Two Rivers Water & Farming Company -- Definitive 14A 2013 ProxyOUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | | Estimated Future Payments Under Equity Incentive Plan Awards | | | Grant Date Fair Value | |
| | | | | | | | | | | | | |
John R. McKowen | October 2010 | | | 1,480,948 | | | | 2,480,947 | | | | 2,480,947 | | | | 4,561,000 | |
Wayne E. Harding III | October 2010 | | | 166,667 | | | | 166,667 | | | | 166,667 | | | | 1,292,000 | |
Long-Term Compensation Plans and Stock Options
LONG-TERM COMPENSATION PLANS AND STOCK OPTIONS
The boardBoard of directorsDirectors 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 of the Company.employees. The incentive plan is administered by the Company's board of directorsBoard’s Nominating, Compensation and Corporate Governance Committee under guidance from the Company’sBoard. 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, RSUsrestricted stock units and options will be granted following the successful closing of an equity or debt funding and successful acquisitions by the Company.or an acquisition. The amount of the grants will be based on the value of the transaction, and participants arewill be designated by the Company's board of directorsBoard or Nominating, Compensation and Corporate Governance Committee upon recommendation by the Chief Executive Officer.our chief executive officer.
Stock Option Plan
On May 6, 2005, the Company's board of directorsBoard adopted the Two Riversour 2005 Stock Option Plan, (“or 2005 Plan”)Plan, pursuant to which the boardBoard may grant options to purchase a maximum of 5,000,000 shares of Two Rivers common stock to key employees, directors and consultants. As of December 31, 2012,consultants options to purchase an aggregate of 1,668,200up to 5,000,000 shares of common stock (1,643,200 from the 2005 Plan and 25,000 from the 2011 Plan) were issued and outstanding consisting of options to purchase 1,623,200 shares of common stock at an exercise price of $1.25 per share, options to purchase an aggregate of 20,000 shares of common stock at an exercise price of $3.00 per share, and from our 2011 Plan, options to purchase 25,000 shares at $1.05 per share.
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 and properly expensed,under the 2005 Plan, leaving 200,000 shares available to be issued.
For No options were issued under the issuance2005 Plan in 2013. As of December 31, 2013, options theto 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 of directors and willBoard. Stock options must expire no later than the tenth anniversary of the date of grant. The boardgrant and may establishbe subject to vesting or other requirements which must be met prior toestablished by the exercise of the stock options.Board. In the event of a corporate transaction involving Two Riversour company (including without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the boardBoard may adjust outstanding awards to preserve the benefits or potential benefits of the awards.
On August 26, 2011, the Company's board of directors adopted the Two Rivers 2011 Long-Term Stock Plan (the “2011 Plan”). This plan was adopted by the Company’s shareholders at the November 7, 2011 shareholder meeting. The 2011 Plan Pursuant allows the board During 2013, we cancelled 2,850,000 restricted stock units granted to grant stock incentives to the Company’s executives and for the Company’s CEO to grant stock incentives to non-executive employees and vendors/consultants for a combined maximum of 10,000,000 shares of Two Rivers’ common stock.in 2012. As of December 31, 2012, RSUs2013, options to purchase an aggregate of 25,000 shares at $1.05 per share and restricted stock units representing 6,134,2823,112,615 shares of common stock were issuedoutstanding under the 2011 Plan.
Employment Agreements
We entered into an employment agreement with John McKowen, our Chief Executive Officer, on September 9, 2004 and outstanding.amended that agreement on June 15, 2005 and December 16, 2010. The initial two-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. Effective January 1, 2013, Mr. McKowen’s base salary, which had been decreased effective January 1, 2011 to $180,000 per year, was increased to $250,000 per year.
We entered into an employment agreement with Wayne Harding, who then served as our Controller and now serves as our Chief Financial Officer, on November 1, 2008 an 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. Effective January 1, 2013, Mr. Harding’s base salary was increased to $125,000.
Our employment agreements with Messrs. McKowen and 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
Our current directors, all of whom have been nominated for re-election at the meeting, are as follows:
John R. McKowen has served as our Chief Executive Officer and Chairman of the Board since our company was founded in December 2002. Mr. McKowen served in a number of capacities at Navidec, Inc. (now BPZ Resources, Inc.), including as a director from 2002 to 2005, as president and chief executive officer from 2003 to 2004, and as a financial consultant involved in private, public and secondary financings from 1996 to 1999. Mr. McKowen began his career in the financial services industry in 1978 and worked as an independent consultant from 1984 to 2007. Mr. McKowen received a B.A. in economics from Metropolitan State College. He is 64 years old.
John Stroh II has served as one of our directors since September 2010. Mr. Stroh is the owner/managing broker of Southern Colorado Land and Livestock Company, a real estate management, appraisal, consulting, and brokerage firm. He has been a real estate broker since receiving his real estate broker license in the State of Colorado in 1976. In 1991, he passed the State of Colorado Certified Appraiser exam. Mr. Stroh is secretary of the Lower Cucharas Water Users Association, secretary of the Holita Ditch and Reservoir Companies, secretary of the Walsenburg Ditch Company, and chairperson of the Sangre de Cristo Habitat Partnership Program Committee. Mr. Stroh received his B.S. in Business Administration from Colorado State University, and he teaches real estate courses, including water law, broker and mandatory fair housing courses, at Trinidad State Junior College.
Dennis Channer has served as one of our directors since October 2010. Mr. Channer has 36 years of financial and investment management experience. Since 2001 Mr. Channer has been a principal at Cornerstone Investment Advisors LLC, a financial planning, portfolio and trust management firm. He served on the board of directors of AeroGrow International, Inc., a publicly traded provider of advanced indoor garden systems, in 2007 and 2008. In 1999 and 2000, he served as a senior consultant and vice president of Portfolio Management Consultants, Inc., a provider of wealth management services. From 1996 to 1999, Mr. Channer was the co-founder of Investors Independent Trust Company and served in various capacities, including managing director and chairman of the board. His background also includes experience as a Certified Financial Planner, Registered Investment Advisor, Certified Public Accountant and Controller, and he holds Certified Financial Planner, Accredited Estate Planner and Certified Public Accountant licenses in Colorado. He received his B.S. from Metropolitan State College.
