U
NITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed
by the Registrant ☒ Filed by a party other than the Registrant ☐
Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material under §240.14a-12
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Two
Rivers Water and Farming Company
(Name
of the Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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appropriate box):
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No fee required.
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Aggregate number of securities to which transaction
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Filing Party:
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Date Filed:
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NOTICE
OF ANNUAL MEETING OF COMMON SHAREHOLDERS
Thursday
September 7, 2017
2:30
p.m., MDT, local time
The
Annual Meeting of Common Shareholders of Two Rivers Water and Farming Company will be held at our principal executive offices
located at 3025 South Parker Rd., Suite 140, Aurora, Colorado, on Thursday, September 7, 2017 at 2:30 p.m., local time. The purposes
of the meeting are to:
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1.
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elect
the six directors named in the proxy statement to serve until the next Annual Meeting
of Common Shareholders;
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2.
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ratify
the appointment of our independent registered public accounting firm for 2017;
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3.
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increase
the number of authorized shares from 100 million to 200 million;
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4.
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approve,
on an advisory basis, executive compensation; and
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5.
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transact
any other business as may properly come before the meeting or any adjournment thereof.
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You
may vote at the meeting if you were a holder of record of our common stock at the close of business on July 7, 2017. A complete
list of those shareholders will be open for examination by shareholders at our principal executive offices during ordinary business
hours, for a period of ten days prior to the meeting as well as on the day of the meeting. The annual meeting may be adjourned
from time to time without notice other than by announcement at the meeting.
This
year we are using the SEC “Notice and Access” model, which allows us to deliver proxy materials via the Internet.
We believe Notice and Access provides common shareholders with a convenient method to access the proxy materials and vote, while
allowing us to conserve natural resources and reduce the costs of printing and distributing proxy materials. On August 1, 2017,
we are mailing to common shareholders of record a notice with instructions on how to access the proxy materials via the Internet.
Whether
or not you expect to attend the meeting, please complete, date, sign and return the proxy card, or vote over the telephone or
the Internet, as instructed in the proxy materials, as promptly as possible in order to ensure your representation at the meeting.
Even if you vote by proxy, you may still vote in person if you attend the meeting. If your common stock is held of
record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from
the record holder.
August
1, 2017
Denver,
Colorado
By
Order of the Board of Directors,
Bill
Gregorak
Secretary
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Important
Notice Regarding Availability of Proxy Materials for Annual Meeting on September 7, 2017:
The
Proxy Statement, form of proxy card and
our Annual Report to Shareholders
are available at
www.proxyvote.com
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PROXY
STATEMENT
FOR
ANNUAL MEETING OF COMMON SHAREHOLDERS
Table
of Contents
QUESTIONS
AND ANSWERS ABOUT THE
PROXY MATERIALS AND VOTING
Why
am I receiving proxy materials?
We
have mailed you a notice of Internet availability of proxy materials, together with a proxy card, because the Board of Directors
of Two Rivers Water and Farming Company is soliciting your proxy to vote at the 2017 Annual Meeting of Common Shareholders, including
at any adjournments or postponements of the meeting. We urge you to access the proxy statement and other materials as described
in the Notice of Internet Availability. You are invited to attend the meeting to vote on the proposals described in this proxy
statement. You do not, however, need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return
the proxy card, or follow the instructions below to submit your proxy over the telephone or through the Internet.
We
intend to send the notice of Internet availability of proxy materials and proxy card on or about August 1, 2017 to all shareholders
of record entitled to vote at the meeting.
Why
did I receive a notice as to the Internet availability of proxy materials instead of a full set of materials?
We
have elected, pursuant to rules adopted by the SEC, to provide access to our proxy materials over the Internet. We have sent a
notice of Internet availability of proxy materials, together with a proxy card, to our common shareholders of record as of July
7, 2017. Instructions on how to access proxy materials over the Internet or to request a printed copy may be found in the Notice
of Internet Availability. In addition, you may request to receive future proxy materials in printed form by mail or electronically.
Your election to receive future proxy materials by mail or electronically will remain in effect until you terminate such election.
How
can I access the proxy materials over the Internet?
You
may view and also download our proxy materials for the meeting including the Notice of Internet Availability, the Proxy Statement,
the form of proxy card and our 2016 Annual Report to Shareholders at
www.proxyvote.com
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How
do I attend the meeting?
The
meeting will be held on Thursday, September 7, 2017 at 2:30 p.m., Mountain Daylight Saving Time, at our principal executive offices
at 3025 South Parker Rd. Suite 140, Aurora, Colorado.
Do
I need to present identification to attend the meeting?
Yes.
You will need to present valid personal identification and proof of common stock ownership to be admitted to attend the meeting.
Who
can vote at the meeting?
Only
holders of record of common stock at the close of business on July 7, 2017 will be entitled to vote at the meeting. On this record
date, there were 32,205,271 shares of common stock outstanding and entitled to vote.
Shareholder
of Record — Shares Registered in Your Name:
If on July 7, 2017 your shares of common stock were registered directly
in your name with our transfer agent, then you are a shareholder of record for the meeting. As a shareholder of record, you may
vote in person at the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to fill out and return
the proxy card, or vote by proxy over the telephone or on the Internet as instructed below, to ensure your vote is counted.
Beneficial
Owner — Shares Registered in the Name of a Broker or Bank:
If on July 7, 2017 your shares of common stock were not registered
in your name, but instead were held in an account at a brokerage firm, bank, dealer or similar organization, then you are the
beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization.
The organization holding your account is considered to be the shareholder of record for purposes of voting at the meeting. As
a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account.
You are also invited to attend the meeting. Since you are not the shareholder of record, however, you may not vote your shares
in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.
What
am I voting on?
There
are four matters scheduled for a vote:
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election
of six directors nominated by the Board of Directors to hold office until the 2018 Annual
Meeting of Common Shareholders;
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ratification
of the selection, by the Audit Committee of the Board of Directors, of Eide Bailly LLP
as our independent registered public accounting firm for 2017;
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increase
the number of authorized shares from 100,000,000 to 200,000,000, and
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approval
of, on an advisory basis, the compensation of our Named Executive Officers as identified
in this proxy statement.
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At
our 2013 Annual Meeting of Shareholders, the common shareholders voted to approve annual advisory votes on compensation of our
Named Executive Officers. The third proposal has been made pursuant to that year’s vote on the frequency of consideration
of executive compensation.
What
if another matter is properly brought before the meeting?
The
Board of Directors knows of no other matters that will be presented for consideration at the meeting. If any other matters are
properly brought before the meeting, it is the intention of the person named in the accompanying proxy card to vote on those matters
in accordance with his best judgment.
How
do I vote?
With
respect to Proposal No. 1, you may vote “FOR” all of the nominees to the Board of Directors or you may “Withhold”
your vote for one or more of the nominees. With respect to Proposal No. 2, you may vote “FOR” or “AGAINST”
the ratification of Eide Bailly LLP as our independent registered public accounting firm for 2017, or you may abstain from voting.
With respect to Proposal No. 3, you may vote “FOR” or “AGAINST” the approval of increasing the number
of authorized shares from 100 million to 200 million. With respect to Proposal No. 4, you may vote “FOR” or “AGAINST”
the approval of, on an advisory basis, the compensation of our Named Executive Officers.
Shareholder
of Record — Shares Registered in Your Name:
If you are a shareholder of record, you may vote in person at the meeting,
vote by proxy using the enclosed proxy card, vote by proxy over the telephone, or vote by proxy through the Internet. Whether
or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting
and vote in person even if you have already voted by proxy.
