TWO RIVERS WATER & FARMING Co (Form: 10-Q, Received: 05/14/2014 07:02:34)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPOR T PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _________ to _____________

Commission file number: 000-51139

Two Rivers Water & Farming Company

(Exact Name of Registrant as Specified in Its Charter)

Colorado	13-4228144
(State or Other Jurisdiction or Incorporation or Organization)	(I.R.S. Employee Identification No.)
2000 South Colorado Blvd. Tower 1, Suite 3100 Denver, Colorado	80222
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 222-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One).

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer (Do not check if a smaller reporting company)	o		Smaller reporting company	þ

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

Yes o No þ

As of May 13, 2014 there were 24,879,549 shares outstanding of the registrant's Common Stock.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18

PART II – OTHER INFORMATION
Item 1A.	Risk Factors	19
Item 6.	Exhibits	19

SIGNATURES		20

PART I. OTHER INFORMATION

ITEM 1. FINANCIAL STATEMENTS

	Page
Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets – March 31, 2014 and December 31, 2013	4
Condensed Consolidated Statements of Operations – Three months ended March 31, 2014 and 2013	5
Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2014 and 2013	6
Notes to Condensed Consolidated Financial Statements	7

TWO RIVERS WATER & FARMING COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (In Thousands)

		March 31, 2014			December 31, 2013
ASSETS:		(Unaudited)			(Derived from Audit)
Current Assets:
Cash and cash equivalents		$	2,184		$	2,069
Advances and accounts receivable, net			9			54
Farm product			321			29
Deposits and other current assets			121			108
Total Current Assets			2,635			2,260
Long Term Assets:
Property, equipment and software, net			1,959			1,892
Land and real estate, net			4,978			4,978
Water assets			31,449			31,507
Intangible assets, net			984			997
Other long term assets			71			68
Total Long Term Assets			39,441			39,442
TOTAL ASSETS		$	42,076		$	41,702

LIABILITIES & STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable		$	136		$	47
Accrued liabilities			347			317
Preferred shares and membership dividends payable			470			-
Current portion of long term debt (Note 4)			1,385			2,759
Total Current Liabilities			2,338			3,123
Long Term Debt (Note 4)			11,439			12,961
	Total Liabilities		13,777			16,084
Commitments and contingencies (Note 4)
Stockholders' Equity:
Convertible preferred shares, $0.001 par value, 4,000,000 shares authorized, 3,494,000 shares outstanding at March 31, 2014 and 3,794,000 shares outstanding at December 31, 2013 (liquidation value of $3,494,000 and $3,794,000, respectively), net			2,627			2,851
Common stock, $0.001 par value, 100,000,000 shares authorized, 24,879,549 shares issued and outstanding at March 31, 2014 and December 31, 2013			25			25
Additional paid-in capital			61,114			60,220
Accumulated (deficit)			(49,509	)		(47,449	)
Total Two Rivers Water Company Shareholders' Equity			14,257			15,647
Noncontrolling interest in subsidiaries			14,042			9,971
Total Stockholders' Equity			28,299			25,618
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY		$	42,076		$	41,702

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

TWO RIVERS WATER & FARMING COMANY AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (In Thousands)

	Three months ended March 31,
	2014			2013
Revenue
Other income	$	5		$	-
Total Revenue		5			-
Direct cost of revenue		-			-
Gross Profit (Loss)		5			-
Operating Expenses:
General and administrative		838			1,856
Depreciation		125			129
Total operating expenses		963			1,985
(Loss) from operations		(958	)		(1,985	)
Other income (expense):
Interest expense		(335	)		(173	)
Warrant expense		-			(28	)
Other Income		11			5
Total other income (expense)		(324	)		(196	)
Net (Loss) before taxes		(1,282	)		(2,181	)
Income tax (provision) benefit		-			-
Net (Loss) before preferred dividends and non-controlling interest		(1,282	)		(2,181	)
Preferred Dividends		(470	)		-
Net loss attributable to the noncontrolling interest		-			1
Net (Loss) attributable to Two Rivers Water Company	$	(1,752	)	$	(2,180	)
(Loss) Per Common Stock Share - Basic and Dilutive:	$	(0.07	)	$	(0.09	)
Weighted Average Shares Outstanding:
Basic and Dilutive		24,880			24,310

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

TWO RIVERS WATER & FARMING COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (In Thousands)

	For the three months ended March 31,
	2014			2013
Cash Flows from Operating Activities:
Net (Loss)	$	(1,752	)	$	(2,180	)
Adjustments to reconcile net income or (loss) to net cash (used in) operating activities:
Depreciation and amortization		125			129
Accretion of debt discount		47			-
Assumption of assessments due to purchase of HCIC shares		-			80
Stock based compensation		-			680
Stock and options for services		64			763
Gain on disposal of assets		(3	)		-
Impairment of asset		34			-
Net change in operating assets and liabilities:
Decrease (increase) in advances & accounts receivable		44			82
(Increase) in farm product		(292	)		(112	)
(Increase) decrease in deposits, prepaid expenses and other assets		(16	)		(248	)
Increase (decrease) in accounts payable		50			(30	)
Increase (decrease) in accrued liabilities and other		499			(163	)
Net Cash (Used in) Operating Activities		(1,200	)		(999	)
Cash Flows from Investing Activities:
Purchase of property, equipment and software		(42	)		(6	)
Purchase of land, water shares, infrastructure		-			(1,315	)
Net Cash (Used in) Investing Activities		(42	)		(1,321	)
Cash Flows from Financing Activities:
Proceeds from Preferred Units		1,700			-
Proceeds from long-term debt		-			1,050
Proceeds from sale of convertible preferred shares in DFP		-			1,600
Payment of offering costs		-			(223	)
Payment on notes payable		(343	)		(133	)
Net Cash Provided by Financing Activities		1,357			2,294
Net (Decrease) Increase in Cash & Cash Equivalents		115			(26	)
Beginning Cash & Cash Equivalents		2,069			1,340
Ending Cash & Cash Equivalents	$	2,184		$	1,314

Supplemental Disclosure of Cash Flow Information Cash paid for interest	$	202		$	148

The accompanying notes to condensed consolidated financial statements are an integral part of these statements

TWO RIVERS WATER & FARMING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2014 and March 31, 2013

(Unaudited)

NOTE 1 – ORGANIZATION AND BUSINESS

Corporate Information

Two Rivers Water & Farming Company (the “Company”) is a Colorado corporation with principal executive offices at 2000 South Colorado Boulevard, Tower 1, Suite 3100, Denver, Colorado, and our telephone number at that address is (303) 222-1000.

Organizational Restructuring

On January 29, 2014, the board of directors approved a plan to reorganize the Company’s subsidiaries in a more integrated manner based on functional operations. The Company formed a new company, TR Capital Partners, LLC (“TR Capital”), which issued all of its Common Units to the Company. TR Capital then initiated the transactions described below. Following the completion of those transactions in mid-2014, the Company expects that TR Capital and its other direct and indirect subsidiaries (excluding HCIC Holdings, LLC, or “HCIC,” and Huerfano-Cucharas Irrigation Company) (the “Transferring Subsidiaries”) will enter into a series of related transactions as the result of which assets and operations of the Transferring Subsidiaries will be transferred to TR Capital. As a result of those transactions, TR Capital would operate all of the operations formerly conducted by the Transferring Subsidiaries. The following chart shows the expected corporate organization following completion of the anticipated transactions among the Transferring Subsidiaries, as well as the principal operating areas to be managed by TR Capital:

The placement of Preferred Units is being effectuated by either (1) the holders of certain debt or equity securities of the Transferring Subsidiaries exchanging their ownership interest or debt holdings for Preferred Units or (2) the direct investment into TR Capital through the cash purchase of Preferred Units. These debt or equity securities or the cash consideration to purchase Preferred Units are collectively referred to as “Qualified Assets.”

The Qualified Assets are being exchanged into Preferred Units at a rate of $0.70 or $1.00. If new capital (cash) is invested in Preferred Units, for each new $1.00 of new capital, another $1.2988 of Qualified Assets can be converted into Preferred Units at a rate of $0.70. Additionally, the new capital (cash) purchases Preferred Units at a rate of $0.70. All other Qualified Assets are being exchanged into Preferred Units at a rate of $1.00.

The Preferred Units provide the member with the following:

●	The ability, upon exchange, to receive one share of the Company’s common stock and a warrant to purchase one-half of one share of the Company’s common stock for each Preferred Unit owned. The warrants expire five years after issuance and have a strike price of $2.10.

●	A quarterly dividend of 2% (8% annually) based on the consideration exchanged or paid for the Preferred Units.

●	An annual distribution based on the Adjusted Gross Profit (as defined) of the Company.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements do not include all of the disclosures required by accounting principles generally accepted in the U.S. (“GAAP”), pursuant to the rules and regulations of the SEC. The unaudited Consolidated Financial Statements reflect all adjustments, which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company as of March 31, 2014, and the consolidated results of operations and comprehensive income and cash flows of the Company for the three months ended March 31, 2014 and 2013. Operating results for the three months ended March 31, 2014 and due to the seasonality of the agriculture business are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Two Rivers and its subsidiaries, TR Capital Partners, LLC and HCIC. All significant inter-company balances and transactions have been eliminated in consolidation.

Non-controlling Interest

Non-controlling interest is recorded for the ownership of HCIC not owned by the Company, for preferred shares not owned by the Company in the Company’s subsidiaries and for the TR Capital Preferred Units. Below is the detail of non-controlling interest shown on the balance sheet:

Entity	Mar 31, 2014		Dec 31, 2013
TR Capital	$	5,151,000	$	-
HCIC		1,363,000		1,363,000
Two Rivers Farms F-1, Inc. 1		735,000		1,494,000
Two Rivers Farms F-2, Inc. 1		3,806,000		3,933,000
Dionisio Farms & Produce, Inc. (“DFP”) 1		2,987,000		3,181,000
Totals	$	14,042,000	$	9,971,000

1 These entities will be owned by TR Capital after the organizational restructuring detailed in Note 1 is completed.

Based on ASC 815-40-25, the Company classified the TR Capital Preferred Units as permanent equity. Further, pursuant to the ASC 810-10, the Company determined that the TR Capital Preferred Units should be classified as a non-controlling interest in a subsidiary and shown separately within the Equity section of the Company’s Consolidated Balance Sheet.

Pursuant to ASC 470-20, the Company valued the Preferred Units by assessing the fair market value of the preferred units and the warrants and allocating those values to the face value of the Preferred Units.

The Preferred Units were valued based on the number of common shares into which the Preferred Units can be exchanged and the Company’s common share price on the date of the exchange. The Qualified Assets were exchange between February 1, 2014 and February 4, 2014. The common share price during those dates ranged from $0.85 to $0.90 per share. In total, the 8,924,286 Preferred Units have a fair market value of $7,799,000 based on these common share prices.

The fair market value of the warrants underlying the Preferred Units was determined using the Black Scholes model. Assumptions underlying the Black Scholes model were as follows:

Conversion Date	2/1/14 - 2/4/14
Stock Price	$	0.85 - $0.90
Exercise Price	$	2.10
Term (in years)		5
Volatility		74.34	%
Annual Rate of Quarterly Dividends		0	%
Discount Rate - Bond Equivalent Yield		1.46% - 1.49	%

In total, the warrants underlying the Preferred Units have a fair market value of $1,659,000 based on these assumptions.

Reclassification

Certain amounts previously reported have been reclassified to conform to current presentation. Certain labels of accounts/classifications have been changed.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers cash and cash equivalents to include highly liquid investments with original maturities of 90 days or less. Those are readily convertible into cash and not subject to significant risk from fluctuations in interest rates. The recorded amounts for cash equivalents approximate fair value due to the short-term nature of these financial instruments.

Farm product

Farm product represents expenses directly attributed to the planting and cultivation of crop. Upon harvesting, the farm product is reduced in proportion of the revenue generated. The reduction of the farm product is recognized as direct cost of revenue.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed principally on the straight-line method over the estimated useful life of each type of asset which ranges from three to twenty seven and a half years. Maintenance and repairs are charged to expense as incurred; improvements and betterments are capitalized. Upon retirement or disposition, the related costs and accumulated depreciation are removed from the accounts, and any resulting gains or losses are credited or charged to income.

Below is a summary of premises and equipment:

Asset Type	Life in Years		Mar 31, 2014			Dec 31, 2013
Office equipment, furniture, computers		5 – 7	$	11,000		$	11,000
Computers		3		40,000			40,000
Vehicles		5		45,000			45,000
Farm equipment		7 - 10		1,527,000			1,411,000
Irrigation system		10		989,000			989,000
Buildings		27.5		35,000			35,000
Website		3		7,000			7,000
Subtotal				2,654,000			2,538,000
Less Accumulated Depreciation				(695,000	)		(646,000	)
Net Book Value			$	1,959,000		$	1,892,000

Land

Land acquired for farming is recorded at cost. Some of the land acquired has not been farmed for many years, if not decades. Therefore, additional expenditures are required to make the land ready for efficient farming. Expenditures for leveling the land are added to the cost of the land. Irrigation is not capitalized in the cost of Land (Property and Equipment above). Land is not depreciated. However, once per year, management will assess the value of land held, and in their opinion, if the land has become impaired, management will establish an allowance against the land.

Water rights and infrastructure

Subsequent to purchase of water rights and water infrastructure, management periodically evaluates the carrying value of its assets, and if the carrying value is in excess of fair market value, the Company will establish an impairment allowance. Currently, there are no impairments on the Company’s land and water shares. No amortization or depreciation is taken on the water rights.

Intangibles

The Company recognizes the estimated fair value of water rights acquired by the Company’s purchase of equity interests in HCIC and Orlando Reservoir No. 2 Company, LLC (“Orlando”). These intangible assets will not be amortized because they have an indefinite remaining useful life based on many factors and considerations, including, the historical upward valuation of water rights within Colorado.

Revenue Recognition

Farm Revenues

Revenues from farming operations are recognized when sold into the market. All direct expenses related to farming operations are capitalized as farm inventory and recognized as a direct cost of sale upon the sale of the crops.

Water Revenues

Current water revenues are from the lease of water own by HCIC to farmers in the HCIC service area and through re-leasing of water from the Pueblo Board of Water lease. Water revenues are recognized when the water is consumed.

Member Assessments

Once per year the HCIC board estimates HCIC’s expenses, less anticipated water revenues, and establishes an annual assessment per ownership share. One-half of the member assessment is recorded in the first quarter of the calendar year and the other one-half of the member assessment is recorded in the third quarter of the calendar year. Assessments paid by the Company to HCIC are eliminated in consolidation of the financial statements.

HCIC does not reserve against any unpaid assessments. Assessments due, but unpaid, are secured by the member’s ownership of HCIC. The value of this ownership is significantly greater than the annual assessments.

Stock Based Compensation

Beginning January 1, 2006, the Company adopted the provisions of ASC 718 and accounts for stock-based compensation in accordance with ASC 718. Under the fair value recognition provisions of this standard, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which generally is the vesting period. The Company elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of ASC 718 apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified.

All options granted prior to the adoption of ASC 718 and outstanding during the periods presented were fully vested at the date of adoption.

In December 2007, the SEC issued Staff Accounting Bulletin (“SAB”) 110 which was issued to express the understanding that the use of a “simplified” method, as discussed in SAB 107 in developing an estimate of expected term of “plain vanilla” share options in accordance with ASC 718 would be acceptable beyond December 31, 2007. The Company adopted this standard beginning January 2008.

Net Income (Loss) per Share

Basic net income per share is computed by dividing net income (loss) attributed to the Company available to common shareholders for the period by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing the net income for the period by the weighted average number of common and potential common shares outstanding during the period.

The dilutive effect of the outstanding 3,122,615 RSUs, 2,014,867 options and 9,890,209 warrants at March 31, 2014, has not been included in the determination of diluted earnings per share since, under ASC 260 they would anti-dilutive.

Recently issued Accounting Pronouncements

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU No. 2013-11”). ASU No. 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with limited exceptions. ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013 and may be applied retrospectively. The adoption of the provisions of ASU No. 2013-11 is not expected to have a material impact on the company’s financial position or results of operations.

Management does not believe that any other recently issued, but not effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements.

NOTE 3 – INVESTMENTS AND LONG-LIVED ASSETS

Land

Upon purchasing land, the value is recorded at the purchase price or fair value, whichever is more accurate. Costs incurred to prepare the land for the intended purpose, which is efficient irrigated farming, is also capitalized in the recorded cost of the land. No amortization or depreciation is taken on land. However the land is reviewed by management at least once per year to ascertain if a further analysis is necessary for any potential impairments.

