0001214659-12-001747.txt : 20120419 0001214659-12-001747.hdr.sgml : 20120419 20120419145104 ACCESSION NUMBER: 0001214659-12-001747 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20120419 DATE AS OF CHANGE: 20120419 GROUP MEMBERS: DAVID CHENG GROUP MEMBERS: FRED F. JONES GROUP MEMBERS: KEITH WILHITE GROUP MEMBERS: KEN ROEHRICH GROUP MEMBERS: ROGER LEFLER FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HODGES STEPHEN R CENTRAL INDEX KEY: 0001547844 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: P.O. BOX 942 CITY: WALSENBURG STATE: CO ZIP: 81089 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TWO RIVERS WATER Co CENTRAL INDEX KEY: 0001302946 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 134228144 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-80624 FILM NUMBER: 12768253 BUSINESS ADDRESS: STREET 1: 2000 S COLORADO BLVD. STREET 2: ANNEX STE 420 CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 303-222-1000 MAIL ADDRESS: STREET 1: 2000 S COLORADO BLVD. STREET 2: ANNEX STE 420 CITY: DENVER STATE: CO ZIP: 80222 FORMER COMPANY: FORMER CONFORMED NAME: Navidec Financial Services, Inc. DATE OF NAME CHANGE: 20040913 SC 13D 1 s419120sc13d.htm s419120sc13d.htm
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D


 
Name of Issuer:
Two Rivers Water Company
   
   
Title of Class of Securities:
Common Stock
   
   
CUSIP Number:
90207B107
   
   
Contact Person:
G. Brian Christie
 
Christie Law Firm
 
4 Upper Newport Plaza
 
Suite 101
 
Newport Beach, CA 92660
 
Phone: (949) 863-9495
 
Fax:     (949) 863-9497
 
Email: brianchristie@christielaw.net


Date of Event Requiring Filing:  April 11, 2012

 
 
 
 
 
1.     Names of Reporting Persons: 
Fred F. Jones
Steve Hodges
Roger Lefler
Ken Roehrich
David Cheng
Keith Wilhite

The six Reporting Persons are collectively referred to herein as the “TRB Group”.

 
2. 
(a)  Shares held by each of the Reporting Members are imputed to the TRB Group.

 
3. 
 
 
 
4. 
Not applicable
 
 
5. 
Not applicable
 
 
6. 
All members of the TRB Group are citizens of the United States of America.
 
 
7. 
Sole Voting Power: 5,507,140 shares
 
 
8. 
Shared Voting Power:  Not applicable
 
 
9. 
Sole Dispositive Power:  5,507,140 shares
 
 
10. 
 Shared Dispositive Power:  Not applicable
 
 
11. 
Aggregate Amount Beneficially Owned by Each Reporting Person:  The TRB Group owns 5,507,140 shares, held by its six members as listed above.
 
 
12. 
Not applicable
 
 
13. 
Percent of Class Represented by Amount in Row 11:  23.33%, based on 23,616,824 shares reported outstanding in Registrant’s most recent Form 10-K.
 
 
14. 
Type of Reporting Person:  OO.  Other.  Six natural persons listed in #1 above, each of whom owns the number of shares listed in response to Item 2, formed a group (“the TRB Group”) to explore the coordinated disposition of all or a portion of their shares in a common transaction or series of transactions.
 
 

 
 
 
 
Item 1. 
Security and Issuer:  Refer to Cover Page.

Item 2.    Identity and Background:  The group of persons is referred to as the TRB Group.  The members of the TRB Group, who are all natural persons, are:

1.
 a)
Fred F. Jones - 996,430 shares
 
b) 
13 Pedregal Lane, Pueblo, CO 81005
 
c) 
Consultant at Star Consulting, Inc., 13 Pedregal Lane, Pueblo, CO 81005
 
d) 
No convictions
 
e) 
No securities law violations
 
f) 
Citizen of the United States of America
 
2.
a) 
Stephen Russell Hodges - 996,430 shares
 
b) 
P.O. Box 942, Walsenburg, CO 81089
 
c)
Regional Sales Manager for Southern Farm Bureau Casualty Ins.
Company, 9177 East Mineral Circle, Centennial, CO 80112
 
d) 
No convictions
 
e) 
No securities law violations
 
f) 
Citizen of the United States of America
 
 
 
 
 