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To
vote in person, bring your personal identification and proof of common stock ownership
to the meeting and we will give you a ballot when you arrive.
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To
vote by proxy, complete, sign and date the proxy card and return it promptly in the envelope
provided. If you return your signed proxy card to us before the meeting, we will vote
your shares as you direct.
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To
vote over the telephone from a location in the United States, Canada or Puerto Rico,
dial toll-free 1-800-690-6903 using a touch-tone phone and follow the recorded instructions.
You will be asked to provide the company number and control number from the proxy card.
Your vote must be received by 11:59 p.m., Eastern daylight saving time, on September
6, 2017 to be counted.
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To
vote through the Internet, go to
www.proxyvote.com
to complete an electronic proxy
card. You will be asked to provide the company number and control number from the proxy
card. Your vote must be received by 11:59 p.m., Eastern daylight saving time, on September
6, 2017 to be counted.
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Beneficial
Owner — Shares Registered in the Name of a Broker or Bank:
If you are a beneficial owner of shares of common stock registered
in the name of your broker, bank, dealer or similar organization, you should have received proxy materials from that organization
rather than from us. Simply complete and mail the proxy card to ensure that your vote is counted. Alternatively, you may vote
by telephone or over the Internet as instructed by the organization holding your shares. To vote in person at the meeting, you
must obtain a valid proxy and proof of common stock ownership from the organization holding your shares. Follow the instructions
from the organization holding your shares included with these proxy materials, or contact that organization to request a proxy
form.
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We
provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and
correctness of your proxy vote instructions. Please be aware, however, that you must bear any costs associated with your Internet
access, such as usage charges from Internet access providers and telephone companies.
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How
many votes do I have?
On
each matter to be voted upon, you have one vote for each share of common stock you owned as of July 7, 2017.
What
if I return a proxy card or otherwise vote but do not make specific choices?
If
you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable,
“FOR” the election of each of the six nominees for director, “FOR” ratification of Eide Bailly LLP as
our independent registered public accounting firm for 2017, “FOR” the increase in the number of authorized shares
to 200 million and “FOR” the approval of, on an advisory basis, the compensation of our Named Executive Officers.
If any other matter is properly presented at the meeting, your proxyholder will vote your shares using his best judgment.
Who
is paying for this proxy solicitation?
We
will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also
solicit proxies in person, by telephone or by other means of communication. Directors and employees will not be paid any additional
compensation for soliciting proxies. We may also reimburse brokerage firms, banks, dealers and similar organizations for the cost
of forwarding proxy materials to beneficial owners.
What
does it mean if I receive more than one notice of Internet availability of proxy materials?
If
you receive more than one notice of Internet availability of proxy materials, your shares of common stock may be registered in
more than one name or in different accounts. Please follow the voting instructions on the proxy cards in the proxy materials to
ensure that all of your shares are voted.
Can
I change my vote after submitting my proxy?
Yes.
You can revoke your proxy at any time before the final vote at the meeting. If you are the record holder of your shares, you may
revoke your proxy in any one of the following ways:
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You
may submit another properly completed proxy card with a later date.
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You
may grant a subsequent proxy by telephone or through the Internet.
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You
may send a timely written notice that you are revoking your proxy to Bill Gregorak, our
Secretary, at 3025 South Parker Rd., Ste. 140, Aurora, CO 80014.
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You
may attend the meeting and vote in person. Simply attending the meeting will not, by
itself, revoke your proxy.
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Your
latest proxy card or telephone or Internet proxy is the one that is counted. If your shares are held by your broker, bank, dealer
or similar organization as a nominee, you should follow the instructions provided by that organization.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the meeting, who will separately count:
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“FOR”
and “Withhold” votes with respect to Proposal No. 1;
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“FOR”
and “AGAINST” votes with respect to Proposal No. 2, Proposal No. 3, and Proposal
No. 4; and
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abstentions
and broker non-votes.
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Abstentions
are counted in tabulations of the votes cast on proposals presented to shareholders other than the election of directors. Thus
an abstention from voting on a matter has the same legal effect as a vote “AGAINST” that matter. Broker non-votes
and directions to withhold are counted as present, but are not entitled to vote on proposals for which brokers do not have discretionary
authority and have no effect other than to reduce the number of affirmative votes needed to approve a proposal.
What
are “broker non-votes”?
Broker
non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker or
nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street
name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares.
If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to
matters that are considered to be “routine,” but not with respect to “non-routine” matters. “Non-routine”
matters are generally those involving a contest or a matter that may substantially affect the rights or privileges of shareholders,
such as mergers, shareholder proposals and director elections, even if those matters are not contested. Proposal No. 2 is considered
to be “routine.”
The
election of directors (Proposal No. 1) and the approval, on an advisory basis, of the compensation of our Named Executive Officers
(Proposal No. 4) are matters considered “non-routine” under applicable rules. A broker or other nominee cannot vote
without instructions on “non-routine” matters, and therefore there may be broker non-votes on Proposal No. 1 and Proposal
No. 4.
How
many votes are needed to approve each proposal?
To
be approved, Proposal No. 1, which relates to the election of directors, the six nominees receiving the most “FOR”
votes (from the holders of votes of shares present in person or represented by proxy and entitled to vote on the election of directors)
will be elected. Only votes “FOR” or “WITHHELD” will affect the outcome.
To
be approved, Proposal No. 2, which relates to the ratification of Eide Bailly LLP as our independent registered public accounting
firm for 2017, must receive “FOR” votes from the holders of a majority of shares present and entitled to vote either
in person or by proxy. If you “ABSTAIN” from voting, it will have no effect. Broker non-votes will have no effect.
To
be approved, Proposal No. 3, which relates to the approval of increasing the Company’s number of authorized shares from
100 million to 200 million must receive “FOR” votes from the holders of a majority of the shares that are present
in person or represented by proxy and entitled to vote at the meeting. If you “ABSTAIN” from voting, it will have
no affect. Broker non-votes will have no effect.
To
be approved, Proposal No. 4 which relates to the approval, on an advisory basis, of the compensation of our Named Executive Officers,
must receive “FOR” votes from the holders of a majority of the shares that are present in person or represented by
proxy and entitled to vote at the meeting. If you “ABSTAIN” from voting, it will have no effect. Broker non-votes
will have no effect.
What
is the quorum requirement?
A
quorum of shareholders is necessary to hold a valid meeting. A quorum will be present if shareholders holding at least a majority
of the outstanding shares of common stock entitled to vote are present at the meeting in person or represented by proxy.
Your
shares of common stock will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf
by your broker, bank or other nominee) or if you vote in person at the meeting. Abstentions and broker non-votes will be counted
towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the meeting in person or
represented by proxy may adjourn the meeting to another date.
How
can I find out the results of the voting at the meeting?
Preliminary
voting results will be announced at the meeting. Final voting results will be included on a current report on Form 8-K filed with
the SEC on or before September 13, 2017.
PROPOSALS
Proposal
No. 1. Election of Directors
Our
Articles of Incorporation and Bylaws provide that the Board of Directors shall consist of no fewer than two and no more than nine
directors. The number of directors currently is fixed at six. The Board has nominated six directors for election at the meeting.
If elected at the meeting, each of the nominees would serve until the 2018 Annual Meeting of Common Shareholders and until their
successors are elected and qualified or until their death, resignation or removal.