Water rights and infrastructure

The Company has acquired both direct flow water rights and water storage rights. It has obtained water rights through the purchase of shares in a mutual ditch company, which it accomplished through its purchase of shares in HCIC, or through the purchase of an entity holding water rights, which it effected through its purchase of a membership interest of Orlando. The Company may also acquire water rights through outright purchase. In all cases, such rights are recognized under decrees of the Colorado water court and administered under the jurisdiction of the Office of the State Engineer.

Upon purchasing water rights, the value is recorded at our purchase price. If a majority interest is acquired in a company holding water assets (potentially with other assets including water delivery infrastructure, right of ways, and land), the Company determines the fair value of the assets. To assist with the valuation, the Company may consider reports from a third-party valuation firm. If the value of the water rights is greater than what the Company paid then a bargain purchase gain is recognized. If the value of the water assets are less than what the Company paid then goodwill is recognized.

Subsequent to purchase, management periodically evaluates the carrying value of its assets, and if the carrying value is in excess of fair market value, the Company will establish an impairment allowance. Currently, there are no impairments on the Company’s land and water shares. No amortization or depreciation is taken on the water rights.

Dam and water infrastructure construction in progress

The Company has commenced engineering for the reconstruction of the dam owned by the HCIC. In addition the Company is in the process of rehabilitating various outlet gates, pipes and water gates. These costs are capitalized, and not amortized or depreciated until the dam reconstruction is completed in accordance with ASC 360 and 835.

Reconstruction costs are as follows:

	3 months ended		Year ended
	Mar 31, 2014		Dec 31, 2013
Beginning balance	$	34,000	$	34,000
Additions		-		-
Written off		34,000		-
Ending Balance	$	-	$	34,000

Intangible Assets

The Company acquired the Dionisio produce business and related equipment for $1,873,000 plus accrued interest of $30,000. The purchase price was allocated as follows:

Produce business	$	1,037,000
Equipment		836,000
Prepaid interest		30,000
Ending Balance	$	1,903,000

Based on the discounted cash flow analysis and assuming the average life of a customer is 20 years, the produce business has the following values:

	Mar. 31, 2014			Dec. 31, 2013
Customer list	$	580,000		$	580,000
Tradename		220,000			220,000
Residual goodwill		237,000			237,000
Purchase price		1,037,000			1,037,000
Less: Accumulated amortization		(53,000	)		(40,000	)
Intangible assets, net	$	984,000		$	997,000

The cost of the customer list and the tradename will be amortized on a straight-line basis over 20 years. The total amortization is $40,000 per year. The residual goodwill will be tested in December in each year for impairments, if any.

NOTE 4 – NOTES PAYABLE

Below is a summary of the Company’s long term debt:

				Mar 31, 2014
Note	Dec 31, 2013 Principal Bal.			Principal balance			Accrued interest		Interest rate			Security
HCIC seller carry back	$	7,896,000		$	7,719,000		$	-		6	%	Shares in the Mutual Ditch Company
Orlando seller carry back		188,000			188,000			33,000		7	%	188 acres of land
Series A convertible debt		110,000			85,000			6,000		6	%	F-1 assets
Series B convertible debt		405,000			405,000			30,000		6	%	F-2 assets
CWCB		1,151,000			1,104,000			3,000		2.5	%	Certain Orlando and Farmland assets
FirstOak Bank - Dionisio Farm		826,000			826,000			12,000		(1	)	Dionisio farmland and 146.4 shares of Bessemer Irrigating Ditch Company Stock, well permits
Seller Carry Back - Dionisio		590,000			590,000			9,000		6.0	%	Unsecured
FirstOak Bank - Mater		166,000			166,000			3,000		(1	)	Secured by Mater assets purchased
Seller Carry Back - Mater		25,000			25,000			-		6.0	%	Land from Mater purchase
McFinney Agri-Finance		645,000			644,000			-		6.8	%	2,579 acres of pasture land in Ellicott Colorado
Ellicott second mortgage		400,000			400,000			-		12.0	%	Second lien on above Ellicott land
ASF Note holders		2,036,000			528,000			-		8.0	%	ASF assets
Bridge Notes		1,300,000			-			-		12.0	%	Unsecured
Kirby Group		45,000			105,000			-		6.0	%
Equipment loans		485,000			540,000			8,000		5 - 8	%	Specific equipment
Total		16,268,000			13,325,000		$	104,000
Less: HCIC Discount		(548,000	)		(501,000	)
Less: Current portion		(2,759,000	)		(1,385,000	)
Long Term portion	$	12,961,000		$	11,439,000

Note 1: Prime rate +1%, but not less than 6%

NOTE 5 – INFORMATION ON BUSINESS SEGMENTS

The Company organizes its business segments based on the nature of the products and services offered. It focuses on water and farming with Two Rivers Water & Farming Company as the parent company. Therefore, it reports its segments by these lines of businesses: Farms and Water. Farms contain all of farming activity. Water contains all of our water activity. Our parent category is not a separate reportable operating segment. Segment allocations may differ from those on the face of the income statement.

In the following tables of financial data, the total of the operating results of these business segments is reconciled, as appropriate, to the corresponding consolidated amount. There are some corporate expenses that were not allocated to the business segments, and these expenses are contained in the “Total Operating Expenses” under Parent.

Operating results for each of the segments of the Company are as follows (in thousands):

	For the three months ended March 31, 2014												For the three months ended March 31, 2013
	Parent			Farms			Water			Total			Parent			Farms			Water			Total
Revenue
Other & misc.	$	-		$	2		$	3		$	5		$	-		$	-		$	-		$	-
Less: direct cost of revenue		-			-			-			-			-			-			-			-
Gross Margin		-			2			3			5			-			-			-			-
Expenses
Total operating expenses		860			118			66			1,045			1,200			533			252			1,985
Total other expense		300			8			14			322			39			25			132			196
Income (Loss) from operations before taxes		(1,160	)		(124	)		(77	)		(1,362	)		(1,239	)		(558	)		(384	)		(2,181	)
Income Taxes (Expense)/Credit		-			-			-			-			-			-			-			-
Net (loss)		(1,160	)		(124	)		(77	)		(1,362	)		(1,239	)		(558	)		(384	)		(2,181	)
Non-controlling interest		-			-			-			-			-			-			1			1
Preferred Dividends		390			-			-			390			-			-			-			-
Net (Loss) Income	$	(1,551	)	$	(124	)	$	(77	)	$	(1,752	)	$	(1,239	)	$	(558	)	$	(383	)	$	(2,180	)
Segment assets	$	1,763		$	12,981		$	27,332		$	42,076		$	304		$	12,485		$	33,029		$	45,818

NOTE 6 – EQUITY TRANSACTIONS

Common Stock

During the three months ended March 31, 2013, the Company had the following common stock transactions:

●	In February 2013 the Company issued 179,348 shares of our common stock to a consultant for work performed in 2012.

●	In February 2013 the Company issued 85,000 shares of our common stock to the independent members of the Board in exchange for Board of Director services rendered in 2012.

●	In March 2013 the Company issued 200,000 shares of our common stock to a consultant for investor relations work performed in first quarter, 2013.

●	In March 2013 the Company issued 100,000 shares of our common stock to an independent member of the DFP Board of Directors in exchange for services.

During the three months ended March 31, 2014, the Company had no common stock transactions.

NOTE 7 – SUBSEQUENT EVENTS

There were no material subsequent events through the date the financial statements were available to be issued.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context requires otherwise, references in this Form 10-Q to “we,” “our,” “us” and similar terms refer to Two Rivers Water & Farming Company and its subsidiaries.

Note about Forward-Looking Statements

This Form 10-Q contains forward-looking statements, such as statements relating to our financial condition, results of operations, plans, objectives, future performance and business operations. These statements relate to expectations concerning matters that are not historical facts. These forward-looking statements reflect our current views and expectations based largely upon the information currently available to us and are subject to inherent risks and uncertainties. Although we believe our expectations are based on reasonable assumptions, they are not guarantees of future performance and there are a number of important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. By making these forward-looking statements, we do not undertake to update them in any manner except as may be required by our disclosure obligations in filings we make with the Securities and Exchange Commission under the Federal securities laws. Our actual results may differ materially from our forward-looking statements.

Overview

Currently, there is a significant arbitrage between the value of irrigation water and municipal water in the semi-arid regions of the southwestern United States. The arbitrage is amplified by a predicted water supply shortage for municipalities in the near future. The arbitrage results in a 5-10 fold increase in the price of municipal water over irrigation water. First generation western water business models attempted to capture the arbitrage by “buying and drying” irrigated farmland in order to sell the irrigation water to municipalities. The practice fallowed some of the most productive irrigated farmland and decimated entire agricultural communities. The buy and dry model failed to generate any significant revenues and earnings for investors as political and legal challenges developed. The buy and dry model became politically, economically and legally untenable. In the late 19 th century, 85% of all water rights were granted to and are still primarily held by agriculture interests. Since then, populations have increased and people have moved from the farm to the city. This has resulted in a water shortage for municipalities, for which there must be a solution. Two Rivers has developed a more viable and sustainable solution than the buy and dry practices of the past.

Our business model reinvigorates, rather than decimates, agricultural communities and provides excess water to municipalities through market forces. Our core business converts irrigated farmland, which is marginally profitable growing low value feed crops, into highly profitable irrigated farmland growing high yield, high value, fruit and vegetable crops. Fruit & vegetable crops generate six times the revenue of feed crops with better margins. As a result of our higher revenue and better margins, we can afford to and are willing to pay a higher price for water. As the price of water increases, so does the supply. Farmers receive more for their crops and water. Municipal consumers pay more for excess water and make better water choices. The water arbitrage shrinks. Water supply and demand reaches equilibrium. Market action, between satisfied buyers and sellers from both the agricultural and municipal communities, rather than insurmountable political and legal processes, is the driving force of our business.

Our financial returns far outpace the revenues and margins generated by first generation western water business models. In the agricultural communities where we operate, we create new and better paying jobs for farming, marketing, handling and processing vegetables. In the municipal communities, we provide wholesale water not necessary for our core business, agriculture. We concentrate our acquisitions on water rights and infrastructure that are, in part, owned by municipalities, thereby letting the municipalities do the heavy legal and political lifting necessary to obtain excess water.

Results of Operations

For the Three Months Ended March 31, 2014, Compared to the Three Months Ended March 31, 2013

During the three months ended March 31, 2014 and March 31, 2013, we recognized no revenues from our farming operations and $5,000 versus $ -0- from other sources, respectively.

Operating expenses from continuing operations during the three months ended March 31, 2014 and 2013 were $963,000 and $1,985,000, respectively. The decrease of $1,022,000 was primarily due to the decrease of non-cash expense of granting of restrictive stock units (no expense for the three months ended March 31, 2014 compared to $680,000 for the three months ended March 31, 2013) and a reduction is stock and options issued for services ($64,000 for the three months ended March 31, 2014 compared to $763,000 for the three months ended March 31, 2013).

For operations, during the three months ended March 31, 2014 and 2013, we recognized a net loss of $958,000 and $1,985,000, respectively. The decreased loss of $1,027,000 is due primarily to the reasons stated above.

Net loss attributed to Two Rivers for the three months ended March 31, 2014 was $1,752,000, compared to a loss of $2,180,000 for the three months ended March 31, 2013. The decrease of $428,000 is due primarily to the reasons stated above, offset in part by declared dividends and distributions to Dionisio Farms & Produce, Inc. and TR Capital Partners, LLC, or TR Capital.

Liquidity and Capital Resources

From our inception through March 31, 2014, we have funded our operations primarily from the following sources:

-	Equity proceeds through private placements of Two Rivers Water & Farming Company and subsidiaries securities;

-	Revenue generated from operations;

-	Loans and lines of credit;

-	Sales of residential properties acquired through deed-in-lieu of foreclosure actions;

-	Sales of equity investments, and

-	Proceeds from the exercise of options.

As of March 31, 2014, we had no available line or letters of credit and do not intend to seek any such financing in the foreseeable future.

Cash flow from operations has not historically been sufficient to sustain our operations without the above additional sources of capital. As of March 31, 2014, we had cash and cash equivalents of $2,184,000. Cash flow consumed by our operating activities totaled $1,200,000 for the three months ended March 31, 2014, compared to operating activities consuming $999,000 for the three months ended March 31, 2013. The increase in the cash consumed by our operating activities is largely due to the expansion of our farming operations.

As of March 31, 2014, we had $2,635,000 in current assets and $2,338,000 in current liabilities. We expect TR Capital will receive an additional $3,000,000 through the sale of Preferred Units by June 30, 2014.

Cash used in investing activities was $42,000 for the three months ended March 31, 2014, compared to use of cash of $1,321,000 for the three months ended March 31, 2013. During the three months ended March 31, 2014, we purchased equipment compared to the three months ended March 31, 2013 we purchased land and invested in water infrastructure through the expenditure of $1,321,000.

Cash flows generated by our financing activities for the three months ended March 31, 2014, were $1,357,000 compared to $2,294,000 for the three months ended March 31, 2013. The decrease is primarily due to a reduction in borrowing. During the three months ended March 31, 2014, we initiated our TR Capital preferred membership unit offering and received gross proceeds of $1,700,000 and used $343,000 to pay down notes payable.

Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results from operations. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Conditions and Results of Operations where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements. Note that our preparation of this document requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Revenue Recognition

We follow specific and detailed guidelines in measuring revenue; however, certain judgments may affect the application of our revenue policy. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause our operating results to vary significantly from quarter to quarter and could result in future operating losses.

Goodwill and Intangible Assets

We have acquired water shares in HCIC, which is considered an intangible asset and shown on our balance sheet as part of “Water assets”. Currently, these shares are recorded at purchase price less our pro rata share of the negative net worth in HCIC. Management evaluates the carrying value, and if necessary, will establish an impairment of value to reflect current fair market value. Currently, there are no impairments on the water shares.

In 2012, we acquired a produce business, which is considered an intangible asset and shown on our balance sheet as “Intangible assets, net.” Management evaluated the purchase price of $1,037,000 and allocated this price to customer list, tradename and goodwill. See Note 3 to our Financial Statements for a detail allocation.

Seasonality of Farming Business

Our Farming Business is subject to seasonality. We begin planting early in the calendar year for harvesting that begins in early July and continues through November. Management believes that we have enough capital and outside capital resources to fund the farming inputs until revenue is generated.

Material Contractual Obligations

During the three months ended March 31, 2013, we purchased approximately an additional 4% of the shares of HCIC. For the purchase we assumed the sellers’ past due assessment to HCIC of $80,000, which was eliminated on consolidation. This transaction was recorded as a reclassification from HCIC non-controlling interest to additional paid in capital. Further, we committed to provide the sellers a 100-year water lease equal to 4% of the total water available through the HCIC system at no additional charge to the sellers.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to the impact of interest rate changes and change in the market values of our investments. Based on our market risk sensitive instruments outstanding as of March 31, 2014, as described below, management has determined that there was no material market risk exposure to our consolidated financial position, results of operations, or cash flows as of such date. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Interest Rate Risk

At March 31, 2014,our exposure to market rate risk for changes in interest rates relates primarily to its borrowings and opportunities for retiring or rolling over our debt. We have not used derivative financial instruments in its credit facilities. A hypothetical 10% increase in the prime rate would not be significant to our financial position, results of operations, or cash flows.

Impairment Policy

At least once every year, management examines all of our assets for proper valuation and to determine if an allowance for impairment is necessary. In terms of real estate owned, this impairment examination also includes the accumulated depreciation. Management examines market valuations and if an additional impairment is necessary for lower of cost or market, then an impairment charge is recorded.

Inflation

We do not believe that inflation will have a material negative impact on our future operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of interest rate changes and change in the market values of our real estate properties and water assets. Because we had no market risk sensitive instruments outstanding as of March 31, 2014, it was determined that there was no material market risk exposure to our consolidated financial position, results of operations, or cash flows as of such date. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

ITEM 4. CONTROLS AND PROCEDURES

Disclosures Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2014. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2014, and due to the material weakness in our internal control over financial reporting described in our Management's Annual Report on Internal Control over Financial Reporting accompanying our Annual Report on Form 10-K for the year ended December 31, 2013, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures over financial reporting were not effective during reporting periods ended December 31, 2013 and March 31, 2014 as discussed below.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2014, no changes other than those in conjunction with certain remediation efforts described below, were identified to our internal control over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

Remediation Efforts

In the three months ended March 31, 2014, we continued to implement the following measures that we initiated in fiscal 2013 to improve our internal controls over the financial reporting process.

We increased our controls over financial reporting through the engagement in 2014 of an outside review team of our recording of transaction through the publishing of our financials.