Gregg Campbell has served as one of our directors since July, 2011. Mr. Campbell began his career in water with the Denver Board of Water Commissioners in 1974. Over a span of fourteen years with Denver Water, he served in various engineering capacities, was chief planner for the Denver water system, and oversaw the management of Denver’s multi-billion dollar water portfolio as chief of water rights acquisition, protection and development. In 1988 Mr. Campbell founded Kiowa Resources, Inc., a water investment and development venture. As president and chief executive officer of Kiowa, he directed the acquisition of senior South Platte River water rights and assets and the development of an innovative municipal water supply project concept that has been widely copied. In 1995, Mr. Campbell founded HydroSource, LLC to provide consulting and water rights brokerage services to buyers and sellers of water, water rights, and water storage reservoirs in both the public and private sectors of the Colorado Front Range. HydroSource specializes in assembling large blocks of water, water rights, and water storage for municipal and commercial customers, but provides equal attention to the needs of individual clients. Mr. Campbell has testified on multiple occasions as an expert on water rights, and water rights and water storage valuation, in Colorado water court and condemnation proceedings. Mr. Campbell brings to the Board of Directors an in-depth knowledge of water and water rights.
Gus J. Blass III has served as one of our directors since February 2014. Since 1981 Mr. Blass has been a general partner for Capital Properties LLC, an Arkansas partnership that owns and manages over 1,000,000 square feet of warehouse space in Little Rock and invests in public and private companies. From 1984 to 2013, Mr. Blass was a principal at Falcon Securities, Inc., a FINRA-registered broker-dealer. Mr. Blass brings a wealth of board experience to Two Rivers. Currently he serves on the boards of: BancorpSouth, Inc., an NYSE-listed financial holding company; First Federal Bancshares of Arkansas, Inc., a NASDAQ-listed bank holding company; Heatwurx, Inc., a NASDAQ-listed developer of alternative methods of pavement repair; Berkley Partners, a hotel management company; Cajuns Wharf Corporation, a restaurant operator; and U.S. Bentonite, Inc., a mining company. He is also active on not-for-profit boards and civic activities. Mr. Blass served on the Arkansas Governor’s staff for the prior governor, David Pryor. Mr. Blass graduated from the University of Arkansas with a B.S. in Finance and Banking.
Board Committees
The Board of Directors has established an Audit Committee and a Nominating, Compensation and Corporate Governance.
Audit Committee
In 2010 the Company established a separate Audit Committee. The Chairmembers of the Audit Committee isare Gus Blass, Gregg Campbell and Dennis Channer. Mr. Channer chairs the Audit Committee. The Board of Directors has determined that Mr. Channer 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, Compensation and Corporate Governance Committee
The members of the Nominating, Compensation and Corporate Governance Committee, or the NCCG Committee, are Gus Blass, Gregg Campbell and Dennis Channer. Mr. Brad Walker areCampbell chairs the other board members serving onNCCG Committee. The primary functions of the Audit Committee.NCCG 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; |
● | discussing and setting compensation for officers; |
● | developing and recommending to the Board corporate governance principles and monitor compliance with all such principles; |
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
Compensation, Governance & Nominating● | 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. |
The NCCG 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 NCCG Committee.
In identifying and evaluating individuals qualified to become Board members, the NCCG 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 NCCG Committee has not adopted a formal policy with regard to the consideration of diversity when evaluating candidates for election to the Board. However, the NCCG 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 NCCG 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 NCCG 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.
Audit Committee Report
The Audit Committee has reviewed and discussed the audited consolidated financial statements of Two Rivers and its subsidiaries for the year ended December 31, 2013, and has discussed these financial statements with the management of Two Rivers and Eide Bailly LLP, the independent registered public accounting firm of Two Rivers for 2013.
The Audit Committee also has received from, and discussed with, Eide Bailly LLP the matters required to be discussed by the Auditing Standards Board Statement of Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has also received and reviewed the required written disclosures and a confirming letter from Eide Bailly LLP under applicable requirements of the Public Accounting Oversight Board regarding Eide Bailly LLP’s independence, and has discussed the matter with Eide Bailly LLP.
Based upon its review and discussions of the foregoing, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements for the year ended December 31, 2013 be included in the Annual Report on Form 10-K of Two Rivers for the year ended December 31, 2013.
| AUDIT COMMITTEE | |
| | | |
| | | |
| | Gus J. Blass III Gregg Campbell Dennis Channer | |
| | | |
| | | |
DIRECTOR COMPENSATION
The following table sets forth information concerning compensation paid to our non-employee directors for services as directors in 2013:
| | Fees Earned or Paid in Cash ($) | | | | | | | |
Gregg Campbell | | | 22,350 | | | | 41,000 | | | | 63,350 | |
Dennis Channer | | | 9,000 | | | | 41,000 | | | | 50,000 | |
John Stroh II | | | 9,000 | | | | 30,750 | | | | 39,750 | |
Bradley Walker(1) | | | 9,000 | | | | 30,750 | | | | 39,750 | |
| | | | | | | | | | | | |
________________________
(1) | Mr. Walker resigned from the Board of Directors in February 2014. |
(2) | Stock awards are granted the first calendar quarter following the calendar year of service. |
Since October 1, 2012, each non-employee director receives $2,000 per calendar quarter and $1,000 for each meeting in person. For the first year of service, a non-employee director receives 5,000 shares of common stock per calendar quarter. After a full year of service, a non-employee director receives 7,500 shares of common stock per calendar quarter. The Chairs of the Audit Committee and of the Nominating, Compensation and Corporate Governance Committee receive an additional 2,500 shares of common stock per calendar quarter.
In 2010 the Company established a separate Compensation, Governance & Nominating Committee. The Chairfirst quarter of this Committee is2014, we granted stock options for the following numbers of shares of common stock, at an average valuation of $1.03 per share: Gregg Campbell. Mr.Campbell, 40,000 shares; Dennis Channer, 40,000 shares; John Stroh, 30,000 shares; and Mr. Brad Walker, 30,000 shares.