We
have no reason to believe that any of the director nominees will be unable to serve if elected. However, if any of these nominees
becomes unavailable, the person named in the proxy intends to vote for any alternate designated by the current Board, or the Board
may reduce the number of current directors.
None
of the independent director nominees is related by blood, marriage or adoption to any of the other director nominees or any of
our executive officers, and none is party to an arrangement or understanding with any person pursuant to which the nominee is
to be selected or nominated for election as a director.
Directors
are elected by plurality of the votes of the holders of common stock present in person or represented by proxy and entitled to
vote on the election of directors. The six nominees receiving the highest number of affirmative votes will be elected.
Brief
biographies of the nominees are set forth below under “Board of Directors—Biographical Information” and include
information, as of the date of this proxy statement, regarding the specific and particular experience, qualifications, attributed
and skills of each nominee that lead the Nominating, Compensation and Corporate Governance Committee to believe that such nominee
should continue to serve on the Board.
The
Board of Directors recommends that holders of common stock vote
“FOR”
election of each of Wayne E. Harding III, Samuel Morris, Michael Harnish, James Cochran, Christopher Bragg and T. Keith Wiggins.
Proposal
No. 2. Appointment of Independent Registered Public Accounting Firm
The
Audit Committee of the Board of Directors has selected Eide Bailly, LLP, Denver, Colorado, as our independent registered public
accounting firm for fiscal year 2017. Eide Bailly has served as our independent registered public accountants since 2011. While
we are not required to seek shareholder ratification of the selection of Eide Bailly as our independent registered public accounting
firm, we are doing so as a matter of good corporate governance. If the shareholders do not ratify the selection, the Audit Committee
will take the vote into consideration when determining whether or not to retain Eide Bailly. Representatives of Eide Bailly, LLP
are not expected to be present at the meeting.
The
affirmative vote of the holders of a majority of the common stock present in person or represented by proxy and entitled to vote
at the meeting will be required to ratify the selection of Eide Bailly. Abstentions will be counted toward the tabulation of votes
cast on proposals presented to the shareholders and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose in determining whether this matter has been approved.
The
Board of Directors recommends that holders of common stock vote
“FOR”
ratification of the appointment of Eide Bailly, LLP as independent registered public accounting firm.
Proposal
No. 3. Increase the number of authorized shares from 100 million to 200 million
The
Company currently has 100,000,000 authorized shares of its common stock, ticker symbol TURV. As of July 7, 2017 there were 32,205,271
common shares outstanding. On a fully diluted basis, which includes the conversion rights of TR Cap Preferred Members (29,881,698
shares), the warrants that will be issued upon TR Cap Preferred Members conversion (14,168,944 shares), along with other outstanding
warrants and options, the Company could possibility of issue a total of over 90,000,000 shares should all conversions
and exercises occur. In order to provide the needed flexibility to raise new capital through equity, the expansion of the Company’s
authorized share count is necessary.
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The
Board of Directors recommends that holders of common stock vote
“FOR”
increasing
the authorized Two Rivers common shares to 200 million.
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Proposal
No. 4. Advisory Approval of Executive Compensation
In
accordance with SEC rules, we are asking common shareholders to cast an advisory vote to approve the compensation of our Named
Executive Officers disclosed below in “Executive Compensation.” While this vote is non-binding, we value the opinions
of its shareholders and, consistent with our record of shareholder engagement, will consider the outcome of the vote when making
future compensation decisions.
In
considering your vote, we invite you to review the compensation tables and narrative presented below under “Executive Compensation.”
As described in that section, we believe that our executive compensation program enables us to attract, motivate and retain key
executives, aligns our compensation arrangements with our annual and long-term business objectives and strategy, and provides
variable compensation opportunities that are directly linked with our financial and strategic performance.
We
are asking our shareholders to vote FOR, in a non-binding vote, the following advisory resolution on executive compensation:
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RESOLVED,
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that
the holders of common stock approve, on an advisory basis, the compensation of the Named
Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the
Summary Compensation Table, the other compensation tables, and the related notes and
narratives set forth under “Executive Compensation” of the proxy statement
for the 2017 Annual Meeting of Common Shareholders.
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The
Board has adopted a policy of providing annual advisory votes on the compensation of our Named Executive Officers. At the 2013
Annual Meeting of Shareholders, common shareholders approved this policy, on an advisory basis. The next advisory vote to approve
our executive compensation is expected to occur at the Annual Meeting of Common Shareholders.
The
Board of Directors recommends that holders of common stock vote
“FOR”
the advisory resolution on executive compensation.
Other
Matters
The
Board of Directors is not aware of any matters other than those set forth in this proxy statement that will be presented for consideration
at the meeting. If any other matters properly come before the meeting, it is the intention of the person named in the accompanying
proxy card to vote on such matters in accordance with his best judgment.
Shareholder
Proposals
To
be considered for inclusion in our proxy materials for presentation at the 2018 Annual Meeting of Common Shareholders, shareholder
proposals must be received in writing by our Secretary at our corporate headquarters at 3025 South Parker Rd., Suite 140, Aurora,
Colorado, by March 26, 2018.
EXECUTIVE
OFFICERS
Our
executive officers as of July 7, 2017 are:
Wayne
E. Harding III
serves as our Chief Executive Officer. Mr. Harding served as our Chief Financial Officer and Secretary from
September 2009 to May 2017. In June 2016 the Board appointed Mr. Harding as the Company’s CEO in addition to his role as
CFO. He also served as our controller from July 2008 to September 2009. From 2004 to 2007 he served as vice president business
development of Rivet Software, Inc., a financial reporting software company; from 2002 to 2004, principal of Wayne Harding and
Company PC, a financial consulting firm; and from 2000 to 2002, director-business development of CPA2Biz, Inc., a multi-channel
marketing subsidiary of the American Institute of Certified Public Accountants. Mr. Harding serves as a director and chair of
the audit committee of Aerogrow International, Inc., a publicly traded provider of advanced indoor garden systems, since December
2011, and he previously served as a director and chair of the governance, compensation and nominating committee and the audit
committee of Aerogrow from 2005 to 2007. Mr. Harding is a licensed CPA in Colorado and holds the Charter Global Management Accountant
designation. He received his BS and MBA degrees from the University of Denver. He is a past president of the Colorado Society
of CPAs. Mr. Harding is 62 years old.
William
Gregorak
serves as our Chief Financial Officer and Secretary. Mr. Gregorak has served as the Company’s Secretary since
September 2016. In March 2017 the Board appointed Mr. Gregorak as the Company’s CFO. He served as our Vice President Finance
and Accounting from June 2016 through March 2017. Prior to joining Two Rivers, Mr. Gregorak served as CFO at Ascent Solar Technologies,
a NASDAQ listed manufacturer and marketer of flexible, thin-film photovoltaic (PV) modules for off-grid and specialty applications,
from 2013-2016. Before Ascent Solar, Mr. Gregorak was CFO of Thule Organization Solutions, a consumer products manufacturer of
personal electronics cases sold under both the Case Logic® and Thule brands®, from 2008-2013; overseeing organizations
in the United States, Europe and Hong Kong. Before Thule, Mr. Gregorak was the Vice President and corporate controller for Advanced
Energy and Xilinx Corporations, both of which trade on the NASDAQ. Advanced Energy is a manufacturer of semiconductor equipment
with operations in both the United States and China, while Xilinx is a manufacturer of semiconductors with operations spanning
the United States, Ireland and Singapore. Prior to 2000, Mr. Gregorak spent 17 years with Hewlett-Packard in various financial
and operational capacities. Mr. Gregorak holds a Bachelor’s degree in Economics from the University of Washington. He is
61 years old.