We are seeking to hire a new senior level accountant with one of this person’s main responsibilities is the overseeing of our established internal controls.

We plan to do another formal assessment of our internal controls before the end of our quarter ending September 30, 2014; thereby allowing for internal corrective action before the end of our fiscal year ending December 31, 2014.

We will continue to monitor the effectiveness of our internal control over financial reporting in the areas affected by the facts described above and employ any additional tools and resources deemed necessary to ensure that our financial statements are fairly stated in all material respects.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

The risks described in Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2013, could materially and adversely affect our business, financial condition and results of operations. These risk factors do not identify all risks that we face—our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. The Risk Factors section of our 2013 Annual Report on Form 10-K remains current in material respects.

ITEM 6. EXHIBITS

The following is a complete list of exhibits filed as part of this Form 10Q/A. Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of Regulation S-K.

Exhibit Number		Description
10.1		Limited Liability Company Agreement dated as of January 31, 2014 among TR Capital Partners, LLC and the Members named therein
10.2		Membership Interest Purchase Agreement dated as of January 31, 2014 among TR Capital Partners, LLC and the Investors named therein
10.3		Exchange Agreement dated as of January 31, 2014 among TR Capital Partners, LLC, Two Rivers Water and Farming Company and the Holders named therein
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2		Certification of Principal Financial Officer pursuant to the Section 302 of the Sarbanes-Oxley Act
32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TWO RIVERS WATER & FARMING COMPANY (Registrant)

Date: May 13, 2014	By:	/s/ John McKowen
		Chief Executive Officer & Chairman of the Board

Date: May 13, 2014	By:	/s/ Wayne Harding
		Chief Financial Officer & Principal Accounting Officer

EXHIBIT INDEX

Exhibit Number		Description
10.1		Limited Liability Company Agreement dated as of January 31, 2014 among TR Capital Partners, LLC and the Members named therein
10.2		Membership Interest Purchase Agreement dated as of January 31, 2014 among TR Capital Partners, LLC and the Investors named therein
10.3		Exchange Agreement dated as of January 31, 2014 among TR Capital Partners, LLC, Two Rivers Water and Farming Company and the Holders named therein
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2		Certification of Principal Financial Officer pursuant to the Section 302 of the Sarbanes-Oxley Act
32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

Exhibit 10.1

LIMITED LIABILITY COMPANY AGREEMENT

among

TR Capital Partners, LLC

and

Members Named in Schedule 1

Dated as of January __, 2014

Table of Contents

Page

Article I. Definitions		1
Section 1.01	Definitions	1
Section 1.02	Interpretation	11
Article II. Organization		12
Section 2.01	Formation	12
Section 2.02	Name	12
Section 2.03	Principal Office	12
Section 2.04	Registered Office and Agent	12
Section 2.05	Purpose and Powers	13
Section 2.06	Term	13
Section 2.07	No State-Law Partnership	13
Article III. Units		13
Section 3.01	Units Generally	13
Section 3.02	Authorization and Issuance of Preferred Units	13
Section 3.03	Authorization and Issuance of Common Units	13
Section 3.04	Authorization and Issuance of Incentive Units	14
Section 3.05	Other Issuances	15
Section 3.06	Certification of Units	15
Section 3.07	Action by Consent	15
Article IV. Members		16
Section 4.01	Admission of New Members	16
Section 4.02	Representations and Warranties of Members	16
Section 4.03	No Personal Liability	17
Section 4.04	No Withdrawal	17
Section 4.05	Death	17
Section 4.06	Voting	17
Section 4.07	Power of Members	17
Section 4.08	No Interest in Company Property	18
Article V. Capital Contributions; Capital Accounts		18
Section 5.01	Existing Capital Contributions	18
Section 5.02	Additional Capital Contributions	18
Section 5.03	Maintenance of Capital Accounts	18
Section 5.04	Succession Upon Transfer	19
Section 5.05	Negative Capital Accounts	19
Section 5.06	No Withdrawal	19
Section 5.07	Treatment of Loans From Members	19
Section 5.08	Modifications	19

Article VI. Allocations		19
Section 6.01	Allocation of Net Income and Net Loss	19
Section 6.02	Regulatory and Special Allocations	19
Section 6.03	Tax Allocations	21
Section 6.04	Allocations in Respect of Transferred Units	21
Section 6.05	Curative Allocations	21
Article VII. Distributions		22
Section 7.01	General	22
Section 7.02	Distributions on Preferred Units	22
Section 7.03	Priority of Distributions	23
Section 7.04	Limitations on Distributions to Incentive Units	24
Section 7.05	Tax Withholding; Withholding Advances	24
Section 7.06	Distributions in Kind	25
Article VIII. Management		26
Section 8.01	Establishment of the Board	26
Section 8.02	Board Composition; Vacancies	26
Section 8.03	Removal; Resignation	26
Section 8.04	Meetings	27
Section 8.05	Quorum; Manner of Acting	27
Section 8.06	Action By Written Consent	27
Section 8.07	Compensation; No Employment	28
Section 8.08	Committees	28
Section 8.09	Officers	28
Section 8.10	No Personal Liability	28
Article IX. Exchanges of Preferred Units		29
Section 9.01	Exchange Agreement	29
Section 9.02	Termination of Preferred Unit Rights Upon Exchange	29
Article X. Transfers		29
Section 10.01	General Restrictions on Transfer	29
Section 10.02	Incentive Units Call Right	30
Section 10.03	Incentive Units Put Right	32
Article XI. Confidentiality		33
Section 11.01	Nondisclosure	33
Section 11.02	Permtted Disclosures	34
Section 11.03	Excluded Information	34
Article XII. Tax Matters		34
Section 12.01	Tax Matters Member	34
Section 12.02	Tax Returns	35
Section 12.03	Company Funds	35
Article XIII. Dissolution and Liquidation		35
Section 13.01	Events of Dissolution	35
Section 13.02	Effectiveness of Dissolution	36
Section 13.03	Liquidation	36
Section 13.04	Cancellation of Articles	37
Section 13.05	Survival of Rights, Duties and Obligations	37
Section 13.06	Recourse for Claims	37
Article XIV. Exculpation and Indemnification		37
Section 14.01	Exculpation of Covered Persons	37
Section 14.02	Liabilities and Duties of Covered Persons	38
Section 14.03	Indemnification	38
Section 14.04	Survival	40
Article XV. Miscellaneous		40
Section 15.01	Further Assurances	40
Section 15.02	Notices	40
Section 15.03	Severability	40
Section 15.04	Entire Agreement	40
Section 15.05	Successors and Assigns	41
Section 15.06	No Third-Party Beneficiaries	41
Section 15.07	Amendment	41
Section 15.08	Waiver	41
Section 15.09	Governing Law	41
Section 15.10	Submission to Jurisdiction	41
Section 15.11	Waiver of Jury Trial	42
Section 15.12	Equitable Remedies	42
Section 15.13	Remedies Cumulative	42

Exhibit A	Form of Joinder Agreement
Schedule 1	Member Schedule

This Limited Liability Company Agreement of TR Capital Partners, LLC, a Colorado limited liability company (the “ Company ”), is entered into as of January __, 2014 among the Company and Two Rivers Water & Farming Company and each other individual or entity that after the date hereof becomes a member of the Company and a party hereto by executing a Joinder Agreement (as defined below).

Recitals

Whereas , the Company was formed under the laws of the State of Colorado by the filing of Articles of Organization with the Secretary of State of the State of Colorado on December 19, 2013 (the “ Articles of Organization ”);

Now, Therefore , in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

Definitions

Section 1.01. Definitions . The following terms shall have the meanings set forth or referenced below:

“ Adjusted Capital Account Deficit ” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

(a)

crediting to such Capital Account any amount that such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(I HBY); and

(b)

debiting to such Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

“ Affiliate ” means, with respect to any Person, any other Person who, directly or indirectly (including through one or more intermediaries), controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control,” when used with respect to any specified Person, shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or partnership or other ownership interests, by contract or otherwise; and the terms “controlling” and “controlled” shall have correlative meanings.

This “ Agreement ” means this Limited Liability Company Agreement, as executed and as it may be amended, modified, supplemented or restated from time to time, as provided herein.

“ Applicable Law ” means all applicable provisions of:

(a)

constitutions, treaties, statutes, laws (including the common law), rules, regulations, decrees, ordinances, codes, proclamations, declarations or orders of any Governmental Authority;

(b)

any consents or approvals of any Governmental Authority; and

(c)

any orders, decisions, advisory or interpretative opinions, injunctions, judgments, awards, decrees of, or agreements with, any Governmental Authority.

“ Articles of Organization ” has the meaning set forth in the Recitals.

“ Award Agreement ” means an award agreement entered into by the Company with a Service Provider to whom the Company grants Incentive Units.

“ Bankruptcy ” means, with respect to a Member, the occurrence of any of the following:

(a)

the filing of an application by such Member for, or a consent to, the appointment of a trustee of such Member’s assets;

(b)

the filing by such Member of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing such Member’s inability to pay its debts as they come due;

(c)

the making by such Member of a general assignment for the benefit of such Member’s creditors;

(d)

the filing by such Member of an answer admitting the material allegations of, or such Member’s consenting to, or defaulting in answering a bankruptcy petition filed against such Member in any bankruptcy proceeding; or

(e)

the expiration of sixty days following the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Member a bankrupt or appointing a trustee of such Member’s assets.

“ Board ” means the board of managers of the Company established in accordance with Section 8.01.

“ Book Depreciation ” means, with respect to any Company asset for each Fiscal Year, the Company’s depreciation, amortization or other cost recovery deductions determined for federal income tax purposes, except that if the Book Value of an asset differs from its adjusted tax basis at the beginning of such Fiscal Year, Book Depreciation shall be an amount that bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero and the Book Value of the asset is positive, Book Depreciation shall be determined with reference to such beginning Book Value using any permitted method selected by the Board in accordance with Treasury Regulations Section 1.704-1(b)( 2)(iv)( g )( 3).

“ Book Value ” means, with respect to any Company asset, the adjusted basis of such asset for federal income tax purposes, except as follows:

(a)

the initial Book Value of any Company asset contributed by a Member to the Company shall be the gross Fair Market Value of such Company asset as of the date of such contribution;

(b)

immediately prior to the Distribution by the Company of any Company asset to a Member, the Book Value of such asset shall be adjusted to its gross Fair Market Value as of the date of such Distribution;

(c)

the Book Value of all Company assets shall be adjusted to equal their respective gross Fair Market Values, as determined by the Board, as of the following times:

(i)	the acquisition of an additional Membership Interest in the Company by a new or existing Member in consideration of a Capital Contribution of more than a de minimis amount;

(ii)	the Distribution by the Company to a Member of more than a de minimis amount of property (other than cash) as consideration for all or a part of such Member’s Membership Interest in the Company;

(iii)

the grant to a Service Provider of any Incentive Units; and

(iv)	the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)( 2)(ii)(g);

provided that adjustments pursuant to clauses (i), (ii) and (iii) above need not be made if the Board reasonably determines that such adjustment is not necessary or appropriate to reflect the relative economic interests of the Members and that the absence of such adjustment does not adversely and disproportionately affect any Member;

(d)

the Book Value of each Company asset shall be increased or decreased, as the case may be, to reflect any adjustments to the adjusted tax basis of such Company asset pursuant to Code Section 734(b) or 743(b), but only to the extent that such adjustments are taken into account in determining Capital Account balances pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m); provided that Book Values shall not be adjusted pursuant to this clause (d) to the extent that an adjustment pursuant to clause (c) above is made in conjunction with a transaction that would otherwise result in an adjustment pursuant to this clause (d); and

(e)

if the Book Value of a Company asset has been determined pursuant to clause (a) above or adjusted pursuant to clause (c) or (d) above, such Book Value shall thereafter be adjusted to reflect the Book Depreciation taken into account with respect to such Company asset for purposes of computing Net Income and Net Losses.

“ Call Purchase Price ” means the Cause Purchase Price or Fair Market Value, as applicable pursuant to Section 10.02(a).

“ Capital Account ” has the meaning set forth in Section 5.03.

“ Capital Contribution ” means, for any Member, the total amount of cash and property contributed to the Company by such Member, as set forth opposite the name of such Member in the Member Schedule.

“ Cause ,” with respect to any particular Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “ Cause ” means any of the following:

(a)

such Service Provider’s repeated failure to perform substantially such Service Provider’s duties as an employee or other associate of the Company or any of the Subsidiaries (other than any such failure resulting from his Disability) which failure, whether committed willfully or negligently, has continued unremedied for more than thirty days after the Company has provided written notice thereof; provided that a failure to meet financial performance expectations shall not, by itself, constitute a failure by the Service Provider to substantially perform such Service Provider’s duties;

(b)

such Service Provider’s fraud or embezzlement;

(c)

such Service Provider’s material dishonesty or breach of fiduciary duty against the Company or any of the Subsidiaries;

(d)

such Service Provider’s willful misconduct or gross negligence that is injurious to the Company or any of the Subsidiaries;

(e)

any conviction of, or the entering of a plea of guilty or nolo contendere to, a crime that constitutes a felony (or any state-law equivalent) or that involves moral turpitude, or any willful or material violation by such Service Provider of any federal, state or foreign securities laws;

(f)

any conviction of any other criminal act or act of material dishonesty, disloyalty or misconduct by such Service Provider that has a material adverse effect on the property, operations, business or reputation of the Company or any of the Subsidiaries;

(g)

the unlawful use (including being under the influence) or possession of illegal drugs by such Service Provider on the premises of the Company or any of the Subsidiaries while performing any duties or responsibilities with the Company or any of the Subsidiaries;

(h)

the material violation by such Service Provider of any rule or policy of the Company or any of the Subsidiaries; or

(i)

the material breach by such Service Provider of any covenant undertaken in Section 11.01 or any effective Award Agreement, employment agreement or written non-disclosure, non-competition or non-solicitation agreement with the Company or any of the Subsidiaries.

“ Cause Purchase Price ” means, with respect to an Incentive Unit, the lesser of such Incentive Unit’s Fair Market Value and its Initial Cost.

“ Change of Control ” means:

(a)

the sale of all or substantially all of the consolidated assets of the Company and the Subsidiaries to a Third-Party Purchaser;

(b)

a sale resulting in no less than a majority of the Common Units on a Fully Diluted Basis being held by a Third-Party Purchaser; or

(c)

a merger, consolidation, recapitalization or reorganization of the Company with or into a Third-Party Purchaser that results in the inability of the Members to designate or elect a majority of the Managers (or the board of directors (or its equivalent) of the resulting entity or its parent company).

“ Code ” means the Internal Revenue Code of 1986.

“ Colorado Act ” means the Colorado Limited Liability Company Act, Title 7, Article 80 , Sections 80- 101, et seq. , and any successor statute, as it may be amended from time to time.

“ Common Managers ” has the meaning set forth in Section 8.02(a)(i).

“ Common Members ” means the Members who own Common Units as listed in the Member Schedule.

“ Common Units ” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Common Units” in this Agreement.

“ Company ” has the meaning set forth in the Preamble.

“ Company Interest Rate ” means a rate equal to the prime rate published in The Wall Street Journal on the date of payment plus two percent per annum.

“ Company Minimum Gain ” means “partnership minimum gain” as defined in Treasury Regulations Section 1.704-2(b)( 2), substituting the term “Company” for the term “partnership” as the context requires.

“ Confidential Information ” has the meaning set forth in Section 11.01.

“ Covered Person ” has the meaning set forth in Section 14.01(a).

“ Delay Condition ” means any of the following conditions:

(a)

the Company is prohibited from purchasing any Incentive Units by any Financing Document or by Applicable Law;

(b)

a default has occurred under any Financing Document and is continuing;

(c)

the purchase of any Incentive Units would, or in the good-faith opinion of the Board could, result in the occurrence of an event of default under any Financing Document or create a condition that would or could, with notice or lapse of time or both, result in such an event of default; or

(d)

the purchase of any Incentive Units would, in the good faith opinion of the Board, be imprudent in view of the financial condition of the Company, the anticipated impact of the purchase of such Incentive Units on the Company’s ability to meet its obligations under any Financing Document or otherwise in connection with its business and operations.

“ Disability ,” with respect to any Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “ Disability ” means such Service Provider’s incapacity due to physical or mental illness that:

(a)

shall have prevented such Service Provider from performing his duties for the Company or any of the Subsidiaries on a full-time basis for more than ninety or more consecutive days or an aggregate of 180 days in any 365-day period; or

(b)

(i) the Board determines, in compliance with Applicable Law, is likely to prevent such Service Provider from performing such duties for such period of time and (ii) thirty days have elapsed since delivery to such Service Provider of the determination of the Board and such Service Provider has not resumed such performance (in which case the date of termination in the case of a termination for “ Disability ” pursuant to this clause (b) shall be deemed to be the last day of such thirty-day period).