3.
a) 
Roger Lefler - 996,430 shares
 
b)
P.O. Box 33490, Las Vegas, NV 89133
 
c)
Retired
 
d) 
No convictions
 
e) 
No securities law violations
 
f) 
Citizen of the United States of America

4.
a) 
Ken Roehrich - 996,430 shares
 
b) 
102 Flocktown Road, Long Valley, NJ 07853
 
c) 
Retired
 
d) 
No convictions
 
e) 
No securities law violations
 
f) 
Citizen of the United States of America

5.
a) 
David Cheng - 996,430 shares
 
b) 
2923 Pullman Street, Santa Ana, CA 92705
 
c)
President, Accord Engineering, Inc., 2923 Pullman Street, Santa Ana, CA 92705.
Managing Principal, Accord Holdings, LLC, 19642 Vista del Valle, North Tustin, CA 92705.
Managing Principal, Water for Humanity, 2923 Pullman Street, Santa Ana, CA 92705.
 
d) 
No convictions
 
e) 
No securities law violations
 
f) 
Citizen of the United States of America

6.
a)
Keith Wilhite – 524,990 shares
 
b) 
2132 Vinewood, Pueblo, CO 81005
 
c)
Retired
 
d) 
No convictions
 
e) 
No securities law violations
 
f) 
Citizen of the United States of America

 
 
 
 
Item 3. 
Source and Amount of Funds or Other Consideration:
On August 17, 2009, the Registrant, Two Rivers Water Company, and Two Rivers Basin, LLC (“TRB”, an unrelated company) formed HCIC Holdings LLC (“HCIC”, a joint venture) for the purpose of acquiring shares in the Huerfano Cucharas Irrigation Company (an historic mutual ditch company in Colorado).  The Registrant and TRB each owned a 50% interest in HCIC.  On September 14, 2010, TRWC purchased TRB’s ownership of HCIC through a merger and the issuance of 7,500,000 shares of the Company’s stock to the eight individual members of TRB.  As part of the merger and issuance, the members of TRB agreed to lock up their shares until March 14, 2012.  Prior to the expiration of the lock up period, the individuals who had been the members of TRB, engaged an attorney to begin to explore the disposal of a portion of their common stock in a coordinated fashion and the ramifications of acting together as a group.  In support of that exploratory effort, the individuals agreed among themselves not to individually sell any shares during the exploratory period. On April 11, 2012, the TRB Group decided to move forward as a group to begin negotiating the sale of their shares. However, on April 16, 2012, two of the former members of TRB (specifically John Stroh, who is a director of Registrant, and Kevin Lowther, who is a former employee of Registrant) decided to withdraw from the TRB Group, leaving the six members listed in response to Item 2 as the members of the TRB Group.  The Registrant, in cooperation with the TRB Group and their representative, has agreed to investigate opportunities for an off-market sale of the TRB Group’s 5,507,140 shares of the Registrant’s common stock.

Item 4. 
Purpose of Transaction:
The members of the TRB Group propose to dispose of a portion of their shares in a coordinated disposition, if such a disposition can be arranged on satisfactory terms.

Item 5. 
Interest in Securities of the Issuer:
In its Form 10-K, filed on March 8, 2012, the Registrant reported that there were 23,616,824 shares of its common stock outstanding.  The TRB Group’s 5,507,140 shares represent 23.33% of the Registrant’s common stock.
 
 
 
 
 
Item 6. 
Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer:
Reference is made to (i) the engagement agreement between and among the members of TRB and G. Brian Christie and (ii) a Discussion Term Sheet related to the possible terms for the contemplated disposition of a portion of the TRB Group’s shares which documents are incorporated herein by this reference.
 
Item 7. 
Material to be Filed as Exhibits:
 
1. 
Engagement Agreement
 
2. 
Discussion Term Sheet

Signature:
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
 
 
 
Dated: April 18, 2012
 /s/ G. Brian Christie  
  G. Brian Christie, Attorney  
  for the TRB Group  
     
 
 
 
 
 
 
 EX-99.1 2 ex99_1.htm EXHIBIT 99.1 ex99_1.htm
Exhibit 99.1
 
AGREEMENT
 
 
THIS AGREEMENT (the “Agreement”) is made and dated as of February 22, 2012 by and between  CHRISTIE LAW FIRM (referred to herein as the “Firm"), located at 4 Upper Newport Plaza, Suite 101, Newport Beach, California 92660, and FRED F. JONES, KEVIN LOWTHER, STEVE HODGES, JOHN STROH, ROGER LEFLER, KEN ROEHRICH, DAVID CHENG and KEITH WILHITE, (referred to herein as “Clients"), located at addresses shown in the signature block.
 