EXECUTIVE
COMPENSATION
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Name
& Position
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Year
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Salary
($)
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Bonus
($)
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Stock
Awards ($) (1)
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Option
Awards ($)
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Non-equity
incentive plan comp ($)
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Non-qualified
deferred comp earnings ($)
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All
other comp ($)
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Total
($)
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John
McKowen,
Former CEO & Chairman
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2016
(7,2)
|
192,164
|
—
|
—
|
—
|
—
|
—
|
12,361
|
204,525
|
|
|
2015
(3)
|
258,050
|
—
|
—
|
—
|
—
|
—
|
38,284
|
296,334
|
|
|
2014
(3)
|
281,400
|
—
|
245,000
|
—
|
—
|
—
|
38,284
|
557,684
|
|
Wayne
Harding,
CFO & Secretary
|
2016
(8,4)
|
131,379
|
—
|
33,093
|
—
|
—
|
—
|
6,050
|
170,522
|
|
|
2015
(5)
|
154,231
|
—
|
—
|
—
|
—
|
—
|
6,800
|
161,031
|
|
|
2014
(6)
|
136,200
|
—
|
81,667
|
—
|
—
|
—
|
4,800
|
222,667
|
|
|
(1)
|
Stock
award compensation is based on stock options or RSUs granted, vested and issued during the year. For payroll tax purposes,
and as reported here, valuation of the RSU grants that are vested is recorded through payroll at a 25% fair value discount
due to large blocks and limitations on selling. This is based on outside executive compensation consultant’s opinion.
For financial statement purposes, the full fair value of the grant is recorded, less expected forfeitures.
|
|
(2)
|
Other
Compensation is the payment of the health insurance benefit by the Company ($2,361) and office allowance ($10,000).
|
|
(3)
|
Other
Compensation is the payment of the health insurance benefit by the Company ($13,284) and office allowance ($25,000).
|
|
(4)
|
Other
Compensation is the payment of the health insurance benefit by the Company ($6,050).
|
|
(5)
|
Other
Compensation is office reimbursement ($10,000) and health insurance benefit ($6,800).
|
|
(6)
|
Other
Compensation is office reimbursement ($10,000) and health insurance benefit ($4,800).
|
|
(7)
|
Mr.
McKowen resigned in May 2016.
|
|
(8)
|
Mr.
Harding was named CEO in June 2016 and became Chairman in September 2016.
|
Grants
and Issuance of Plan-Based Awards for 2016
For
the year ended December 31, 2016, the Company issued 600,000 options for common shares to Wayne Harding, 200,000 with immediate
vesting, 400,000 with vesting in future years.
Outstanding
Equity Awards at Fiscal Year End
The
following table sets forth certain information as to unexercised restricted stock units held on December 31, 2016 by the named
executive officers.
|
|
|
Stock Awards
|
|
|
Name
|
|
Number of
Options that
have vested (#)
|
|
Market value of
Options that have
vested ($) (1)
|
|
|
Options that
have not vested
(#)
|
|
|
Market value of
stock options
that have not
vested ($) (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne Harding
|
|
200,000
|
|
$
|
80,000
|
|
|
|
400,000
|
|
|
$
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The closing price of our common stock on OTCQB on December
31, 2016 was $0.59
|
Option
Exercises and Stock Vested in 2016
Our
executive officer has no RSU holdings. In 2016 Mr. Harding was granted 600,000 stock options, 200,000 of which vested immediately
with the remainder vesting in future years.
Employment
and Change in Control Agreements
We
entered into an employment agreement with Wayne Harding effective as of January 1, 2011. This employment agreement renews automatically
for successive one-year terms until either party delivers notice of termination within 30 days of the expiration of the then-current
term.
Under
each agreement, annual base salary and other compensation is to be reviewed, and may be adjusted upward, no less frequently than
quarterly. Mr. Harding’s annual base salary has been $120,000 per year until November 2016, when his salary was increased
to $150,000 per year.
The
employment agreement provides that executive officer party thereto will be entitled, in the event his employment is terminated
during the term by us without cause (as defined) or by him for good reason (as defined), to (a) receive an amount in cash equal
to six months’ base salary at the highest base salary in effect during the twelve months prior to termination plus the amount
of the annual bonus, if any, paid to him for the preceding fiscal year, prorated to the termination date and (b) immediate vesting
of all non-vested stock options. The agreement provides for immediate vesting of all non-vested stock options in the event of
a change in control, which generally is defined to be a sale or other disposition to a person, entity or group of 50% or more
of our consolidated assets. The following table sets forth estimated compensation that would have been payable to our executive
officers upon termination of employment, assuming termination took place on December 31, 2016, whether in connection with a change
in control or otherwise. Mr. Harding held unvested options as of December 31, 2016, and therefore would have been entitled to
additional compensation had a change in control occurred as of December 31, 2016.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
|
Name
|
|
Acceleration of Compensation Upon Termination
|
|
|
Wayne Harding
|
|
$
|
75,000
|
|
Long-Term
Compensation Plans and Stock Options
The
Board of Directors has adopted a Management Incentive Plan that contemplates the issuance of stock-based compensation as well
as cash bonuses to certain executive officers and key employees. The incentive plan is administered by the Board’s Nominating,
Compensation and Corporate Governance Committee under guidance from the Board. The Management Incentive Plan authorizes our chief
executive officer to approve grants of equity incentive awards to employees, except that grants to our chief executive officer
or chief financial officer must be approved by the Board or the Nominating, Compensation and Corporate Governance Committee. It
is contemplated that cash bonuses, restricted stock units and options will be granted following the successful closing of an equity
or debt funding or an acquisition. The amount of the grants will be based on the value of the transaction, and participants will
be designated by the Board or Nominating, Compensation and Corporate Governance Committee upon recommendation by our chief executive
officer.
On
May 6, 2005, the Board adopted our 2005 Stock Option Plan, or 2005 Plan, pursuant to which the Board may grant to key employees,
directors and consultants options to purchase up to 5,000,000 shares of common stock. During 2011, the Board authorized the issuance
of 800,000 shares from the 2005 Plan as compensation for future debt and capital efforts by consultants. In 2011 and 2012, 600,000
shares were issued under the 2005 Plan, leaving 200,000 shares available to be issued. No options were issued under the 2005 Plan
in 2016. As of December 31, 2016, options to purchase an aggregate of 1,989,867 shares of common stock at an exercise price of
$1.25 per share were outstanding under the 2005 Plan.
On
August 26, 2011, the Board adopted our 2011 Long-Term Stock Plan, or 2011 Plan, which was approved by our shareholders on November
7, 2011. The 2011 Plan allows the Board to grant stock incentives to executives and permits our chief executive officer to grant
stock incentives to non-executive employees, vendors and consultants for up to a combined total of 10,000,000 shares of common
stock. The per-share exercise price of common stock options granted under the 2011 Plan may not be less than the fair market value
of a share of common stock on the date of grant as determined by the Board. Stock options must expire no later than the tenth
anniversary of the date of grant and may be subject to vesting or other requirements established by the Board. In the event of
a corporate transaction involving our Company (including any stock dividend, stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the Board may adjust outstanding
awards to preserve the benefits or potential benefits of the awards. As of December 31, 2016, options to purchase an aggregate
of 1,835,000 shares at $1.05 per share and restricted stock units representing 4,173,448 shares of common stock were outstanding
under the 2011 Plan.