“ Distribution ” means a distribution made by the Company to a Member, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided that none of the following shall be a Distribution: (a) any redemption or repurchase by the Company or any Member of any Units or Unit Equivalents; (b) any recapitalization or exchange of securities of the Company, including any exchange of Preferred Units pursuant to the Exchange Agreement; (c) any subdivision (by a split of Units or otherwise) or any combination (by a reverse split of Units or otherwise) of any outstanding Units; or (d) any fees or remuneration paid to any Member in such Member’s capacity as a Service Provider for the Company or a Subsidiary. “ Distribute ” when used as a verb shall have a correlative meaning.

“ Electronic Transmission ” means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process.

“ Exchange Agreement ” means the Exchange Agreement dated as of the date hereof among the Company, Two Rivers Water & Farming Company and each of the Preferred Members from time to time.

“ Fair Market Value ” means, with respect to an asset as of a specified date, the purchase price that a willing buyer having all relevant knowledge would pay a willing seller for such asset in an arm’s-length transaction on such date, as determined in good faith by the Board based on such factors as the Board, in the exercise of its reasonable business judgment, considers relevant.

“ Financing Document ” means any credit agreement, guarantee, financing or security agreement or other agreements or instruments governing indebtedness of the Company or any of the Subsidiaries.

“ Fiscal Quarter ” means the first three-month period, second three-month period, third three-month period or fourth three-month period of a Fiscal Year.

“ Fiscal Year ” means the calendar year, unless the Company is required to have a taxable year other than the calendar year, in which case Fiscal Year shall be the period that conforms to the Company’s taxable year.

“ Forfeiture Allocations ” has the meaning set forth in Section 6.02(e).

“ Fully Diluted Basis ” means, as of any date of determination:

(a)

with respect to all Units, all issued and outstanding Units and all Units issuable upon the exercise of any outstanding Unit Equivalents as of such date, whether or not such Unit Equivalents are then exercisable; or

(b)

with respect to any specified type, class or series of Units, all issued and outstanding Units designated as such type, class or series and all such designated Units issuable upon the exercise of any outstanding Unit Equivalents as of such date, whether or not such Unit Equivalents are then exercisable.

“ GAAP ” means U.S. generally accepted accounting principles in effect from time to time.

“ Good Reason, ” with respect to any Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider or, if none, then “Good Reason” means any of the following actions taken without the Service Provider’s written consent:

(a)

a material reduction in the Service Provider’s base salary or the Service Provider’s ability to participate in Company incentive or bonus plans (other than a general reduction in base salary or bonuses that affects all salaried Service Providers equally);

(b)

the failure by the Company to pay to the Service Provider any material portion of the salary, bonus or other benefits owed to such Service Provider;

(c)

a substantial adverse change in the Service Provider’s duties and responsibilities or a material diminution in the Service Provider’s title, responsibility, or authority; or

(d)

a transfer of the Service Provider’s primary workplace by more than fifty miles from the Service Provider’s current workplace;

provided that Good Reason shall not be deemed to exist unless (i) the Company fails to cure the event giving rise to Good Reason within thirty days after written notice thereof given by the Service Provider to the Board, which notice shall (A) be delivered to the Board no later than twenty days following the Service Provider’s initial detection of the condition and (B) specifically set forth the nature of such event and the corrective action reasonably sought by the Service Provider and (ii) the Service Provider terminates his employment within thirty days following the last day of the foregoing cure period.

“ Governmental Authority ” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.

“ Incentive Liquidation Value ” means, as of the date of determination and with respect to new Incentive Units to be issued, the aggregate amount that would be Distributed to the Members pursuant to Section 7.03 if, immediately prior to the issuance of such Incentive Units, all of the assets of the Company were sold for Fair Market Value, the Company was immediately liquidated, the Company’s debts and liabilities were satisfied in full, and the proceeds of the liquidation were Distributed pursuant to Section 13.03(c).

“ Incentive Plan ” means a written plan, as in effect from time to time, pursuant to which Incentive Units may be granted in compliance with Rule 701 under the Securities Act or another applicable exemption.

“ Incentive Units ” means Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Incentive Units” in this Agreement and includes both Restricted Incentive Units and Unrestricted Incentive Units.

“ Initial Cost ” means, with respect to any Unit, the purchase price paid to the Company with respect to such Unit by the Member to whom such Unit was originally issued.

“ Intended Call Closing Date ” has the meaning set forth in Section 10.02(c)(i).

“ Intended Put Closing Date ” has the meaning set forth in Section 10.03(c)(i).

“ Joinder Agreement ” means a written undertaking substantially in the form of the joinder agreement attached as Exhibit A .

“ Liquidator ” has the meaning set forth in Section 13.03(a).

“ Losses ” has the meaning set forth in Section 14.03(a).

“ Manager ” has the meaning set forth in Section 8.01.

“ Member ” means:

(a)

Two Rivers Water & Farming Company, which as of the date of this Agreement holds 50,000,000 Common Units, has executed this Agreement and is identified as a Member on the Member Schedule, so long as it continues to be shown on the Member Schedule (as updated from time to time) as the owner of one or more Units; and

(b)

each Person who is hereafter admitted as a Member in accordance with the terms of this Agreement and the Colorado Act, in each case so long as such Person is shown on the Member Schedule (as updated from time to time) as the owner of one or more Units.

The Members shall constitute the “members” (as that term is defined in the Colorado Act) of the Company.

“ Member Nonrecourse Debt ” means “partner nonrecourse debt” as defined in Treasury Regulations Section 1.704-2(b)( 4), substituting the term “Company” for the term “partnership” and the term “Member” for the term “partner” as the context requires.

“ Member Nonrecourse Debt Minimum Gain ” means, with respect to any Member Nonrecourse Debt, an amount equal to the Company Minimum Gain that would result if the Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i)( 3).

“ Member Nonrecourse Deduction ” means “partner nonrecourse deduction” as defined in Treasury Regulations Section 1.704-2(i), substituting the term “Member” for the term “partner” as the context requires.

“ Member Schedule ” has the meaning set forth in Section 3.01.

“ Membership Interest ” means an interest in the Company owned by a Member, including such Member’s right (based on the type and class of Unit or Units held by such Member), as applicable, to:

(a)

a Distributive share of Net Income, Net Losses and other items of income, gain, loss and deduction of the Company,

(b)

a Distributive share of the assets of the Company,

(c)

vote on, consent to or otherwise participate in any decision of the Members as provided in this Agreement, and

(d)

any and all other benefits to which such Member may be entitled as provided in this Agreement or the Colorado Act.

“ Misallocated Item ” has the meaning set forth in Section 6.05.

“ National Exchange ” means the NASDAQ Global Market (including the NASDAQ Global Select Market), the NASDAQ Capital Market, the NYSE MKT, the New York Stock Exchange or any successor to any of the foregoing.

“ Net Income ” and “ Net Loss ” mean, for each Fiscal Year, Fiscal Quarter or other period specified in this Agreement, an amount equal to the Company’s taxable income or taxable loss, or particular items thereof, determined in accordance with Code Section 703(a) (where, for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)( 1) shall be included in taxable income or taxable loss), but with the following adjustments:

(a)

any income realized by the Company that is exempt from federal income taxation, as described in Code Section 705(a)(1)(B), shall be added to such taxable income or taxable loss, notwithstanding that such income is not includable in gross income;

(b)

any expenditures of the Company described in Code Section 705(a)(2)(B), including any items treated under Treasury Regulations Section 1.704-1(b)(2)(iv)(i) as items described in Code Section 705(a)(2)(B), shall be subtracted from such taxable income or taxable loss, notwithstanding that such expenditures are not deductible for federal income tax purposes;

(c)

any gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property so disposed, notwithstanding that the adjusted tax basis of such property differs from its Book Value;

(d)

any items of depreciation, amortization and other cost recovery deductions with respect to Company property having a Book Value that differs from its adjusted tax basis shall be computed by reference to the property’s Book Value (as adjusted for Book Depreciation) in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g);

(e)

if the Book Value of any Company property is adjusted as provided in the definition of Book Value, then the amount of such adjustment shall be treated as an item of gain or loss and included in the computation of such taxable income or taxable loss; and

(f)

to the extent an adjustment to the adjusted tax basis of any Company property pursuant to Code Section 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulations Section 1.704 1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).

“ New Interests ” has the meaning set forth in Section 3.05.

“ Nonrecourse Liability ” has the meaning set forth in Treasury Regulations Section 1.704-2(b)( 3).

“ Offering Service Provider ” has the meaning set forth in Section 10.03(a).

“ Officers ” has the meaning set forth in Section 8.09.

“ Person ” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“ Preferred Managers ” has the meaning set forth in Section 8.02(a)(ii).

“ Preferred Members ” means Members who own Preferred Units as listed in the Member Schedule.

“ Preferred Units ” means Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Preferred Units” in this Agreement.

“ Profits Interest ” has the meaning set forth in Section 3.04(d).

“ Profits Interest Hurdle ” means an amount set forth in each Award Agreement reflecting the Incentive Liquidation Value of the relevant Incentive Units at the time the units are issued.

“ Put Purchase Price ” has the meaning set forth in Section 10.03(a).

“ Regular Daily Accumulation ” has the meaning set forth in Section 7.02(a)(ii).

“ Regular Quarterly Accumulation ” has the meaning set forth in Section 7.02(a)(ii).

“ Regulatory Allocations ” has the meaning set forth in Section 6.02(d).

“ Representative ” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“ Restricted Incentive Units ” means any Incentive Units that have not vested pursuant to the terms of the Incentive Plan and any associated Award Agreement.

“ Securities Act ” means the Securities Act of 1933.

“ Service Provider Sale Notice ” has the meaning set forth in Section 10.03(b)(i).

“ Service Providers ” has the meaning set forth in Section 3.04(a).

“ Subsidiary ” means any Person of which a majority of the outstanding shares or other equity interests having the power to vote for directors or comparable managers are owned, directly or indirectly, by the Company.

“ Tax Matters Member ” has the meaning set forth in Section 12.01.

“ Taxing Authority ” has the meaning set forth in Section 7.05(b).

“ Third-Party Purchaser ” means any Person who, immediately prior to a contemplated transaction:

(a)

does not directly or indirectly own or have the right to acquire any outstanding Preferred Units or Common Units (or applicable Unit Equivalents) or

(b)

is not a Permitted Transferee of any Person who directly or indirectly owns or has the right to acquire any Preferred Units or Common Units (or applicable Unit Equivalents).

“ Transfer ” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Units owned by a Person or any interest (including a beneficial interest) in any Units or Unit Equivalents owned by a Person. “ Transfer ” when used as a noun shall have a correlative meaning. “ Transferor ” and “ Transferee ” mean a Person who makes or receives a Transfer, respectively.

“ Treasury Regulations ” means final or temporary regulations issued by the U.S. Department of Treasury pursuant to authority under the Code, and any successor regulations.

“ Unallocated Item ” has the meaning set forth in Section 6.05.

“ Unit ” means a unit representing a fractional part of the Membership Interests of the Members and shall include all types and classes of Units, including Preferred Units, Common Units and Incentive Units, provided that any type or class of Unit shall have the privileges, preference, duties, liabilities, obligations and rights set forth in this Agreement and the Membership Interests represented by such type or class or series of Unit shall be determined in accordance with such privileges, preference, duties, liabilities, obligations and rights.

“ Unit Equivalents ” means any security or obligation that is by its terms, directly or indirectly, convertible into, exchangeable or exercisable for Units and any option, warrant or other right to subscribe for, purchase or acquire Units.

“ Unrestricted Incentive Units ” means any Incentive Units that have vested pursuant to the terms of the Incentive Plan and any associated Award Agreement.

“ Withholding Advances ” has the meaning set forth in Section 7.05(b).

Section 1.02. Interpretation

. For purposes of this Agreement:

(a)

headings used in this Agreement are for convenience of reference only and shall not, for any purpose, be deemed a part of this Agreement;

(b)

any references herein to an Article, Section or Exhibit refer to an Article or Section of, or Exhibit attached to, this Agreement, unless specified otherwise;

(c)

the word “day” refers to a calendar day;

(d)

the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole;

(e)

the words “include,” “includes” and “including” as used herein shall not be construed so as to exclude any other thing not referred to or described;

(f)

the word “or” is not exclusive;

(g)

the definition given for any term in this Agreement shall apply equally to both the singular and plural forms of the term defined;

(h)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(i)

unless the context otherwise requires, (1) references herein to an agreement, instrument or other document mean such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (2) references herein to a statute means such statute as amended from time to time and includes any successor legislation thereto and any rules and regulations promulgated thereunder; and

(j)

this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

ARTICLE II

Organization

Section 2.01. Formation .

(a) The Company was formed on December 19, 2013, pursuant to the provisions of the Colorado Act, upon the filing of the Articles of Organization with the Secretary of State of the State of Colorado.

(b) This Agreement shall constitute the “operating agreement” (as that term is used in the Colorado Act) of the Company. The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Colorado Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than they would be under the Colorado Act in the absence of such provision, this Agreement shall, to the extent permitted by the Colorado Act, control.

Section 2.02. Name . The name of the Company shall be “TR Capital Partners, LLC” or such other name or names as the Board may from time to time designate; provided that the name shall always contain the words “Limited Liability Company” or the abbreviation “L.L.C.” or the designation “LLC.”

Section 2.03. Principal Office . The principal office of the Company shall be located at 2000 South Colorado Boulevard , Tower 1, Suite 3100, Denver, Colorado, or such other place as may from time to time be determined by the Board. The Board shall give prompt notice of any such change to each of the Members.

Section 2.04. Registered Office and Agent .

(a) The registered office of the Company shall be the office of the initial registered agent named in the Articles of Organization or such other office (which need not be a place of business of the Company) as the Board may designate from time to time in the manner provided by the Colorado Act and other Applicable Law.

(b) The registered agent for service of process on the Company in the State of Colorado shall be the initial registered agent named in the Articles of Organization or such other Person or Persons as the Board may designate from time to time in the manner provided by the Colorado Act and other Applicable Law.

Section 2.05. Purpose and Powers .

(a) The purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be formed under the Colorado Act and in any and all activities necessary or incidental thereto.

(b) The Company shall have all the powers necessary or convenient to carry out the purposes for which it is formed, including the powers granted by the Colorado Act.

Section 2.06. Term . The term of the Company commenced on December 19, 2013 and shall continue perpetually until the Company is dissolved in accordance with the provisions of this Agreement.

Section 2.07. No State-Law Partnership . The Members intend that the Company shall be treated as a partnership for federal and, if applicable, state and local income tax purposes, and, to the extent permissible, the Company shall elect to be treated as a partnership for such purposes. The Company and each Member shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment and no Member shall take any action inconsistent with such treatment. The Members intend that the Company shall not be a partnership (including a limited partnership) or joint venture and that no Member, Manager or Officer of the Company shall be a partner or joint venturer of any other Member, Manager or Officer of the Company, for any purposes other than as set forth in the first sentence of this Section 2.07.

ARTICLE III

Units

Section 3.01. Units Generally . Membership Interests of the Members shall be represented by issued and outstanding Units, which may be divided into one or more types, classes or series. Each type, class or series of Units shall have the privileges, preference, duties, liabilities, obligations and rights, including voting rights, if any, set forth in this Agreement with respect to such type, class or series. The Board shall maintain a schedule (the “ Member Schedule ”) setting forth the name and address of each Member and, with respect to each type, class or series of Units held by such Member, (a) the number and issue date thereof, (b) the number of the certificate (if any) issued therefor, (c) the Capital Contribution of the Member with respect thereto, and (d) such other information as the Board may determine to be desirable. The Company shall update the Member Schedule upon the issuance or Transfer of any Units to any new or existing Member. A copy of the Member Schedule as of the date of this Agreement is attached as Schedule 1 .

Section 3.02. Authorization and Issuance of Preferred Units . Subject to compliance with Section 10.01(a), the Company is hereby authorized to issue a class of Units designated as Preferred Units, of which no Preferred Units are outstanding as of the date of this Agreement. The Company may issue up to a total of 32,500,000 Preferred Units on or prior to September 30, 2014, but may neither issue a greater number of Preferred Units nor issue any Preferred Units after September 30, 2014, without obtaining the consent of Preferred Members holding a majority of the Preferred Units outstanding as of the date of such consent.

Section 3.03. Authorization and Issuance of Common Units . T he Company is hereby authorized to issue a class of Units designated as Common Units and, as of the date hereof, 50,000,000 Common Units have been issued and are outstanding.

