying disclosures.

Statement of comprehensive income

Effective January 1, 2012, the Company adopted the FASB issued authoritative guidance on the presentation of comprehensive income. This update requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The adoption of this pronouncement did not have a material impact on the Company’s Consolidated Financial Statements and accompanying disclosures.

Goodwill impairment

Effective January 1, 2012, the Company adopted an update to the authoritative guidance related to goodwill impairment testing. This update gives companies the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before performing the two-step test mandated prior to the update. If, after assessing the totality of events and circumstances, a company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then it must perform the two-step test. Otherwise, a company may bypass the two-step test. Companies are not required to perform the qualitative assessment and may, instead proceed directly to the first step of the two-part test. The adoption of this update guidance did not have a material impact on the Company’s Consolidated Financial Statements.

NOTE 3 – PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS

Property, plant, equipment and water programs consist of the following (dollars in thousands):

	December 31,
	2012			2011

Land and land improvements	$	24,191		$	24,188
Water programs		21,324			18,914
Buildings		1,187			1,187
Leasehold improvements		570			570
Furniture and fixtures		458			458
Machinery and equipment		1,122			997
Construction in progress		103			103
		48,955			46,417
Less accumulated depreciation		(4,881	)		(4,531	)

	$	44,074		$	41,886

NOTE 4 – OTHER ASSETS

Other assets consist of the following (dollars in thousands):

	December 31,
	2012		2011

Deferred loan costs, net	$	81	$	148
Prepaid rent and option payments		68		31
Security deposits		133		7
	$	282	$	186

Deferred loan costs consist of legal and other fees incurred to obtain debt financing. Amortization of deferred loan costs was approximately $108,000, $72,000, and $42,000 in 2012, 2011 and 2010, respectively. Prepaid fees consist of rental fees incurred to obtain the right-of-way for the Water Project, as well as cash payments related to the extension of an option agreement with El Paso Natural Gas to purchase an underground natural gas pipeline. Amortization of prepaid fees was approximately $1,088,000, $136,000 and $132,000 in 2012, 2011 and 2010, respectively.

NOTE 5 – ACCRUED LIABILITIES

At December 31, 2012 and 2011, accrued liabilities consist of the following (dollars in thousands):

	December 31,
	2012		2011

Payroll, bonus, and benefits	$	160	$	150
Well-field, environmental studies, legal and consulting		884		716
Stock-based compensation		67		27
Other accrued expenses		284		156
	$	1,395	$	1,049

NOTE 6 – LONG-TERM DEBT

At December 31, 2012 and 2011, the carrying amount of the Company’s outstanding debt is summarized as follows (dollars in thousands):

	December 31,
	2012			2011
Zero coupon secured convertible term loan due June 29, 2013. Interest accruing at 5% per annum until June 29, 2009 and at 6% thereafter	$	65,262		$	56,673
Other loans		50			4
Debt discount		(2,051	)		(4,641	)
		63,261			52,036

Less current portion		11			4

	$	63,250		$	52,032

The carrying value of the Company’s debt, before discount, approximates fair value. The fair value of the Company’s debt (Level 2) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company for similar debt instruments of comparable maturities by its lenders.

Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on December 31, 2012, are as follows:

12 Months Ending December 31	$	000’s

2013		65,273
2014		11
2015		11
2016		11
2017		6
	$	65,312

In June 2006, the Company raised $36.4 million through the private placement of a five-year zero coupon convertible term loan with Peloton, as administrative agent, and an affiliate of Peloton and another investor, as lenders (the “Term Loan”). The proceeds of the Term Loan were partially used to repay the Company’s prior term loan facility with ING. On April 16, 2008, the Company was advised that Peloton’s interest in the Term Loan had been assigned to an affiliate of Lampe Conway, and Lampe Conway subsequently replaced Peloton as administrative agent of the loan. On June 4, 2009, the Company completed arrangements to amend the Term Loan as to certain of its conversion features and extend its maturity to June of 2013. This facility was further modified as to certain of its conversion features on October 19, 2010, in connection with a new $10 million working capital facility with the existing lenders. On October 30, 2012, the Company increased the capacity of its existing Term Loan facility with an additional $5 million facility. The Term Loan consisted of the following tranches as of December 31, 2012:

Tranche	Principal Amount (in thousands)		Conversion Price (per share)		Potential Number of Shares Issuable

Tranche A-1	$	4,550	$	7.00		650,000
Tranche A-2a		2,411	$	35.00		68,889
Tranche A-2b		7,419		Non-Convertible		-
Tranche B-1		2,856	$	13.50		211,565
Tranche B-2		2,190	$	12.50		175,239
Tranche B-3a		6,810	$	35.00		194,558
Tranche B-3b		26,072		Non-Convertible		-
Tranche C-1		5,712	$	13.50		423,130
Tranche C-2		2,190	$	12.50		175,239
Tranche D		5,052		Non-Convertible		-
	$	65,262				1,898,620

The Term Loan is collateralized by substantially all of the assets of the Company, and contains representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit the Company’s ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another entity. However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on the Company’s ability to issue additional common stock to fund future working capital needs. The debt covenants associated with the loan were negotiated by the parties with a view towards the Company’s operating and financial condition as it existed at the time the agreements were executed. At December 31, 2012, the Company was in compliance with its debt covenants.

As a result of the modifications of the convertible debt arrangements in June 2009 and October 2010, the change in conversion value between the original and modified instrument totaling approximately $3.2 million was recorded as additional debt discount with an offsetting amount recorded as additional paid-in capital. Such debt discount is accreted to the redemption value of the instrument over the remaining term of the loan as additional interest expense. In connection with the modification transaction in October 2010, the Company recorded a derivative liability related to the conversion option. The fair value of the derivative liability was marked-to-market at the end of each reporting period with the associated change in fair value recorded as other income (expense). On July 25, 2011, the Company entered into an amendment to the facility eliminating the availability to the Company of the unused $3 million portion of the facility. As a result, the conversion option related to the unused portion of the facility no longer exists and a derivative liability is no longer being recorded. On October 30, 2012, the Company increased the capacity of the Term Loan with an additional $5 million facility. As a result of this transaction, the Company issued warrants to the lenders to purchase shares of common stock. The value of the warrants totaled approximately $533 thousand and was recorded as additional debt discount with a corresponding amount recorded as additional paid-in capital.

The Company incurred $73,500 and $42,000 in 2010 and 2012 respectively, of outside legal expenses and lenders fees related to the negotiation and documentation of the loan, which is amortized over the life of the loan.

NOTE 7 – INCOME TAXES

Deferred taxes are recorded based upon differences between the financial statement and tax bases of assets and liabilities and available carryforwards. Temporary differences and carryforwards which gave rise to a significant portion of deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows (in thousands):

	December 31,
	2012			2011

Deferred tax assets:
Net operating losses	$	50,502		$	44,850
Fixed asset basis difference		7,141			7,177
Contributions carryover		2			2
Deferred compensation		2,367			2,230
Accrued liabilities		29			529

Total deferred tax assets		60,041			54,788

Valuation allowance for deferred tax assets		(60,041	)		(54,788	)

Net deferred tax asset	$	-		$	-

The valuation allowance increased $5,253,000 and $4,476,000 in 2012 and 2011, respectively, due to an increase in net operating losses. The change in deferred tax assets resulted from current year net operating losses, expiration of prior year loss carryovers, and changes to future tax deductions resulting from terms of stock compensation plans.

As of December 31, 2012, the Company had net operating loss (“NOL”) carryforwards of approximately $124.5 million for federal income tax purposes and $92.2 million for California income tax purposes. Such carryforwards expire in varying amounts through the year 2032. Use of the carryforward amounts is subject to an annual limitation as a result of ownership changes in 2005 and 2011.

On August 26, 2005, a Settlement Agreement between Cadiz, on the one hand, and Sun World and three of Sun World’s subsidiaries, on the other hand, was approved by the U.S. Bankruptcy Court, concurrently with the Court’s confirmation of the amended reorganization plan. The Settlement Agreement provides that following the September 6, 2005 effective date of Sun World’s plan of reorganization, Cadiz retains the right to utilize the Sun World NOL carryovers. Sun World Federal NOLs are estimated to be approximately $58 million.

As of December 31, 2012, the Company possessed unrecognized tax benefits totaling approximately $3.0 million. There were no changes to unrecognized tax benefits during the 36 months ended December 31, 2012.

None of these tax benefits, if recognized, would affect the Company's effective tax rate because the Company has recorded a full valuation allowance against these assets.

As of December 31, 2011, the Company had accrued a total of $321,000 for state taxes, interest and penalties related to income tax positions in prior returns. As a result of the expiration of statutes of limitation during the year ended December 31, 2012, the Company recognized a state tax benefit of $321,000.

The Company's tax years 2009 through 2012 remain subject to examination by the Internal Revenue Service, and tax years 2008 through 2012 remain subject to examination by California tax jurisdictions. In addition, the Company's loss carryforward amounts are generally subject to examination and adjustment for a period of three years for federal tax purposes and four years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.

A reconciliation of the income tax benefit to the statutory federal income tax rate is as follows (dollars in thousands):

	Year Ended December 31,
	2012			2011			2010

Expected federal income tax benefit at 34%	$	(6,614	)	$	(5,720	)	$	(5,405	)
Loss with no tax benefit provided		5,535			4,880			4,545
State income tax		10			7			6
State tax benefit		(321	)		-			-
Stock Options		-			(6	)		154
Non-deductible expenses and other		1,079			846			706

Income (benefit) tax expense	$	(311	)	$	7		$	6

Because it is more likely than not that the Company will not realize its deferred tax assets, it has recorded a full valuation allowance against these assets. Accordingly, no deferred tax asset has been recorded in the accompanying balance sheet.

NOTE 8 – EMPLOYEE BENEFIT PLANS

The Company has a 401(k) Plan for its salaried employees. The Company matches 100% of the first three percent of annual base salary and 50% of the next two percent of annual base salary contributed by an employee to the plan. The Company contributed approximately $62,000, $55,000 and $49,000 to the plans in 2012, 2011 and 2010, respectively.

NOTE 9 – COMMON STOCK AND WARRANTS

On October 1, 2007, the Company agreed to the conditional issuance of up to 300,000 shares to the former sole shareholder and successor in interest to Exploration Research Associates, Inc. (“ERA”), who is now an employee of the Company. The agreement settled certain claims by ERA against the Company, and provided that the 300,000 shares will be issued if and when certain significant milestones in the development of the Company’s properties are achieved.

In November 2008, the Company entered into an agreement with the law firm of Brownstein Hyatt Farber Schreck LLP (“Brownstein”) to provide legal and advisory services. The primary services being provided are advising the Company as to the Water Project design and implementation, permit approvals, environmental compliance, negotiation and drafting of agreements related to the Water Project. The agreement provides for interim payments due upon completion of specified milestones with respect to the Water Project, with the fee payable in cash and/or stock. The first such milestone was satisfied on June 4, 2009, resulting in an obligation by the Company to pay a fee of $500,000, for which the parties agreed to payment in the form of 59,312 shares of the Company’s common stock valued at $8.43 per share, reflecting the fair market value of the stock on June 4, 2009. On January 9, 2013, the agreement with Brownstein was revised as to certain incentive compensation provisions. See Note 15, “Subsequent Events”.

In June 2011, the Company filed a shelf registration statement on Form S-3 registering the sale of up to $50 million of the Company’s common stock in one or more public offerings. The registration statement was declared effective on June 10, 2011. By way of takedown from this shelf registration, the Company raised $4 million with the sale of 363,636 shares at $11 per share on July 8, 2011, and $5.1 million with the sale of 570,000 shares at $9 per share on December 14, 2011.

On November 30, 2011, the Company raised $6 million in a private placement of 666,667 shares of Common Stock at a price of $9 per share. For every three (3) shares of Common Stock issued, the Company issued one (1) Common Stock purchase warrant (collectively, the “Warrants”) entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share.

On October 30, 2012, the Company increased the capacity of its existing Term Loan facility with an additional $5 million facility. Concurrently with the funding of the facility, the Company issued warrants to the lenders to purchase an aggregate of 250,000 shares of its common stock. These warrants have an exercise price of $10 per share and must be exercised not later than two years from the date of issuance.

As discussed in Note 6, “Long-Term Debt”, principal and accrued interest on the Term Loan is convertible into common shares of the Company at the Lender’s option. The terms of the loan include optional prepayment provisions that could result in an early conversion of the loan under certain circumstances.

NOTE 10 – STOCK-BASED COMPENSATION PLANS AND WARRANTS

The Company has issued options and has granted stock awards pursuant to its 2003 Management Equity Incentive Plan, 2007 Management Equity Incentive Plan, and 2009 Equity Incentive Plan. The Company also has granted stock awards pursuant to its 2009 Equity Incentive Plan and Outside Director Compensation Plan, as described below.

2003 Management Equity Incentive Plan

In December 2003, concurrently with the completion of the Company’s then current financing arrangements with ING, the Company’s board of directors authorized the adoption of a Management Equity Incentive Plan. As of December 31, 2012, a total of 315,000 common stock options remain outstanding under this plan.

Outside Director Compensation Plan

The Cadiz Inc. Outside Director Compensation Plan was approved by the Company’s stockholders in November 2006. Under the plan, each outside director receives $30,000 of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to $20,000 on June 30 of each year. The award accrues on a quarterly basis, with $7,500 of cash compensation and $5,000 of stock earned for each fiscal quarter in which a director serves. The deferred stock award vests automatically on the January 31 that first follows the award date.

2007 Management Equity Incentive Plan

The 2007 Management Equity Incentive Plan was approved by stockholders at the 2007 Annual Meeting. As of December 31, 2012, a total of 10,000 common stock options remain outstanding under this plan.

2009 Equity Incentive Plan

The 2009 Equity Incentive Plan was approved by stockholders at the 2009 Annual Meeting. The plan provides for the grant and issuance of up to 850,000 shares and options to the Company’s employees and consultants. The plan became effective when the Company filed a registration statement on Form S-8 on December 18, 2009. All options issued under the 2009 Equity Incentive Plan have a ten-year term with vesting periods ranging from issuance date to 24 months. To date, 537,500 common stock purchase options have been issued under this plan and all remained outstanding as of December 31, 2012.

All options that have been issued under the above plans have been issued to officers, employees and consultants of the Company. In total, options to purchase 862,500 shares were unexercised and outstanding on December 31, 2012, under the three equity incentive plans.

For consultants of the Company, the fair value of each option granted under the 2009 Equity Incentive Plan is estimated at each reporting period using the Black-Scholes option pricing model and recorded as a liability until the award is settled.

For officers and employees of the Company, the fair value of each option granted under the plans was estimated on the date of grant using the Black-Scholes option pricing model based on the following weighted-average assumptions:

Risk-free interest rate		3.90	%
Expected life	9.4 years
Expected volatility		52	%
Expected dividend yield		0.0	%

The risk-free interest rate is assumed to be equal to the yield of a U.S. Treasury bond of comparable maturity, as published in the Federal Reserve Statistical Release for the relevant date. The expected life estimate is based on an analysis of the employees receiving option grants and the expected behavior of each employee. The expected volatility is derived from an analysis of the historical volatility of the trading price per share of the Company’s common stock on the NASDAQ Global Market. The Company does not anticipate that it will pay dividends to common stockholders in the future.

The Company recognized stock option related compensation costs of $284,000, $1,245,000, and $2,561,000 in fiscal 2012, 2011, and 2010, respectively, relating to these options. No stock options were exercised during 2012.

A summary of option activity under the plans as of December 31, 2012, and changes during the current year are presented below:

			Weighted-		Average		Aggregate
			Average		Remaining		Intrinsic
			Exercise		Contractual		Value
Options	Shares		Price		Term		($000’s)

Outstanding January 1, 2012		862,500	$	11.92		6.5	$	7,516
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at December 31, 2012		862,500	$	11.92		5.5	$	7,499
Exercisable at December 31, 2012		817,502	$	11.91		5.3	$	7,147

The weighted-average grant-date fair value of options granted during the years ended December 31, 2011 and 2010, were $7.28 and 7.65 per share, respectively. No options were granted in 2012. The following table summarizes stock option activity for the periods noted.

				Weighted-
				Average
	Amount			Exercise Price

Outstanding at January 1, 2010		325,000		$	12.31
Granted		402,500		$	11.51
Expired or canceled		-		$	-
Exercised		-		$	-

Outstanding at December 31, 2010		727,500		$	11.86
Granted		135,000		$	12.23
Expired or canceled		-		$	-
Exercised		-			-

Outstanding at December 31, 2011		862,500		$	11.92
Granted		-		$	-
Expired or canceled		-			-
Exercised		-			-

Outstanding at December 31, 2012		862,500	(a)	$	11.92

Options exercisable at December 31, 2012		817,502		$	11.91

Weighted-average years of remaining contractual life of options outstanding at December 31, 2012		5.5

(a)	Exercise prices vary from $9.88 to $18.99, and expiration dates vary from May 2015 to December 2021.

Stock Awards to Directors, Officers, Consultants and Employees

The Company has granted stock awards pursuant to its 2007 Management Equity Incentive Plan, 2009 Equity Incentive Plan and Outside Director Compensation Plan.

Under the 2007 Management Equity Incentive Plan 250,000 shares were issued. A 150,000-share award was issued that vested in three equal installments on January 1, 2008, January 1, 2009 and January 1, 2010. Of the remaining 100,000 shares reserved under the 2007 Management Equity Incentive Plan, 10,000 were issued as options as described above, and 90,000 were issued as shares that vested in May 2009 consistent with the terms of the agreements pursuant to which those executives provided services to the Company.

Of the total 850,000 shares reserved under the 2009 Equity Incentive Plan, 115,000 restricted shares of common stock were granted on January 14, 2010, and 140,000 restricted shares of common stock were granted on January 10, 2011, consistent with the terms of the agreements pursuant to which those executives provide services to the Company and which contemplate that such executives will participate in the Company’s long-term incentive plans. The recipients of these restricted shares have a contractual agreement not to sell any of these shares for a period of three years following the effective date. Of the remaining 595,000 shares reserved under the 2009 Equity Incentive Plan, 22,782 shares of common stock were issued to directors, 537,500 were issued as options as described above and 34,718 are available for future distribution.

Under the Outside Director Compensation Plan, 72,782 shares have been awarded for the plan years ended June 30, 2006, through June 30, 2012. Of the 72,782 shares awarded, 13,795 shares were awarded for service during the plan year ended June 30, 2012, became effective on that date and vested on January 31, 2013.

The accompanying consolidated statements include approximately $99,000, $1,130,000 and $1,388,000 of stock-based compensation expense related to stock awards in the years ended December 31, 2012, 2011 and 2010, respectively.

A summary of stock awards activity under the plans during the years ended December 31, 2012 and 2011 is presented below:

				Weighted-
				Average
				Grant-date
	Shares			Fair Value
				($000’s)

Nonvested at December 31, 2010		9,582		$	116
Granted		151,304			951
Forfeited or canceled		-			-
Vested		(151,466	)		(951	)

Nonvested at December 31, 2011		9,420			102
Granted		13,795			99
Forfeited or canceled		-			-
Vested		(9,420	)		(102	)

Nonvested at December 31, 2012		13,795		$	99

As of December 31, 2012, the total unrecognized compensation cost related to unvested share-based awards under the plans totaled $50,000, and is expected to be recognized over a weighted-average period of one year.

Stock Purchase Warrants Issued to Non-Employees

The Company accounts for equity securities issued to non-employees in accordance with the provisions of ASC 718 and ASC 505.

On November 30, 2011, the Company raised $6 million with a private placement of 666,667 shares of Common Stock at a price of $9 per share. For every three (3) shares of Common Stock issued, the Company issued one (1) Common Stock purchase warrant entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share.

As of December 31, 2012, 472,222 warrants remain outstanding.

NOTE 11 – SEGMENT INFORMATION

The primary business of the Company is to acquire and develop land and water resources. As a result, the Company’s financial results are reported in a single segment.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

The Company leases equipment and office facilities under operating leases that expire through January 2016. Aggregate rental expense under all operating leases was approximately $343,000, $338,000 and $371,000 in the years ended December 31, 2012, 2011 and 2010, respectively. At December 31, 2012, the future minimum rental commitments under existing non-cancelable operating leases are as follows:

12 Months Ending December 31	$	000’s

2013		219
2014		187
2015		176
	$	582

In the normal course of its agricultural operations, the Company handles, stores, transports and dispenses products identified as hazardous materials. Regulatory agencies periodically conduct inspections and, currently, there are no pending claims with respect to hazardous materials.

The Company entered into a Services and Exclusivity Agreement with Layne Christensen Company (“Layne”) on November 2, 2009. The agreement provides that the Company will contract exclusively with Layne for certain water related services, including drilling of boreholes, drilling of monitoring wells, completion of test wells, completion of production wells, and completion of aquifer, storage and recovery wells. In exchange for the Services and Exclusivity Agreement, Layne has agreed to forego $923,000 for work performed. This amount continues to be recorded as an other long-term liability as of December 31, 2012, and will be credited toward future work performed during the construction phase of the Water Project.

In November 2008, the Company entered into an agreement with the law firm of Brownstein Hyatt Farber Schreck LLP (“Brownstein”) to provide legal and advisory services. The primary services being provided are advising the Company as to Water Project design and implementation, permit approvals, environmental compliance, negotiation and drafting of agreements related to the Water Project. Under the agreement, the Company had a potential obligation to pay an amount of up to 1% of the net present value of the Water Project with the fee payable in cash and/or stock. This fee would have been payable upon receipt of all environmental approvals and permits and the completion of binding agreements for at least 51% of the Water Project’s annual capacity. Interim payments of $1.5 million, to be credited to the final total, would have been made upon the achievement of certain specified milestones. An interim payment amount of $500 thousand was earned in June 2009 in consideration for the legal and advisory services previously provided. No further milestones have been met as of December 31, 2012. On January 9, 2013, the agreement with Brownstein was revised as to certain incentive compensation provisions (see Note 15, “Subsequent Events”). This arrangement may be terminated by either party upon 60 days notice, with any compensation earned but unpaid prior to termination payable following termination.

Pursuant to cost sharing agreements that have been entered into by participants in the Company’s Water Project, $750 thousand in funds have offset costs incurred in the environmental analysis of the Water Project. These funds may either be reimbursed or credited to participants participation in the Water Project and, accordingly, are fully reflected as deferred revenue as of December 31, 2012.

Third parties have the ability in California to file litigation challenging the approval of a project. The Company is currently named as a real party in interest in eight lawsuits related to the Water Project approvals granted last year by the Santa Margarita Water District and County of San Bernardino in accordance with the California Environmental Quality Act (“CEQA”). The cases seek various forms of relief, but are primarily focused on causing a reconsideration of the environmental documents and limitation of the Project approvals. The cases are expected to proceed to administrative trial later this year. The Company cannot predict the outcome of any of the proceedings. In the opinion of management, the ultimate outcome of each proceeding, individually and in the aggregate, will not have a material adverse impact on the Company's financial position, results of operations or cash flows.

NOTE 13 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED )

(in thousands except per share data)
	Quarter Ended
	March 31,			June 30,			September 30,			December 31,
	2012			2012			2012			2012

Revenues	$	31		$	6		$	287		$	38
Gross profit		31			4			(6	)		(188	)
Operating loss		(2,885	)		(2,986	)		(3,068	)		(4,129	)
Net loss		(4,448	)		(4,584	)		(4,736	)		(5,806	)
Basic and diluted net loss per common share	$	(0.29	)	$	(0.30	)	$	(0.31	)	$	(0.38	)


	Quarter Ended
	March 31,			June 30,			September 30,			December 31,
	2011			2011			2011			2011

Revenues	$	457		$	40		$	121		$	401
Gross profit		25			22			(145	)		(324	)
Operating loss		(3,029	)		(2,288	)		(2,704	)		(3,213	)
Net loss		(4,254	)		(3,728	)		(4,105	)		(4,750	)
Basic and diluted net loss per common share	$	(0.31	)	$	(0.27	)	$	(0.29	)	$	(0.33	)

NOTE 14 – FAIR VALUE MEASUREMENTS

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2012 and 2011, and indicate the fair value hierarchy of the valuation techniques we utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. We consider a security that trades at least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair value determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

	Investments at Fair Value as of December 31, 2012
(in thousands)	Level 1			Level 2			Level 3		Total

Certificates of Deposit		$	250		$	-	$	-	$	250

Total investments at fair value		$	250		$	-	$	-	$	250

	Investments at Fair Value as of December 31, 2011
(in thousands)	Level 1			Level 2			Level 3		Total

Certificates of Deposit		$	6,500		$	-	$	-	$	6,500

Total investments at fair value		$	6,500		$	-	$	-	$	6,500

NOTE 15 – SUBSEQUENT EVENTS

On January 9, 2013, Cadiz revised its existing agreement with the Brownstein. Under this agreement, Brownstein provides certain legal and advisory services to the Company, including the services of Mr. Scott Slater, the Company’s Chief Executive Officer. As previously disclosed, the Company had agreed to pay to Brownstein an amount of up to 1% of the net present value of the Water Project as incentive compensation in consideration of the services provided by Brownstein under the original agreement.

The revised agreement replaces the net present-value-based incentive compensation provisions of the original agreement with an agreement to issue up to a total of 400,000 shares of the Company’s common stock, with 100,000 shares earned upon the achievement of each of four enumerated milestones as follows:

i.	100,000 shares earned upon the execution of the revised agreement;

ii.	100,000 shares earned upon receipt by the Company of a final judicial order dismissing all legal challenges to the Final Environmental Impact Report for the Project;

iii.	100,000 shares earned upon the signing of binding agreements for more than 51% of the Project’s annual capacity; and

iv.	100,000 shares earned upon the commencement of construction of all of the major facilities contemplated in the Final Environmental Impact Report necessary for the completion and delivery of the Project.

All shares earned upon achievement of any of the four milestones will be payable three years from the date earned. The agreement also provides for base cash compensation payments to Brownstein of $25,000 per month.

On March 5, 2013, the Company completed arrangements with its senior lenders to refinance the Company’s existing $66 million corporate term debt. The new agreement establishes two separate debt instruments, a $30 million senior secured mortgage loan due in three years, and a new $53.5 million convertible bond due in five years, with no principal or interest payments due on either instrument until maturity. The new debt instruments will replace all existing term debt on the Company’s balance sheet and provide $17.5 million in new working capital to fund the Company’s current operations, including pre-construction activities related to the Project.

The major components of the refinancing include:

A $30 million senior term loan secured by the underlying assets of the Company, including landholdings and infrastructure (the “Senior Secured Debt”). The instrument, which will be held entirely by existing Lenders, will accrue interest at 8% per annum and require no principal or interest payments before maturity on March 5, 2016. Prepayment would be mandatory following any asset sale or voluntarily at the Company’s option, subject to a premium. The Senior Secured Debt will have a senior position to any other Company debt instrument.

A $53.5 million convertible bond held by our existing Lenders and new investors (the “Bond”). The Bond will be convertible at any time into the Company’s common stock at a price of $8.05 per share. Interest would accrue at 7% per annum, with no principal or interest payments required before maturity on March 5, 2018. This instrument will have a junior position to the Senior Secured Debt.

·	Approximately $17.5 million in new working capital provided as part of the Bond issuance to fund Company operations.

In September 2008, the Company entered into a lease agreement with the Arizona and California Railroad Company (“ACR”). Under the terms of the lease, the Company can use a portion of the railroad’s right-of-way to construct and operate a water conveyance pipeline for a period up to 99 years. The lease agreement provides for an initial design term, a design term extension, and an additional term for the construction and operation of a water conveyance pipeline. The initial design term and design terms extension expired on March 6, 2013. Pursuant to the agreement, the Company made a payment in the amount of $3.3 million on March 6, 2013, to commence the construction and operation term of the agreement.

Cadiz Inc.

Schedule 1 - Valuation and Qualifying Accounts

For the years ended December 31, 2012, 2011 and 2010 ($ in thousands)

	Balance at		Additions Charged to						Balance
	Beginning		Costs and		Other				at End
Year ended December 31, 2012	of Period		Expenses		Accounts		Deductions		of Period

Deferred tax asset valuation allowance	$	54,788	$	5,253	$	-	$	-	$	60,041


Year ended December 31, 2011

Deferred tax asset valuation allowance	$	50,312	$	4,476	$	-	$	-	$	54,788


Year ended December 31, 2010

Deferred tax asset valuation allowance	$	47,350	$	2,962	$	-	$	-	$	50,312

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

CADIZ INC.

By:	/s/ Scott Slater
	Scott Slater,
	Chief Executive Officer

Date:	March 15, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.

Name and Position	Date

/s/ Keith Brackpool	March 15, 2013
Keith Brackpool, Chairman

/s/ Scott Slater	March 15, 2013
Scott Slater, Chief Executive Officer, President and Director (Principal Executive Officer)

/s/ Timothy J. Shaheen	March 15, 2013
Timothy J. Shaheen, Chief Financial Officer and Director
(Principal Financial and Accounting Officer)

/s/ Geoffrey Grant	March 15, 2013
Geoffrey Grant, Director

/s/ Winston H. Hickox	March 15, 2013
Winston H. Hickox, Director

/s/ Murray H. Hutchison	March 15, 2013
Murray H. Hutchison, Director

/s/ Raymond J. Pacini	March 15, 2013
Raymond J. Pacini, Director

/s/ Stephen E. Courter	March 15, 2013
Stephen E. Courter, Director

EXHIBIT 10.36

[On Questar Southern Trails Pipeline Company Letterhead]

October 26, 2012

Via Facsimile (213-271-1614)

Cadiz, Inc.

Attn: President

550 South Hope Street, Ste 2850

Los Angeles, CA 90071

Re: Notice of Termination of “Option Agreement between Cadiz, Inc. and Questar Southern Trails Pipeline Company, dated August 12, 2011, and as Amended June 29, 2012”

To Whom It May Concern:

Cadiz, Inc. (“Cadiz”) and Questar Southern Trails Pipeline Company (“Questar Southern Trials”) are both Parties to the “Option Agreement between Cadiz, Inc. and Questar Southern Trials Pipeline Company, dated August 12, 2011, effective August 1, 2011, as amended June 29, 2012” (“Amended Option Agreement”).

Pursuant to Section 2.5 of the Amended Option Agreement either Cadiz or Questar Southern Trails has the right to terminate the Amended Option Agreement at any time during the Phase 3 Option Period, upon giving at least 30 days advance written notice to the non-terminating Party. Section 2.5 of the Amended Option Agreement defines the Phase 3 Option Period as commencing July 1, 2012, and continuing through the earlier of April 30, 2013, or the closing of a definitive Purchase and Sales Agreement.

Accordingly, Questar Southern Trails hereby provides Cadiz notice that Questar Southern Trails is terminating the Amended Option Agreement in its entirety, effective November 26, 2012.

Sincerely,

/s/ Lawrence A. Conti

Lawrence A. Conti

EHXIBIT 10.37

[On Cadiz Inc. Letterhead]

January 9, 2013

Brownstein, Hyatt Farber and Schreck

21 E. Carrillo Street

Santa Barbara, CA, 93101

Re: Cadiz Inc. and Cadiz Real Estate LLC – Revised Terms of Engagement

Dear Sirs:

On behalf of Cadiz Inc. ("Cadiz"), this letter will set forth the terms on which Brownstein, Hyatt Farber and Schreck (“Brownstein”) shall provide certain legal and consulting services as General Counsel, and Scott S. Slater ("Slater") shall serve in certain specific roles and provid certain services as described below, to the Company and its wholly owned subsidiary, Cadiz Real Estate LLC ("CRE"). Cadiz and CRE will be referred to collectively in this letter as the "Company".

This letter will amend and supersede the terms of engagement set forth in our prior engagement letter dated November 24, 2008 (the “2008 Letter”) as to the matters described in the 2008 Letter.

1. Availability of Scott Slater . Brownstein shall make available to the Company the services of Slater in assisting the Company in the development and implementation of the Cadiz Valley Water Conservation, Recovery and Storage Project (the "Water Project"), and for such other duties as the Company may deem necessary. The Company may separately offer Slater such executive positions with the Company as the Company’s Board of Directors shall determine from time to time, including without limitation Chief Executive Officer and President.

In performing these duties, Slater shall not be limited to approximately one-half of his available working hours per week (as provided in the 2008 Letter); rather, Slater shall spend whatever portion of his available working hours per week as may be necessary in performing these duties and in advancing the development and implementation of the Water Project. The Company acknowledges that Slater may continue to provide services to others on behalf of Brownstein provided that such other services are provided in a manner such that there is no interference with the performance of Slater’s duties for the Company.

Brownstein may be called upon to perfomr legal services as may be reasonably required in support of the Company or Slater’s duties, pursuant to an independent legal services agreement under terms and conditions that are acceptable to the Company. Fees for these legal services that are expected to exceed $25,000 per assignment shall be approved by the Chairman or Chief Financial Officer of the Company.

2. Compensation . In consideration of the services to be provided pursuant to this Agreement, the Company shall compensate Brownstein as follows:

a. Base Cash Compensation . Brownstein shall receive base cash compensation of $25,000 per month, plus reimbursement for reasonable business and travel expenses incurred within the scope of work with the Company.

b. Incentive Compensation . Brownstein shall be entitled to receive incentive based compensation subject to achievement of the milestones set forth below, which shall supersede the incentive compensation payments set forth in the 2008 Letter. In this regard, Brownstein acknowledges that is has already received, pursuant to the 2008 Letter, a fee of $500,000 which was earned and paid upon the signing of deal term sheets for more than 51% of the Water Project’s annual capacity.

(i) A fee equal to One Hundred Thousand (100,000) shares of the Company’ common stock, earned upon the execution of this Letter Agreement and the concurrent commitment by Brownstein, as set forth herein, to expand the level of services provided by Brownstein to the Company beyond those previously required under the 2008 Letter and payable three years from the date of execution.

(ii) A fee equal to One Hundred Thousand (100,000) shares of the Company’ common stock, earned upon receipt by the Company of a final judicial order dismissing all legal challenges to the Final Environmental Impact Report for the Cadiz Water Project and payable three years from the date of the judicial order.

(iii) A fee equal to One Hundred Thousand (100,000) shares of the Company’ common stock, earned upon the signing of binding agreements for more than 51% of the Cadiz Water Project's annual capacity and payable three years from the date of signing.

(iv) A fee equal to One Hundred Thousand (100,000) shares of the Company’ common stock, earned upon the commencement of construction of construction of all of the major facilities contemplated in the Final Environmental Impact Report necessary for the completioin and delivery of the Cadiz Water Project, including wellfield, power distribution, 43 mile pipeline, and connection to aqueduct and payable three years from the date of commencement.

For any incentive fee to be earned, Brownstein must be providing services to the Company pursuant to this Letter Agreement at the time the milestones applicable to such fee are achieved, although Brownstein need not be so engaged at the time the fee is payable or paid. The Company acknowledges and agrees that this Letter Agreement is subject to the covenant of good faith and fair dealing and that if, during the term of this Letter Agreement, the Company has made substantial progress towards achieving the milestones set forth in subsections (ii), (iii) and (iv) above and Brownstein’s services hereunder are terminated at the option of the Company, Brownstein will be given the opportunity without further compensation from the Company to complete such milestones or Brownstein will be compensated with a mutually agreeable proportionate share of such milestone based fees.

The incentive fees payable hereunder in the form of common stock shall be subject to compliance with all applicable federal and state securities laws and Nasdaq rules. In this regard, Brownstein agrees to execute and deliver to the Company such further documentation as the Company may deem necessary or appropriate to demonstrate compliance with such rules.

All fees payable to Brownstein under this Section 2 shall be in addition to, and not in lieu of, any fees that may be payable directly by the Company to Slater for his service as an executive officer of the Company pursuant to a separate agreement between the Company and Slater.

3. Term . Brownstein shall continue to provide services under the terms set forth in this Letter Agreement until sixty (60) days after either party gives notice of termination to the other (the "Term"). Any compensation earned but unpaid prior to the date of termination (including incentive fees) shall remain payable following termination.

4. General .

a. Non- Employee Status . During the Term, neither Slater nor any other Brownstein attorney or employee providing services to the Company under this Letter Agreement shall be an employee of the Company. No payroll or employment taxes of any kind shall be withheld or paid by the Company with respect to payments to Brownstein during the Term, and the Company shall make no additional benefits available to Brownstein or any of its respective attorneys and employees. The Company shall indemnify and hold harmless Brownstein, its shareholders, officers, agents and assigns from any liability and all liability that might traditionally be associated with or arise out of the services being provided by Brownstein hereunder, other than in the case of gross negligence or intentional misconduct. The Company further agrees that, except in the case of the specific services to be provided to the Company under this Letter Agreement, Brownstein shall have reasonable discretion, in consultation with senior management, to make assignments to Brownstein professionals, subject to a separate professional services agreement with the Company. Any other existing retainer agreements between the Company and Brownstein are unaffected by this Letter Agreement.

b. Confidentiality . You shall keep in strictest confidence all information relating to the business, affairs, customers and suppliers of the Company which you may acquire during the performance of services and duties hereunder and which is not otherwise generally known to the public.

c. Public Disclosure . You understand that the terms of this letter may be required to be disclosed in, or filed as an exhibit to, the Company's annual proxy statement or other reports filed publicly with the U.S. Securities and Exchange Commission.

If the foregoing correctly sets forth your understanding, kindly indicated your acceptance below whereupon this letter shall constitute an agreement between us in accordance with its terms.

Cadiz Inc.

By: /s/ Keith Brackpool

Keith Brackpool

Chief Executive Officer

Cadiz Real Estate LLC

By: /s/ Timothy J. Shaheen

Timothy J. Shaheen

Chief Executive Officer

Agreed and Accepted as of the date set forth above:

Brownstein, Hyatt Farber and Schreck

By: /s/ Robert J. Saperstein

Robert J. Shaperstein

California Managing Shareholder

EXHIBIT 10.3

AMENDMENT NO. 2

TO LIMITED LIABILITY COMPANY AGREEMENT

CADIZ REAL ESTATE LLC

This AMENDMENT NO. 2 TO LIMITED LIABILITY COMPANY AGREEMENT (“Amendment”) is entered into as of March 5, 2013. The parties to this Amendment are hereinafter sometimes referred to collectively as the "Parties".

RECITALS :

WHEREAS, Cadiz Inc. (“Cadiz”) and M. Solomon & Associates, Inc. (the “Independent Member”) have entered into a Limited Liability Company Agreement of Cadiz Real Estate LLC (the “LLC”) dated as of December 11, 2003, as amended by Amendment No. 1 dated October 29, 2004 (the "LLC Agreement"); and

WHEREAS, pursuant to Section 9.1 of the LLC Agreement, for as long as any amounts due under the terms of the New Note are outstanding, any amendment to the LLC Agreement requires the prior written consent of (i) the lenders holding at least 66% of the interest in the New Note or such higher supermajority as may be required pursuant to the terms of the New Note, and (ii) the Independent Member; and

WHEREAS, as of June 30, 2006, the New Note was repaid in full, as a consequence of which the LLC Agreement may be amended as of the date hereof without the prior written consent of (i) the lenders holding at least 66% of the interest in the New Note or such higher supermajority as may be required pursuant to the terms of the New Note, and (ii) the Independent Member; and

WHEREAS, the New Note was repaid in full using proceeds of a convertible term loan facility (the "Term Loan Facility") evidenced by a Credit Agreement, dated as of June 26, 2006, as amended (the "Credit Agreement") ; and

WHEREAS, concurrently herewith the parties to the Credit Agreement are entering into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”), among Cadiz, the LLC, the lenders from time to time party thereto and LC Capital Master Fund, Ltd. , as administrative agent.

WHEREAS, Section 3.1(b) of the LLC Agreement provides that the Independent Member shall cease to be a Member at such time as all amounts due under the terms of the New Note are no longer outstanding, so that M. Solomon & Associates, Inc. ceased to be the Independent Member in 2006 upon the payment in full of the New Note; and

WHEREAS, Section 4.1(a) of the LLC Agreement provides that the Independent Manager shall cease to be a member of the Board of Managers at such time as all amounts due under the terms of the New Note are no longer outstanding, so that M. Solomon & Associates, Inc. ceased to be the Independent Manager in 2006 upon the payment in full of the New Note; and

WHEREAS, it is a requirement of the Amended and Restated Credit Agreement that the LLC Agreement be amended as provided herein;

NOW THEREFORE, in consideration of the above recitals, the promises and the mutual representations, warranties, covenants and agreements herein contained, the undersigned, constituting the sole Member and all of the Managers of the LLC hereby agree as follows:

1. Amendment of Section 1.1 . Section 1.1 the LLC Agreement is hereby amended as follows:

a. The definitions of "Bank" (Section 1.1(d)), "New Note" (Section 1.1(s)), "Restructuring" (Section 1.1(u)), Sixth Amended and Restated Credit Agreement" (Section 1.1(v)) and "Sixth Global Amendment Agreement" (Section 1.1(w)) are hereby deleted;

b. The reference to M. Solomon Associates, Inc., within the definition of "Independent Member" (Section 1.1(m)) is hereby deleted;

c. Section 1.1(x) is hereby added to read in its entirety as follows:

"(x) " Term Loan Facility " shall mean all obligations of any borrower evidenced by, or under, that certain Amended and Restated Credit Agreement dated as of March 5, 2013 among Cadiz and the Company, as borrowers, the several Lenders from time to time parties thereto, and LC Capital Master Fund, Ltd. , as Administrative Agent (as such Agreement may be amended from time to time); and

d. Section 1.1(y) is hereby added to read in its entirety as follows:

"(y) " Agent " shall mean the Administrative Agent as set forth in the Term Loan Facility."

2. " New Note" Replaced by "Term Loan Facility" . Each and every reference to "New Note" in the LLC Agreement (other than in Section 1.1) is hereby deleted and replaced by a corresponding reference to "Term Loan Facility.

3. " Bank" Replaced by "Agent" . Each and every reference to "Bank" in the LLC Agreement (other than in Section 1.1) is hereby deleted and replaced by a corresponding reference to "Agent".

4. Amendment of Section 3.1(b) . The first sentence of Section 3.1(b) of the LLC Agreement is hereby amended to read in its entirety as follows:

"The Company shall have an Independent Member as and when appointed by the Agent, provided, however, that the Independent Member shall cease to be a Member at such times as all amounts due under the terms of the Term Loan Facility are no longer outstanding."

5. Amendment of Section 3.5(a) . The final sentence of the first paragraph of Section 3.5(a) of the LLC Agreement is hereby amended to add, at the end of such sentence, the phrase “or is otherwise permitted under the terms of the Term Loan Facility”.

6. Amendment of Section 3.5(a)(iv) . Section 3.5(a)(iv) of the LLC Agreement is hereby amended to substitute the term “Term Loan Facility” for the term “Restructuring” therein.

7. Amendment of Section 5.1 . The second sentence of Section 5.1 of the LLC Agreement is hereby deleted in its entirety.

8. Amendment of Section 9.7 . Section 9.7 the LLC Agreement is hereby amended to replace the final clause of the first full paragraph to read "in each case addressed to Cadiz and to the Independent Member at the last known address of such party", and to delete the remainder of Section 9.7.

9. Company Address . Each and every reference to the business address of the Company in the LLC Agreement is hereby deleted and replaced by a corresponding reference to “550 S. Hope Street, Suite 2850, Los Angeles California 90071".

10. Existing LLC Agreement . Except as otherwise amended or modified herein or hereby, the provisions of the LLC Agreement are hereby reaffirmed and shall remain in full force and effect.

IN WITNESS WHEREOF, each of the undersigned has caused this Amendment No. 2 to Limited Liability Company Agreement to be executed and delivered as of the date first above written.

“MEMBER”

CADIZ INC.

By: /s/ Scott Slater

Scott Slater

Chief Executive Officer

“MANAGERS”

/s/ Murray Hutchison

Murray Hutchison

/s/ Timothy J. Shaheen

Timothy J. Shaheen

EXHIBIT 10.38

[On Cadiz Inc. Letterhead]

ACCEPTANCE LETTER

CADIZ INC.

550 South Hope Street, Suite 2850

Los Angeles, CA 90071

Gentlemen:

This letter will confirm my acceptance of the position of Chief Executive Officer of Cadiz Inc. (the “ Company ”) effective on February 1, 2013.

I acknowledge and agree that my agreement to serve as CEO of the Company, and the performance of my duties as CEO, shall be in addition to and not in lieu of any services which I may provide to the Company on behalf of the law firm of Brownstein Hyatt Farber and Schreck pursuant to the terms of that certain amended and revised Letter Agreement being executed concurrently herewith.

I further acknowledge and agree that in consideration of my agreement to serve as CEO of the Company the Company shall pay directly to me a fee of $25,000 per month, to be payable in such periodic increments as we may agree from time to time.

I further acknowledge that the terms of this Acceptance Letter may be required to be disclosed in, or filed as an exhibit to, the Company’s annual proxy statement or other reports filed publicly with the U.S. Securities and Exchange Commission (“SEC”). I further acknowledge and agree that it is my responsibility to ensure that I comply with any disclosure and reporting requirements of the SEC related to my ownership in the Company.

If the foregoing accurately describes our arrangement, please sign, date and return to me a countersigned copy of this letter, whereupon my appointment shall be effective as of the date set forth below.

Very Truly Yours

/s/ Scott S. Slater

Scott S. Slater

ACKNOWLEDGED AND AGREED TO:

CADIZ INC., a Delaware corporation

By: /s/ Keith Brackpool

Keith Brackpool

Chief Executive Officer

Date: January 10, 2013

EXHIBIT 10.39

$30,000,000

AMENDED AND RESTATED

CREDIT AGREEMENT

among

CADIZ INC.

and

CADIZ REAL ESTATE LLC,

as Borrowers,

The Several Lenders from Time to Time Parties Hereto,

and

LC CAPITAL MASTER FUND, LTD.,

as Administrative Agent

Dated as of March 5, 2013

TABLE OF CONTENTS

SECTION 1.

DEFINITIONS

1.1

Defined Terms

1.2

Other Definitional Provisions

SECTION 2.

AMOUNT AND TERMS OF LOANS

2.1

Original Loans; Exchange

2.2

Repayment of Loans

2.3

Optional Prepayments

2.4

Interest Rates and Payment Dates

2.5

Computation of Interest and Fees

2.6

Mandatory Prepayments

SECTION 3.

REPRESENTATIONS AND WARRANTIES

3.1

No Change

3.2

Existence; Compliance with Law

3.3

Power; Authorization; Enforceable Obligations

3.4

No Legal Bar

3.5

Litigation

3.6

No Default

3.7

Ownership of Property; Liens

3.8

Intellectual Property

3.9

Taxes

3.10

ERISA

3.11

Investment Company Act; Other Regulations

3.12

Subsidiaries

3.13

Not Used

3.14

Environmental Matters

3.15

Accuracy of Information, Etc

3.16

Security Documents

3.17

Solvency

3.18

Regulation H

3.19

Labor Matters

SECTION 4.

CONDITIONS

4.1

Conditions to Restatement Date

4.2

Conditions Subsequent to the Restatement Date

4.3

Waiver of Conditions

SECTION 5.

AFFIRMATIVE COVENANTS

5.1

Financial Statements

5.2

Certificates; Other Information

5.3

Payment of Obligations

5.4

Maintenance of Existence; Compliance

5.5

Maintenance of Property; Insurance

5.6

Inspection of Property; Books and Records; Discussions

5.7

Notices

5.8

Environmental Laws

5.9

Additional Collateral, Etc

SECTION 6.

NEGATIVE COVENANTS

6.1

Indebtedness

6.2

Liens

6.3

Fundamental Changes

6.4

Disposition of Property

6.5

Restricted Payments

6.6

Investments

6.7

Transactions with Affiliates

6.8

Sales and Leasebacks

6.9

Swap Agreements

6.10

Changes in Fiscal Periods

6.11

Negative Pledge Clauses

6.12

Clauses Restricting Subsidiary Distributions

6.13

Lines of Business

6.14

Amendments to Organizational Documents

6.15

Other Senior Indebtedness

6.16

Convertible Note Payments

SECTION 7.

EVENTS OF DEFAULT

SECTION 8.

THE AGENT

8.1

Appointment

8.2

Delegation of Duties

8.3

Exculpatory Provisions

8.4

Reliance By Agent

8.5

Notice of Default

8.6

Non-Reliance on Agent and Other Lenders

8.7

Indemnification

8.8

Agent In Its Individual Capacity

8.9

Successor Agent

SECTION 9.

MISCELLANEOUS

9.1

Amendments and Waivers

9.2

Notices

9.3

No Waiver; Cumulative Remedies

9.4

Survival of Representations and Warranties

9.5

Payment of Expenses and Taxes; Indemnification

9.6

Successors and Assigns; Assignments and Participations

9.7

Surety Waivers

9.8

Counterparts

9.9

Severability

9.10

Integration

9.11

Governing Law

9.12

Submission To Jurisdiction; Waivers

9.13

Acknowledgments

9.14

Confidentiality

9.15

Waivers of Jury Trial

SCHEDULES AND EXHIBITS

Schedules :

1.1A Lenders and Loan Amounts

1.1B Mortgaged Properties

3.16(a) UCC Filing Jurisdictions

3.16(b) Mortgage Filing Jurisdictions

Exhibits :

A Form of Assignment and Assumption

B Form of Compliance Certificate

C [INTENTIONALLY OMITTED]

D Form of Amended and Restated Security Agreement

E Form of Mortgage Amendment

F Form of Closing Certificate

G Form of Operating Agreement Amendment

CREDIT AGREEMENT (this “ Agreement ”), dated as of March 5, 2013, among Cadiz Inc., a Delaware corporation (“ Cadiz ”), and Cadiz Real Estate LLC, a Delaware limited liability company (“ CRE ”; together with Cadiz, the “ Borrower ” or “ Borrowers ” ), the lenders from time to time party hereto (“ Lenders ”) and LC Capital Master Fund, Ltd. (“ LC Capital ”), as administrative agent (the “ Agent ”).

The parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

1.1 Defined Terms . As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.

“ 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.

“ Affiliate ”: as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 20% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

“ After-Acquired Property ”: any fee interest in any real property or any leasehold interest in any Material Leased Property acquired after the Restatement Date by any Loan Party or its Subsidiaries (other than any such fee interest in real property or leasehold interest in Material Leased Property subject to a Lien expressly permitted by Section 6.2(f)).

“ Agent ”: as defined in the preamble hereto.

“ Agreement ”: as defined in the preamble hereto.

“ Applicable Prepayment Premium ”: with respect to any prepayment of Secured Term Loans pursuant to Section 2.3(a) or Section 2.6 or upon any acceleration of the outstanding Loans, an amount equal to the product of (a) the Accreted Loan Value of any amount of the Secured Term Loans being prepaid multiplied by (b) the amount determined in accordance with the following table:

Date of Prepayment	Applicable Prepayment Premium
From the Restatement Date through but excluding the first (1st) anniversary of the Restatement Date		105.0	%
From the first (1st) anniversary of the Restatement Date through but excluding the second (2nd) anniversary of the Restatement Date		102.5	%
From the second (2nd) anniversary of the Restatement Date through but excluding the Maturity Date		100.0	%

“ Applicable Rate ”: eight percent (8.00%).

“ Asset Sale ”: any Disposition of any Collateral or of any other property of the Borrowers or any of their Subsidiaries, other than Dispositions described Sections 6.4(a) and 6.4(b).

“ Assignee ”: as defined in Section 9.6(a).

“ Assignment and Assumption ”: an Assignment and Assumption, substantially in the form of Exhibit A .

“ Borrower ”: as defined in the preamble hereto.

“ Business ”: as defined in Section 3.14(b).

“ Business Day ”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City and Los Angeles are authorized or required by law to close.

“ Capital Lease Obligations ”: as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

“ Capital Stock ”: any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“ Cash Equivalents ”: (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve (12) months from the date of acquisition, (b) Dollar-denominated time deposits and certificates of deposit of (i) any Lender, (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500 million or (iii) any bank whose short-term commercial paper rating from S&P is at least A-1 or from Moody’s is at least P-1, in each case with maturities of not more than three hundred sixty-five (365) days from the date of acquisition, (c) commercial paper issued by any issuer bearing at least a “2” rating for any short-term rating provided by S&P and/or Moody’s and maturing within two hundred seventy (270) days of the date of acquisition, (d) repurchase agreements entered into by the Borrower with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500 million for direct obligations issued by or fully guaranteed by the United States, or for mortgage collateral, in which the Borrower shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least one hundred percent (100%) of the amount of the repurchase obligations, (e) variable or fixed rate notes issued by any issuer rated at least AA by S&P (or the equivalent thereof) or at least Aa2 by Moody’s (or the equivalent thereof) and maturing within one (1) year of the date of acquisition and (f) Investments (classified in accordance with GAAP as current assets) in money market investment programs registered under the Investment Company Act of 1940, as amended, that are administered by reputable financial institutions having capital and surplus of at least $500 million and the portfolios of which are limited to Investments of the character described in the foregoing subclauses hereof.

“ Change of Control ”: the occurrence of any of the following: (i) the Loan Parties shall sell or transfer all or substantially all of their assets to any Person other than a Loan Party, (ii) any Borrower shall merge or consolidate with another Person other than a Loan Party in a transaction not permitted by this Agreement, (iii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d) 5 under the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the outstanding Capital Stock of Cadiz or (iv) a “Change in Control” as defined under the Indenture.

“ Code ”: the Internal Revenue Code of 1986, as amended from time to time.

“ Collateral ”: all property of the Borrowers and their Subsidiaries, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

“ Commonly Controlled Entity ”: an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under section 414 of the Code.

“ Compliance Certificate ”: a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B .

“ Contractual Obligation ”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“ Convertible Notes ”: the 7.00% Convertible Senior Notes of Cadiz due 2018.

“ Default ”: any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“ Disposition ”: with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition (including pursuant to a condemnation) thereof. The terms “ Dispose ” and “ Disposed of ” shall have correlative meanings.

“ Dollars ” and “ $ ”: dollars in lawful currency of the United States.

“ Environmental Laws ”: any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.

“ ERISA ”: the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ Event of Default ”: any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“ Exchange ”: as defined in Section 2.1(a).