Employment
Agreements
We
entered into an employment agreement with Wayne Harding, who then served as our Controller and now serves as our Chief Executive
Officer, on November 1, 2008 and amended that agreement on December 16, 2010. The initial one-year term of the contract renews
automatically for successive one-year terms unless and until either party delivers notice of termination within 30 days of the
expiration of the then-current term.
Our
employment agreement with Harding provide for accelerated stock vesting in the event of a change in control. Change in control
is defined generally as the sale or other disposition to a person, entity or group of 50% or more of our consolidated assets.
Board
of Directors
Biographical
Information
Samuel
Morris
has served as one of our directors since June 2017. Mr. Morris is the principal of Morris Law Associates which he formed
in 2006 after serving as general counsel to several companies. Through Morris Law, he has provided counsel on a variety of legal
matters, such as acquisitions, management buyouts, restructurings and personnel matters. From 2006 until 2010, he also was General
Counsel for Gichner Shelter Systems, Inc. Prior to Morris Law Associates, Mr. Morris was General Counsel of Wire One Communications,
Inc. (formerly V-SPAN), a full-service video conferencing company, as well as to a number of smaller companies, handling customer
and vendor contracts, employment matters, acquisitions and litigation from 2002 to 2005. In 2000-2001, he was Senior Vice President,
General Counsel and Secretary of Digital Access, LLC, a telecommunications broadband start-up. From 1993 to 2000, Mr. Morris was
Vice President/General Counsel/Secretary for Lenfest Communications, Inc., a public diversified cable television and entertainment
company. From 1985 to 1993, Mr. Morris was a Senior Partner of Hoyle, Morris & Kerr, a law firm that he co-founded. Prior
to that Mr. Morris was in private practice, primarily as a partner in the law firm of Dilworth, Paxson, Kalish and Kaufman. Mr.
Morris received his B.A. degree,
cum laude
, from Harvard College and his J.D. degree from the National Law Center of the
George Washington University in Washington, D.C. Mr. Morris is 74 years old.
Mike
Harnish
has served as one of our directors since July 2017. Officially retired, Mr. Harnish continues to serve as technology
consultant to the Examination Review Board responsible for the administration and content of the CPA exam since 1999. He is also
currently serving on the Board of Directors of Alliance Sports Group where he is chairman of the compensation committee as well
as a member of the audit and special committees. Mr. Harnish previously served on the Board of Directors of DeltaHawk Engines
where he was chairman of the audit committee. Prior to retirement, Mr. Harnish held the offices of COO/CIO of EthicsPoint, Inc.,
Fios, Inc., CPA2BIZ, and the law firm of Dickinson Wright PLLC. He has also served as President and CEO of Technology Consulting
Partners LLC and was a former Associate, Technology Consulting Solutions at Plante& Moran. Mr. Harnish is a former Partner
of Crowe, Chizek and Company CPAs (now Crowe Horwath LLP). Additionally, Mr. Harnish previously held the office of Director of
Consulting Services, Lotus Development Corp. and has been a member of Various AICPA Committees including the Computerization Implementation
Committee (CIC) and the first Chairman of the Information Technology Executive Committee and Membership Division. Mr. Harnish
is a former member of the Illinois CPA Society Board of Directors and recipient of the AICPA Innovative User of Technology and
the AICPA Sustained Contribution Awards. Mr. Harnish received his B.S. in Industrial Management with a Computer Science Technical
Option from Purdue University and has received the certifications of: Certified Public Accountant (CPA); Certified Information
Technology Professional (CITP); Certified in Financial Forensics (CFF); Certified Information Systems Auditor (CISA); EnCase Certified
Examiner (EnCE); and the Certificate in Data Processing (CDP). Mr. Harnish is 66 years old.
T.
Keith Wiggins
is one of the early investors in Two Rivers and was elected to our Board of Directors at our prior annual meeting
held on September 30, 2016. He resides in southern Colorado and operates a large cattle ranch. In 1995, Mr. Wiggins retired from
Union Texas Petroleum Holdings, a Fortune 500 company, as vice president of human resources and environmental services. Prior
to his tenure at Union Texas, Mr. Wiggins was employed by Allied Chemical Corporation and held positions with increasing management
responsibility in manufacturing, engineering, human resources and labor relations. Mr. Wiggins has board experience with Lake
Forrest Utility district and various community entities. On February 2, 2006, Colorado governor, Bill Owens, appointed Mr. Wiggins
to the 3
rd
Judicial Nominating Commission of the State of Colorado Supreme Court. Mr. Wiggins received his B.S. degree
from Auburn University and his Master of Agriculture from Colorado State University, Fort Collins. He is a veteran of the U.S.
Army and the National Guard. Mr. Wiggins is 75 years old.
James
D. Cochran
was elected to our Board of Directors at our prior annual meeting held on September 30, 2016. He is founder and
Managing Principal of Aspen Capital Partners, LLC, a privately held real estate investment, development, and asset management
organization that focuses on all major real estate asset classes across the investment risk spectrum. Mr. Cochran has over 32
years of leadership, investments, operations, and capital markets experience with real estate firms in both the public and private
sectors. He has had hands on operations, leasing, acquisitions, and development roles with local, national, and international
responsibilities and has also been instrumental in successfully completing two IPO’s and raising private equity from national
and foreign investors. He has served as President and Chief Investment Officer for DCT Industrial Trust (NYSE: DCT), Board Member
and member of the Executive Committee of Macquarie ProLogis Trust, an Australian Listed Property Trust (ASX:MPR), and Senior Vice
President and member of the Investment Committee for ProLogis Trust (NYSE:PLD). Before joining ProLogis, Mr. Cochran worked at
TCW Realty Advisors and Economics Research Associates. He is the former Chairman of the Board of the Denver Street School, a non-profit
high school in Denver. Mr. Cochran has a B.A. degree from the University of California, Davis and an MBA from the Anderson School
at UCLA. Mr. Cochran is 56 years old.
Christopher
Bragg
was elected to our Board of Directors at our prior annual meeting held on September 30, 2016. He has nearly fifteen
years of experience in the financial industry. After spending the first two years of his career in the private banking business,
Mr. Bragg joined Western Asset Management as a Portfolio Controller. He quickly transitioned over to the mutual fund operations
group, where he supported the rollout and growth of the newly formed Legg Mason and Western Asset managed mutual funds; the company
had over $400 billion in assets under management at the time. In 2007, Mr. Bragg transitioned over to the public equities side
of the business and joined Camden Asset Management as a Controller and Trade Support Specialist. He worked directly with the trading
desk in the development and support of their Convertible Arbitrage strategic side of the business. During his 5+ years with the
company, Mr. Bragg played a crucial role in a restructure of the operational/back office division, the buildout of a proprietary
in-house trading system, and assisted in the maintenance of the ever-changing compliance requirements for the $2 billion under
management. He then spent just over a year with Empire Capital Management; a technology focused hedge fund with $800 million under
management across several funds. In his time as a trading specialist and west coast operations manager, he assisted in the growth
of the newly built west coast office and implemented a multi-faceted trading platform that allowed traders on both coasts to input,
execute and allocate orders across the several fund accounts. In mid-2014, Mr. Bragg left Empire Capital Management to join the
McGrain Financial group as a partner in the overseeing of over $70 million in assets under management. He assists in the management
of the day to day activities of the investment portfolio, and is active in the local Pasadena community as well. Mr. Bragg is
33 years old.