Section 3.04. Authorization and Issuance of Incentive Units .

(a) The Company is hereby authorized to issue a class of Units designated as Incentive Units and to adopt the Incentive Plan. Incentive Units may be issued to Managers, Officers, employees, consultants or other service providers of the Company or any Subsidiary (collectively, “ Service Providers ”). In connection with issuances of Incentive Units, the Company is hereby authorized and directed to enter into an Award Agreement with each Service Provider whom the Board determines from time to time should receive Incentive Units. Each Award Agreement shall include such terms, conditions, rights and obligations as may be determined by the Board, in its sole discretion, consistent with the terms herein, and should be executed and delivered on behalf of the Company by an Officer designated by the Board.

(b) The Board shall establish such vesting criteria for the Incentive Units as it determines in its discretion and shall include such vesting criteria in the Incentive Plan or the applicable Award Agreement for any grant of Incentive Units.

(c) In connection with each issuance of Incentive Units, the Board shall determine in good faith the Incentive Liquidation Value applicably to such Incentive Units. In each Award Agreement for Incentive Units, the Board shall include an appropriate Profits Interest Hurdle for such Incentive Units on the basis of the Incentive Liquidation Value immediately prior to the issuance of such Incentive Units.

(d) The Company and each Member hereby acknowledge and agree that, with respect to any Service Provider, such Service Provider’s Incentive Units constitute a “profits interest” in the Company within the meaning of Rev. Proc. 93- 27 (a “ Profits Interest ”) and that any and all Incentive Units received by a Service Provider are received in exchange for the provision of services by the Service Provider to or for the benefit of the Company in a Service Provider capacity or in anticipation of becoming a Service Provider. The Company and each Service Provider who receives Incentive Units hereby agree to comply with the provisions of Rev. Proc. 2001- 43, and neither the Company nor any Service Provider who receives Incentive Units shall perform any act or take any position inconsistent with the application of Rev. Proc. 2001- 43 or any future Internal Revenue Service guidance or other Governmental Authority that supplements or supersedes the foregoing Revenue Procedures.

(e) Incentive Units shall receive the following tax treatment:

(i) The Company and each Service Provider who receives Incentive Units shall treat such Service Provider as the holder of such Incentive Units from the date of their receipt, and the Service Provider receiving such Incentive Units shall take into account his Distributive share of Net Income, Net Loss, income, gain, loss and deduction associated with the Incentive Units in computing such Service Provider’s income tax liability for the entire period during which such Service Provider holds the Incentive Units.

(ii) Each Service Provider who receives Incentive Units shall make a timely and effective election under Code Section 83(b) with respect to such Incentive Units and shall promptly provide a copy to the Company. Except as otherwise determined by the Board, the Company and all Members shall (A) treat such Incentive Units as outstanding for tax purposes, (B) treat such Service Provider as a partner for tax purposes with respect to such Incentive Units and (C) file all tax returns and reports consistently with the foregoing. Neither the Company nor any of its Members shall deduct any amount (as wages, compensation or otherwise) with respect to the receipt of such Incentive Units for federal income tax purposes.

(iii) In accordance with the finally promulgated successor rules to proposed Treasury Regulations Section 1.83-3(l) and IRS Notice 2005- 43, each Member, by executing this Agreement, authorizes and directs the Company to elect a safe harbor under which the fair market value of any Incentive Units issued after the effective date of such proposed Treasury Regulations (or other guidance) will be treated as equal to the liquidation value (within the meaning of the proposed Treasury Regulations or successor rules) of the Incentive Units as of the date of issuance of such Incentive Units. In the event that the Company makes a safe harbor election as described in the preceding sentence, each Member hereby agrees to comply with all safe harbor requirements with respect to Transfers of Units while the safe harbor election remains effective.

Section 3.05. Other Issuances . In addition to the Preferred Units, Common Units and Incentive Units, the Company is hereby authorized, subject to compliance with Section 10.01(a), to authorize and issue or sell to any Person any of the following (collectively, “ New Interests ”): (i) any new type, class or series of Units not otherwise described in this Agreement, which Units may be designated as classes or series of the Preferred Units, Common Units or Incentive Units but having different rights; and (ii) Unit Equivalents. The Board is hereby authorized, subject to Section 15.06, to amend this Agreement to reflect such issuance and to fix the relative privileges, preference, duties, liabilities, obligations and rights of any such New Interests, including the number of such New Interests to be issued, the preference (with respect to Distributions, in liquidation or otherwise) over any other Units, and any contributions required in connection therewith.

Section 3.06. Certification of Units . The Board shall cause the Company to issue to each Member a certificate or certificates representing the Units held by the Member. In addition to any other legend required by Applicable Law, all certificates representing issued and outstanding Units shall bear a legend substantially in the following form:

“THE UNITS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LIMITED LIABILITY COMPANY AGREEMENT AMONG THE COMPANY AND ITS MEMBERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH LIMITED LIABILITY COMPANY AGREEMENT.

“THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUE THAT SUCH REGISTRATION IS NOT REQUIRED.”

Section 3.07. Action by Consent . Any matter that is to be voted on, consented to or approved by the holders of any type, class or series of Membership Interests (including Common Units and Preferred Units) may be taken without a meeting, without prior notice and without a vote if consented to, in writing or by Electronic Transmission, by a Member or Members holding not less than a majority of such type, class or series of Membership Interests. A record shall be maintained by the Board of each such action taken by written consent of a Member or Members.

ARTICLE IV

Members

Section 4.01. Admission of New Members .

(a) New Members may be admitted from time to time (i) subject to compliance with the provisions of Sections 4.01(b) and 11.01(b) in connection with an issuance of Units by the Company and (ii) subject to compliance with the provisions of Section 4.01(b) and Article XI in connection with a Transfer of Units.

(b) In order for any Person not already a Member to be admitted as a Member, whether pursuant to an issuance or a Transfer of Units, such Person shall have executed and delivered a Joinder Agreement to the Company. Upon the amendment of the Member Schedule by the Board and the satisfaction of any other applicable conditions (including, if a condition, the receipt by the Company of payment for the issuance of the applicable Units), such Person shall be admitted as a Member and issued such Units and the Board shall adjust the Capital Accounts of the Members as necessary in accordance with Section 5.03.

Section 4.02. Representations and Warranties of Members . By execution and delivery of this Agreement or a Joinder Agreement, as applicable, each of the Members, whether admitted as of the date hereof or pursuant to Section 4.01, represents and warrants to the Company and acknowledges that:

(a) The Units have not been registered under the Securities Act or the securities laws of any other jurisdiction, are issued in reliance upon federal and state exemptions for transactions not involving a public offering and cannot be disposed of unless (i) they are subsequently registered or exempted from registration under the Securities Act and (ii) the provisions of this Agreement have been complied with.

(b) Such Member is an “accredited investor” within the meaning of Rule 501 under the Securities Act and agrees that such Member will not take any action that could have an adverse effect on the availability of the exemption from registration provided by Rule 501 under the Securities Act with respect to the offer and sale of the Units.

(c) Such Member’s Units are being acquired for its own account solely for investment and not with a view to resale or distribution thereof.

(d) Such Member has conducted its own independent review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and the Subsidiaries, and such Member acknowledges that it has been provided adequate access to the personnel, properties, premises and records of the Company and the Subsidiaries for such purpose.

(e) The determination of such Member to acquire Units has been made by such Member independent of any other Member and independent of any statements or opinions as to the advisability of such purchase or as to the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and the Subsidiaries that may have been made or given by any other Member or by any agent or employee of any other Member.

(f) Such Member has such knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of an investment in the Company and making an informed decision with respect thereto.

(g) Such Member is able to bear the economic and financial risk of an investment in the Company for an indefinite period of time.

(h) The execution, delivery and performance of this Agreement have been duly authorized by such Member and do not require such Member to obtain any consent or approval that has not been obtained and do not contravene or result in a default in any material respect under any provision of any law or regulation applicable to such Member or other governing documents or any agreement or instrument to which such Member is a party or by which such Member is bound.

(i) This Agreement is valid, binding and enforceable against such Member in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights or general equity principles (regardless of whether considered at law or in equity).

(j) Neither the issuance of any Units to any Member nor any provision contained herein will entitle the Member to remain in the employment of the Company or any Subsidiary or affect the right of the Company or any Subsidiary to terminate the Member’s employment at any time for any reason, other than as otherwise provided in such Member’s employment agreement or other similar agreement with the Company or such Subsidiary, if applicable.

None of the foregoing shall replace, diminish or otherwise adversely affect any Member’s representations and warranties made by it in any purchase agreement or Award Agreement, as applicable.

Section 4.03. No Personal Liability . Except as otherwise provided in the Colorado Act, by other Applicable Law or expressly in this Agreement, no Member will be obligated personally for any debt, obligation or liability of the Company, any Subsidiary or any other Member, whether arising in contract, tort or otherwise, solely by reason of being a Member.

Section 4.04. No Withdrawal . A Member shall not cease to be a Member as a result of the Bankruptcy of such Member. So long as a Member continues to hold any Units, such Member shall not have the ability to withdraw or resign as a Member prior to the dissolution and winding up of the Company and any such withdrawal or resignation or attempted withdrawal or resignation by a Member prior to the dissolution or winding up of the Company shall be null and void. As soon as any Person who is a Member ceases to hold any Units, such Person shall no longer be a Member; provided that this Agreement shall continue to apply with respect to any Units that have been surrendered for exchange pursuant to Section 10.02 until full payment is made therefor in accordance with the terms of this Agreement.

Section 4.05. Death . The death of any Member shall not cause the dissolution of the Company. In such event the Company and its business shall be continued by the remaining Member or Members and the Units owned by the deceased Member shall automatically be Transferred to such Member’s heirs; provided that within a reasonable time after such Transfer, the applicable heirs shall sign a Joinder Agreement.

Section 4.06. Voting . Except as otherwise provided by this Agreement (including Section 15.07) or as otherwise required by the Colorado Act or other Applicable Law, (a) each Member shall be entitled to one vote per Common Unit on all matters upon which the Members have the right to vote under this Agreement; and (b) Preferred Units and Incentive Units shall not entitle the holders thereof to vote on any matters required or permitted to be voted on by the Members.

Section 4.07. Power of Members . The Members shall have the power to exercise any and all rights or powers granted to Members pursuant to the express terms of this Agreement and the Colorado Act. Except as otherwise specifically provided by this Agreement or required by the Colorado Act, no Member, in its capacity as a Member, shall have the power to act for or on behalf of, or to bind, the Company.

Section 4.08. No Interest in Company Property . No real or personal property of the Company shall be deemed to be owned by any Member individually, but shall be owned by, and title shall be vested solely in, the Company. Without limiting the foregoing, each Member hereby irrevocably waives during the term of the Company any right that such Member may have to maintain any action for partition with respect to the property of the Company.

ARTICLE V

Capital Contributions; Capital Accounts

Section 5.01. Existing Capital Contributions . Two Rivers Water & Farming Company has made the Capital Contribution giving rise to its initial Capital Account and is deemed to own 50,000,000 Common Units on the date hereof.

Section 5.02. Additional Capital Contributions .

(a) No Member shall be required to make any additional Capital Contributions to the Company. Any future Capital Contributions made by any Member shall only be made with the consent of the Board.

(b) No Member shall be required to lend any funds to the Company or shall have any personal liability for the payment or repayment of any Capital Contribution by or to any other Member.

Section 5.03. Maintenance of Capital Accounts . The Company shall establish and maintain for each Member a separate capital account (a “ Capital Account ”) on its books and records in accordance with this Section 5.03. Each Capital Account shall be established and maintained in accordance with the following provisions:

(a) Each Member’s Capital Account shall be increased by the amount of:

(i)	such Member’s Capital Contributions, including such Member’s initial Capital Contribution;

(ii)	any Net Income or other item of income or gain allocated to such Member pursuant to Article VI ; and

(iii)

any liabilities of the Company that are assumed by such Member or secured by any property Distributed to such Member.

(b) Each Member’s Capital Account shall be decreased by:

(i)	the cash amount or Book Value of any property Distributed to such Member pursuant to Article VII and Section 13.03(c);

(ii)	the amount of any Net Loss or other item of loss or deduction allocated to such Member pursuant to Article VI ; and

(iii)

the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

Section 5.04. Succession Upon Transfer . In the event that any Membership Interests of Members are Transferred in accordance with the terms of this Agreement, the Transferee shall succeed to the Capital Account of the Transferor to the extent it relates to the Transferred Units and, subject to Section 6.04, shall receive allocations and Distributions pursuant to Article VI , Article VII and Article XIII in respect of such Units.

Section 5.05. Negative Capital Accounts . In the event that any Member shall have a deficit balance in its Capital Account, such Member shall have no obligation, during the term of the Company or upon dissolution or liquidation thereof, to restore such negative balance or make any Capital Contributions to the Company by reason thereof, except as may be required by Applicable Law or in respect of any negative balance resulting from a withdrawal of capital or dissolution in contravention of this Agreement.

Section 5.06. No Withdrawal . No Member shall be entitled to withdraw any part of its Capital Account or to receive any Distribution from the Company, except as provided in this Agreement. No Member shall receive any interest, salary or drawing with respect to its Capital Contributions or its Capital Account, except as otherwise provided in this Agreement. The Capital Accounts are maintained for the sole purpose of allocating items of income, gain, loss and deduction among the Members and shall have no effect on the amount of any Distributions to any Members, in liquidation or otherwise.

Section 5.07. Treatment of Loans From Members . Loans by any Member to the Company shall not be considered Capital Contributions and shall not affect the maintenance of such Member’s Capital Account, other than to the extent provided in (iii) , if applicable.

Section 5.08. Modifications . The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations. If the Board determines that it is prudent to modify the manner in which the Capital Accounts, or any increases or decreases to the Capital Accounts, are computed in order to comply with such Treasury Regulations, the Board may authorize such modifications.

ARTICLE VI

Allocations

Section 6.01. Allocation of Net Income and Net Loss . For each Fiscal Year (or portion thereof), except as otherwise provided in this Agreement, Net Income and Net Loss (and, to the extent necessary, individual items of income, gain, loss or deduction) of the Company shall be allocated among the Members in a manner such that, after giving effect to the special allocations set forth in Section 6.02 and the Preferred Unit Distributions set forth in Section 7.02, the Capital Account balance of each Member, immediately after making such allocations, is, as nearly as possible, equal to (a) the Distributions that would be made to such Member pursuant to Section 13.03(c) if the Company were dissolved and its affairs wound up, its assets sold for cash equal to their Book Value, all Company liabilities were satisfied (limited with respect to each Nonrecourse Liability to the Book Value of the assets securing such liability), the net assets of the Company were Distributed, in accordance with Section 13.03(c), to the Members immediately after making such allocations, minus (b) such Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets.

Section 6.02. Regulatory and Special Allocations . Notwithstanding the provisions of Section 6.01:

(a) If there is a net decrease in Company Minimum Gain (determined according to Treasury Regulations Section 1.704-2(d)( 1)) during any Fiscal Year, each Member shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g). The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(f)( 6) and 1.704-2(j)( 2). This Section 6.02(a) is intended to comply with the “minimum gain chargeback” requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

(b) Member Nonrecourse Deductions shall be allocated in the manner required by Treasury Regulations Section 1.704-2(i). Except as otherwise provided in Treasury Regulations Section 1.704-2(i)( 4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Fiscal Year, each Member that has a share of such Member Minimum Gain shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to that Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain. Items to be allocated pursuant to this paragraph shall be determined in accordance with Treasury Regulations Sections 1.704-2(i)( 4) and 1.704-2(j)( 2). This Section 6.02(b) is intended to comply with the “minimum gain chargeback” requirements in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(c) In the event any Member unexpectedly receives any adjustments, allocations or Distributions described in Treasury Regulations Section 1.704-1(b)( 2)(ii)(d)( 4), ( 5) or ( 6), Net Income shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or Distributions as quickly as possible. This Section 6.02(c) is intended to comply with the qualified income offset requirement in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(d) The allocations set forth in paragraphs (a), (b) and (c) above (the “ Regulatory Allocations ”) are intended to comply with certain requirements of the Treasury Regulations under Code Section 704. Notwithstanding any other provisions of this Article VI (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating Net Income and Net Losses among Members so that, to the extent possible, the net amount of such allocations of Net Income and Net Losses and other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to such Member if the Regulatory Allocations had not occurred.