“ GAAP ”: generally accepted accounting principles in the United States as in effect from time to time. In the event that any “Accounting Change” (as defined below) shall occur and such change results in a change in the standards or terms in this Agreement, then the Borrower and the Agent agrees to enter into negotiations in order to amend such provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower and the Agent, all standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. “Accounting Changes” refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.

“ Governmental Authority ”: any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

“ Guarantee Obligation ”: as to any Person (the “ Guaranteeing Person ”), any obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing person that guarantees or in effect guarantees, or which is given to induce the creation of a separate obligation by another Person (including any bank under any letter of credit) that guarantees or in effect guarantees, any Indebtedness, leases, dividends or other obligations (the “ Primary Obligations ”) of any other third Person (the “ Primary Obligor ”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however , that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.

“ Indebtedness ”: of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (including the Convertible Notes), (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (g) the liquidation value of all redeemable preferred Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Section 7(e) only, all obligations of such Person in respect of Swap Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.

“ Indemnified Liabilities ”: as defined in Section 9.5.

“ Indemnitee ”: as defined in Section 9.5.

“ Indenture ”: The Indenture dated as of March 5, 2013 between Cadiz and The Bank of New York Mellon, N.A., as Trustee, with respect to the Convertible Notes, as amended, extended, renewed, restated, supplemented or otherwise modified from time to time.

“ Insolvency ”: with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

“ Insolvent ”: pertaining to a condition of Insolvency.

“ Intellectual Property ”: the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

“ Investments ”: as defined in Section 6.6.

“ LC Capital ”: as defined in the preamble hereto.

“ Lender ”: as defined in the preamble hereto.

“ Lien ”: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).

“ Loan ”: any Secured Term Loan held by any Lender pursuant to this Agreement.

“ Loan Documents ”: this Agreement, the Security Documents and any amendment, waiver, supplement or other modification to any of the foregoing.

“ Loan Parties ”: the Borrowers and any of their Subsidiaries that is a party to a Loan Document.

“ Material Adverse Effect ”: (a) a material adverse effect on the business, property, operations, condition (financial or other) or prospects of the Borrower and its Subsidiaries taken as a whole, (b) ten (10) Business Days after the occurrence of an event, which would not otherwise fall into the purview of clause (a) above, which results in an adverse effect that has or is reasonably likely to have a financial consequence of Five Hundred Thousand Dollars ($500,000) or more to the Borrower and its Subsidiaries taken as a whole, or (c) a material adverse effect on the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Lenders hereunder or thereunder.

“ Material Leased Property ”: any real property located in the United States in which a Loan Party or any of their Subsidiaries has a leasehold interest (excluding any such real property that is used primarily for executive and administrative functions of the Loan Parties).

“ Materials of Environmental Concern ”: any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

“ Maturity Date ”: the third (3rd) anniversary of the Restatement Date.

“ Mortgage ”: each mortgage or deed of trust, including, without limitation, the Original Mortgages, any amendments thereto made by any Loan Party in favor of, or for the benefit of, the Agent for the benefit of the Lenders (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded).

“ Mortgage Amendment ”: as defined in Section 4.1(a)(iii).

“ Mortgaged Properties ”: the real properties listed on Schedule 1.1B, as to which the Agent for the benefit of the Lenders shall be granted a Lien pursuant to the Mortgage.

“ Multiemployer Plan ”: a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“ Net Cash Proceeds ”: with respect to any Asset Sale, the cash proceeds (including cash proceeds subsequently received (as and when received) in respect of noncash consideration initially received), net of (a) selling expenses (including broker’s fees or commissions, legal fees, transfer and similar taxes and the Borrowers’ good faith estimate of income taxes paid or payable in connection with such sale), (b) amounts provided as a reserve, in accordance with GAAP (to the extent applicable), against any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (c) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money permitted pursuant to Section 6.1 which is secured by the Collateral or other property sold in such Asset Sale (to the extent such Lien is permitted pursuant to Section 6.2) and which is required to be repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset).

“ Obligations ”: the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all reasonable fees, charges and disbursements of counsel to the Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise.

“ Original Credit Agreement ”: the Credit Agreement, dated as of June 26, 2006, by and among the Borrowers, the lenders party thereto and Peloton Partners LLP, as administrative agent (“ Peloton Agent ”), as amended pursuant to that certain Amendment No. 1 to Credit Agreement dated as of September 29, 2006, by and among the Borrowers, the lenders party thereto and Peloton Agent; as further amended pursuant to that certain Amendment No. 2 to Credit Agreement and Amendment No. 1 to Registration Rights Agreement dated as of June 4, 2009, by and among the Borrowers, the lenders party thereto and LC Capital, as administrative agent; as further amended pursuant to that certain Amendment No. 3 to Credit Agreement and Amendment No. 2 to Registration Rights Agreement dated as of October 19, 2010, by and among the Borrowers, the lenders party thereto and LC Capital, as administrative agent; as further amended pursuant to that certain Amendment No. 4 to Credit Agreement dated as of July 25, 2011, by and among the Borrowers, the lenders party thereto and LC Capital, as administrative agent; as further amended pursuant to that certain Amendment No. 5 to Credit Agreement and Amendment No. 3 to Registration Rights Agreement dated as of August 8, 2012, by and among the Borrowers, the lenders party thereto and LC Capital, as administrative agent; and as further amended pursuant to that certain Amendment No. 6 to Credit Agreement and Amendment No. 4 to Registration Rights Agreement dated as of October 30, 2012, by and among the Borrowers, the lenders party thereto and LC Capital, as administrative agent (and as the same may be further amended and supplemented from time to time prior to the Restatement Date).

“ Original Lender ”: as defined in Section 2.1(a).

“ Original Loans” : means the loans under the Original Credit Agreement outstanding immediately prior to the Restatement.

“ Original Mortgages ”: means (a) the Mortgage initially recorded in the offices specified on Schedule 3.16(b) on June 29, 2006 and (b) the Mortgage initially recorded in the offices specified on Schedule 3.16(b) on December 3, 2010, in each case, as the same have and may be further amended and supplemented from time to time prior to the Restatement Date.

“ PBGC ”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

“ Person ”: an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“ Plan ”: at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“ Register ”: as defined in Section 9.6(a).

“ Reorganization ”: with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

“ Reportable Event ”: any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. 4043.

“ Required Lenders ”: at any time, the holders of more than 50% of the aggregate unpaid principal amount of the Loans then outstanding.

“ Requirement of Law ”: as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“ Responsible Officer ”: the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower.

“ Restatement Date ”: the date on which the conditions precedent set forth in Section 4.1 shall have been satisfied or waived in accordance with the provisions of Section 4.3.

“ Restricted Payments ”: as defined in Section 6.5.

“ SEC ”: the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.

“ SEC Reports ”: as defined in Section 4.1(c).

“ Secured Term Loan ”: a Loan designated as a “Secured Term Loan” in Schedule 1.1A.

“ Security Agreement ”: the Amended and Restated Security Agreement to be executed and delivered by the Loan Parties and the Agent, substantially in the form of Exhibit D .

“ Security Documents ”: the collective reference to the Security Agreement, the Mortgage and all other security documents hereafter delivered to the Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Borrower under any Loan Document.

“ Single Employer Plan ”: any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.

“ Solvent ”: when used with respect to any Person, means that, as of any date of determination, (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“ Subsidiary ”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

“ Title Company ”: as defined in Section 4.1(a)(iii).

“ United States ”: the United States of America.

1.2 Other Definitional Provisions . Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.

(a) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Loan Party not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (iii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time.

(b) The words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

(c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 2. AMOUNT AND TERMS OF LOANS

2.1 Original Loans; Exchange .

(a) On the Restatement Date, each lender under the Original Credit Agreement (each an “ Original Lender ”) having Original Loans outstanding immediately prior to the Restatement Date will exchange such Original Loans (i) in part for Secured Term Loans and (ii) in part for Convertible Notes pursuant to the terms of the Exchange Agreement dated March 4, 2013 among the Lenders and Cadiz (the “ Exchange ”).

(b) Immediately after giving effect to the Exchange, (i) the aggregate amount of Secured Term Loans outstanding will be Thirty Million Dollars ($30,000,000), (ii) each Lender will hold the principal amount of Secured Term Loans and Convertible Notes set forth opposite such Lender’s name as is set forth in Schedule 1.1A and (iii) the Original Loans so exchanged shall be deemed to have been fully repaid on the Restatement Date.

(c) The Borrowers shall not have any right to reborrow any portion of any Secured Term Loan that may be repaid or prepaid from time to time.

2.2 Repayment of Loans . The Accreted Loan Value of the Secured Term Loan shall be due and payable on the Maturity Date to the Agent for the account of each Lender as set forth in the Register referenced in Section 9.6(a).

2.3 Optional Prepayments .

(a) At any time and from time to time, the Borrowers may prepay the Secured Term Loans, in whole or in part (in increments of not less than $100,000), for an amount equal to the Accreted Loan Value of the amount being prepaid through the day prior to the date of such prepayment plus the Applicable Prepayment Premium, upon at least thirty (30) Business Days’ notice to the Agent, which notice shall specify the principal amount of the Secured Term Loans to be prepaid and the date on which such prepayment will be delivered 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 Agent shall deliver any prepayment notice it receives from the Borrower under this Section 2.3(a) to the Lenders within three (3) Business Days of receipt of such notice.

(b) The Borrowers shall not have any right to prepay the Loans other than as set forth in this Section 2.3.

2.4 Interest Rates and Payment Dates . Interest on the Loans shall accrete to the outstanding principal amount of the Loans (including any additional principal amount added pursuant to this Agreement) at the at a rate per annum equal to the Applicable Rate (compounded quarterly on each March 5, June 5, September 5 and December 5 after the Restatement Date) from and including the Restatement Date through but excluding the date of payment or prepayment. If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans (whether or not overdue) shall bear interest at a rate per annum equal to the Applicable Rate plus two percent (2.0%).

2.5 Computation of Interest and Fees . Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed.

2.6 Mandatory Prepayments . In the event of any Asset Sale, the Borrowers shall, within five (5) Business Days after the receipt of Net Cash Proceeds of such Asset Sale, apply the Net Cash Proceeds of such Asset Sale first to prepay all amounts due under the Secured Term Loans and the Applicable Prepayment Premium thereon. The Agent shall deliver any notice of deposit it receives from the Borrower under this Section 2.6 to the Lenders within three (3) Business Days.

SECTION 3. REPRESENTATIONS AND WARRANTIES

To induce the Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrowers hereby jointly and severally represent and warrant to the Agent and each Lender that:

3.1 No Change . Since the last day of the fiscal year with respect to which Cadiz has filed with the SEC an Annual Report on Form 10-K, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

3.2 Existence; Compliance with Law . Each Loan Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation or other organization and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

3.3 Power; Authorization; Enforceable Obligations . Each Loan Party has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and , in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except the filings referred to in Section 3.16. Each Loan Document has been duly executed and delivered on behalf of each Loan Party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

3.4 No Legal Bar . The execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Loan Party and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). No Requirement of Law or Contractual Obligation applicable to the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.

3.5 Litigation . No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrowers, threatened by or against any Loan Party or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.

3.6 No Default . No Loan Party is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect.

3.7 Ownership of Property; Liens . Each Loan Party has title in fee simple to, or a valid leasehold interest in, all its real property (including without limitation the right to extract by any means and use, for domestic and agricultural purposes, for sale to third parties, and for any other purpose, water therefrom) other than the property currently owned by Harweal Investments Limited, the name of which has subsequently been changed to EVCO Limited, as nominee for Cadiz Land Company, Inc., which property is subject to no Liens other than Liens in favor of a Loan Party. Each Loan Party has good title to, or a valid leasehold interest in, all its other property. Each Loan Party represents that Octagon Partners, LLC, a California limited liability company and an Affiliate of each of the Borrowers, has title in fee simple to all its real property (including without limitation the right to extract by any means and use, for domestic and agricultural purposes, for sale to third parties, and for any other purpose water therefrom). None of such property referenced in this Section 3.7 is subject to any Lien except as permitted by Section 6.2 or such other minor defects in title that do not interfere with such Loan Party’s ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. The property subject to the Mortgage comprises all of the real property owned by the Loan Parties and any of their Subsidiaries or Affiliates and all of the Material Leased Properties.

3.8 Intellectual Property . Each Loan Party owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted. No material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does any Loan Party know of any valid basis for any such claim. The use of Intellectual Property by each Loan Party does not infringe on the rights of any Person in any material respect.

3.9 Taxes . Each Loan Party has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than (i) any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Loan Party or (ii) to the extent the failure of which could not reasonably be expected to result in a Material Adverse Effect). No tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge.

3.10 ERISA . No Reportable Event has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, each Plan has satisfied the applicable “minimum funding standard” and has had no “waived funding deficiency” (as such terms are defined in section 412 of the Code and section 302 of ERISA) during the five-year period prior to the date on which this representation is made or deemed made, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No “prohibited transaction” (and the transactions contemplated by this Agreement, will not constitute, or indirectly result in, a “prohibited transaction” within the meaning of section 4975 of the Code or section 406 of ERISA) has occurred, or is expected to occur, which has subjected, or could subject, the Mortgaged Properties, Borrower, or any officer, director or employee of the Borrower, or Trustee of any Single Employer Plan, administrator or other fiduciary to any tax or penalty on prohibited transactions imposed by either section 502 of ERISA or section 4975 of the Code or any other liability with respect thereto. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw partially or completely from any or all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.

3.11 Investment Company Act; Other Regulations . No Loan Party is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board of Governors of the Federal Reserve System of the United States or any successor thereto) that limits its ability to incur Indebtedness.

3.12 Subsidiaries . Except as disclosed to the Agent by the Borrower in writing from time to time after the Restatement Date, (a) Schedule 3.12 sets forth the name and jurisdiction of formation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by any Loan Party and (b) except as disclosed in public filings to the SEC, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors’ qualifying shares) of any nature relating to any Capital Stock of the Borrower or any Subsidiary, except as created by the Loan Documents.

3.13 Not Used .

3.14 Environmental Matters . Except as, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect:

(a) the Mortgaged Properties do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law;

(b) no Loan Party has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Mortgaged Properties or the business operated by any Loan Party (the “ Business ”), nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened;

(c) Materials of Environmental Concern have not been transported or disposed of from the Mortgaged Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Mortgaged Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law;

(d) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which any Loan Party is or will be named as a party with respect to the Mortgaged Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Mortgaged Properties or the Business;

(e) there has been no release or threat of release of Materials of Environmental Concern at or from the Mortgaged Properties, or arising from or related to the operations of any Loan Party in connection with the Mortgaged Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws;

(f) the Mortgaged Properties and all operations at the Mortgaged Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Mortgaged Properties or violation of any Environmental Law with respect to the Mortgaged Properties or the Business; and

(g) no Loan Party has assumed any liability of any other Person under Environmental Laws.

3.15 Accuracy of Information, Etc. No statement or information contained in this Agreement, any other Loan Document, any SEC Report or any other document, certificate or statement furnished by or on behalf of any Loan Party to the Agent or the Lenders or filed with the SEC, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, any SEC Report or in any other documents, certificates and statements furnished to the Agent or the Lenders or filed with the SEC for use in connection with the transactions contemplated hereby and by the other Loan Documents.

3.16 Security Documents .

(a) The Security Agreement is effective to create in favor of the Agent, for the benefit of the Lenders holding Secured Term Loans, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the other Collateral described in the Security Agreement, when financing statements and other filings specified on Schedule 3.16(a) in appropriate form are filed in the offices specified on Schedule 3.16(a), the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Security Agreement) under the Secured Term Loans, in each case prior and superior in right to any other Person (except, in the case of Collateral, Liens permitted by Section 6.2).

(b) The Mortgage is effective to create in favor of the Agent for the benefit of the Lenders holding Secured Term Loans, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgage is filed in the offices specified on Schedule 3.16(b), each such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage) under the Secured Term Loans, in each case prior and superior in right to any other Person (except exceptions permitted by the Agent in the relevant title policies). Schedule 1.1B lists, as of the Restatement Date, each parcel of real property owned in fee by the Loan Parties and any of their Subsidiaries and each leasehold interest in Material Leased Properties. All of the properties listed on Schedule 1.1B shall be subject to the Mortgage.

3.17 Solvency . Each Loan Party is, and after giving effect to the incurrence of all Indebtedness and obligations being incurred in connection herewith, will be and will continue to be, Solvent.

3.18 Regulation H . No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968.

3.19 Labor Matters . Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Loan Party pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of each Loan Party have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all payments due from any Loan Party on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Loan Party.

SECTION 4. CONDITIONS

4.1 Conditions to Restatement Date . The occurrence of the Restatement Date and the obligations of each Lender to otherwise complete the transactions contemplated by this Agreement are, in each case, subject to the satisfaction of each of the following conditions precedent:

(a) Credit Agreement; Mortgage Amendments; Security Agreement . The Agent shall have received (i) this Agreement, executed and delivered by the Borrowers, the Agent and each of the Lenders; (ii) Amendments to the Mortgages, in the form attached hereto as Exhibit E , and in scope and substance satisfactory to the Agent (the “ Mortgage Amendments ”), executed and delivered by the Agent, the Borrowers and Chicago Title (the “ Title Company ”), as trustee; and (iii) the Security Agreement, executed and delivered by each Loan Party party thereto and, as applicable, the Agent.

(b) [ Intentionally Omitted ].

(c) SEC Filings . The Borrower shall have filed with the SEC all annual reports on Form 10-K, all quarterly reports on Form 10-Q, all periodic reports on Form 8-K and each preliminary and definitive proxy statement on Schedule 14A required to be filed as of the Restatement Date (collectively, the “ SEC Reports ”). There shall have not have been any restatement of the financial statements of the Borrower contained in the SEC Reports that has not been included in an SEC Report filed prior to the Restatement Date.

(d) Approvals and Filings . All governmental and third party approvals and filings (including landlords’ consents and the SEC Reports) necessary in connection with the continuing operations of the Loan Parties and the transactions contemplated hereby shall have been obtained and/or filed and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the financing contemplated hereby.

(e) Expenses . The Lenders and the Agent shall have received payment of all expenses (including the reasonable fees and expenses of legal counsel) for which invoices have been presented prior to the Restatement Date.

(f) Bring Down . The representations and warranties contained in the Loan Documents shall be true and correct as if made on and as of the Restatement 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) and no default or event of default under the Original Credit Agreement or Default or Event of Default shall have occurred and, as of the Restatement Date, be continuing.

(g) CRE Amendment . CRE shall have amended its Limited Liability Company Agreement, dated as of December 11, 2003 (as amended), substantially in the form attached hereto as Exhibit G .

(h) Closing Certificate; Good Standing Certificates . The Agent shall have received (i) a certificate of each Loan Party, dated the Restatement Date, substantially in the form of Exhibit F , with appropriate insertions and attachments and (ii) a good standing certificate from each Borrower from its jurisdiction of incorporation and the State of California dated not earlier than thirty (30) days prior to the Restatement Date.

(i) Legal Opinion . The Agent shall have received the legal opinions of Theodora Oringher P.C. and Cadwalader, Wickersham & Taft LLP, each counsel to the Loan Parties, in form and substance satisfactory to the Agent.

4.2 Conditions Subsequent to the Restatement Date . No later than the Restatement Date (a) the Mortgage Amendments shall have been duly recorded in the offices specified on Schedule 3.16(b), (b) the Agent shall have received evidence, in form, scope and substance satisfactory to the Agent of such recordation and (c) the Agent shall have received the irrevocable and unconditional commitment of the Title Company to issue to the Agent, on behalf of the Lenders, in form, scope and substance satisfactory to the Agent, effective as of the date and time the Mortgage Amendments are recorded, endorsements to each Lender’s Policy which shall (i) redate each policy and all endorsements to the date of recording of the Mortgage Amendments, (ii) reduce the aggregate amount of the policies to Thirty Million Dollars ($30,000,000), plus accreted interest (to be allocated among the policies in such manner as deemed appropriate by Agent), (iii) reflect continued priority of the Mortgages, (iv) contain any endorsements as to other matters as the Agent reasonably deems necessary or advisable, which endorsements shall each be in form, scope and substance satisfactory to the Agent, (v) be subject to no monetary liens (other than non-delinquent real property taxes) and only such non-monetary title exceptions as reasonably approved by the Agent. Notwithstanding the foregoing, Agent shall approve of any title exception (x) that was set forth in the Lender’s Policies previously approved by the Agent in respect of the Original Credit Agreement or (y) that Agent in its reasonable discretion determines would not have a Material Adverse Effect on the value of the Collateral, either now or in the future. In conjunction with the foregoing conditions, as soon as reasonably possible after the Effective Date, Borrowers shall cause the Title Company to provide to the Agent a supplemental title report reflecting any new exceptions to title not appearing in the existing Lender’s Policy relating to each Mortgage. Any premiums, expenses or fees charged by the Title Company in connection with issuing the foregoing policies and/or endorsements shall be the responsibility of the Borrowers.

4.3 Waiver of Conditions . Each of the conditions precedent set forth in Section 4.1 may be waived with the consent of each of the Lenders.

SECTION 5. AFFIRMATIVE COVENANTS

The Borrowers hereby jointly and severally agree that, so long as any Loan is owing to any Lender hereunder, each of the Borrowers shall and shall cause each of its Subsidiaries to:

5.1 Financial Statements . Furnish to the Agent (for distribution to each Lender within three (3) Business Days after receipt thereof):

(a) within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, by PriceWaterhouseCoopers LLP or other independent certified public accountants of nationally recognized standing;

(b) within 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (c) at the request of the Agent and to the extent prepared for, and concurrently with the delivery to, Cadiz’s management or Board of Directors, after the end of each month occurring during each fiscal year of the Borrower, the unaudited consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and of cash flows for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments). All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

5.2 Certificates; Other Information . Furnish to the Agent (for distribution to each Lender within three (3) Business Days after receipt thereof):

(a) upon Agent’s request at a cost to the Borrowers not to exceed Ten Thousand Dollars ($10,000), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;

(b) concurrently with the delivery of any financial statements pursuant to Section 5.1, (i) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer’s knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) in the case of quarterly or annual financial statements, (x) a Compliance Certificate containing all information necessary for determining compliance by each Loan Party with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, and (y) to the extent not previously disclosed to the Agent, a description of any change in the jurisdiction of organization of any Loan Party and a list of any Intellectual Property acquired by any Loan Party since the date of the most recent report delivered pursuant to this clause (y);

(c) within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that the Borrower may make to, or file with, the SEC; and

(d) promptly, such additional financial and other information as the Agent may from time to time reasonably request.

5.3 Payment of Obligations . Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Borrower.

5.4 Maintenance of Existence; Compliance .

(a) (i) Preserve, renew and keep in full force and effect its organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 6.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and

(b) Comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.5 Maintenance of Property; Insurance.

(a) Keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.

(b) Maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.

5.6 Inspection of Property; Books and Records; Discussions.

(a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and

(b) permit representatives of the Agent and each Lender to concurrently visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Loan Parties with officers and employees of the Loan Parties and with their independent certified public accountants.

5.7 Notices . Promptly give notice to the Agent (for distribution to each Lender within three (3) Business Days after receipt thereof):

(a) the occurrence of any Default or Event of Default;

(b) any (i) default or event of default under any Contractual Obligation of any Loan Party or (ii) litigation, investigation or proceeding that may exist at any time between any Loan Party and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;

(c) any litigation or proceeding affecting any Loan Party (i) in which the amount involved is $500,000 or more and not covered by insurance, (ii) in which injunctive or similar relief is sought or (iii) which relates to any Loan Document;

(d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; and

(e) any development or event that has had or could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section 5.7 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the relevant Loan Party proposes to take with respect thereto.

5.8 Environmental Laws .

(a) Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, and

(b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws.

5.9 Additional Collateral, Etc.

(a) With respect to any property acquired after the Restatement Date by any Loan Party (other than (x) any property described in paragraph (b) below or (y) any property subject to a Lien expressly permitted by Section 6.2(f)) as to which the Agent, for the benefit of the Lenders does not have a perfected Lien, promptly (i) execute and deliver to the Agent such amendments to the Security Agreement or Mortgages and such other documents as the Agent deems necessary or advisable to grant to the Agent, for the benefit of the Lenders, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Agent, for the benefit of the Lenders, a perfected first priority security interest in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Security Agreement or by law or as may be requested by the Agent.

(b) With respect to any After-Acquired Property, promptly (i) deliver an amended and restated version of Schedule 1.1B which shall include a legal description of such After-Acquired Property, (ii) unless directed otherwise by the Agent, deliver a Phase I environmental assessment with respect to such After-Acquired Property, (iii) execute and deliver a first priority Mortgage, in favor of the Agent, for the benefit of the Lenders, covering such After-Acquired Property, (iv) provide the Agent with (x) title and extended coverage insurance covering such After-Acquired Property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Agent) and (y) any consents and estoppels reasonably deemed necessary or advisable by the Agent in connection with such Mortgage, each of the foregoing in form, scope and substance reasonably satisfactory to the Agent and (v) if requested by the Agent, deliver to the Agent legal opinions relating to matters described above, which opinions shall be in form, scope and substance, and from counsel, reasonably satisfactory to the Agent.

SECTION 6. NEGATIVE COVENANTS

The Borrowers hereby jointly and severally agree that, so long as any Loan or other amount is owing to any Lender hereunder, each of the Borrowers shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:

6.1 Indebtedness . Create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except:

(a) Indebtedness of any Loan Party pursuant to any Loan Document;

(b) Indebtedness (including, without limitation, Capital Lease Obligations) incurred to finance the acquisition, construction or improvement of any assets, and Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to 90 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of such Indebtedness shall not exceed $500,000 at any one time outstanding;

(c) Indebtedness of any Loan Party to any other Loan Party, provided that any such intercompany loan is evidenced by a note that is pledged to the Agent for the benefit of the Lenders;

(d) Indebtedness constituting unsecured debt in an aggregate principal amount not to exceed $250,000 at any one time outstanding; and

(e) Indebtedness constituting Convertible Notes in an aggregate original principal amount not to exceed $ 53,458,000 at any one time outstanding plus any accretion to such principal amount pursuant to the terms of the Indenture and the Convertible Notes.

6.2 Liens . Create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except:

(a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings;

(c) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation;

(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;

(f) Liens securing Indebtedness of the Borrower or any other Subsidiary incurred pursuant to Section 6.1(b), provided that (i) such Liens are incurred prior to 90 days after such acquisition or the completion of such construction or improvement, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) the amount of Indebtedness secured thereby is not increased;

(g) Liens created pursuant to the Security Documents;

(h) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased;

(i) Liens arising out of any judgment awarded against the Borrower which have been discharged, vacated, reversed or execution thereof stayed pending appeal;

(j) Liens with respect to which the Borrower or related lessee shall have provided a bond or other security in an amount and under terms reasonably satisfactory to the Agent and which does not involve any material risk of the sale, forfeiture or loss of any interest in Borrower’s real or personal property;

(k) Liens described in the Lender’s Policy issued by the Title Company, insuring priority in the Mortgage, and permitted by the Agent as of the Restatement Date; and

(l) Liens not otherwise permitted by this Section so long as the aggregate outstanding principal amount of the obligations secured thereby does not exceed (as to the Loan Parties) $200,000 at any one time outstanding.

6.3 Fundamental Changes . Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its property or business, except that any Investment expressly permitted by Section 6.6 may be structured as a merger, consolidation or amalgamation.

6.4 Disposition of Property . Dispose of any of its property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s Capital Stock to any Person, except:

(a) the Disposition of obsolete or worn out property in the ordinary course of business;

(b) the Disposition of other property having a fair market value not to exceed $200,000 in the aggregate for any fiscal year of the Borrower.

6.5 Restricted Payments . Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of any Loan Party, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of any Borrower (collectively, “ Restricted Payments ”), except that any Subsidiary may make Restricted Payments to the Borrowers. Notwithstanding the foregoing, this Section 6.5 shall not prohibit (a) Cadiz from converting all or any portion of the Convertible Notes into Capital Stock of the Company pursuant to the terms of the Indenture or (b) the Borrowers from making the following payments, (i) the Accreted Principal Amount on the Maturity Date (as defined in the Indenture) or any Default Interest, (ii) the Fundamental Change Repurchase Price on the Fundamental Change Repurchase Date, (iii) and cash in lieu of fractional shares of Common Stock upon conversion of the Convertible Notes pursuant to the Indenture and (iv) cash payable in respect of shares of Common Stock that cannot be issued pursuant to Section 10.24 of the Indenture. Capitalized terms used in the preceding sentence of this Section 6.5 without definition shall have the meanings ascribed to such terms in the Indenture.

6.6 Investments . Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, “ Investments ”), except:

(a) extensions of trade credit in the ordinary course of business;

(b) investments in Cash Equivalents;

(d) acquisitions (by merger, purchase of securities or purchase of assets) where 100% of the purchase price is paid in the Capital Stock of Cadiz, provided that (i) any such acquisition must be reasonably acceptable to the Agent and the Required Lenders and (ii) any equity interests so acquired must be pledged to the Agent, for the benefit of the Lenders, as provided in Section 5.9(a).

6.7 Transactions with Affiliates . Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than among the Loan Parties) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of the relevant Loan Party, and (c) upon fair and reasonable terms no less favorable to the relevant Loan Party than it would obtain in a comparable arm’s length transaction with a Person that is not an Affiliate.

6.8 Sales and Leasebacks . Enter into any arrangement with any Person providing for the leasing by any Borrower of real or personal property that has been or is to be sold or transferred by such Borrower to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Borrower.

6.9 Swap Agreements . Enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.

6.10 Changes in Fiscal Periods . Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower’s method of determining fiscal quarters.

6.11 Negative Pledge Clauses . Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of any Loan Parties to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, other than (a) this Agreement and the other Loan Documents and (b) any agreements governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby).

6.12 Clauses Restricting Subsidiary Distributions . Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of any Borrower to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (b) make loans or advances to, or other Investments in, the Borrower or any other Subsidiary of the Borrower or (c) transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents or the limited liability company agreement of CRE, (ii) imposed by law, or (iii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary.

6.13 Lines of Business .

(a) With respect to any Loan Party, enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto.

(b) With respect to any Subsidiary that is not a Loan Party, engage in any business activity, incur any liabilities or own any assets, other than those activities relating to the maintenance of its legal existence as an inactive Subsidiary.

6.14 Amendments to Organizational Documents . Amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the terms and conditions of the organizational documents of any Borrower or any Subsidiary.

6.15 Other Senior Indebtedness . Incur any Indebtedness senior to or pari passu with the Secured Term Loans or secured by the Collateral without the consent of all of the holders of the Secured Term Loans.

6.16 Convertible Note Payments . Make any cash payment with respect to Convertible Notes, other than (i) the Accreted Principal Amount on the Maturity Date (as defined in the Indenture) or any Default Interest, (ii) the Fundamental Change Repurchase Price on the Fundamental Change Repurchase Date, (iii) and cash in lieu of fractional shares of Common Stock upon conversion of the Convertible Notes pursuant to the Indenture and (iv) cash payable in respect of shares of Common Stock that cannot be issued pursuant to Section 10.24 of the Indenture. Capitalized terms used in this Section 6.16 without definition shall have the meanings ascribed to such terms in the Indenture.

SECTION 7. EVENTS OF DEFAULT

If any of the following events shall occur and be continuing:

(a) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within five (5) days after any such interest or other amount becomes due in accordance with the terms hereof; or

(b) any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or

(c) (i) any Loan Party shall default in the observance or performance of any agreement contained in Section 5.4(a), Section 5.7, or Section 6 of this Agreement or Sections 4.5 of the Security Agreement, (ii) the conditions subsequent set forth in Section 4.2 shall not have been satisfied, (iii) an “Event of Default” under the Indenture shall have occurred and be continuing, or (iv) an “Event of Default” under and as defined in any Mortgage shall have occurred and be continuing; or

(d) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Agent; or

(e) any Loan Party shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto beyond the period of grace, if any; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; Provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $500,000; or

(f) (i) any Loan Party shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Loan Party shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Loan Party any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Borrower any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Loan Party shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Loan Party shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

(g) (i) any Person shall engage in any “prohibited transaction” (as defined in section 406 of ERISA or section 4975 of the Code) involving any Plan, (ii) any “unpaid minimum required contribution” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Loan Party or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any Loan Party or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or

(h) one or more judgments or decrees shall be entered against any Loan Party involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $500,000 or more, and all such judgments or decrees shall not have been paid, satisfied, vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or

(i) any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or

(j) a Change of Control;

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, the Agent may, or upon the request of the Required Lenders (or any Lender with respect to an Event of Default specified in paragraph (j) above (solely with respect to such Lender’s Loans)), by notice to the Borrower, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower. Nothing in this Agreement or any of the Loan Documents shall impair any Lender’s right to enforce its claims for amounts owed to such Lender hereunder and under the Loan Documents following the Maturity Date until payment in full of the Obligations and, subject to the provisions of this Section 7 and Section 9.1, to pursue any enforcement action or remedies at law or equity with respect to amounts owed to any Lender as such Lender shall determine in its sole discretion.

SECTION 8. THE AGENT

8.1 Appointment . Each Lender hereby irrevocably designates and appoints the Agent as the administrative agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent.

8.2 Delegation of Duties . The Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.

8.3 Exculpatory Provisions . Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.

8.4 Reliance By Agent . The Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

8.5 Notice of Default . The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

8.6 Non-Reliance on Agent and Other Lenders . Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.

8.7 Indemnification . The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective holding of the outstanding Loans in effect on the date on which indemnification is sought under this Section, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Agent’s gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.

8.8 Agent In Its Individual Capacity . The Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though the Agent were not an Agent. The terms “Lender” and “Lenders” shall include each Agent in its individual capacity.

8.9 Successor Agent . The Agent may resign as Agent upon ten (10) days’ notice to the Lenders and the Borrower. If the Agent shall resign as Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 7(a) or Section 7(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term “Agent” shall mean such successor agent effective upon such appointment and approval, and the former Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Agent by the date that is 10 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Agent’s resignation as Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents.

SECTION 9. MISCELLANEOUS

9.1 Amendments and Waivers . Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 9.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Agent, the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however , that, in the case of clause (a) and clause (b) hereof, no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 9.1 without the written consent of such Lender; (iii) reduce any percentage specified in the definition of Required Lenders, or consent to the assignment or transfer by the Borrowers of any of their rights and obligations under this Agreement and the other Loan Documents, in each case without the written consent of all Lenders; (iv) release all or substantially all of the Collateral or amend, modify or waive the last paragraph of Section 7 or Section 5.5 of the Security Agreement, in each case without the written consent of all Lenders; (v) amend, modify or waive any of the provisions of the Security Agreement (other than Section 5.5), or amend, modify or waive any of the provisions of Section 2.6, Section 3.7, Section 3.16, Section 3.18, Section 5.9, Section 6.4, Section 6.8 or Section 6.15 or any of the definitions relating to any of the foregoing, in each case without the written consent of the Required Lenders; or (vi) amend, modify or waive any provision of this Section 9 without the written consent of the Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agent and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

9.2 Notices . All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or, in the case of telecopy notice, when received, addressed as follows, or to such other address as may be hereafter notified by the respective parties hereto:

Borrowers:

Cadiz Inc.

550 South Hope Street, Suite 2850

Los Angeles, CA 90017

Attention: Chief Financial Officer

Telecopy: 213-271-1614

Telephone: 213-271-1600

with a copy to:

Theodora Oringher P.C.

10880 Wilshire Boulevard, Suite 1700

Los Angeles, CA 90024

Attention: Howard Unterberger

Telecopy: 310-551-0283

Telephone: 310-557-2009

Agent:

LC Capital Master Fund, Ltd.

c/o Lampe Conway & Company

680 Fifth Avenue, Suite 1202

New York, New York 10019

Attention: Steven G. Lampe

Telecopy: 212-581-8999

Telephone: 212-581-8989

with a copy to:

Manatt, Phelps & Phillips, LLP

7 Times Square

New York, NY 10036

Attention: Neil S. Faden

Telecopy: 212-790-4545

Telephone: 212-790-4500

provided that any notice, request or demand to or upon the Agent or the Lenders shall not be effective until received.

Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Agent. The Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it;

provided that approval of such procedures may be limited to particular notices or communications.

9.3 No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

9.4 Survival of Representations and Warranties . All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder.

9.5 Payment of Expenses and Taxes; Indemnification . The Borrower agrees (a) to pay or reimburse the Agent for all its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to the Agent and filing and recording fees and expenses, with statements with respect to the foregoing to be submitted to the Borrower prior to the Restatement Date (in the case of amounts to be paid on the Restatement Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Agent shall deem appropriate, (b) to pay or reimburse each Lender and the Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Agent, (c) to pay, indemnify, and hold the Agent and the Lenders harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold the each Lender and the Agent and their respective officers, directors, employees, affiliates, agents and controlling persons (each, an “ Indemnitee ”) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Loan Party or any of the Mortgaged Properties and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against any Loan Party under any Loan Document (all the foregoing in this clause (d), collectively, the “ Indemnified Liabilities ”), provided , that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee. All amounts due under this Section 9.5 shall be payable not later than 10 days after written demand therefor.

9.6 Successors and Assigns; Assignments and Participations .

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Agent (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) the Lenders may not assign or otherwise transfer its rights or obligations hereunder except to an assignee (“ Assignee ”). Subject to acceptance and recording thereof pursuant to this Section, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 9.5). The Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive, and the Borrower, the Agent, and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee’s completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), and any written consent to such assignment required by this Section, the Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(b) Any Lender may, without the consent of the Borrower or the Agent, sell participations to one or more entities in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the loan participant, agree to any amendment, modification or waiver that (x) requires the consent of each Lender directly affected thereby pursuant to Section 9.1 and (y) directly affects such loan participant.

9.7 Surety Waivers . This paragraph is included solely out of an abundance of caution, and shall not be construed to mean that any of the above-referenced provisions of California law are in any way applicable to this Agreement or to any of the Obligations, or that CRE is a guarantor hereunder. As used in this paragraph, any reference to “the principal” includes Cadiz, and any reference to “the creditor” includes the Agent and the Lenders. In accordance with Section 2856 of the California Civil Code: (a) CRE unconditionally and irrevocably waives any and all rights and defenses available to it by reason of Sections 2787 to 2855, inclusive, 2899 and 3433 of the California Civil Code; and (b) CRE unconditionally and irrevocably waives any and all rights and defenses available to it by reason of the Obligation being secured by real property or otherwise, including without limitation, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure or other law, which means, among other things, (1) the creditor may collect from CRE without first foreclosing on any real or personal property collateral pledged by the principal, (2) if the creditor forecloses on any real property collateral pledged by the principal, (A) the amount of the Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price and (B) the creditor may collect from CRE even if the creditor, by foreclosing on the real property collateral, has destroyed any right CRE may have to collect from the principal, and (3) CRE is waiving all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for the Obligations, has destroyed CRE’s rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise, and even though that election of remedies by the creditor, such as nonjudicial foreclosure with respect to security for an obligation of any other guarantor of any of the Obligations, has destroyed CRE’s rights of contribution against any other guarantor. No other provision of this Agreement shall be construed as limiting the generality of any of the covenants and waivers set forth in this paragraph.

9.8 Counterparts . This Agreement may be executed by one or more of the parties to this Agreement 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 Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Agent.

9.9 Severability . Any provision of this Agreement 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.

9.10 Integration . This Agreement and the other Loan Documents represent the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any such party relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

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

9.12 Submission To Jurisdiction; Waivers . Each of the Borrowers hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrowers at its address set forth in Section 9.2 or at such other address of which the Agent shall have been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

9.13 Acknowledgments . Each of the Borrowers hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; and

(b) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Borrowers and the Lender.

9.14 Confidentiality . Each of the Agent and each Lender agrees to keep confidential all material non-public information provided to it by any Loan Party pursuant to or in connection with this Agreement that is designated as confidential; provided that nothing herein shall prevent the Agent or any Lender from disclosing any such information (a) to the Agent, any other Lender or any affiliate thereof, (b) subject to an agreement to comply with the provisions of this Section, to any actual or prospective Assignee, (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, or (h) in connection with the exercise of any remedy hereunder or under any other Loan Document. The Agent and each Lender further agrees that it shall not engage in any public purchases or sales of any securities of Cadiz for so long as the Agent or such Lender possesses material non-public information about the Borrowers.

9.15 Waivers of Jury Trial . EACH OF THE BORROWERS , THE AGENT, AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

CADIZ INC.

By: /s/ Timothy J. Shaheen

Name: Timothy J. Shaheen

Title: CFO

CADIZ REAL ESTATE LLC

By: /s/ Timothy J. Shaheen

Name:Timothy J. Shaheen

Title:CEO

( signature page to Amended and Restated Credit Agreement)

THE AGENT :

LC CAPITAL MASTER FUND, LTD.,

as Administrative Agent

By: /s/ Richard F. Conway

Name: Richard F. Conway

Title: Director

( signature page to Amended and Restated Credit Agreement)

THE LENDERS:

LC CAPITAL MASTER FUND, LTD.,

as Lender

By: /s/ Richard F. Conway

Name: Richard F. Conway

Title: Director

( signature page to Amended and Restated Credit Agreement)

MILFAM II L.P.

By: Milfam LLC, as general partner

By: /s/ Lloyd Miller, III

Name: Lloyd Miller, III

Title: Managing Member

( signature page to Amended and Restated Credit Agreement)

WATER ASSET MANAGEMENT—MANAGED ACCOUNT #1, L.L.C.,

By: /s/ Matthew Diserio

Name: Matthew Diserio

Title: Member

Schedule 1.1A

LENDERS AND LOAN AMOUNTS

Lender	Secured Term Loan	Convertible Notes
LC CAPITAL MASTER FUND, LTD. c/o Lampe, Conway & Company LLC 680 Fifth Avenue, Suite 1202 New York, NY 10019 Attn: Steven G. Lampe Telecopy: 212-581-8999 Telephone: 212-581-8989 with a copy to: Manatt, Phelps & Phillips, LLP 7 Times Square New York, NY 10036 Attn: Neil S. Faden Telecopy: 212-790-4545 Telephone: 212-790-4500	$24,370,000	$29,426,000
MILFAM II L.P. 222 Lakeview Avenue, Suite 160-365 West Palm Beach, FL 33401 Attn: Eric Fangmann Telecopy: 619-923-2908 Telephone: 561-287-5399 with a copy to: O’Melveny & Myers LLP 400 South Hope Street Los Angeles, CA 90071 Attn: Steve Warren Telecopy: 213-430-6407 Telephone: 213-430-7875	$4,353,000	$5,256,000
WATER ASSET MANAGEMENT—MANAGED ACCOUNT c/o Water Asset Management, LLC 509 Madison Avenue, Suite 804 New York, NY 10022 Attn: Stacy Kincaid Telecopy: 212-754-5101 Telephone:	$1,277,000	$1,276,000
AGGREGATE TERM LOANS/COMMITMENTS	$30,000,000	$35,958,000

Schedule 1.1B

MORTGAGED PROPERTIES

SCHEDULE 1.1B: MORTGAGED PROPERTIES

Parcel Number	Legal Description	Area	Owner’s Title Policy	Acreage	Purchase Date	Use
0556-271-06-0000	T5N R13E Sec 1	Cadiz	TICOR no. 901984	673.82	10/14/1988	Undeveloped
0556-271-25-0000	T5N R13E Sec 13	Cadiz	TICOR no. 901984	129.60	10/14/1988	Undeveloped
0556-271-26-0000	T5N R13E Sec 13	Cadiz	TICOR no. 901984	440.80	10/14/1988	Undeveloped
0556-281-02-0000	T5N R14E Sec 5	Cadiz	TICOR no. 901984	682.38	10/14/1988	Undeveloped
0556-281-12-0000	T5N R14E Sec 9	Cadiz	TICOR no. 901984	640.00	10/14/1988	Undeveloped
0556-281-13-0000	T5N R14E Sec 8	Cadiz	TICOR no. 864655	640.00	12/31/1986	Undeveloped
0556-281-17-0000	T5N R14E Sec 18	Cadiz	TICOR no. 864655	624.68	12/31/1986	Undeveloped
0556-281-19-0000	T5N R14E Sec 17	Cadiz	TICOR no. 864655	280.00	12/31/1986	Undeveloped
0556-281-20-0000	T5N R14E Sec 17	Cadiz	TICOR no. 864655	332.00	12/31/1986	Undeveloped
0556-291-10-0000	T5N R14E Sec 16	Cadiz	no owner’s title policy	106.00	11/6/1984	Undeveloped
0556-291-11-0000	T5N R14E Sec 16	Cadiz	no owner’s title policy	500.00	11/6/1984	Undeveloped
0556-301-06-0000	T5N R14E Sec 13	Cadiz	TICOR no. 901984	342.70	10/14/1988	Undeveloped
0556-301-07-0000	T5N R14E Sec 13	Cadiz	TICOR no. 901984	276.22	10/14/1988	Undeveloped
0556-311-01-0000	T5N R14E Sec 19	Cadiz	TICOR no. 864655	646.78	12/31/1986	Undeveloped
0556-311-02-0000	T5N R14E Sec 20	Cadiz	TICOR no. 864655	640.00	12/31/1986	Undeveloped
0556-311-05-0000	T5N R14E Sec 23	Cadiz	TICOR no. 864655	632.71	12/31/1986	Undeveloped
0556-311-06-0000	T5N R14E Sec 24	Cadiz	TICOR no. 864655	640.00	12/31/1986	Undeveloped
0556-311-10-0000	T5N R14E Sec 28	Cadiz	TICOR no. 864655	640.00	12/31/1986	Undeveloped
0556-311-11-0000	T5N R14E Sec 29	Cadiz	TICOR no. 864655	640.00	12/31/1986	Undeveloped
0556-311-14-0000	T5N R14E Sec 32	Cadiz	TICOR no. 864655	640.00	12/31/1986	Undeveloped
0556-311-16-0000	T5N R14E Sec 34	Cadiz	no owner’s title policy	640.00	N/A	Undeveloped
0556-311-17-0000	T5N R14E Sec 35	Cadiz	no owner’s title policy	638.57	N/A	Undeveloped
0556-311-41-0000	T5N R14E Sec 25	Cadiz	TICOR no. 901984	628.50	10/14/1988	Undeveloped
0556-311-47-0000	T5N R14E Sec 26	Cadiz	TICOR no. 864655	536.93	12/31/1986	Undeveloped
0556-311-49-0000	T5N R14E Sec 21	Cadiz	TICOR no. 864655	37.58	12/31/1986	Vineyard-PSWRI
0556-311-52-0000	T5N R14E Sec 21	Cadiz	TICOR no. 864655	484.82	12/31/1986	Undeveloped
0556-311-53-0000	T5N R14E Sec 21	Cadiz	CT no. 8222127	80.00	12/31/1986	Vineyard-SWFG
0556-321-02-0000	T4N R14E Sec 5	Cadiz	CT no. 8222127	640.92	10/14/1988	Undeveloped-SWFG
0556-321-03-0000	T4N R14E Sec 4	Cadiz	TICOR no. 901984	639.60	10/14/1988	Undeveloped
0556-321-04-0000	T4N R14E Sec 3	Cadiz	TICOR no. 864655	640.68	12/31/1986	Undeveloped
0556-321-05-0000	T4N R14E Sec 2	Cadiz	CT no. 8222127	640.22	10/14/1988	Undeveloped-SWFG
0556-321-06-0000	T4N R14E Sec 1	Cadiz	CT no. 8222127	639.42	10/14/1988	Undeveloped-SWFG
0556-321-10-0000	T4N R14E Sec 9	Cadiz	CT no. 8222127	640.00	10/14/1988	Undeveloped-SWFG
0556-321-18-0000	T4N R14E Sec 13	Cadiz	TICOR no. 901984	640.00	10/14/1988	Undeveloped
0556-341-01-0000	T5N R14E Sec 33, Par 1	Cadiz	CT no. 8222127	36.45	12/31/1986	Vineyard-SWFG
0556-341-03-0000	T5N R14E Sec 33, Par 3	Cadiz	CT no. 8222127	38.81	12/31/1986	Vineyard-SWFG
0556-341-04-0000	T5N R14E Sec 33, Par 4	Cadiz	CT no. 8222127	36.45	12/31/1986	Vineyard-Cadiz
0556-341-05-0000	T5N R14E Sec 33, Par 5	Cadiz	CT no. 8222127	36.45	12/31/1986	Vineyard-SWFG
0556-341-06-0000	T5N R14E Sec 33, Par 6	Cadiz	CT no. 8222127	38.81	12/31/1986	Vineyard-SWFG
0556-341-07-0000	T5N R14E Sec 33, Par 7	Cadiz	CT no. 8222127	38.81	12/31/1986	Vineyard-SWFG
0556-341-08-0000	T5N R14E Sec 33, Par 8	Cadiz	CT no. 8222127	36.45	12/31/1986	Vineyard-SWFG
0556-351-01-0000	T5N R14E Sec 33, Par 9	Cadiz	CT no. 8222127	36.89	12/31/1986	Vineyard-SWFG
0556-351-02-0000	T5N R14E Sec 33, Par 10	Cadiz	CT no. 8222127	38.96	12/31/1986	Vineyard-SWFG
0556-351-03-0000	T5N R14E Sec 33, Par 11	Cadiz	CT no. 8222127	39.06	12/31/1986	Vineyard-SWFG
0556-351-04-0000	T5N R14E Sec 33, Par 12	Cadiz	CT no. 8222127	36.78	12/31/1986	Vineyard-SWFG
0556-351-05-0000	T5N R14E Sec 33, Par 13	Cadiz	CT no. 8222127	36.87	12/31/1986	Vineyard-SWFG
0556-351-06-0000	T5N R14E Sec 33, Par 14	Cadiz	CT no. 8222127	39.38	12/31/1986	Vineyard-SWFG
0556-351-07-0000	T5N R14E Sec 33, Par 15	Cadiz	CT no. 8222127	39.48	12/31/1986	Vineyard-SWFG
0556-351-08-0000	T5N R14E Sec 33, Par 16	Cadiz	CT no. 8222127	39.56	12/31/1986	Vineyard-SWFG
0558-181-04-0000	T6N R14E Sec 31	Cadiz	no owner's title policy	30.00	12/26/1985	Undeveloped
0558-201-11-0000	T6N R14E Sec 29	Cadiz_Option	CT no. 6053782	640.00	12/26/1996	Undeveloped
0558-201-13-0000	T6N R14E Sec 33	Cadiz_Option	CT no. 6053782	448.00	12/26/1996	Undeveloped
0558-201-14-0000	T6N R14E Sec 33	Cadiz_Option	CT no. 6053782	165.50	12/26/1996	Undeveloped
0653-021-14-0000	T4N R15E Sec 17	Cadiz	TICOR no. 9101984	640.00	10/14/1988	Undeveloped
0653-041-10-0000	T5N R15E Sec 9	Cadiz	TICOR no. 9101984	440.00	10/14/1988	Undeveloped
0653-041-13-0000	T5N R15E Sec 8	Cadiz	TICOR no. 9101984	560.10	10/14/1988	Undeveloped
0653-041-15-0000	T5N R15E Sec 18	Cadiz	TICOR no. 864655	622.44	12/31/1986	Undeveloped
0653-041-16-0000	T5N R15E Sec 17	Cadiz	TICOR no. 9101984	612.52	10/14/1988	Undeveloped
0653-041-23-0000	T5N R15E Sec 5	Cadiz	TICOR no. 9101984	622.00	10/14/1988	Undeveloped
0653-041-24-0000	T5N R15E Sec 5	Cadiz	TICOR no. 9101984	12.80	10/14/1988	Undeveloped
0654-011 -03-0000	T6N R15E Sec 21	Cadiz	TICOR no. 9101984	640.00	10/14/1988	Undeveloped
0654-011-11-0000	T6N R15E Sec 29	Cadiz	TICOR no. 9101984	640.00	10/14/1988	Undeveloped
0654-011-21-0000	T6N R15E Sec 33	Cadiz	TICOR no. 9101984	640.00	10/14/1988	Undeveloped
0654-011-22-0000	T6N R15E Sec 33	Cadiz	TICOR no. 9101984	0.00	10/14/1988	Undeveloped
0654-021-27-0000	T6N R15E Sec 13	Cadiz	TICOR no. 9101984	297.05	10/14/1988	Undeveloped
0645-071-18-0000	T3N R18E Sec 36	Danby	CT 6053566 k26	640.00	3/21/1995	Undeveloped
0645-091-06-0000	T2N R18E Sec 12	Danby	Commonwlth 94 411050	20.00	10/7/1994	Undeveloped
0645-091-09-0000	T2N R18E Sec 12	Danby	Commonwlth 94 411050	20.00	10/12/1994	Undeveloped
0645-091-10-0000	T2N R18E Sec 12	Danby	Commonwlth 94 411050	20.00	10/7/1994	Undeveloped
0645-101-04-0000	T2N R18E Sec 23	Danby	Commonwlth 94 411050	80.00	10/7/1994	Undeveloped
0645-121-05-0000	T2N R18E Sec 36	Danby	OCT no. 94 409589	20.00	10/6/1994	Undeveloped
0645-121-06-0000	T2N R18E Sec 36	Danby	OCT no. 94 409589	15.59	10/6/1994	Undeveloped
0645-121-09-0000	T2N R18E Sec 36	Danby	OCT no. 94 409589	15.50	10/6/1994	Undeveloped
0645-271-03-0000	T2N R18E Sec 16	Danby	OCT no. 94 409589	20.00	10/6/1994	Undeveloped
0645-271-05-0000	T2N R18E Sec 16	Danby	OCT no. 94 409589	20.00	10/6/1994	Undeveloped
0645-271-06-0000	T2N R18E Sec 16	Danby	OCT no. 94 409590	20.00	10/6/1994	Undeveloped
0645-271-07-0000	T2N R18E Sec 16	Danby	OCT no. 94 409589	20.00	10/6/1994	Undeveloped
0645-271-08-0000	T2N R18E Sec 16	Danby	OCT no. 94 409589	20.00	10/6/1994	Undeveloped
0645-271-10-0000	T2N R18E Sec 16	Danby	OCT no. 94 409590	20.00	10/6/1994	Undeveloped
0645-271-11-0000	T2N R18E Sec 16	Danby	OCT no. 94 409589	17.34	10/6/1994	Undeveloped
0645-271-13-0000	T2N R18E Sec 16	Danby	OCT no. 94 409589	20.00	10/6/1994	Undeveloped
0645-271-15-0000	T2N R18E Sec 16	Danby	OCT no. 94 409589	20.00	10/6/1994	Undeveloped
0645-271-16-0000	T2N R18E Sec 16	Danby	OCT no. 94 29882	20.00	10/6/1994	Undeveloped
0645-271-18-0000	T2N R18E Sec 16	Danby	OCT no. 94 409590	15.45	10/6/1994	Undeveloped
0645-271-23-0000	T2N R18E Sec 16	Danby	OCT no. 94 409589	20.00	10/6/1994	Undeveloped
0568-341-04-0000	T12N R20E Sec 33	Piute	FATCo no. 93-000748	571.41	1/6/1993	Undeveloped
0568-341-07-0000	T12N R20E Sec 29	Piute	FATCo no. 96-197383	463.48	1/6/1993	Undeveloped
0659-171-10-0000	T10N R21E Sec 29	Piute	CT no. 92035296 k27	640.00	6/18/1999	Undeveloped
0659-181-03-0000	T10N R21E Sec 5	Piute	CT no. 92035296 k27	13.64	6/18/1999	Undeveloped
0659-181-06-0000	T10N R21E Sec 9	Piute	CT no. 92035296 k27	641.36	6/18/1999	Undeveloped
0659-241-02-0000	T10N R21E Sec 17	Piute	CT no. 92035296 k27	612.45	6/18/1999	Undeveloped
0659-241-16-0000	T10N R21E Sec 21	Piute	CT no. 92035296 k27	457.19	6/18/1999	Undeveloped
0659-241-17-0000	T10N R21E Sec 21	Piute	CT no. 92035296 k27	91.74	6/18/1999	Undeveloped
0658-131-02-0000	T11N R20E Gov Tract 38	Piute	FATCo no. 93-00748	640.60	1/6/1993	Undeveloped
0658-131-06-0000	T11N R20E Gov Tract 42	Piute	FATCo no. 93-00748	640.00	1/6/1993	Undeveloped
0658-141-04-0000	T11N R20E Gov Tract 39	Piute	FATCo no. 93-00748	640.00	1/6/1993	Undeveloped
0659-051-07-0000	T10N R19E Sec 25	Homer	FATCo no. 93-419956	640.00	9/30/1993	Undeveloped
0659-061-16-0000	T10N R19E Sec 13	Homer	FATCo no. 93-419956	640.00	9/30/1993	Undeveloped
0659-081-03-0000	T10N R20E Sec 21	Homer	FATCo no. 93-419956	640.00	9/30/1993	Undeveloped
0659-081-25-0000	T10N R20E Sec 29	Homer	FATCo no. 93-419956	627.97	9/30/1993	Undeveloped
0659-081-26-0000	T10N R20E Sec 29	Homer	FATCo no. 93-419956	640.00	9/30/93	Undeveloped
0556-251-03-0000	T5N R13E Sec 21	Cadiz_Rail Cycle	CT no. 12035113	640.00	5/9/2001	Undeveloped
0556-251-11-0000	T5N R13E Sec 29	Cadiz_Rail Cycle	CT no. 12035113	640.00	5/9/2001	Undeveloped
0556-251-15-0000	T5N R13E Sec 33	Cadiz_Rail Cycle	CT no. 12035113	640.00	5/9/2001	Undeveloped
0556-271-02-0000	T5N R13E Sec 5	Cadiz_Rail Cycle	CT no. 12035113	682.38	5/9/2001	Undeveloped
0556-271-10-0000	T5N R13E Sec 9	Cadiz_Rail Cycle	CT no. 12035113	557.25	5/9/2001	Undeveloped
0556-271-14-0000	Map 804 36 63 Par 5	Cadiz_Rail Cycle	CT no. 12035113	50.00	5/9/2001	Undeveloped
0556-271-15-0000	Map 804 36 63 Par 6	Cadiz_Rail Cycle	CT no. 12035113	21.00	5/9/2001	Undeveloped
0556-271-16-0000	Map 804 36 63 Par 7	Cadiz_Rail Cycle	CT no. 12035113	21.00	5/9/2001	Undeveloped
0556-271-22-0000	T5N R13E Sec 16	Cadiz_Rail Cycle	CT no. 12035113	625.49	5/9/2001	Undeveloped
0556-271-23-0000	T5N R13E Sec 17	Cadiz_Rail Cycle	CT no. 12035113	640.00	5/9/2001	Undeveloped
0556-311-04-0000	T5N R14E Sec 22	Cadiz	FATCo no. 972090	620.57	12/31/1986	Undeveloped
0556-311-09-0000	T5N R14E Sec 27	Cadiz	FATCo no. 972090	640.00	12/31/1986	Citrus
0556-311-50-0000	T5N R14E Sec 21	Cadiz	FATCo no. 972090	37.58	12/31/1986	Vineyard-Harweal
0556-341-02-0000	T5N R14E Sec 33, Par 2	Cadiz	CT no. 8222127	38.81	12/31/86	Vineyard-SWFG
0558-151-14-0000	T6N R13E Sec 33	Cadiz_Rail Cycle	CT no. 12035113	523.00	5/9/01	Undeveloped
0558-151-15-0000	T6N R13E Sec 33	Cadiz_Rail Cycle	CT no. 12035113	88.40	5/9/2001	Undeveloped
0558-171-16-0000	T6N R13E Sec 36	Cadiz	no owner's title policy i	40.00	6/27/1995	Undeveloped
0558-181-05-0000	T6N R14E Sec 31	Cadiz	no owner's title policy ii	10.00	10/31/2007	Undeveloped
0558-181-21-0000	T6N R14E Sec 31	Cadiz	CT no. 8222457	160.00	9/28/1998	Mobile Home Park – Land
0558-181-21-6000	T6N R14E Sec 31	Cadiz	no owner's title policy	N/A	2/7/1999	Mobile Home Park – Facilities
0568-251-10-0000	T13N R19E Sec 29	Cadiz_Rail Cycle	CT no. 12035113	640.00	5/9/2001	Undeveloped
0645-061-15-0000	T3N R18E Sec 16	Danby	CT no. 6053565	640.00	6/4/1996	Undeveloped
0653-011-15-0000	T4N R15E Sec 33	Cadiz_Rail Cycle	CT no. 12035113	640.00	5/9/2001	Undeveloped
0654-031-02-0000	T6N R15E Sec 1	Cadiz	TICOR no. 9101984	477.60	10/14/1988	Undeveloped
0654-031-03-0000	T6N R15E Sec 1	Cadiz	TICOR no. 9101984	149.20	10/14/1988	Undeveloped
0656-111-18-0000	T9N R17E Sec 13	Cadiz_Rail Cycle	CT no. 12035113	640.00	5/9/2001	Undeveloped
0659-241-03-0000	T10N R21E Sec 16	Piute	CT no. 605364 k26	556.32	6/4/96	Undeveloped

Schedule 3.16(a)

UCC FILING JURISDICTIONS

LOAN PARTY	UCC FILING JURISDICTION
CADIZ INC.	Delaware, California
CADIZ REAL ESTATE LLC	Delaware, California

Schedule 3.16(b)

MORTGAGE FILING JURISDICTIONS

The Office of the County Recorder for the County of San Bernardino, California

Exhibit A

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ ASSIGNMENT AGREEMENT ”) is entered into as of [DATE] between [NAME OF ASSIGNOR] (the “ Assignor ”) and [NAME OF ASSIGNEE] (the “ Assignee ”). Reference is made to the credit agreement described in Annex I hereto (the “ Credit Agreement ”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Credit Agreement.