Board
Committees
The
Board of Directors has established an Audit Committee, Nominating and Governance, and a Compensation Committee.
Audit
Committee
The
current members of the Audit Committee are Michael Harnish, Samuel Morris and Christopher Bragg. Mr. Harnish chairs the Audit
Committee. The Board of Directors has determined that Mr. Harnish is an “audit committee financial expert” as defined
in applicable SEC rules. The primary functions of the Audit Committee are:
|
|
●
|
overseeing
management’s establishment and maintenance of processes to provide for the reliability
and integrity of our accounting policies, financial statements, and financial reporting
and disclosure practices;
|
|
|
●
|
overseeing
management’s establishment and maintenance of processes to provide for an adequate
system of internal control over our financial reporting and management’s policies
and guidelines for the assessment and management of risk, and overseeing our compliance
with laws and regulations relating to financial reporting and internal control over financial
reporting;
|
|
|
●
|
overseeing
management’s establishment and maintenance of processes to provide for compliance
with our financial policies;
|
|
|
●
|
retaining
our independent registered public accounting firm and overseeing the firm’s independence,
qualifications and performance; and
|
|
|
●
|
preparing
the report required by the rules of the Securities and Exchange Commission to be included
in annual proxy statements.
|
Nominating
and Corporate Governance Committee (NCG)
The
current members of the Nominating and Corporate Governance Committee, or the NCG Committee, are Samuel Morris and Keith Wiggins.
Mr. Morris chairs the NCG Committee. The primary functions of the NCG Committee are:
|
|
●
|
identifying
and recommending to the Board of Directors for election or appointment qualified candidates
for membership on the Board and the committees of the Board;
|
|
|
●
|
reviewing
director candidates proposed by shareholders;
|
|
|
●
|
developing
and recommending to the Board corporate governance principles and monitor compliance
with all such principles;
|
|
|
●
|
proposing
a slate of candidates for election as directors at each annual meeting; and
|
|
|
●
|
developing
and monitoring succession plans for members of the Board, the members of the committees
of the Board, and the Chairs of those committees.
|
In
identifying and evaluating individuals qualified to become Board members, the NCG Committee considers such factors as the members
deem appropriate to assist in developing a board of directors and committees thereof that are diverse in nature and comprised
of experienced and seasoned advisors. The NCG Committee has not adopted a formal policy with regard to the consideration of diversity
when evaluating candidates for election to the Board. However, the NCG Committee believes that membership should reflect diversity
in its broadest sense, but should not be chosen nor excluded based on race, color, gender, national origin or sexual orientation.
In this context, the NCG Committee and the Board consider a candidate’s experience, education, industry knowledge and, history
with Two Rivers, and differences of viewpoint when evaluating the candidate’s qualifications for election to the Board.
In evaluating such candidates, the NCG Committee seeks to achieve a balance of knowledge, experience and capability in its composition.
In connection with this evaluation, the Board determines whether to interview the prospective nominee, and if warranted, one or
more directors interview prospective nominees in person or by telephone.
Compensation
Committee
The
current members of the Compensation Committee are Samuel Morris, Michael Harnish, and James Cochran. Mr. Morris chairs the Compensation
Committee. The primary functions of the Compensation Committee are:
|
|
●
|
discharge
the board’s responsibilities relating to the compensation of our executives, including
annual review and evaluation of management’s performance and compensation.
|
|
|
●
|
provide
general oversight and risk management of our compensation structure including equity
compensation and benefits programs
|
The
CG Committee approves employment agreements and bonuses paid to our executives. There is no set schedule for the payment of bonuses.
Bonuses are considered when certain benchmarks are reach. The benchmarks can include such activities as a successful capital or
debt raise, operational performance, and acquisitions of significant assets or agreements that are accretive to our business.
Both the benchmarks and the amount and type of bonus are determined by the Board with input from the CG Committee.
Summary
of Committee Service
The
following is a table showing board members involvement in each committee:
|
Name
|
Audit
|
Compensation
|
Nominating/Governance
|
|
Wayne
Harding
|
—
|
—
|
—
|
|
Samuel
Morris
|
M
|
C
|
C
|
|
Michael
Harnish
|
C
|
M
|
—
|
|
James
Cochran
|
—
|
M
|
—
|
|
T.
Keith Wiggins
|
—
|
—
|
M
|
|
Christopher
Bragg
|
M
|
—
|
—
|
M
= Member C = Chair
Audit
Committee Report
The
audit committee has reviewed and discussed the audited consolidated financial statements of the Parent Company and its subsidiaries
for fiscal 2016, and has discussed these financial statements with the Parent Company’s management and independent registered
public accounting firm for fiscal 2016, Eide Bailly LLP.
The
audit committee has also received from, and discussed with, Eide Bailly LLP various communications that the independent registered
public accounting firm is required to provide to the audit committee, including the matters required to be discussed by Statement
on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380) as adopted by the Public Company
Accounting Oversight Board in Rule 3200T.
Eide
Bailly LLP also provided the audit committee with the written communications required under regulations of the Public Company
Accounting Oversight Board, including communications regarding the independence of the registered public accounting firm. The
audit committee has discussed with Eide Bailly LLP its independence from the Parent Company. The audit committee also considered
whether the provision of other, non-audit related services referred to under the heading “Independent Registered Public
Accounting Firm Fees and Other Matters” is compatible with maintaining the independence of the registered public accounting
firm.
Based
on its discussions with management and the independent registered public accounting firm, and its review of the representations
and information provided by management and Eide Bailly LLP, the audit committee recommended to the board of directors that the
audited consolidated financial statements be included in the Parent Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2016.
|
|
AUDIT
COMMITTEE
|
|
|
|
|
|
Michael
Harnish
|
|
|
Christopher
Bragg
|
|
|
Samuel
Morris
|
DIRECTOR
COMPENSATION
The
following table sets forth information concerning compensation paid to our outside directors for services during 2016:
|
Name
|
|
Fees earned or paid in cash
|
|
|
Stock
award
|
|
|
Total
|
|
|
John Stroh (former director)
|
|
|
—
|
|
|
$
|
8,303
|
|
|
$
|
8,303
|
|
|
Dennis Channer (former director)
|
|
|
—
|
|
|
$
|
11,071
|
|
|
$
|
11,071
|
|
|
Gregg Campbell (former director)
|
|
|
—
|
|
|
$
|
7,300
|
|
|
$
|
7,300
|
|
|
Rockey Wells (former director)
|
|
|
—
|
|
|
$
|
4,907
|
|
|
$
|
4,907
|
|
|
Samuel Morris
|
|
$
|
5,000
|
|
|
$
|
6,227
|
|
|
$
|
11,227
|
|
|
Michael Harnish
|
|
$
|
5,000
|
|
|
$
|
1,954
|
|
|
$
|
6,954
|
|
|
James Cochran
|
|
$
|
5,000
|
|
|
|
—
|
|
|
$
|
5,000
|
|
|
T. Keith Wiggins
|
|
$
|
5,000
|
|
|
|
—
|
|
|
$
|
5,000
|
|
|
Christopher Bragg
|
|
$
|
5,000
|
|
|
|
—
|
|
|
$
|
5,000
|
|
Since
September 30, 2016, each outside director receives $1,000 for each meeting attended in person. Directors are also paid $4,000
per calendar quarter. For each year of service, an outside director receives 100,000 options for shares of Common Stock. Director
stock option shares vest equally over eight quarters. The chair of the audit committee receives an additional 10,000 stock options
per year. The chair of the compensation committee receives an additional 5,000 stock options per year. Committee chair options
vest half immediately, half in six months.