(e) The Company and the Members acknowledge that allocations like those described in Proposed Treasury Regulations Section 1.704-1(b)( 4)(xii)(c) (“ Forfeiture Allocations ”) result from the allocations of Net Income and Net Loss provided for in this Agreement. For the avoidance of doubt, the Company is entitled to make Forfeiture Allocations and, once required by applicable final or temporary guidance, allocations of Net Income and Net Loss will be made in accordance with Proposed Treasury Regulations Section 1.704-1(b)( 4)(xii)(c) or any successor provision or guidance.

(f) If the Company from time to time holds municipal bonds or other securities and receives from such securities interest payments that are exempt from federal or state income taxes, any such interest payments shall be allocated first, and solely, to Preferred Members to the extent of Net Income allocable to the Preferred Members.

Section 6.03. Tax Allocations .

(a) Subject to clauses (b) through (e) of this Section 6.03, all income, gains, losses and deductions of the Company shall be allocated, for federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses and deductions among the Members for computing their Capital Accounts, except that if any such allocation for tax purposes is not permitted by the Code or other Applicable Law, the Company’s subsequent income, gains, losses and deductions shall be allocated among the Members for tax purposes, to the extent permitted by the Code and other Applicable Law, so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.

(b) Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall be allocated among the Members in accordance with Code Section 704(c) and the traditional method of Treasury Regulations Section 1.704-3(b), so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Book Value.

(c) If the Book Value of any Company asset is adjusted pursuant to Treasury Regulations Section 1.704-1(b)( 2)(iv)(f) as provided in clause (c) of the definition of Book Value, subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c).

(d) Allocations of tax credit, tax credit recapture and any items related thereto shall be allocated to the Members according to their interests in such items as determined by the Board taking into account the principles of Treasury Regulations Section 1.704-1(b)( 4)(ii).

(e) Allocations pursuant to this Section 6.03 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Losses, Distributions or other items pursuant to any provisions of this Agreement.

Section 6.04. Allocations in Respect of Transferred Units . In the event of a Transfer of Units during any Fiscal Year made in compliance with the provisions of Article X , Net Income, Net Losses and other items of income, gain, loss and deduction of the Company attributable to such Units for such Fiscal Year shall be determined using the interim closing of the books method.

Section 6.05. Curative Allocations . In the event that the Tax Matters Member determines, after consultation with counsel experienced in income tax matters, that the allocation of any item of Company income, gain, loss or deduction is not specified in this Article VI (an “ Unallocated Item ”), or that the allocation of any item of Company income, gain, loss or deduction hereunder is clearly inconsistent with the Members’ economic interests in the Company (determined by reference to the general principles of Treasury Regulations Section 1.704-1(b) and the factors set forth in Treasury Regulations Section 1.704-1(b)(3)(ii)) (a “ Misallocated Item ”), then the Board may allocate such Unallocated Items, or reallocate such Misallocated Items, to reflect such economic interests; provided that (a) no such allocation will be made without the prior consent of each Member that would be adversely and disproportionately affected thereby and (b) no such allocation shall have any material effect on the amounts distributable to any Member, including the amounts to be distributed upon the complete liquidation of the Company.

ARTICLE VII

Distributions

Section 7.01. General .

(a) Subject to Section 7.01(b) and 7.02, the Board shall have sole discretion regarding the amounts and timing of Distributions to Members, including to decide to forego payment of Distributions in order to provide for the retention and establishment of reserves of, or payment to third parties of, such funds as it deems necessary with respect to the reasonable business needs of the Company, which needs may include the payment or the making of provision for the payment when due of the Company’s obligations, including present and anticipated debts and obligations, capital needs and expenses, the payment of any management or administrative fees and expenses, and reasonable reserves for contingencies.

(b) Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make any Distribution to Members if su ch Distribution would violate either Colorado Act Section 80- 606 or any other Applicable Law.

Section 7.02. Distributions on Preferred Units .

(a) Quarterly Distributions .

(i) Subject in all respects to the more specific provisions set forth in clause (ii) of this Section 7.02(a), it is generally intended that Preferred Members receive regular quarterly Distributions with respect to each Fiscal Year that are (A) calculated to provide to Preferred Members an aggregate amount of Distributions that represents a return of 8.0% per annum on the total amount of Preferred Members’ Capital Contributions from time to time and (B) then allocated to Preferred Members pro rata, based on the respective numbers of Preferred Units they hold from time to time.

(ii) Subject to Section 7.01(b), the Company shall, by no later than the forty-fifth day after the last day of a Fiscal Quarter (commencing with the Fiscal Quarter ending March 31, 2014), Distribute to each Member who holds a Preferred Unit as of such Distribution date, an amount equal to the sum of the Regular Daily Accumulations for each of the days on which such Preferred Unit was outstanding as of 9 a.m., Mountain time, during such Fiscal Quarter (with respect to a specified Preferred Unit, a “ Regular Quarterly Accumulation ”). For purposes of this Section 7.02, “ Regular Daily Accumulation ” shall mean, with respect to a specified day:

(A)	8.0% divided by the total number of days in the Fiscal Year in which such day occurs, multiplied by

(B)	the aggregate amount of Capital Contributions of Preferred Members attributable to all Preferred Units that are outstanding as of 9 a.m., Mountain time, on such day, divided by

(C)	the total number of Preferred Units outstanding as of 9 a.m., Mountain time, on such day.

(iii) Upon request from a Preferred Member in connection with a proposed Transfer of Preferred Units, the Company will provide to such Preferred Member, as promptly as reasonably practicable, the total Regular Quarterly Accumulations with respect to such Preferred Units that have accumulated through a requested date but have not been Distributed.

(b) Supplemental Annual Distributions .

(i) Subject in all respects to the more specific provisions set forth in clause (ii) of this Section 7.02(b), it is generally intended that Preferred Members are eligible to receive supplemental annual Distributions with respect to each Fiscal Year that are (A) calculated to provide to Preferred Members an aggregate amount of Distributions that represents an additional return of up to 4.0% per annum on the total amount of Preferred Members’ Capital Contributions from time to time, subject to limitations based upon specified operating results of the Company for such Fiscal Year, and (B) then allocated to Preferred Members pro rata, based on the respective numbers of Preferred Units they hold from time to time.

(ii) Subject to Section 7.01(b), the Company shall, by no later than the earlier of (y) the thirtieth day after Two Rivers Water & Farming Company receives from its independent accountants an audit report with respect to its consolidated financial statements for a Fiscal Year (commencing with the Fiscal Year ending December 31, 2014) and (z) the one hundred twentieth day after the last day of such Fiscal Year, Distribute to each Member who holds a Preferred Unit as of such Distribution date the amount, if any, by which the product of:

(A)

the amount of the Company’s total revenue for such Fiscal Year less its cost of goods sold, interest expense, depreciation expense and amortization expense for such Fiscal Year (regardless of whether any such expense is reflected as a separate line item in the Company’s consolidated financial statements for such Fiscal Year or is included as part of a line item therein), each as determined in accordance with GAAP, multiplied by

(B)

a fraction, the numerator of which shall be the total of the Regular Quarterly Accumulations with respect to such Preferred Unit for all Fiscal Quarters during such Fiscal Year, and the denominator of which shall be the sum of all Regular Quarterly Accumulations with respect to all Preferred Units for all Fiscal Quarters during such Fiscal Year (calculated on a Preferred Member-by-Preferred Member basis, and then totaled),

exceeds the total of the Distributions made pursuant to Section 7.02(a) with respect to such Preferred Unit for such Fiscal Year (that is, the total of the Regular Quarterly Accumulations with respect to such Preferred Unit for all Fiscal Quarters in such Fiscal Year); provided that, notwithstanding the foregoing, the Distribution made pursuant to this Section 7.02(b) with respect to such Preferred Unit for such Fiscal Year shall not in any event exceed 50% of the total of the Distributions made pursuant to Section 7.02(a) with respect to such Preferred Unit for such Fiscal Year (that is, 50% of the total of the Regular Quarterly Accumulations with respect to such Preferred Unit for the Fiscal Quarters during such Fiscal Year).

Section 7.03. Priority of Distributions . After making all Distributions then due to Preferred Members under Section 7.02 and subject to the priority of Distributions pursuant to Section 13.03(c), if applicable, all Distributions determined to be made by the Board pursuant to Section 7.01 shall be made in the following manner:

(a)	first, to the Members pro rata in proportion to their holdings of Common Units, until Distributions under this clause (a) equal the aggregate amount of Capital Contributions attributable to the Members in respect of their acquisitions of Common Units; and

(b)	second , any remaining amounts to the Members holding Common Units and Incentive Units (subject to Section 7.04) pro rata in proportion to their aggregate holdings of Common Units and Incentive Units treated as one class of Units.

Section 7.04. Limitations on Distributions to Incentive Units .

(a) Notwithstanding the provisions of Section 7.03(b), no Distribution shall be made to a Member on account of its Restricted Incentive Units. Any amount that would otherwise be Distributed to such a Member but for the application of the preceding sentence shall instead be retained in a segregated Company account to be Distributed in accordance with Section 7.03(b) by the Company and paid to such Member if, as and when the Restricted Incentive Unit to which such retained amount relates vests pursuant to Section 3.04(b).

(b) It is the intention of the parties to this Agreement that Distributions to any Service Provider with respect to Incentive Units be limited to the extent necessary so that the related Membership Interest constitutes a Profits Interest. In furtherance of the foregoing, and notwithstanding anything to the contrary in this Agreement, the Board shall, if necessary, limit any Distributions to any Service Provider with respect to Incentive Units so that such Distributions do not exceed the available profits in respect of such Service Provider’s related Profits Interest. Available profits shall include the aggregate amount of profit and unrealized appreciation in all of the assets of the Company between the date of issuance of such Incentive Units and the date of such Distribution, it being understood that such unrealized appreciation shall be determined on the basis of the Profits Interest Hurdle applicable to such Incentive Unit.

Section 7.05. Tax Withholding; Withholding Advances .

(a) Tax Withholding . If requested by the Board, each Member shall, if able to do so, deliver to the Board:

(i)	an affidavit in form satisfactory to the Board that the applicable Member (or its members, as the case may be) is not subject to withholding under the provisions of any federal, state, local, foreign or other Applicable Law;

(ii)	any certificate that the Board may reasonably request with respect to any such laws; and

(iii)

any other form or instrument reasonably requested by the Board relating to any Member’s status under such law.

If a Member fails or is unable to deliver to the Board the affidavit described in the preceding clause (i) of Section 7.05, the Board may withhold amounts from such Member in accordance with Section 7.05(b).

(b) Withholding Advances . The Company is hereby authorized at all times to make payments (“ Withholding Advances ”) with respect to each Member in amounts required to discharge any obligation of the Company (as determined by the Tax Matters Member based on the advice of legal or tax counsel to the Company) to withhold or make payments to any federal, state, local or foreign taxing authority (a “ Taxing Authority ”) with respect to any Distribution or allocation by the Company of income or gain to such Member and to withhold the same from Distributions to such Member. Any funds withheld from a Distribution by reason of this Section 7.05(b) shall nonetheless be deemed Distributed to the Member in question for all purposes under this Agreement and, at the option of the Board, shall be charged against the Member’s Capital Account.

(c) Repayment of Withholding Advances . Any Withholding Advance made by the Company to a Taxing Authority on behalf of a Member and not simultaneously withheld from a Distribution to that Member shall be, with interest thereon accruing from the date of payment at the Company Interest Rate:

(i)

promptly repaid to the Company by the Member on whose behalf the Withholding Advance was made (which repayment by the Member shall not constitute a Capital Contribution, but shall credit the Member’s Capital Account if the Board shall have initially charged the amount of the Withholding Advance to the Capital Account); or

(ii)

with the consent of the Board, repaid by reducing the amount of the next succeeding Distribution or Distributions to be made to such Member (which reduction amount shall be deemed to have been Distributed to the Member, but shall not further reduce the Member’s Capital Account if the Board shall have initially charged the amount of the Withholding Advance to the Capital Account).

Interest shall cease to accrue from the time the Member on whose behalf the Withholding Advance was made repays such Withholding Advance (and all accrued interest) by either method of repayment described above.

(d) Indemnification . Each Member hereby agrees to indemnify and hold harmless the Company and the other Members from and against any liability with respect to taxes, interest or penalties that may be asserted by reason of the Company’s failure to deduct and withhold tax on amounts Distributable or allocable to such Member. The provisions of this Section 7.05(d) and the obligations of a Member pursuant to Section 7.05(c) shall survive the termination, dissolution, liquidation and winding up of the Company and the withdrawal of such Member from the Company or Transfer of its Units. The Company may pursue and enforce all rights and remedies it may have against each Member under this Section 7.05, including bringing a lawsuit to collect repayment with interest of any Withholding Advances.

(e) Overwithholding . Neither the Company nor the Board shall be liable for any excess taxes withheld in respect of any Distribution or allocation of income or gain to a Member. In the event of an overwithholding, a Member’s sole recourse shall be to apply for a refund from the appropriate Taxing Authority.

Section 7.06. Distributions in Kind .

(a) The Board is hereby authorized, in its sole discretion, to make Distributions to the Members in the form of securities or other property held by the Company, provided that Distributions pursuant to Section 7.02 shall only be made in cash. In any non-cash Distribution, the securities or property so Distributed will be Distributed among the Members in the same proportion and priority as cash equal to the Fair Market Value of such securities or property would be Distributed among the Members pursuant to Section 7.03.

(b) Any Distribution of securities shall be subject to such conditions and restrictions as the Board determines are required or advisable to ensure compliance with Applicable Law. In furtherance of the foregoing, the Board may require that Members execute and deliver such documents as the Board may deem necessary or appropriate to ensure compliance with all federal and state securities laws that apply to such Distribution and any further Transfer of the Distributed securities and may appropriately legend the certificates that represent such securities to reflect any restriction on Transfer with respect to such laws.

ARTICLE VIII

Management

Section 8.01. Establishment of the Board . The Board is hereby established and shall be comprised of natural Persons (each such Person, a “ Manager ”) who shall be appointed in accordance with the provisions of Section 8.02. The business and affairs of the Company shall be managed, operated and controlled by or under the direction of the Board, and the Board shall have, and is hereby granted, the full and complete power, authority and discretion for, on behalf of and in the name of the Company, to take such actions as it may in its sole discretion deem necessary or advisable to carry out any and all of the objectives and purposes of the Company, subject only to the terms of this Agreement.

Section 8.02. Board Composition; Vacancies .

(a) The Company and the Members shall take such actions as may be required to ensure that the number of managers constituting the Board initially is three and, at all times at which Preferred Units are outstanding, five. The Board shall be comprised as follows:

(i)	three individuals designated by the Common Members (the “ Common Managers ”), who initially shall be John McKowen, Wayne Harding and Kirsty Cameron; and

(ii)	at all times at which any Preferred Units are outstanding, two individuals designated by the Preferred Members (the “ Preferred Managers ”), who initially shall be [NAME] and [NAME].

(b) In the event that a vacancy is created on the Board at any time due to the death, Disability, retirement, resignation or removal of a Common Manager, then the Common Members shall have the right to designate and approve (in accordance with Section 3.07) an individual to fill such vacancy and the Company and each Member hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board.

(c) In the event that a vacancy is created on the Board at any time due to the death, Disability, retirement, resignation or removal of a Preferred Manager, then the Preferred Members shall have the right to designate an individual to fill such vacancy and the Company and each Member hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board.

Section 8.03. Removal; Resignation .

(a) A Common Manager may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the Common Members.

(b) A Preferred Manager may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the Preferred Members.

(c) A Manager may resign at any time from the Board by delivering a written resignation to the Board. Any such resignation shall be effective upon receipt thereof unless it is specified to be effective at some other time or upon the occurrence of some other event. The Board’s acceptance of a resignation shall not be necessary to make it effective.

Section 8.04. Meetings .

(a) Generally . The Board shall meet at such time and at such place as the Board may designate. Meetings of the Board may be held either in person or by means of telephone or video conference or other communications device that permits all Managers participating in the meeting to hear each other, at the principal office of the Company or such other place (either within or outside the State of Colorado) as may be determined from time to time by the Board. Written notice of each meeting of the Board shall be given to each Manager at least 24 hours prior to each such meeting.

(b) Special Meetings . Special meetings of the Board shall be held on the call of any three Managers upon at least three days’ written notice (if the meeting is to be held in person) or 24 hours’ written notice (if the meeting is to be held by telephone communications or video conference) to the Managers, or upon such shorter notice as may be approved by all the Managers. Any Manager may waive such notice as to himself.

(c) Attendance and Waiver of Notice . Attendance of a Manager at any meeting shall constitute a waiver of notice of such meeting, except where a Manager attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting.

Section 8.05. Quorum; Manner of Acting .