1. In accordance with the terms and conditions of section 9.6 of the Credit Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor without recourse and without representation or warranty (except as provided in this Assignment Agreement), that interest in and to the Assignor's rights and obligations under the Loan Documents as of the date hereof with respect to the Obligations owing to the Assignor to the extent specified on Annex I.

2. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim and (ii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment Agreement and to consummate the transactions contemplated hereby; (b) makes no representation or warranty and assumes no responsibility with respect to (i) any statements, representations or warranties made in or in connection with the Loan Documents, or (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance or observance by Borrower of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto, and (d) represents and warrants that the amount set forth as the Purchase Price on Annex I represents the amount owed by Borrower to Assignor with respect to Assignor's share of the Loans assigned hereunder, as reflected on the Assignor's books and records.

3. The Assignee represents and warrants that (a) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment Agreement and to consummate the transactions contemplated hereby and (b) that this Assignment Agreement has been duly authorized, executed and delivered by the Assignee and that this Assignment Agreement constitutes a legal, valid and binding obligation of the Assignee, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium or other similar laws affecting creditors' rights generally and by general equitable principles.

4. The Assignee (a) confirms that it has received copies of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement and that it is not relying upon any representation, warranty or statement (except any such representation, warranty or statement expressly set forth in this Assignment Agreement); (b) agrees that it will, independently and without reliance upon Agent, Assignor or any other Lender based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Loan Documents; (c) appoints and authorizes the Agent to take such action as agent on behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (d) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; and (e) and attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty. The Assignor shall have no duty or responsibility either initially or on a continuing basis to make any such investigation or any such appraisal on behalf of the Assignee or to provide the Assignee with any credit or other information with respect thereto, whether coming into its possession before the making of the initial extension of credit under the Credit Agreement or at any time or times thereafter.

5. Following the execution of this Assignment Agreement by the Assignor and Assignee, the Assignor will deliver this Assignment Agreement to the Agent for recording by the Agent. The effective date of this Assignment (the “ Settlement Date ”) shall be the later to occur of (a) the date of the execution and delivery hereof by the Assignor and the Assignee, and (b) the date specified in Annex I.

6. As of the Settlement Date (a) the Assignee shall be a party to the Credit Agreement and, to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and obligations of the Lender thereunder and under the other Loan Documents, and (b) the Assignor shall, to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents.

7. Upon the Settlement Date, Assignee shall pay to Assignor the Purchase Price (as set forth in Annex 1). From and after the Settlement Date, the Agent shall make all payments that are due and payable to the holder of the interest assigned hereunder (including payments of principal, interest, fees and other amounts) to Assignor for amounts which have accrued up to but excluding the Settlement Date and to Assignee for amounts which have accrued from and after the Settlement Date. On the Settlement Date, Assignor shall pay to Assignee an amount equal to the portion of any interest, fee, or any other charge that was paid to Assignor prior to the Settlement Date on account of the interest assigned hereunder and that are due and payable to Assignee with respect thereto, to the extent that such interest, fee or other charge relates to the period of time from and after the Settlement Date.

8. This Assignment Agreement may be executed in counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. This Assignment Agreement may be executed and delivered by telecopier or other facsimile transmission all with the same force and effect as if the same were a fully executed and delivered original manual counterpart.

9. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption, including Annex I hereto to be executed by their respective officers, as of the first date written above.

[LENDER OR ORIGINAL LENDER] ,

as Assignor

	By:
	Name:
	Title

[LENDER] ,

as Assignee

	By:
	Name:
	Title

ANNEX FOR ASSIGNMENT AND ASSUMPTION

1. Borrower: Cadiz Inc. and Cadiz Real Estate LLC

2. Name and Date of Credit Agreement:

Amended and Restated Credit Agreement, dated as of March 4, 2013 (as amended, the “ Credit Agreement ”), by and among Cadiz Inc. and Cadiz Real Estate LLC, as borrowers (the “ Borrower ”), the lenders party thereto, LC Capital Master Fund, Ltd., as administrative agent (the “ Agent ”).

3. Date of Assignment Agreement: [DATE]

4. Amounts:

Designation of Assigned Loan	Amount of Assigned Loan

5. Settlement Date: [DATE]

6. Purchase Price: [$PRICE]

7. Notice and Payment Instructions, etc.

Assignor	Assignee
[NAME OF ASSIGNOR]
[ADDRESS]
[ADDRESS]
[ATTENTION]
[TELECOPY]
[TELEPHONE]
[PAYMENT ACCOUNT BANK]
[PAYMENT ACCOUNT R/T NUMBER]
[PAYMENT ACCOUNT NUMBER]
[PAYMENT ACCOUNT REFERENCE]

8. Agreed and Accepted:

[NAME OF ASSIGNOR],

as Assignor

	By:
	Name:
	Title

[NAME OF ASSIGNEE],

as Assignee

	By:
	Name:
	Title

Exhibit B

FORM OF COMPLIANCE CERTIFICATE

[CADIZ LETTERHEAD]

LC Capital Master Fund, Ltd., as Agent

c/o Lampe Conway & Company

680 Fifth Avenue, Suite 1202

New York, New York 10019

Attention: Steven G. Lampe

Re: Compliance Certificate dated _____________________

Ladies and Gentlemen:

Reference is made to that certain Amended and Restated Credit Agreement, dated as of March 4, 2013 (as amended, the “Credit Agreement”), by and among Cadiz Inc. (“Cadiz”) and Cadiz Real Estate LLC, as borrowers (together, the “Borrower”), the lenders party thereto and LC Capital Master Fund, Ltd., as administrative agent (the “Agent”). Capitalized terms used in this Compliance Certificate have the meanings set forth in the Credit Agreement unless specifically defined herein.

Pursuant to Section 5.2 of the Credit Agreement, the undersigned, being a Responsible Officer of Cadiz, hereby certifies that:

1. The financial information of the Borrower furnished in SCHEDULE 1 attached hereto, has been prepared in accordance with GAAP (except for year-end adjustments and the lack of footnotes), and fairly presents in all material respects the financial condition of Cadiz and its Subsidiaries.

2. The undersigned has reviewed the terms of the Credit Agreement and has made, or caused to be made under his/her supervision, a review in reasonable detail of the transactions and condition of Cadiz and its Subsidiaries during the accounting period covered by the financial statements delivered pursuant to SCHEDULE 5.2 of the Credit Agreement.

3. Such review has not disclosed the existence on and as of the date hereof, and the undersigned does not have knowledge of the existence as of the date hereof, of any event or condition that constitutes a Default or Event of Default, except for such conditions or events listed on SCHEDULE 2 attached hereto, specifying the nature and period of existence thereof and what action Cadiz and its Subsidiaries have taken, are taking or propose to take with respect thereto.

4. The representations and warranties of Cadiz and its Subsidiaries set forth in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of the date hereof (except to the extent they relate to a specified date), except as set forth on SCHEDULE 3 attached hereto.

IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this ___ day of ___________________.

CADIZ INC.

By:_________________________

Name:

Title:

Exhibit C

INTENTIONALLY OMITTED

Exhibit D

SECURITY AGREEMENT

made by

CADIZ INC.,

and

CADIZ REAL ESTATE LLC,

as Loan Parties

in favor of

LC CAPITAL MASTER FUND, LTD.,

as Agent

Amended and Restated as of March 5, 2013

TABLE OF CONTENTS

Page

SECTION 1.

DEFINED TERMS

1.1

Definitions

1.2

Other Definitional Provisions

SECTION 2.

GRANT OF SECURITY INTEREST

SECTION 3.

REPRESENTATIONS AND WARRANTIES

3.1

Title; No Other Liens

3.2

Perfected First Priority Liens

3.3

Jurisdiction Of Organization; Chief Executive Office

3.4

Inventory and Equipment

3.5

Farm Products

3.6

Investment Property

3.7

Receivables

3.8

Intellectual Property

SECTION 4.

COVENANTS

4.1

Delivery of Instruments, Certificated Securities and Chattel Paper

4.2

Payment of Obligations

4.3

Maintenance Of Perfected Security Interest; Further Documentation

4.4

Changes in Locations, Name, Etc

4.5

Notices

4.6

Investment Property

4.7

Receivables

SECTION 5.

REMEDIAL PROVISIONS

5.1

Certain Matters Relating To Receivables

5.2

Communications With Obligors; Loan Parties Remain Liable

5.3

Pledged Stock

5.4

Proceeds to be Turned Over to Agent

5.5

Application of Proceeds

5.6

Code and Other Remedies

5.7

Deficiency

SECTION 6.

MISCELLANEOUS

6.1

Amendments In Writing

6.2

Notices

6.3

No Waiver by Course of Conduct; Cumulative Remedies

6.4

Enforcement Expenses; Indemnification

6.5

Successors and Assigns

6.6

Set-Off

6.7

Counterparts

6.8

Severability

6.9

Section Headings

6.10

Integration

6.11

GOVERNING LAW

6.12

Submission to Jurisdiction; Waivers

6.13

Acknowledgments

6.14

Releases

6.15

WAIVER OF JURY TRIAL

Schedules

Schedule 1 Notice Addresses

Schedule 2 Investment Property

Schedule 3 Perfection Matters

Schedule 4 Jurisdictions of Organization and Chief Executive Offices

Schedule 5 Inventory and Equipment Locations

Schedule 6 Intellectual Property

SECURITY AGREEMENT

SECURITY AGREEMENT, amended and restated as of March 5, 2013, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, the “ Loan Parties ”), in favor of LC Capital Master Fund, Ltd., as administrative agent (in such capacity, the “ Agent ”) on behalf of the Lenders holding Secured Term Loans under the Amended and Restated Credit Agreement, amended and restated as of March 5, 2013 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Cadiz Inc., a Delaware corporation (“ Parent ”) and Cadiz Real Estate LLC, a Delaware limited liability company (“ CRE ”) each as borrowers (together, the “ Borrower ”), the lenders party thereto (the “ Lenders ”) and the Agent.

W I T N E S S E T H:

WHEREAS, as of the Restatement Date, the Loan Parties and the Lenders have agreed to enter into the Credit Agreement and to make extensions of credit to the Borrowers upon the terms and subject to the conditions set forth therein;

WHEREAS, it is a condition precedent to the Restatement Date that the Loan Parties shall have executed and delivered this Agreement to the Agent;

NOW, THEREFORE, in consideration of the premises hereunder, and to induce the Agent and the Lenders to enter into the Credit Agreement and the Lenders to make the extensions of credit to the Borrowers thereunder, each Loan Party hereby agrees with the Agent as follows:

SECTION 1. DEFINED TERMS

1.1 Definitions . Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms are used herein as defined in the New York UCC: Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims, Contracts, Documents, Equipment, Farm Products, General Intangibles, Goods, Instruments, Inventory, Letter-of-Credit Rights and Supporting Obligations. The following terms shall have the following meanings:

(a) “ Agreement ”: this Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

(b) “ Borrower Obligations ”: the collective reference to the Obligations, as defined in the Credit Agreement, with respect only to the Secured Term Loans outstanding thereunder and to the Lenders holding Secured Term Loans.

(d) “ Collateral Account ”: any collateral account established by the Agent as provided in Section 5.1 or 5.4.

(e) “ Convertible Note Documents ”: means (i) that certain Indenture, dated as of March 5, 2013, between Parent and The Bank of New York Mellon Trust Company, N.A., as trustee, (ii) Exchange Agreement, dated as of March 4, 2013, by and among LC Capital Master Fund, Ltd., Milfam II LP, Water Asset Management Managed Account #1, L.L.C. and Parent and (iii) that certain Private Placement Purchase Agreement, dated as of March 4, 2013, by and among Parent, Altima Global Special Situations Master Fund Ltd, Nokomis Capital Master Fund, LP, Moussescapade, L.P., Sphinx Trading, LP, Bryant and Carlene Riley JTWROS, B. Riley & Co., LLC 401(k) Profit Sharing Plan, B Riley & Co., LLC, Riley Family Trust DTD 6/20/89, Modified 01/25/07, and Robert Antin Children Irrevocable Trust DTD 01/01/01.

(f) “ Copyright Licenses ”: any written agreement naming any Loan Party as licensor or licensee (including, without limitation, those listed in Schedule 6), granting any right under any Copyright, including, without limitation, the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright.

(g) “ Copyrights ”: (i) all copyrights arising under the laws of the United States, whether registered or unregistered and whether published or unpublished (including, without limitation, those listed in Schedule 6), all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, and (ii) the right to obtain all renewals thereof.

(h) “ Deposit Account ”: as such term is defined in the New York UCC, the deposit accounts listed on Schedule 2.

(i) “ Intellectual Property ”: the collective reference to all rights, priorities and privileges relating to intellectual property arising under United States laws, including, without limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses.

(j) “ Intercompany Note ”: any promissory note evidencing loans made by any Loan Party to another Loan Party.

(k) “ Investment Property ”: the collective reference to (i) all “ Investment Property ” as such term is defined in Section 9- 102(a)(49) of the New York UCC and (ii) in any event, all Pledged Notes and all Pledged Stock.

(l) “ Issuers ”: the collective reference to each issuer of any Investment Property.

(m) “ New York UCC ”: the Uniform Commercial Code as from time to time in effect in the State of New York.

(n) “ Loan Party Obligations ”: with respect to any Loan Party, all obligations and liabilities of such Loan Party with respect only to the Secured Term Loans outstanding thereunder and to the Lenders holding Secured Term Loans which may arise under or in connection with this Agreement, any other Loan Document to which such Loan Party is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Agent that are required to be paid by such Loan Party pursuant to the terms of this Agreement, any other Loan Document).

(o) “ Obligations ”: (i) in the case of the Borrower, the Borrower Obligations, and (ii) in the case of each other Loan Party, its Loan Party Obligations.

(p) “ Patent License ”: all agreements, whether written or oral, providing for the grant by or to any Loan Party of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including, without limitation, any of the foregoing referred to in Schedule 6.

(q) “ Patents ”: (i) all letters patent of the United States, all reissues and extensions thereof and all goodwill associated therewith, including, without limitation, any of the foregoing referred to in Schedule 6, (ii) all applications for letters patent of the United States, continuations and continuations-in-part thereof, including, without limitation, any of the foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues or extensions of the foregoing.

(r) “ Pledged Notes ”: all promissory notes listed on Schedule 2 and all Intercompany Notes at any time issued to any Loan Party and all other promissory notes issued to or held by any Loan Party.

(s) “ Pledged Stock ”: (i) the shares of Capital Stock listed on Schedule 2 and (ii) any other shares, stock certificates, options, interests or rights of any nature whatsoever in respect of the Capital Stock of any Person (other than a Subsidiary that is not a Loan Party) that may be issued or granted to, or held by, any Loan Party while this Agreement is in effect.

(t) “ Proceeds ”: all “Proceeds” as such term is defined in Section 9-102(a)(64) of the New York UCC and, in any event, shall include, without limitation, all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.

(u) “ Receivable ”: any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account).

(v) “ Securities Act ”: the Securities Act of 1933, as amended.

(w) “ Trademark License ”: any agreement, whether written or oral, providing for the grant by or to any Loan Party of any right to use any Trademark, including, without limitation, any of the foregoing referred to in Schedule 6.

(x) “ Trademarks ”: (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States or any State thereof, or otherwise, and all common-law rights related thereto, including, without limitation, any of the foregoing referred to in Schedule 5, and (ii) the right to obtain all renewals thereof.

1.2 Other Definitional Provisions .

(a) The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.

(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

(c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Loan Party, shall refer to such Loan Party’s Collateral or the relevant part thereof.

SECTION 2. GRANT OF SECURITY INTEREST

Each Loan Party hereby grants to the Agent, on behalf of the Lenders holding Secured Term Loans, a security interest in, all of the following property now owned or at any time hereafter acquired by such Loan Party or in which such Loan Party now has or at any time in the future may acquire any right, title or interest (collectively, the “ Collateral ”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Loan Party’s Obligations:

(a) all Accounts;

(b) all Chattel Paper;

(d) the Deposit Accounts;

(e) all Documents;

(f) all Equipment;

(g) all General Intangibles;

(h) all Instruments;

(i) all Intellectual Property;

(j) all Inventory;

(k) all Investment Property (other than the capital stock of any Subsidiary that is not a Loan Party);

(l) all Letter-of-Credit Rights;

(m) all Goods not otherwise described above;

(n) all books and records pertaining to the foregoing; and

(o) to the extent not otherwise included, all Proceeds, Supporting Obligations and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing;

provided, however, that notwithstanding any of the other provisions set forth in this Section 2, this Agreement shall not constitute a grant of a security interest in any property to the extent that such grant of a security interest is prohibited by any Requirements of Law of a Governmental Authority, requires a consent not obtained of any Governmental Authority pursuant to such Requirement of Law or is prohibited by, or constitutes a breach or default under or results in the termination of or requires any consent not obtained under, any contract, license, agreement, instrument or other document evidencing or giving rise to such property or, in the case of any Investment Property, Pledged Stock or Pledged Note, any applicable shareholder or similar agreement, except to the extent that such Requirement of Law or the term in such contract, license, agreement, instrument or other document or shareholder or similar agreement providing for such prohibition, breach, default or termination or requiring such consent is ineffective under applicable law.

SECTION 3. REPRESENTATIONS AND WARRANTIES

To induce the Lenders and the Agent to enter into the Credit Agreement and the Lenders to make their extensions of credit to the Borrower thereunder, each Loan Party hereby represents and warrants to the Agent for the benefit of the Lenders holding Secured Term Loans that:

3.1 Title; No Other Liens . Except for the security interest granted to the Agent pursuant to this Agreement and the other Liens permitted to exist on the Collateral by the Credit Agreement, such Loan Party owns each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Agent, for the benefit of the Lenders holding Secured Term Loans, pursuant to this Agreement or as are permitted by the Credit Agreement.

3.2 Perfected First Priority Liens . The security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents referred to on said Schedule, have been delivered to the Agent in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the Agent as collateral security for such Loan Party’s Obligations, enforceable in accordance with the terms hereof against all creditors of such Loan Party and any Persons purporting to purchase any Collateral from such Loan Party and (b) are prior to all other Liens on the Collateral in existence on the date hereof except, in the case of Collateral other than Pledged Stock, to the extent permitted by the Credit Agreement.

3.3 Jurisdiction Of Organization; Chief Executive Office . On the date hereof, such Loan Party’s jurisdiction of organization, identification number from the jurisdiction of organization (if any) and the location of such Loan Party’s chief executive office or sole place of business or principal residence, as the case may be, are specified on Schedule 3. Such Loan Party has furnished to the Agent a certified charter, certificate of incorporation or other organization document and long-form good standing certificate as of a date which is recent to the date hereof.

3.4 Inventory and Equipment . On the date hereof, a material portion of the Inventory and the Equipment (other than mobile goods) are kept at the locations listed on Schedule 5.

3.5 Farm Products . None of the Collateral constitutes, or is the Proceeds of, Farm Products in any material respect.

3.6 Investment Property . The shares of Pledged Stock pledged by such Loan Party hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of each Issuer owned by such Loan Party. All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. Each of the Pledged Notes constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. Such Loan Party is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement.

3.7 Receivables . No material amount payable to such Loan Party under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the Agent. The amounts represented by such Loan Party to the Agent from time to time as owing to such Loan Party in respect of the Receivables will at such times be accurate in all material respects.

3.8 Intellectual Property .

(a) Schedule 6 lists all registered or applied for Intellectual Property owned by such Loan Party in its own name on the date hereof which is material to such Loan Party.

(b) On the date hereof, all material Intellectual Property is valid, subsisting, unexpired and enforceable, has not been abandoned and, to the best knowledge of such Loan Party, does not infringe the intellectual property rights of any other Person.

(c) Except as set forth in Schedule 6, on the date hereof, no material Intellectual Property is the subject of any licensing or franchise agreement pursuant to which such Loan Party is the licensor or franchisor.

(d) No holding, decision or judgment has been rendered by any Governmental Authority which would limit, cancel or question the validity of, or such Loan Party’s rights in, any Intellectual Property in any respect that could reasonably be expected to have a Material Adverse Effect.

(e) There is no action or proceeding pending, or, to the knowledge of such Loan Party, threatened, on the date hereof seeking to limit, cancel or question the validity of any Intellectual Property or such Loan Party’s ownership interest therein that could reasonably be expected to have a Material Adverse Effect.

SECTION 4. COVENANTS

Each Loan Party covenants and agrees with the Agent that, from and after the date of this Agreement until the Obligations shall have been paid in full:

4.1 Delivery of Instruments, Certificated Securities and Chattel Paper . If any amount in excess of an aggregate principal amount of $100,000 payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be immediately delivered to the Agent, duly indorsed in a manner satisfactory to the Agent, to be held as Collateral pursuant to this Agreement.

4.2 Payment of Obligations . Such Loan Party will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such tax, assessment, charge or levy need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with GAAP with respect thereto have been provided on the books of such Loan Party or such failure to pay could not reasonably be expected to result in the sale, forfeiture or loss of any material portion of the Collateral or any interest therein.

4.3 Maintenance Of Perfected Security Interest; Further Documentation . Such Loan Party shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 3.2 and shall defend such security interest against the claims and demands of all Persons whomsoever, subject to the rights of such Loan Party under the Loan Documents to dispose of the Collateral. Such Loan Party will furnish to the Agent from time to time statements and schedules further identifying and describing the assets and property of such Loan Party and such other reports in connection therewith as the Agent may reasonably request, all in reasonable detail. At any time and from time to time, upon the written request of the Agent, and at the sole expense of such Loan Party, such Loan Party will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) filing any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) to the extent commercially reasonable, in the case of Investment Property, the Deposit Accounts, Letter-of-Credit Rights and any other relevant Collateral, taking any actions necessary to enable the Agent to obtain “control” (within the meaning of the applicable Uniform Commercial Code) with respect thereto.

4.4 Changes in Locations, Name, Etc . Such Loan Party will not, except upon 10 days’ prior written notice to the Agent and delivery to the Agent of (a) all additional executed financing statements and other documents reasonably requested by the Agent to maintain the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 5 showing any additional location at which material Inventory or Equipment shall be kept:

(a) change its jurisdiction of organization or the location of its chief executive office or sole place of business or principal residence from that referred to in Section 3.3; or

(b) change its name, identity or corporate structure to such an extent that any financing statement filed by the Agent in connection with this Agreement would be misleading.

4.5 Notices . Such Loan Party will advise the Agent promptly in reasonable detail of:

(a) any Lien (other than security interests created hereby or Liens permitted under the Credit Agreement) on any of the Collateral which would materially adversely affect the ability of the Agent to exercise any of its remedies hereunder; and

(b) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby.

4.6 Investment Property .

(a) If such Loan Party shall become entitled to receive or shall receive after the date hereof any certificate (including, without limitation, any certificate representing a dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Loan Party shall accept the same as the agent of the Agent, hold the same in trust for the Agent and deliver the same forthwith to the Agent in the exact form received, duly indorsed by such Loan Party to the Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Loan Party and with, if the Agent so requests, signature guaranteed, to be held by the Agent, subject to the terms hereof, as additional collateral security for the Obligations. Any sums paid upon or in respect of the Investment Property upon the liquidation or dissolution of any Issuer shall be paid over to the Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Investment Property or any property shall be distributed upon or with respect to the Investment Property pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Agent, be delivered to the Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Investment Property shall be received by such Loan Party, such Loan Party shall, until such money or property is paid or delivered to the Agent, hold such money or property in trust for the Agent, segregated from other funds of such Loan Party, as additional collateral security for the Obligations.

(b) Without the prior written consent of the Agent (not to be unreasonably withheld), such Loan Party will not (i) vote to enable, or take any other action to permit, any Issuer to issue any Capital Stock of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any Capital Stock of any nature of any Issuer (except pursuant to a transaction permitted by the Credit Agreement or the Convertible Note Documents), (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Investment Property or Proceeds thereof (except pursuant to a transaction permitted by the Credit Agreement), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or permitted by the Credit Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Loan Party or the Agent to sell, assign or transfer any of the Investment Property or Proceeds thereof except as permitted by the Credit Agreement.

(c) In the case of each Loan Party which is an Issuer, such Issuer agrees that it will be bound by the terms of this Agreement relating to the Investment Property issued by it and will comply with such terms insofar as such terms are applicable to it.

(d) In the case of each Loan Party which holds Pledged Notes that have not been delivered into the possession of the Agent, such Loan Party agrees that it will not sell, transfer or otherwise dispose of such Pledged Notes to any other party other than another Loan Party under the Loan Documents, except for any sale, transfer or disposition in accordance with Section 6.15.

4.7 Receivables . Other than in the ordinary course of business consistent with its past practice and unless commercially reasonable, such Loan Party will not (i) (as to any Receivable which is a material amount) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could materially adversely affect the value thereof. Such Loan Party will deliver to the Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables.

SECTION 5. REMEDIAL PROVISIONS

5.1 Certain Matters Relating To Receivables . If required by the Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Loan Party, (i) shall be forthwith (and, in any event, within three Business Days) deposited by such Loan Party in the exact form received, duly indorsed by such Loan Party to the Agent if required, in a Collateral Account maintained under the sole dominion and control of the Agent, subject to withdrawal by the Agent only as provided in Section 5.5, and (ii) until so turned over, shall be held by such Loan Party in trust for the Agent, for the benefit of the Lenders holding Secured Term Loans, segregated from other funds of such Loan Party. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit. Upon the occurrence and during the continuance of an Event of Default, at the reasonable request of the Agent, each Loan Party shall deliver to the Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts.

5.2 Communications With Obligors; Loan Parties Remain Liable . The Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables to verify with them to the satisfaction of the Agent the existence, amount and terms of any Receivables. Upon the request of the Agent at any time after the occurrence and during the continuance of an Event of Default, each Loan Party shall notify obligors on the Receivables that the Receivables have been assigned to the Agent and that payments in respect thereof shall be made directly to the Agent. Anything herein to the contrary notwithstanding, each Loan Party shall remain liable under each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. The Agent shall not have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Agent of any payment relating thereto, nor shall the Agent be obligated in any manner to perform any of the obligations of any Loan Party under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

5.3 Pledged Stock . Unless an Event of Default shall have occurred and be continuing and the Agent shall have given notice to the relevant Loan Party of the intent of the Agent to exercise its rights pursuant to this Section 5.3 each Loan Party shall be permitted to receive all cash dividends paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes, in each case paid in the normal course of business of the relevant Issuer and consistent with past practice, to the extent permitted in the Credit Agreement, and to exercise all voting and corporate or other organizational rights with respect to the Investment Property; provided, however, that no vote shall be cast or corporate or other organizational right exercised or other action taken which, in the reasonable judgment of the Agent, would materially impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document. If an Event of Default shall occur and be continuing and the Agent shall give notice of its intent to exercise such rights to the relevant Loan Party or Loan Parties, (i) the Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Investment Property and make application thereof to the Obligations in accordance with Section 5.5 hereof and (ii) any or all of the Investment Property shall be registered in the name of the Agent or its nominee, and the Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Investment Property at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate or other organizational structure of any Issuer, or upon the exercise by any Loan Party or the Agent of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Agent may determine), all without liability except to account for property actually received by it, but the Agent shall have no duty to any Loan Party to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. Each Loan Party hereby authorizes and instructs each Issuer of any Investment Property pledged by such Loan Party hereunder to (i) comply with any instruction received by it from the Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Loan Party, and each Loan Party agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Investment Property directly to the Agent for application to the Obligations in accordance with Section 5.5 hereof.

5.4 Proceeds to be Turned Over to Agent . In addition to the rights of the Agent specified in Section 5.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Loan Party consisting of cash, checks and other near-cash items shall be held by such Loan Party in trust for the Agent, segregated from other funds of such Loan Party, and shall, forthwith upon receipt by such Loan Party, be turned over to the Agent in the exact form received by such Loan Party (duly indorsed by such Loan Party to the Agent, if required). All Proceeds received by the Agent hereunder shall be held by the Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Agent in a Collateral Account (or by such Loan Party in trust for the Agent) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 5.5.

5.5 Application of Proceeds . At such intervals as may be agreed upon by the Borrower and the Agent or, if an Event of Default shall have occurred and be continuing, (x) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of Section 7 of the Credit Agreement with respect to the Borrower, automatically, (y) if such event is an Event of Default specified in paragraph (j) of Section 7 of the Credit Agreement, at any time as the Agent may be so directed by any Lender or (z) if such event is any other Event of Default, at any time as the Agent may be so directed by Lenders holding a majority in principal amount of the Secured Term Loans, the Agent may apply all or any part of Proceeds constituting Collateral, whether or not held in any Collateral Account, in payment of the Obligations in the following order: first, to any costs, fees and expenses incurred by the Agent in connection with this Agreement, the Credit Agreement, any other Loan Document or any of the Obligations (including the reasonable costs, fees and expenses of its agents and legal counsel, and any costs or expenses incurred in connection with the exercise by the Agent of any right or remedy under this Agreement, the Credit Agreement or any other Loan Document); second, to the ratable satisfaction of the Obligations; and third, any balance of remaining Proceeds to the Borrower or to whomsoever may be lawfully entitled to receive the same. Any balance of such Proceeds remaining after the Obligations shall have been paid in full shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same.

5.6 Code and Other Remedies . If an Event of Default shall occur and be continuing, the Agent may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of the Agent under the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Loan Party or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Agent or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Loan Party, which right or equity is hereby waived and released. Each Loan Party further agrees, at the Agent’s request, to assemble the Collateral and make it available to the Agent at places which the Agent shall reasonably select, whether at such Loan Party’s premises or elsewhere. The Agent shall apply the net proceeds of any action taken by it pursuant to this Section 5.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Agent hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations, in the order as set forth in Section 5.5, and only after such application and after the payment by the Agent of any other amount required by any provision of law, including, without limitation, Section 9-615(a) of the New York UCC, need the Agent account for the surplus, if any, to any Loan Party. To the extent permitted by applicable law, each Loan Party waives all claims, damages and demands it may acquire against the Agent arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

5.7 Deficiency . Each Loan Party shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by the Agent to collect such deficiency.

SECTION 6. MISCELLANEOUS

6.1 Amendments In Writing . None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 9.1 of the Credit Agreement.

6.2 Notices . All notices, requests and demands to or upon the Agent or any Loan Party hereunder shall be effected in the manner provided for in Section 9.2 of the Credit Agreement.

6.3 No Waiver by Course of Conduct; Cumulative Remedies . The Agent shall not by any act (except by a written instrument pursuant to Section 6.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Agent any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Agent would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

6.4 Enforcement Expenses; Indemnification . Each Loan Party agrees to pay, and to save the Agent harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement, except to the extent such liabilities were caused by the gross negligence or willful misconduct of the Agent, as determined by a final and nonappealable decision of a court of competent jurisdiction. Each Loan Party agrees to pay, and to save the Agent harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent the Borrower would be required to do so pursuant to Section 9.5 of the Credit Agreement. The agreements in this Section 6.4 shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.

6.5 Successors and Assigns . This Agreement shall be binding upon the successors and assigns of each Loan Party and shall inure to the benefit of the Agent and its successors and assigns; provided that no Loan Party may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Agent.

6.6 Set-Off . Each Loan Party hereby irrevocably authorizes the Agent at any time and from time to time while an Event of Default shall have occurred and be continuing, without notice to such Loan Party or any other Loan Party, any such notice being expressly waived by each Loan Party, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Agent to or for the credit or the account of such Loan Party, or any part thereof in such amounts as the Agent may elect, against and on account of the obligations and liabilities of such Loan Party to the Agent hereunder and claims of every nature and description of the Agent against such Loan Party, in any currency, whether arising hereunder, under the Credit Agreement or any other Loan Document, as the Agent may elect, whether or not the Agent has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Agent shall notify such Loan Party promptly of any such set-off and the application made by the Agent of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent under this Section 6.6 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Agent may have.

6.7 Counterparts . This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

6.8 Severability . Any provision of this Agreement which 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.

6.9 Section Headings . The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

6.10 Integration . This Agreement, the other Loan Documents represent the agreement of the Loan Parties and the Agent with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Agent relative to subject matter hereof not expressly set forth or referred to herein, in the other Loan Documents.

6.11 GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK AND APPLICABLE FEDERAL LAW.

6.12 Submission to Jurisdiction; Waivers . Each Loan Party hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State and County of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Loan Party at its address referred to in Section 6.2 or at such other address of which the Agent shall have been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

6.13 Acknowledgments . Each Loan Party hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;

(b) the Agent has no fiduciary relationship with or duty to any Loan Party arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Loan Parties, on the one hand, and the Agent, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Loan Parties and the Agent or any Lender.

6.14 Releases . At such time as the Loans and the other Obligations shall have been paid in full, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Agent and each Loan Party hereunder (including all guarantee obligations) shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Loan Parties. At the request and sole expense of any Loan Party following any such termination, the Agent shall deliver to such Loan Party any Collateral held by the Agent hereunder, and execute and deliver to such Loan Party such documents as such Loan Party shall reasonably request to evidence such termination. If any of the Collateral shall be sold, transferred or otherwise disposed of by any Loan Party in a transaction permitted by the Credit Agreement, then the Agent, at the request and sole expense of such Loan Party, shall execute and deliver to such Loan Party all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral.

6.15 WAIVER OF JURY TRIAL . EACH GRANTOR AND THE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

[Remainder of This Page Left Intentionally Blank]

IN WITNESS WHEREOF, each of the undersigned has caused this Security Agreement to be duly executed and delivered as of the date first above written.

LOAN PARTIES :

CADIZ INC.

By:

Name:

Title:

CADIZ REAL ESTATE LLC

By:

Name:

Title:

AGENT :

LC CAPITAL MASTER FUND, LTD.

By:

Name:

Title:

Schedule 1

NOTICE ADDRESSES OF GRANTORS

c/o Cadiz Inc.

550 South Hope Street, Suite 2850

Los Angeles, CA 90071

Attention: Chief Financial Officer

Telecopy: 213-271-1614

Telephone: 213-271-1600

Schedule 2

DESCRIPTION OF INVESTMENT PROPERTY

Pledged Stock :

Issuer	Class of Stock	No. of Shares	Stock Certificate No.
Cadiz Real Estate LLC	Membership Interest	100% Interest	N/A

Pledged Notes :

Issuer	Payee	Principal Amount
N/A

Schedule 3

FILINGS AND OTHER ACTIONS REQUIRED

TO PERFECT SECURITY INTERESTS

Uniform Commercial Code Filings :

Loan Party	UCC Filing Jurisdictions
Cadiz Inc.	Delaware California San Bernardino County, California
Cadiz Real Estate LLC	Delaware California San Bernardino County, California

Patent and Trademark Filings :

None

Actions With Respect to Pledged Stock :

N/A

Schedule 4

LOCATION OF JURISDICTION OF ORGANIZATION

AND CHIEF EXECUTIVE OFFICE

Loan Party	Jurisdiction of Organization	Location of Chief Executive Office
Cadiz Inc.	Delaware	550 South Hope Street Suite 2850 Los Angeles, CA 90071
Cadiz Real Estate LLC	Delaware	550 South Hope Street Suite 2850 Los Angeles, CA 90071

Schedule 5

LOCATIONS OF INVENTORY AND EQUIPMENT

Loan Party	Locations
Cadiz Inc.	550 South Hope Street, Suite 2850, Los Angeles, CA 90071
Cadiz Real Estate LLC	550 South Hope Street, Suite 2850, Los Angeles, CA 90071 96-726 National Trails Highway, CA 92304

Schedule 6

INTELLECTUAL PROPERTY

Copyrights and Copyright Licenses :

None

Patents and Patent Licenses :

None

Trademarks and Trademark Licenses :

None

Exhibit E

[Attached]

This Amendment was prepared

by and when recorded should

be mailed to:

Jubin Meraj, Esq.

Manatt, Phelps & Phillips, LLP

11355 W. Olympic Blvd.

Los Angeles, California 90064

Space above this line for recorder’s use

THIRD AMENDMENT OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING

KNOW ALL PERSONS BY THESE PRESENTS:

THIS THIRD AMENDMENT OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (this “ Amendment ”) is made as of the [__] day of __________, 2013 by and among CADIZ INC., a Delaware corporation with an address of 550 South Hope Street, Suite 2850, Los Angeles, California 90071 (“ Cadiz ”) and CADIZ REAL ESTATE LLC, a Delaware limited liability company with an address of 550 South Hope Street, Suite 2850, Los Angeles, California 90071 (“ CRE ”, together with Cadiz, collectively the “ Trustor ”), in favor of Chicago Title Company, having an office at 560 East Hospitality Lane, San Bernardino, California 92408, as trustee (the “ Trustee ”) for the benefit of LC CAPITAL MASTER FUND, LTD., a company organized under the laws of the Cayman Islands, with an address of c/o Lampe, Conway & Co. LLC, 680 Fifth Avenue, 12th Floor, New York, New York 10019, as administrative agent for the benefit of the Lenders (as defined below) (the “ Beneficiary ”).

WITNESSETH

WHEREAS, reference is made to that certain Credit Agreement dated as of June 26, 2006, among Trustor as borrower, the lenders party thereto and Peloton Partners LLP as administrative agent (“ Peloton Agent ”); as amended pursuant to that certain Amendment No. 1 to Credit Agreement dated as of September 29, 2006 by and among Trustor, the lenders party thereto and Peloton Agent; as further amended by that certain Amendment No. 2 to Credit Agreement and Amendment No. 1 to Registration Rights Agreement dated as of June 4, 2009 by and among Borrower, the lenders party thereto and Beneficiary, as administrative agent; as further amended by that certain Amendment No. 3 to Credit Agreement and Amendment No. 2 to Registration Rights Agreement dated as of October 19, 2010, by and among the Borrowers, the lenders party thereto and Beneficiary, as administrative agent; as further amended by that certain Amendment No. 4 to Credit Agreement dated as of July 25, 2011, by and among the Borrowers, the lenders party thereto and Beneficiary, as administrative agent; as further amended by that certain Amendment No. 5 to Credit Agreement and Amendment No. 3 to Registration Rights Agreement dated as of August 8, 2012, by and among the Borrowers, the lenders party thereto and Beneficiary, as administrative agent; as further amended by that certain Amendment No. 6 to Credit Agreement and Amendment No. 4 to Registration Rights Agreement dated as of October 30, 2012, by and among the Borrowers, the lenders party thereto and Beneficiary, as administrative agent (collectively, the “ Original Credit Agreement ”); and as further amended by that certain Amended and Restated Credit Agreement dated concurrently herewith (the “ Amended and Restated Credit Agreement ”), by and among the Borrowers, the lenders party thereto and Beneficiary, as administrative agent (as the same may be further amended and supplemented from time to time, and together with the Original Credit Agreement, the “ Credit Agreement ”);

WHEREAS, as security for the promises, terms, conditions, agreements and obligations imposed on the Trustor under the Original Credit Agreement, the Trustor executed and delivered to the Trustee, for the benefit of Peloton Agent, that certain Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated as of June 26, 2006 and recorded on June 29, 2006 as Document Number 2006-0445332 in the Official Records in the County of San Bernardino of the State of California (the “ Official Records ”), as amended by that certain First Amendment of Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing dated October 19, 2010 and recorded on October 20, 2010 as Document Number 2010-0434229 in the Official Records, and as further amended by that certain Second Amendment of Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing dated October 30, 2012 and recorded on November 28, 2012 as Document Number 2012-0506328 in the Official Records (collectively, the “ Existing Deed of Trust ”), which covers the real property more particularly described therein;

WHEREAS, the Existing Deed of Trust was assigned from Peleton Agent, as administrative agent, to Beneficiary, as administrative agent, by that certain Assignment of Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated May 22, 2008 and recorded on July 3, 2008 as Document Number 2008-0302078 in the Official Records in the County of San Bernardino of the State of California (the “ Assignment of Deed of Trust ”);

WHEREAS, concurrent herewith, the Trustor and Beneficiary are entering into the Amended and Restated Credit Agreement;

WHEREAS, the Trustor and the Beneficiary desire that the Existing Deed of Trust continue to secure the promises, terms, conditions, agreements and obligations imposed on the Trustor under the Credit Agreement and the other Loan Documents; and

WHEREAS, the Trustor and the Beneficiary desire to amend, extend and modify the Existing Deed of Trust, and the liens created thereby, as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree that the Existing Deed of Trust shall be hereby amended and modified as follows:

Section 1. Defined Terms . Each capitalized term used herein and not otherwise defined herein shall have the meaning assigned thereto in the Existing Deed of Trust, as amended by this Amendment, or if not defined therein, in the Credit Agreement. Each reference in the Existing Deed of Trust to “this Deed of Trust” shall be deemed to be a reference to the Existing Deed of Trust, as amended by this Amendment. The term “Lender” or “Lenders” as used herein shall refer to the Lenders (as defined in the Credit Agreement) holding Secured Term Loans.

Section 2. Modification . The Existing Deed of Trust is hereby amended as follows:

(a) All references to the “Credit Agreement” shall mean the Amended and Restated Credit Agreement, as further amended, modified or restated from time to time;

(b) The reference in Article I, Section B.1.1(i) thereof to “payment to the Beneficiary of indebtedness in the total principal amount of up to $64,597,491.45, with interest accrued or accruing thereon at the rate and in the manner set forth in the Credit Agreement and any and all modifications, extensions, renewals and replacements thereof are by this reference hereby made a part hereof” is hereby deleted and the following is hereby substituted therefor: “payment to the Beneficiary of indebtedness in connection with the Secured Term Loans in the total principal amount of up to $30,000,000, with interest accrued or accruing thereon at the rate and in the manner set forth in the Credit Agreement and any and all modifications, extensions, renewals and replacements thereof are by this reference hereby made a part hereof”.

Section 3. Confirmation and Restatement . The Trustor, in order to continue to secure the payment of the Obligations, hereby confirms and restates (a) the conveyance pursuant to the Existing Deed of Trust to the Trustee for the benefit of the Beneficiary of the Trust Estate and (b) the grant pursuant to the Existing Deed of Trust of a security interest in the Collateral and any other personal property comprising the Trust Estate. Nothing contained in this Amendment shall be construed as (a) a novation of the Obligations or (b) a release or waiver of all or any portion of the conveyance to the Trustee for the benefit of the Beneficiary of the Trust Estate or of the grant to the Beneficiary of a security interest in the Collateral and any other personal property comprising the Trust Estate pursuant to the Existing Deed of Trust.

Section 4. Representations and Warranties . The Trustor hereby represents and warrants that the representations and warranties made by it in the Existing Deed of Trust are true and complete in all material respects on and as of the date hereof as if made on and as of the date hereof.

Section 5. Covenants . The Trustor hereby covenants and agrees to perform each and every duty and obligation of the Trustor contained in the Existing Deed of Trust as amended by this Amendment.

Section 6. Effectiveness . This Amendment shall be effective as of the day and year first written above upon its execution and delivery by the Trustor. Except as herein provided, the Existing Deed of Trust shall remain unchanged and in full force and effect.

Section 7. Counterparts . This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one instrument.

[Signature Page Follows]

IN WITNESS WHEREOF, this Amendment has been duly executed by the Trustor as of the day and year first above written.

TRUSTOR:

CADIZ INC.

By:

Name: Timothy J. Shaheen

Title: CFO

CADIZ REAL ESTATE LLC

By:

Name: Timothy J. Shaheen

Title: CEO

AGREED TO AND ACCEPTED :

LC CAPITAL MASTER FUND, LTD.

as the Beneficiary

By: ____________________

Name: ____________________

Title: ____________________

Signature Page to Third Amendment to Deed of Trust

[Trustor]

State of California )

)

County of Los Angeles )

On ___________, 2013, before me, _______________________________Notary Public, personally appeared, Timothy J. Shaheen, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature (Seal)

[Beneficiary]

State of California )

)

County of Los Angeles )

On ___________, 2013, before me, _______________________________Notary Public, personally appeared, _______________________________ who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature (Seal)

This Amendment was prepared

by and when recorded should

be mailed to:

Jubin Meraj, Esq.

Manatt, Phelps & Phillips, LLP

11355 W. Olympic Blvd.

Los Angeles, California 90064

Space above this line for recorder’s use

SECOND AMENDMENT OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING

KNOW ALL PERSONS BY THESE PRESENTS:

THIS SECOND AMENDMENT OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (this “ Amendment ”) is made as of the [__] day of __________, 2013 by and among CADIZ INC., a Delaware corporation with an address of 550 South Hope Street, Suite 2850, Los Angeles, California 90071 (“ Cadiz ”), CADIZ REAL ESTATE LLC, a Delaware limited liability company with an address of 550 South Hope Street, Suite 2850, Los Angeles, California 90071 (“ CRE ”) and Octagon Partners, LLC, a California limited liability company (“ Octagon ” and together with Cadiz and CRE, collectively the “ Trustor ”), in favor of Chicago Title Company, having an office at 560 East Hospitality Lane, San Bernardino, California 92408, as trustee (the “ Trustee ”) for the benefit of LC CAPITAL MASTER FUND, LTD., a company organized under the laws of the Cayman Islands, with an address of c/o Lampe, Conway & Co. LLC, 680 Fifth Avenue, 12th Floor, New York, New York 10019, as administrative agent for the benefit of the Lenders (as defined below) (the “ Beneficiary ”).

WITNESSETH

WHEREAS, as security for the promises, terms, conditions, agreements and obligations imposed on the Trustor under the Original Credit Agreement, the Trustor executed and delivered to the Trustee, for the benefit of Beneficiary as administrative agent, that certain Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated as of December 3, 2010 and recorded on December 3, 2010 as Document Number 2010-0513716 in the Official Records in the County of San Bernardino of the State of California, as amended by that certain First Amendment of Deed of Trust, Assignment of Leases and Rents, Security Agreement, Financing Statement and Fixture Filing dated October 30, 2012 and recorded on November 28, 2012 as Document Number 2012-0506329 in the Official Records (the “ Existing Deed of Trust ”), which covers the real property more particularly described therein;

WHEREAS, concurrent herewith, the Trustor and Beneficiary are entering into the Amended and Restated Credit Agreement;

WHEREAS, the Trustor and the Beneficiary desire to amend, extend and modify the Existing Deed of Trust, and the liens created thereby, as set forth herein.

Section 2. Modification . The Existing Deed of Trust is hereby amended as follows:

(a) All references to the “Credit Agreement” shall mean the Amended and Restated Credit Agreement, and as further amended, modified or restated from time to time;

Section 5. Covenants . The Trustor hereby covenants and agrees to perform each and every duty and obligation of the Trustor contained in the Existing Deed of Trust as amended by this Amendment.

Section 7. Counterparts . This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one instrument.

IN WITNESS WHEREOF, this Amendment has been duly executed by the Trustor as of the day and year first above written.

TRUSTOR:

CADIZ INC.