In
2016, we expensed RSU stock compensation for the following shares of Common Stock: Dennis Channer, 20,000 shares; Gregg Campbell,
10,000 shares; John Stroh, 15,000 shares; Rockey Wells, 8,333 shares; Samuel Morris 7,500 shares; Michael Harnish 7,500 shares.
In
2016, we expensed stock option compensation for the following shares of Common Stock: Samuel Morris 150,000 shares; Michael Harnish
150,000 shares; James Cochran 100,000 shares; T. Keith Wiggins 100,000 shares; Christopher Bragg 100,000 shares. These shares
vest over two years and are expensed over that period.
CORPORATE
GOVERNANCE
Director
Nomination Process
For
a discussion of our process for nominating directors, please see “Board of Directors—Board Committees—Nominating
and Corporate Governance Committee.”
Communicating
with Independent Directors
The
Board of Directors will give appropriate attention to written communications that are submitted by shareholders and will respond
if and as appropriate. Our Chairman of the Board is primarily responsible for monitoring communications from shareholders and
for providing copies or summaries of those communications to the other directors as he considers appropriate.
Communications
are forwarded to all directors if the communications relate to important substantive matters and include suggestions or comments
that the Chairman of the Board considers to be important for the directors to know. In general, communications relating to corporate
governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business
affairs, personal grievances, and matters as to which we tend to receive repetitive or duplicative communications.
Shareholders
who wish to send communications on any topic to the Board should address such communications to the Board in care of our Secretary
at Two Rivers Water and Farming Company, 3025 South Parker Rd. Suite 140, Aurora, Colorado 80014.
Code
of Ethics
We
have adopted a written Code of Conduct that applies to our directors, officers and salaried employees, including our principal
executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.
Conflicts
of Interest
Our
officers and directors are, or may become, in their individual capacities, officers, directors, controlling shareholder or partners
of other entities engaged in a variety of businesses. Thus, there exists potential conflicts of interest including time, efforts
and corporate opportunity, involved in participation with such other business entities. While each officer and director of our
business is engaged in business activities outside of our business, they devote to our business such time as they believe to be
necessary.
Presently
no requirement is contained in our Articles of Incorporation, Bylaws, or minutes that requires our officers and directors to disclose
to us business opportunities that come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty
to us to disclose to us any business opportunities that come to their attention, in their capacity as an officer, director or
otherwise. Excluded from this duty would be opportunities that the person learns about through his involvement as an officer and
director of another company.
Compensation
Committee Interlocks and Insider Participation
Since
January 1, 2013, none of our executive officers has served as a member of the Compensation Committee of the board of directors
of any other entity. One or more of our executive officers has served as a member of another entity’s Board of Directors
Audit Committee, Nominating and Corporate Governance Committee.
LIMITATION
OF LIABILITY AND INDEMNIFICATION
Indemnification
of Directors and Officers
As
permitted by the Colorado Corporation Act, the personal liability of directors for monetary damages for breach or alleged breach
of their duty of care is limited. In addition, as permitted by the Colorado Corporation Act, our Bylaws provide generally that
we shall indemnify our directors and officers to the fullest extent permitted by Colorado law, including those circumstances in
which indemnification would otherwise be discretionary.
We
have agreed to indemnify each of our directors and officers to provide the maximum indemnity allowed to directors and executive
officers by the Colorado Corporation Act and our Bylaws, as well as certain additional procedural protections. In addition, the
indemnification agreements provide generally that we will advance expenses incurred by directors and officers in any action or
proceeding as to which they may be indemnified.
The
indemnification provision in our Bylaws, and the indemnification agreements we have entered into with our directors and
officers, may be sufficiently broad to permit indemnification of the officers and directors for liabilities arising under the
Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our
directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
We
maintain director and officer insurance providing for indemnification of our directors and officers for certain liabilities, including
certain liabilities under the Securities Act. We also maintain a general liability insurance policy that covers certain liabilities
of directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.
There
is no pending litigation or proceeding involving any of our directors or officers to which indemnification is required or permitted,
and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
RELATED-PARTY
TRANSACTIONS
The
following discussion relates to certain transactions that involve both our company and one of our executive officers, directors
or five-percent shareholders, each of whom we refer to as a “related party.” For purposes of this discussion, a “related-party
transaction” is a transaction, arrangement or relationship in which we participate and in which a related party has a direct
or indirect material interest.
Since
January 1, 2016 there have been the following related-party transactions, except for the compensation arrangements described under
“Executive Compensation” and “Director Compensation”:
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Short-term
loan to the Company of $5,000.
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Short-term
loan to the Company of $25,000.
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Samuel
Morris $5,000 short-term loan to the Company.
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Michael
Harnish invested $35,000 in the GrowCo $6M Exchange Note prior to becoming a board member.
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Thomas
Prasil greater than five percent shareholder had the following transactions with the
Company:
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Invested
$400,000 in the GrowCo $6M Exchange Note.
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The
following is a list of all related party transactions with John McKowen, former CEO of Two Rivers, during the year ended December
31, 2016:
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Advance
of $33,599 for expenses incurred for greenhouse supplies. Recorded as a related party
receivable on balance sheet.
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In
August 2016 TR Capital Partners, LLC’s subsidiary GCP1 signed a lease agreement
for greenhouse 1 with Johnny Cannaseed, a company formed and operated by John McKowen.
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In
August 2016, the Company’s subsidiary GCP2 signed a lease agreement for greenhouse
2 with Johnny Cannaseed.
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Revenue
recorded of $178,609 for greenhouse lease. Recorded as a related party receivable on
balance sheet.
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In
July 2016 the Company’s subsidiary GrowCo signed a series of agreements with McGrow,
LLC, a Colorado limited liability company that is headed and partially owned by John
McKowen. The agreements included a Master Agreement, and Advisory Services agreement,
a Construction Services agreement, a Financing Services agreement, a Non-Compete and
Exclusivity agreement, and a Stock Purchase Agreement. Collectively these are known as
the “McGrow Agreements”. As a result of these agreements GrowCo paid McGrow
for services provided primarily for the construction of greenhouses and fees associated
with the raising of capital.
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Advance
of $8,295 for services rendered.
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Advance
of $5,000 for services rendered.
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Expense
payment of $374,526 for services rendered.
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Fees
paid of $107,250 for financing services.
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Advance
of $12,548 for services rendered.
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The
Company entered into a subleasing agreement whereby McGrow will pay $47,000 per year
for office space leased by the Company.
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Interest
expense of $85,630 on investment into GCP Super Units.
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Payment
of office space of $29,458 while CEO of Two Rivers.
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Equity
investment of $496,000 in GCP Super Units.
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Equity
compensation in the form of GrowCo common shares valued at $10,000 for services provided.
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Fees
of $71,864 for GrowCo capital raised.
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The
following is a list of all related party transactions during the quarter ended March 31, 2017
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Wayne
Harding, Company CEO provided a short term loan to the Company of $25,000. The loan is
secured by land assets of the Company and carries an interest rate of 12%.
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Advances
totaling $34,400 resulting in a cumulative total of $72,999 for greenhouse expenses to
Johnny Cannaseed, LLC which is majority owned by former Company CEO John McKowen.