(a) Quorum . A majority of the Managers serving on the Board shall constitute a quorum for the transaction of business of the Board. At all times when the Board is conducting business at a meeting of the Board, a quorum of the Board must be present at such meeting. If a quorum shall not be present at any meeting of the Board, then the Managers present at the meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

(b) Participation . Any Manager may participate in a meeting of the Board by means of telephone or video conference or other communications device that permits all Managers participating in the meeting to hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. A Manager may vote or be present at a meeting either in person or by proxy, and such proxy may be granted in writing, by means of Electronic Transmission or as otherwise permitted by Applicable Law.

(c) Binding Act . Each Manager shall have one vote on all matters submitted to the Board or any committee thereof. With respect to any matter before the Board, the act of a majority of the Managers shall be the act of the Board.

Section 8.06. Action By Written Consent . Notwithstanding anything herein to the contrary, any action of the Board (or any committee of the Board) may be taken without a meeting if either (a) a written consent of a majority of the Managers on the Board (or committee) shall approve such action; provided that prior written notice of such action is provided to all Managers at least one day before such action is taken or (b) a written consent constituting all of the Managers on the Board (or committee) shall approve such action. Such consent shall have the same force and effect as a vote at a meeting where a quorum was present and may be stated as such in any document or instrument filed with the Secretary of State of Colorado.

Section 8.07. Compensation; No Employment .

(a) Managers shall be reimbursed for reasonable out-of-pocket expenses incurred in the performance of their duties as Managers, pursuant to such policies as are established by the Board from time to time. Nothing contained in this Section 8.07 shall be construed to preclude any Manager from serving the Company in any other capacity and receiving reasonable compensation for such services.

(b) This Agreement does not, and is not intended to, confer upon any Manager any rights with respect to continued employment by the Company, and nothing herein should be construed to have created any employment agreement with any Manager.

Section 8.08. Committees .

(a) Establishment . The Board may, by resolution, designate from among the Managers one or more committees, each of which shall be comprised of one or more Managers; provided that in no event may the Board designate any committee with all of the authority of the Board. Subject to the immediately preceding proviso, any such committee, to the extent provided in the resolution forming such committee, shall have and may exercise the authority of the Board, subject to the limitations set forth in Section 8.08(b). The Board may dissolve any committee or remove any member of a committee at any time.

(b) Limitation of Authority . No committee of the Board shall have the authority of the Board in reference to:

(i)	authorizing or making Distributions to Members;

(ii)	authorizing the issuance of any Membership Rights other than Incentive Units;

(iii)

approving a plan of merger or sale of the Company;

(iv)	recommending to the Members a voluntary dissolution of the Company or a revocation thereof;

(v)	filling vacancies in the Board; or

(vi)	altering or repealing any resolution of the Board that by its terms provides that it shall not be so amendable or repealable.

Section 8.09. Officers . The Board may appoint individuals as officers of the Company (the “ Officers ”) as it deems necessary or desirable to carry on the business of the Company and the Board may delegate to such Officers such power and authority as the Board deems advisable. No Officer need be a Member or Manager. Any individual may hold two or more offices of the Company. Each Officer shall hold office until his successor is designated by the Board or until his earlier death, resignation or removal. Any Officer may resign at any time upon written notice to the Board. Any Officer may be removed by the Board (acting by majority vote of all Managers other than the Officer being considered for removal, if applicable) with or without cause at any time. A vacancy in any office occurring because of death, resignation, removal or otherwise, may, but need not, be filled by the Board.

Section 8.10. No Personal Liability . Except as otherwise provided in the Colorado Act, by other Applicable Law or expressly in this Agreement, no Manager will be obligated personally for any debt, obligation or liability of the Company or any Subsidiary, whether arising in contract, tort or otherwise, solely by reason of being a Manager.

ARTICLE IX

Exchanges of Preferred Units

Section 9.01. Exchange Agreement . Contemporaneously with its execution and delivery of a Joinder Agreement, each Preferred Member shall execute and deliver to the Company and TRFW a written understanding pursuant to which such Preferred Member becomes a party to the Exchange Agreement.

Section 9.02. Termination of Preferred Unit Rights Upon Exchange . Upon the effective time of an exchange of a Preferred Unit as provided in Section 3.01 or 3.02 of the Exchange Agreement, the surrendered Preferred Unit shall no longer be outstanding and all rights under this Agreement with respect to such Preferred Unit, including the right to receive Distributions, will terminate. Thereafter, the Company may not resell such Preferred Unit except in accordance with the provisions of this Agreement relating to issuances of new Preferred Units, including the provisions of Sections 3.02 and 10.01.

ARTICLE X

Transfers

Section 10.01. General Restrictions on Transfer .

(a) Each Member acknowledges and agrees that it will not, directly or indirectly, Transfer any of its Units or Unit Equivalents, and the Company agrees that it shall not issue any Units or Unit Equivalents:

(i)

except as permitted under the Securities Act and other applicable federal or state securities or blue sky laws, and then, with respect to a Transfer of Units or Unit Equivalents, if requested by the Company, only upon delivery to the Company of an opinion of counsel in form and substance satisfactory to the Company to the effect that such Transfer may be effected without registration under the Securities Act;

(ii)	if such Transfer or issuance would cause the Company to be considered a “publicly traded partnership” under Code Section 7704(b) within the meaning of Treasury Regulations Section 1.7704-1(h)( 1)(ii), including the look-through rule in Treasury Regulations Section 1.7704-1(h)( 3);

(iii)

if such Transfer or issuance would affect the Company’s existence or qualification as a limited liability company under the Colorado Act;

(iv)	if such Transfer or issuance would cause the Company to lose its status as a partnership for federal income tax purposes;

(v)	if such Transfer or issuance would cause a termination of the Company for federal income tax purposes;

(vi)	if such Transfer or issuance would cause the Company or any of the Subsidiaries to be required to register as an investment company under the Investment Company Act of 1940; or

(vii)

if such Transfer or issuance would cause the assets of the Company or any of the Subsidiaries to be deemed “Plan Assets” as defined for purposes of the Employee Retirement Income Security Act of 1974 or result in any “prohibited transaction” thereunder involving the Company or any Subsidiary.

In any event, the Board may refuse the Transfer to any Person if such Transfer would have a material adverse effect on the Company as a result of any regulatory or other restrictions imposed by any Governmental Authority.

(b) Any Transfer or attempted Transfer of any Units or Unit Equivalents in violation of this Agreement shall be null and void, no such Transfer shall be recorded on the Company’s books and the purported Transferee in any such Transfer shall not be treated (and the purported Transferor shall continue be treated) as the holder of such Units or Unit Equivalents for all purposes of this Agreement.

(c) For the avoidance of doubt, any Transfer of Units or Unit Equivalents permitted by Section 10.02 or made in accordance with the procedures described in Section 10.03, as applicable, and purporting to be a sale, transfer, assignment or other disposal of the entire Membership Interest represented by such Units or Unit Equivalents, inclusive of all the rights and benefits applicable to such Membership Interest as described in the definition of the term “ Membership Interest, ” shall be deemed a sale, transfer, assignment or other disposal of such Membership Interest in its entirety as intended by the parties to such Transfer, and shall not be deemed a sale, transfer, assignment or other disposal of any less than all of the rights and benefits described in the definition of the term “ Membership Interest, ” unless otherwise explicitly agreed to by the parties to such Transfer.

Section 10.02. Incentive Units Call Right .

(a) Call Right . At any time prior to a Change of Control, following the termination of employment or other engagement of any Service Provider with the Company or any of the Subsidiaries, the Company may, at its election, require the Service Provider and any or all of such Service Provider’s Permitted Transferees to sell to the Company all or any portion of such Service Provider’s Incentive Units at the following respective purchase prices:

(i)	for the Restricted Incentive Units, under all circumstances of termination, their Cause Purchase Price;

(ii)	for the Unrestricted Incentive Units, their Cause Purchase Price in the event of:

(A)	the termination of such Service Provider’s employment or other engagement by the Company or any of the Subsidiaries for Cause; or

(B)	the resignation of such Service Provider for any reason other than Good Reason; and

(iii)

for the Unrestricted Incentive Units, a price equal to their Fair Market Value in the event of:

(A)	the termination of such Service Provider’s employment or other engagement by the Company or any of the Subsidiaries for a reason other than for Cause;

(B)	the resignation of such Service Provider at any time for Good Reason; or

(C)	the death or Disability of such Service Provider.

(b) Procedures .

(i) If the Company desires to exercise its right to purchase Incentive Units pursuant to this Section 10.02, the Company shall deliver to the Service Provider, within ninety days after the termination of such Service Provider’s employment or other engagement, a written notice (the “ Repurchase Notice ”) specifying the number of Incentive Units to be repurchased by the Company (the “ Repurchased Incentive Units ”) and the purchase price therefor in accordance with Section 10.02(a).

(ii) Each applicable Service Provider shall, at the closing of any purchase consummated pursuant to this Section 10.02, represent and warrant to the Company that:

(A)	such Service Provider has full right, title and interest in and to the Repurchased Incentive Units;

(B)	such Service Provider has all the necessary power and authority and has taken all necessary action to sell such Repurchased Incentive Units as contemplated by this Section 10.02; and

(C)	the Repurchased Incentive Units are free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement.

(iii) Subject to Section 10.02(c), the closing of any sale of Repurchased Incentive Units pursuant to this Section 10.02 shall take place no later than thirty days following receipt by the Service Provider of the Repurchase Notice. Subject to the existence of any Delay Condition, the Company shall pay the Call Purchase Price for the Repurchased Incentive Units by certified or official bank check or by wire transfer of immediately available funds. The Company shall give the Service Provider at least ten days’ written notice of the date of closing, which notice shall include the method of payment selected by the Company.

(c) Delay Condition . Notwithstanding the provisions of Section 10.02(b)(iii), the Company shall not be obligated to repurchase any Incentive Units if there exists a Delay Condition. In such event, the Company shall notify the Service Provider in writing as soon as practicable of such Delay Condition and the Company may thereafter:

(i)

defer the closing and pay the Call Purchase Price at the earliest practicable date on which no Delay Condition exists, in which case, the Call Purchase Price shall accrue interest at the Company Interest Rate from the latest date that the closing could have taken place pursuant to Section 10.02(b)(iii) (the “ Intended Call Closing Date ”) to the date the Call Purchase Price is actually paid; or

(ii)	pay the Call Purchase Price with a subordinated note (fully subordinated in right of payment and exercise of remedies to the lenders’ rights under any Financing Document) bearing interest at the Company Interest Rate from the Intended Call Closing Date until paid in full.

(d) Cooperation . The Service Provider shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 10.02, including entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate.

(e) Closing . At the closing of any sale and purchase pursuant to this Section 10.02, the Service Provider shall deliver to the Company a certificate or certificates representing the Incentive Units to be sold (if any), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the Call Purchase Price.

Section 10.03. Incentive Units Put Right .

(a) Put Right . At any time prior to a Change of Control, if a Service Provider’s employment or other engagement with the Company or any of the Subsidiaries is terminated as a result of such Service Provider’s death or Disability, and the Company has not delivered a Repurchase Notice pursuant to Section 10.02(b)(i) within ninety days of such termination, then, subject to the other provisions of this Section 10.03, such Service Provider and any or all of his Permitted Transferees (collectively, the “ Offering Service Provider ”) may elect to sell to the Company all or any percentage of the Unrestricted Incentive Units held by such Person at a price equal to the Fair Market Value of such Unrestricted Incentive Units as of the date of termination (the “ Put Purchase Price ”).

(b) Procedures .

(i) If the Offering Service Provider desires to sell Unrestricted Incentive Units pursuant to this Section 10.03, such Offering Service Provider shall deliver to the Company not more than ninety days after the date of termination of the Service Provider’s employment or other engagement a written notice (the “ Service Provider Sale Notice ”) specifying the number of Unrestricted Incentive Units to be sold (the “ Offered Unrestricted Incentive Units ”) by such Offering Service Provider.

(ii) By delivering the Service Provider Sale Notice, the Offering Service Provider represents and warrants to the Company that:

(A)	the Offering Service Provider has full right, title and interest in and to the Offered Unrestricted Incentive Units;

(B)	the Offering Service Provider has all the necessary power and authority and has taken all necessary action to sell such Offered Unrestricted Incentive Units as contemplated by this Section 10.03; and

(C)	the Offered Unrestricted Incentive Units are free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement.

(iii) Promptly following receipt of the Service Provider Sale Notice, the Company shall deliver to the Offering Service Provider a calculation of the Put Purchase Price for the Offered Unrestricted Incentive Units. The Offering Service Provider shall have the right to irrevocably rescind the Service Provider Sale Notice for a period of ten days following the delivery of such calculation.

(iv) Subject to Section 10.03(c), the closing of any sale of Offered Unrestricted Incentive Units pursuant to this Section 10.03 shall take place no later than thirty days following receipt by the Company of the Service Provider Sale Notice, if not otherwise rescinded pursuant to Section 10.03(b)(iii). Subject to the existence of any Delay Condition, the Company shall pay the Put Purchase Price for the Offered Unrestricted Incentive Units by certified or official bank check or by wire transfer of immediately available funds. The Company shall give the Offering Service Provider at least ten days’ written notice of the date of closing, which notice shall include the method of payment selected by the Company.

(c) Delay Condition . Notwithstanding the provisions of Section 10.03(b)(iv), the Company shall not be obligated to purchase any Offered Unrestricted Incentive Units if there exists a Delay Condition. In such event, the Company shall notify the Offering Service Provider in writing as soon as practicable of such Delay Condition and shall permit the Offering Service Provider, within ten days of receipt thereof, to rescind the Service Provider Sale Notice. If the Offering Service Provider does not rescind the Service Provider Sale Notice, the Service Provider Sale Notice shall remain outstanding and the Company may thereafter:

(i)

defer the closing and pay the Put Purchase Price at the earliest practicable date on which no Delay Condition exists, in which case, the Put Purchase Price shall accrue interest at the Company Interest Rate from the latest date that the closing could have taken place pursuant to Section 10.03(b)(iv) (the “ Intended Put Closing Date ”) to the date the Put Purchase Price is actually paid; or

(ii)	pay the Put Purchase Price with a subordinated note (fully subordinated in right of payment and exercise of remedies to the lenders’ rights under any Financing Document) bearing interest at the Company Interest Rate from the Intended Put Closing Date until paid in full.

(d) Cooperation . The Offering Service Provider shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 10.03, including entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate.

(e) Closing . At the closing of any sale and purchase pursuant to this Section 10.03, the Offering Service Provider shall deliver to the Company a certificate or certificates representing the Offered Unrestricted Incentive Units to be sold (if any), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the Put Purchase Price.

ARTICLE XI

Confidentiality

Section 11.01. Nondisclosure . Each Preferred Member acknowledges that during the term of this Agreement, he will have access to and become acquainted with trade secrets, proprietary information and confidential information belonging to the Company, the Subsidiaries and their Affiliates that are not generally known to the public, including information concerning business plans, financial statements and other information provided pursuant to this Agreement, operating practices and methods, expansion plans, strategic plans, marketing plans, contracts, customer lists or other business documents which the Company treats as confidential, in any format whatsoever (including oral, written, electronic or any other form or medium) (collectively, “ Confidential Information ”). In addition, each Preferred Member acknowledges that: (a) the Company has invested, and continues to invest, substantial time, expense and specialized knowledge in developing its Confidential Information; (b) the Confidential Information provides the Company with a competitive advantage over others in the marketplace; and (c) the Company would be irreparably harmed if the Confidential Information were disclosed to competitors or made available to the public. Without limiting the applicability of any other agreement to which any Preferred Member is subject, no Preferred Member shall, directly or indirectly, disclose or use (other than solely for the purposes of such Preferred Member monitoring and analyzing his investment in the Company or performing his duties as a Manager, Officer, employee, consultant or other service provider of the Company) at any time, including use for personal, commercial or proprietary advantage or profit, either during his association or employment with the Company or thereafter, any Confidential Information of which such Preferred Member is or becomes aware. Each Preferred Member in possession of Confidential Information shall take all appropriate steps to safeguard such information and to protect it against disclosure, misuse, espionage, loss and theft.