By:

Name: Timothy J. Shaheen

Title: CFO

CADIZ REAL ESTATE LLC

By:

Name: Timothy J. Shaheen

Title: CEO

AGREED TO AND ACCEPTED :

LC CAPITAL MASTER FUND, LTD.

as the Beneficiary

By: ____________________

Name: ____________________

Title: ____________________

Signature Page to Second Amendment to Deed of Trust

TRUSTOR:

OCTAGON PARTNERS, LLC

By:

Name: Timothy J. Shaheen

Title: Manager

Signature Page to Second Amendment to Deed of Trust

[Trustor]

State of California )

)

County of Los Angeles )

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature (Seal)

[Beneficiary]

State of California )

)

County of Los Angeles )

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature (Seal)

Exhibit F

[Attached]

Form of Closing Certificate

CADIZ INC.

CADIZ REAL ESTATE LLC

CLOSING CERTIFICATE

March 5, 2013

Each of the undersigned, Scott Slater, Chief Executive Officer of Cadiz Inc., a Delaware corporation (the “ Company ”), on behalf of and solely in his capacity as an officer of the Company and Timothy J. Shaheen, Chief Executive Officer of Cadiz Real Estate LLC, a Delaware limited liability company (the “ LLC ”), on behalf of and solely in his capacity as an officer of the LLC, does hereby certify as of the date hereof as follows:

1. This Closing Certificate (this “ Certificate ”) is being delivered pursuant to Section 4.1(h) of that certain Amended and Restated Credit Agreement, dated as of the date hereof (the “ Credit Agreement ”, capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement), by and among the Company and the LLC, as borrowers, the lenders party thereto and LC Capital Master Fund, Ltd., as administrative agent.

2. Attached hereto as Exhibit 1 is a true, correct and complete copy of the resolutions of the board of directors of the Company relating to the approval of the Credit Agreement and the other Loan Documents and any other documents required thereunder or contemplated thereby that are required to be executed, delivered and performed by the Company pursuant thereto, which approval is in full force and effect and has not been altered, amended or rescinded in any way.

3. Attached hereto as Exhibit 2 is a true, correct and complete copy of the resolutions of the board of managers of the LLC relating the approval of the Credit Agreement and the other Loan Documents and any other documents required thereunder or contemplated thereby that are required to be executed, delivered and performed by the LLC pursuant thereto, which approval is in full force and effect and has not been altered, amended or rescinded in any way.

4. The person named below has been duly elected (or appointed) and qualified and is an acting officer of the Company as of the date hereof, holding the office set forth opposite his name, and the signature set forth below opposite his name being the genuine signature of such officer and he is authorized to execute and deliver this Certificate and all other documents required of the Company in connection with the execution, delivery and performance of the Credit Agreement and the other Loan Documents and any other documents required thereunder or contemplated thereby.

Name	Title	Signature
Scott Slater	Chief Executive Officer
Timothy J. Shaheen	Chief Financial Officer

5. The person named below has been duly elected (or appointed) and qualified and is an acting officer of the LLC as of the date hereof, holding the office set forth opposite his name, and the signature set forth below opposite his name being the genuine signature of such officer and he is authorized to execute and deliver this Certificate and all other documents required of the LLC in connection with the execution, delivery and performance of the Credit Agreement and the other Loan Documents and any other documents required thereunder or contemplated thereby.

Name	Title	Signature
Timothy J. Shaheen	Chief Executive Officer

6. The person named below has been duly elected (or appointed) and qualified and is an acting officer of Octagon Partners, LLC (“ Octagon ”) as of the date hereof, holding the office set forth opposite his name, and the signature set forth below opposite his name being the genuine signature of such officer and he is authorized to execute and deliver this Certificate and all other documents required of Octagon in connection with the execution, delivery and performance of the Mortgage Amendments and any other documents required thereunder or contemplated thereby.

Name	Title	Signature
Timothy J. Shaheen	Chief Executive Officer

7. The representations and warranties of the Company and the LLC under the Loan Documents are true and correct as if made on the date hereof (or, if such representation or warranty is expressly stated to have been made as of a specific date, such representation or warranty is true and correct as of such specific date) and (b) no Default or Event of Default has occurred and is, as of the date hereof, continuing under the Loan Documents.

8. Attached hereto as Exhibit 3 (i) is a true and complete copy of the Certificate of Incorporation of the Company, as amended, certified by the Secretary of State of the State of Delaware (the “ DSOS ”) and (ii) is a true and complete copy of the Certificate of Formation of the LLC, certified by the DSOS.

9. Attached hereto as Exhibit 4 (i) is a true and complete copy of the Bylaws of the Company, as amended, and such document has not been further amended, modified, revoked or rescinded and is in full force and effect as of the date hereof and (ii) is a true and complete copy of the Limited Liability Company Agreement of the LLC, as amended, and such document has not been further amended, modified, revoked or rescinded and is in full force and effect as of the date hereof.

10. Attached hereto as Exhibit 5 (i) are true and complete copies of good standing certificates for the Company and the LLC, certified by the DSOS and (ii) are true and complete copies of certificates of status for the Company and the LLC, certified by the Secretary of State of the State of California.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the undersigned has executed this Certificate and caused this Certificate to be delivered as of the 4th day of March, 2013.

By: ________________________

Name: Scott Slater

Title: Chief Executive Officer, Cadiz Inc.

By: ________________________

Name: Timothy J. Shaheen

Title: Chief Financial Officer and Secretary, Cadiz Inc.

I, Timothy J. Shaheen, the Chief Financial Officer and Secretary of the Company, do hereby certify on behalf of the Company and solely in my capacities as Chief Financial Officer and Secretary that Scott Slater is the duly elected, qualified and acting Chief Executive Officer of the Company, that the signature set forth above is his genuine signature and that he is authorized to execute and deliver this Certificate and all other documents required of the Company in connection with the execution, delivery and performance of the Credit Agreement and the Loan Documents and any other documents required thereunder or contemplated thereby.

By: ________________________

Name: Timothy J. Shaheen

Title: Chief Financial Officer and Secretary, Cadiz Inc.

I, Scott Slater, the Chief Executive Officer of the Company, the holder of all of the outstanding membership interests of the LLC and of Octagon, do hereby certify on behalf of the Company, the LLC and Octagon and solely in my capacity as Chief Executive Officer of the Company that Timothy J. Shaheen is the duly elected, qualified and acting Chief Financial Officer of the Company, Chief Executive Officer of the LLC and Manager of Octagon, that the signature set forth above is his genuine signature and that he is authorized to execute and deliver this Certificate and all other documents required of the Company, the LLC and Octagon in connection with the execution, delivery and performance of the Credit Agreement and the Loan Documents and any other documents required thereunder or contemplated thereby.

By: ________________________

Name: Scott Slater

Title: Chief Executive Officer, Cadiz Inc.

EXHIBIT 1

Company Resolutions

EXHIBIT 2

LLC Resolutions

EXHIBIT 3

Certificates

EXHIBIT 4

Organizational Documents

EXHIBIT 5

Good Standings

Exhibit G

Amendment No. 2 to Limited Liability Company Agreement of Cadiz Real Estate LLC

EXHIBIT 10.40

CADIZ INC.,

as Issuer

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee

Indenture

Dated as of March 5, 2013

7.00% Convertible Senior Notes due 2018

TABLE OF CONTENTS

Page

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01

Definitions

Section 1.02

Other Definitions

Section 1.03

Rules of Construction

Section 1.04

Acts of Holders

ARTICLE 2

THE NOTES

Section 2.01

Form, Dating and Denominations; Legends

Section 2.02

Execution and Authentication

Section 2.03

Registrar, Paying Agent and Conversion Agent

Section 2.04

Paying Agent to Hold Money in Trust

Section 2.05

Noteholder Lists

Section 2.06

Transfer and Exchange

Section 2.07

Replacement Notes

Section 2.08

Outstanding Notes

Section 2.09

Treasury Notes

Section 2.10

Temporary Notes

Section 2.11

Cancellation

Section 2.12

CUSIP Numbers 7

1 7

Section 2.13

Additional Transfer and Exchange Requirements

1 7

Section 2.14

Additional Notes

Section 2.15

Accretion

Section 2.16

Calculation of Original Issue Discount

ARTICLE 3

REPURCHASES

Section 3.01

Repurchase or Conversion Upon a Change in Control

Section 3.02

Effect of Repurchase Notice

2 5

Section 3.03

Deposit of Fundamental Change Repurchase Price

Section 3.04

Notes Repurchased in Part

Section 3.05

Covenant to Comply with Securities Laws upon Repurchase of Notes

ARTICLE 4

COVENANTS

Section 4.01

Payment of Notes

Section 4.02

Maintenance of Office or Agency

Section 4.03

Existence

Section 4.04

Annual Reports

Section 4.05

Reports to Trustee

Section 4.06

Rule 144A Information Requirements

Section 4.07

Reservation of Common Stock

Section 4.08

Issuance of Shares

Section 4.09

Incurrence of Debt

Section 4.10

Asset Sales

ARTICLE 5

CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS

Section 5.01

Consolidation, Merger, Sale or Lease of Assets by the Company

ARTICLE 6

DEFAULT AND REMEDIES

Section 6.01

Events of Default

Section 6.02

Acceleration

Section 6.03

Other Remedies

Section 6.04

Waiver of Past Defaults

Section 6.05

Control by Majority

Section 6.06

Limitation on Suits

Section 6.07

Rights of Holders to Receive Payment

Section 6.08

Collection Suit by Trustee

Section 6.09

Trustee May File Proofs of Claim 6

3 6

Section 6.10

Priorities

Section 6.11

Restoration of Rights and Remedies

Section 6.12

Undertaking for Costs

Section 6.13

Rights and Remedies Cumulative

Section 6.14

Delay or Omission Not Waiver

ARTICLE 7

THE TRUSTEE

Section 7.01

General

Section 7.02

Certain Rights of Trustee

Section 7.03

Individual Rights of Trustee

Section 7.04

Trustee’s Disclaimer

Section 7.05

Notice of Default

Section 7.06

Reports by Trustee to Holders

Section 7.07

Compensation and Indemnity

Section 7.08

Replacement of Trustee

Section 7.09

Successor Trustee by Merger

Section 7.10

Eligibility

Section 7.11

Money Held in Trust

ARTICLE 8

DISCHARGE

Section 8.01

Satisfaction and Discharge of this Indenture

Section 8.02

Application of Trust Money

Section 8.03

Repayment to Company

Section 8.04

Reinstatement

ARTICLE 9

AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 9.01

Amendments Without Consent of Holders

Section 9.02

Amendments With Consent of Holders

4 5

Section 9.03

Effect of Consent

Section 9.04

Trustee’s Rights and Obligations

ARTICLE 10

CONVERSION

Section 10.01

Conversion Privilege

Section 10.02

Conversion Procedures; Conversion Settlement

Section 10.03

Fractional Shares

Section 10.04

Taxes on Conversion

Section 10.05

Company to Provide Common Stock

Section 10.06

Adjustment for Change in Capital Stock

Section 10.07

Adjustment for Rights, Options or Warrants Issue

Section 10.08

Adjustment for Other Distributions

Section 10.09

Adjustment for Cash Dividends

Section 10.10

Adjustment for Tender Offer

Section 10.11

Provisions Governing Adjustment to Conversion Rate

Section 10.12

Disposition Events

Section 10.13

Rights Issued in Respect of Common Stock Issued Upon Conversion

Section 10.14

When Adjustment May Be Deferred

Section 10.15

When No Adjustment Required

Section 10.16

Notice of Adjustment

Section 10.17

Notice of Certain Transactions

Section 10.18

Company Determination Final

Section 10.19

Trustee’s Adjustment Disclaimer

Section 10.20

Simultaneous Adjustments

Section 10.21

Successive Adjustments

Section 10.22

Withholding Taxes

Section 10.23

Restricted Shares

Section 10.24

Limitation on Issuance of Common Stock

ARTICLE 11

REDEMPTION

Section 11.01

No Right to Redeem

ARTICLE 12

MISCELLANEOUS

Section 12.01

Trust Indenture Act of 1939

Section 12.02

Noteholder Communications; Noteholder Actions

Section 12.03

Notices

Section 12.04

Communication by Holders with Other Holders

Section 12.05

Certificate and Opinion as to Conditions Precedent

Section 12.06

Statements Required in Certificate or Opinion

Section 12.07

Legal Holiday

Section 12.08

Rules by Trustee, Paying Agent, Conversion Agent and Registrar

Section 12.09

Governing Law; Waiver of Jury Trial

Section 12.10

No Adverse Interpretation of Other Agreements

Section 12.11

Successors

Section 12.12

Counterparts

Section 12.13

Severability

Section 12.14

Table of Contents and Headings

Section 12.15

No Liability of Directors, Officers, Employees, Incorporators, Members and Stockholders

Section 12.16

U.S.A. Patriot Act

Section 12.17

Force Majeure

SCHEDULES

SCHEDULE I Accretion Schedule

EXHIBITS

EXHIBIT A Form of Note

EXHIBIT B DTC Legend

EXHIBIT C OID Legend

EXHIBIT D Transfer Restriction Legend

EXHIBIT E Certificate for Exchange or Transfer of Transfer Restricted Notes

EXHIBIT F Option of Holder to Elect Purchase

INDENTURE dated as of March 5, 2013 between Cadiz Inc., a Delaware corporation (the “ Company ”) and The Bank of New York Mellon Trust Company, N.A., as Trustee.

RECITALS

The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of the Company’s 7.00% Convertible Senior Notes due 2018 (the “ Notes ”). All things necessary to make this Indenture a legal, valid and binding agreement of the Company, in accordance with its terms, have been done, and the Company has done all things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee and duly issued by the Company, the valid obligations of the Company as hereinafter provided.

THIS INDENTURE WITNESSETH

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the parties hereto covenant and agree, for the equal and proportionate benefit of all Holders, as follows:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.

“ Accretion Date ” means, as applicable, each March 5, June 5, September 5 and December 5 of each year, commencing June 5, 2013.

“ Accreted Principal Amount ” means the Original Principal Amount as adjusted upward for accretion pursuant to Section 2.15.

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”) with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Securities, by contract or otherwise.

“ Agent ” means any Registrar, Paying Agent or Conversion Agent.

“ Agent Member ” means a member of, or a participant in, the Depositary.

“ Applicable Conversion Rate ” means the Conversion Rate on any day.

“ Applicable Procedures ” means, with respect to any transfer, exchange or conversion of beneficial ownership interests in a Global Note, the rules and procedures of the Depositary, in each case to the extent applicable to such transfer, exchange or conversion.

“ Asset Sale ” means “Asset Sale” as defined in the Credit Agreement.

“ Bankruptcy Law ” means Title 11 of the United States Code (or any successor thereto) or any similar federal or state law for the relief of debtors.

“ Board of Directors ” means the board of directors or comparable governing body of the Company, or any committee thereof duly authorized to act on its behalf.

“ Business Day ” means any weekday that is not a day on which banking institutions in The City of New York or the place of payment of the Notes are authorized or obligated to close.

“ Capital Lease Obligations ” means, with respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Indenture, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

“ Capital Stock ” means, with respect to any Person, any and all shares of stock of a corporation, partnership interests or other equivalent interests (however designated, whether voting or non-voting) in such Person’s equity, entitling the holder to receive a share of the profits and losses, and a distribution of assets, after liabilities, of such Person.

“ Cash ” means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts.

“ Certificated Note ” means a Note in registered individual form without interest coupons.

“ Close of Business ” means 5:00 p.m. (New York City time).

“ Closing Date ” means March 5, 2013.

“ Closing Price ” of Common Stock or any other security on any date means the closing sale price per share (or, if no closing sale price is reported, the average of the last bid and last ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. securities exchange on which Common Stock or such other security is traded. If Common Stock or such other security is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the Closing Price will be the last quoted bid price for Common Stock or such other security in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If Common Stock or such other security is not so quoted, the Closing Price will be the average of the mid-point of the last bid and ask prices for Common Stock or such other security on the relevant date from each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose. The Closing Price will be determined without reference to extended or after hours trading.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Commission ” means the Securities and Exchange Commission.

“ Commodity Price Protection Agreement ” means, with respect to any Person, any forward contract, futures contract, commodity swap, commodity option or other similar agreement or arrangement (including derivative agreements or arrangements) as to which such Person is a party or a beneficiary relating to, or the value of which is dependent upon or which is designed to protect such Person against, fluctuations in commodity prices.

“ Common Stock ” means common stock of the Company, $0.01 par value, as it exists on the date of this Indenture and any shares of any class or classes of Capital Stock of the Company resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable on conversion of Notes shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.

“ Company ” means the party named as such in the first paragraph of this Indenture or any successor obligor under this Indenture and the Notes pursuant to Section 5.01.

“ Corporate Trust Office ” means an office of the Trustee at which the corporate trust business of the Trustee is principally administered, which at the date of this Indenture is 400 South Hope Street, Suite 400, Los Angeles, CA 90071.

“ Credit Agreement ” means the Amended and Restated Credit Agreement, dated as of the date hereof, among the Company, Cadiz Real Estate LLC, LC Capital Master Fund, Ltd., as administrative agent, and the lenders party thereto, as amended, extended, renewed, restated, supplemented or otherwise modified from time to time, and one or more agreements, including an indenture, governing Refinancing Indebtedness Incurred to Refinance, in whole or in part, the Debt then outstanding under the Credit Agreement or one or more successor Credit Agreements; provided , however , that the principal amount (or accreted value, in the case of Debt issued at a discount) of the Refinancing Indebtedness does not exceed the principal amount (or accreted value, as the case may be) of the Debt Refinanced plus the amount of accrued and unpaid interest on the Debt Refinanced, any premium paid to holders of the Debt Refinanced and reasonable expenses (including underwriting discounts) incurred in connection with the Incurrence of the Refinancing Indebtedness.

“ Currency Agreement ” means, with respect to any Person, any foreign exchange contract, currency swap agreement or other similar agreement or arrangement (including derivative agreements or arrangements) as to which such Person is a party or a beneficiary designed to hedge foreign currency risk of such Person.

“ Debt ” means, with respect to any Person at any date, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables incurred in the ordinary course of such Person’s business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all Capital Lease Obligations of such Person, (vi) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (vii) the liquidation value of all redeemable preferred Capital Stock of such Person, (viii) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (i) through (vii) above, (ix) all obligations of the kind referred to in clauses (i) through (viii) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (x) all obligations under Hedging Obligations of such Person. The Debt of any Person shall include the Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Debt expressly provide that such Person is not liable therefor.

“ Default ” means any event that is, or after notice or passage of time or both would be, an Event of Default.

“ Depositary ” means DTC or the nominee thereof, or any successor thereto.

“ DTC ” means The Depository Trust Company, a New York corporation, and its successors.

“ DTC Legend ” means the legend set forth in Exhibit B.

“ Exchange Act ” means the Securities Exchange Act of 1934, and the rules and regulations of the Commission thereunder, in each case as amended.

“ Exchange Agreement ” means the Exchange Agreement, dated as of March 4, 2013, by and among the Company, LC Capital Master Fund, Ltd., Milfam II LP and Water Asset Management Managed Account #1, L.L.C.

“ Exchange Transaction ” refers to the transactions consummated pursuant to the Exchange Agreement.

“ Ex-Date ” means, with respect to any issuance, dividend or distribution on Common Stock, the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance, dividend or distribution.

“ GAAP ” means generally accepted accounting principles in the United States of America, as in effect from time to time.

“ Global Note ” means a Note in registered global form without interest coupons.

“ Guarantee Obligation ” means, with respect to any Person (the “ Guaranteeing Person ”), any obligation, including a reimbursement, counterindemnity or similar obligation, of the Guaranteeing Person that guarantees or in effect guarantees, or which is given to induce the creation of a separate obligation by another Person (including any bank under any letter of credit) that guarantees or in effect guarantees, any Debt, leases, dividends or other obligations (the “ Primary Obligations ”) of any other third Person (the “ Primary Obligor ”) in any manner, whether directly or indirectly, including any obligation of the Guaranteeing Person, whether or not contingent, (i) to purchase any such Primary Obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such Primary Obligation or (2) to maintain working capital or equity capital of the Primary Obligor or otherwise to maintain the net worth or solvency of the Primary Obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such Primary Obligation of the ability of the Primary Obligor to make payment of such Primary Obligation or (iv) otherwise to assure or hold harmless the owner of any such Primary Obligation against loss in respect thereof; provided, however , that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any Guaranteeing Person shall be deemed to be the maximum amount for which such Guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such Primary Obligation and the maximum amount for which such Guaranteeing Person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such Guaranteeing Person’s maximum reasonably anticipated liability in respect thereof as determined by the Guaranteeing Person in good faith.

“ Hedging Obligations ” mean, with respect to any Person, the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Price Protection Agreement.

“ Holder ” or “ Noteholder ” means the registered holder of any Note.

“ Incur ” means, with respect to any Debt or other obligation of any Person, to create, issue, incur (including by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Debt or other obligation on the balance sheet of such Person (and “ Incurrence ,” “ Incurred ” and “ Incurring ” will have meanings correlative to the foregoing); provided that a change in GAAP that results in an obligation of such Person that exists at such time becoming Debt will not be deemed an Incurrence of such Debt. Accrual of interest, the accretion of accreted value, the payment of interest in the form of additional Debt and increases in Debt outstanding solely as a result of fluctuations in the exchange rate of currencies will not be deemed to be an Incurrence of Debt. Any Debt issued at a discount (including Debt on which interest is payable through the issuance of additional Debt) will be deemed Incurred at the time of original issuance of the Debt at the accreted amount thereof.

“ Indenture ” means this indenture, as amended or supplemented from time to time.

“ Indirect Participant ” means an entity that, with respect to any Depositary, clears through or maintains a direct or indirect, custodial relationship with a Participant.

“ Initial Notes ” means the Notes issued on the Closing Date and any Notes issued in replacement thereof, which Initial Notes shall be Transfer Restricted Notes as of the Closing Date.

“ Interest Rate Agreement ” means, with respect to any Person, any interest rate protection agreement, interest rate swaps, caps, floors or collars, option, future or derivative agreements or arrangements and similar agreements or arrangements and/or other types of hedging agreements as of which such Person is a party or beneficiary designed to hedge interest rate risk of such Person.

“ Lien ” means any security interest, pledge, lien or other encumbrance.

“ Market Disruption Event ” means, with respect to Common Stock or any other security, the occurrence or existence for more than one-half hour period in the aggregate on any Scheduled Trading Day for Common Stock or such other security of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in Common Stock or such other security or in any options, contracts or future contracts relating to Common Stock or such other security, and such suspension or limitation occurs or exists at any time before 1:00 p.m. (New York City time) on such day.

“ Maturity Date ” means March 5, 2018.

“ NASDAQ ” means the NASDAQ Stock Market or any successor thereto.

“ Net Cash Proceeds ” means “Net Cash Proceeds” as defined in the Credit Agreement.

“ Notes ” has the meaning assigned to such term in the Recitals.

“ Officer ” means the chairman of the Board of Directors, the president, the chief executive officer, any vice president, the chief financial officer, the treasurer, any assistant treasurer, the secretary or any assistant secretary, in each case of the Company.

“ Officers’ Certificate ” means a certificate of the Company signed in the name of the Company, (a) by the chairman of the Board of Directors, the president or chief executive officer or a vice president and (b) by the chief financial officer, the treasurer, any assistant treasurer, the secretary or any assistant secretary, for which such officer shall have no personal or individual liability.

“ Opinion of Counsel ” means a written opinion signed by legal counsel, who may be an employee of or counsel to the Company, reasonably satisfactory to the Trustee.

“ Original Issue Discount ” means the amount of ordinary interest income on a Note that must be accrued as original issue discount for U.S. federal income tax purposes.

“ Original Principal Amount ” means (a) with respect to Notes issued on the Closing Date $53,458,000 and (b) with respect to Additional Notes issued pursuant to Section 2.14, the principal amount of such Additional Notes on their date of issuance.

“ Participant ” means a Person who has an account with the Depositary.

“ Paying Agent ” refers to a Person engaged to perform the obligations of the Trustee in respect of payments made or funds held hereunder in respect of the Notes.

“ Person ” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity, including a government or political subdivision or an agency or instrumentality thereof.

“ principal ” of any Debt (including the Notes) means the principal amount of such Debt (or if such Debt was issued with original issue discount, the face amount of such Debt less the remaining unamortized portion of the original issue discount of such Debt), together with, unless the context otherwise indicates, any premium then payable on such Debt.

“ Qualified Water Project ” means a water conservation project, consistent with the water conservation project contemplated by the Final Environmental Impact Report for the Cadiz Valley Water Conservation, Recovery & Storage Project SCH# 2011031002 and certified by the Santa Margarita Water District on July 31, 2012, but that would transfer an average of not less than 20,000 acre-feet of water per annum to and/or from the groundwater basin underlying the Cadiz Valley portion of the Mortgaged Properties (as defined in the Credit Agreement) located in the eastern Mojave Desert portion of San Bernardino County, California and that requires the conversion of existing facilities and the construction of certain necessary facilities including an expansion of an existing wellfield on the property, a manifold system (including connecting piping and natural gas power supply), monitoring wells, pumping facilities, power facilities, pipelines and/or related buildings and appurtenances.

“ Refinance ” means, in respect of any Debt, to refinance, extend (including pursuant to any defeasance or discharge mechanism), renew, refund, repay, prepay, redeem, defease or retire, or to issue Debt in exchange or replacement for, such Debt in whole or in part. “ Refinanced ” and “ Refinancing ” will have correlative meanings.

“ Refinancing Indebtedness ” means any Debt of the Company or any of its Subsidiaries to the extent Incurred to substantially concurrently Refinance any other Debt of the Company or any of its Subsidiaries.

“ Responsible Officer ” means, when used with respect to the Trustee, any officer of the trustee within the Corporate Trust Office of the Trustee who has direct responsibility for the administration of this Indenture and shall also mean any other officer of the Trustee to whom any corporate trust matter is referred because of such person’s knowledge and familiarity with the particular subject matter.

“ Rule 144 ” means Rule 144 promulgated under the Securities Act or any successor to such Rule.

“ Rule 144A ” means Rule 144A promulgated under the Securities Act or any successor to such Rule.

“ Scheduled Trading Day ” means a day that is scheduled to be a Trading Day.

“ Securities Act ” means the Securities Act of 1933, and the rules and regulations of the Commission thereunder, in each case as amended.

“ Significant Subsidiary ” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1, Rule 1-02 of Regulation S-X under the Exchange Act.

“ Subsidiary ” means with respect to any Person, any corporation, association or other business entity of which more than 50% of the outstanding Voting Securities is owned, directly or indirectly, by, or, in the case of a partnership, the sole general partner or the managing partner or the only general partners of which are, such Person and one or more Subsidiaries of such Person (or a combination thereof).

“ Trading Day ” means, with respect to Common Stock or any other security, a day during which (a) trading in Common Stock or such other security generally occurs on NASDAQ or, if the Common Stock is not then listed on NASDAQ, on the principal other U.S. national or regional securities exchange, if any, on which the Common Stock is then listed or, if the Common Stock is not then listed on a U.S. national or regional securities exchange, on the principal other market, if any, on which the Common Stock is then admitted for trading, (b) there is no Market Disruption Event and (c) a Closing Price for Common Stock or such other security (other than a Closing Price referred to in the next to last sentence of such definition) is available for such securities exchange or market; provided that if Common Stock or such other security is not admitted for trading or quotation on or by any exchange, bureau or other organization, Trading Day will mean any Business Day.

“ Transfer Restricted Global Note ” means a Global Note that is a Transfer Restricted Note.

“ Transfer Restricted Note ” means a Note that is subject to resale restrictions pursuant to the Securities Act of 1933, and the rules and regulations thereunder, in each case as amended.

“ Treasury regulations ” means the U.S. federal income tax regulations, including temporary regulations, promulgated under the Code, as those regulations may be amended from time to time. Any reference herein to a specific Section of the Treasury regulations shall include any corresponding provisions of succeeding, similar, substitute, proposed or final Treasury regulations.

“ Trustee ” means the party named as such in the first paragraph of this Indenture or any successor trustee under this Indenture pursuant to Article 7.

“ Trust Indenture Act ” means the Trust Indenture Act of 1939, as amended.

“ Unrestricted Global Note ” means a Global Note that is not a Transfer Restricted Note.

“ Unrestricted Note ” means a Note that is not a Transfer Restricted Note.

“ Volume Weighted Average Price ” per share of Common Stock on any Trading Day means such price as displayed on Bloomberg (or any successor service) page CDZI <equity> VWAP (or, in connection with any Reference Property, the applicable price of such Reference Property as displayed on Bloomberg, as determined by the Company) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day. If such price is not available, the Volume Weighted Average Price means the market value per share of Common Stock on such day as determined by a nationally recognized independent investment banking firm retained for this purpose by the Company.

“ Voting Securities ” means, with respect to any Person, securities of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

Section 1.02. Other Definitions.

Term	Defined in Section
“Accretion Schedule”		2.15
“Act”		1.04
“Additional Notes”		2.14
“Asset Sale Offer”		4.10	(a)
“Averaging Period”		10.10
“Bankruptcy Default”		6.01	(h)
“Change in Control”		3.01	(a)
“Company Order”		2.02
“Conversion Agent”		2.03
“Conversion Date”		10.02	(a)
“Conversion Obligation”		10.01	(a)
“Conversion Rate”		10.01
“Conversion Shares”		10.24
“Custodian”		2.03
“Disposition Event”		10.12
“EDGAR”		4.04
“Event of Default”		6.01
“Exchange Notes”		2.01	(a)
“Expiration Date”		10.10
“Fundamental Change Election Date”		3.01	(a)
“Fundamental Change Repurchase Date”		3.01	(a)
“Fundamental Change Repurchase Price”		3.01	(a)
“Legal Holiday”		12.07
“Offer Amount”		4.10	(c)
“Offer Period”		4.10	(c)
“Paying Agent”		2.03
“Primary Registrar”		2.03
“Purchase Agreement Notes”		2.01	(a)
“Purchase Date”		4.10	(c)
“Reference Property”		10.12
“reference dividend”		10.09
“Register”		2.03
“Registrar”		2.03
“Regulatory Cap”		10.24
“Repurchase Notice”		3.01	(b)
“Restricted Shares”		10.23
“Rights”		10.13
“Settlement Amount”		10.02	(b)
“Shareholder Approval”		10.24
“Shareholder Rights Plan”		10.13
“Spin-Off”		10.08	(b)
“Transfer Restriction Legend”		2.14
“Trigger Event”		10.11
“Valuation Period”		10.08	(b)
“Weighted Average Consideration”		10.12

Section 1.03. Rules of Construction.

Unless the context otherwise requires or except as otherwise expressly provided,

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c) “herein,” “hereof” and other words of similar import refer to this Indenture as a whole and not to any particular Section, Article or other subdivision;

(d) all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to this Indenture unless otherwise indicated;

(e) references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended from time to time (or to successor statutes and regulations);

(f) in the event that a transaction meets the criteria of more than one category of permitted transactions or listed exceptions the Company may classify such transaction as it, in its sole discretion, determines;

(g) “or” is not exclusive;

(h) “including” means including, without limitation; and

(i) words in the singular include the plural, and words in the plural include the singular.

Section 1.04. Acts of Holders.

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments (which may take the form of an electronic writing or messaging or otherwise be in accordance with the Applicable Procedures or customary procedures of the Trustee) of substantially similar tenor signed by, or on behalf of, such Holders, including by an agent duly appointed in writing (which may be in electronic form); and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “ Act ” of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent (either of which may be in electronic form) shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.

ARTICLE 2

THE NOTES

Section 2.01. Form, Dating and Denominations; Legends.

(a) The Notes and the Trustee’s certificate of authentication will be substantially in the form attached as Exhibit A. The terms and provisions contained in the form of the Note annexed as Exhibit A constitute and are hereby expressly made a part of this Indenture. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Indenture and a Note, the terms of this Indenture will control. The Notes may have notations, legends or endorsements required by law, rules of or agreements with national securities exchanges to which the Company is subject, or usage. Each Note will be dated the date of its authentication. The Notes will be issuable only in minimum denominations of $1,000 in Original Principal Amount and any integral multiples of $1,000 in excess thereof. The Initial Notes are being issued by the Company either (i) pursuant to the Exchange Transactions entered into on the Closing Date (the “ Exchange Notes ”) or (ii) to qualified purchasers for Cash, in each case in a transaction exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act (the “ Purchase Agreement Notes ”). The Initial Notes shall be issued as Transfer Restricted Notes.

(b) Global Notes in General . Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that (i) it shall represent the aggregate Original Principal Amount of outstanding Notes from time to time endorsed thereon and that the aggregate Original Principal Amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions, repurchases and conversions and (ii) principal shall accrete on the principal amount of such Global Note pursuant to Section 2.15. Any adjustment of the aggregate principal amount of a Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.06 and shall be made on the records of the Trustee and the Depositary.

The Global Notes representing the Initial Notes shall initially be Transfer Restricted Notes.

Agent Members shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or under the Global Note, and the Depositary (including, for this purpose, its nominee) may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and Holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall (i) prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or (ii) impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note.

(c) Authentication and Delivery . The Company shall execute and the Trustee shall, in accordance with Section 2.02, authenticate and deliver initially one or more Notes that (i) shall be registered in the name of each applicable Holder, (ii) may be held by the Trustee as Custodian and (iii) shall bear a legend substantially to the effect set forth in Exhibit B.

(d) Transfer Restriction Legend . All Transfer Restricted Notes shall bear the Transfer Restriction Legend.

Section 2.02. Execution and Authentication.

An Officer shall sign the Notes for the Company by manual signature. Typographic errors or defects in any such facsimile signature shall not affect the validity or enforceability of any Note which has been authenticated and delivered by the Trustee.

If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

A Note shall not be valid until an authorized signatory of the Trustee signs manually the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

On the Closing Date, the Company shall issue, and the Trustee shall authenticate and make available for delivery, the Initial Notes for original issue in the aggregate Original Principal Amount of up to $53,458,000 upon the Company Order delivered with respect to the Closing Date. After the Closing Date, the Company may issue, and the Trustee shall authenticate and make available for delivery, Additional Notes issued pursuant to Section 2.14. The Trustee shall so authenticate and make available for delivery Notes upon receipt of a written order or orders of the Company signed by an Officer of the Company (a “ Company Order ”). The Company Order shall specify the Original Principal Amount of Notes to be authenticated, shall specify whether such Notes will be represented by a Transfer Restricted Note or an Unrestricted Note and shall specify the date on which each original issue of Notes is to be authenticated; provided that any Initial Notes shall be issued in the form of Transfer Restricted Notes that are Certificated Notes.

The Company at any time or from time to time may, without the consent of any Holder, issue Additional Notes pursuant to Section 2.14, which Additional Notes shall be entitled to all of the benefits of this Indenture. Such Additional Notes will be deemed Notes for all purposes hereunder, including without limitation in determining the necessary Holders who may take the actions or consent to the taking of actions as specified in this Indenture.

The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent shall have the same rights as an Agent to deal with the Company or an Affiliate of the Company.

The Notes shall be issuable only in registered form without coupons and only in minimum denominations of $1,000 Original Principal Amount and any integral multiples of $1,000 in excess thereof.

Section 2.03. Registrar, Paying Agent and Conversion Agent.

The Company shall maintain one or more offices or agencies where Notes may be presented for registration of transfer or for exchange (each, a “ Registrar ”), one or more offices or agencies where Notes may be presented for payment (each, a “ Paying Agent ”), one or more offices or agencies where Notes may be presented for conversion (each, a “ Conversion Agent ”) and one or more offices or agencies where notices and demands to or upon the Company in respect of the Notes and this Indenture may be delivered. The Company will at all times maintain a Paying Agent, Conversion Agent, Registrar and an office or agency where notices and demands to or upon the Company in respect of the Notes and this Indenture may be delivered in the United States. One of the Registrars (the “ Primary Registrar ”) shall keep a register of the Notes and of their transfer and exchange (the “ Register ”).

The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to maintain a Registrar, Paying Agent, or location for delivery of notices and demands in any place required by this Indenture, or fails to give the foregoing notice, the Trustee shall act as such. The Company or any Affiliate of the Company may act as Paying Agent (except for the purposes of Article 8); provided that if the Company or any Affiliate of the Company is acting as Paying Agent, and an Event of Default occurs under either of Section 6.01(f) or 6.01(g), thereafter the Trustee shall serve as the Paying Agent.

The Company hereby initially designates the Trustee as Paying Agent and Registrar, and each of the Corporate Trust Office of the Trustee and the office or agency of the Trustee in the United States (located at 400 South Hope Street, Suite 400, Los Angeles, CA 90071) for each of the aforesaid purposes. Each Noteholder may elect to have the Trustee act as custodian (the “ Custodian ”) on behalf of such Noteholder, and the electing Noteholders are deemed to have consented to the appointment of the trustee as Custodian. The Trustee as Custodian shall have the same rights, benefits, and protections as the Trustee.

Section 2.04. Paying Agent to Hold Money in Trust.

Prior to 12:00 p.m., New York City time, on each date on which the Accreted Principal Amount of any Notes is due and payable, the Company shall deposit with a Paying Agent a sum sufficient to pay such Accreted Principal Amount so becoming due. A Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of the Accreted Principal Amount of the Notes, and shall notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall, before 12:00 p.m., New York City time, on each date on which a payment of the Accreted Principal Amount of Notes is due and payable, segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee, and the Trustee may at any time during the continuance of any Default, upon written request to a Paying Agent, require such Paying Agent to pay forthwith to the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than the Company) shall have no further liability for the money.

Section 2.05. Noteholder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders. If the Trustee is not the Primary Registrar, the Company shall furnish to the Trustee at such times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders.

Section 2.06. Transfer and Exchange.

Subject to compliance with any applicable additional requirements contained in Section 2.13, when a Note is presented to a Registrar with a request to register a transfer thereof or to exchange such Note for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met; provided that every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by an assignment form in the form included in Exhibit A, duly executed by the Holder thereof or its attorney duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Note for registration of transfer or exchange at an office or agency maintained pursuant to Section 2.03, the Company shall execute and the Trustee shall authenticate Notes of a like aggregate principal amount at the Company’s request. Any exchange or transfer shall be without service charge, except that the Company or the Registrar may require payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto; provided that this sentence shall not apply to any exchange pursuant to Section 2.10, Section 3.04, Section 9.03(b) or Section 10.02(f) not involving any transfer.

All Notes issued upon any transfer or exchange of Notes shall be valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture, as the Notes surrendered upon such transfer or exchange.

Any Registrar appointed pursuant to Section 2.03 shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Notes upon transfer or exchange of Notes.

The Trustee and Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Agent Members or other beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Section 2.07. Replacement Notes.

If any mutilated Note is surrendered to the Company, a Registrar or the Trustee, or the Company, a Registrar and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company, the applicable Registrar and the Trustee such security or indemnity as will be required by them to save each of them harmless, then, in the absence of notice to the Company, such Registrar or the Trustee that such Note has been acquired by a protected purchaser, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article 3 or Section 4.10, the Company in its discretion may, instead of issuing a new Note, pay or purchase such Note, as the case may be.

Upon the issuance of any new Notes under this Section 2.07, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the reasonable fees and expenses of the Trustee or the Registrar) in connection therewith.

Every new Note issued pursuant to this Section 2.07 in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

The provisions of this Section 2.07 are (to the extent lawful) exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 2.08. Outstanding Notes.

Notes outstanding at any time are all Notes authenticated by the Trustee, except for those canceled by it, those paid pursuant to Section 2.07, those converted pursuant to Article 10, those delivered to it for cancellation or surrendered for transfer or exchange and those described in this Section 2.08 as not outstanding.

If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Company and the Trustee receive proof satisfactory to them that the replaced Note is held by a protected purchaser.

If a Paying Agent holds at 12:00 p.m., New York City time, on the Maturity Date Cash sufficient to pay the Accreted Principal Amount of the Notes payable on that date, then on and after the Maturity Date, such Notes shall cease to be outstanding and the Accreted Principal Amount shall cease to accrete.

Subject to the restrictions contained in Section 2.09, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note.

Section 2.09. Treasury Notes.

In determining whether the Holders have concurred in any notice, direction, waiver or consent, Notes owned by the Company or any other obligor on the Notes or by any Subsidiary of the Company or of such other obligor shall be disregarded, except that, for purposes of determining whether the Trustee shall be protected in relying on any such notice, direction, waiver or consent, only Notes which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to the Notes and that the pledgee is not the Company or any other obligor on the Notes or any Subsidiary of the Company or of such other obligor.

Section 2.10. Temporary Notes.

Until definitive Notes are ready for delivery, the Company may prepare and execute, and, upon receipt of a Company Order, the Trustee shall authenticate and deliver, temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company with the consent of the Trustee considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Notes in exchange for temporary Notes.

Section 2.11. Cancellation.

To the extent permitted by law, the Company or any of its Subsidiaries may from time to time repurchase any Notes in the open market or by tender offer at any price or by private agreement without giving prior notice to Holders. The Company shall cause any Notes so repurchased to be surrendered to the Trustee for cancellation. The Registrar, the Paying Agent and the Conversion Agent shall forward to the Trustee or its agent any Notes surrendered to them for transfer, exchange, payment or conversion. The Trustee and no one else shall cancel, in accordance with its standard procedures, all Notes surrendered for transfer, exchange, payment, conversion or cancellation and upon written request of the Company shall deliver evidence of the canceled Notes to the Company.

Section 2.12. CUSIP Numbers.

The Company in issuing the Notes may use one or more “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices of purchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a purchase and that reliance may be placed only on the other identification numbers printed on the Notes, and any such purchase shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

Section 2.13. Additional Transfer and Exchange Requirements.

(a) If Notes are issued upon the transfer, exchange or replacement of Notes subject to restrictions on transfer and bearing the Transfer Restriction Legend, or if a request is made to remove the Transfer Restriction Legend on a Note, the Notes so issued shall bear the Transfer Restriction Legend, or the Transfer Restriction Legend shall not be removed, as the case may be, unless such Note has been sold pursuant to an effective registration statement under the Securities Act and the Holder selling such Notes has delivered to the Company and the Registrar a certification of the same or there is delivered to the Company and the Registrar such reasonably satisfactory evidence, which shall include an Opinion of Counsel, as may be reasonably required by the Company and the Registrar, that neither the Transfer Restriction Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 or that such Notes are not “restricted” within the meaning of Rule 144 or may otherwise be transferred without registration under the Securities Act. Upon provision of such evidence to the Company or the Registrar if requested by the Company or the Registrar, the Trustee, at the written direction of the Company, shall authenticate and deliver a Note that does not bear the Transfer Restriction Legend. If the Transfer Restriction Legend is removed from the face of a Note, the Transfer Restriction Legend shall be reinstated at any time the Company reasonably determinates that, to comply with applicable law (including, without limitation, the Securities Act), such Note must bear the Transfer Restriction Legend.

(b) No transfer of a Note to any Person shall be effective under this Indenture or the Notes unless and until such Note has been registered in the name of such Person. Notwithstanding any other provisions of this Indenture or the Notes, transfers of a Global Note, in whole or in part, shall be made only in accordance with this Section 2.13.

(c) The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures.

(i) Beneficial interests in any Transfer Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Transfer Restricted Global Note in accordance with the transfer restrictions set forth in the Transfer Restriction Legend. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same or any other Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.13(c)(i).

(ii) In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.13(c)(i), the transferor of such beneficial interest must deliver to the Registrar an order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase.

(iii) A beneficial interest in any Transfer Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Transfer Restricted Global Note if the transfer complies with the requirements of Section 2.13(c)(ii) and the Registrar receives a duly executed certificate substantially in the form of Exhibit E hereto.

(iv) A beneficial interest in any Transfer Restricted Global Note may be exchanged for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if (1) the exchange or transfer complies with the requirements of Section 2.13(c)(ii) and (2) if the Registrar or the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company stating that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Transfer Restriction Legend are no longer required in order to maintain compliance with the Securities Act.

(d) The restrictions imposed by the Transfer Restriction Legend upon the transferability of any Note shall cease and terminate upon the earlier of (i) the sale of such Note pursuant to an effective registration statement under the Securities Act or the transfer of such Note in compliance with Rule 144 (or any successor provision thereto), or (ii) upon the expiration of the holding period applicable to sales thereof under Rule 144(d) under the Securities Act (or any successor provision). Any Note as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Note for exchange to the Registrar in accordance with the provisions of this Section 2.13, be exchanged for a new Note, of like tenor and aggregate principal amount, in accordance with Section 2.13(a).

(e) As used in Section 2.13(c) and (d), the term “transfer” encompasses any sale, pledge, transfer, hypothecation or other disposition of any Note.

(f) This Section 2.13(f) shall apply only to Global Notes:

(i) Notwithstanding any other provisions of this Indenture or the Notes, a Global Note shall not be exchanged in whole or in part for a Note registered in the name of any Person other than the Depositary or one or more nominees thereof; provided that a Global Note may be exchanged for Notes registered in the names of any person designated by the Depositary in the event that (A) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Note or such Depositary has ceased to be a “clearing agency” registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days, (B) the Company has provided the Depositary with written notice that it has decided to discontinue use of the system of book-entry transfer through the Depositary or any successor Depositary or (C) an Event of Default has occurred and is continuing and the Trustee or the Holders of a majority of the Accreted Principal Amount of the outstanding Notes have requested such exchange. Any Global Note exchanged pursuant to clauses (A) or (B) above shall be so exchanged in whole and not in part, and any Global Note exchanged pursuant to clause (C) above may be exchanged in whole or from time to time in part as directed by the Depositary. Any Note issued in exchange for a Global Note or any portion thereof shall be a Global Note; provided that any such Note so issued that is registered in the name of a Person other than the Depositary or a nominee thereof shall not be a Global Note.

(ii) Notes issued in exchange for a Global Note or any portion thereof shall be issued in definitive, fully-registered book-entry form, without interest coupons, shall have an Accreted Principal Amount equal to that of such Global Note or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the legends provided for herein applicable thereto. Any Global Note to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Note to be exchanged in part, either such Global Note shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Note, the principal amount thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Note issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof.

(iii) Subject to the provisions of clause (v) below, the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

(iv) In the event of the occurrence of any of the events specified in clause (i) above, the Company will promptly make available to the Trustee a reasonable supply of Certificated Notes in definitive, fully registered form, without interest coupons.

(v) Neither Agent Members nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Note registered in the name of the Depositary or any nominee thereof, or under any such Global Note, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Note. Neither the Trustee nor any Agent Member shall have any responsibility or liability for any actions taken or not taken by the Depositary.

Section 2.14. Additional Notes.

If authorized by a resolution of the Board of Directors, the Company shall be entitled to issue additional Notes under this Indenture (“ Additional Notes ”) which shall have substantially identical terms as the Notes, other than with respect to (i) the date of issuance, (ii) the issue price, (iii) the accretion rate on the Notes (to the extent such Additional Notes are issued with a different “CUSIP”, “ISIN” or “Common Code” number than the Notes), and (iv) if such Additional Notes shall be issued in the form of Unrestricted Notes or Transfer Restricted Notes (in which case the Transfer Restricted Notes will bear the legends set forth in Exhibit D (collectively, the “ Transfer Restriction Legend ”)), the transfer restrictions in respect of Notes that are, respectively, Transfer Restricted Notes or Unrestricted Notes; provided that such issuance shall be made in compliance with this Indenture; provided , further , that no Additional Notes may be issued with the same “CUSIP”, “ISIN” or “Common Code” number as other Notes unless it is so permitted in accordance with applicable law and such Additional Notes are fungible with the Notes for U.S. federal tax purposes. The Notes issued on the Closing Date and any Additional Notes shall be treated as a single class for all purposes under this Indenture.

With respect to any Additional Notes, the Company shall set forth in an Officers’ Certificate, a copy of which shall be delivered to the Trustee, or in a supplemental indenture, the following information:

(1) the aggregate Accreted Principal Amount of Notes outstanding immediately prior to the issuance of such Additional Notes;

(2) the aggregate Original Principal Amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;

(3) the issue price, if any, the issue date of such Additional Notes and the accretion amount as of the first Accretion Date following the issuance of such Additional Notes;

(4) the “CUSIP”, “ISIN” or “Common Code” number, as applicable, of such Additional Notes; and

(5) whether such Additional Notes shall be Transfer Restricted Notes or Unrestricted Notes.

In authenticating such Additional Notes, and accepting the additional responsibilities under this Indenture in relation to such Additional Notes, the Trustee shall receive, and, subject to Section 7.01, shall be fully protected in relying upon:

(a) A copy of the resolution or resolutions of the Board of Directors in or pursuant to which the terms and form of the Additional Notes were established, certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect as of the date of such certificate, and if the terms and form of such Additional Notes are established by an Officers' Certificate pursuant to general authorization of the Board of Directors, such Officers' Certificate;

(b) an executed supplemental indenture, if any;

(d) an Opinion of Counsel which shall state: (i) that the form of such Additional Notes has been established by a supplemental indenture or by or pursuant to a resolution of the Board of Directors in accordance and in conformity with the provisions of this Indenture; (ii) that the terms of such Additional Notes have been established in accordance with and in conformity with the other provisions of this Indenture; (iii) that such Additional Notes, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles; and (iv) that all conditions precedent to the authentication of the Additional Notes have been met.

The Trustee shall have the right to decline to authenticate and deliver any Notes under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing Holders.

Section 2.15. Accretion. Commencing on the Closing Date, the principal amount of the Notes shall accrete at a rate equal to 7.00% per annum (compounded quarterly). Schedule I hereto sets forth the Accreted Principal Amounts per $1,000 Original Principal Amount of Notes as of specified dates during the period from the Closing Date through the Maturity Date (the “ Accretion Schedule ”).

Section 2.16. Calculation of Original Issue Discount . The Company shall file with the Trustee within 30 days after the end of each calendar year (i) a written notice specifying the amount of Original Issue Discount (including daily rates and accrual periods) accrued on outstanding Notes as of the end of such year and (ii) such other specific information relating to such Original Issue Discount as may then be required under the Code or the Treasury regulations promulgated thereunder.

ARTICLE 3

REPURCHASES

Section 3.01. Repurchase or Conversion Upon a Change in Control.

(a) Upon the occurrence of a Change in Control, each Holder shall elect, at such Holder’s option, subject to the terms and conditions of Article 3 of this Indenture, either (i) to require the Company to repurchase for Cash all, but not less than all, of such Holder’s Notes in integral multiples of $1,000 principal amount at a price (the “ Fundamental Change Repurchase Price ”) equal to the Accreted Principal Amount as of such Change in Control or (ii) to convert all, but not less than all, of such Holder’s Notes on the Conversion Date pursuant to Section 10.02. Upon a valid exercise of the option to require repurchase, the Company will be required to repurchase the Notes on a date selected by the Company (the “ Fundamental Change Repurchase Date ”), which shall be no earlier than 15 days or later than 35 days after the date on which the Company mails the notice contemplated by this Section 3.01, subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.01(b). A failure by a Holder to (x) make such election or (y) surrender any Notes to be converted to the Conversion Agent pursuant to Section 10.02, in each case, on or before the third (3 rd ) Business Day before the Fundamental Change Repurchase Date (the “ Fundamental Change Election Date ”) shall be deemed to constitute an election to require the Company to repurchase such Holder’s Notes for the Fundamental Change Repurchase Price.

A “ Change in Control ” will be deemed to have occurred when any of the following has occurred:

(a) the consummation of any transaction (including, without limitation, any merger or consolidation other than those excluded under clause (d) below) the result of which is that any “person” or “group” becomes the “beneficial owner” (as these terms are defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Capital Stock of the Company that is at that time entitled to vote by the holder thereof in the election of the Board of Directors (or comparable body);

(b) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company;

(c) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any “person” or “group” (as these terms are used in Section 13(d)(3) of the Exchange Act); or

(d) any transaction or series of related transactions in connection with which (whether by means of exchange, liquidation, consolidation, merger, combination, reclassification, recapitalization, acquisition or otherwise) all of the Common Stock is exchanged for, converted into, acquired for, or constitutes solely the right to receive, other securities, other property, assets or cash, other than (i) any transaction pursuant to which the holders of 50% or more of the total voting power of all shares of Capital Stock of the Company entitled to vote generally in elections of directors immediately prior to such transaction have the right to exercise, directly or indirectly, 50% or more of the total voting power of all shares of Capital Stock of the continuing or surviving Person entitled to vote generally in elections of directors immediately after giving effect to such transaction (ii) any changes resulting solely from a subdivision or combination or change solely in par value, or (iii) any merger solely for the purpose of changing the jurisdiction of incorporation of the Company and resulting in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of common stock of the surviving entity.

On or before the fifth (5) day after the occurrence of a Change in Control (or in the case of a Change in Control under clause (c) or (d) of the definition thereof on the same day as the public announcement of such transaction by the Company), the Company will mail a written notice of Change in Control by first-class mail to the Trustee and to each Holder at their addresses shown in the register of the Registrar (and to beneficial owners as required by applicable law). The notice shall include a form of Repurchase Notice to be completed by the Noteholder and shall state:

(1) the events causing a Change in Control;

(2) the date of such Change in Control;

(3) the Fundamental Change Election Date;

(4) the Fundamental Change Repurchase Price;

(5) the Fundamental Change Repurchase Date;

(6) the name and address of the Paying Agent and the Conversion Agent;

(7) the then current Applicable Conversion Rate and any adjustments thereto;

(8) that Notes with respect to which a Repurchase Notice is given by the Holder may be converted pursuant to Article 10 hereof only if the Repurchase Notice has been withdrawn in accordance with the terms of this Indenture;

(9) the procedures a Holder must follow to exercise rights under this Section 3.01(a); and

(10) the CUSIP and ISIN number(s) of the Notes, if applicable.

(b) A Holder shall make its election under this Section 3.01 by (x) delivery of a written notice (a “ Repurchase Notice ”) to the Paying Agent or (y) delivery of a Conversion Notice to the Conversion Agent in accordance with Section 10.02, at any time prior to the Close of Business on the Fundamental Change Election Date. The Repurchase Notice shall state:

(i) if Certificated Notes have been issued, the certificate number of the Notes (or if the Holder’s Notes are Global Notes, that such Holder’s notice must comply with the Applicable Procedures);

(ii) the portion of the Original Principal Amount of Notes to be repurchased, which portion must be $1,000 or an integral multiple of $1,000; and

(iii) that such Notes shall be repurchased by the Company pursuant to the terms and conditions specified in this Article 3.