ARTICLE 1.
EMPLOYMENT OF FIRM
 
1.1.           Clients have asked Firm to perform legal services in connection with the sale of up to 50% of the Two Rivers Water Company shares owned by Clients and the structure of agreements regarding Clients’ unsold shares.  Based on the terms and conditions set forth in this Agreement, Firm agrees to provide Clients with the following services: consulting regarding strategic and legal options, negotiating and drafting legal structures to accomplish Clients’ goals, including negotiating and drafting Letters of Intent, sales agreements, securities agreements, financing instruments, business contracts, corporate documents, and other documents necessary to accomplish Clients’ goals.  Firm will also co-ordinate with the Escrow Holders for the release of Clients’ shares that are now all subject to Restrictions and Holdback provisions. (the “matter").
 
ARTICLE 2.
HOURLY RATE
 
2.1.           Clients agree to pay Firm attorney's fees based on the amount of time Firm devotes to Clients’ matter. Firm will compute attorney's fees based on the usual hourly charge for services performed by Firm of Three Hundred Seventy-Five Dollars ($375.00) per hour. Firm estimates that its attorney’s fees for this matter will be approximately $37,500.00 (approximately 100 hours of legal work is my best estimate).
 
2.2.           It is not presently possible for Firm to determine in advance the total amount of time necessary to complete Clients’ case. Clients therefore acknowledge that Firm cannot fix the total amount of fees and costs Clients may incur in connection with this matter.
 
2.3.           As used in this Agreement, "services" includes, but is not limited to, the following: Time spent for conferences with Clients or others regarding Clients’ case, telephone calls, emails, travel, review of correspondence received, research, consultations with other attorneys and experts, negotiations, and preparation and review of documents, contracts, and letters.
 
2.4.           Current hourly billing rates may include paralegal(s) and/or other staff who may perform Firm services on Clients’ behalf in this matter.
 
2.5           The advance deposit for payment of fees and costs is hereby waived.
 
 
Retainer Agreement
 
1
 
 
ARTICLE 3.
COSTS
 
3.1.           Clients agree to pay all fees, costs, and expenses arising in the course of Firm's work for Clients pro rata according to the percentages set forth next to each Client’s name in the signature block. These costs may include, but are not limited to, accounting fees, postage, photocopying charges, facsimile transmission charges, long distance telephone charges, travel expenses, filing fees, recording fees, corporate service fees, and other comparable costs.
 
3.2.           Clients agree to pay Firm for all costs incurred by Firm on behalf of Clients as they are incurred, and to reimburse Firm immediately for any costs Firm may advance to Clients on Clients’ behalf. Firm is not able to finance costs for Clients.
 
ARTICLE 4.
MONTHLY BILLING
 
4.1.           Firm will send Clients a monthly written billing statement that fully itemizes services provided to Clients and the costs incurred by Firm in this matter. Clients agree to pay Firm for all services performed on Clients’ behalf in connection with this matter within fifteen (15) days of receiving Firm's billing statement.
 
4.2.            If Clients have questions concerning any entry on a billing statement provided to Clients by Firm, Clients should address those questions to Firm either orally or in writing. Firm agrees to respond promptly to such questions.
 
4.3.           Client agrees to pay Firm the amount due on each billing statement within fifteen (15) days of the date of the statement.  If Firm does not receive the amount due within sixty (60) days after the statement date, Firm has the right to terminate this Agreement as set forth in Paragraph 10. Firm also has the right to impose a late charge of ten percent (10%) per month on all sums owed to Firm for more than ninety (90) days.
 
ARTICLE 5.
CLIENT'S DUTIES
 
5.1.           Clients shall be truthful with Firm, cooperate with Firm, keep Firm informed of developments, abide by this Agreement, pay Firm bills on time and keep Firm advised of Clients’ addresses, telephone numbers, and whereabouts.
 
5.2            Clients agree that they shall not make any attempt to sell their Two Rivers Water
Company shares for a period of ninety (90) days from the date of this Agreement, during which time Firm is endeavoring to negotiate and structure a sale of up to 50% of the shares owned by Clients to an institutional investor.  However, if Firm determines that it is unable to structure such a sale of the Clients’ shares in Two Rivers Water Company, Firm shall immediately notify Clients that it has been unable to negotiate and structure such a sale of Clients’ shares, at which time Clients shall be released from this prohibition to sell their shares.  Clients acknowledge and agree that this 90-day prohibition against the sale of their shares in Two Rivers Water Company is necessary in order for Firm to negotiate and structure a sale of Clients’ shares.
 