CORPORATE GOVERNANCE
Director Nomination Process
For a discussion of our process for nominating directors, please see “Board of Directors—Board Committees—Nominating, Compensation 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 board members servingdirectors 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 this Committee.any topic to the Board should address such communications to the Board in care of our Secretary at Two Rivers Water and Farming Company, 2000 South Colorado Boulevard, Tower 1, Suite 3100, Denver, Colorado 80222.
Code of Ethics
The Company hasWe have adopted a written Code of Conduct for the Boardthat applies to our directors, officers and the salaried employees.employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.
CONFLICTS OF INTEREST - GENERAL13
Conflicts of Interest
Our directorsofficers and officersdirectors are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including among other things, time, efforts and corporationcorporate 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.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently no requirement is contained in our Articles of Incorporation, Bylaws, or minutes which requirethat requires our officers and directors of our business to disclose to us business opportunities whichthat 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 whichthat come to their attention, in their capacity as an officer, and/or director or otherwise. Excluded from this duty would be opportunities whichthat 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 either the board of directors or compensation committee of any entity, one or more of whose executive officers served as a member of either the Board of Directors or its Nominating, Compensation 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 intentionpending litigation or proceeding involving any of merging withour directors or acquiring an affiliate, associate personofficers to which indemnification is required or business opportunity from any affiliate or any clientpermitted, 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, director nominees or five percent shareholders, including their immediate family members, each of whom we refer to as a “related party.” For purposes of this discussion, a “related-party transaction” (as defined under Item 404 of Regulation S-K) is a transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships in which we participate (i) that involves an amount in excess of $120,000; and (ii) in which a related party has a direct or indirect material interest. The Board of Directors recognizes that related party transactions present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof) and therefore follows the procedures as described below to address such person.risks.
The Board is required to review all related party transactions. We are prohibited from entering or continuing a material related party transaction that has not been reviewed and approved or ratified by the Board. Additionally, in transactions where an executive officer is related to any of our goods or services provider, the Board must approve the transaction. In reviewing a related party transaction the Board considers all of the relevant factors surrounding the transaction including:
● | whether there is a valid business reason for us to enter into the related party transaction consistent with the best interests of Two Rivers and our shareholders; |
● | whether the transaction is negotiated on an arm’s-length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally; |
● | whether the Board determines that it has been duly apprised of all significant conflicts that may exist or may otherwise arise on account of the transaction, and it believes, nonetheless, that we are warranted in entering into the related party transaction and have developed an appropriate plan to manage the potential conflicts of interest; |
● | whether the rates or charges involved in the transaction are determined by competitive bids, or the transaction involves rates or charges fixed in conformity with law or governmental authority; and |
● | whether the interest of the related party or that of a member of the immediate family of the related party arises solely from the ownership of our class of equity securities and all holders of our equity securities received the same benefit on a pro-rata basis. |
STOCK OWNERSHIP
Directors, Officers and Principal Shareholders
The following table sets forth information regarding the beneficial ownership of common stock as of April 16, 2014 for (a) each person known to us to own beneficially 5% or more of the outstanding shares of common stock, (b) each of our directors and Named Executive Officers, and (c) all of our directors and executive officers as a group.
Beneficial ownership is calculated in accordance with the rules of the SEC, which generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include shares of common stock issuable upon the exercise of options, or upon the vesting of restricted stock units, by May 11, 2014 (60 days after April 16, 2014). 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.
Percentage ownership calculations are based on 24,879,549 shares outstanding as of April 16, 2014. Addresses of named beneficial owners are in care of Two Rivers Water and Farming Company, 2000 South Colorado Boulevard, Tower 1, Suite 3100, Denver, Colorado 80222.
| | Shares Beneficially Owned | |
Name of Beneficial Owner | | | | | | |
John R. McKowen (1) | | | 4,651,620 | | | | 17.0 | % |
Wayne E. Harding III (2) | | | 814,756 | | | | 3.3 | |
John Stroh II | | | 653,902 | | | | 2.6 | |
Dennis Channer | | | 50,000 | | | | * | |
Greg Campbell | | | 35,000 | | | | * | |
Gus Blass | | | — | | | | — | |
All directors and executive officers as a group (6 persons) | | | 6,205,278 | | | | 22.5 | |
| | | | | | | | |
(1) | Includes 2,480,948 shares subject to restricted stock units. |
(2) | Includes (a) 166,667 shares subject to restricted stock units and (b) 6,666 shares owned by an individual retirement account for the benefit of Mr. Harding’s spouse. |
Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our Officersofficers and Directors,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, directors and greater than 10% shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely 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, 2012,2013, some of the Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were not filed in compliance with all applicable requirements, except for Brad Walker who owns 47,500 shares of the Company’s common stock.requirements.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Colorado Corporation Act, the personal liability of its directors for monetary damages for breach or alleged breach of their duty of care is very limited. In addition, as permitted by the Colorado Corporation Act, the Bylaws of the Company provide generally that the Company shall indemnify its directors and officers to the fullest extent permitted by Colorado law, including those circumstances in which indemnification would otherwise be discretionary.
The Company has agreed to indemnify each of its directors and executive officers to provide the maximum indemnity allowed to directors and executive officers by the Colorado Corporation Act and the Bylaws, as well as certain additional procedural protections. In addition, the indemnification agreements provide generally that the Company will advance expenses incurred by directors and executive officers in any action or proceeding as to which they may be indemnified.
The indemnification provision in the Bylaws, and the indemnification agreements entered into between the Company and its directors and executive officers, may be sufficiently broad to permit indemnification of the officers and directors for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act").
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of outstanding shares of the Company's common stock as of December 31, 2012 on a fully diluted basis, by (a) each person known by the Company to own beneficially 5% or more of the outstanding shares of common stock, (b) the Company's directors, Chief Executive Officer and executive officers whose total compensation exceeded $100,000 for the last fiscal year, and (c) all directors and executive officers of the Company as a group.