The delivery of such Note to the Paying Agent prior to, on or after the Fundamental Change Repurchase Date (together with all necessary endorsements and compliance by the Holder with the Applicable Procedures) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Fundamental Change Repurchase Price therefor; provided , however , that such Fundamental Change Repurchase Price shall be so paid pursuant to this Section 3.01 only if the Note so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Repurchase Notice.

The Company shall repurchase from the Holder thereof, pursuant to this Section 3.01, a portion of a Note if the Original Principal Amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the repurchase of all of a Note also apply to the repurchase of such portion of such Note.

Any repurchase by the Company contemplated pursuant to the provisions of this Section 3.01 shall be consummated by the delivery of the consideration to be received by the Holder on or prior to the later of the Fundamental Change Repurchase Date and the time of delivery of the Note to the Paying Agent in accordance with this Section 3.01.

Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Repurchase Notice contemplated by this Section 3.01(b) shall have the right to withdraw such Repurchase Notice at any time prior to the Close of Business on the Fundamental Change Election Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.02 and contemporaneous delivery of a Conversion Notice to the Conversion Agent in accordance with Section 10.02.

The Paying Agent shall promptly notify the Company of the receipt by it of any Repurchase Notice or written withdrawal thereof.

No Notes may be repurchased by the Company at the option of Holders upon a Change in Control if the principal amount of the Notes has been accelerated (other than as a result of a default in the payment of the Fundamental Change Repurchase Price with respect to the Notes), and such acceleration has not been rescinded, on or prior to the date on which such repurchase is to be consummated. The Paying Agent will promptly return to the respective Holders thereof any Notes (x) with respect to which a Repurchase Notice has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of acceleration described in the immediately preceding sentence in which case, upon such return, the Repurchase Notice with respect thereto shall be deemed to have been withdrawn.

Section 3.02. Effect of Repurchase Notice.

(a) Upon receipt by the Paying Agent of the Repurchase Notice specified in Section 3.01(b), the Holder of the Note in respect of which such Repurchase Notice was given shall (unless such Repurchase Notice is withdrawn as specified in this Section 3.02) thereafter be entitled to receive solely the Fundamental Change Repurchase Price with respect to such Note. Such Fundamental Change Repurchase Price shall be paid to such Holder, subject to receipt of funds by the Paying Agent, on or prior to the later of (x) the Fundamental Change Repurchase Date, with respect to such Note (provided the conditions in Section 3.01(b) have been satisfied) and (y) the time of delivery of such Note to the Paying Agent by the Holder thereof in the manner required by Section 3.01(b). Notes in respect of which a Repurchase Notice has been given by the Holder thereof may not be converted pursuant to Article 10 hereof on or after the date of the delivery of such Repurchase Notice unless such Repurchase Notice has first been validly withdrawn as specified in this Section 3.02.

(b) A Repurchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to the Close of Business on the Fundamental Change Election Date. Such notice of withdrawal shall state:

(i) the principal amount being withdrawn;

(ii) if Certificated Notes are to be withdrawn, the certificate numbers of the Notes being withdrawn (or, if Global Notes or a portion thereof are to be withdrawn, that such Holder has complied with the Applicable Procedures in respect of the withdrawal of such Holder’s election to exercise its repurchase rights pursuant to Section 3.01 of this Indenture);

(iii) the principal amount, if any, of the Notes that remain subject to a Repurchase Notice; and

(iv) that such Holder has contemporaneously delivered a Conversion Notice to the Conversion Agent in accordance with Section 10.02 with respect to such withdrawn Notes.

Section 3.03. Deposit of Fundamental Change Repurchase Price.

Prior to 12:00 p.m. (New York City time) on the Business Day prior to the Fundamental Change Repurchase Date, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary of the Company or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.04) an amount of money (in immediately available funds if deposited on such Trading Day) sufficient to pay the aggregate Fundamental Change Repurchase Price of all the Notes or portions thereof which are to be repurchased as of the Fundamental Change Repurchase Date.

If the Paying Agent holds money sufficient to pay the Fundamental Change Repurchase Price with respect to the Notes to be repurchased on the Fundamental Change Repurchase Date in accordance with the terms of this Indenture, then, immediately on and after the Fundamental Change Repurchase Date, the Accreted Principal Amount on such Notes shall cease to accrete, whether or not the Notes are delivered to the Paying Agent, and all other rights of the Holders of such Notes shall terminate, other than the right to receive the Fundamental Change Repurchase Price upon delivery of such Notes.

Section 3.04. Notes Repurchased in Part.

Any Note which is to be repurchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing) and, provided that the Holder has properly delivered a Conversion Notice to the Conversion Agent pursuant to Section 10.02 prior to the Fundamental Change Election Date with respect to such remaining portion, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Note so surrendered that is not repurchased; provided that such Notes so delivered shall be immediately surrendered to the Conversion Agent pursuant to Section 10.02 and the Holder thereof shall be entitled to receive solely the Settlement Amount as contemplated by Section 10.02(b).

Section 3.05. Covenant to Comply with Securities Laws upon Repurchase of Notes.

In connection with any repurchase upon the occurrence of a Change in Control, to the extent required by applicable law, the Company shall:

(a) comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act that may then be applicable; and

(b) otherwise comply with all federal and state securities laws as necessary to effect a repurchase of Notes by the Company at the option of Holder.

ARTICLE 4

COVENANTS

Section 4.01. Payment of Notes.

The Company shall make all payments in respect of the Notes on the dates and in the manner provided in the Notes or pursuant to this Indenture. Any amounts of shares of Common Stock to be given to the Conversion Agent shall be deposited with the Conversion Agent by 12:00 p.m., New York City time, by the Company. The Accreted Principal Amount of the Notes and the Fundamental Change Repurchase Price shall be considered paid on the applicable date due if on such date (which, in the case of a Fundamental Change Repurchase Price, shall be on the Business Day immediately following the Fundamental Change Repurchase Date) the Trustee, the Conversion Agent or the Paying Agent (other than the Company or any Subsidiary of the Company, as applicable) holds, in accordance with this Indenture, cash or securities, if permitted hereunder, sufficient to pay all such amounts then due.

Section 4.02. Maintenance of Office or Agency.

The Company will maintain in the United States an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be delivered. The Company hereby initially designates the Corporate Trust Office of the Trustee as such office of the Company. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or delivered to the Trustee.

The Company may also from time to time designate one or more other offices or agencies where the Notes may be surrendered or presented for any of such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

Section 4.03. Existence.

The Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and the existence, rights and franchises of the Company; provided that the Company is not required to preserve any such right or franchise if the preservation thereof is no longer desirable in the conduct of the business of the Company as determined by the Board of Directors; provided further that this Section does not prohibit any transaction otherwise permitted by Section 5.01.

Section 4.04. Annual Reports.

The Company shall deliver to the Trustee, within fifteen days after the Company is required to file the same with the Commission, copies of the Company’s annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) that the Company is required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; provided that any such information, documents or reports filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval (“ EDGAR ”) system, or any successor system established by the Commission, shall be deemed to be filed with the Trustee; provided , however , that the Trustee shall have no obligation whatsoever to determine whether or not such information, documents or reports have been filed pursuant to the EDGAR system.

Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

Section 4.05. Reports to Trustee.

The Company will deliver to the Trustee:

(a) within 120 days after the end of each fiscal year (commencing in 2014) a certificate from the principal executive, financial or accounting officer of the Company stating that the officer has conducted or supervised a review of the activities of the Company and its performance under this Indenture and that, based upon such review, no Default exists hereunder or, if there has been a Default, specifying the Default, its nature, status and what action the Company is taking or proposes to take with respect thereto; and

(b) promptly and in any event within 15 days after the Company becomes aware of the occurrence of a Default, an Officers’ Certificate setting forth the details of the Default, and the action which the Company is taking or proposes to take with respect thereto.

Section 4.06. Rule 144A Information Requirements . At any time the Company is not subject to Section 13 or 15(d) of the Exchange Act, so long as (i) any of the Notes or any shares of Common Stock issuable upon conversion thereof shall, at such time, constitute “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act and (ii) less than one year has passed since the acquisition of such Notes from the Company or an Affiliate of the Company, the Company shall (x) promptly provide to the Trustee and shall, upon written request, provide to any Holder, beneficial owner or prospective purchaser of such Notes or any shares of Common Stock issued upon conversion of such Notes, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to facilitate the resale of such Notes or shares of Common Stock pursuant to Rule 144A under the Securities Act and (y) take such further action as any Holder or beneficial owner of such Notes or such Common Stock may reasonably request to the extent required from time to time to enable such Holder or beneficial owner to sell such Notes or shares of Common Stock in accordance with Rule 144A under the Securities Act.

Section 4.07. Reservation of Common Stock. The Company shall at all times reserve and keep available, out of its authorized but unissued shares of Common Stock, such shares of Common Stock as shall be sufficient to effect conversion of all outstanding Notes. If at any time the number of authorized but unissued shares of Common Stock of the Company shall not be sufficient to effect the conversion of the Notes and otherwise to comply with the terms of this Indenture, the Company will forthwith take such corporate action as may be necessary to increase its authorized but unissued shares of such Common Stock to such number of shares as shall be sufficient for such purpose. The Company will obtain any authorization, consent, approval or other action by or make any filing with any court or administrative body that may be required under applicable securities laws in connection with the issuance of shares of its Common Stock upon the conversion of the Notes.

Section 4.08. Issuance of Shares. The Common Stock, when issued, will be duly and validly issued, fully paid and nonassessable and will be free and clear of any Liens caused or created by the Company, and will have been issued in compliance with the Securities Act. When issued, the Common Stock will be free from any restrictions, other than transfer restrictions pursuant to the securities laws.

Section 4.09. Incurrence of Debt. The Company shall not, and shall not cause or permit any of its Subsidiaries to, directly or indirectly, Incur any Debt, except that the Company and its Subsidiaries may Incur the following Debt: (i) Debt of the Company in respect of the Notes (including Additional Notes in an aggregate Original Principal Amount not to exceed $5,000,000 at any one time outstanding), (ii) Debt of the Company and Cadiz Real Estate LLC Incurred pursuant to the Credit Agreement, (iii) Debt of the Company and its Subsidiaries Incurred solely for the purpose of financing (whether in whole or in part) the cost of construction or improvement of the Qualified Water Project, including out-of-pocket costs and expenses incurred by the Company and its Subsidiaries in connection with such construction or improvement, in an aggregate principal amount at any one time outstanding, including all Refinancing Debt Incurred to Refinance Debt Incurred pursuant to this clause (iii), not to exceed, together with the aggregate principal amount of all Debt then outstanding pursuant to clause (ii) of this Section 4.09, the lesser of (x) the aggregate cost of such construction or improvement, including out-of-pocket costs and expenses incurred by the Company and its Subsidiaries in connection with such construction or improvement, as determined by the Board of Directors in good faith and evidenced by a resolution of the Board of Directors, plus the amount necessary to Refinance the Debt outstanding pursuant to clause (ii) of this Section 4.09 and (y) $300,000,000, (iv) Hedging Obligations entered into by the Company and its Subsidiaries in the ordinary course of business and not for speculative purposes up to an aggregate principal amount of $5,000,000 at any one time outstanding, (v) Debt of a Subsidiary of the Company owed to and held by the Company, (vi) Debt of the Company or any of its Subsidiaries arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Debt is extinguished within five Business Days after Incurrence, (vii) Debt of the Company or any of its Subsidiaries with respect to letters of credit issued in the ordinary course of business in respect of health, disability or other employee benefits or property, casualty or liability insurance or self-insurance, or other Debt with respect to reimbursement-type obligations regarding workers’ compensation claims; provided that, upon the drawing of any such letter of credit, the reimbursement obligation with respect thereto is reimbursed within thirty (30) days following such drawing, (viii) Debt of the Company or any of its Subsidiaries arising from agreements for indemnification, adjustment of purchase price, earn-outs or similar obligations, in each case Incurred in connection with the disposition or acquisition of any business, asset or Subsidiary, other than Guarantee Obligations Incurred by any Person acquiring all or any portion of such business, assets or other Person for purposes of financing such acquisition; provided that (A) such Debt is not reflected on the balance sheet of the Company or any of its Subsidiaries (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (A) and (B) in the case of a disposition, the maximum aggregate liability in respect of all such Debt under this clause (viii) will at no time exceed the gross proceeds, including the fair market value of non-cash proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value), actually received by the Company and its Subsidiaries in connection with such disposition, (ix) Debt of the Company or any of its Subsidiaries consisting of take-or-pay obligations contained in supply agreements, in each case in the ordinary course of business, (x) Debt arising in connection with endorsement of instruments of deposit in the ordinary course of business, (xi) Capitalized Lease Obligations of the Company or any of its Subsidiaries in an aggregate principal amount at any one time outstanding, including all Refinancing Debt Incurred to Refinance Debt Incurred pursuant to this clause (xi), not to exceed $10,000,000, and (xii) unsecured Debt in an aggregate principal amount not to exceed $10,000,000 at any one time outstanding. For purposes of determining any particular amount of Indebtedness under this Section 4.09, Guarantee Obligations, Liens or obligations with respect to letters of credit otherwise supporting Debt otherwise included in the determination of such particular amount will not be included.

Section 4.10. Asset Sales. (a) i f, the Net Cash Proceeds from Asset Sales available to the Company after all outstanding obligations under the Credit Agreement have been repaid and the commitments thereunder permanently reduced to zero, exceeds $2,500,000, the Company shall deposit the Net Cash Proceeds of such Asset Sales into a cash collateral account and shall promptly provide notice thereof to the Trustee, which notice shall specify the amount of the Net Cash Proceeds so deposited. The Trustee shall deliver any notice of deposit it receives from the Company under this Section 4.10 to the Noteholders within five (5) Business Days. The Trustee shall, by notice to the Company delivered no more than thirty (30) days after the Trustee’s receipt of notice from the Company of such deposit, require the Company to apply the applicable Net Cash Proceeds towards prepayment of amounts owing under the Notes (“ Asset Sale Offer ”) in accordance with this Section 4.10.

(b) In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an Asset Sale Offer, it shall follow the procedures specified below.

(c) The Asset Sale Offer shall remain open for a period of twenty (20) Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the “ Offer Period ”). No later than five (5) Business Days after the termination of the Offer Period (the “ Purchase Date ”), the Company shall apply all Net Cash Proceeds (the “ Offer Amount ”) to the purchase of Notes, or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as all other payments are made under the Indenture and Notes.

(d) Upon the commencement of an Asset Sale Offer, the Company shall send, by first-class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(i) that the Asset Sale Offer is being made pursuant to this Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open;

(ii) the Offer Amount, the purchase price and the Purchase Date;

(iii) that the principal of any Note not tendered or accepted for payment shall continue to accrete;

(iv) that, unless the Company defaults in making such payment, the principal amount of any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete after the Purchase Date;

(v) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in minimum amounts of $1,000 or an integral multiple of $1,000 in excess thereof;

(vi) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” attached to the Note completed, or transfer by book-entry transfer, to the Company, the Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three (3) days before the Purchase Date;

(vii) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(viii) that, if the aggregate principal amount of Notes surrendered by the holders thereof exceeds the Offer Amount, the Trustee, in accordance with the applicable Depositary procedures in the case of Global Notes, shall select the Notes to be purchased on a pro rata basis based on the Accreted Principal Amount of the Notes tendered (with such adjustments as may be deemed appropriate by the Trustee, in accordance with the applicable Depositary procedures in the case of Global Notes, so that only Notes in minimum denominations of $1,000, or an integral multiple of $1,000 in excess thereof, shall be purchased); and

(ix) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer) representing the same indebtedness to the extent not repurchased.

(e) On or before the Purchase Date, the Company shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof validly tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered and (2) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof so tendered.

(f) The Company, the Depositary or the Paying Agent, as the case may be, shall promptly mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes properly tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon receipt of an Authentication Order, shall authenticate and mail or deliver (or cause to be transferred by book-entry) such new Note to such Holder in a principal amount equal to any unpurchased portion of the Note surrendered representing the same indebtedness to the extent not repurchased; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple of $1,000 in excess thereof. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on or as soon as practicable after the Purchase Date.

(g) Any Net Cash Proceeds remaining after the Asset Sale Offer may be used by the Company for working capital.

ARTICLE 5

CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS

Section 5.01. Consolidation, Merger, Sale or Lease of Assets by the Company.

(a) The Company may not, directly or indirectly, consolidate with or merge into any Person or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person, unless:

(i) the resulting, surviving or transferee Person (if other than the Company) is an entity organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia;

(ii) such entity (if other than the Company) expressly assumes all of the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture;

(iii) immediately after giving effect to the transaction, no Event of Default or Default has occurred and is continuing; and

(iv) the Company delivers to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and the supplemental indenture (if any) comply with this Indenture.

(b) Subject to Article 3, upon the consummation of any transaction effected in accordance with these provisions, if the Company is not the resulting, surviving or transferee Person, the resulting, surviving or transferee Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Notes with the same effect as if such successor Person had been named as the Company in this Indenture. Upon such substitution, except in the case of a lease, the Company will be released from its obligations under the Notes and this Indenture.

ARTICLE 6

DEFAULT AND REMEDIES

Section 6.01. Events of Default.

An “ Event of Default ” occurs with respect to the Notes if:

(a) the Company defaults in payment of the Fundamental Change Repurchase Price with respect to any Note, when such becomes due and payable;

(b) the Company defaults in the payment of the Accreted Principal Amount of any Note when due at maturity, redemption, upon repurchase or otherwise (including, without limitation, upon the exercise by a Holder of its right to require the Company to repurchase such Notes pursuant to and in accordance with Articles 3 or 4 hereof);

(c) the Company fails to issue any notice of a Change in Control as required under Section 3.01(a) of this Indenture, and such default continues for a period of three Business Days;

(d) the Company fails to comply with its obligation to convert the Notes into Common Stock or other property pursuant to and in accordance with Article 10 upon exercise of a Holder’s right to convert its Notes pursuant to Article 10;

(e) other than as set forth in paragraph (f), the Company fails to comply with any of its other covenants or agreements in the Notes or this Indenture and fails to cure (or obtain a waiver of) such default, within 45 days after the Company receives a notice of such default by the Trustee or by Holders of not less than 25% in Accreted Principal Amount of the Notes then outstanding;

(f) the Company fails to comply with its covenants or agreements in Article V of this Indenture and fails to cure such default within 3 Business Days;

(g) the Company or any Significant Subsidiary fails to pay principal when due (whether at stated maturity or otherwise) or an uncured default that results in the acceleration of maturity, of any indebtedness for borrowed money of the Company or any of its Significant Subsidiaries in an aggregate amount in excess of $10,000,000 (or its foreign currency equivalent), unless such indebtedness is discharged, or such acceleration is rescinded, stayed or annulled, within a period of 30 calendar days after written notice of such failure or uncured default is given to the Company by the Trustee or to the Company and the Trustee by the Holders of not less than 25% in Accreted Principal Amount of the Notes then outstanding; provided that if any such failure or acceleration referred to above shall cease or be cured, waived, rescinded or annulled, then the resulting Event of Default shall be deemed not to have occurred;

(h) the Company or any Significant Subsidiary, pursuant to or under or within the meaning of any Bankruptcy Law, (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it; (iii) consents to the appointment of any receiver, trustee, assignee, liquidator, custodian or similar official of it or for any substantial part of its property; (iv) makes a general assignment for the benefit of its creditors; (v) files a petition in bankruptcy or answer or consent seeking reorganization or relief; or (vi) consents to the filing of such petition or the appointment of or taking possession by any receiver, trustee, assignee, liquidator, custodian or similar official;

(i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against the Company or any Significant Subsidiary in an involuntary case or proceeding, or adjudicates the Company or any Significant Subsidiary insolvent or bankrupt; (ii) appoints any receiver, trustee, assignee, liquidator, custodian or similar official of the Company or any Significant Subsidiary or for any substantial part of any such entity’s property; or (iii) orders the winding up or liquidation of the Company or any Significant Subsidiary, and the order or decree remains unstayed and in effect for 60 consecutive days (an Event of Default specified in clause (h) or (i) a “ Bankruptcy Default ”); or

(j) the Company or any of its Significant Subsidiaries fails to pay final non-appealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $10,000,000 (net of any amounts as to which a reputable and solvent third party insurer has accepted full coverage), which judgments are not paid, discharged, bonded or stayed for a period of 60 days.

Section 6.02. Acceleration.

If an Event of Default, other than a Bankruptcy Default, occurs and is continuing under this Indenture, the Holders of at least 25% in aggregate of the Original Principal Amount of the Notes then outstanding, by written notice to the Company (and to the Trustee), may, and the Trustee at the written request of such Holders may, declare the then Accreted Principal Amount of the Notes to be immediately due and payable. Upon a declaration of acceleration, such Accreted Principal Amount will become immediately due and payable. If a Bankruptcy Default occurs, the Accreted Principal Amount of the Notes then outstanding will become immediately due and payable automatically without any declaration or other act on the part of the Trustee or any Holder. If the Accreted Principal Amount of any Note is not paid when due (whether upon acceleration pursuant to this Section 6.02, upon the date set for payment of the Fundamental Change Repurchase Price pursuant to Article 3 hereof or upon the Maturity Date), then in each such case the overdue amount shall, to the extent permitted by law, bear cash interest at the rate of 2.00% per annum (“ Default Interest ”), compounded quarterly, which interest shall accrue from the date the Accreted Principal Amount was originally due to the payment date of such amount has been made or duly provided for.

Section 6.03. Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of Accreted Principal Amount of the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding.

Section 6.04. Waiver of Past Defaults.

Except as otherwise provided in Section 6.07 and Section 9.02(b), Holders of a majority in Original Principal Amount of the outstanding Notes by written notice to the Company and to the Trustee may waive any existing or future Default or Event of Default and its consequences and rescind and annul a declaration of acceleration with respect to such Event of Default and its consequences (other than an Event of Default (a) with respect to the failure to make payment of the Accreted Principal Amount or the Fundamental Change Repurchase Price, in each case with respect to any Note, (b) with respect to the failure to pay or deliver the consideration due upon conversion of the Notes or (c) with respect to any provision that under this Indenture cannot be modified or amended without the consent of the Holder of each outstanding Note affected) if:

(i) all existing Events of Default, other than the nonpayment of the Accreted Principal Amount, if any on the Notes that have become due solely by the declaration of acceleration, have been cured or waived, and

(ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.

Upon such waiver, the Default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, but no such waiver will extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05. Control by Majority.

The Holders of a majority in Original Principal Amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction, and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes. Prior to taking any action hereunder, the Trustee shall receive indemnification satisfactory to it against all fees, losses and expenses (including attorney’s fees and expenses) incurred or to be incurred by taking such action.

Section 6.06. Limitation on Suits.

A Holder may not institute any proceeding, judicial or otherwise, with respect to this Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy under this Indenture or the Notes, unless:

(i) the Holder has previously given to the Trustee written notice of a continuing Event of Default;

(ii) Holders of at least 25% in Original Principal Amount of outstanding Notes have made written request to the Trustee to institute proceedings in respect of the Event of Default in its own name as Trustee under this Indenture;

(iii) Holders have offered to the Trustee indemnity satisfactory to the Trustee against any costs, liabilities or expenses to be incurred in compliance with such request;

(iv) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(v) during such 60-day period, the Holders of a majority in Original Principal Amount of the outstanding Notes have not given the Trustee a direction that is inconsistent with such written request.

Section 6.07. Rights of Holders to Receive Payment.

Notwithstanding anything to the contrary, the right of a Holder of a Note to receive (x) the Accreted Principal Amount of a Note on the Maturity Date, (y) payment of the Fundamental Change Repurchase Price on the Fundamental Change Repurchase Date and (z) payment or delivery, as the case may be, of Common Stock, Cash and/or other property pursuant to and in accordance with Article 10 upon conversion of such Note on the date specified in Article 10, or to bring suit for the enforcement of any such payment or delivery, as the case may be, on or after such respective dates, may not be impaired or affected without the consent of that Holder.

Section 6.08. Collection Suit by Trustee.

If an Event of Default specified in clause (a) or (b) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust for the whole amount owing with respect to the Notes, and such further amount as is sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee hereunder.

Section 6.09. Trustee May File Proofs of Claim.

The Trustee may file proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee hereunder) and the Holders allowed in any judicial proceedings relating to the Company or its creditors or property, and is entitled and empowered to collect, receive and distribute any money, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims. Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, if the Trustee consents to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee hereunder. Nothing in this Indenture will be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10. Priorities.

If the Trustee collects any money or property pursuant to this Article, it shall pay out the money or property in the following order:

First: to the Trustee for all amounts due under Section 7.07 hereof;

Second: to Holders for other amounts then due and unpaid in respect of the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable in respect of the Notes; and

Third: to the Company or as a court of competent jurisdiction may direct.

The Trustee, upon written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Noteholder and the Company a notice that states the record date, the payment date and the amount to be paid.

Section 6.11. Restoration of Rights and Remedies.

If the Trustee or any Holder has instituted a proceeding to enforce any right or remedy under this Indenture and the proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to the Holder, then, subject to any determination in the proceeding, the Company, the Trustee and the Holders will be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, the Trustee and the Holders will continue as though no such proceeding had been instituted.

Section 6.12. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may require any party litigant in such suit (other than the Trustee) to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant (other than the Trustee) in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to (a) a suit by a Holder to enforce payment of (i) the Accreted Principal Amount on the Maturity Date or any Default Interest, (ii) payment of the Fundamental Change Repurchase Price on the Fundamental Change Repurchase Date, (iii) delivery of the Common Stock, Cash and/or other property pursuant to and in accordance with Article 10 upon conversion of such Note on the date specified in Article 10 or (iv) payment of the applicable portion of the Offer Amount with respect to any Notes properly tendered and accepted for payment in connection with an Asset Sale Offer, (b) a suit by Holders of more than 10% in Accreted Principal Amount of the outstanding Notes or (c) a suit by the Trustee.

Section 6.13. Rights and Remedies Cumulative.

No right or remedy conferred or reserved to the Trustee or to the Holders under this Indenture is intended to be exclusive of any other right or remedy, and all such rights and remedies are, to the extent permitted by law, cumulative and in addition to every other right and remedy hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or exercise of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or exercise of any other right or remedy.

Section 6.14. Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default will impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

ARTICLE 7

THE TRUSTEE

Section 7.01. General.

(a) The duties and responsibilities of the Trustee are as provided by the Trust Indenture Act and as set forth herein. Whether or not expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to this Article.

(b) Except during the continuance of an Event of Default, the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations will be read into this Indenture against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise those rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(1) this Subsection shall not be construed to limit the effect of Subsection (b) of this Section;

(2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and

(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of the required percentage (as set forth in the relevant provisions of the Indenture) in principal amount of the Notes, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Notes.

(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

Section 7.02. Certain Rights of Trustee.

Subject to Trust Indenture Act Sections 315(a) through (d) (to which this Indenture is hereby subject):

(a) The Trustee may conclusively rely, and will be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but, in the case of any document which is specifically required to be furnished to the Trustee pursuant to any provision hereof, the Trustee shall examine the document to determine whether it conforms to the form requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel, or both, each conforming to Section 12.06 and the Trustee will not be liable for any action it takes or omits to take in reliance on the certificate or opinion.

(c) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, unless such Holders have offered to the Trustee security or indemnity satisfactory to it against the fees, costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.

(e) The Trustee will not be liable for any action it takes or omits to take that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the direction of the Holders in accordance with Section 6.05 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.

(f) The Trustee may consult with counsel of its selection, and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(g) No provision of this Indenture will require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of its rights or powers, unless it receives indemnity satisfactory to it against any fee, loss, liability or expense.

(h) The Trustee shall have no duty to inquire as to performance of the Company with respect to the covenants contained in Article 4. In addition, the Trustee shall not be deemed to have knowledge of a Default or an Event of Default except (i) a Default or Event of Default occurring pursuant to Section 6.01(a) and 6.01(b) or (ii) any Default or Event of Default of which a Responsible Officer of the Trustee shall have received actual written notification from the Company or the Holders of at least 25% in Original Principal Amount of Notes then outstanding or obtained actual knowledge.

(i) The rights, privileges, protections, immunities and benefits given to the Trustee including, without limitation, its rights to be indemnified, are extended to and shall be enforced by the Trustee in its capacities hereunder and each agent, custodian and other person employed to act hereunder.

(j) The permissive rights of the Trustee to take certain actions under this Indenture shall not be construed as a duty unless so specified herein.

(k) In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(l) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

(m) The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.

(n) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

Section 7.03. Individual Rights of Trustee.

The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Trust Indenture Act Sections 310(b) and 311.

Section 7.04. Trustee’s Disclaimer.

The Trustee (a) makes no representation as to the validity or adequacy of this Indenture or the Notes, (b) is not accountable for the Company’s use or application of the proceeds from the Notes and (c) is not responsible for any statement in the Notes other than its certificate of authentication.

Section 7.05. Notice of Default.

If any Default or Event of Default occurs and is continuing and is known to the Trustee, the Trustee will send notice of the Default or Event of Default to each Holder within 90 days after it occurs, unless the Default or Event of Default has been cured; provided that, except in the case of a Default (w) in the payment of Accreted Principal Amount of any Note, (x) in the payment of the Fundamental Change Repurchase Price on the Fundamental Change Repurchase Date, (y) in the payment or delivery of Common Stock, Cash and/or property pursuant to and in accordance with Article 10 upon conversion of such Note on the date specified in Article 10 or (z) in the payment of the applicable portion of the Offer Amount with respect to any Notes properly tendered and accepted for payment in connection with an Asset Sale Offer, the Trustee may withhold the notice if and so long as a Responsible Officer or committee of Responsible Officers of the Trustee in good faith determines that withholding the notice is in the interest of the Holders. Notice to Holders under this Section will be given in the manner and to the extent provided in Trust Indenture Act Section 313(c).

Section 7.06. Reports by Trustee to Holders.

As promptly as practicable after each June 1, beginning with the June 1 following the date of this Indenture, the Trustee will mail to each Holder, as provided in Trust Indenture Act Section 313(c), a brief report dated as of such June 1, covering the matters described in Trust Indenture Act Section 313(a), and file such reports with each stock exchange upon which the Notes are listed and with the Commission. The Company will promptly notify the Trustee in writing if and when the Notes are listed on any stock exchange and of any delisting thereof.

Section 7.07. Compensation and Indemnity.

(a) The Company will pay the Trustee compensation as agreed upon in writing for its services. The compensation of the Trustee is not limited by any law on compensation of a Trustee of an express trust. The Company will reimburse the Trustee upon request for all out-of-pocket expenses, disbursements and advances incurred or made by the Trustee, including the compensation and expenses of the Trustee’s agents and counsel.

(b) The Company will indemnify the Trustee and any predecessor Truestee and their agents (which for purpose of this Section 7.07 shall include its officers, directors, employees and agents)for, and hold it harmless against, any and all loss, damage, claim or liability or expense incurred by it without negligence or willful misconduct on its part arising out of or in connection with the acceptance or administration of this Indenture and its duties under this Indenture and the Notes, including the costs and expenses of defending itself against any claim (whether asserted by the Company, a Holder or any other Person) or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties under this Indenture and the Notes or in connection with enforcing the provisions of this Section 7.07.

(c) To secure the Company’s payment obligations in this Section, the Trustee will have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal or accreted value of particular Notes.

When the Trustee incurs expenses or renders services in connection with a Bankruptcy Default, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture, and any earlier resignation or removal of the Trustee in accordance with Section 7.08.

Section 7.08. Replacement of Trustee.

(a) (i) The Trustee may resign at any time by written notice to the Company.

(ii) The Holders of a majority in the Original Principal Amount of the outstanding Notes may remove the Trustee by written notice to the Trustee.

(iii) If the Trustee is no longer eligible under Section 7.10 or in the circumstances described in Trust Indenture Act Section 310(b), any Holder that satisfies the requirements of Trust Indenture Act Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(iv) The Company may remove the Trustee if (A) the Trustee is no longer eligible under Section 7.10; (B) the Trustee is adjudged a bankrupt or an insolvent; (C) a receiver or other public officer takes charge of the Trustee or its property; or (D) the Trustee becomes incapable of acting.

A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section.

(b) If the Trustee has been removed by the Holders, Holders of a majority of the Original Principal Amount of the Notes then outstanding may appoint a successor Trustee with the consent of the Company. Otherwise, if the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. If the successor Trustee does not deliver its written acceptance within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority of the Original Principal Amount of the outstanding Notes may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee.

(c) Upon delivery by the successor Trustee of a written acceptance of its appointment to the retiring Trustee and to the Company, (i) the retiring Trustee will transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07(c), (ii) the resignation or removal of the retiring Trustee will become effective, and (iii) the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. Upon request of any successor Trustee, the Company will execute any and all reasonable instruments for fully and vesting in and confirming to the successor Trustee all such rights, powers and trusts. The Company will give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders, and include in the notice the name of the successor Trustee and the address of its Corporate Trust Office.

(d) Notwithstanding replacement of the Trustee pursuant to this Section, the Company’s obligations under Section 7.07 will continue for the benefit of the retiring Trustee.

(e) The Trustee agrees to give the notices provided for in, and otherwise comply with, Trust Indenture Act Section 310(b).

Section 7.09. Successor Trustee by Merger.

If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act will be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee in this Indenture.

Section 7.10. Eligibility.

This Indenture must always have a Trustee that satisfies the requirements of Trust Indenture Act Section 310(a) and has a combined capital and surplus of at least $25,000,000 as set forth in its most recent published annual report of condition.

Section 7.11. Money Held in Trust.

The Trustee will not be liable for interest on any money received by it except as it may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article 8.

ARTICLE 8

DISCHARGE

Section 8.01. Satisfaction and Discharge of this Indenture.

(a) This Indenture shall cease to be of further effect if either: (i) all outstanding Notes (other than Notes replaced pursuant to Section 2.07) have been delivered to the Trustee for cancellation, (ii) all outstanding Notes have become due and payable on the Maturity Date or on the Fundamental Change Repurchase Date in connection with any repurchase of all outstanding Notes or (iii) all outstanding Notes have been delivered for conversion pursuant to Article 10, and the Company irrevocably deposits or delivers, as the case may be, prior to the applicable date on which such payment is due and payable, or such conversion is to be settled, with the Trustee, the Paying Agent (if the Paying Agent is not the Company or any of its Affiliates) or the Conversion Agent Cash in respect of such payment or Common Stock, Cash and/or other property pursuant to and in accordance with Article 10 in respect of any such conversion on the Maturity Date, the Fundamental Change Repurchase Date or the date such conversion is to be settled, as the case may be; provided that, in all cases, the Company shall pay to the Trustee all other sums payable hereunder by the Company.

(b) Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 7.07 shall survive. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture, at the cost and expense of the Company, on demand, accompanied by an Officers’ Certificate and an Opinion of Counsel pursuant to Section 12.05.

Section 8.02. Application of Trust Money.

Subject to the provisions of Section 8.03, the Trustee, the Conversion Agent or a Paying Agent (as applicable) shall hold in trust, for the benefit of the Holders, all money, Common Stock or other consideration paid or delivered to it, as the case may be, pursuant to Section 8.01 and shall apply such money, Common Stock or other consideration in accordance with this Indenture and the Notes to the payment of the principal amount of (including the relevant Fundamental Change Repurchase Price) the Notes or delivery of the Common Stock, Cash and/or other property pursuant to and in accordance with Article 10, if applicable, payable or issuable, as the case may be, upon conversion of the Notes.

Section 8.03. Repayment to Company.

The Trustee, the Conversion Agent and each Paying Agent shall promptly pay or deliver, as the case may be, to the Company upon request any excess money, Common Stock or other consideration (x) paid or delivered to them pursuant to Section 8.01 and (y) held by them at any time.

Subject to applicable abandoned property law, the Trustee, the Conversion Agent and each Paying Agent (as applicable) shall also pay or deliver, as the case may be, to the Company upon request any money, Common Stock or other consideration held by them for the payment of the principal amount of (including the relevant Fundamental Change Repurchase Price) and interest on, or the amount due in connection with any conversion of, the Notes that remains unclaimed for two years after a right to such money, Common Stock or other consideration has matured (which maturity shall occur, for the avoidance of doubt, on the Maturity Date, the Fundamental Change Repurchase Date, the Purchase Date or the date specified in Section 10.02(a), as the case may be); provided that the Trustee or such Paying Agent, before being required to make any such payment or delivery, may at the expense of the Company cause to be mailed to each Holder entitled to such money, Common Stock or other consideration or publish in a newspaper of general circulation in the City of New York notice that such money, Common Stock or other consideration remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such mailing or publication, any unclaimed balance or portion of such money, Common Stock or other consideration then remaining will be repaid or re-delivered to the Company. After payment or delivery, as the case may be, to the Company, Holders entitled to such money, Common Stock or other consideration must look to the Company for payment or delivery as general creditors unless an applicable abandoned property law designates another Person.

Section 8.04. Reinstatement.

If the Trustee, the Conversion Agent or any Paying Agent (as applicable) is unable to apply any money, Common Stock or other consideration in accordance with Section 8.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no payment or delivery, as the case may be, had occurred pursuant to Section 8.01 until such time as the Trustee or such Paying Agent is permitted to apply all such money in accordance with Section 8.02; provided that if the Company has made any payment of the principal amount of (including the relevant Fundamental Change Repurchase Price or the Offer Amount pursuant to Section 4.10), or the amount due in connection with any conversion of, the Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive any such payment or delivery from the money, Common Stock or other consideration held by the Trustee or such Paying Agent.

ARTICLE 9

AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 9.01. Amendments Without Consent of Holders.

The Company and the Trustee may amend or supplement this Indenture or the Notes without notice to or the consent of any Noteholder:

(a) to cure any ambiguity, omission, defect or inconsistency in this Indenture or the Notes;

(b) to evidence a successor to the Company and the assumption by that successor of the obligations of the Company under this Indenture in accordance with Article 5 or Section 10.12 of this Indenture;

(d) to add to the covenants or Events of Default of the Company for the benefit of the Holders of the Notes or to surrender any right or power conferred upon the Company;

(e) to make any change to comply with the Trust Indenture Act, or any amendment thereto;

(f) to make any provision with respect to matters or questions arising under this Indenture that the Company may deem necessary or desirable and that shall not be inconsistent with provisions of this Indenture provided that such change or modification does not, in the good faith opinion of the Company’s Board of Directors, adversely affect the interests of the Holders of the Notes in any material respect;

(g) to provide for the addition or modification of any of the provisions of this Indenture as shall be necessary or desirable to provide for or facilitate the guarantee of the Notes by one or more guarantors;

(h) to increase the Conversion Rate; provided that the increase will not adversely affect the interest of the Holders of the Notes; and

(i) to make any change that does not adversely affect the rights of any Holder of the Notes.

Section 9.02. Amendments With Consent of Holders.

(a) Except as otherwise provided in Section 6.07 or paragraph (b) of this Section, the Company and the Trustee may amend this Indenture and the Notes with the written consent of the Holders of at least a majority in Original Principal Amount of the outstanding Notes, and the Holders of a majority of the Original Principal Amount of Notes then outstanding by written notice to the Trustee may, on behalf of the Holders of such Notes waive any existing or past Default under this Indenture and its consequences, except an uncured Default (i) in the payment of the Accreted Principal Amount of any Note or Default Interest, (ii) in the payment of the Fundamental Change Repurchase Price with respect to any Note, (iii) in the payment of the applicable portion of the Offer Amount with respect to any Notes properly tendered and accepted for payment in connection with an Asset Sale Offer (iv) in the payment or delivery of the consideration due upon conversion of the Notes or (v) in respect of any provision that under this Indenture cannot be modified or amended without the consent of the Holder of each outstanding Note affected.

(b) Notwithstanding the provisions of paragraph (a), without the consent of each Holder affected, an amendment or waiver may not:

(i) reduce the Original Principal Amount or the Accreted Principal Amount on any Note or reduce the Fundamental Change Repurchase Price on any Note;

(ii) make any Note payable in any currency or securities other than that stated in the Note;

(iii) change the Maturity Date of any Note;

(iv) reduce the rate of accretion or Default Interest or the time for accretion or payment of interest of any Note;

(v) after a Change in Control, make any change that adversely affects the right of a Holder to require the Company to repurchase a Note upon the occurrence of a Change in Control;

(vi) impair the right to institute suit for the enforcement of any payment with respect to, or conversion of, the Notes;

(vii) make any change that adversely affects the right of a Holder to convert any Note; or

(viii) change this Section 9.02(b).

(c) It is not necessary for Noteholders to approve the particular form of any proposed amendment, supplement or waiver, but is sufficient if their consent approves the substance thereof.

(d) An amendment, supplement or waiver under this Section will become effective on receipt by the Trustee of written consents (including consents delivered in accordance with the Applicable Procedures with respect to Global Notes) from the Holders of the requisite percentage in Original Principal Amount of the outstanding Notes. After an amendment, supplement or waiver under this Section becomes effective, the Company will send to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Company will send photocopies of the applicable supplemental indentures to Holders upon request. Any failure of the Company to send such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such supplemental indenture or waiver.

Section 9.03. Effect of Consent.

(a) After an amendment, supplement or waiver becomes effective, it will bind every Holder unless it is of the type requiring the consent of each Holder affected. If the amendment, supplement or waiver is of the type requiring the consent of each Holder affected, the amendment, supplement or waiver shall bind each Holder that has consented to it and every subsequent Holder of a Note that evidences the same debt as the Note of the consenting Holder.

(b) If an amendment, supplement or waiver changes the terms of a Note, the Company or the Trustee may require the Holder to deliver it to the Trustee so that the Trustee may place an appropriate notation of the changed terms on the Note and return it to the Holder, or exchange it for a new Note that reflects the changed terms. The Trustee may also place an appropriate notation on any Note thereafter authenticated. However, the effectiveness of the amendment, supplement or waiver is not affected by any failure to annotate or exchange Notes in this fashion.

Section 9.04. Trustee’s Rights and Obligations.

The Trustee shall receive, and will be fully protected in conclusively relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article is authorized or permitted by this Indenture and is the valid and binding obligation of the Company, enforceable in accordance with its terms, which Opinion of Counsel may contain customary limitations and qualifications. The Trustee shall additionally receive an Officers’ Certificate stating that the exception of any amendment, supplement or waiver is authorized or permitted by this Indenture. If the Trustee has received such an Opinion of Counsel and Officers’ Certificate, it shall sign the amendment, supplement or waiver so long as the same does not adversely affect the rights of the Trustee. The Trustee may, but is not obligated to, execute any amendment, supplement or waiver that affects the Trustee’s own rights, duties, liabilities or immunities under this Indenture. For the avoidance of doubt, the Trustee is also entitled to receive an Officers’ Certificate and Opinion of Counsel pursuant to Section 12.05 in connection with any amendment, supplement or waiver of any provision of the Indenture.

ARTICLE 10

CONVERSION

Section 10.01. Conversion Privilege.

Subject to and upon compliance with the provisions of this Article 10, any applicable limitations on exercise by any Noteholder contained in the Exchange Agreement or the purchase agreement with the Company pursuant to which the Initial Notes were issued and to the limitations on issuance of Common Stock set forth in Section 10.24, a Noteholder shall have the right, at such Noteholder’s option, to convert all or any portion (if the portion to be converted is a minimum of $1,000 of then Accreted Principal Amount or an integral multiple of $1,000 in excess thereof) of such Noteholder’s Notes at any time and from time to time following the Closing Date at a conversion rate (the “ Conversion Rate ”) equivalent to 124.223 shares of Common Stock per $1,000 of then Accreted Principal Amount of Notes, subject to adjustment as set forth in this Article 10. Subject to any applicable limitations on exercise by any Noteholder contained in the Exchange Agreement or the purchase agreement with the Company pursuant to which the Initial Notes were issued and to the limitations on issuance of Common Stock set forth in Section 10.24, upon conversion of any Notes, the Company shall pay or deliver to the converting Noteholder shares of Common Stock, Cash in lieu of fractional shares of Common Stock as described in Section 10.02 and Section 10.03 and/or any other property pursuant to and in accordance with this Article 10 (the Company’s obligation to pay or deliver such consideration being herein called the “ Conversion Obligation ”).

Section 10.02. Conversion Procedures; Conversion Settlement.

(a) To convert a Note that is represented by a Certificated Note, a Noteholder must (1) complete and manually sign a Conversion Notice, a form of which is on the back of the Note, and deliver such Conversion Notice to the Conversion Agent, (2) surrender the Note to the Conversion Agent, (3) if required, furnish appropriate endorsement and transfer documents and (4) if required, pay all transfer or similar taxes. If a Noteholder holds a beneficial interest in a Global Note, to convert such beneficial interest, such Noteholder must comply with requirements (1) and (4) as set forth in the immediately preceding sentence and comply with the Applicable Procedures. The first date on which all of the requirements set forth in the first sentence of this Section 10.02(a) (in the case of a Certificated Note) or the second sentence of this Section 10.02(a) (in the case of a Global Note or a beneficial interest therein) have been satisfied is referred to in this Indenture as the “ Conversion Date .” The Conversion Agent shall, within one (1) Business Day of any Conversion Date, provide notice to the Company, as set forth in Section 12.03, of the occurrence of such Conversion Date. The Accreted Principal Amount shall have the accreted value as of the date of delivery of the notice described in clause (1) of the first sentence of this Section 10.02(a).

(b) Subject to any applicable limitations on exercise by any Noteholder contained in the Exchange Agreement or the purchase agreement with the Company pursuant to which the Initial Notes were issued and to the limitations on issuance of Common Stock set forth in Section 10.24, upon any conversion of any Note, the Company will deliver to converting Holders, in respect of each $1,000 of then Accreted Principal Amount of Notes being converted determined as of the date of delivery of the Conversion Notice, a “ Settlement Amount ” equal to the number of shares of Common Stock equal to the Applicable Conversion Rate (or, if applicable, the equivalent amount of Reference Property as determined in accordance with Section 10.12), Cash in lieu of fractional shares of Common Stock as provided in Section 10.03 and Cash in lieu of shares of Common Stock that cannot be issued pursuant to Section 10.24. The Settlement Amount will be delivered by the Company on the third Business Day immediately following the applicable Conversion Date. A Holder shall not be entitled to any payment (or shares) in connection with accretion occurring after the date specified in the last sentence of Section 10.02(a).

(c) A Holder receiving any Common Stock upon conversion shall not be entitled to any rights as a holder of Common Stock with respect to shares issuable upon conversion, including, among other things, the right to vote and receive dividends and notices of stockholder meetings, until the Conversion Date.

(d) No payment or adjustment will be made for dividends on, other distributions with respect to, or other transactions with respect to, any Common Stock except as specifically provided in this Article 10. Upon conversion of a Note, any Accreted Principal Amount will be deemed paid by the shares of Common Stock received by the Noteholder upon conversion. Delivery to the Noteholder of such shares of Common Stock shall thus be deemed to satisfy the Company’s obligation to pay the Accreted Principal Amount of such Note, such that such Note is deemed paid in full rather than cancelled, extinguished or forfeited.

(e) If a Noteholder converts more than one Note at the same time, the number of shares of Common Stock and any Cash in lieu of fractional shares of Common Stock due upon conversion or any other Reference Property shall be determined based on the total principal amount of the Notes converted.

(f) Upon surrender of a Note that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Note in an authorized denomination equal in principal amount to the unconverted portion of the Note surrendered.

(g) Notwithstanding the foregoing, with respect to any shares of Common Stock to be issued to a Holder in connection with any conversion hereunder, if the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and either (i) a registration statement covering the resale of such shares of Common Stock is effective under the Securities Act, (ii) such Holder has sold such shares of Common Stock pursuant to and in compliance with Rule 144 (assuming neither the transferor nor the transferee is an affiliate of the Company), (iii) such shares of Common Stock are eligible to be sold, assigned or transferred under Rule 144 (provided that such Holder provides the Company with reasonable assurances that such shares of Common Stock are eligible for sale, assignment or transfer under Rule 144 which shall include an opinion of Holder’s counsel as may be reasonably required by the Company or the transfer agent), or (iv) a restrictive legend is not required to be included on the certificate with respect to such shares of Common Stock under applicable requirements of the Securities Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the Commission), then, at such Holder’s request, the Company shall deliver such shares of Common Stock, within three (3) Business Days following the Conversion Date, to such Holder by crediting (or causing the Company’s transfer agent to credit) such aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder's or its designee's balance account with DTC through its Deposit/Withdrawal At Custodian system.

Section 10.03. Fractional Shares.

The Company will not issue a fractional share of Common Stock upon conversion of a Note. Instead, the Company shall pay Cash in lieu of fractional shares of Common Stock equal to the number of such fractional shares multiplied by the Closing Price on the relevant Conversion Date.

Section 10.04. Taxes on Conversion.

If a Holder converts a Note, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of any shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder’s name. The Conversion Agent may refuse to deliver the certificates representing Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because Common Stock is to be delivered in a name other than the Holder’s name.

Section 10.05. Company to Provide Common Stock.

The Company will use all reasonable efforts to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Notes and shall use all reasonable efforts to list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which Common Stock is then listed or quoted.

In addition, if any shares of Common Stock that would be issuable upon conversion of Notes hereunder require registration with or approval of any governmental authority before such shares of Common Stock may be issued upon such conversion, the Company will use all reasonable efforts to cause such shares of Common Stock to be duly registered or approved, as the case may be.

Following conversion pursuant to this Article 10, the Company may place a legend on the shares of Common Stock that such stock is subject to certain resale restrictions, pursuant to the Securities Act of 1933, and the rules and regulations thereunder, in each case, as amended.

Section 10.06. Adjustment for Change in Capital Stock.

If the Company issues shares of Common Stock as a dividend or distribution on shares of Common Stock, or if the Company effects a share split or share combination of the Common Stock, then the Conversion Rate will be adjusted based on the following formula:


CR 1 = CR 0 ´	OS 1
CR 1 = CR 0 ´	OS 0

where,

CR 1 =

the new Conversion Rate in effect immediately after the opening of business on the Ex-Date for such dividend or distribution or immediately after the opening of business on the effective date of such share split or combination, as the case may be;

CR 0 =

the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such dividend or distribution or the effective date of such share split or share combination, as applicable;

OS 0 =

the number of shares of Common Stock outstanding immediately prior to such dividend or distribution, or the effective date of such share split or share combination, as applicable; and

OS 1 =

the number of shares of Common Stock outstanding immediately after such dividend or distribution, or the effective date of such share split or share combination.

Any adjustment made under this Section 10.06 shall become effective immediately after the opening of business on the Ex-Date for such dividend or distribution, or immediately after the opening of business on the effective date of such share split or share combination, as applicable. If any dividend or distribution described in this Section 10.06 is declared but not so paid or made, or if the outstanding shares of Common Stock are not split or combined, as the case may be, effective as of the date the Board of Directors or a committee thereof determines not to pay such dividend or distribution or to effect such split or combination, the new Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such dividend or distribution or share split or share combination had not been declared.

Section 10.07. Adjustment for Rights, Options or Warrants Issue.

If the Company distributes to all or substantially all holders of Common Stock any rights, warrants or options (other than pursuant to a stockholder rights plan, provided that such rights plan provides for the issuance of such rights with respect to the Common Stock issued upon conversion of the Notes) entitling them to subscribe for or purchase, for a period of not more than 60 days following the issuance of such rights, warrants or options, shares of Common Stock at a price per share less than the average of the Closing Prices of Common Stock for the ten consecutive Trading Days ending on, and including, the Trading Day immediately preceding the announcement of the issuance of such rights, warrants or options, then the Conversion Rate will be increased based on the following formula;


CR 1 = CR 0 ´	OS 0 + X
CR 1 = CR 0 ´	OS 0 + Y

where,

CR 1 =

the new Conversion Rate in effect immediately after the opening of business on the Ex-Date for such distribution;

CR 0 =

the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such distribution;

OS 0 =

the number of shares of Common Stock outstanding immediately prior to the Ex-Date for such distribution;

X =

the aggregate number of shares of Common Stock issuable pursuant to such rights, warrants or options; and

Y =

the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, warrants or options divided by the average of the Closing Prices over the ten consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the announcement of the issuance of such rights, warrants or options.

Any increase made under this Section 10.07 shall be made successively whenever any such rights, warrants or options are issued and shall become effective immediately after the opening of business on the Ex-Date for such distribution. However, to the extent that shares of Common Stock are not delivered pursuant to such rights or upon the expiration or termination of such rights, warrants or options, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustments made upon the issuance of such rights, warrants or options been made on the basis of the delivery of only the number of shares of Common Stock actually delivered.

For the purposes of this Section 10.07, in determining whether any rights, warrants or options entitle the holders thereof to subscribe for or purchase shares of Common Stock at less than the average of the Closing Prices for the ten consecutive Trading Days ending on, and including, the Trading Day immediately preceding the announcement of the issuance of such rights, warrants or option, and in determining the aggregate price payable to exercise such rights, warrants or options, there shall be taken into account any consideration received by the Company for such rights, warrants or options and any amount payable upon exercise or conversion thereof, with the value of such consideration, if other than cash, as shall be determined in good faith by the Board of Directors. If any right, warrant or option described in this Section 10.07 is not exercised or converted prior to the expiration of the exercisability or convertibility thereof, the new Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such right, warrant or option had not been so issued. Except in connection with any readjustment expressly provided for in this clause, in no event shall the Conversion Rate be decreased pursuant to this Section 10.07.

If the Company elects to make a distribution described in this Section 10.07 that has a per share of Common Stock value equal to more than 15% of the Closing Price of Common Stock on the day preceding the date of announcement for such distribution, the Company will be required to give notice to Holders at least 35 Business Days prior to the Ex-Date for such distribution.

Section 10.08. Adjustment for Other Distributions.

(a) If the Company distributes shares of the Company’s Capital Stock, evidences of the Company’s indebtedness or other assets or property of the Company to all or substantially all holders of Common Stock (excluding (i) dividends or distributions as to which adjustment is required to be effected pursuant to Section 10.06, (ii) rights, warrants or options as to which adjustment is required to be effected pursuant to Section 10.07, (iii) the initial distribution of rights issued pursuant to a stockholder rights plan, provided that such rights plan provides for the issuance of such rights with respect to Common Stock issued upon conversion of the Notes, (iv) dividends or distributions paid exclusively in cash and (v) spin-offs described below in Section 10.08(b)), then the Conversion Rate will be adjusted based on the following formula:


CR 1 = CR 0 ´	SP 0
CR 1 = CR 0 ´	SP 0 – FMV

where,

CR 1 =

the new Conversion Rate in effect immediately after the opening of business on the Ex-Date for such distribution;

CR 0 =

the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such distribution;

SP 0 =

the average of the Closing Prices over the ten consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date for such distribution; and

FMV =

the fair market value (as determined in good faith by the Board of Directors) of the shares of Capital Stock, evidences of indebtedness, assets or property distributed with respect to each outstanding share of Common Stock on the earlier of the record date or the Ex-Date for such distribution.