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Accounts
Receivable to Johnny Cannaseed for the quarter ending 3/31/17 was $536K, with total outstanding
AR $839K.
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Advances
totaling $26,957 resulting in a cumulative total of $39,505 for greenhouse expense to
McGrow, LLC which is majority owned by former Company CEO John McKowen.
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Payments
totaling $178,733 to MCG Services, LLC which is majority owned by former Company CEO
John McKowen for costs associated with a services agreement with GrowCo.
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Advances
to MCG Services, LLC total $8,294
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Advance
of $5,000 to McGrow, LLC for services rendered.
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Payments
totaling $11,210 to John McKowen for interest expense on a loan held by Mr. McKowen to
GrowCo.
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Existing
investors, including the Thomas Prasil Trust who is a greater than 5% investor, have
invested approximately $9.5 M in GrowCo securities.
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The
Chief Executive Officer of Two Rivers serve as the only members of the Sunset Metropolitan
District (Sunset). Sunset is a quasi-governmental agency operating under Title 32 of
the State of Colorado Constitution. As of March 31, 2017, the Company had advanced $80,000
to Sunset.
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STOCK
OWNERSHIP
Directors,
Officers and Principal Shareholders
The
following table sets forth information regarding the beneficial ownership of Common Stock as of March 21, 2017, by:
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each
person, or group of affiliated persons, who is known by us to own beneficially more than
five percent of the outstanding shares of Common Stock;
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each
of our directors and executive officers; and
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all
of our current directors and executive officers as a group.
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The
following table lists the percentage of shares beneficially owned based on 31,455,709 shares of Common Stock outstanding as of
March 21, 2017, which include shares of Common Stock issuable upon the exercise of options, or upon the vesting of RSUs, by May
21, 2017 (60 days after March 21, 2017). Except as otherwise indicated, all of the shares reflected in the table are Common Stock
and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject
to applicable community property laws.
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Shares Beneficially Owned
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Name of Beneficial Owner
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Number
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Percentage
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Wayne Harding (1)
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708,089
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2.3
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%
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Samuel Morris
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264,649
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0.8
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%
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Michael Harnish
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7,500
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0.0
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%
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James Cochran
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265,715
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0.8
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%
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T. Keith Wiggins
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288,616
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0.9
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%
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Christopher Bragg
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—
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0.0
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%
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All directors and
executive officers
as a group (6 persons)
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1,534,569
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4.9
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%
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(1)
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Includes 6,666 shares owned by an individual retirement account for the benefit of Mr. Harding’s spouse.
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For
purposes of the table above, the address of each of our directors and executive officers is in care of Two Rivers Water &
Farming Company, 3025 S Parker Rd, Suite 140, Aurora CO. 80014.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our
equity securities, to file reports of ownership and changes in ownership with the SEC. Officers and directors are required by
SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based on our review of copies of such reports received,
and representations from certain reporting persons, we believe that, during the fiscal year ended December 31, 2016, all of the
Section 16(a) filing requirements applicable to our officers and directors were filed in compliance with all applicable requirements.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FEES
Eide
Bailly LLP is the current principal audit accounting firm and has performed the audit beginning with the year ended December 31,
2011. The board of directors has considered whether the provisions of audit services are compatible with maintaining Eide Bailly
LLP’s independence and concluded that Eide Bailly LLP is independent. Further, the audit committee held a pre-audit conference
with Eide Bailly LLP and pre-approved the audit planned process and procedures. The audit committee has approved all of Eide Bailly
LLP’s fees.
The
following table represents aggregate fees billed to us by Eide Bailly LLP during 2016 and 2014.
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Year Ended
December 31,
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2016
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2015
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Audit Fees
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$
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103,348
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$
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77,698
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All
audit and non-audit services provided by Eide Bailly, LLP are pre-approved by the Audit Committee on a case-by-case basis, which
considers whether the provision of non-audit services is compatible with maintaining the independent registered public accounting
firm’s independence.
*
* *
A
COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016, AS FILED WITH THE SEC, IS INCLUDED IN OUR
2016 ANNUAL REPORT TO SHAREHOLDERS, WHICH MAY BE ACCESSED OVER THE INTERNET AS SET FORTH IN THE NOTICE OF INTERNET AVAILABILITY
OF PROXY MATERIALS SENT TO OUR COMMON SHAREHOLDERS OF RECORD AS OF JULY 7, 2017. YOU MAY VIEW AND ALSO DOWNLOAD OUR 2016 ANNUAL
REPORT TO SHAREHOLDERS AT
www.proxyvote.com.
A SHAREHOLDER MAY SUBMIT A WRITTEN REQUEST FOR A COPY OF OUR ANNUAL REPORT
ON FORM 10-K FOR 2016 TO OUR SECRETARY AT 3025 SOUTH PARKER RD. SUITE 140, AURORA, COLORADO 80014.
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Broadridge
Corporate Issuer Solutions
C/O Two Rivers Water & Farming Company
PO Box 1342
Brentwood, NY 11717
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VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions
to obtain your records and to create an electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
If you
would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP
THIS PORTION FOR YOUR RECORDS
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY
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For
All
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Withhold
All
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For All
Except
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To withhold
authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on
the line below.
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The
Board of Directors recommends you vote FOR the following:
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☐
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☐
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1.
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Election of Directors
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Nominees
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01
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Michael
W. Harnish
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02 Wayne
E. Harding III
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03 Samuel Morris
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04 James Cochran
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05 T. Keith Wiggins
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06
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Christopher Bragg
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The
Board of Directors recommends you vote FOR proposals 2, 3 and 4.
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For
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Against
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Abstain
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2.
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To
ratify the appointment of our independent registered public accounting firm.
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☐
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3.
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To
increase the number of authorized shares from 100 million to 200 million.
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☐
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☐
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4.
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To approve, by non-binding vote, the advisory resolution on executive compensation.
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☐
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☐
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NOTE:
Such other business as may properly
come before the meeting or any adjournment thereof.
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Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give
full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign
in full corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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0000341744_1 R1.0.1.15
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The
Notice & Proxy Statement, and Form 10-K is/ are available at
www.proxyvote.com
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TWO RIVERS WATER & FARMING COMPANY
Annual Meeting of Common Shareholders
September 7, 2017 2:30 PM MDT
This proxy is solicited by the Board of Directors
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The undersigned hereby appoints Wayne E. Harding III proxy, with
full power of substitution, for and in the name or names of the undersigned, to vote all shares of Common Stock of Two Rivers
Water & Farming Company held of record by the undersigned at the Annual Meeting of Common Shareholders to be held on September
7, 2017, at 2:30 PM MDT, at 3025 South Parker Rd, Suite 140 Aurora, CO 80014, and at any adjournment thereof, upon the matters
described in the accompanying Notice of Annual Meeting and Proxy Statement, receipt of which is hereby acknowledged, and upon
any other business that may properly come before, and matters incident to the conduct of, the meeting or any adjournment thereof.
Said person is directed to vote on the matters described in the Notice of Annual Meeting and Proxy Statement as follows, and
otherwise in their discretion upon such other business as may properly come before, and matters incident to the conduct of,
the meeting and any adjournment thereof.
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To elect six (6) directors to hold office until the next annual meeting of common shareholders
or until their respective successors have been elected and qualified, and “FOR” Proposals 2, 3 and 4.
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Continued and to be signed on reverse side
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0000341744_2 R1.0.1.15
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