Beneficial ownership of each person is shown as calculated in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, which includes all securities that the person, directly, or indirectly through an contract, arrangement, understanding, relationship or otherwise has or shares voting power which includes the power to vote or direct the voting of a security, or investment power, which includes the power to dispose, or direct the disposition of such security.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
Title of Class | Name & Address of Beneficial Owner | Amount & Nature of Beneficial Owner | % of Class (1) |
Common Shares | John McKowen (CEO & Chairman of the Board) (2), 2000 S Colorado Blvd, Ste 1-3100, Denver CO 80222 | 4,318,287 | 15.28% |
Common Shares | Wayne Harding (CFO & Secretary) (3), 2000 S Colorado Blvd, Ste 1-3100, Denver CO 80222 | 540,423 | 1.91% |
Common Shares | John Stroh II, (Board member) (5), 2000 S Colorado Blvd, Ste 1-3100, Denver CO 80222 | 950,357 | 3.36% |
Common Shares | Dennis Channer (Board member) (6), 2000 S Colorado Blvd, Ste 1-3100, Denver CO 80222 | 50,000 | 0.18% |
Common Shares | Brad Walker, (Board member) (7), 2000 S Colorado Blvd, Ste 1-3100, Denver CO 80222 | 47,500 | 0.17% |
Common Shares | Greg Campbell, (Board member) (8), 2000 S Colorado Blvd, Ste 1-3100, Denver CO 80222 | 35,000 | 0.12% |
Total for All Directors & Executive Officers as a Group | 5,941,567 | 21.02% |
(1) | Applicable percentage ownership is based on 26,251,834 shares of common stock issued and outstanding as of December 31, 2011. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of December 31, 2012 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. For the purpose of the Officers and Directors ownership computation, there are 24,028,202 common shares outstanding; 1,661,533 options, and 2,564,281 RSUs for a total dilution pool of 28,255,016 which is used as the denominator is the Percent of Class calculation. |
(2) | Mr. McKowen holds, directly, 2,170,672 shares of the Company’s common stock. He holds RSUs exercisable for 3,880,948 shares of the Company’s common stock, of which 2,147,615 are considered for the beneficial ownership calculation. |
(3) | Mr. Harding directly holds 373,756 shares of the Company’s common stock. He holds RSUs exercisable for 833,334, of which 166,667 shares are considered for the beneficial ownership calculation. |
(4) | Mr. Stroh directly holds 950,357 shares of the Company’s common stock, which all are used in this calculation. |
(5) | Mr. Channer directly owns 25,000 shares of the Company’s common stock. He is granted 25,000 shares of the Company in February 2013 for board service in 2012. |
(6) | Mr. Walker directly owns 25,000 shares of the Company’s common stock. He is granted 22,500 shares of the Company in February 2013 for board service in 2012. |
(7) | Mr. Campbell directly owns 10,000 shares of the Company’s common stock. He is granted 25,000 shares of the Company in February 2013 for board service in 2012. |
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
PROPOSAL 2. APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTSACCOUNTING FIRM FEES
Eide Bailly, LLP, Independent Public Accountants, of Denver, Colorado have been appointed asThe following table summarizes the Certifying Accountants for the period through fiscal year 2012 and shareholders are asked to ratify such appointment. Ratification of the appointmentfees of Eide Bailly, LLP, as the Company's independent public accountants for the fiscal year ending December 31, 2012 will require the affirmative vote of a majority of the shares of Common Stock represented in person or by proxy and entitled to vote at the Annual Meeting. In the event the stockholders do not ratify the appointment of Eide Bailly, LLP for the forthcoming fiscal year, such appointment will be reconsidered by the Board. Representatives of Eide Bailly, LLP are not expected to be present at the Annual Meeting.
Principal Accounting Fees And Services
Eide Bailly, LLP has been engaged as the Company's principalour independent registered public accounting firm, from January 1, 2011 to date. The Company's Boardfor each of Directors has considered whether the provisions of audit services are compatible with maintaining Edie Bailly and Schumacher’s independence.last two years:
The following table represents aggregate fees billed to the Company during the year ended December 31, 2012 and December 31, 2011 by Eide Bailly and Schumacher (our previous auditors).
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| | |
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Audit Fees(1) | $94,833 | $60,500 |
Audit-related Fees (2) | - | - |
Tax Fees(3) | - | - |
All Other Fees(4) | | |
Total Fees | $94,833 | $60,500 |
| | | |
| | | | | | |
| | (in thousands) | |
Audit fees (1) | | $ | 101,345 | | | $ | 92,833 | |
Audit-related fees (2) | | | — | | | | — | |
Tax fees (3) | | | — | | | | — | |
All other fees (4) | | | — | | | | — | |
Total fees | | $ | 101,345 | | | $ | 92,833 | |
(1) | Audit Fees. Audit fees includeconsist of fees and expenses for professional services related to the audits of our consolidated financial statements, including review of our quarterly financial statements.
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| (2) | Audit-Related Fees. Audit-related fees billed to us for services performed during 2012 and 2011 represent fees and expenses related to the audit of our employee benefit plan.
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| (3) | Tax Fees. Taxfees consist of fees and expenses billed to us for services rendered during 2012 and 2011 related to federal and state tax compliance and international tax compliance and research. |
| (4) | All Other Fees.All other fees represent fees and expenses billed to us for all other services performed, during 2012 and 2011 wereincluding fees for subscription, due diligence and research services.
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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. All of the non-audit services provided by our independent registered public accounting firm in 2012 were pre-approved in accordance with this policy.
The Company uses a different CPA/Attorney firm for the preparation of income tax reporting.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
PROPOSAL 3. TO APPROVE A ONE-TIME AUTHORIZATION, EXPIRING JUNE 30, 2014, FOR THE COMPANY TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY’S COMMON STOCK, WITHIN A RANGE OF NOT LESS THAN ONE-FOR-TWO AND NOT MORE THAN ONE-FOR-THREE, BUT OTHERWISE AT TERMS TO BE DETERMINED BY THE COMPANY’S BOARD OF DIRECTORS FOR THE SOLE PURPOSE OF APPLYING FOR AND OBTAINING A LISTING ON A NATIONAL STOCK MARKET EXCHANGE.
General
The Board is recommending that the Company seek shareholder approval to amend the Company's Restated Articles of Incorporation in substantially the form attached hereto as Annex A (the "Amendment"), to effect a reverse stock split within the range of not less than one-for-two and not more than one-for-three, with the final terms of the reverse stock split to be determined by the Board, in its sole discretion, following stockholder approval, for the sole purpose of applying for and obtaining a listing on a national stock market exchange. If the stockholders approve the reverse stock split, and the Board decides to implement it, the reverse stock split will become effective upon the filing of the Amendment with the Colorado Secretary of State.