Any adjustment made under this Section 10.08 shall become effective immediately after the opening of business on the Ex-Date for such distribution. If the Board of Directors determines the FMV by reference to the actual or when-issued trading market for any securities, then, in doing so, it must consider the prices in such market over the same period used in computing SP 0 . Notwithstanding the foregoing, if FMV is equal to or greater than SP 0 , then, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall receive, on the date on which such Capital Stock, evidences of indebtedness, or other assets or property are distributed to holders of Common Stock, for each $1,000 principal amount of Notes, the amount of such Capital Stock, evidences of indebtedness, or other assets or property that a person who was a holder of record, on the record date for such distribution, of a number of shares of Common Stock equal to the Conversion Rate in effect immediately prior to the Ex-Date would have been entitled to receive pursuant to such distribution.

(b) Notwithstanding anything to the contrary in this Section 10.08, if there has been a payment of a dividend or other distribution on Common Stock in shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary, or other business unit, of the Company, which shares or equity interest are listed on a national securities exchange (a “ Spin-Off ”), the Conversion Rate will be increased based on the following formula:


CR 1 = CR 0 ´	FMV 0 + MP 0
	MP 0

where,

CR 1 =

the new Conversion Rate in effect immediately after the opening of business on the Ex-Date for such Spin-Off;

CR 0 =

the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such Spin-Off;

FMV 0 =

the average of the Closing Prices of the Capital Stock or similar equity interest distributed to holders of Common Stock applicable to one (1) share of Common Stock over the first ten consecutive Trading Day period immediately following the Ex-Date for such Spin-Off (such period, the “ Valuation Period ”); and

MP 0 =

the average of the Closing Prices per share of Common Stock over the Valuation Period.

The adjustment to the Conversion Rate pursuant to the immediately preceding formula will be made immediately after the open of business on the day after the last day of the applicable Valuation Period, but will be given effect immediately on and after the Ex-Date for the applicable Spin-Off. In no event shall the Conversion Rate be decreased pursuant to this Section 10.08.

(c) If the Company elects to make a distribution described in Section 10.08(a) or Section 10.08(b) that has a per share of Common Stock value equal to more than 15% of the Closing Price of Common Stock on the day preceding the declaration date for such distribution, the Company will be required to give notice to Holders at least 35 Business Days prior to the Ex-Date for such distribution.

If any such dividend or distribution described in Section 10.08(a) or (b) is declared but not paid or made, the new Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such dividend or right had not been declared.

Section 10.09. Adjustment for Cash Dividends.

If the Company pays any cash dividends or distributions paid exclusively in cash to all or substantially all holders of Common Stock (other than (i) distributions described in Section 10.10 below, (ii) dividends or distributions made in connection with the Company’s liquidation, dissolution or winding-up or (iii) upon a Disposition Event) during any of its quarterly fiscal periods in an aggregate amount that, together with other cash dividends and distributions made during such quarterly fiscal period, exceeds the product of $0.00 (the “ reference dividend ”), multiplied by the number of shares of Common Stock outstanding on the record date of such distribution, then the Conversion Rate will be increased based on the following formula:


CR 1 = CR 0 ´	SP 0
CR 1 = CR 0 ´	SP 0 – C

where,

CR 1 =

the new Conversion Rate in effect immediately after the opening of business on the Ex-Date for such dividend or distribution;

CR 0 =

the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such dividend or distribution;

SP 0 =

the average of the Closing Prices over the ten consecutive Trading Day period ending on the Trading Day immediately preceding the earlier of the record date or the day prior to the Ex-Date for such dividend or distribution; and

C =

the amount in cash per share the Company distributes to holders of Common Stock that exceeds the reference dividend;

provided , however , that if C is equal to or greater than SP 0 , then, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive, on the date on which such cash dividend or distribution is distributed to holders of Common Stock and upon the same terms as such holders, for each $1,000 principal amount of Notes, the amount of cash to be paid as a dividend or distribution by the Company in respect of a number of shares of Common Stock equal to the Conversion Rate in effect on such Ex-Date. Any adjustment made under this Section 10.09 shall become effective immediately after the opening of business on the Ex-Date for such cash dividend or distribution.

If the Company elects to make a distribution described in this Section 10.09 that has a per share of Common Stock value equal to more than 15% of the Closing Price of Common Stock on the day preceding the declaration date for such distribution, the Company will be required to give notice to Holders at least 35 Business Days prior to the Ex-Date for such distribution.

If any such dividend or distribution described in this Section 10.09 is declared but not paid or made, the new Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such dividend or right had not been declared. Except in connection with any readjustment expressly provided for in the immediately preceding sentence, in no event shall the Conversion Rate be decreased pursuant to this Section 10.09.

The amount of the reference dividend is subject to adjustment in a manner inversely proportional to adjustments to the Conversion Rate; provided that no adjustment shall be made to the amount of the reference dividend for any adjustment made to the Conversion Rate under this Section 10.09.

Notwithstanding the foregoing, if an adjustment is required to be made under this Section 10.09 as a result of a distribution that is not a quarterly dividend, the reference dividend amount shall be deemed to be zero.

Section 10.10. Adjustment for Tender Offer.

If the Company or any of its Subsidiaries makes a payment in respect of a tender offer or exchange offer for Common Stock, where the cash and value (as determined by the Board of Directors) of any other consideration included in the payment per share of Common Stock pursuant to such tender offer or exchange offer exceeds the Closing Price on the Trading Day next succeeding the last date (such last date, the “ Expiration Date ”) on which tenders or exchanges may be made pursuant to such tender offer or exchange offer, then the Conversion Rate will be increased based on the following formula:


CR 1 = CR 0 ´	AC + (SP 1 ´ OS 1 )
	OS 0 ´ SP 1

where,

CR 1 =

the new Conversion Rate in effect on the second day immediately following the Expiration Date;

CR 0 =

the conversion rate in effect on the day immediately following the Expiration Date;

AC =

the aggregate of the cash and value of all other consideration (as determined by the Board of Directors or a committee thereof) paid or payable for all shares of Common Stock purchased in such tender offer or exchange offer;

SP 1 =

the average of the Closing Prices over the ten consecutive Trading Day period (the “ Averaging Period ”) commencing on, and including, the Trading Day next succeeding the Expiration Date;

OS 1 =

the number of shares of Common Stock outstanding immediately after the Expiration Date (after giving effect to the purchase or exchange of shares pursuant to such tender offer or exchange offer); and

OS 0 =

the number of shares of Common Stock outstanding immediately prior to the Expiration Date (prior to giving effect to such tender offer or exchange offer).

The adjustment to the Conversion Rate pursuant to the immediately preceding formula will be made immediately prior to the open of business on the day after the last day of the applicable Averaging Period, but will be given effect on the second day immediately following the Expiration Date. Notwithstanding anything to the contrary in this Indenture or the Notes, if the Company, or any of its Subsidiaries, is obligated to purchase Common Stock pursuant to any such tender offer or exchange offer but is permanently prevented by applicable law from effecting any such purchase or all such purchases are rescinded, then the Conversion Rate shall be readjusted to be the Conversion Rate that would be in effect if such tender offer or exchange offer had not been made. Except as provided in the immediately preceding sentence, if the application of this Section 10.10 to any tender offer or exchange offer would result in a decrease in the Conversion Rate, no adjustment shall be made for such tender offer or exchange offer under this Section 10.10.

Section 10.11. Provisions Governing Adjustment to Conversion Rate.

Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company’s Capital Stock (either initially or under certain circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“ Trigger Event ”): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of Section 10.06, Section 10.07, Section 10.08, Section 10.09 or Section 10.10 (and no adjustment to the Conversion Rate under Section 10.06, Section 10.07, Section 10.08, Section 10.09 or Section 10.10 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights, options and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under Section 10.08, and, if applicable, Section 10.13. If any such right, option or warrant, including any such existing rights, options or warrants distributed prior to the date of this Indenture, are subject to events, upon the occurrence of which such rights, options or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Ex-Date with respect to new rights, options or warrants with such rights (and a termination or expiration of the existing rights, options or warrants without exercise by any of the holders thereof), except as set forth in Section 10.13. In addition, except as set forth in Section 10.13, in the event of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under Section 10.08 was made (including any adjustment contemplated in Section 10.13), (1) in the case of any such rights, options or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a Cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights, options or warrants (assuming such holder had retained such rights, options or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights, options or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options and warrants had not been issued.

Section 10.12. Disposition Events.

If any of the following events (a “ Disposition Event ”) occurs:

(a) any reclassification of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination);

(b) a consolidation, merger, or other combination involving the Company; or

in each case, in which holders of outstanding Common Stock would be entitled to receive Cash, securities or other property for their shares of Common Stock, then, subject to the provisions of Section 3.01, (i) the right to convert each $1,000 Accreted Principal Amount of Notes into shares of Common Stock will be changed to a right to convert each $1,000 Accreted Principal Amount of Notes into the kind and amount of Cash, securities or other property that a holder of a number of shares of Common Stock equal to the Conversion Rate immediately prior to such transaction would have owned or been entitled to receive (the “ Reference Property ”) (but such Accreted Principal Amount is to be determined based upon the accreted value as of the date of consummation of the Disposition Event and not any accretion after such date), and (ii) upon conversion the Notes shall be settled as set forth in this Section 10.12.

With respect to each $1,000 of Accreted Principal Amount of Notes surrendered for conversion after the effective date of any Disposition Event, upon conversion the Notes shall be settled in units of Reference Property, as follows: the Company shall deliver to the converting Noteholder a number of units of Reference Property (each such unit comprised of the kind and amount of Cash, securities or other property or assets that a holder of one share of Common Stock immediately prior to such Disposition Event would have owned or been entitled to receive based on the Weighted Average Consideration) equal to (1) the Accreted Principal Amount of Notes to be converted (but such Accreted Principal Amount is to be determined based upon the accreted value as of the date of consummation of the Disposition Event and not any accretion after such date), divided by $1,000, multiplied by (2) the then-applicable Conversion Rate.

The Company will deliver the Cash in lieu of fractional units of Reference Property as set forth pursuant to Section 10.03; provided that the amount of such Cash shall be determined as if references in such Section to “Closing Price of Common Stock” were instead a reference to the Closing Price of a unit of Reference Property composed of the kind and amount of Cash, securities or other property that a holder of one share of Common Stock immediately prior to such Disposition Event would have owned or been entitled to receive based on the Weighted Average Consideration.

“ Weighted Average Consideration ” shall mean the weighted average of the types and amounts of consideration received by the holders of the Common Stock entitled to receive Cash, securities or other property with respect to or in exchange for such Common Stock in any Disposition Event who affirmatively make such an election. The Company shall notify the Holders of the Weighted Average Consideration as soon as practicable after the Weighted Average Consideration is determined.

Upon the occurrence of a Disposition Event, to the extent the Notes are not otherwise required to be repurchased or converted in accordance with Article 3, the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture permitted under Section 9.02(b) providing for the conversion and settlement of the Notes as set forth in this Indenture. Such supplemental indenture shall amend the Conversion Obligation to provide for the delivery of Reference Property upon conversion as nearly equivalent in value to the Conversion Obligation as determined by the Company and shall provide for conversion settlement mechanics and adjustments that shall be as nearly equivalent as may be practicable to the conversion settlement mechanics and adjustments provided for in this Article 10. If, in the case of any Disposition Event, the Reference Property includes shares of stock or other securities and assets of a Person other than the successor or purchasing Person, as the case may be, in such reclassification, consolidation, merger, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other Person and shall contain such additional provisions to protect the interests of the Holders of the Notes as the Board of Directors shall reasonably consider necessary by reason of the foregoing, including to the extent required by the Board of Directors and practicable the provisions providing for the repurchase rights set forth in Article 3 herein.

In the event the Company shall execute a supplemental indenture pursuant to this Section 10.12, the Company shall promptly file with the Trustee an Officers’ Certificate briefly stating the reasons therefore, the kind or amount of cash, securities or property or asset that will comprise the Reference Property after any such Disposition Event, any adjustment to be made with respect thereto and that all conditions precedent have been complied with, and shall promptly mail notice thereof to all Noteholders. The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Noteholder, at its address appearing on the Register provided for in this Indenture, within twenty days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

Section 10.13. Rights Issued in Respect of Common Stock Issued Upon Conversion.

Each share of Common Stock issued upon conversion of Notes pursuant to this Article 10 shall be entitled to receive the appropriate number of rights (“ Rights ”), if any, and the certificates representing Common Stock issued upon such conversion shall bear such legends, if any, in each case as may be provided by the terms of any rights plan (i.e., a poison pill) adopted by the Company, as the same may be amended from time to time, is in effect, (in each case, a “ Shareholders Rights Plan ”). Upon conversion of the Notes a Holder will receive, in addition to any Common Stock received in connection with such conversion, the Rights under the Shareholders Rights Plan, unless prior to any conversion, the Rights have separated from Common Stock, in which case no such Rights shall be delivered upon conversion. Any distribution of Rights pursuant to the Shareholders Rights Plan that would allow a Holder to receive upon conversion, in addition to shares of Common Stock, the Rights described therein (unless such Rights have separated from Common Stock) shall not constitute a distribution that would entitle the Holder to an adjustment to the Conversion Rate pursuant to Section 10.06.

Section 10.14. When Adjustment May Be Deferred.

No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% of the Conversion Rate. Any adjustments that are less than 1% of the Conversion Rate will be carried forward and taken into account in determining any subsequent adjustment. In addition, the Company shall make any carry forward adjustments not otherwise effected on each anniversary of the date hereof, upon conversion of any Note, upon required repurchases of the Notes pursuant to Section 3.01, and on each day from and after the 24th Scheduled Trading Day prior to the Maturity Date. The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required pursuant to the terms hereof, and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment absent manifest error or negligence.

Section 10.15. When No Adjustment Required.

(a) No adjustment need be made for a transaction referred to in Section 10.06, 10.07, 10.08, 10.09 or 10.10 if Noteholders participate, without conversion, in the transaction or event that would otherwise give rise to an adjustment pursuant to such Section at the same time as holders of Common Stock participate with respect to such transaction or event and on the same terms as holders of Common Stock participate with respect to such transaction or event as if Noteholders, at such time, held a number of shares of Common Stock equal to the Applicable Conversion Rate, multiplied by the Accreted Principal Amount (expressed in thousands) of Notes held by such Noteholder, without having to convert their Notes.

(b) No adjustment need be made for the issuance of Common Stock or any securities convertible into or exchangeable for Common Stock or carrying the right to purchase Common Stock or any such security with respect to which adjustment has already been made.

(c) No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest.

(d) No adjustment need be made for a change in the par value or no par value of Common Stock.

(e) To the extent the Notes become convertible pursuant to this Article 10 into Cash, no adjustment need be made thereafter as to the Cash. Interest will not accrue on the Cash.

Section 10.16. Notice of Adjustment.

Whenever the Conversion Rate is adjusted, the Company shall promptly mail to Noteholders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice and a certificate from the Company’s independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof.

Section 10.17. Notice of Certain Transactions.

If (a) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 10.06, 10.07, 10.08, 10.09 or 10.10 (unless no adjustment is to occur pursuant to Section 10.14 or Section 10.15), (b) the Company takes any action that would require a supplemental indenture pursuant to Section 10.12, or (c) there is a liquidation or dissolution of the Company, then the Company shall mail to Noteholders and file with the Trustee and the Conversion Agent a notice stating the proposed Ex-Date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, combination, sale or conveyance. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction.

Section 10.18. Company Determination Final.

The Company shall be responsible for making all calculations called for hereunder and under the Notes. These calculations include, but are not limited to, the Weighted Average Price, the then Accreted Principal Amount of the notes being converted, the Closing Price, the Applicable Conversion Rate and the number of shares of Common Stock to be issued upon conversion of the Notes. The Company shall make all these calculations using commercially reasonable means and, absent manifest error, the Company’s calculations will be final and binding on Noteholders. The Company shall provide a schedule of the Company’s calculations to the Trustee, and the Trustee is entitled to rely upon the accuracy of the Company’s calculations without independent verification.

Section 10.19. Trustee’s Adjustment Disclaimer.

The Trustee has no duty to determine when an adjustment under this Article 10 should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 10.12 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Notes. The Trustee shall not be responsible for the Company’s failure to comply with this Article 10. Each Conversion Agent shall have the same protection under this Section 10.19 as the Trustee.

Section 10.20. Simultaneous Adjustments. For purposes of Section 10.08, Section 10.06 and Section 10.07, any dividend or distribution to which Section 10.08 is applicable that also includes shares of Common Stock, or rights, options or warrants to subscribe for or purchase shares of Common Stock (or both), shall be deemed instead to be (1) a dividend or distribution of the debt securities, assets or shares of Capital Stock other than such shares of Common Stock or rights (and any Conversion Rate adjustment required by Section 10.08 with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights (and any further Conversion Rate adjustment required by Section 10.06 and Section 10.07 with respect to such dividend or distribution shall then be made), except any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding immediately prior to such dividend or distribution” within the meaning of Section 10.06.

Section 10.21. Successive Adjustments. After an adjustment to the Conversion Rate under this Article 10, any subsequent event requiring an adjustment under this Article 10 shall cause an adjustment to the Conversion Rate as so adjusted.

Section 10.22. Withholding Taxes.

The Company may, at its option, set-off withholding taxes due with respect to Notes against payments of Common Stock, Cash in lieu of fractional shares of Common Stock on the Notes, if any and Cash in lieu of shares of Common Stock or Reference Property that cannot be issued pursuant to Section 10.24, if any. In the case of any such set-off against Common Stock delivered upon conversion of the Notes, such Common Stock shall be valued based on the average of the Closing Prices for the last ten Trading Days immediately preceding the date of payment of Common Stock and Cash in lieu of fractional shares of Common Stock, if any, and Cash in lieu of shares of Common Stock that cannot be issued pursuant to Section 10.24, if any.

Section 10.23. Restricted Shares.

Any shares of Common Stock issued upon conversion of Transfer Restricted Notes that are “restricted securities” under Rule 144 are “Restricted Shares”. Any Restricted Shares shall bear appropriate legends regarding restrictions of the transfer of such Restricted Shares comparable to those set forth on Exhibit D.

Section 10.24. Limitation on Issuance of Common Stock.

Notwithstanding any other provision of this Indenture, no Notes of any Holder shall be convertible into Common Stock under this Indenture to the extent that after such conversion such Holder would own more than 19.99% of the currently outstanding Common Stock of the Company (the “ Regulatory Cap ”) unless the Company shall have obtained the prior approval of its stockholders to the issuance of Common Stock upon conversion of the Notes (“ Conversion Shares ”) to any Holder, which, after such conversion would beneficially own shares of Common Stock in excess of the Regulatory Cap (“ Shareholder Approval ”); provided, however , that no Conversion Shares issued to such Holder (or, if necessary under applicable law or listing requirements, Conversion Shares issued to any other Holder) prior to any such stockholder approval shall be entitled to vote on any proposal submitted to Company stockholders to approve the issuance of Conversion Shares in excess of the Regulatory Cap. The Company hereby agrees that (i) it shall seek stockholder approval to the issuance of the Conversion Shares in accordance with the terms of this Indenture, (ii) will use its reasonable efforts to obtain such approval and (iii) management of the Company shall recommend that the stockholders give such approval.

ARTICLE 11

REDEMPTION

Section 11.01. No Right to Redeem.

Other than in connection with a repurchase on a Change in Control on the terms and under the circumstances set forth in Article 3, the Notes shall not be redeemable before the Maturity Date at the option of the Company.

ARTICLE 12

MISCELLANEOUS

Section 12.01. Trust Indenture Act of 1939.

The mandatory provisions of Trust Indenture Act (as they apply to trust indentures) are intended to be applicable to, and shall govern, this Indenture and the Notes. If any express provision of this Indenture limits, qualifies, or conflicts with another provision which is required or deemed to be included in this Indenture by the Trust Indenture Act, such required or deemed provision shall control to the extent of such conflict.

Section 12.02. Noteholder Communications; Noteholder Actions.

(a) The rights of Holders to communicate with other Holders with respect to this Indenture or the Notes are as provided by the Trust Indenture Act, and the Company and the Trustee shall comply with the requirements of Trust Indenture Act Sections 312(a) and 312(b). Neither the Company nor the Trustee will be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to this Indenture.

(b) Subject to Section 1.04, the Trustee may make reasonable rules for action by or at a meeting of Holders, which will be binding on all the Holders.

(c) Any act by the Holder of any Note binds that Holder and every subsequent Holder of a Note that evidences the same debt as the Note of the acting Holder, even if no notation thereof appears on the Note.

(d) The Company may, but is not obligated to, fix a record date (which need not be within the time limits otherwise prescribed by Trust Indenture Act Section 316(c)) for the purpose of determining the Holders entitled to act with respect to any amendment or waiver or in any other regard, except that during the continuance of an Event of Default, only the Trustee may set a record date as to notices of Default, any declaration or acceleration or any other remedies or other consequences of the Event of Default. If a record date is fixed, those Persons that were Holders at such record date and only those Persons will be entitled to act, or to revoke any previous act, whether or not those Persons continue to be Holders after the record date. No act will be valid or effective for more than 90 days after the record date.

Section 12.03. Notices.

(a) Any notice or communication to the Company will be deemed given if in writing (i) when delivered in person or (ii) five days after mailing when mailed by first class mail, or (iii) when sent by facsimile transmission, with transmission confirmed, or electronic mail in PDF format. Any notice to the Trustee will be effective only upon receipt. In each case the notice or communication should be addressed as follows:

if to the Company :

Cadiz Inc.

550 South Hope Street, Suite 2850

Los Angeles, CA 90017

Attention: Chief Financial Officer

Fax: 213-271-1614

if to the Trustee :

The Bank of New York Mellon Trust Company, N.A.

400 South Hope Street, Suite 400

Los Angeles, CA 90071

Attention: Corporate Unit

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

(b) In addition to the foregoing, the Trustee agrees to accept and act upon notice, instructions or directions pursuant to this Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods. If the Company elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Company agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties. Except as otherwise expressly provided with respect to published notices, any notice or communication to a Holder will be deemed given when mailed to the Holder at its address as it appears on the Register by first class mail or, as to any Global Note registered in the name of the Depository or its nominee, in accordance with the Applicable Procedures. Copies of any notice or communication to a Holder, if given by the Company, will be mailed to the Trustee at the same time. Any defect in mailing a notice or communication to any particular Holder will not affect its sufficiency with respect to other Holders.

(c) Where this Indenture provides for notice, the notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and the waiver will be the equivalent of the notice. Waivers of notice by Holders must be filed with the Trustee, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waivers.

Section 12.04. Communication by Holders with Other Holders.

Noteholders may communicate pursuant to Section 312(b) of the Trust Indenture Act with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of Section 312(c) of the Trust Indenture Act.

Section 12.05. Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate and Opinion of Counsel stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with.

Section 12.06. Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture may include:

(1) a statement that each person signing the certificate or opinion has read the covenant or condition and the related definitions;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in the certificate or opinion is based;

(3) a statement that, in the opinion of each such person, that person has made such examination or investigation as is necessary to enable the person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with, provided that an Opinion of Counsel may rely on an Officers’ Certificate or certificates of public officials.

Section 12.07. Legal Holiday.

A “ Legal Holiday ” is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Notes, no interest shall accrue for the intervening period.

Section 12.08. Rules by Trustee, Paying Agent, Conversion Agent and Registrar.

The Registrar, Conversion Agent and the Paying Agent may make reasonable rules for their functions.

Section 12.09. Governing Law; Waiver of Jury Trial.

THIS INDENTURE AND EACH NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF).

EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 12.10. No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture or loan or debt agreement of the Company or any Subsidiary of the Company, and no such indenture or loan or debt agreement may be used to interpret this Indenture.

Section 12.11. Successors.

All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successor.

Section 12.12. Counterparts.

The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

Section 12.13. Severability.

In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

Section 12.14. Table of Contents and Headings.

The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and in no way modify or restrict any of the terms and provisions of this Indenture.

Section 12.15. No Liability of Directors, Officers, Employees, Incorporators, Members and Stockholders.

No director, officer, employee, incorporator, member or stockholder of the Company, as such, will have any liability for any obligations of the Company under the Notes or this Indenture, including by way of an Officers’ Certificate, or for any claim based on, in respect of, or by reason of, such obligations. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

Section 12.16. U.S.A. Patriot Act.

The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee. The parties to this Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act.

Section 12.17. Force Majeure.

In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

CADIZ INC. ,

as Issuer

	/s/ Timothy J. Shaheen
	Name: Timothy J. Shaheen
	Title: Chief Financial Officer and Secretary

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee

	/s/ R. Tarnas
	Name: R. Tarna
	Title: Vice President

SCHEDULE I

The following table sets forth the Accreted Principal Amount per $1,000 Original Principal Amount of Notes as of the specified dates during the period from the Closing Date through the Maturity Date.

	Accreted Principal Amount
Date	Accreted Principal Amount
3/05/2013	1,000
6/05/2013	1,017
9/05/2013	1,036
12/05/2013	1,054
3/05/2014	1,073
6/05/2014	1,091
9/05/2014	1,111
12/05/2014	1,131
3/05/2015	1,151
6/05/2015	1,171
9/05/2015	1,192
12/05/2015	1,213
3/05/2016	1,235
6/05/2016	1,257
9/05/2016	1,279
12/05/2016	1,302
3/05/2017	1,325
6/05/2017	1,348
9/05/2017	1,372
12/05/2017	1,397
3/05/2018	1,422

The Accreted Principal Amount for a Note between the dates listed above will include an amount reflecting the additional principal accretion that has accrued as of such date since the immediately preceding date in the table at an accretion rate of 7.00% per annum.

EXHIBIT A

[FACE OF NOTE]

THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE HOLDER OF THIS NOTE MAY REQUEST THE FOLLOWING INFORMATION WITH RESPECT TO THIS NOTE: ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY. SUCH INFORMATION WILL PROMPTLY BE MADE AVAILABLE UPON REQUEST AND WILL BE PROVIDED BY THE CHIEF FINANCIAL OFFICER OF CADIZ INC. AT 550 SOUTH HOPE STREET, SUITE 2850 LOS ANGELES, CA 90017 FAX: 213-271-1614.

CADIZ INC.

7.00% Convertible Senior Note due 2018

No. CUSIP No. [ n ]

ISIN No. [ n ]

CADIZ Inc., a Delaware corporation (the “ Company ,” which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to Cede & Co. or its registered assigns, the principal sum of [ n ] [set forth on Schedule I hereto] 1 on March 5, 2018.

Initial Accretion Rate: The Notes shall accrete at a rate equal to 7.00% per annum (compounded quarterly).

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which will for all purposes have the same effect as if set forth at this place.

1 This schedule should be included only if the Note is a Global Note.

Exh. A-

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officer.

CADIZ INC.

By:

Name:

Title:

(Form of Trustee’s Certificate of Authentication)

This is one of the 7.00% Convertible Senior Notes due 2018 described in the Indenture referred to in this Note.

Date:

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

As Trustee

By:

Authorized Signatory

[REVERSE SIDE OF NOTE]

CADIZ INC.

7.00% Convertible Senior Note due 2018

Principal and Accretion.

The Company promises to pay the principal of this Note on March 5, 2018.

Pursuant to Section 2.15 of the Indenture, principal shall accrete on the principal amount of this Note (including the Original Principal Amount) at a rate equal to 7.00% per annum (compounded quarterly). The Accreted Principal Amount per $1,000 Original Principal Amount is set forth on Annex I attached hereto.

If the Accreted Principal Amount of any Note is not paid when due (whether upon acceleration pursuant to Section 6.02 of the Indenture, upon the date set for payment of the Fundamental Change Repurchase Price pursuant to Article 3 of the Indenture, upon the Purchase Date for payment of the Offer Amount in connection with an Asset Sale Offer pursuant to Section 4.10 of the Indenture or upon the Maturity Date), then in each such case the overdue amount shall, to the extent permitted by law, bear cash interest at the rate of 2.00% per annum, compounded quarterly, which interest shall accrue from the date such Accreted Principal Amount was originally due to the payment date such amount has been made or duly provided for.

Paying Agent, Conversion Agent and Registrar.

Initially, the Trustee will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Conversion Agent, Registrar or co-registrar without notice, other than notice to the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Registrar or co-registrar. The Company may maintain deposit accounts and conduct other banking transactions with the Trustee in the normal course of business.

Indenture.

This is one of the Notes issued under an Indenture dated as of March 5, 2013 (as amended from time to time, the “ Indenture ”), between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee. Capitalized terms used herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those expressly made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture will control. The Notes are general unsecured obligations of the Company.

Repurchase or Conversion at the Option of the Holders.

Upon the occurrence of a Change in Control, a Holder has the right, at such Holder’s option, to require the Company to repurchase all of such Holder’s Notes or any portion thereof (in minimum principal amounts of $1,000 or integral multiples of $1,000) on the Fundamental Change Repurchase Date at a price equal to the Fundamental Change Repurchase Price or to convert such Holder’s Notes. Any Notes not elected to be converted will be repurchased.

Redemption at the Option of the Company.

No sinking fund is provided for the Notes. Other than in connection with a repurchase on a Change in Control on the terms and under the circumstances set forth in Article 3 of the Indenture, the Notes shall not be redeemable before the Maturity Date at the option of the Company.

Conversion.

Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, upon the occurrence of certain conditions specified in the Indenture, prior to the close of business on the Business Day immediately preceding the Maturity Date, to convert (on the basis of the then Accreted Principal Amount) this Note or portion thereof that is at least $1,000 or an integral multiple of $1,000, into shares of Common Stock at a Conversion Rate specified in the Indenture, as adjusted from time to time as provided in the Indenture. The Company shall pay Cash in lieu of fractional shares of Common Stock and as otherwise provided in the Indenture, and shall pay Cash in lieu of shares of Common Stock that cannot be issued pursuant to the terms of the Indenture, subject to notice and as otherwise provided for in the Indenture.

Defaults and Remedies.

Subject to certain exceptions, if an Event of Default, other than a Bankruptcy Default, occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in Accreted Principal Amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if the notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the Accreted Principal Amount of the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal and accreted value will become immediately due and payable. If a Bankruptcy Default occurs, the Accreted Principal Amount of the Notes then outstanding will become immediately due and payable automatically without any declaration or other act on the part of the Trustee or any Holder.

Amendment and Waiver.

Subject to certain exceptions set forth in the Indenture, the Indenture and the Notes may be amended, or default may be waived, with the consent of the Holders of a majority in Original Principal Amount of the outstanding Notes. Without notice to or the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or this Note to, among other things, cure any ambiguity, omission, defect or inconsistency in the Indenture or this Note that does not adversely affect the rights of any Holder of the Notes.

Registered Form; Denominations; Transfer; Exchange.

The Notes are in registered form without coupons in minimum denominations of $1,000 principal amount and integral multiples of $1,000. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Trustee may require a Holder to furnish appropriate endorsements and transfer documents and to pay any taxes and fees as set forth in the Indenture. Pursuant to the Indenture, there are certain periods during which the Trustee will not be required to issue, register the transfer of or exchange any Note or certain portions of a Note.

Persons Deemed Owners.

The registered Holder of this Note may be treated as the owner of this Note for all purposes.

Unclaimed Money or Notes.

Subject to applicable abandoned property law, the Trustee and each Paying Agent shall pay or deliver, as the case may be, to the Company upon request any money, Common Stock or other consideration held by them for the payment of the Accreted Principal Amount of, or the amount due in connection with any conversion of, this Note that remains unclaimed for two years after a right to such money, Common Stock or other consideration has matured.

Trustee Dealings with the Company.

The Trustee, in its individual or any other capacity, may become the owner or pledgee of this Note and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Trust Indenture Act Sections 310(b) and 311.

No Recourse Against Others.

No director, officer, employee, incorporator, member or stockholder of the Company, as such, will have any liability for any obligations of the Company under this Note or the Indenture or for any claim based on, in respect of, or by reason of, such obligations. Each Holder of this Note by accepting this Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of this Note.

Authentication.

This Note shall not be valid until an authorized officer of the Trustee signs manually the Trustee’s Certificate of Authentication on the other side of this Note.

Governing Law.

THE INDENTURE AND THE NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF).

Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).

The Company will furnish a copy of the Indenture to any Holder upon written request and without charge.

[FORM OF TRANSFER NOTICE]

FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

Please print or typewrite name and address including zip code of assignee

the within Note and all rights thereunder, hereby irrevocably constituting and appointing

attorney to transfer said Note on the books of the Company with full power of substitution in the premises.

Your Signature:

(Sign exactly as your name appears on the other side of this Note)

Date:

Signature guaranteed by: 2

By:

2 The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee.

Cadiz Inc.

550 South Hope Street, Suite 2850

Los Angeles, CA 90017

Attention: Chief Financial Officer

Fax: 213-271-1614

The Bank of New York Mellon Trust Company, N.A.

400 South Hope Street, Suite 400

Los Angeles, CA 90071

Attention: Corporate Unit

CONVERSION NOTICE

To convert only part of this Note, state the Accreted Principal Amount to be converted (must be a minimum of $1,000 principal amount or an integral multiple of $1,000 principal amount): $________.

If only a portion of the Notes is to be converted, please indicate:

1.	Accreted Principal Amount to be converted: U.S. $_________

2.	Accreted Principal Amount and denomination of Notes representing unconverted Accreted Principal Amount to be issued: _________

Amount: U.S. $_________ Denominations: U.S. $_________

If you want the stock certificate made out in another person’s name or Cash in lieu of fractional shares of Common Stock paid to another person, fill in the form below:

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint

agent to transfer this Note on the books of the Company. The agent may substitute another to act for him or her.

Account Number:
(if electronic book entry transfer)
Transaction Code Number:
(if electronic book entry transfer)

Your Signature:

(Sign exactly as your name appears on the other side of this Note)

Date:

Signature guaranteed by: 3

By:

3 The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee.

Annex I

The following table sets forth the Accreted Principal Amount per $1,000 Original Principal Amount of Notes as of the specified dates during the period from the Closing Date through the Maturity Date.

	Accreted Principal Amount
Date	Accreted Principal Amount
3/05/2013	1,000
6/05/2013	1,017
9/05/2013	1,036
12/05/2013	1,054
3/05/2014	1,073
6/05/2014	1,091
9/05/2014	1,111
12/05/2014	1,131
3/05/2015	1,151
6/05/2015	1,171
9/05/2015	1,192
12/05/2015	1,213
3/05/2016	1,235
6/05/2016	1,257
9/05/2016	1,279
12/05/2016	1,302
3/05/2017	1,325
6/05/2017	1,348
9/05/2017	1,372
12/05/2017	1,397
3/05/2018	1,422

Schedule I 4

No. ___

The initial principal amount of this Global Note is $________.

Date	Principal Amount of this Global Note	Notation Explaining Change in Principal Amount	Authorized Signature of Trustee

4 This schedule should be included only if the Note is a Global Note.

EXHIBIT B

DTC LEGEND

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“ DTC ”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE INDENTURE.

EXHIBIT C

OID LEGEND

EXHIBIT D

TRANSFER RESTRICTION LEGEND

THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

THIS NOTE, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

EXHIBIT E

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION

OF TRANSFER OF TRANSFER RESTRICTED NOTES

Re:	7.00% Convertible Senior Notes due 2018 (the “Notes”) of Cadiz Inc.

This certificate relates to $________ principal amount of Notes owned in (check applicable box)

book-entry or definitive form by _____________(the “ Transferor ”).

The Transferor has requested a Registrar or the Trustee to exchange or register the transfer of such Notes.

In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with transfer restrictions relating to the Notes as provided in Section 2.13 of the Indenture dated as of March 5, 2013 between Cadiz Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (the “ Indenture ”), and the transfer of such Note is being made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”) (check applicable box) or the transfer or exchange, as the case may be, of such Note does not require registration under the Securities Act because (check applicable box):

Such Note is being transferred pursuant to an effective registration statement under the Securities Act.

Such Note is being transferred outside the United States in an offshore transaction in accordance with Rule 904 under the Securities Act.

Such Note is being acquired for the Transferor’s own account, without transfer.

Such Note is being transferred to the Company or a Subsidiary (as defined in the Indenture) of the Company.

Such Note is being transferred to a person the Transferor reasonably believes is a “qualified institutional buyer” (as defined in Rule 144A or any successor provision thereto (“ Rule 144A ”) under the Securities Act) that is purchasing for its own account or for the account of a “qualified institutional buyer”, in each case to whom notice has been given that the transfer is being made in reliance on such Rule 144A, and in each case in reliance on Rule 144A.

Such Note is being transferred pursuant to and in compliance with an exemption from the registration requirements under the Securities Act in accordance with Rule 144 (or any successor thereto) (“ Rule 144 ”) under the Securities Act.

Such Note is being transferred pursuant to and in compliance with an exemption from the registration requirements of the Securities Act (other than an exemption referred to above) and as a result of which such Note will, upon such transfer, cease to be a “restricted security” within the meaning of Rule 144 under the Securities Act.

Date: __________

(Insert Name of Transferor)

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.10 of the Indenture, check the box below:

[ ] Section 4.10

Date: _____________________

Your Signature:

(Sign exactly as your name appears on the face of this Note)

Tax Identification No.:

Signature Guarantee*: __________________________________

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

EXHIBIT 10.41

PRIVATE PLACEMENT PURCHASE AGREEMENT

This Private Placement Purchase Agreement (the “ Agreement ”) is made as of March 4, 2013 by and among the parties set forth on Exhibit A hereof (together, the “ Purchasers ”) and Cadiz, Inc. (the “ Company ”).

RECITALS

WHEREAS, in connection with the entry of that certain amended and restated credit agreement (the “ Amended and Restated Credit Agreement ”), to be entered into by and among the Company, Cadiz Real Estate LLC, LC Capital Master Fund, Ltd., as administrative agent, and the lenders party thereto (the “ Current Lenders ”), the Current Lenders and the Company are entering into an Exchange Agreement dated as of the date hereof (the “ Exchange Agreement ”) pursuant to which the Current Lenders are exchanging certain outstanding loans to the Company for $35,958,000 in original principal amount of the Company’s 7% Convertible Senior Notes due 2018 (the “ Notes ”) that will be issued pursuant to the provisions of an indenture (the “ Indenture ”) to be entered into between the Company and The Bank of New York Mellon Trust Company, N.A. (the “ Trustee ”) in the form attached hereto as Exhibit B .

WHEREAS, the Purchasers desire to purchase from the Company and the Company desires to sell to the Purchasers $17,500,000 in original principal amount of the Notes.

WHEREAS, the Conversion Shares (as defined below) will have the benefit of the Registration Rights Agreement, to be dated as of the Closing Date, by and among the Company and each of the parties that are signatories thereto (the “ Registration Rights Agreement ”), in the form attached hereto as Exhibit C .

WHEREAS, terms and expressions defined or construed in the Amended and Restated Credit Agreement shall have the same meanings or construction when used in this Agreement and the rules of usage set forth therein shall apply hereto, except (i) as amended below and (ii) where the context requires otherwise.

NOW THEREFORE, on and subject to the terms hereof, the parties hereto agree as follows:

ARTICLE I

PURCHASE OF NOTES

Subject to the terms set forth in this Agreement, at the Closing (as defined herein), the Company agrees to issue the Notes, and each Purchaser severally, and not jointly, agrees to purchase the principal amount of the Notes set out against its name as its purchase commitment in Exhibit A hereto at the purchase price of 100% of the principal amount of the Notes (the “ Purchase Price ”).

Subject to Section 5.1, the closing of the purchase and sale of the Notes (the “ Closing ”) shall occur on a date (the “ Closing Date ”) no later than three business days after the date of this Agreement. At the Closing, (a) each Purchaser shall deliver or cause to be delivered to the Company its portion of the Purchase Price equivalent to its purchase commitment in Exhibit A hereto, and (b) the Company shall issue to each Purchaser the principal amount of Notes set out against such Purchaser’s name in Exhibit A hereto. Following the Closing Date, the Company shall use commercially reasonable efforts to issue global notes, in a form eligible for deposit with The Depository Trust Company. Once the Notes become eligible to use the system of The Depositary Trust Company, each Purchaser shall promptly deliver their Notes back to the Trustee prior to the Company issuing the global notes.

ARTICLE II

REPRESENTATIONS AND

WARRANTIES OF THE PURCHASERS

Each Purchaser hereby makes the following representations and warranties (solely as to itself), each of which is and shall be true and correct on the date hereof and at the Closing, to the Company and all such representations and warranties shall survive the Closing:

Section 2.1 Power and Authorization . In the case of any Purchaser that is an entity, the Purchaser is duly organized, validly existing and in good standing, and has the power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the Purchase contemplated hereby.

Section 2.2 Valid and Enforceable Agreement; No Violations . This Agreement has been duly executed and delivered by the Purchaser and constitutes a legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except that such enforcement may be subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (b) general principles of equity, whether such enforceability is considered in a proceeding at law or in equity (such qualifications in clauses (a) and (b) being the “ Enforceability Exceptions ”). This Agreement and consummation of the Purchase will not violate, conflict with or result in a breach of or default under (i) the Purchaser’s organizational documents, (ii) any agreement or instrument to which the Purchaser is a party or by which the Purchaser or any of its assets are bound, or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to the Purchaser.

Section 2.3 Accredited Investor/Qualified Institutional Buyer . The Purchaser is either (i) an “accredited investor” within the meaning of Rule 501(a) of Regulation D (“ Regulation D ”) promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”) (ii) has (and if applicable, its officers, employees, directors or equity owners have) either alone or with his, her or its purchaser representative or representatives, if any, such knowledge and experience in financial and business matters that he, she or it is capable of evaluating the merits and risks of an investment in the Securities or (iii) a “qualified institutional buyer” within the meaning of Rule 144A promulgated under the Securities Act (“ Rule 144A ”). The information the Purchaser has provided in writing to the Company as set forth on the Purchaser’s signature page hereto is true, correct and complete, as of the date hereof and as of the Closing Date in all material respects.

Section 2.4 No Related Party or 5% Stockholder Status . The Purchaser and its affiliates (within the meaning of Rule 144 promulgated under the Securities Act) (a) collectively beneficially own and will beneficially own as of the Closing Date (after giving effect to the Purchase and prospective conversion of the Notes) (i) less than 5% of the Company’s outstanding common stock, par value $.01 per share (the “ Common Stock ”) and (ii) less than 5% of the aggregate number of votes that may be cast by holders of those outstanding securities of the Company that entitle the holders thereof to vote generally on all matters submitted to the Company’s stockholders for a vote (the “ Voting Power ”) or (b) if such Purchaser and its affiliates collectively beneficially owns and will beneficially own after the Closing Date (after giving effect to the Purchase and prospective conversion of the Notes) (i) 5% or more of the Common Stock and (ii) 5% or more of the Voting Power, it acknowledges and agrees that it will comply in all material respects with all applicable provisions of the Securities Exchange Act of 1934 as a result of such holdings. The Purchaser, except as set forth in any Section 13 filings under the Exchange Act made by the Purchaser prior to the date hereof, is not a subsidiary, affiliate or, to its knowledge, otherwise closely-related to any director or officer of the Company or beneficial owner of 5% or more of the outstanding Common Stock or Voting Power.

Section 2.5 Restricted Notes and Stock . The Purchaser (a) acknowledges (i) that the issuance of the Notes pursuant to this Agreement and the issuance of any shares of Common Stock upon conversion of any of the Notes (the “ Conversion Shares ”) have not been registered, nor does the Company have a plan or intent to register such issuance of Notes or Conversion Shares, under the Securities Act or any state securities laws except with respect to the Conversion Shares as contemplated by the Registration Rights Agreement, (ii) the Notes and Conversion Shares are being offered and sold in reliance upon exemptions provided in the Securities Act and state securities laws for transactions not involving any public offering and, therefore, cannot be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless they are subsequently registered and qualified under the Securities Act and applicable state laws or unless an exemption from such registration and qualification is available (iii) the Notes and Conversion Shares are “restricted securities” as that term is defined in Rule 144 promulgated under the Securities Act and (iv) any and all certificates representing the Notes and Conversion Shares shall bear the Transfer Restriction Legend (in the case of the Notes and as defined in the Indenture) and the legend set forth in the Notes (in the case of the Conversion Shares) and (b) is purchasing the Notes and Conversion Shares for investment purposes only for the account of the Purchaser and not with any view toward a distribution thereof or with any intention of selling, distributing or otherwise disposing of the Notes or Conversion Shares in a manner that would violate the registration requirements of the Securities Act. The Purchaser is able to bear the economic risk of holding the Notes and Conversion Shares for an indefinite period and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment in the Notes and Conversion Shares.

Section 2.6 No Illegal Transactions . The Purchaser has not, directly or indirectly, and no person acting on behalf of or pursuant to any understanding with it has, engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales (as defined below) involving any of the Company’s securities) since the time that the Purchaser was first contacted by the Company or any other person regarding the transactions contemplated by this Agreement or an investment in the Notes or the Company. The Purchaser covenants that neither it nor any person acting on its behalf or pursuant to any understanding with it will engage, directly or indirectly, in any transactions in the securities of the Company (including Short Sales) prior to the time the transactions contemplated by this Agreement are publicly disclosed. “ Short Sales ” include, without limitation, all “short sales” as defined in Rule 200 of Regulation SHO promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers. Solely for purposes of this Section 2.6, subject to the Purchaser’s compliance with its obligations under the U.S. federal securities laws and the Purchaser’s internal policies, “Purchaser” shall not be deemed to include any employees, subsidiaries or affiliates of the Purchaser that are effectively walled off by appropriate “Chinese Wall” information barriers approved by the Purchaser’s legal or compliance department (and thus have not been privy to any information concerning the transactions contemplated by this Agreement).

Section 2.7 Adequate Information; No Reliance . The Purchaser acknowledges and agrees that (a) the Purchaser has been furnished with all materials it considers relevant to making an investment decision to enter into the purchase and sale of the Notes and has had the opportunity to review the Company’s filings and submissions with the Securities and Exchange Commission (the “ SEC ”), including, without limitation, all information filed or furnished pursuant to the Exchange Act and all information incorporated into such filings and submissions, (b) the Purchaser has sufficient knowledge and expertise to make an investment decision with respect to the transactions contemplated hereby, (c) the Purchaser has had a full opportunity to speak directly with directors, officers and “ Affiliates ” (as that term is defined in Rule 501(b) of Regulation D under the Securities Act) of the Company and to ask questions of the Company and such directors, officers and Affiliates of the Company concerning the Company, its business, operations, financial performance, financial condition and prospects, and the terms and conditions of the purchase and sale of the Notes, and to obtain such additional information as it deems necessary to verify the accuracy of the information furnished to it and has asked such questions, received such answers and obtained such information as it deems necessary, (d) the Purchaser has had the opportunity to consult with its accounting, tax, financial and legal advisors to be able to evaluate the risks involved in the purchase and sale of the Notes and to make an informed investment decision with respect to such purchase and sale and (e) the Purchaser is not relying, and has not relied, upon any statement, advice (whether accounting, tax, financial, legal or other), representation or warranty made by the Company or any of its affiliates or representatives, except for (A) the publicly available filings and submissions made by the Company with the SEC under the Exchange Act, and (B) the representations and warranties made by the Company in this Agreement.

Section 2.8 Guarantee. The Purchaser represents and warrants that it never has been represented, guaranteed, or warranted to the Purchaser by any officer or director of the Company, their agents or employees or any other person in connection with the Company, expressly or by implication, any of the following :

(a) the approximate or exact length of time that the Purchaser will be required to remain as the owner of the Notes;

(b) the exact amount of profit and/or amount or type of consideration, profits or losses (including tax benefits) to be realized, if any, by the Company; or

(c) that the past performance or experience of the officers and directors of the Company, or any other person connected with the Company, can predict the results of the ownership of the Notes or the overall success of the Company.

Section 2.9 Purchaser’s Reporting Requirement. The Company has made no representations to the Purchaser regarding the Purchaser’s reporting requirements with the SEC related to the Purchaser’s ownership in the Company, and the Purchaser acknowledges and agrees that it is the responsibility of the Purchaser to ensure that it complies with any disclosure and reporting requirements of the SEC.

Section 2.10 No Public Market . The Purchaser understands that no public market exists for the Notes, and that there is no assurance that a public market will ever develop for the Notes.

Section 2.11 No General Solicitation or Advertising . The offer to enter into the purchase of the Notes was directly communicated to the Purchaser, and the Purchaser was able to ask questions of and receive answers concerning the terms of this transaction. At no time was Purchaser presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.

Section 2.12 Legal Opinions . The Purchaser acknowledges and understands that a legal opinion is being delivered by counsel to the Company in reliance on, and assuming the accuracy of, the foregoing representations and warranties of the Purchaser.

ARTICLE III

REPRESENTATIONS AND

WARRANTIES OF THE COMPANY

The Company hereby makes the following representations and warranties, each of which is and shall be true and correct on the date hereof and at the Closing, to the Purchasers, and all such representations and warranties shall survive the Closing.

Section 3.1 Exchange Act Filings . The Company has filed or furnished, as applicable, on a timely basis all forms, statements, certifications, reports and documents required to be filed or furnished by it with the SEC pursuant to the Exchange Act or the Securities Act since December 31, 2011 (the “ Company Reports ”). The Company Reports, when they became effective or were filed with or furnished to the SEC, as the case may be, conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations thereunder and none of such documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and any further documents so filed or furnished after the date hereof and on or prior to the Closing, when such documents become effective or are filed with the SEC, as the case may be, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. On or before the first business day following the date of this Agreement, the Company shall issue a publicly available press release or file with the SEC a Current Report on Form 8-K disclosing all material terms of the transactions contemplated hereby.

Section 3.2 Due Incorporation . Each of the Company and each of its Subsidiaries has been duly organized and is validly existing as a corporation or other legal entity in good standing (or the foreign equivalent thereof) under the laws of its jurisdiction of incorporation or organization. Each of the Company and its Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other legal entity in each jurisdiction in which its ownership or lease of its properties or the conduct of its business requires such qualification and has all power and authority (corporate or other) necessary to own or hold its properties and to conduct the businesses in which each is engaged, except where the failure to so qualify or have such power or authority (i) would not have and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), results of operations, assets or business of the Company and its Subsidiaries, taken as a whole, or (ii) impair in any material respect the ability of the Company to perform its obligations under this Agreement or the Indenture or to consummate any transactions contemplated hereby or thereby (any such effect as described in clauses (i) or (ii), a “ Material Adverse Effect ”). As used in this Agreement, “ Subsidiary ” shall have the meaning set forth in Rule 1-02 of Regulation S-X of the SEC.

Section 3.3 Subsidiaries . The membership interests or capital stock, as applicable, of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable and, except to the extent set forth in the Company Reports, are owned by the Company directly, free and clear of any claim, lien, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party.

Section 3.4 Due Authorization . The Company has the full right, power and authority to enter into this Agreement, the Indenture and the Registration Rights Agreement and to perform and to discharge its obligations hereunder and thereunder; and this Agreement, the Indenture and the Registration Rights Agreement have been duly authorized, this Agreement has been, and at Closing the Indenture and Registration Rights Agreement will be, duly executed and delivered by the Company, and each such agreement constitutes or will constitute upon Closing a valid and binding obligation of the Company enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general principles of equity.

Section 3.5 The Notes and the Conversion Shares . The Notes have been duly authorized and, when issued and delivered upon sale, will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture. The Conversion Shares have been duly authorized for issuance by the Company and, when issued in accordance with the terms of the Notes and the Indenture, will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights. The Notes and the Conversion Shares will be issued in compliance with all federal and state securities laws.

Section 3.6 Capitalization . The authorized capital stock of the Company consists of 70,000,000 shares of Common Stock, of which 15,452,756 shares of Common Stock were outstanding as of the close of business on March 1, 2013. All of the outstanding shares of Common Stock have been duly authorized and are validly issued, fully paid and nonassessable. Other than 897,218 shares of Common Stock reserved for issuance under the Company’s employee benefit plans, stock option and employee stock purchase plans or other employee compensation plans as such plans are in existence on the date hereof and described in the Company Reports and 472,223 shares of Common Stock reserved for issuance upon exercise of warrants outstanding on the date hereof and previously described in the Company Reports, the Company has no shares of capital stock reserved for issuance. Except as set forth above or pursuant to this Agreement or the Exchange Agreement, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company or any of its Subsidiaries to issue or sell any shares of capital stock or other securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company.

Section 3.7 No Default, Termination or Lien . The execution, delivery and performance of this Agreement the Indenture and the Registration Rights Agreement by the Company, the issuance, sale and delivery of the Notes by the Company, the issuance and delivery of the Conversion Shares in accordance with the terms of the Notes and the Indenture, the consummation of the transactions contemplated hereby and thereby, and compliance by the Company with the terms of this Agreement, the Indenture and the Registration Rights Agreement will not (with or without notice or lapse of time or both) conflict with or result in a breach or violation of any of the terms or provisions of, constitute a default under, give rise to any right of termination or other right or the cancellation or acceleration of any right or obligation or loss of a benefit under, or give rise to the creation or imposition of any lien, encumbrance, security interest, claim or charge upon any property or assets of the Company or any Subsidiary (except as provided in the Amended and Restated Credit Agreement) pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws (or analogous governing instruments, as applicable) of the Company or any of its Subsidiaries or any law, statute, rule, regulation, judgment, order or decree of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its Subsidiaries or any of their properties or assets.

Section 3.8 No Consents . No consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, the Indenture and the Registration Rights Agreement, except such as may be required by the securities or blue sky laws of the various states and the NASDAQ Global Market in connection with the offer and sale of the Notes.