 
Retainer Agreement
 
2
 
 
5.3            Clients acknowledge and agree that it is essential for the benefit of all the Clients, as well as for the success of the Firm, that all the Clients executing this Agreement act in unison during the negotiations and structuring of the sale of Clients’ securities as envisioned in this Agreement.  Therefore, Clients also agree that during the next ninety (90) days after the execution of this Agreement, Clients shall not withdraw from this Agreement because all the Clients agree that could be detrimental to the other Clients and to Firm’s assignment.
 
5.4            Clients hereby authorize Firm to act on Clients’ behalf in representing each of the Clients who execute this Agreement in attempting to negotiate and sell Clients’ shares in Two Rivers Water Company.  Absent gross negligence or willful misconduct on the part of Firm, Clients agree that such authorization shall not be rescinded for ninety (90) days from the date of this Agreement.
ARTICLE 6.
DISPUTE RESOLUTION.
 
6.1.           In the event of a dispute over the terms of this agreement, the prevailing party is entitled to recover reasonable attorney's fees expended in obtaining recovery.
 
ARTICLE 7.
YOUR RIGHT TO ARBITRATE
 
7.1.           The parties agree that any disputes relating to Firm’s fees under this agreement shall be submitted to binding arbitration in Orange County, California before the Orange County Bar Association (OCBA) in accordance with the provisions of Business & Professionals Code § 6200 et seq.  Should the OCBA decline to arbitrate the dispute, the parties agree to submit the dispute to binding arbitration to the State Bar of California in Orange County in accordance with the Business & Professionals Code § 6200 et seq.  Any other dispute (other than attorney’s fees) between the parties hereto arising out of this agreement or the professional services rendered errors or omissions, negligence, breach of fiduciary duty or other wrongdoing of Christie Law Firm and/or any of its attorneys shall be resolved by binding arbitration in Orange County, California pursuant to the provisions of California Code of Civil Procedure § 1280 et seq.  By signing this agreement, the parties hereto each waives its right to a jury or court trial, the right to appeal and full discovery rights otherwise available with respect to any and all disputes between themselves and agree to be bound by binding arbitration as described herein.  The parties further agree that the arbitrator shall have the discretion to order the losing party in the arbitration proceedings to reimburse the prevailing party for all costs incurred in connection with the arbitration, including without limitation, arbitrator’s fees.
 
ARTICLE 8.
FIRM MAKES NO GUARANTEES.
 
8.1.           Clients acknowledge that Firm has not made guarantees as to the outcome of this matter. Any statements made by Firm representatives regarding the outcome of this matter are opinions only.
 
 
Retainer Agreement
 
3
 
 
ARTICLE 9.
WITHDRAWAL AND TERMINATION OF SERVICES
 
9.1.           Firm and Clients agree that the parties' attorney-client relationship requires mutual consent, and that the attorney-client relationship may be terminated at any time for any reason by either party in the manner provided in Paragraph 10.2 below.
 
9.2.           If Clients fail or refuse to pay a monthly bill as provided in Article 5, Firm has the right to terminate its representation of Clients by giving Clients fifteen (15) days' written notice by mail at Clients’ below addresses.
 
9.3.           In the event Attorney terminates representation of Clients, Clients agree to relieve Firm of responsibility for subsequent legal representation.
 
ARTICLE 10.
CONCLUSION OF SERVICES
 
10.1.         When Firm's services conclude, all unpaid charges shall become immediately due and payable. After Firm's services conclude, Firm will upon Clients’ request, deliver Clients’ file to Clients along with any Clients’ funds or property in Firm's possession. Clients agree to pay for the cost of copying and transferring Clients’ files on termination of Firm's services.
 
ARTICLE 11.
CONFLICT OF INTEREST
 
11.1          This will confirm that I have informed you about the potential conflict of interest inherent in any representation of more than one person or entity.  It is important that you understand that since I am representing all of you in connection with the above referenced transactions, each of you would be my client. As a result, matters which one of you might discuss with me would not be protected by the attorney/client privilege from disclosure to the others of you. The Rules of Professional Conduct of the State Bar of California (the "Rules") prohibit me from agreeing with any one of you to withhold information from any of the others. Of course, anything any of you discusses with me is privileged from disclosure to third parties. If any of you have a difference of opinion concerning the above referenced transactions, I can point out the pros and cons of such differing opinions. The Rules prohibit me, as the lawyer for all of you, from advocating any one position over another.