The reverse stock split will be realized simultaneously for all outstanding Common Stock and the ratio determined by the Board will be the same for all outstanding Common Stock. The reverse stock split will affect all holders of Common Stock uniformly and each stockholder will hold the same percentage of Common Stock outstanding immediately following the reverse stock split as that stockholder held immediately prior to the reverse stock split, except for adjustments that may result from the treatment of fractional shares as described below. The Amendment will not reduce the number of authorized shares of Common Stock (which will remain at 100,000,000) and will not change the par value of the Common Stock (which will remain at $0.001 per share).
Reasons for the Reverse Stock Split
The reason for proposing the reverse stock split is to increase the per share market price of the Common Stock and facilitate the Company’s application for listing on the NYSE MKT. The Common Stock is currently listed on the OTC QB under the symbol "TURV". One of the qualitative requirements to be listed on the NYSE MKT is a per share market price at $2.00 or above per share. Besides the higher per share trading price, the Board believes that the reverse stock split will result in increased stock liquidity, company recognition, and investor interest.
The Board believes that applying for a listing of the Common Stock on the NYSE MKT is in the best interests of the Company and its stockholders. If the reverse stock split is approved by our stockholders and implemented by the Board, we expect to satisfy the $2.00 per share market price for continued listing. However, despite the approval of the reverse stock split by our stockholders and the implementation by the Board, there is no assurance that the reverse stock split will result in our meeting the $2.00 per share market price. Nor is there any assurance that the NYSE MKT will approve the Company’s listing applications even if the reverse stock split results in a $2.00 per share market price.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
The Board further believes that an increased stock price may encourage investor interest and improve the marketability of the Common Stock to a broader range of investors. Because of the trading volatility often associated with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies and practices pertain to the payment of brokers' commissions and to time-consuming procedures that function to make the handling of lower-priced stocks unattractive to brokers from an economic standpoint. Additionally, because brokers' commissions on lower-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current share price of the Common Stock can result in an individual stockholder paying transaction costs that represent a higher percentage of total share value than would be the case if our share price were substantially higher. This factor may also limit the willingness of institutions to purchase our stock. The Board believes that the anticipated higher market price resulting from a reverse stock split could enable institutional investors and brokerage firms with such policies and practices to invest in the Common Stock.
Another reason for the reverse stock split is to provide the Company with the ability to support its present capital needs and future anticipated growth. The reverse stock split will have the effect of significantly increasing the number of authorized but unissued shares of Common Stock. The Board believes that the operation of the Company will require additional capital to implement its planned growth. The availability of additional shares of Common Stock would also provide the Company with the flexibility to consider and respond to future business opportunities and needs as they arise, including equity offerings, mergers or other business combinations, asset acquisitions, stock dividends, stock splits and other corporate purposes. The reverse stock split would permit the Company to undertake certain of the foregoing actions without the delay and expense associated with holding a special meeting of stockholders to obtain stockholder approval each time such an opportunity arises that would require the issuance of shares of our common stock.
Determination of Ratio
The ratio of the reverse stock split, if approved and implemented, will be within a range of not less than one-for-two and not more than one-for-three, but otherwise as determined by the Board in its sole discretion for the sole purpose of applying for and obtaining a listing on a national stock market exchange. In determining the reverse stock split ratio, the Board will consider numerous factors including:* * *
Two Rivers Water & Farming Company -- Definitive 14AA COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013, Proxy
· | the historical and projected performance of the Common Stock; |
· | prevailing market conditions; |
· | general economic and other related conditions prevailing in our industry and in the marketplace; |
· | the projected impact of the selected reverse stock split ratio on trading liquidity in the Common Stock and our ability to secure a listing on the NYSE MKT; |
· | our capitalization (including the number of shares of Common Stock issued and outstanding); |
· | the prevailing trading price for Common Stock and the volume level thereof; and potential devaluation of our market capitalization as a result of a reverse stock split. |
The purpose of asking for authorization to implement the reverse stock split at a ratio within a range of not less than one-for-two, but not more than one-for-three, as opposed to a ratio fixed in advance, is to give the Board the flexibility to take into account then-current market conditions and changes in price of Common Stock and to respond to other developments that may be deemed relevant when considering the appropriate ratio.
Principal Effects of the Reverse Stock Split
AS FILED WITH THE SEC, IS INCLUDED IN OUR 2013 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 APRIL 16, 2014. YOU MAY VIEW AND ALSO DOWNLOAD OUR 2013 ANNUAL REPORT TO SHAREHOLDERS AT www.proxyvote.com. A
reverse stock split refers to a reduction in the number of outstanding shares of a class of a corporation's capital stock, which may be accomplished, as in this case, by reclassifying and combining all of our outstanding shares of Common Stock into a proportionately smaller number of shares. For example, if the Board decides to implement a 1-for-2 reverse stock split of Common Stock, then a stockholder holding 10,000 shares of Common Stock before the reverse stock split would instead hold 5,000 shares of Common Stock immediately after the reverse stock split. Each stockholder's proportionate ownership of outstanding shares of Common Stock would remain the same, except that stockholders that would otherwise receive fractional shares as a result of the reverse stock split will have their stock received rounded up to the next whole share in lieu of fractional shares. As a result, no holders of Common Stock would be eliminated in the event that the proposed reverse stock split is implemented and, under the Colorado Business Corporation Act, shareholders are not entitled to dissenters’ or appraisal rights.
Effect on Authorized but Unissued Shares
The reverse stock split will have the effect of increasing the number of authorized but unissued shares of Common Stock. The number of authorized shares of Common Stock will not be decreased and will remain at 100,000,000. Because the number of outstanding shares will be reduced as a result of the reverse stock split, the number of shares available for issuance will be increased. As a result, the reverse stock split could have an anti-takeover effect and may lead to dilution of existing stockholders, if and when such shares are issued. We do not have any current plans, agreements, arrangements, or understandings for the issuance of additional shares, other than the following: (i) we filed a registration statement on Form S-1 with the SEC on February 13,SHAREHOLDER MAY SUBMIT A WRITTEN REQUEST FOR A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR 2013 to cover the issuance of up to 7,700,000 shares upon exercise of outstanding warrants and convertible preferred stock; and (ii) we may issue up to 750,000 unregistered shares to an investor relations firm. The investor relations firm will be engaged to assist the Company in its effort to develop greater recognition and awareness in the public markets through a variety of means, including: the drafting and review of press releases, online content, business plans and presentation materials; community outreach efforts; the arrangement of “non-deal” road shows; and website development.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
Certain Risks Associated with the Reverse Stock Split
A reverse stock split could result in a significant devaluation of the Company's market capitalization and the trading price of the Common Stock.