Section 3.9 Independent Accountants . PricewaterhouseCoopers LLP (“ PwC ”), who have certified certain financial statements and related schedules included or incorporated by reference in the Company Reports, is an independent registered public accounting firm as required by the Securities Act and the rules and regulations thereunder and the Public Company Accounting Oversight Board (United States). Except as pre-approved in accordance with the requirements set forth in Section 10A of the Exchange Act, PwC has not been engaged by the Company to perform any “prohibited activities” (as defined in Section 10A of the Exchange Act).

Section 3.10 Financial Statements . The financial statements, together with the related notes and schedules, included in the Company Reports fairly present the financial position and the results of operations and changes in financial position of the Company and its consolidated Subsidiaries and other consolidated entities at the respective dates or for the respective periods therein specified. Such statements and related notes and schedules have been prepared in accordance with the generally accepted accounting principles in the United States (“ GAAP ”) applied on a consistent basis throughout the periods involved except as may be set forth in the related notes. Such financial statements, together with the related notes and schedules, comply in all material respects with the Securities Act, the Exchange Act, and the rules and regulations thereunder. No other financial statements or supporting schedules or exhibits are required by the Exchange Act or the rules and regulations thereunder to be filed with the SEC.

Section 3.11 No Material Adverse Change . There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its Subsidiaries, taken as a whole, from that set forth or contemplated in the Company Reports filed prior to the date hereof.

Section 3.12 Legal Proceedings . There are no legal or governmental proceedings, actions, suits or claims pending or, to the Company’s knowledge, threatened to which the Company or any of its Subsidiaries is a party or to which any of the properties or assets of the Company or any of its Subsidiaries is subject (i) other than proceedings accurately described in all material respects in the Company Reports (including the section entitled “Risk Factors” beginning on page 10 of the Company’s Form 10-K for the year ended December 31, 2011, filed with the SEC on March 15, 2012), litigation in connection with a Qualified Water Project (as defined in the Indenture) and proceedings that would not have and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (ii) that are required to be described in the Company Reports and are not so described; and there are no statutes, regulations, contracts or other documents to which the Company or any of its Subsidiaries is subject or by which the Company or any of its Subsidiaries is bound that are required to be described in the Company Reports or to be filed as exhibits to the Company Reports that are not described or filed as required. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any legal or governmental proceedings, actions, suits or claims of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. For purposes of this Agreement, “ Company’s Knowledge ” means the actual knowledge of the executive officers (as defined in Exchange Act Rule 3b-7) of the Company or its Subsidiaries, after reasonable due inquiry.

Section 3.13 Regulatory Permits . Each of the Company and its Subsidiaries possesses or has applied for all certificates, authorizations, licenses, franchises, permits, orders and approvals issued or granted by the appropriate governmental or regulatory authorities, agencies, courts, commissions or other entities, whether federal, state, local or foreign, or applicable self-regulatory organizations necessary to conduct its business as currently conducted, except (i) where the failure to possess such certificates, authorizations, licenses, franchises, permits, orders and approval, individually or in the aggregate, has not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (“ Material Permits ”) and (ii) as accurately described in all material respects in the Company Reports (including the section entitled “Risk Factors” beginning on page 10 of the Company’s Form 10-K for the year ended December 31, 2011, filed with the SEC on March 15, 2012), and neither the Company nor any of its Subsidiaries has received any written notice of proceedings relating to the revocation or material adverse modification of any such Material Permits (except as accurately described in all material respects in the Company Reports), and to the Company’s Knowledge, there are no facts or circumstances that would give rise to the revocation or material adverse modifications of any Material Permits.

Section 3.14 Material Contracts . Except for the Material Contracts, the Company and its Subsidiaries are not party to any agreements, contracts or commitments that are material to the business, financial condition, assets or operations of the Company and its Subsidiaries that would be required to be filed pursuant to Item 601(b)(10) of Regulation S-K under the Exchange Act. Neither the Company nor any of its Subsidiaries is in material default under or in material violation of, nor to the Company’s Knowledge, has received written notice of termination or default under any Material Contract. For purposes of this Agreement, “ Material Contract ” means any contract of the Company that was filed as an exhibit to the Company Reports pursuant to Item 601(b)(10) of Regulation S-K.

Section 3.15 Investment Company Act . Neither the Company nor any of its Subsidiaries is or, after giving effect to the Exchange and the purchase and sale of the Notes and the application of the proceeds thereof, will become an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

Section 3.16 No Price Stabilization . Neither the Company, its Subsidiaries nor any of the Company’s or its Subsidiaries’ officers, directors or affiliates has taken or will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which caused or resulted in, or which would in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company.

Section 3.17 Title to Property . The Company and its Subsidiaries have good and marketable title to all real and personal property owned by them which is material to the business of the Company and its Subsidiaries, taken as a whole, in each case free and clear of all liens, encumbrances and defects of title except such as are described in the Company Reports or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries; and any real property and buildings held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries, in each case except as described in the Company Reports.

Section 3.18 No Labor Disputes . No labor problem or dispute with the employees of the Company exists, or, to the Company’s Knowledge, is threatened or imminent, which would or would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. The Company is not aware that any key employee or significant group of employees of the Company plans to terminate employment with the Company. To the Company’s Knowledge, no executive officer (as defined in Rule 501(f) of the Securities Act) of the Company or any of its Subsidiaries is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement. Except for matters which would not and would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect, (i) the Company has not engaged in any unfair labor practice; (ii) there is (A) no unfair labor practice complaint pending or, to the Company’s Knowledge, threatened against the Company before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending or to the Company’s Knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Company’s knowledge, threatened against the Company and (C) no union representation dispute currently existing concerning the employees of the Company and (ii) to the Company’s knowledge, (A) no union organizing activities are currently taking place concerning the employees of the Company and (B) there has been no violation of any federal, state, local or foreign law relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws or any provision of the Employee Retirement Income Security Act of 1974 (“ ERISA ”) or the rules and regulations promulgated thereunder concerning the employees of the Company.

Section 3.19 Taxes . The Company (i) has timely filed all necessary federal, state, local and foreign income and franchise tax returns (or timely filed applicable extensions therefore) that have been required to be filed and (ii) is not in default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto, other than any which the Company is contesting in good faith and for which adequate reserves have been provided and reflected in the financial statements included in the Company Reports. The Company does not have any tax deficiency that has been or, to the Company’s Knowledge, is reasonably likely to be asserted or threatened against it that would result or would reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect.

Section 3.20 ERISA . The Company is in compliance in all material respects with all presently applicable provisions of ERISA; no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the “ Code ”); and each “pension plan” for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

Section 3.21 Compliance with Environmental Laws . Except as disclosed in the Company Reports, neither the Company nor any of its Subsidiaries is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “ Environmental Laws ”), or to the Company’s Knowledge, operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would or would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim.

Section 3.22 Intellectual Property Rights . The Company and its Subsidiaries own or possess, or have the right to use, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, “ Intellectual Property Rights ”) necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights, except such as would not and would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.

Section 3.23 Foreign Corrupt Practices Act . Neither the Company nor any of its Subsidiaries, nor to its knowledge, any director, officer, employee or other person associated with or acting on behalf of the Company or any of its Subsidiaries has: (i) used any Company funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from Company funds; (iii) caused the Company or any of its Subsidiaries to be in violation of any provision of the United States Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment from Company funds.

Section 3.24 OFAC and Similar Laws . None of the Company, any of its Subsidiaries or, to the Company’s Knowledge, any director, officer, agent, employee, affiliate or representative of the Company or any of its subsidiaries is an individual or entity (“ Person ”) currently the subject or target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“ OFAC ”), the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “ Sanctions ”), nor is the Company or any of its Subsidiaries located, organized or resident in a country or territory that is the subject of Sanctions; and the Company will not directly or indirectly use the proceeds of the sale of the Notes, or lend, contribute or otherwise make available such proceeds to any subsidiaries, joint venture partners or other Person, to knowingly fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.

Section 3.25 Disclosure Controls and Procedures . The Company has established and maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are effective in all material respects to ensure that material information relating to the Company, including any consolidated Subsidiaries, is made known to its chief executive officer and chief financial officer by others within those entities. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of the period covered by the most recently filed annual periodic report under the Exchange Act (such date, the “ Evaluation Date ”). The Company presented in its most recently filed annual periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no material changes in the Company’s internal controls (as such term is defined in the rules of the SEC under the Exchange Act) or, to the Company’s Knowledge, in other factors that could affect the Company’s internal controls.

Section 3.26 Accounting Controls . The Company and its Subsidiaries maintain a system of internal accounting and other controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the Company Reports, since the end of the Company’s most recent audited fiscal year, there has been (A) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (B) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Section 3.27 Absence of Material Changes . Subsequent to the respective dates as of which information is given in the Company Reports, and except as may be otherwise disclosed in such Company Reports, there has not been (i) any Material Adverse Effect, (ii) any transaction which is material to the Company, (iii) any obligation, direct or contingent (including any off-balance sheet obligations), incurred by the Company, which is material to the Company, (iv) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, (v) any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to grants of stock under the Company’s stock incentive plans existing on the date hereof or the issuance of shares upon the exercise of outstanding options or warrants)or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock (other than grants of stock options under the Company’s stock option plans existing on the date hereof) of the Company.

Section 3.28 Brokers Fees . Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or understanding with any person (other than the Private Placement Agency Agreement (the “ Placement Agreement ”), dated March 4, 2013, among the Company and the placement agent identified therein (the “ Placement Agent ”) and any letter of understanding between the Company and the Placement Agent) that would give rise to a valid claim against the Company or the Placement Agent for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Notes or any transaction contemplated by this Agreement.

Section 3.29 Listing and Maintenance Requirements . The Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, as applicable. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed on the NASDAQ Global Market, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the NASDAQ Global Market, nor has the Company received any notification that the SEC or NASDAQ is contemplating terminating such registration or listing. The Conversion Shares will be duly authorized for listing on the NASDAQ Global Market immediately upon conversion of the Notes in accordance with the terms of the Notes and the Indenture.

Section 3.30 Sarbanes-Oxley Act . The Company is in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and all applicable rules and regulations promulgated thereunder or implementing the provisions thereof that are then in effect.

Section 3.31 NASDAQ Shareholder Approval Rules . No approval of the stockholders of the Company under the rules and regulations of NASDAQ (including Rule 5635 of the NASDAQ Marketplace Rules) is required for the Company to issue and deliver the Notes to the Purchasers or the Conversion Shares upon conversion of the Notes.

Section 3.32 No General Solicitation . Neither the Company nor any person acting on its or their behalf has offered or sold the Notes or will offer or sell the Notes by means of any general solicitation or general advertising including but not limited to the methods described in Rule 502(c) under the Securities Act.

Section 3.33 Integration . No offers and sales of securities of the same or similar class as the Notes have been made by the Company or on its behalf during the six-month period ending with the date of this Agreement and no such offers or sales are currently being made or contemplated (in each case, whether pursuant to outstanding warrants, options, convertible or exchangeable securities, acquisition agreements or otherwise). Neither the Company nor any other person acting on its behalf will, directly or indirectly, offer or sell any securities of the same or similar class as the Notes, or take any other action, so as to cause the offer and sale of the Notes to fail to be entitled to the exemption afforded by Regulation D under the Securities Act.

ARTICLE IV

OTHER AGREEMENTS

Section 4.1 Participation Rights . Subject to applicable securities law, for so long as any portion of the Notes remain outstanding, in the event the Company issues any shares, interests, participations or other equivalents (however designated) of capital stock or any equivalent ownership interests (“ Capital Stock ”) the Company will offer to sell (subject to consummation of such issuance) to each Purchaser holding Notes with an Original Principal Amount (as that term is defined in the Indenture) of $1,000,000 or more, such Purchaser’s pro rata share of such Capital Stock at the same price and on the same terms (the “ Participation Right ”). Each Purchaser’s “pro rata” share is equal to the ratio of (a) the number of Conversion Shares such Purchaser has the right to acquire upon conversion of the Notes (without giving effect to the limitations in Section 4.2 of this Agreement or Section 10.24 of the Indenture) held thereby to (b) the sum of (i) all Common Stock outstanding as of the time of such determination, (ii) all Common Stock issuable upon the exchange, exercise or conversion of all warrants, options, convertible securities or other such instruments then outstanding (whether or not such instruments are then exercisable) including, but not limited to, any equity securities reserved for issuance under any management or employee benefit plan, and (iii) all other Common Stock then issuable as a result of any anti-dilution adjustments and pre-emptive or similar rights granted to any other holder of the Company’s Common Stock. The Participation Right shall not apply to authorized issuances by the Company in connection with: (i) strategic new business transactions, joint ventures or acquisitions, (ii) firm underwritten commitments for public offerings of common stock with expected gross proceeds in excess of Thirty-Five Million Dollars ($35,000,000), (iii) employee/ consultant stock incentive plans so long as such issuances have been approved by a majority of the independent directors on the Company’s board of directors, (iv) the conversion of any convertible securities of the Company outstanding as of the Closing, (v) the conversion of convertible securities which are offered in a transaction in which the Purchasers are given a right of participation pursuant to this Section 4.1, and (vi) the conversion of the Notes and the corresponding issuance of the Conversion Shares pursuant to the Indenture. Such first offer shall be made in writing by the Company to the Purchaser and shall remain open for at least ten (10) business days (the “ Participation Period ”). The written notice shall provide (i) reasonable information about the terms and conditions of such sale of Capital Stock; and (ii) the expiration date of the Participation Period. Notice of the intention of any Purchaser to exercise its Participation Right shall be evidenced by an irrevocable writing signed by such Purchaser and delivered to the Company prior to the expiration date of the Participation Period, setting forth (i) such Purchaser’s election and (ii) that the representations and warranties of the Purchaser included in this Agreement are true and correct as of the date of such notice.

Section 4.2 Beneficial Ownership Limitation .

(a) No Purchaser listed on Schedule 4.2 hereto shall request that any of the Notes be converted, and the Company shall not effect the conversion of any of the Notes to the extent that, after giving effect to such issuance after conversion, such Purchaser (together with such Purchaser’s affiliates, and any other person or entity acting as a group together with such Purchaser or any of such Purchaser’s affiliates (collectively, the “ Concert Parties ”)), would beneficially own Common Stock in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Purchaser and its Concert Parties shall include the number of Conversion Shares issuable upon conversion of the portion of the Notes with respect to which such determination is being made, but shall exclude the number of Conversion Shares which would be issuable upon (A) conversion of the remaining portion of the Notes beneficially owned by such Purchaser or any of its Concert Parties and (B) conversion or exercise of the unexercised or unconverted portion of any loan to or securities of the Company (or any successor thereto) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Purchaser or any of its Concert Parties. Except as set forth in the preceding sentence, for purposes of this Section 4.2, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder, it being acknowledged by each Purchaser that the Company is not representing to the Purchaser that such calculation is in compliance with Section 13(d) of the Exchange Act and the Purchaser is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 4.2 applies, the determination of whether and the extent to which any of the Notes may be converted (in relation to other loans or securities owned by the Purchaser together with any affiliates) shall be made in good faith by the Purchaser in consultation with its own counsel, and a request that all or a portion of the Notes beneficially owned by such Purchaser be converted shall be deemed to be the Purchaser’s determination that such conversion (in relation to other securities owned by the Purchaser together with any Concert Parties) shall be in compliance with this Section 4.2, and the Company shall not have any obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4.2, in determining the number of outstanding shares of Common Stock, a Purchaser may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s (or its successor’s) most recent periodic or annual report, as the case may be, filed with the SEC (y) a more recent public announcement by the Company (or its successor) or (z) any other notice by the Company or the Company’s transfer agent (or its successor or successor’s transfer agent) setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of any Purchaser listed on Schedule 4.2 hereto, the Company shall within two business days confirm orally and in writing to the Purchaser the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of loans or securities of the Company, including the Notes, by such Purchaser or its Concert Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of the Conversion Shares issuable upon conversion of any of the Notes. Any Purchaser listed on Schedule 4.2 hereto, upon not less than 61 days’ prior notice to the Company, may increase or decrease (including, for the avoidance of doubt, to 0%) the percentage constituting the Beneficial Ownership Limitation, and the provisions of this Section shall continue to apply to such increased or decreased Beneficial Ownership Limitation. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this Section 4.2 shall be construed and implemented in a manner otherwise than in strict conformity with the terms hereof in order to correct such terms (or any portion thereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 4.2 shall apply to any successor to any Purchaser listed on Schedule 4.2 hereto.

(b) Notwithstanding the foregoing, the limitations contained in this Section 4.2 shall not restrict or limit (i) any exercise by a Purchaser of a Participation Right as described in Section 4.1 above or (ii) any conversion or prepayment of the Notes in connection with a Change in Control as contemplated by Article 3 of the Indenture.

ARTICLE V

CONDITIONS TO CLOSING

Section 5.1 Purchaser’s Conditions Precedent . The obligations of each Purchaser to complete the purchase of the Notes contemplated by this Agreement are, in each case, subject to the satisfaction of each of the following conditions precedent:

(a) each of the representations and warranties of the Company contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date;

(b) the Notification Form: Listing of Additional Shares, to be filed with the NASDAQ prior to issuing any common stock, or any security convertible into common stock or in a transaction that may result in the potential issuance of common stock, greater than 10% of either the total shares outstanding or the voting power outstanding on a pre-transaction basis, shall have been filed;

(c) such Purchaser shall have received the Amended and Restated Registration Rights Agreement, executed and delivered by the Company and each of the other parties thereto (other than such Purchaser), substantially in the form of Exhibit C attached hereto;

(d) no court or other governmental or regulatory authorities, agencies, commissions or other entities, whether federal, state, local or foreign, shall have enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the transactions contemplated by this Agreement, and there shall not be pending by or before any such entity any suit, action or proceeding in respect thereof;

(e) the Indenture shall have been entered into as of the Closing Date by and between the Company and the Trustee;

(f) the Closing (as defined in the Amended and Restated Credit Agreement) of the Amended and Restated Credit Agreement shall have occurred;

(g) the Company and the Current Lenders shall have executed the Exchange Agreement and the exchanges contemplated thereby shall have occurred or shall occur simultaneously with the Closing;

(h) Cadwalader, Wickersham & Taft LLP, counsel for the Company, shall have furnished to the Purchasers an opinion, in the form attached hereto as Exhibit D , dated the Closing Date and addressed to the Purchasers;

(i) Theodora Oringher PC, counsel for the Company, shall have furnished to the Purchasers an opinion, in the form attached hereto as Exhibit E , dated the Closing Date and addressed to the Purchasers; and

(j) the Chief Executive Officer and Chief Financial Officer of the Company shall have delivered to such Purchaser a certificate, dated as of the Closing Date, certifying to their knowledge, after reasonable inquiry as to the matters set forth in paragraphs (a), (b), (e) and (f).

Section 5.2 Company Conditions Precedent , The obligations of the Company to complete the sale of the Notes to any Purchaser contemplated by this Agreement are subject to the satisfaction of each of the following conditions precedent:

(a) Each of the representations and warranties of such Purchaser contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date;

(b) such Purchaser shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it at or before the Closing;

(c) no court or other governmental or regulatory authorities, agencies, commissions or other entities, whether federal, state, local or foreign, shall have enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the transactions contemplated by this Agreement, and there shall not be pending by or before any such entity any suit, action or proceeding in respect thereof;

(d) the Trustee shall have received from such Purchaser such documents reasonably requested by the Trustee with respect to the issuance of the Notes contemplated hereby; and

(e) such Purchaser shall have delivered to the Company an executed counterpart to the Registration Rights Agreement.

ARTICLE VI

CERTAIN COVENANTS

Section 6.1 Certain Actions . Each of the Company and each Purchaser shall reasonably cooperate with each other and use (and shall cause their respective affiliates to use) reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable on its part under this Agreement and applicable law and stock exchange listing standards to consummate the transactions contemplated by this Agreement as soon as practicable. Without limiting the generality of the foregoing, on or before the Closing the Company shall deliver to each Purchaser the Registration Rights Agreement duly executed by the Company and a copy of the Indenture duly executed by each of the Company and the Trustee, and each Purchaser shall deliver to the Company the Registration Rights Agreement duly executed by such Purchaser.

Section 6.2 Legends. To the extent reasonably necessary under applicable law, any share certificate representing Conversion Shares which are issued upon conversion of the Notes shall have endorsed, to the extent appropriate, upon its face the following words:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144.

Section 6.3 Legend Removal . Upon the request of any Purchaser or any transferee or proposed transferee thereof, the Company shall remove the legend contemplated by Section 6.2 of this Agreement and the Company shall issue a stock certificate without such legend to such Purchaser or transferee (and shall revoke any related stop transfer or similar instructions to its registrar and transfer agent), or shall cause such shares upon initial issuance not to be so legended (and shall not issue any such stop transfer or similar legends to its registrar and transfer agent) if the Conversion Shares are covered by an effective registration statement under the Securities Act or if such person provides reasonable evidence and an opinion of counsel to the effect that a sale, transfer or assignment of such Conversion Shares may be made without registration under the Securities Act or that such Conversion Shares are eligible for resale pursuant to Rule 144 under the Securities Act.

ARTICLE VII

MISCELLANEOUS

Section 7.1 Entire Agreement . This Agreement and any documents and agreements executed in connection with the Purchase embody the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and understandings between or among the parties or any of their agents, representatives or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents.

Section 7.2 Construction . References in the singular shall include the plural, and vice versa, unless the context otherwise requires. References in the masculine shall include the feminine and neuter, and vice versa, unless the context otherwise requires. Headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meanings of the provisions hereof. Neither party, nor its respective counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions of this Agreement, and all language in all parts of this Agreement shall be construed in accordance with its fair meaning, and not strictly for or against either party.

Section 7.3 Governing Law . This Agreement shall in all respects be construed in accordance with and governed by the substantive laws of the State of New York, without reference to its choice of law rules.

Section 7.4 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any counterpart or other signature hereon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.

Section 7.5 Specific Performance . Each party acknowledges and agrees that, in addition to other remedies, the parties shall be entitled to enforce the terms of this Agreement by decree of specific performance without the necessity of proving the inadequacy of monetary damages as a remedy and to obtain injunctive relief against any breach or threatened breach of this Agreement.

Section 7.6 Certain Definitional Provisions . Unless the express context otherwise requires: the words “hereof”, “herein”, and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; any references herein to a specific Section, Schedule or Annex shall refer, respectively, to Sections, Schedules or Annexes of this Agreement; wherever the word “include”, “includes”, or “including” is used in this Agreement, it shall be deemed to be followed by the words “without limitation”; and references herein to any gender includes each other gender.

[Signature Page Follows]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written.

The Company

CADIZ INC.

By: /s/ Timothy J. Shaheen

Name: Timothy J. Shaheen

Title: Chief Financial Officer and Secretary

[Signature page to Purchase Agreement]

The Purchasers

ALTIMA GLOBAL SPECIAL

SITUATIONS MASTER FUND LTD

By: /s/ Malcolm Goddard

Name: Malcolm Goddard

Title: Authorized Signatory

[ Signature page to Private Placement Purchase Agreement ]

NOKOMIS CAPITAL MASTER FUND, LP

By: /s/ Brett Hendrickson

Name: Brett Hendrickson

Title: Portfolio Manager

[ Signature page to Private Placement Purchase Agreement ]

MOUSSESCAPADE, L.P.

By: /s/ Jean Hoysradt

Name: Jean Hoysradt

Title: Vice President & Secretary of

Moussescribe, General Partner of

Moussescapade, L.P.

[ Signature page to Private Placement Purchase Agreement ]

SPHINX TRADING, LP

By: /s/ Fred Goldman

Name: Fred Goldman

Title: CFO

[ Signature page to Private Placement Purchase Agreement ]

BRYANT AND CARLEEN RILEY JTWROS

By: /s/ Bryant Riley

Name: Bryant Riley

[ Signature page to Private Placement Purchase Agreement ]

B. RILEY & CO., LLC 401(K) PROFIT SHARING PLAN

By: /s/ Bryant Riley

Name: Bryant Riley

Title: Trustee

[ Signature page to Private Placement Purchase Agreement ]

B RILEY & CO., LLC

By: /s/ Bryant Riley

Name: Bryant Riley

Title: Chairman

[ Signature page to Private Placement Purchase Agreement ]

RILEY FAMILY TRUST DTD 6/20/89, MODIFIED 01/25/07

By: /s/ Richard Riley

Name: Richard Riley

Title: Trustee

[ Signature page to Private Placement Purchase Agreement ]

ROBERT ANTIN CHILDREN IRREVOCABLE TRUST DTD 01/01/01

By: /s/ Bryant Riley

Name: Bryant Riley

Title: Trustee

[ Signature page to Private Placement Purchase Agreement ]

WOLVERINE FLAGSHIP FUND TRADING LIMITED

By: /s/ Kenneth Nadel

Name: Kenneth Nadel

Title: Chief Operating Officer

[ Signature page to Private Placement Purchase Agreement ]

EXHIBIT A

Purchasing Beneficial Owners

Bryant and Carleen Riley JTWROS	$	275,000
B. Riley & Co., LLC 401(k) Profit Sharing Plan	$	225,000
B Riley & Co., LLC	$	1,000,000
Riley Family Trust DTd 6/20/89, Modified 01/25/07	$	250,000
Robert Antin Children Irrevocable Trust Dtd 01/01/01	$	250,000
Wolverine Flagship Fund Trading Limited	$	2,000,000
Nokomis Capital Master Fund, LP	$	9,415,000
Moussescapade, L.P.	$	585,000
Sphinx Trading, LP	$	2,500,000
Altima Global Special Situations Master Fund Ltd.	$	1,000,000

EXHIBIT B

Form of Indenture

EXHIBIT C

Form of Registration Rights Agreement

REGISTRATION RIGHTS AGREEMENT

by and among

CADIZ INC.

and

EACH HOLDER OF REGISTRABLE SECURITIES

REFLECTED ON THE SIGNATURE PAGE HEREOF

Amended and Restated as of March 5, 2013

SECTION 1. CERTAIN DEFINITIONS..........1

SECTION 2. DEMAND REGISTRATION RIGHTS..........4

SECTION 3. PIGGY-BACK REGISTRATION RIGHTS.......... 7

SECTION 4. SELECTION OF UNDERWRITERS.......... 8

SECTION 5. BLACKOUT PERIODS.......... 8

SECTION 6. HOLDBACK.......... 8

SECTION 7. INELIGIBILITY TO EFFECT A DEMAND REGISTRATION.......... 9

SECTION 8. LIQUIDATED DAMAGES.......... 9

SECTION 9. REGISTRATION PROCEDURES.......... 10

SECTION 10. REGISTRATION EXPENSES.......... 13

SECTION 11. RULE 144.......... 14

SECTION 12. COVENANTS OF HOLDERS.......... 14

SECTION 13. INDEMNIFICATION; CONTRIBUTION.......... 14

SECTION 14. INJUNCTIONS.......... 16

SECTION 15. AMENDMENTS AND WAIVERS.......... 16

SECTION 16. NOTICES.......... 16

SECTION 17. SUCCESSORS AND ASSIGNS.......... 17

SECTION 18. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......... 17

SECTION 19. COUNTERPARTS.......... 18

SECTION 20. DESCRIPTIVE HEADINGS.......... 18

SECTION 21. CHOICE OF LAW.......... 18

SECTION 22. SEVERABILITY.......... 18

SECTION 23. ENTIRE AGREEMENT.......... 18

SECTION 24. FURTHER ACTIONS; REASONABLE BEST EFFORTS.......... 18

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made as of this 5th day of March, 2013 by and among Cadiz Inc., a Delaware corporation (the “ Company ”), and each holder of Registrable Securities (as defined herein) reflected on the signature page hereto (“ Holders ”).

RECITALS:

WHEREAS, the Company has entered into an Indenture as of March 5, 2013 (the “ Indenture ”) with The Bank of New York Mellon, N.A., as trustee, which provides for the issuance of the Company’s 7.00% Convertible Senior Notes due 2018 (the “ Convertible Notes ”) which Convertible Notes are convertible into shares of the Company’s common stock, par value $.01 per share (the “ Common Stock ”), upon the terms and subject to the limitations and conditions set forth in the Indenture;

WHEREAS, the Company issued, on October 30, 2012, warrants to purchase 250,000 shares of Common Stock (the “ Sixth Amendment Warrants ”); and

WHEREAS, the Company has agreed to amend and restate the registration rights agreement pursuant to which the Company has granted to the Holders registration rights with respect to the Registrable Securities.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

Section 1. Certain Definitions . For purposes of this Agreement, the following terms have the following meanings:

(a) “ Affected Registrable Securities ” means such portion of the Registrable Securities required by the terms hereof to be subject to an effective Registration Statement that are, at the time of determination, not subject to an effective Registration Statement as a result of a Registration Default.”

(b) “ Affiliate ” has the meaning ascribed to such term in Rule 12b-2 of the Exchange Act.

(d) “ Beneficially Own ” has the meaning ascribed to such term in Rule 13d-3 of the Exchange Act.

(e) “ Blackout Period ” has the meaning specified in Section 5 hereof.

(f) “ Board ” has the meaning specified in Section 5 hereof.

(g) “ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of the State of New York and the United States of America.

(h) “ Common Stock ” has the meaning specified in the Recitals hereof.

(i) “ Company ” has the meaning specified in the Preamble hereof.

(j) “ Convertible Notes ” has the meaning specified in the Recitals hereof.

(k) “ Demand ” has the meaning specified in Section 2(a) hereof.

(l) “ Demand Registration ” has the meaning specified in Section 2(a) hereof.

(m) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time that reference is made thereto.

(n) “ Fair Market Value ” means, with respect to the securities of the Company that trade in a liquid market such as NASDAQ or the NYSE, the average of the closing price as best established for the 30-day period prior to the date on which the Fair Market Value is determined, and with respect to the securities of the Company that do not trade in a liquid market such as NASDAQ or the NYSE, the fair market value of such securities as determined by the Board in good faith.

(o) “ FINRA ” means the Financial Industry Regulatory Authority.

(p) “ Holdback Period ” has the meaning specified in Section 6(a) hereof.

(q) “ Holder ” has the meaning specified in the Preamble hereof, and shall include any person to whom the rights of a Holder under this Agreement have been transferred in accordance with the provisions of this Agreement.

(r) “ Indenture ” has the meaning specified in the Recitals hereof.

(s) “ Ineligibility Accommodation Period ” has the meaning specified in Section 7 hereof.

(t) “ Inspectors ” has the meaning specified in Section 9(k) hereof.

(u) “ Liquidated Damages ” has the meaning specified in Section 8(a) hereof.

(v) “ NASDAQ ” means the Nasdaq Stock Market, Inc.

(w) “ NYSE ” means the New York Stock Exchange.

(x) “ Other Rights Holders ” has the meaning specified in Section 2(f) hereof.

(y) “ Person ” means any individual, firm, partnership, corporation (including, without limitation, a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, and shall include any successor (by merger or otherwise) of any such entity.

(z) “ Piggy-Back Request ” has the meaning specified in Section 3(b) hereof.

(aa) “ Piggy-Back Rights ” has the meaning specified in Section 3(a) hereof.

(bb) “ Prospectus ” means the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by any Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus.

(cc) “ Records ” has the meaning specified in Section 9(k) hereof.

(dd) “ Registrable Securities ” means any and all of (i) the shares of Common Stock of the Company received by Holders upon conversion of the Convertible Notes, (i) the shares of Common Stock of the Company underlying the Sixth Amendment Warrants, and (iii) any securities issuable or issued or distributed in respect of any of the securities identified in clauses (i) and (ii) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, reorganization, merger, consolidation or otherwise. Registrable Securities shall cease to be Registrable Securities when and to the extent that they shall have (i) been Transferred by Holders pursuant to an effective Registration Statement; or (ii) ceased to be outstanding. Notwithstanding anything herein to the contrary, the Company shall not be required to have any of the Registrable Securities registered (or maintain the effectiveness of any prior registration of Registrable Securities) if, in the opinion of either counsel for the Company, knowledgeable and experienced in federal securities matters (said counsel to be acceptable to the Holder making a Demand in the reasonable judgment of such Holder), or counsel for such Holder, knowledgeable and experienced in federal securities matters (said counsel to be acceptable to the Company in the Company’s reasonable judgment), all Registrable Securities held by such Holder (and its Affiliates) may be sold pursuant to Rule 144 under the Securities Act during any ninety (90) day period.

(ee) “ Registration Default ” has the meaning specified in Section 8(a) hereof.

(ff) “ Registration Expenses ” means any and all reasonable out-of-pocket expenses incident to performance of or compliance with this Agreement, including, without limitation, (i) all SEC, FINRA and securities exchange registration and filing fees, (ii) all fees and expenses of complying with state securities or “blue sky” laws (including fees and disbursements of counsel for any underwriters in connection with blue sky qualifications of the Registrable Securities), (iii) all processing, printing, copying, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange pursuant to Section 9(h) hereof, (v) all fees and disbursements of counsel for the Company and of its independent public accountants (including the expenses of any special audits or comfort letters), and (vi) the reasonable fees and expenses of any special experts retained in connection with a registration under this Agreement, but excluding (A) any underwriting discounts and commissions and transfer taxes relating to the sale or disposition of Registrable Securities pursuant to a Registration Statement, and (B) any fees, expenses or disbursements of counsel and other advisers to the Holders and any Other Rights Holders, other than the reasonable fees and disbursements of one counsel to all Holders.

(gg) “ Registration Statement ” means any registration statement (including a Shelf Registration) of the Company referred to in Section 2 or Section 3 hereof, including any Prospectus, amendments and supplements to any such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in any such registration statement.

(hh) “ Restatement Date ” has the meaning set forth in that certain Amended and Restated Credit Agreement, amended and restated as of March 5, 2013, among the Company and Cadiz Real Estate LLC, a Delaware limited liability company, each as borrowers, the lenders party thereto (the “ Lenders ”) and LC Capital Master Fund, Ltd., as administrative agent on behalf of the Lenders.

(ii) “ Rule 144 ” means Rule 144 under the Securities Act, or any similar or successor rules or regulations hereafter adopted by the SEC.

(jj) “ SEC ” means the United States Securities and Exchange Commission and any successor federal agency having similar powers.

(kk) “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time that reference is made thereto.

(ll) “ Shelf Registration ” means a “shelf” registration statement on an appropriate form pursuant to Rule 415 under the Securities Act (or any successor rule that may be adopted by the SEC).

(mm) “ Sixth Amendment Warrants ” has the meaning set forth in the Recitals hereof.

(nn) “ Transfer ” means, with respect to any security, any direct or indirect sale, transfer, assignment, hypothecation, pledge or any other disposition of such security or any interest therein.

(oo) “ Uncontrolled Event ” has the meaning specified in Section 5 hereof.

(pp) “ Underwritten Offering ” means an offering in which securities of the Company are sold to an underwriter for reoffering to the public pursuant to an effective Registration Statement under the Securities Act.

Section 2. Demand Registration Rights .

(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 Restatement Date, with respect to all of the Registrable Securities (the “ Closing Demand ”); provided, however, that notwithstanding Section 2(b) of this Agreement, (x) with respect to the shares of Common Stock of the Company underlying the Sixth Amendment Warrants and the Convertible Notes, the Company will use best efforts to file a registration statement on Form S-3 (or amend an existing registration statement) with respect thereto not later than ninety (90) days following the Restatement Date. 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.

(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 90 days and use its best efforts to cause such Registration Statement to become effective (i) 120 days, in the event that the Registration Statement consists of an amendment to an existing S-3 previously filed by the Company (or 150 days in the event such amendment to an existing Registration Statement is reviewed by the SEC) or (ii) 150 days, in the event that the Registration Statement consists of a newly filed S-3 (or 180 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 90 days and use its reasonable best efforts to cause such Registration Statement to become effective within 150 days (or 180 days in the event the Registration Statement is reviewed by the SEC).

(c) Notwithstanding anything in this Agreement to the contrary, the Company shall not be required to file a Registration Statement for Registrable Securities pursuant to a Demand:

(i) if the Company shall have previously effected a Demand Registration at any time during the immediately preceding ninety (90) day period;

(ii) if the Company shall have previously effected a registration of Registrable Securities to be issued and sold by the Company at any time during the immediately preceding ninety (90) day period (other than a registration on Form S-4, Form S-8 or Form S-3(with respect to dividend reinvestment plans and similar plans) or any successor forms thereto);

(iii) during the pendency of any Blackout Period;

(iv) during the pendency of any Ineligibility Accommodation Period;

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

(vi) if the aggregate value of the Registrable Securities to be registered pursuant to a Demand Registration does not equal at least $2,500,000; or

(vii) if the Registrable Securities that are the subject of the Demand are the subject of an effective Shelf Registration.

(d) The Company shall be permitted to satisfy its obligations under this Section 2 by amending (to the extent permitted by applicable law) any Shelf Registration previously filed by the Company under the Securities Act so that such Shelf Registration (as amended) shall permit the disposition (in accordance with the intended methods of disposition specified as aforesaid) of all of the Registrable Securities for which a Demand shall have been made. Notwithstanding the foregoing, the Company shall have no obligation under this Agreement to file any Shelf Registration.

(e) A requested Demand Registration shall not be deemed to count as a Demand Registration described in Section 2(c)(ii) hereof if: (i) such registration has not been declared effective by the SEC or does not become effective in accordance with the Securities Act, (ii) after becoming effective, such registration is materially interfered with by any stop order, injunction or similar order or requirement of the SEC or other governmental agency or court for any reason not attributable to a Holder and does not thereafter become effective, (iii) the conditions to closing specified in any underwriting agreement entered into in connection with such Demand Registration are not satisfied or waived other than by reason of an act or omission on the part of a Holder, or (iv) the Holder making a Demand shall have withdrawn its Demand or otherwise determined not to pursue such registration, provided that, in the case of this clause (iv), such Holder shall have reimbursed the Company for all of its out- of-pocket expenses incurred in connection with such Demand.

(f) If the lead managing underwriters of an Underwritten Offering made pursuant to a Demand shall advise the Holder making a Demand in writing (with a copy to the Company) that marketing or other factors require a limitation on the number of shares of Registrable Securities which can be sold in such offering within a price range acceptable to the Holder, then (i) if the Company shall have elected to include any securities to be issued and sold by the Company or sold on behalf of any of the Company’s security holders excluding such Holder (“ Other Rights Holders ”) in such Registration Statement, then the Company shall reduce the number of securities the Company shall intend to issue and sell (and, if applicable, the number of securities being sold on behalf of the Other Rights Holders) pursuant to such Registration Statement such that the total number of securities being sold by each such party shall be equal to the number which can be sold in such offering within a price range acceptable to such Holder, and (ii) if the Company shall not have elected to include any securities to be issued and sold by the Company or sold on behalf of Other Rights Holders in such Registration Statement or if the reduction referred to in the previous clause (i) shall not be sufficient, then, the Holder shall reduce the number of Registrable Securities requested to be included in such offering to the number that the lead managing underwriter advises can be sold in such offering within a price range acceptable to the Holder. The Holder shall not be required to reduce the number of Registrable Securities requested to be included in any such offering until the number of securities referred to in the previous clause (i) shall have been reduced to zero (0). A requested Demand reduced pursuant to this Section 2(f) shall count as a Demand Registration described in Section 2(c)(ii) hereof. In the event that a requested Demand Registration so reduced does not result in at least $2,500,000 in aggregate gross sales proceeds being received by the Holder, such requested Demand Registration shall not be deemed to count as a Demand Registration described in Section 2(c)(ii) hereof, Provided that Holders shall have reimbursed the Company for all of its out-of- pocket expenses incurred in the preparation, filing and processing of the Registration Statement.

Section 3. Piggy-Back Registration Rights .

(a) At any time on or after the date hereof, whenever the Company shall propose to file a Registration Statement under the Securities Act relating to the public offering of securities for sale for cash, the Company shall give written notice to the Holders as promptly as practicable, but in no event less than fifteen (15) days prior to the anticipated filing thereof, specifying the approximate date on which the Company proposes to file such Registration Statement and the intended method of distribution in connection therewith, and advising Holders of their right to have any or all of the Registrable Securities then Beneficially Owned by them included among the securities to be covered by such Registration Statement (the “ Piggy-Back Rights ”).

(b) Subject to Section 3(c) and Section 3(d) hereof, in the event that Holders have and shall elect to utilize their Piggy- Back Rights, the Company shall include in the Registration Statement the Registrable Securities identified by the Holders in a written request (a “ Piggy-Back Request ”) given to the Company not later than five (5) Business Days prior to the proposed filing date of the Registration Statement. The Registrable Securities identified in a Piggy-Back Request shall be included in the Registration Statement on the same terms and conditions as the other securities included in the Registration Statement.

(c) Notwithstanding anything in this Agreement to the contrary, Holders shall not have Piggy-Back Rights with respect to (i) a Registration Statement on Form S-4 or Form S-8 or Form S-3 (with respect to dividend reinvestment plans and similar plans) or any successor forms thereto or (ii) a Registration Statement filed in connection with an exchange offer or an offering of securities solely to employees of the Company.

(d) If the lead managing underwriters selected by the Company for an Underwritten Offering for which Piggy-Back Rights are requested shall advise the Company in writing that marketing or other factors require a limitation on the number of shares of securities which can be sold in such offering within a price range acceptable to the Company, then, (i) such underwriters shall provide written notice thereof to the Holders and (ii) there shall be included in the offering, (A) first, all securities proposed by the Company to be sold for its account (or such lesser amount as shall equal the maximum number determined by the lead managing underwriters as aforesaid); (B) second, all Registrable Securities requested to be included in such Registration Statement by Holders, or such lesser number as shall equal, together with the amount referred to in (A), the maximum number determined by the lead managing underwriters as aforesaid; and (c) third, only that number of securities requested to be included by any Other Rights Holders that such lead managing underwriters reasonably and in good faith believe will not substantially interfere with (including, without limitation, adversely affecting the pricing of) the offering of all the securities that the Company desires to sell for its own account and all the Registrable Securities that the Holders desire to sell for their own accounts.

(e) Nothing contained in this Section 3 shall create any liability on the part of the Company to the Holders if the Company for any reason should decide not to file a Registration Statement for which Piggy-Back Rights are available or to withdraw such Registration Statement subsequent to its filing, regardless of any action whatsoever Holders may have taken, whether as a result of the issuance by the Company of any notice hereunder or otherwise.

(f) A request made by Holders pursuant to their Piggy- Back Rights to include Registrable Securities in a Registration Statement shall not be deemed to be a Demand Registration described in Section 2(c)(ii) hereof.

Section 4. Selection of Underwriters . In connection with any Underwritten Offering made pursuant to a Demand or a Piggy-Back Right, the Company may, at its sole discretion, select a book running managing underwriter to manage the Underwritten Offering with the prior written consent of the Holders (which consent shall not be unreasonably withheld); provided, however, that the Company shall have no obligation to use an underwriter in connection with any registration made pursuant to a Demand or Piggy-Back Request.

Section 5. Blackout Periods . If (i) within five (5) Business Days following the exercise by a Holder of a Demand, the Company determines in good faith and notifies such Holder in writing that the registration and distribution of Registrable Securities (or the use of the Registration Statement or related Prospectus) resulting from a Demand received from such Holder would materially and adversely interfere with any planned or proposed business combination transaction involving the Company, or any pending financing, acquisition, corporate reorganization or any other corporate development involving the Company or any of its subsidiaries or (ii) following the exercise by such Holder of a Demand but before the effectiveness of the Registration Statement, (A) a business combination, tender offer, acquisition or other corporate event involving the Company is proposed, initiated or announced by another Person beyond the control of the Company (an “ Uncontrolled Event ”), (B) in the reasonable judgment of at least a majority of the members of the Board of Directors of the Company (the “ Board ”), the filing or seeking the effectiveness of the Registration Statement would materially and adversely interfere with such Uncontrolled Event or would otherwise materially and adversely affect the Company and (C) the Company promptly so notifies such Holder, then the Company shall be entitled to (x) postpone the filing of the Registration Statement otherwise required to be filed by the Company pursuant to Section 2 hereof, or (y) elect that the effective Registration Statement not be used, in either case for a reasonable period of time, but not to exceed ninety (90) days after the date that (1) the Demand was made (in the case of an clause (i) above) or (2) the Company so notifies such Holder of such determination (in the case of clause (ii) above) (each, a “ Blackout Period ”). Any such written notice shall contain a general statement of the reasons for such postponement or restriction on use and an estimate of the anticipated delay. The Company shall (a) promptly notify the Holder making a Demand of the expiration or earlier termination of such Blackout Period and (b) use its reasonable best efforts to effect the Demand Registration as promptly as practicable after the end of the Blackout Period.

Section 6. Holdback .

(a) If (i) at any time after the date hereof, the Company shall file a Registration Statement (other than a registration on Form S-4, Form S-8 or Form S-3 (with respect to dividend reinvestment plans and similar plans) or any successor forms thereto) with respect to any shares of its capital stock, and (ii) upon reasonable prior notice the managing underwriter or underwriters (in the case of an Underwritten Offering) advise the Company and the Holders in writing that a sale or distribution of Registrable Securities would adversely impact such offering, then the Holders shall, to the extent not inconsistent with applicable law, refrain from effecting any sale or distribution of Registrable Securities during the period commencing on the effective date of such Registration Statement and continuing until the ninetieth (90th) day after the effective date of such Registration Statement; provided that such restriction shall apply to the Holders only if in connection with such offering, the underwriters require the directors and executive officers of the Company to refrain from selling the Company’s securities for a like period and on like terms (such period, a “ Holdback Period ”).

(b) During the ninety (90) day period commencing on the effective date of a Registration Statement filed by the Company on behalf of Holders in connection with an Underwritten Offering pursuant to a Demand, the Company shall not effect (except pursuant to registrations on Form S-4 or Form S-8 or Form S-3 (with respect to dividend reinvestment plans and similar plans) or any successor forms thereto and except pursuant to Section 2(f) hereof) any public sale or distribution of its securities.

Section 7. Ineligibility to Effect a Demand Registration . If, following receipt of a Demand (other than the Closing Demand) from a Holder, after giving effect to any Holdback Period and any Blackout Period, the Company has not filed a Registration Statement for the Registrable Securities so requested to be registered or has not used its reasonable best efforts to cause such Registration Statement to become effective because it is not eligible to effect a registration pursuant to the Securities Act, the Company shall have 60 additional days to file such Registration Statement for the Registrable Securities so requested to be registered or to use its reasonable best efforts to cause such Registration Statement to become effective (such additional days, the “ Ineligibility Accommodation Period ”).

Section 8. Liquidated Damages .

(a) The parties hereto agree that the Holders will suffer damages if the Company fails to perform its obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages. Accordingly, in the event that after a Holder has made a Demand and all Ineligibility Accommodation Periods, Blackout Periods and Holdback Periods have expired the Company has not filed a Registration Statement for the Registrable Securities so requested to be registered or has not caused such Registration Statement to become effective as provided in Section 2(b) hereof, or has not maintained the effectiveness of such Registration Statement as provided in Section 9(b) hereof (such events, a “ Registration Default ”), then damages (“ Liquidated Damages ”) will accrue in the form of additional interest on the portion of the Convertible Notes that are convertible or were converted into the Affected Registrable Securities with respect to each 30-day period immediately following the occurrence of such Registration Default during which, at any point during such period, such Registration Default is continuing, in an amount equal to 0.5% multiplied by the initial principal amount of the Convertible Notes that are convertible or were converted into the Affected Registrable Securities. Such additional interest shall continue to accrue until such Registration Default has been cured; provided, however, that, during which time at any point during such period, any Holder who has made a Demand that is the subject of a Registration Default and who is not a lender with respect to a Convertible Note that is convertible into Affected Registrable Securities shall be entitled to receive a cash payment from the Company in like amounts no later than 30 days after each such 30-day period.

(b) The parties hereto agree that the Liquidated Damages provided for in this Section 8 constitute a reasonable estimate of the damages that will be suffered by Holders of Securities by reason of the happening of any Registration Default.

Section 9. Registration Procedures . If and whenever the Company shall be required to use its reasonable best efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company shall and, with respect to Section 9(m) and Section 9(n), the Holders shall:

(a) prepare and file with the SEC a Registration Statement with respect to such Registrable Securities on any form for which the Company then qualifies or that counsel for the Company shall deem appropriate, and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its reasonable best efforts to cause such Registration Statement to become and remain effective;

(b) prepare and file with the SEC amendments and post- effective amendments to such Registration Statement and such amendments and supplements to the Prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration or as may be required by the rules, regulations or instructions applicable to the registration form utilized by the Company or by the Securities Act for a Shelf Registration or otherwise necessary to keep such Registration Statement effective for at least ninety (90) days (or one hundred eighty (180) days in the case of a Shelf Registration) and cause the Prospectus as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to otherwise comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement until the earlier of (x) such 90th or 180th day, as the case may be, or (y) such time as all Registrable Securities covered by such Registration Statement shall have ceased to be Registrable Securities (it being understood that the Company at its option may determine to maintain such effectiveness for a longer period, whether pursuant to a Shelf Registration or otherwise); provided, however, that a reasonable time before filing a Registration Statement or Prospectus, or any amendments or supplements thereto (other than reports required to be filed by it under the Exchange Act), the Company shall furnish to the Holders, the managing underwriter and their respective counsel for review and comment, copies of all documents proposed to be filed;

(c) furnish, without charge, to the Holders and to any underwriter in connection with an Underwritten Offering such number of conformed copies of such Registration Statement and of each amendment and post-effective amendment thereto (in each case including all exhibits) and such number of copies of any Prospectus or Prospectus supplement and such other documents as Holders or such underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by the Holders or the underwriter (the Company hereby consenting to the use (subject to the limitations set forth in Section 9(n) hereof) of the Prospectus or any amendment or supplement thereto in connection with such disposition);

(d) use its reasonable best efforts to register or qualify such Registrable Securities covered by such Registration Statement under such other securities or “blue sky” laws of such jurisdictions as Holders shall reasonably request, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 9(d), it would not be obligated to be so qualified, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction;

(e) as promptly as practicable, notify the managing underwriters (if any) and Holders, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in Section 9(b) hereof, of the Company’s becoming aware that the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and, as promptly as practicable, prepare and furnish to the Holders a reasonable number of copies of an amendment or supplement to such Registration Statement or related Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

(f) notify the Holders, as promptly as practicable, at any time:

(i) when the Prospectus or any Prospectus supplement or post- effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective;

(ii) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information;

(iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or any order preventing the use of a related Prospectus, or the initiation (or any overt threats) of any proceedings for such purposes;

(iv) of the receipt by the Company of any written notification of the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation (or overt threats) of any proceeding for that purpose; and

(v) if at any time the representations and warranties of the Company contemplated by Section 9(i) below cease to be true and correct in all material respects;

(g) otherwise comply with all applicable rules and regulations of the SEC, and make available to Holders an earnings statement that shall satisfy the provisions of Section 11(a) of the Securities Act, provided that the Company shall be deemed to have complied with this Section 9(g) if it shall have complied with Rule 158 under the Securities Act;

(h) use its reasonable best efforts to cause all such Registrable Securities to be listed on the NYSE, NASDAQ or any other national securities exchange or automated quotation system on which the class of Registrable Securities being registered is then listed, if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such exchange, and to provide a transfer agent and registrar for such Registrable Securities covered by such Registration Statement no later than the effective date of such Registration Statement;

(i) enter into agreements (including, if applicable, an underwriting agreement and other customary agreements in the form customarily entered into by other companies in comparable underwritten offerings) and take all other appropriate and all commercially reasonable actions in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, whether or not an underwriting agreement shall be entered into and whether or not the registration shall be an underwritten registration:

(i) make such representations and warranties to the Holders and the underwriters, if any, in form, substance and scope as are customarily made by companies to underwriters in comparable underwritten offerings;

(ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions shall be reasonably satisfactory (in form, scope and substance) to the managing underwriters) addressed to the underwriters covering the matters customarily covered in opinions requested in comparable underwritten offerings by the Company;

(iii) obtain “comfort letters” and updates thereof from the Company’s independent certified public accountants addressed to the Board and the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in “comfort letters” by independent accountants in connection with comparable underwritten offerings on such date or dates as may be reasonably requested by the managing underwriters, or if such offering is not an Underwritten Offering, the Board; provided, however, that in connection with any non-Underwritten Offering, such comfort letter shall not be required except to the extent requested by the Board.

(iv) provide the indemnification in accordance with the provisions and procedures of Section 13 hereof to all parties to be indemnified pursuant to such Section 13 and any other indemnification customarily required in underwritten public offerings; and

(v) deliver such documents and certificates as may be reasonably requested by the Holders and the managing underwriters, if any, to evidence compliance with Section 9(f) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company;

(j) cooperate with the Holders and the managing underwriter or underwriters, if any, to facilitate, to the extent reasonable under the circumstances, the timely preparation and delivery of certificates representing the securities to be sold under such Registration Statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or the Holders may request and/or in a form eligible for deposit with the Depository Trust Company;

(k) make available to the Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or such underwriter (collectively, the “ Inspectors ”), reasonable access to appropriate officers and employees of the Company and the Company’s subsidiaries to ask questions and to obtain information reasonably requested by such Inspector and all financial and other records and other information, pertinent corporate documents and properties of any of the Company and its subsidiaries and Affiliates (collectively, the “ Records ”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility; provided, however, that the Records that the Company determines, in good faith, to be confidential and which it notifies the Inspectors in writing are confidential shall not be disclosed to any Inspector unless such Inspector signs a confidentiality agreement in customary form reasonably satisfactory to the Company or either (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission of a material fact in such Registration Statement, or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction; provided, further , that any decision regarding the disclosure of information pursuant to subclause (i) shall be made only after consultation with counsel for the applicable Inspectors; and provided, further, that the Holders agree that they shall, promptly after learning that disclosure of such Records is sought in a court having jurisdiction, give notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of such Records;

(l) in the event of the issuance of any stop order suspending the effectiveness of the Registration Statement or of any order suspending or preventing the use of any related Prospectus or suspending the qualification of any Registrable Securities included in the Registration Statement for sale in any jurisdiction, the Company shall use its reasonable best efforts promptly to obtain its withdrawal;

(m) the Holders shall furnish the Company with such information regarding them and pertinent to the disclosure requirements relating to the registration and the distribution of such securities as the Company may from time to time reasonably request in writing or as shall be required in connection with the action to be taken by the Company hereunder; and

(n) the Holders shall, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 9(e) hereof, forthwith discontinue disposition of Registrable Securities pursuant to the Prospectus or Registration Statement covering such Registrable Securities until the Holders shall have received copies of the supplemented or amended Prospectus contemplated by Section 9(e) hereof, and, if so directed by the Company, the Holders shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in their possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice.