Although I doubt that it will happen, if conflicts do arise among any of you of such nature that it is impossible in my judgment to perform my obligations to each of you in accordance with this letter, it would become necessary for me to withdraw as your joint attorney and to advise one or any of you to obtain independent counsel.

ARTICLE 12.
INSURANCE COVERAGE DISCLOSURE

12.1.         Firm maintains errors and omissions insurance coverage as required by the California State Bar.
 
 
Retainer Agreement
 
4
 
 
ARTICLE 13.
ENTIRETY OF AGREEMENT
 
13.1.         This Agreement supersedes any and all other agreements between Firm and Clients regarding the matter that is the subject of this Agreement.
 
13.2.         This Agreement contains all promises and agreements between the parties concerning this matter. Firm and Clients agree that neither party has made representations, promises, or agreements concerning this matter other than as incorporated in this Agreement. The parties further agree that they are bound only by the representations, promises, or agreements set forth in this Agreement.
 
ARTICLE 14.
EFFECTIVE DATE
 
14.1.         This Agreement will take effect when Clients have performed the conditions stated in Paragraph 1, but its effective date will be retroactive to the date Firm first provided services. Even if this Agreement does not take effect, Clients will be obligated to pay Firm the reasonable value of any services Firm may have performed for Clients.
 
ARTICLE 15.
COUNTERPARTS

15.1          This Agreement may be executed in any number of counterparts, each of which constitutes one and the same instrument, and either party hereto may execute this Agreement by signing any such counterpart.


EXECUTED this _______ day of February, 2012.


We, the undersigned, have read and understood the above terms and agree to them as of the date that Christie Law Firm, Attorneys at Law, first provided services to the undersigned.  If more than one person signs below, each agrees to be jointly and severally liable for the obligations under this agreement.
 



ATTORNEY:


CHRISTIE LAW FIRM
 
  By: /s/ G. Brian Christie  
   
G. Brian Christie, Attorney at Law
  
      
 
Retainer Agreement
 
5
 
 
CLIENTS:
 

 
            Percentage
  FRED F. JONES         13.3%
  Address:          
             
             
             
             
  KEVIN LOWTHER         13.3%__
  Address:          
             
             
             
             
  STEVE HODGES         13.3%
  Address:           
             
             
             
             
  JOHN STROH         13.3%
  Address:          
             
             
             
             
  ROGER LEFLER         13.3%
  Address:           
             
             
 
 
Retainer Agreement
 
6
 
 
  KEN ROEHRICH         13.3%
  Address:          
             
             
             
             
  DAVID CHENG         13.3%
  Address:          
             
             
             
             
  KEITH WILHITE         6.9%
  Address:           
             
             
 
 
 
 
 
 
Retainer Agreement
7
 EX-99.2 3 ex99_2.htm EXHIBIT 99.2 ex99_2.htm
Exhibit 99.2
 
 
Internal Discussion Only
 
Term Sheet for Off-market Purchase/Sale of Stock in Two Rivers Water Company
 
(“TRWC or the Company”)
 
On August 17, 2009, the Company and Two Rivers Basin, LLC (“TRB”, an unrelated company) formed HCIC Holdings LLC (“HCIC”, a joint venture) for the purpose of acquiring shares in the Huerfano Cucharas Irrigation Company (an historic mutual ditch company).  Each entity owned a 50% interest in HCIC.  On September 14, 2010, TRWC purchased TRB’s ownership of HCIC through a merger and the issuance of 7,500,000 shares of the Company’s stock to the eight individual members of TRB.  As part of the merger and issuance, the members of TRB agreed to lock up their shares until March 14, 2012.  In addition, one of the members of the TRB Group joined the Company’s board of directors, and one of the members became an employee of the Company (although the latter member voluntarily left the Company’s employment in January of 2012).  As a result of the merger and issuance (as well as subsequent Company action), the Company now owns 91% of the shares in the Huerfano Cucharas Irrigation Company and has assumed operation of this mutual ditch company.
 