Although we expect that the reverse stock split will result in an increase in the market price of the Common Stock, we cannot assure you that the reverse stock split, if implemented, will increase the market price of the Common Stock in proportion to the reduction in the number of shares of the Common Stock outstanding or result in a permanent increase in the market price. Accordingly, the total market capitalization of the Common Stock after the proposed reverse stock split may be lower than the total market capitalization before the proposed reverse stock split and, in the future, the market price of the Common Stock following the reverse stock split may not exceed or remain higher than the market price prior to the proposed reverse stock split.
The effect the reverse stock split may have upon the market price of the Common Stock cannot be predicted with any certainty, and the history of similar reverse stock splits for companies in similar circumstances to ours is varied. The market price of the Common Stock is dependent on many factors, including our business and financial performance, general market conditions, prospects for future success and other factors detailed from time to time in the reports we file with the Securities and Exchange Commission (the "SEC"). If the reverse stock split is implemented and the market price of the Common Stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the reverse stock split.
The reverse stock split may not generate additional investor interest.
While the Board believes that a higher stock price may help generate investor interest, there can be no assurance that the reverse stock split will result in a per share price that will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of the Common Stock may not necessarily improve.
The reduced number of shares of Common Stock resulting from a reverse stock split could adversely affect the liquidity of the Common Stock.
Although the Board believes that the decrease in the number of shares of Common Stock outstanding as a consequence of the reverse stock split and the anticipated increase in the market price of Common Stock could encourage interest in the Common Stock and possibly promote greater liquidity for our stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the reverse stock split. In addition, even if the reverse stock split is implemented and we meet the $2.00 per share market price requirement, the Company’s approval for listing on the NYSE MKT could be delayed or declined for other reasons.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
Effect on Fractional Stockholders.
No fractional shares of Common Stock will be issued in connection with the reverse stock split. If as a result of the reverse stock split, a stockholder of record would otherwise hold a fractional share, the shares received by that stockholder of record will be rounded up to the next whole share.
Effect on Beneficial Stockholders.
If you hold shares of Common Stock in "street name" through an intermediary (‘Intermediary”) such as a broker-dealer, we will treat your Common Stock in the same manner as stockholders whose shares are registered in their own names. Intermediaries will be instructed to cause the reverse stock split for their customers holding Common Stock in street name. However, these Intermediaries may have different procedures for processing a reverse stock split. If you hold shares of Common Stock in street name, we encourage you to contact your Intermediaries.
Registered "Book-Entry" Holders of Common Stock.
If you hold shares of Common Stock electronically in book-entry form with our transfer agent, you do not currently have and will not be issued stock certificates evidencing your ownership after the reverse stock split, and you do not need to take action to receive post-reverse stock split shares. If you are entitled to post-reverse stock split shares, a transaction statement will automatically be sent to you indicating the number of shares of Common Stock held following the reverse stock split.
If you are entitled to a payment in lieu of any fractional share interest, your shareholdings received as a result of the reverse stock split will be rounded up to the next whole share. See "Effect on Fractional Stockholders."
Effect on Registered Stockholders Holding Certificates.
As soon as practicable after the reverse stock split, our transfer agent will mail transmittal letters to each stockholder holding shares of Common Stock in certificated form. The letter of transmittal will contain instructions on how a stockholder should surrender his or her certificate(s) representing shares of Common Stock (the "Old Certificates") to the transfer agent in exchange for certificates representing the appropriate number of whole shares of post-reverse stock split Common Stock (the "New Certificates"). No New Certificates will be issued to a stockholder until such stockholder has surrendered all Old Certificates, together with a properly completed and executed letter of transmittal, to the transfer agent. No stockholder will be required to pay a transfer or other fee to exchange his or her Old Certificates. Stockholders will then receive a New Certificate(s) representing the number of whole shares of Common Stock that they are entitled as a result of the reverse stock split. Until surrendered, we will deem outstanding Old Certificates held by stockholders to be cancelled and only to represent the number of whole shares of post-reverse stock split Common Stock to which these stockholders are entitled. Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for New Certificates.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
If you are entitled to a payment in lieu of any fractional share interest, your shareholdings received as a result of the reverse stock split will be rounded up to the next whole share. See "Effect on Fractional Stockholders."
Effect on Outstanding Options and Warrants
Upon a reverse stock split, all outstanding options, RSUs, warrants and future or contingent rights to acquire Common Stock may be adjusted to reflect the reverse stock split. With respect to certain outstanding options, RSUs and warrants to purchase Common Stock, the adjustments will be defined in the document that granted the respective option, RSU, warrant or future or contingent right to acquire Common Stock. Also, the number of shares reserved for issuance under our existing stock option and equity incentive plans would be reduced proportionally based on the ratio of the reverse stock split.
Procedure for Effecting the Reverse Stock Split
If our stockholders approve this proposal, and the Board elects to effect the reverse stock split, we will cause the reverse stock split by filing the Amendment (as completed to reflect the reverse stock split ratio as determined by the Board, in its discretion, within the range of not less than 1-for-2 and not more than 1-for-3) with the Secretary of State of the State of Colorado. The reverse stock split will become effective, and the combination of, and reduction in, the number of our outstanding shares as a result of the reverse stock split will occur automatically, at the time of the filing of the Amendment (referred to as the "Effective Time"), without any action on the part of our stockholders and without regard to the date that stock certificates representing any certificated shares prior to the reverse stock split are physically surrendered for new stock certificates. Beginning at the Effective Time, each certificate representing pre-reverse stock split shares will be deemed for all corporate purposes to evidence ownership of post-reverse stock split shares. The text of the Amendment is subject to modification to include such changes as may be required by the office of the Secretary of State of the State of Colorado and as the Board deems necessary and advisable to cause the reverse stock split.