Section 10. Registration Expenses . Except as otherwise provided herein, in connection with all registrations of Registrable Securities made pursuant to a Demand Registration or Piggy-Back Rights, the Company shall pay all Registration Expenses; provided, however, that the Holders shall pay, and shall hold the Company harmless from, (i) any underwriting discounts and commissions and transfer taxes relating to the sale or disposition of Registrable Securities and (ii) any fees, expenses or disbursements of its counsel and other advisors.

Section 11. Rule 144 . From and after the date which is more than one hundred eighty (180) days after the date hereof, the Company shall, at all times when the Holders Beneficially Own any Registrable Securities, take such measures and file and/or make available such information, documents and reports as shall be required by the SEC as a condition to the availability of Rule 144; provided, however, that the Company need not take any of the foregoing actions during any Ineligibility Accommodation Period.

Section 12. Covenants of Holders . Each Holder hereby covenants and agrees that it shall not sell any Registrable Securities in violation of the Securities Act or this Agreement.

Section 13. Indemnification; Contribution .

(a) The Company shall indemnify and hold harmless each Holder, its respective officers and directors, and each Person, if any, who controls such Holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and any agents, representatives or advisers thereof against all losses, claims, damages, liabilities and expenses (including reasonable attorneys’ fees and expenses and reasonable costs of investigation) incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation arising out of or based upon (i) any untrue or alleged untrue statement of material fact contained in any Registration Statement, any Prospectus or preliminary Prospectus, or any amendment or supplement to any of the foregoing, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus or a preliminary Prospectus, in light of the circumstances then existing) not misleading, or (iii) any violation or alleged violation by the Company of any United States federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration except in each case insofar as the same arise out of or are based upon, any such untrue statement or omission made in reliance on and in conformity with written information with respect to the Holders furnished in writing to the Company by the Holders or their counsel expressly for use therein. In connection with an Underwritten Offering, the Company shall indemnify the underwriters thereof, their officers, directors and agents and each Person who controls such underwriters (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders.

(b) Any Person entitled to indemnification hereunder agrees to give prompt written notice to the indemnifying party after the receipt by such indemnified party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which such indemnified party may claim indemnification or contribution pursuant to this Section 13 (provided that failure to give such notification shall not affect the obligations of the indemnifying party pursuant to this Section 13 except to the extent the indemnifying party shall have been materially prejudiced as a result of such failure). In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 13 for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the foregoing, if (i) the indemnifying party shall not have employed counsel reasonably satisfactory to such indemnified party to take charge of the defense of such action within a reasonable time after notice of commencement of such action (so long as such failure to employ counsel is not the result of an unreasonable determination by such indemnified party that counsel selected pursuant to the immediately preceding sentence is unsatisfactory) or if the indemnifying party shall not have demonstrated to the reasonable satisfaction of the indemnified party its ability to finance such defense, or (ii) the indemnified party shall have reasonably concluded or been advised by counsel that there may be legal defenses available to other indemnified parties to such action which could result in a conflict of interest for such counsel or prejudice the prosecution of the defenses available to such indemnified party, then such indemnified party shall have the right to employ separate counsel of its choosing, at the expense of the indemnifying party. No indemnifying party shall consent to entry of any judgment or enter into any settlement without the consent (which consent, in the case of an action, suit, claim or proceeding exclusively seeking monetary relief, shall not be unreasonably withheld) of the applicable indemnified party.

(c) If the indemnification from the indemnifying party provided for in this Section 13 is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions or omissions which resulted in such losses, claims, damages, liabilities and expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied (in writing, in the case of the Holders) by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 13(b) hereof, any legal and other fees and expenses reasonably incurred by such indemnified party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 13(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 13(c). Any underwriter’s obligations in this Section 13(c) to contribute shall be several in proportion to the number of Registrable Securities underwritten by them and not joint. Notwithstanding the provisions of this Section 13(c), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 13, the indemnifying parties shall indemnify each indemnified party to the fullest extent provided in Section 13(a) hereof without regard to the relative fault of such indemnifying parties or indemnified party or any other equitable consideration provided for in this Section 13(c).

(d) The provisions of this Section 13 shall be in addition to any liability which any party may have to any other party and shall survive any termination of this Agreement. The indemnification provided by this Section 13 shall survive the Transfer of such Registrable Securities by the Holders and shall remain in full force and effect irrespective of any investigation made by or on behalf of an indemnified party.

Section 14. Injunctions . EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH ITS SPECIFIC TERMS OR WERE OTHERWISE BREACHED. THEREFORE, EACH PARTY SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THE PROVISIONS OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS HEREOF IN ANY COURT HAVING JURISDICTION, SUCH REMEDY BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH SUCH PARTY MAY BE ENTITLED AT LAW OR IN EQUITY.

Section 15. Amendments and Waivers. No amendment, modification, supplement, termination, consent or waiver of any provision of this Agreement, nor consent to any departure herefrom, shall in any event be effective unless the same is in writing and is signed by the party against whom enforcement of the same is sought. Any waiver of any provision of this Agreement and any consent to any departure from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which given.

Section 16. Notices . All notices, consents, requests, demands and other communications hereunder must be in writing, and shall be deemed to have been duly given or made: (i) when delivered in person; (ii) three (3) days after deposited in the United States mail, first class postage prepaid; (iii) in the case of telegraph or overnight courier services, one (1) Business Day after delivery to the telegraph company or overnight courier service with payment provided; or (iv) in the case of telex or telecopy or fax, when sent, verification received; in each case addressed as follows:

if to the Company:

Cadiz Inc.

550 South Hope Street, Suite 2850

Los Angeles, CA 90071

Telephone: (213) 271-1600

Facsimile: (213) 271-1614

Attention: Chief Financial Officer

with a copy to:

Howard Unterberger, Esq.

Theodora Oringher P.C.

10880 Wilshire Boulevard, Suite 1700

Los Angeles, CA 90024

Telephone: (310) 557-2009

Facsimile: (310) 551-0283

if to the Holders, to the addresses set forth on the signature pages attached hereto.

with a copy to:

Manatt, Phelps & Phillips, LLP

7 Times Square

New York, NY 10036

Attention: Neil S. Faden

Telephone: 212-790-4500

Facsimile: 212-790-4545

Section 17. Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders. The Company hereby agrees to extend the benefits of this Agreement to any Holder and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto.

Section 18. Representations and Warranties of the Company . The Company represents and warrants to the other parties hereto as follows:

(a) Such party is duly organized and validly existing under the laws of its jurisdiction of organization.

(b) Such party has full corporate or other organizational power and authority to enter into this Agreement and to carry out and perform its obligations hereunder. The execution, delivery and performance by such party of this Agreement have been duly authorized and approved by all necessary corporate or other organizational action. This Agreement has been duly authorized, executed and delivered by such party and constitutes the legal, valid and binding obligation of such party enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general principles of equity.

(c) The execution, delivery and performance by such party of its obligations under this Agreement, and compliance by such party with the terms and conditions hereof will not (i) violate, with or without the giving of notice or the lapse of time, or both, or require any registration, qualification, approval or filing (other than registrations, qualifications, approvals and filings that have already been made or obtained) under, any provision of law, statute, ordinance or regulation applicable to it or any of its subsidiaries and (ii) conflict with, or require any consent or approval under, or result in the breach or termination of any provision of, or constitute a default under, or result in the acceleration of the performance of the obligations of such party or any of its subsidiaries under, or result in the creation of any claim, lien, charge or encumbrance upon any of the properties, assets or businesses of such party or any of its subsidiaries pursuant to (x) its organizational documents, (y) any order, judgment, decree, law, ordinance or regulation applicable to it or any of its subsidiaries or (z) any contract, instrument, agreement or restriction to which it or any of its subsidiaries is a party or by which it or any of its subsidiaries or any of its respective assets or properties is bound.

Section 19. Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

Section 20. Descriptive Headings . The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

Section 21. Choice of Law . THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.

Section 22. Severability . In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, shall be held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all remaining provisions contained herein shall not be in any way impaired thereby.

Section 23. Entire Agreement . This Agreement, including any schedules, exhibits or attachments referred to herein, is intended by the parties as a final expression and a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter hereof. There are no restrictions, promises, warranties or undertakings with respect to the subject matter hereof, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

Section 24. Further Actions; Reasonable Best Efforts . Each Holder shall use its reasonable best effort to take or cause to be taken all appropriate action and to do or cause to be done all things reasonably necessary, proper or advisable under applicable law and regulations to assist the Company in the performance of its obligations hereunder, including, without limitation, the preparation and filing of any Registration Statements pursuant to any Demand.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

CADIZ INC.

By:__________________________

Name:

Title:

[Insert Holders’ Signature Blocks]

Exhibit D

Form of Cadwalader, Wickersham & Taft LLP Opinion

March 5, 2013

Addressees Listed on Schedule A

Re:	Cadiz Notes Indenture

Ladies and Gentlemen:

We have acted as special counsel to Cadiz Inc. (the “ Company ”) in connection with the 7.00% Convertible Senior Notes Indenture, dated as of the date hereof, between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “ Indenture ”). We are rendering this opinion letter to you at the request of the Company pursuant to Section 5.1 of the Purchase Agreement (as defined below) and 5.1 of the Exchange Agreement (as defined below). Capitalized terms used herein but not defined herein have the respective meanings given them in the Indenture.

In rendering the opinions set forth below, we have examined and relied upon the originals, copies or specimens, certified or otherwise identified to our satisfaction, of the Transaction Documents (as defined below) and such certificates, corporate and public records, agreements and instruments and other documents, including, among other things, the documents delivered on the date hereof, as we have deemed appropriate as a basis for the opinions expressed below. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents, agreements and instruments submitted to us as originals, the conformity to original documents, agreements and instruments of all documents, agreements and instruments submitted to us as copies or specimens, the authenticity of the originals of such documents, agreements and instruments submitted to us as copies or specimens, the accuracy of the matters set forth in the documents, agreements and instruments we reviewed, and that such documents, agreements and instruments evidence the entire understanding between the parties thereto and have not been amended, modified or supplemented in any manner material to the opinions expressed herein. As to matters of fact relevant to the opinions expressed herein, we have relied upon, and assumed the accuracy of, the representations and warranties contained in the Transaction Documents and we have relied upon certificates and oral or written statements and other information obtained from the Company, the other parties to the transaction referenced herein, and public officials. Except as expressly set forth herein, we have not undertaken any independent investigation (including, without limitation, conducting any review, search or investigation of any public files, records or dockets) to determine the existence or absence of the facts that are material to our opinions, and no inference as to our knowledge concerning such facts should be drawn from our reliance on the representations of the Company in connection with the preparation and delivery of this letter.

In particular, we have examined and relied upon:

a)	the Indenture;

b)	the Notes;

c)	Private Placement Purchase Agreement, dated as of March 4, 2013, by and among the Company and the purchasers set forth on Exhibit A thereto (the “ Purchase Agreement ”);

d)	Exchange Agreement, dated as of March 4, 2013, by and among LC Capital Master Fund, Ltd., Milfam II L.P., Water Asset Management Managed Account #1, L.L.C. and the Company (“ Exchange Agreement ”);

e)	a certificate, dated as of February 27, 2013, from the Secretary of State of Delaware as to the existence and good standing in the State of Delaware of the Company (the “ Delaware Good Standing Certificate ”);

f)	a copy of the Certificate of Incorporation of the Company, certified by the Secretary of State of Delaware as of February 21, 2013 (“ Certificate of Incorporation ”);

g)	a copy of the bylaws of the Company, as in effect on the date hereof and certified by Timothy J. Shaheen, Secretary of the Company (“ Bylaws ”);

h)	a copy of certain resolutions of the board of directors of the Company adopted on February 26, 2013, as in effect on the date hereof and certified as of the date hereof by Timothy J. Shaheen, Secretary of the Company; and

i)	the officer’s certificate attached hereto as Schedule B .

Items (a) to (d) above are referred to in this letter as the “ Transaction Documents ”. References in this letter to “ Applicable Laws ” are to those laws, rules and regulations of the State of New York and of the United States of America that, in our experience, are normally applicable to transactions of the type contemplated by the Transaction Documents. References in this letter to “ Governmental Authorities ” are to executive, legislative, judicial, administrative or regulatory bodies of the State of New York or the United States of America. References in this letter to “ Governmental Approval ” are to any consent, approval, license, authorization or validation of, or filing, recording or registration with, any Governmental Authority pursuant to Applicable Laws.

We have also assumed (x) the legal capacity of all natural persons and (y) (except to the extent expressly opined on herein) that all documents, agreements and instruments have been duly authorized, executed and delivered by all parties thereto, that all such parties are validly existing and in good standing under the laws of their respective jurisdictions of organization, that all such parties had the power and legal right to execute and deliver all such documents, agreements and instruments, and that such documents, agreements and instruments constitute the legal, valid and binding obligations of such parties, enforceable against such parties in accordance with their respective terms. As used herein, “to our knowledge,” “known to us” or words of similar import mean the actual knowledge, without independent investigation, of any lawyer in our firm actively involved in the transactions contemplated by the Agreements.

We have also assumed, for purposes of paragraph 3 below, that each of the Transaction Documents is in consideration of or relates to an obligation arising out of a transaction covering in the aggregate not less than $1,000,000.

We express no view as to whether one or more of the Transaction Documents or a portion thereof may constitute a “swap” under Section 1a of the Commodity Exchange Act, as amended, or a “security-based swap” under Section 3(a) of the Securities Exchange Act of 1934, as amended, and as such terms are further defined by joint regulations of the Commodity Futures Trading Commission and the Securities and Exchange Commission. The opinions expressed herein do not take into account the effect of any portion of a Transaction Document constituting a “swap” or “security-based swap .”

We express no opinion concerning the laws of any jurisdiction other than the laws of the State of New York and, to the extent expressly referred to in this letter, the federal laws of the United States of America .

Based upon and subject to the foregoing, we are of the opinion that:

1. (i) Based solely on a review of the Delaware Good Standing Certificate, the Company is a corporation validly existing and in good standing under the laws of the State of Delaware and (ii) the Company has the requisite corporate power to enter into and perform its obligations under the Transaction Documents.

2. Each of the Transaction Documents constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership or other laws relating to or affecting creditors’ rights generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity), and except that the enforcement of rights with respect to indemnification and contribution obligations and provisions (a) purporting to waive or limit rights to trial by jury, oral amendments to written agreements or rights of set-off, (b) relating to submission to jurisdiction, venue or service of process, or (c) purporting to prohibit, restrict or condition the assignment of, or the grant of a security interest in, rights under the Indenture or property subject thereto, may be limited by applicable law or considerations of public policy.

3. The execution and delivery by the Company of the Transaction Documents, and the performance by the Company of its obligations thereunder (a) do not result in a violation of any provision of the Bylaws or Certificate of Incorporation or any Applicable Laws applicable to the Company, and (b) do not breach or result in a violation of, or default under the Amended and Restated Credit Agreement, dated as of the date hereof, by and among the Company, Cadiz Real Estate LLC, LC Capital Master Fund, Ltd. and the lenders party thereto.

4. The Company is not, nor is it required to register as, an investment company under the Investment Company Act of 1940, as amended.

This opinion letter is rendered to you in connection with the above-described transaction. This opinion letter may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without our prior written consent, except that the Trustee, solely in its capacity as trustee under the Indenture, may rely upon paragraphs 1, 2 and 3(a), in each case subject to the qualifications, assumptions and limitations relating thereto set forth herein.

In addition, we disclaim any obligation to update this letter for changes in fact or law, or otherwise.

Very truly yours,

Schedule A

Bryant and Carleen Riley JTWROS

B. Riley & Co., LLC 401(k) Profit Sharing Plan

B Riley & Co., LLC

Riley Family Trust DTd 6/20/89, Modified 01/25/07

Robert Antin Children Irrevocable Trust Dtd 01/01/01

Wolverine Flagship Fund Trading Limited

Nokomis Capital Master Fund, LP

Moussescapade, L.P.

Sphinx Trading, LP

Altima Global Special Situations Master Fund Ltd.

LC Capital Master Fund, Ltd.

Milfam II LP

Water Asset Management Managed Account #1, L.L.C.

Schedule B

Officer’s Certificate

March 5, 2013

I am a duly authorized officer of Cadiz Inc. (“ Cadiz ”). I hereby certify on behalf of Cadiz as follows:

Opinion Letter . This Officer’s Certificate (this “ Certificate ”) is being delivered in connection with the opinion to be delivered on the date hereof by Cadwalader, Wickersham & Taft LLP (the “ Opinion Letter ”) in connection with 7.00% Convertible Senior Notes Indenture, dated as of the date hereof, between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee (the “ Indenture ”). I am authorized by Cadiz to deliver this Certificate to Cadwalader, Wickersham & Taft LLP. Capitalized terms used herein and not defined herein have the meanings ascribed to them in the Indenture.

2.	Reliance . Cadwalader, Wickersham & Taft LLP is authorized to rely on the statements in this Certificate in preparing and delivering the Opinion Letter.

3.	Knowledge or Investigation of Facts . I am familiar with the business of Cadiz. I have personal knowledge of the facts certified in this Certificate, or have consulted with others at Cadiz who have such personal knowledge and have confirmed such facts to me.

Investment Company Act . Cadiz is primarily engaged directly, or indirectly through one or more Majority-Owned Subsidiaries, in the business of acquiring and developing land; and Cadiz does not: (a) hold itself out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting or trading in Securities; (b) engage, has not engaged, in, or proposes to engage in, the business of issuing Face-Amount Certificates of the Installment Type and has no such certificate outstanding; and (c) own or propose to acquire Investment Securities having a Value exceeding forty percent (40%) of the Value of the total assets of either Obligor (exclusive of Government Securities and cash items) on an unconsolidated basis.

As used in this Certificate, the following terms shall have the meanings ascribed below:

“ Exempt Fund ” means a company that is excluded from treatment as an investment company solely by Section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940, as amended (applicable to certain privately offered investment funds).

“ Face -Amount Certificate of the Installment Type ” means any certificate, investment contract, or other Security which represents an obligation on the part of its issuer to pay a stated or determinable sum or sums at a fixed or determinable date or dates more than 24 months after the date of issuance, in consideration of the payment of periodic installments of a stated or determinable amount.

“ Government Securities ” means all Securities issued or guaranteed as to principal or interest by the United States, or by a person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States; or any certificate of deposit for any of the foregoing.

“ Investment Securities ” includes all Securities except: (A) Government Securities; (B) Securities issued by companies the only shareholders in which are employees and former employees of a company and its subsidiaries, members of the immediate families of such persons and the company and its subsidiaries; and (C) Securities issued by Majority-Owned Subsidiaries of either Obligor which are not engaged and do not propose to be engaged in activities within the scope of clause (a), (b) or (c) of the fourth full paragraph of this Certificate or which are exempted or excepted from treatment as an investment company by statute, rule or governmental order (other than on the basis that they are Exempt Funds).

“ Majority-Owned Subsidiary ” of a person means a company fifty percent (50%) or more of the outstanding Voting Securities of which are owned by such person, or by a company which, within the meaning of this paragraph, is a Majority-Owned Subsidiary of such person.

“ Security ” means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

“ Value ” means: (A) with respect to Securities owned at the end of the last preceding fiscal quarter for which market quotations are readily available, the market value at the end of such quarter; (B) with respect to other Securities and assets owned at the end of the last preceding fiscal quarter, fair value at the end of such quarter, as determined in good faith by or under the direction of the board of directors; and (C) with respect to Securities and other assets acquired after the end of the last preceding fiscal quarter, the cost thereof.

“ Voting Security ” means any Security presently entitling the owner or holder thereof to vote for the election of directors of a company (or their equivalent, e.g., general partner or manager of a limited liability company).

IN WITNESS WHEREOF, I have executed and delivered this Certificate as of the date first above written.

Cadiz Inc.

By:

Name:

Title:

Exhibit E

Form of Theodora Oringher PC Opinion

March 5, 2013

Addressees Listed on Schedule A

(the “Addressees”)

Re: Cadiz Inc. Notes Indenture

Ladies and Gentlemen:

We have acted as counsel to Cadiz Inc. (“Cadiz” or the “Company”) in connection with the 7.00% Convertible Senior Notes Indenture, dated as of the date hereof between the Company and The Bank of New York Mellon, as Trustee (the “ Indenture ”). We are rendering this opinion letter to you at the request of the Company pursuant to Section 5.1 of the Purchase Agreement (as defined below) and 5.1 of the Exchange Agreement (as defined below). Capitalized terms used herein but not defined herein have the respective meanings given them in the Indenture.

In our capacity as counsel in connection with the Indenture, we have examined originals (or copies identified to our satisfaction as true copies of the originals) a copy of each of the following documents:

(a) the Indenture;

(b) the Notes;

(c) the Private Placement Purchase Agreement, dated as the date hereof by and among Cadiz, Inc. and those Purchasers listed on Schedule B (the “ Purchase Agreement ”); and

(d) the Exchange Agreement, dated as of the date hereof by and among LC Capital Master Fund, Ltd., Milfam II L.P., Water Asset Management Managed Account #1, L.L.C. and Cadiz Inc. (“ Exchange Agreement ”).

The agreements, instruments and other documents referred to in the foregoing lettered clauses are referred to collectively as the “Transaction Documents”.

In connection with this opinion, we have (i) investigated such questions of law, (ii) examined such corporate documents and records of Cadiz, certificates of public officials and other documents, and (iii) received such information from officers and representatives of Cadiz, as we have deemed necessary for the purpose of this opinion.

Also in connection with this opinion, we reviewed a certificate executed by an officer of Cadiz for the benefit of Theodora Oringher PC, the accuracy of which we will not be held accountable for (the “Certificate of Due Inquiry”).

In rendering this opinion, we have, with your permission, assumed without independent verification the following assumptions, the accuracy of which we will not be held accountable for:

1. The genuineness of all signatures affixed to the Transaction Documents, the authenticity of all items submitted to us as originals and the conformity with originals of all items submitted to us as copies including, without limitation, facsimile copies.

2. There are no documents, understandings, negotiations or agreements between or among any of the parties to the Transaction Documents and others which would expand, modify or otherwise affect the terms of the Transaction Documents or the agreements or the obligations of the respective parties thereunder and which would have an effect on the opinion rendered hereinafter.

3. Each natural person executing any such instrument, document, or agreement is legally competent to do so.

Whenever our opinion herein with respect to the existence or absence of facts is qualified by the phrase “to our knowledge,” or “known to us” or “we have no knowledge” or “to the best of our knowledge”, it is intended to mean the current actual knowledge of Howard J. Unterberger or Juliana Stamato, the attorneys in this firm who have represented Cadiz, of the existence or absence of any facts which would contradict the opinions set forth below. Except for a review of our own files, and except as expressly stated otherwise herein, we have not undertaken any independent inquiry or investigation to determine the existence or absence of such facts, and no inference as to our knowledge of the existence or absence of such facts should be drawn from the fact of our representation of Cadiz.

In addition, as to factual matters, with your consent we have relied solely upon (1) the representations and warranties of the parties contained in the Transaction Documents and (2) the Certificate of Due Inquiry, in each case without independent investigation, to establish the truth and accuracy of the factual matters specified therein.

We offer no opinion as to any matter or any law not expressly contained in this opinion.

OPINIONS.

Based on and subject to the above, and subject to the assumptions, limitations, qualifications, exceptions and reservations set forth herein, it is our opinion that:

1. Each of the Transaction Documents has been duly authorized by all necessary corporate action on the part of Cadiz and has been duly executed and delivered on behalf of Cadiz, and the performance by Cadiz of its obligations thereunder does not contravene (i) to the best of our knowledge, any law, rule or regulation applicable to Cadiz (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (ii) any contractual or legal restriction binding on or affecting Cadiz or Cadiz Real Estate LLC in any agreement or contract filed by Cadiz with the Securities and Exchange Commission pursuant to Item 601(b)(10) of Regulation S-K.

2. The shares of Common Stock issuable upon conversion of the Notes pursuant to the terms of the Indenture have been duly authorized and reserved for issuance by Cadiz and, upon due conversion of the Notes in accordance with the terms of the Indenture, said Common Stock will be validly issued, fully paid and non-assessable, free and clear of any Liens or encumbrances, other than transfer restrictions pursuant to the securities laws.

(a) 3. The offer and sale of the Notes under the circumstances contemplated by the Indenture constitute exempt transactions under the Securities Act and applicable state law.

4. To the best of our knowledge, based solely on the Certificate of Due Inquiry, except for the matters disclosed in the Transaction Documents or in public filings made by Cadiz with the U.S. Securities and Exchange Commission, there is no pending or threatened action or proceeding against Cadiz before any court, governmental agency or arbitrator which is likely to have a materially adverse effect upon the financial condition or operations of Cadiz.

5. The execution and delivery by Cadiz of the Transaction Documents to which it is a party, and the performance of such Transaction Documents by Cadiz or the consummation of the transactions contemplated thereby, do not require any consent or approval of, notice to, filing with, or other action by, any California or Delaware governmental body, agency or court having jurisdiction over Cadiz other than such of the foregoing as (i) are specifically referred to or described in the Transaction Documents or any schedule pertaining thereto, or (ii) have already been obtained or completed in connection with the execution and delivery by Cadiz of the Transaction Documents to which it is a party.

6. The execution, delivery and performance of, and compliance with, the terms of the Transaction Documents and the issuance of the Common Stock upon conversion of the Notes, do not violate any provision of Cadiz’ organizational documents. To our knowledge, the issuance of the Common Stock issuable upon conversion of the Notes do not violate, or constitute a default under, any material contract of Cadiz relating to stockholder rights or the issuance of securities in existence prior to such issuance.

7. No consent, approval or authorization of, or designation, declaration or filing with, any governmental authority on the part of Cadiz is required in connection with the offer, sale or issuance of the Common Stock issuable upon conversion of the Notes except as contemplated by the Transaction Documents.

8. To our knowledge, except for rights described in the Transaction Documents or in public filings of Cadiz with the Commission, there are no other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of capital stock or other securities of Cadiz or any other agreements to issue any such securities or rights.

II.	EXCEPTIONS, QUALIFICATIONS, LIMITATIONS AND ASSUMPTIONS.

1. Choice of Law. Our opinions are expressed with respect only to the laws of the State of California, the federal laws of the United States, the Delaware General Corporation Law and the Delaware Limited Liability Company Act, and are expressed only as to the outcome that would pertain were the laws of the State of California, the federal laws of the United States and the Delaware General Corporation Laws the governing laws applicable to the relevant issue. We express no opinion as to whether the laws of any particular jurisdiction apply. We call your attention to the fact that Transaction Documents are stated therein to be governed by New York law and that we are not members of the Bar of the State of New York. We understand that you will be relying on the opinion issued by Cadwalader, Wickersham & Taft LLP as to matters involving the laws of the State of New York. Our opinions and confirmations herein are based upon our consideration of only those statutes, rules and regulations which, in our experience, are normally applicable to loan transactions, provided that no opinion or confirmation is expressed in paragraph 1 with respect to state securities laws, tax laws, antitrust or trade regulation laws, insolvency or fraudulent transfer laws, antifraud laws or compliance with fiduciary duty requirements. We express no opinion as to any state or federal laws or regulations applicable to the subject transaction because of the nature or extent of the business of any parties to the Transaction Documents other than the Cadiz.

2. No Enforceability Opinion. We express no opinion as to the enforceability of the Transaction Documents.

We bring to your attention the fact that our legal opinions are an expression of our professional judgment and are not a guarantee of a result. This opinion is rendered as of the date set forth above solely for the benefit of the Addressees and their permitted successors and assigns under the Transaction Documents and may not be relied upon, used, circulated, referred to or quoted to any party without our prior written consent, except that the Addressees may furnish copies thereof (1) to any person if required by law to do so, (2) to the independent auditors and attorneys of the Addressees, (3) to any governmental authority having regulatory jurisdiction over the Addressees, (4) pursuant to order or legal process of any court or governmental authority, (5) in connection with any legal action to which an Addressee is a party arising out of the transactions contemplated in the Transaction Documents, and (6) to any prospective assignee permitted under the Transaction Documents, and the attorneys and advisers of such assignee, and to any credit rating agency or bond insurer in connection with a securitization or other disposition of the Note.

We make no undertaking to supplement this opinion if, after the date hereof, facts or circumstances come to our attention or changes in the law occur which could affect such opinion. The paragraph headings used herein are not intended to modify or otherwise alter the opinions, assumptions or exceptions herein.

Very truly yours,

THEODORA ORINGHER PC

SCHEDULE A

ADDRESSEES

LC Capital Master Fund, Ltd.

Milfam II L.P.

Water Asset Management Managed Account #1, L.L.C.

Bryant and Carleen Riley JTWROS

B. Riley & Co., LLC 401(k) Profit Sharing Plan

B. Riley & Co., LLC

Riley Family Trust Dtd 6/20/89, Modified 01/25/07

Robert Antin Children Irrevocable Trust Dtd 01/01/01

Wolverine Funds

Nokomis Capital Master Fund, LP

Moussescapade, L.P.

Sphinx Trading, LP

Altima Global Special Situations Master Fund Ltd.

SCHEDULE B

PURCHASERS UNDER PURCHASE AGREEMENT

Bryant and Carleen Riley JTWROS

B. Riley & Co., LLC 401(k) Profit Sharing Plan

B. Riley & Co., LLC

Riley Family Trust Dtd 6/20/89, Modified 01/25/07

Robert Antin Children Irrevocable Trust Dtd 01/01/01

Wolverine Funds

Nokomis Capital Master Fund, LP

Moussescapade, L.P.

Sphinx Trading, LP

Altima Global Special Situations Master Fund Ltd.

SCHEDULE 4.2

Altima Global Special Situations Master Fund Ltd

EXHIBIT 10.42

EXCHANGE AGREEMENT

This Exchange Agreement (the “ Agreement ”) is made as of March 4, 2013 by and among LC Capital Master Fund, Ltd. (“ LC Capital ”), Milfam II LP and Water Asset Management Managed Account #1, L.L.C. (together, the “ Holders ”) and Cadiz Inc., a Delaware corporation (the “ Company ”).

RECITALS

WHEREAS, in connection with the entry of that certain amended and restated credit agreement (the “ Amended and Restated Credit Agreement ”), to be entered into by and among the Company, Cadiz Real Estate LLC, LC Capital Master Fund, Ltd., as administrative agent, and the lenders party thereto (the “ Current Lenders ”), the Holders will exchange $65,958,047.42 in accreted principal amount of the Company’s outstanding term loans (“ Existing Loans ”) under the Original Credit Agreement for (i) $30,000,000 in original principal amount of new secured term loans (the “ Secured Term Loans ”) pursuant to the Amended and Restated Credit Agreement and (ii) $35,958,000 in original principal amount of the Company’s new 7.00% Convertible Senior Notes due 2018 (the “ Notes ”) that will be issued pursuant to the provisions of an indenture (the “ Indenture ”) to be entered into between the Company and The Bank of New York Mellon Trust Company, N.A. (the “ Trustee ”) in the form attached hereto as Exhibit B . The portion of Existing Loans being converted into Notes (the “ Exchange ”) is referred to herein as the “Exchange Loans”.

WHEREAS, contemporaneously with the execution of this Agreement, the Company will enter into a Private Placement Purchase Agreement (the “ Purchase Agreement ”) with the purchasers that are parties thereto (together, the “ Purchasers ”), whereby the Purchasers will purchase from the Company and the Company will sell to the Purchasers $17,500,000 in original principal amount of the Notes.

NOW THEREFORE, on and subject to the terms hereof, the parties hereto agree as follows:

ARTICLE I

EXCHANGE OF THE EXCHANGE LOAN

FOR THE NOTES

Subject to the terms set forth in this Agreement, at the Closing (as defined herein), the Holders shall exchange the Exchange Loan for the Notes, and, in exchange therefor, the Company hereby agrees to issue to the Holders the Notes. Subject to Section 5.1, the closing of the Exchange (the “ Closing ”) shall occur on a date (the “ Closing Date ”) no later than three business days after the date of this Agreement. At the Closing, each Holder shall exchange its portion of the principal amount of the Exchange Loan for, and the Company shall issue to each Holder, the principal amount of the Notes set out against such Holder’s name in Exhibit A hereto. Following the Closing Date, the Company shall use commercially reasonable efforts to issue global notes, in a form eligible for deposit with The Depository Trust Company. Once the Notes become eligible to use the system of The Depositary Trust Company, each Purchaser shall promptly deliver their Notes back to the Trustee prior to the Company issuing the global notes.

ARTICLE II

REPRESENTATIONS AND

WARRANTIES OF THE HOLDERS

Each Holder hereby makes the following representations and warranties (solely as to itself), each of which is and shall be true and correct on the date hereof and at the Closing, to the Company and all such representations and warranties shall survive the Closing:

Section 2.1 Power and Authorization . The Holder is duly organized, validly existing and in good standing, and has the power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the Exchange contemplated hereby.

Section 2.2 Valid and Enforceable Agreement; No Violations . This Agreement has been duly executed and delivered by the Holder and constitutes a legal, valid and binding obligation of the Holder, enforceable against the Holder in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (b) general principles of equity, whether such enforceability is considered in a proceeding at law or in equity (such qualifications in clauses (a) and (b) being the “ Enforceability Exceptions ”). This Agreement and consummation of the Exchange will not violate, conflict with or result in a breach of or default under (i) the Holder’s organizational documents, (ii) any agreement or instrument to which the Holder is a party or by which the Holder or any of their respective assets are bound, or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to the Holder.

Section 2.3 Title to the Exchange Loan . The Holder has not, in whole or in part, (a) assigned, transferred, hypothecated, pledged, exchanged or otherwise disposed of any of its rights in the Exchange Loan, or (b) given any person or entity any transfer order, power of attorney or other authority of any nature whatsoever with respect to the Exchange Loan.

Section 2.4 Hold Period . From the date of this Agreement until the Closing Date, the Holder shall not, and shall not allow any of its Affiliates to, offer, sell, contract to sell or otherwise dispose of, except as provided hereunder, all or any portion of the Exchange Loan to be surrendered by the Holder for exchange or repurchase hereunder.

Section 2.5 Accredited Investor/Qualified Institutional Buyer . The Holder is either (i) an “accredited investor” within the meaning of Rule 501(a) of Regulation D (“ Regulation D ”) promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”) (ii) has (and if applicable, its officers, employees, directors or equity owners have) either alone or with his, her or its purchaser representative or representatives, if any, such knowledge and experience in financial and business matters that he, she or it is capable of evaluating the merits and risks of an investment in the Securities or (iii) a “qualified institutional buyer” within the meaning of Rule 144A promulgated under the Securities Act (“ Rule 144A ”). The information the Holder has provided in writing to the Company as set forth on the Holder’s signature page hereto is true, correct and complete, as of the date hereof and as of the Closing Date in all material respects.

Section 2.6 No Affiliate, Related Party or 5% Stockholder Status . The Holder and its affiliates (within the meaning of Rule 144 promulgated under the Securities Act) (a) collectively beneficially own and will beneficially own as of the Closing Date (after giving effect to the Purchase and prospective conversion of the Notes) (i) less than 5% of the Company’s outstanding common stock, par value $.01 per share (the “ Common Stock ”) and (ii) less than 5% of the aggregate number of votes that may be cast by holders of those outstanding securities of the Company that entitle the holders thereof to vote generally on all matters submitted to the Company’s stockholders for a vote (the “ Voting Power ”) or (b) if such Holder and its affiliates collectively beneficially owns and will beneficially own after the Closing Date (after giving effect to the Purchase and prospective conversion of the Notes) (i) 5% or more of the Common Stock and (ii) 5% or more of the Voting Power, it acknowledges and agrees that it will comply in all material respects with all applicable provisions of the Securities Exchange Act of 1934 as a result of such holdings. The Holder, except as set forth in any Section 13 filings under the Exchange Act made by the Holder prior to the date hereof, is not a subsidiary, affiliate or, to its knowledge, otherwise closely-related to any director or officer of the Company or beneficial owner of 5% or more of the outstanding Common Stock or Voting Power.

Section 2.7 Restricted Notes and Stock . The Holder (a) acknowledges (i) that the issuance of the Notes pursuant to this Agreement and the issuance of any shares of Common Stock upon conversion of any of the Notes (the “ Conversion Shares ”) have not been registered, nor does the Company have a plan or intent to register such issuance of Notes or Conversion Shares, under the Securities Act or any state securities laws except with respect to the Conversion Shares as contemplated by the Registration Rights Agreement, (ii) the Notes and Conversion Shares are being offered and sold in reliance upon exemptions provided in the Securities Act and state securities laws for transactions not involving any public offering and, therefore, cannot be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless they are subsequently registered and qualified under the Securities Act and applicable state laws or unless an exemption from such registration and qualification is available, (iii) the Notes and Conversion Shares are “ restricted securities ” as that term is defined in Rule 144 promulgated under the Securities Act and (iv) any and all certificates representing the Notes and Conversion Shares shall bear the Transfer Restriction Legend (in the case of the Notes and as defined in the Indenture) and the legend set forth in the Notes (in the case of the Conversion Shares) and (b) is purchasing the Notes and Conversion Shares for investment purposes only for the account of the Holder and not with any view toward a distribution thereof or with any intention of selling, distributing or otherwise disposing of the Notes or Conversion Shares in a manner that would violate the registration requirements of the Securities Act. The Holder is able to bear the economic risk of holding the Notes and Conversion Shares for an indefinite period and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment in the Notes and Conversion Shares.

Section 2.8 No Illegal Transactions . Each Holder has not, directly or indirectly, and no person acting on behalf of or pursuant to any understanding with it has, engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales (as defined below) involving any of the Company’s securities) since the time that the Agent was first contacted by either the Company or any other person regarding the transactions contemplated by this Agreement or an investment in the Notes or the Company. Each Holder covenants that neither it nor any person acting on its behalf or pursuant to any understanding with it will engage, directly or indirectly, in any transactions in the securities of the Company (including Short Sales) prior to the time the transactions contemplated by this Agreement are publicly disclosed. “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 of Regulation SHO promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers. Solely for purposes of this Section 2.8, subject to the Holder’s compliance with its obligations under the U.S. federal securities laws and the Holder’s internal policies, “Holder” shall not be deemed to include any employees, subsidiaries or affiliates of the Holder that are effectively walled off by appropriate “Chinese Wall” information barriers approved by the Holder’s legal or compliance department (and thus have not been privy to any information concerning the transactions contemplated by this Agreement).

Section 2.9 Adequate Information; No Reliance . The Holder acknowledges and agrees that (a) the Holder has been furnished with all materials it considers relevant to making an investment decision to enter into the Exchange and has had the opportunity to review the Company’s filings and submissions with the Securities and Exchange Commission (the “ SEC ”), including, without limitation, all information filed or furnished pursuant to the Exchange Act and all information incorporated into such filings and submissions, (b) the Holder has sufficient knowledge and expertise to make an investment decision with respect to the transactions contemplated hereby, (c) the Holder has had a full opportunity to speak directly with directors, officers and “ Affiliates ” (as that term is defined in Rule 501(b) of Regulation D under the Securities Act) of the Company and to ask questions of the Company and such directors, officers and Affiliates of the Company concerning the Company, its business, operations, financial performance, financial condition and prospects, and the terms and conditions of the Exchange, and to obtain such additional information as it deems necessary to verify the accuracy of the information furnished to it and has asked such questions, received such answers and obtained such information as it deems necessary, (d) the Holder has had the opportunity to consult with its accounting, tax, financial and legal advisors to be able to evaluate the risks involved in the Exchange and to make an informed investment decision with respect to such Exchange and (e) the Holder is not relying, and has not relied, upon any statement, advice (whether accounting, tax, financial, legal or other), representation or warranty made by the Company or any of its affiliates or representatives, except for (A) the publicly available filings and submissions made by the Company with the SEC under the Exchange Act, and (B) the representations and warranties made by the Company in this Agreement.

Section 2.10 Guarantee. The Holder represents and warrants that it never has been represented, guaranteed, or warranted to the Holder by any officer or director of the Company, their agents or employees or any other person in connection with the Company, expressly or by implication, any of the following:

(a) the approximate or exact length of time that the Holder will be required to remain as the owner of the Notes;

(b) the exact amount of profit and/or amount or type of consideration, profits or losses (including tax benefits) to be realized, if any, by the Company; or

Section 2.11 Holder’s Reporting Requirement. The Company has made no representations to the Holder regarding the Holder’s reporting requirements with the SEC related to the Holder’s ownership in the Company, and the Holder acknowledges and agrees that it is the responsibility of the Holder to ensure that it complies with any disclosure and reporting requirements of the SEC.

Section 2.12 No Public Market . The Holder understands that no public market exists for the Notes, and that there is no assurance that a public market will ever develop for the Notes.

Section 2.13 No General Solicitation or Advertising . The offer to enter into the exchange of the Notes was directly communicated to the Holder, and the Holder was able to ask questions of and receive answers concerning the terms of this transaction. At no time was the Holder presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.

Section 2.14 Legal Opinions . The Holder acknowledges and understands that a legal opinion is being delivered by counsel to the Company in reliance on, and assuming the accuracy of, the foregoing representations and warranties of the Holder.

Section 2.15 No Conversion . The Holder has not taken any action to convert all or any portion of the convertible term loans held by it under the Original Credit Agreement.

ARTICLE III

REPRESENTATIONS AND

WARRANTIES OF THE COMPANY

The Company hereby makes the following representations and warranties, each of which is and shall be true and correct on the date hereof and at the Closing, to the Holders, and all such representations and warranties shall survive the Closing.

Section 3.6 Capitalization . The authorized capital stock of the Company consists of 70,000,000 shares of Common Stock, of which 15,452,756 shares of Common Stock were outstanding as of the close of business on March 1, 2013. All of the outstanding shares of Common Stock have been duly authorized and are validly issued, fully paid and nonassessable. Other than 897,218 shares of Common Stock reserved for issuance under the Company’s employee benefit plans, stock option and employee stock purchase plans or other employee compensation plans as such plans are in existence on the date hereof and described in the Company Reports and 472,223 shares of Common Stock reserved for issuance upon exercise of warrants outstanding on the date hereof and previously described in the Company Reports, the Company has no shares of capital stock reserved for issuance. Except as set forth above or pursuant to this Agreement or the Purchase Agreement, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company or any of its Subsidiaries to issue or sell any shares of capital stock or other securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company.

Section 3.15 Investment Company Act . Neither the Company nor any of its Subsidiaries is or, after giving effect to the Exchange and the application of the proceeds thereof, will become an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

Section 3.31 NASDAQ Shareholder Approval Rules . No approval of the stockholders of the Company under the rules and regulations of NASDAQ (including Rule 5635 of the NASDAQ Marketplace Rules) is required for the Company to issue and deliver the Notes to the Holders or the Conversion Shares upon conversion of the Notes.

ARTICLE IV

OTHER AGREEMENTS

Section 4.1 Participation Rights . Subject to applicable securities law, for so long as any portion of the Notes remain outstanding, in the event the Company issues any shares, interests, participations or other equivalents (however designated) of capital stock or any equivalent ownership interests (“ Capital Stock ”) the Company will offer to sell (subject to consummation of such issuance) to each Holder holding Notes with an Original Principal Amount (as that term is defined in the Indenture) of $1,000,000 or more, such Holder’s pro rata share of such Capital Stock at the same price and on the same terms (the “ Participation Right ”). Each Holder’s “pro rata” share is equal to the ratio of (a) the number of Conversion Shares such Holder has the right to acquire upon conversion of the Notes (without giving effect to the limitations in Section 4.3 of this Agreement or Section 10.24 of the Indenture) held thereby to (b) the sum of (i) all Common Stock outstanding as of the time of such determination, (ii) all Common Stock issuable upon the exchange, exercise or conversion of all warrants, options, convertible securities or other such instruments then outstanding (whether or not such instruments are then exercisable) including, but not limited to, any equity securities reserved for issuance under any management or employee benefit plan, and (iii) all other Common Stock then issuable as a result of any anti-dilution adjustments and pre-emptive or similar rights granted to any other holder of the Company’s Common Stock. The Participation Right shall not apply to authorized issuances by the Company in connection with: (i) strategic new business transactions, joint ventures or acquisitions, (ii) firm underwritten commitments for public offerings of common stock with expected gross proceeds in excess of Thirty-Five Million Dollars ($35,000,000), (iii) employee/ consultant stock incentive plans so long as such issuances have been approved by a majority of the independent directors on the Company’s board of directors, (iv) the conversion of any convertible securities of the Company outstanding as of the Closing, (v) the conversion of convertible securities which are offered in a transaction in which the Holders are given a right of participation pursuant to this Section 4.1, and (vi) the conversion of the Notes and the corresponding issuance of the Conversion Shares pursuant to the Indenture. Such first offer shall be made in writing by the Company to the Holder and shall remain open for at least ten (10) business days (the “ Participation Period ”). The written notice shall provide (i) reasonable information about the terms and conditions of such sale of Capital Stock; and (ii) the expiration date of the Participation Period. Notice of the intention of any Holder to exercise its Participation Right shall be evidenced by an irrevocable writing signed by such Holder and delivered to the Company prior to the expiration date of the Participation Period, setting forth (i) such Holder’s election and (ii) that the representations and warranties of the Holder included in this Agreement are true and correct as of the date of such notice.

Section 4.2 Director Appointment .

(a) For as long as LC Capital or its affiliates own or hold Capital Stock of the Company and/or Notes such that LC Capital and its affiliates hold or have the right to acquire at least 5% of the Capital Stock of the Company, LC Capital shall have the right to designate one (1) independent director to serve on the Company’s board of directors (subject to any restrictions under applicable law or the rules and requirements of any securities exchange upon which any of the Company’s securities may be traded). Further, for as long as LC Capital or its affiliates own or hold Capital Stock of the Company and/or Notes such that LC Capital and its affiliates hold or have the right to acquire at least 12% of the Capital Stock of the Company, LC Capital shall have the right to designate two (2) independent directors to serve on the Company’s board of directors (subject to any restrictions under applicable law or the rules and requirements of any securities exchange upon which any of the Company’s securities may be traded).

(b) Each director appointed pursuant to this Section 4.2 must meet the requirements of “independent director” for all purposes under the rules and regulations of the NASDAQ and the SEC. The director designation right is personal to LC Capital and cannot be assigned.

Section 4.3 Beneficial Ownership Limitation .

(a) No Holder listed on Schedule 4.3 hereto shall request that any of the Notes be converted, and the Company shall not effect the conversion of any of the Notes to the extent that, after giving effect to such issuance after conversion, such Holder (together with such Holder’s affiliates, and any other person or entity acting as a group together with such Holder or any of such Holder’s affiliates (collectively, the “ Concert Parties ”)), would beneficially own Common Stock in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Concert Parties shall include the number of Conversion Shares issuable upon conversion of the portion of the Notes with respect to which such determination is being made, but shall exclude the number of Conversion Shares which would be issuable upon (A) conversion of the remaining portion of the Notes beneficially owned by such Holder or any of its Concert Parties and (B) conversion or exercise of the unexercised or unconverted portion of any loan to or securities of the Company (or any successor thereto) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Holder or any of its Concert Parties. Except as set forth in the preceding sentence, for purposes of this Section 4.3, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder, it being acknowledged by each Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 4.3 applies, the determination of whether and the extent to which any of the Notes may be converted (in relation to other loans or securities owned by the Holder together with any affiliates) shall be made in good faith by the Holder in consultation with its own counsel, and a request that all or a portion of the Notes beneficially owned by such Holder be converted shall be deemed to be the Holder’s determination that such conversion (in relation to other securities owned by the Holder together with any Concert Parties) shall be in compliance with this Section 4.3, and the Company shall not have any obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4.3, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s (or its successor’s) most recent periodic or annual report, as the case may be, filed with the SEC (y) a more recent public announcement by the Company (or its successor) or (z) any other notice by the Company or the Company’s transfer agent (or its successor or successor’s transfer agent) setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of any Holder listed on Schedule 4.3 hereto, the Company shall within two business days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of loans or securities of the Company, including the Notes, by such Holder or its Concert Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of the Conversion Shares issuable upon conversion of any of the Notes. Any Holder listed on Schedule 4.3 hereto, upon not less than 61 days’ prior notice to the Company, may increase or decrease (including, for the avoidance of doubt, to 0%) the percentage constituting the Beneficial Ownership Limitation, and the provisions of this Section shall continue to apply to such increased or decreased Beneficial Ownership Limitation. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this Section 4.3 shall be construed and implemented in a manner otherwise than in strict conformity with the terms hereof in order to correct such terms (or any portion thereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 4.3 shall apply to any successor to any Holder listed on Schedule 4.3 hereto.

(b) Notwithstanding the foregoing, the limitations contained in this Section 4.3 shall not restrict or limit (i) any exercise by a Holder of a Participation Right as described in Section 4.1 above or (ii) any conversion or prepayment of the Notes in connection with a Change in Control as contemplated by Article 3 of the Indenture.

ARTICLE V

CONDITIONS TO CLOSING

Section 5.1 Holder’s Conditions Precedent . The obligations of each Holder to complete the exchange contemplated by this Agreement are, in each case, subject to the satisfaction of each of the following conditions precedent:

(c) such Holder shall have received the Amended and Restated Registration Rights Agreement, executed and delivered by the Company and each of the other parties thereto (other than such Holder), substantially in the form of Exhibit C attached hereto;

(e) the Indenture shall have been entered into as of the Closing Date by and between the Company and the Trustee;

(f) the Closing (as defined in the Amended and Restated Credit Agreement) of the Amended and Restated Credit Agreement shall have occurred;

(g) the Company and the Purchasers shall have executed the Purchase Agreement and the purchases contemplated thereby shall have occurred or shall occur simultaneously with the Closing;

(h) Cadwalader, Wickersham & Taft LLP, counsel for the Company, shall have furnished to the Holders an opinion, in the form attached hereto as Exhibit D , dated the Closing Date and addressed to the Holders;

(i) Theodora Oringher PC, counsel for the Company, shall have furnished to the Holders an opinion, in the form attached hereto as Exhibit E , dated the Closing Date and addressed to the Holders; and

(j) the Chief Executive Officer and Chief Financial Officer of the Company shall have delivered to such Holder a certificate, dated as of the Closing Date, certifying to their knowledge, after reasonable inquiry as to the matters set forth in paragraphs (a), (b), (e) and (f).

Section 5.2 Company Conditions Precedent , The obligations of the Company to complete the exchange of the Notes with any Holder contemplated by this Agreement are subject to the satisfaction of each of the following conditions precedent:

(a) Each of the representations and warranties of such Holder contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date;

(b) such Holder shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it at or before the Closing;

(d) the Trustee shall have received from such Holder such documents reasonably requested by the Trustee with respect to the issuance of the Notes contemplated hereby; and

(e) such Holder shall have delivered to the Company an executed counterpart to the Registration Rights Agreement.

ARTICLE VI

MISCELLANEOUS

Section 6.1 Certain Actions . Each of the Company and each Holder shall reasonably cooperate with each other and use (and shall cause their respective affiliates to use) reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable on its part under this Agreement and applicable law and stock exchange listing standards to consummate the transactions contemplated by this Agreement as soon as practicable. Without limiting the generality of the foregoing, on or before the Closing the Company shall deliver to each Holder the Registration Rights Agreement duly executed by the Company and a copy of the Indenture duly executed by each of the Company and the Trustee, and each Holder shall deliver to the Company the Registration Rights Agreement duly executed by such Holder.

Section 6.3 Legend Removal . Upon the request of any Holder or any transferee or proposed transferee thereof, the Company shall remove the legend contemplated by Section 6.2 of this Agreement and the Company shall issue a stock certificate without such legend to such Holder or transferee (and shall revoke any related stop transfer or similar instructions to its registrar and transfer agent), or shall cause such shares upon initial issuance not to be so legended (and shall not issue any such stop transfer or similar legends to its registrar and transfer agent) if the Conversion Shares are covered by an effective registration statement under the Securities Act or if such person provides reasonable evidence and an opinion of counsel to the effect that a sale, transfer or assignment of such Conversion Shares may be made without registration under the Securities Act or that such Conversion Shares are eligible for resale pursuant to Rule 144 under the Securities Act.

ARTICLE VII

MISCELLANEOUS

Section 7.1 Entire Agreement . This Agreement and any documents and agreements executed in connection with the Exchange embody the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and understandings between or among the parties or any of their agents, representatives or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents.

Section 7.5 Specific Performance. Each party acknowledges and agrees that, in addition to other remedies, the parties shall be entitled to enforce the terms of this Agreement by decree of specific performance without the necessity of proving the inadequacy of monetary damages as a remedy and to obtain injunctive relief against any breach or threatened breach of this Agreement.

Section 7.6 Certain Definitional Provisions. Unless the express context otherwise requires: the words “hereof”, “herein”, and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; any references herein to a specific Section, Schedule or Annex shall refer, respectively, to Sections, Schedules or Annexes of this Agreement; wherever the word “include”, “includes”, or “including” is used in this Agreement, it shall be deemed to be followed by the words “without limitation”; and references herein to any gender includes each other gender.

[Signature Page Follows]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written.

The Company

CADIZ, INC.

By: /s/ Timothy J. Shahee

Name: Timothy J. Shaheen

Title: Chief Financial Officer and Secretary

The Holders

LC CAPITAL MASTER FUND, LTD.

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

Title: Director

MILFAM II L.P.

By: MILFAM LLC

Its: General Partner

By: /s/ Lloyd I Miller III

Name: Lloyd I. Miller III

Title: Manager

WATER ASSET MANAGEMENT-MANAGED ACCOUNT #1, L.L.C.

By: /s/ Matthew Diserio

Name: Matthew Diserio

Title: Member

[Signature Page to Exchange Agreement]

EXHIBIT A

Exchanging Beneficial Owners

Name of Holder	Exchange Loan		Principal Amount of the Notes

LC Capital Master Fund, Ltd.	$	29,426,000	$	29,426,000

Milfam II LP	$	5,256,000	$	5,256,000

Water Asset Management Managed Account #1, LLC	$	1,276,000	$	1,276,000