Prior to the expiration of the lock up period, former members of TRB, (“the TRB Group”) notified the Company, through a representative, that they proposed to explore the disposal of a portion of their common stock in a coordinated fashion and that they had agreed among themselves not to individually sell any shares during the exploratory period.  Subsequently, two of the former members of TRB (specifically, John Stroh, who is a Company director, and Kevin Lowther, who is a former Company employee) decided to withdraw from the TRB Group and to retain their shares in the Company.  The remaining six members of the TRB Group own, in aggregate, 5,507,140 shares.  The Company, in cooperation with the six-member TRB Group and their representative, has agreed to investigate opportunities for an off-market sale of their 5,507,140 shares of TRWC common stock.
 
The Company is now contacting qualified investors who have expressed a prior interest in acquiring a substantial position in the Company or in similar agricultural and/or water investments.
 
 
WEDBUSH SECURITIES INC.
Member NYSE/FINRA/SIPC
One Bush Street, Suite 1700, San Francisco California 94104 (415) 274-6800 Fax (415) 274-6824 www.wedbush.com
 
 
 
 
 
The proposed terms for the purchase/sale are as follows:
 
Purchase and Options:
1.          Purchase 1,835,714 TRWC common stock at $1.25 per share from the TRB Group ($2,294,642.50).
   
 
2.          The TRB Group and its individual members will agree to lock up their remaining shares (“Remaining Shares”) for two years, subject to: (i) a Purchaser’s option to purchase 1,835,713 of the Remaining Shares at a strike price of $2.75 per share ($5,048,210.75) and (ii) a Purchaser’s right of first refusal to 1,835,713 of the Remaining Shares.
   
 
3.          During the lock up period, the Remaining Shares will be contractually obligated to vote the shares as recommended by the TRWC Board; however, the Purchaser will have the right to exercise any other rights granted to the Remaining Shares during the lock up period.
   
Early Exit Opportunity:
The Company will provide registration rights and agreement to include the sale of up to 3,671,426 of Purchaser’s TRWC common stock in an anticipated follow-on underwritten offering.  Based on planned deployment of new capital and expected progress in implementing its business plan, the Company believes that the value of the Company can be substantially increased over the next two to three years and that such value should be reflected in an increased share price.
 
 
Term Sheet for Off-market Purchase/Sale
April 17, 2012
Page 2 of 4
For discussion only; not an offer for the sale nor solicitation of an offer
to purchase securities
 
 
 
 
 
Potential Board Representation:
The Company will consider a qualified nominee of the Purchaser to serve on its Board of Directors.
   
Alignment with Management:
In light of the Company’s unique assets and business plan, the management team’s incentives have been aligned with shareholders through a restricted stock unit program which features vesting on an incremental basis taking into account both time and performance milestones.  Further, the CEO is a participant in the Company’s current Bridge Loan and will consider deferring liquidity of his equity investment in the Company to accommodate a preferential exit for the Purchaser.
   
Registration:
In the event that (i) the Purchaser does not fully exercise the option to purchase Remaining Shares, and/or (ii) the Remaining Shares subject to the Purchaser’s right of first refusal are not liquidated during the two-year lock up period, the Company will register the Remaining Shares still in the hands of the TRB Group and will support their distribution in conjunction with the Company’s next succeeding registered equity offering; provided, however, there will be no restriction on the ability of the TRB Group to sell, or not to sell, the Remaining Shares at, or after, said offering.
 
 
Term Sheet for Off-market Purchase/Sale
April 17, 2012
Page 3 of 4
For discussion only; not an offer for the sale nor solicitation of an offer
to purchase securities
 
 
 
 
 
Company Background:
On March 8, 2012, the Company filed with the SEC its latest annual report on Form 10-K.  Copies are available on the Company’s website (www.2riverswater.com) and on the SEC’s website.  In addition, subject to a Non-disclosure Agreement, the management team will be available for discussion of current market trends and to conduct a tour of Company facilities in Huerfano and Pueblo Counties in Colorado.
   
Facilitation Fee:
Wedbush Securities is the Company’s exclusive financial advisor and, in that role, is assisting the Company to develop and execute an integrated capitalization plan.  For its role in facilitating the purchase/sale of the TRB Group’s shares, the Purchaser will pay Wedbush 1% of the acquisition price for the TRB Group’s shares at the time of each such acquisition.
 

 
 
 
 
Term Sheet for Off-market Purchase/Sale
April 17, 2012
Page 4 of 4
For discussion only; not an offer for the sale nor solicitation of an offer
to purchase securities
 
 
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