The Board reserves the right, notwithstanding stockholder approval and without further action by the stockholders, to elect not to proceed with the reverse stock split if, at any time prior to filing the Amendment, the Board, in its sole discretion, determines that it is no longer in the best interests of the Company and its stockholders to proceed with the reverse stock split. By voting in favor of the reverse stock split, you are expressly also authorizing the Board to delay (until June 30, 2014) or abandon the reverse stock split. If the Amendment has not been filed with the Secretary of State of the State of Colorado by the close of business on June 30, 2014, the Board will abandon the reverse stock split.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
Stockholders should not destroy any stock certificate(s) and should not submit any certificate(s) until they receive a letter of transmittal from our transfer agent.
Each stockholder is urged to consult with such stockholder's own tax advisor with respect to the tax consequences of the reverse stock split.
Accounting Matters
The total equity of the Company will remain the same. There will be no adjustment in any of the equity accounts; however, the number of shares disclosed will decrease in proportion to the stock reverse approved.
Board Recommendation
After careful consideration, the Board has determined that the reverse stock split is advisable and in the best interests of the Company and its stockholders and recommends that you vote "FOR" the approval of the reverse stock split.
PROPOSAL 4 TO APPROVE, ON AN ADVISORY BASIS, THE EXECUTIVE COMPENSATION OF NAMED EXECUTIVE OFFICERS
In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) was enacted. Under the Dodd-Frank Act, the Company is providing the shareholders a vote to approve, on an advisory (nonbinding) basis, the compensation of our Named Executive Officers as disclosed in this proxy statement in accordance with the SEC’s rules.
As described in detail under the heading “EXECUTIVE COMPENSATION — Compensation Discussion and Analysis,” our executive compensation program enables the Company 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. Please read “Executive Compensation” beginning on page 15 of this proxy statement and the compensation tables and narrative disclosure of this proxy statement for additional details about our compensation programs for our Named Executive Officers for 2012.
This proposal, commonly known as a “say-on-pay” proposal, gives the shareholders the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to address any specific element of our executive compensation programs, but rather to address our overall approach to the compensation of our Named Executive Officers as described in this proxy statement. The Board of Directors is asking the shareholders to indicate their support for our executive compensation program, as described in this Proxy Statement, by voting “For” the following resolution:
RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 2013 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Executive Compensation, the Summary Executive Compensation Table and the other related tables and disclosure.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
Advisory Nature of the Vote
Because this vote is advisory, it will not be binding upon the Company, the Compensation Committee or the Board of Directors. However, the Compensation Committee and the Board of Directors value the opinions of the shareholders and, to the extent there is any significant vote against the Company’s compensation practices for the Named Executive Officers as disclosed in this proxy statement, the Board of Directors will consider this shareholders vote and the Compensation Committee will evaluate whether any actions are necessary to address shareholder concerns when considering future executive compensation arrangements.
Board Recommendation
THE BOARD OF DIRECTORS IS RECOMMENDING AN ADVISORY VOTE “FOR” A RESOLUTION APPROVING THE COMPENSATION OF NAMED EXECUTIVE OFFICERS.OUR SECRETARY AT 2000 SOUTH COLORADO BOULEVARD, TOWER 1, SUITE 3100, DENVER, COLORADO 80222.
PROPOSAL 5 ADVISORY VOTE ON THE FREQUENCY OF SAY ON PAY
The Dodd-Frank Act also requires us to provide the shareholders with an advisory vote on how frequently the Company should seek an advisory vote on the compensation of our Named Executive Officers, as disclosed pursuant to the SEC’s compensation disclosure rules. In voting on this Proposal Four, shareholders may indicate whether they would prefer an advisory vote on Named Executive Officers’ compensation once every one, two, or three years. If desired, as set forth in the attached proxy, a shareholder may abstain from voting on this Proposal Four.
The Board of Directors has considered the Dodd-Frank Act requirements for such “say-on-pay frequency” vote and has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for the Company. The appropriate frequency of an advisory vote on executive compensation is the subject of diverging opinions and views, and the Board of Directors believes there is reasonable basis for each of the three options. Less frequency would encourage a more long-term, rather than short-term, analysis of our executive compensation programs and would avoid the burden that annual votes would impose on shareholders required to evaluate the executive compensation program each year. On the other hand, greater frequency provides shareholders the opportunity to react promptly to emerging trends in compensation and gives the Board of Directors and the Compensation Committee the opportunity to evaluate the compensation program each year in light of timely input from shareholders.
Advisory Nature of the Vote
Because this vote is advisory, it will not be binding upon the Company, the Compensation Committee or the Board of Directors. However, the Compensation Committee and the Board of Directors values the shareholders’ opinions and will consider the outcome of the vote when determining the frequency of future advisory votes on executive compensation.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
The alternative of “One Year”, “Two Years” or “Three Years” that receives the most shareholder votes will be the frequency for the advisory vote on executive compensation that has been selected by shareholders. This is a plurality vote.
Board Recommendation
THE BOARD OF DIRECTORS IS RECOMMENDING A VOTE FOR “ONE YEAR.”
Vote Required for Each Proposal
Proposal 1: ELECTION OF THE BOARD OF DIRECTORS
The five nominees for director receiving the highest number of affirmative votes cast in person or by proxy at the annual meeting will be elected. This is a plurality vote. Cumulative voting in the election of directors is not allowed.
The Directors nominated by the nomination committee are:
Mr. John McKowen
Mr. John Stroh III
Mr. Dennis Channer
Mr. Gregg Campbell
Mr. Brad Walker
The biographical information of all Director Nominees are contained beginning on page 9, under “Information Concerning Directors.”
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION TO THE BOARD OF DIRECTORS OF THE COMPANY FOR EACH OF THE DIRECTOR NOMINEES.
Proposal 2: RATIFICATION OF THE APPOINTMENT OF EIDE BAILLY, LLP AS INDEPENDENT ACCOUNTANTS AND AUDITORS
Ratification of the appointment of Eide Bailly, LLP as the Company's independent public accountants for the fiscal year ending December 31, 2012 will require the affirmative vote of a majority of the shares of Common Stock represented in person or by proxy and entitled to vote at the Annual Meeting. In the event the stockholders do not ratify the appointment of Eide Bailly, LLP for the forthcoming fiscal year, such appointment will be reconsidered by the Board.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
Unless marked to the contrary on the ballot, all proxies will be voted in favor of the Management's nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S INDEPENDENT ACCOUNTANTS.
Proposal 3. TO APPROVE A ONE-TIME AUTHORIZATION, EXPIRING JUNE 30, 2014, FOR THE COMPANY TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY’S COMMON STOCK WITHIN A RANGE OF NOT LESS THAN ONE-FOR-TWO AND NOT MORE THAN ONE-FOR-THREE, BUT OTHERWISE AT TERMS TO BE DETERMINED BY THE COMPANY’S BOARD OF DIRECTORS, FOR THE SOLE PURPOSE OF APPLYING FOR AND OBTAINING A LISTING ON A NATIONAL STOCK MARKET EXCHANGE.
The affirmative vote of a majority of the votes cast on Proposal Three is required to approve Proposal Three. The primary reason for proposing the reverse stock split is to increase the per share market price of the Common Stock and facilitate the Company’s application for listing on the NYSE MKT. The Common Stock is currently listed on the OTC QB under the symbol "TURV". One of the qualitative requirements to be listed on the NYSE MKT is a per share market price at $2.00 or above per share. Besides the higher per share trading price, the Board believes that the reverse stock split will result in increased stock liquidity, company recognition, and investor interest.
THE BOARD OF DIRECTORS IS RECOMMENDING THAT THE REVERSE STOCK SPLIT BE APPROVED.
Proposal 4 TO APPROVE, ON AN ADVISORY BASIS, THE EXECUTIVE COMPENSATION OF NAMED EXECUTIVE OFFICERS
The affirmative vote of a majority of the votes cast on Proposal Four is required to approve the compensation of the Company’s named executive officers.
THE BOARD OF DIRECTORS IS RECOMMENDING AN ADVISORY VOTE “FOR” A RESOLUTION APPROVING THE COMPENSATION OF NAMED EXECUTIVE OFFICERS.
Proposal 5 ADVISORY VOTE ON THE FREQUENCY OF SAY ON PAY
The alternative of “One Year”, “Two Years” or “Three Years” that receives the most shareholder votes will be the frequency for the advisory vote on executive compensation that has been selected by shareholders. This is a plurality vote.
THE BOARD OF DIRECTORS IS RECOMMENDING A VOTE FOR “ONE YEAR.”
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
FINANCIAL AND OTHER INFORMATION
Reference is made to the financial statements and other information included in the Company's Annual Report on Form 10-K for the period ended December 31, 2012 (as filed with the Securities and Exchange Commission on March 25, 2013). A copy of such report is available upon a written or oral request by you and by first class mail or other equally prompt means within one business day of receipt of such request, a copy of such report. Written requests for such report should be addressed to the Office of the President, Two Rivers Water & Farming Company, 2000 South Colorado Blvd., Tower 1, Suite 3100, Denver, Colorado 80222.
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matter appropriate for shareholder action consistent with regulations of the Securities and Exchange Commission. Should a shareholder intend to present a proposal at next year's annual meeting, it must be received by John R. McKowen, the CEO of the Company, at Two Rivers Water & Farming Company, 2000 South Colorado Blvd., Tower 1, Suite 3100, Denver, Colorado 80222, no later than 30 days prior to fiscal year end (December 1, 2013), in order to be included in the Company's proxy statement and form of proxy relating to that meeting. It is anticipated that the next annual meeting will be held in June 2014.
OTHER MATTERS
The Board is not aware of any other matter other than those set forth in this Proxy Statement that will be presented for action at the Annual Meeting. If other matters properly come before the Annual Meeting, the persons named as proxies intend to vote the shares they represent in accordance with their best judgment in the interest of the Company.
May 1, 2013 | Two Rivers Water & Farming Company
By Order of the Board of Directors
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| /s/ John McKowen
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| John R. McKowen
Chief Executive Officer and Chairman of the Board
|
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
BALLOT
Two Rivers Water & Farming Company
2000 South Colorado Blvd., Tower 1 Suite 3100
Denver, Colorado 80222
(303) 222-1000 (303) 222-1000
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints John R. McKowen 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 Stockholders to be held on June 11, 2013, at 2:30 p.m., at 2000 South Colorado Blvd., Tower 1, Suite 3100, Denver, CO 80222, 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.
1. To elect five (5) directors to hold office until the next annual meeting of stockholders or until their respective successors have been elected and qualified:
Nominees: John R. McKowen, John Stroh, II, Dennis Channer, Gregg Campbell, Bradley Walker.
[_] FOR: nominees listed above (except as marked to the contrary below).
[_] WITHHOLD authority to vote for nominee(s) specified below.
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), write the applicable name(s) in the space provided below.
2. To ratify the appointment of our independent registered public accounting firm, Eide Bailly, LLP.
[_] FOR [_] AGAINST [_] ABSTAIN
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy
3. To approve a one-time authorization, expiring June 30, 2014, for the Company to effect a reverse stock split of the Company’s common stock within a range of not less than 1-for-2 and not more than 1-for-3, but otherwise at terms to be determined by the Company’s board of directors for the sole purpose of applying for and obtaining a listing on a national stock market exchange.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To approve, by non-binding vote, the advisory resolution on executive compensation.
[_] FOR [_] AGAINST [_] ABSTAIN
5. To indicate, by non-binding vote, holding an advisory vote on executive compensation every one, two or three years, as indicated.
[_] 1 Year [_] 2 Years [_] 3 Years [_] ABSTAIN
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU MAY SIGN AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED "FOR" THE STATED PROPOSALS.
Number of shares owned ________________
_____________________________________ | ____________________________________ |
Signature of Stockholder | Signature if held jointly |
Printed name: __________________________ | Printed name: ________________________ |
Address: ______________________________
Dated: _________________________, 2013
IMPORTANT: If shares are jointly owned, both owners should sign. If signing as attorney, executor, administrator, trustee, guardian or other person signing in a representative capacity, please give your full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
Two Rivers Water & Farming Company -- Definitive 14A 2013 Proxy