Section 11.02. Permitted Disclosures . Nothing contained in Section 11.01 shall prevent any Preferred Member from disclosing Confidential Information: (a) upon the order of any court or administrative agency; (b) upon the request or demand of any regulatory agency or authority having jurisdiction over such Preferred Member; (c) to the extent compelled by legal process or required or requested pursuant to subpoena, interrogatories or other discovery requests; (d) to the extent necessary in connection with the exercise of any remedy hereunder; (e) to other Members; (f) to such Preferred Member’s Representatives who, in the reasonable judgment of such Preferred Member, need to know such Confidential Information and agree to be bound by the provisions of this Article XI as if a Preferred Member; or (g) to any potential Permitted Transferee in connection with a proposed Transfer of Units from such Preferred Member, as long as such Transferee agrees to be bound by the provisions of this Article XI as if a Preferred Member; provided that in the case of clause (a), (b) or (c), such Preferred Member shall notify the Company and other Members of the proposed disclosure as far in advance of such disclosure as practicable (but in no event make any such disclosure before notifying the Company and other Members) and use reasonable efforts to ensure that any Confidential Information so disclosed is accorded confidential treatment satisfactory to the Company, when and if available.

Section 11.03. Excluded Information . The restrictions of Section 11.01 shall not apply to Confidential Information that: (a) is or becomes generally available to the public other than as a result of a disclosure by a Preferred Member in violation of this Agreement; (b) is or becomes available to a Preferred Member or any of its Representatives on a non-confidential basis prior to its disclosure to the receiving Preferred Member and any of its Representatives in compliance with this Agreement; (c) is or has been independently developed or conceived by such Preferred Member without use of Confidential Information; or (d) becomes available to the receiving Preferred Member or any of its Representatives on a non-confidential basis from a source other than the Company, any other Member or any of their respective Representatives; provided that such source is not known by the recipient of the Confidential Information to be bound by a confidentiality agreement with the disclosing Member or any of its Representatives.

ARTICLE XII

Tax Matters

Section 12.01. Tax Matters Member .

(a) Appointment . The Members hereby appoint Two Rivers Water & Farming Company as the “ Tax Matters Member ” who shall serve as the “tax matters partner” (as such term is defined in Code Section 6231) for the Company.

(b) Tax Examinations and Audits . The Tax Matters Member is authorized and required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by Taxing Authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. Each Member agrees to cooperate with the Tax Matters Member and to do or refrain from doing any or all things reasonably requested by the Tax Matters Member with respect to the conduct of examinations by Taxing Authorities and any resulting proceedings. Each Member agrees that any action taken by the Tax Matters Member in connection with audits of the Company shall be binding upon such Members and that such Member shall not independently act with respect to tax audits or tax litigation affecting the Company.

(c) Income Tax Elections . The Tax Matters Member shall have sole discretion to make any income tax election it deems advisable on behalf of the Company; provided that the Tax Matters Member will make an election under Code Section 754, if requested in writing by Members holding a majority of the outstanding Common Units. All determinations as to tax elections and accounting principles shall be made solely by the Tax Matters Member.

(d) Tax Returns and Tax Deficiencies . Each Member agrees that such Member shall not treat any Company item inconsistently on such Member’s federal, state, foreign or other income tax return with the treatment of the item on the Company’s return. The Tax Matters Member shall have sole discretion to determine whether the Company (either on its own behalf or on behalf of the Members) will contest or continue to contest any tax deficiencies assessed or proposed to be assessed by any Taxing Authority. Any deficiency for taxes imposed on any Member (including penalties, additions to tax or interest imposed with respect to such taxes) will be paid by such Member and if required to be paid (and actually paid) by the Company, will be recoverable from such Member as provided in Section 7.05(d).

(e) Resignation . The Tax Matters Member may resign at any time. If Two Rivers Water & Farming Company ceases to be the Tax Matters Member for any reason, the holders of a majority of the Company shall appoint a new Tax Matters Member.

Section 12.02. Tax Returns . At the expense of the Company, the Board (or any Officer that it may designate pursuant to Section 8.09) shall endeavor to cause the preparation and timely filing (including extensions) of all tax returns required to be filed by the Company pursuant to the Code as well as all other required tax returns in each jurisdiction in which the Company and the Subsidiaries own property or do business. As soon as reasonably possible after the end of each Fiscal Year, the Board or designated Officer will cause to be delivered to each Person who was a Member at any time during such Fiscal Year, IRS Schedule K-1 to Form 1065 and such other information with respect to the Company as may be necessary for the preparation of such Person’s federal, state and local income tax returns for such Fiscal Year.

Section 12.03. Company Funds . All funds of the Company shall be deposited in its name, or in such name as may be designated by the Board, in such checking, savings or other accounts, or held in its name in the form of such other investments as shall be designated by the Board. The funds of the Company shall not be commingled with the funds of any other Person. All withdrawals of such deposits or liquidations of such investments by the Company shall be made exclusively upon the signature or signatures of such Officer or Officers as the Board may designate.

ARTICLE XIII

Dissolution and Liquidation

Section 13.01. Events of Dissolution . The Company shall be dissolved and is affairs wound up only upon the occurrence of any of the following events:

(a)	the determination of the Board to dissolve the Company;

(b)	an election to dissolve the Company made by holders of a majority of the Common Units;

(c)	the sale, exchange, involuntary conversion, or other disposition or Transfer of all or substantially all the assets of the Company; or

(d)	the entry of a decree of judicial dissolution under Colorado Act Section 80- 810.

Section 13.02. Effectiveness of Dissolution . Dissolution of the Company shall be effective on the day on which the event described in Section 13.01 occurs, but the Company shall not terminate until the winding up of the Company has been completed, the assets of the Company have been distributed as provided in Section 13.03 and the Articles of Organization shall have been cancelled as provided in Section 13.04.

Section 13.03. Liquidation . If the Company is dissolved pursuant to Section 13.01, the Company shall be liquidated and its business and affairs wound up in accordance with the Colorado Act and the following provisions:

(a) Liquidator . The Board, or, if the Board is unable to do so, a Person selected by the holders of a majority of the Common Units, shall act as liquidator to wind up the Company (the “ Liquidator ”). The Liquidator shall have full power and authority to sell, assign, and encumber any or all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and business-like manner.

(b) Accounting . As promptly as possible after dissolution and again after final liquidation, the Liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company’s assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable.

(c) Distribution of Proceeds . The Liquidator shall liquidate the assets of the Company and Distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of Applicable Law:

(i)	first , to the payment of all of the Company’s debts and liabilities to its creditors (including Members, if applicable) and the expenses of liquidation (including sales commissions incident to any sales of assets of the Company);

(ii)	second , to the establishment of and additions to reserves that are determined by the Board in its sole discretion to be reasonably necessary for any contingent unforeseen liabilities or obligations of the Company;

(iii)

third, to the Preferred Members in an amount equal to $ 1.00 for each Preferred Unit; and

(iv)	fourth , to Members other than Preferred Members in the same manner as Distributions are made under Section 7.02.

(d) Discretion of Liquidator . Notwithstanding the provisions of Section 13.03(c) that require the liquidation of the assets of the Company, but subject to the order of priorities set forth in Section 13.03(c), if upon dissolution of the Company the Liquidator determines that an immediate sale of part or all of the Company’s assets would be impractical or could cause undue loss to the Members, the Liquidator may defer the liquidation of any assets except those necessary to satisfy Company liabilities and reserves, and may, in its absolute discretion, Distribute to the Members, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.03(c), undivided interests in such Company assets as the Liquidator deems not suitable for liquidation. Any such Distribution in kind will be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operating of such properties at such time. For purposes of any such Distribution, any property to be Distributed will be valued at its Fair Market Value.

Section 13.04. Cancellation of Articles . Upon completion of the Distribution of the assets of the Company as provided in Section 13.03(c), the Company shall be terminated and the Liquidator shall cause the cancellation of the Articles of Organization in the State of Colorado and of all qualifications and registrations of the Company as a foreign limited liability company in jurisdictions other than the State of Colorado and shall take such other actions as may be necessary to terminate the Company.

Section 13.05. Survival of Rights, Duties and Obligations . Dissolution, liquidation, winding up or termination of the Company for any reason shall not release any party from any Loss which at the time of such dissolution, liquidation, winding up or termination already had accrued to any other party or which thereafter may accrue in respect of any act or omission prior to such dissolution, liquidation, winding up or termination. For the avoidance of doubt, none of the foregoing shall replace, diminish or otherwise adversely affect any Member’s right to indemnification pursuant to Section 14.03.

Section 13.06. Recourse for Claims . Each Member shall look solely to the assets of the Company for all Distributions with respect to the Company, such Member’s Capital Account, and such Member’s share of Net Income, Net Loss and other items of income, gain, loss and deduction, and shall have no recourse therefor (upon dissolution or otherwise) against the Board, the Liquidator or any other Member.

ARTICLE XIV

Exculpation and Indemnification

Section 14.01. Exculpation of Covered Persons .

(a) Covered Persons . As used herein, the term “ Covered Person ” shall mean (i) each Member, (ii) each officer, director, shareholder, partner, member, controlling Affiliate, employee, agent or representative of each Member, and each of their controlling Affiliates, and (iii) each Manager, Officer, employee, agent or representative of the Company.

(b) Standard of Care . No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any action taken or omitted to be taken by such Covered Person in good-faith reliance on the provisions of this Agreement, so long as such action or omission does not constitute fraud or willful misconduct by such Covered Person.

(c) Good Faith Reliance . A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, Net Income or Net Losses of the Company or any facts pertinent to the existence and amount of assets from which Distributions might properly be paid) of the following Persons or groups: (i) another Manager; (ii) one or more Officers or employees of the Company; (iii) any attorney, independent accountant, appraiser or other expert or professional employed or engaged by or on behalf of the Company; or (iv) any other Person selected in good faith by or on behalf of the Company, in each case as to matters that such relying Person reasonably believes to be within such other Person’s professional or expert competence. The preceding sentence shall in no way limit any Person’s right to rely on informat ion to the extent provided in the Colorado Act.

Section 14.02. Liabilities and Duties of Covered Persons .

(a) Limitation of Liability . This Agreement is not intended to, and does not, create or impose any fiduciary duty on any Covered Person. Furthermore, each of the Members and the Company hereby waives any and all fiduciary duties that, absent such waiver, may be implied by Applicable Law, and in doing so, acknowledges and agrees that the duties and obligation of each Covered Person to each other and to the Company are only as expressly set forth in this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Covered Person.

(b) Duties . Whenever in this Agreement a Covered Person is permitted or required to make a decision (including a decision that is in such Covered Person’s “discretion” or under a grant of similar authority or latitude), the Covered Person shall be entitled to consider only such interests and factors as such Covered Person desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Company or any other Person. Whenever in this Agreement a Covered Person is permitted or required to make a decision in such Covered Person’s “good faith,” the Covered Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or any Applicable Law.

Section 14.03. Indemnification .

(a) Indemnification . To the fullest extent permitted by the Colorado Act, as the same now exists or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than the Colorado Act permitted the Company to provide prior to such amendment, substitution or replacement), the Company shall indemnify, hold harmless, defend, pay and reimburse any Covered Person against any and all losses, claims, damages, judgments, fines or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending against such losses, claims, damages, judgments, fines or liabilities, and any amounts expended in settlement of any claims (collectively, “ Losses ”) to which such Covered Person may become subject by reason of:

(i)	any act or omission or alleged act or omission performed or omitted to be performed on behalf of the Company, any Member or any Affiliate of the foregoing in connection with the business of the Company; or

(ii)

the fact that such Covered Person is or was acting in connection with the business of the Company as a partner, member, stockholder, controlling Affiliate, manager, director, officer, employee or agent of the Company, any Member, or any of their respective controlling Affiliates, or that such Covered Person is or was serving at the request of the Company as a partner, member, manager, director, officer, employee or agent of any Person including the Company or any Subsidiary;

provided that (A) such Covered Person acted in good faith and in a manner believed by such Covered Person to be in, or not opposed to, the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful and (B) such Covered Person’s conduct did not constitute fraud or willful misconduct, in either case as determined by a final, nonappealable order of a court of competent jurisdiction. In connection with the foregoing, the termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Covered Person did not act in good faith or, with respect to any criminal proceeding, had reasonable cause to believe that such Covered Person’s conduct was unlawful, or that the Covered Person’s conduct constituted fraud or willful misconduct.

(b) Reimbursement . The Company shall promptly reimburse (and/or advance to the extent reasonably required) each Covered Person for reasonable legal or other expenses (as incurred) of such Covered Person in connection with investigating, preparing to defend or defending any claim, lawsuit or other proceeding relating to any Losses for which such Covered Person may be indemnified pursuant to this Section 14.03; provided that if it is finally judicially determined that such Covered Person is not entitled to the indemnification provided by this Section 14.03, then such Covered Person shall promptly reimburse the Company for any reimbursed or advanced expenses.

(c) Entitlement to Indemnity . The indemnification provided by this Section 14.03 shall not be deemed exclusive of any other rights to indemnification to which those seeking indemnification may be entitled under any agreement or otherwise. The provisions of this Section 14.03 shall continue to afford protection to each Covered Person regardless of whether such Covered Person remains in the position or capacity pursuant to which such Covered Person became entitled to indemnification under this Section 14.03 and shall inure to the benefit of the executors, administrators, legatees and distributees of such Covered Person.

(d) Insurance . To the extent available on commercially reasonable terms, the Company may purchase, at its expense, insurance to cover Losses covered by the foregoing indemnification provisions and to otherwise cover Losses for any breach or alleged breach by any Covered Person of such Covered Person’s duties in such amount and with such deductibles as the Board may determine; provided that the failure to obtain such insurance shall not affect the right to indemnification of any Covered Person under the indemnification provisions contained herein, including the right to be reimbursed or advanced expenses or otherwise indemnified for Losses hereunder. If any Covered Person recovers any amounts in respect of any Losses from any insurance coverage, then such Covered Person shall, to the extent that such recovery is duplicative, reimburse the Company for any amounts previously paid to such Covered Person by the Company in respect of such Losses.

(e) Funding of Indemnification Obligation . Notwithstanding anything contained herein to the contrary, any indemnity by the Company relating to the matters covered in this Section 14.03 shall be provided out of and to the extent of Company assets only, and no Member (unless such Member otherwise agrees in writing) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity by the Company.

(f) Savings Clause . If this Section 14.03 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Covered Person pursuant to this Section 14.03 to the fullest extent permitted by any applicable portion of this Section 14.03 that shall not have been invalidated and to the fullest extent permitted by Applicable Law.

(g) Amendment . The provisions of this Section 14.03 shall be a contract between the Company, on the one hand, and each Covered Person who served in such capacity at any time while this Section 14.03 is in effect, on the other hand, pursuant to which the Company and each such Covered Person intend to be legally bound. No amendment, modification or repeal of this Section 14.03 that adversely affects the rights of a Covered Person to indemnification for Losses incurred or relating to a state of facts existing prior to such amendment, modification or repeal shall apply in such a way as to eliminate or reduce such Covered Person’s entitlement to indemnification for such Losses without the Covered Person’s prior written consent.

Section 14.04. Survival . The provisions of this Article XIV shall survive the dissolution, liquidation, winding up and termination of the Company.

ARTICLE XV

Miscellaneous

Section 15.01. Further Assurances . In connection with this Agreement and the transactions contemplated hereby, the Company and each Member hereby agrees, at the request of the Company or any other Member, to execute and deliver such additional documents, instruments, conveyances and assurances and to take such further actions as may be required to carry out the provisions hereof and give effect to the transactions contemplated hereby.

Section 15.02. Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next day (other than a Saturday, Sunday or other day on which commercial banks in the City of Denver are authorized or required to close) if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 15.02):

If to the Company:	2000 South Colorado Boulevard Tower 1, Suite 3100 Denver, Colorado 80222 Facsimile: (303) 845-9400 E-mail: info@2riverswater.com Attention: Chief Financial Officer
with a copy to:	K&L Gates LLP One Lincoln Street Boston, Massachusetts 02111-2950 Facsimile: (617) 261-3175 E-mail: mark.johnson@klgates.com Attention: Mark L. Johnson

If to a Member, to such Member’s mailing address as set forth on the Member Schedule

Section 15.03. Severability . If any term or provision of this Agreement is held to be invalid, illegal or unenforceable under Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

Section 15.04. Entire Agreement . This Agreement, including the Exhibit and Schedule hereto, and the Exchange Agreement, including the Exhibits and Schedule thereto, constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.

Section 15.05. Successors and Assigns . Subject to the restrictions on Transfers set forth herein, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns.

Section 15.06. No Third-Party Beneficiaries . Except as provided in Article XIV , which shall be for the benefit of and enforceable by Covered Persons as described therein, this Agreement is for the sole benefit of the parties hereto (and their respective heirs, executors, administrators, successors and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any creditor of the Company, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 15.07. Amendment . Except as otherwise expressly provided herein, no provision of this Agreement may be amended or modified except by an instrument in writing executed by the Company and Members holding a majority of the Common Units. Any such written amendment or modification will be binding upon the Company and each Member; provided that (a) an amendment or modification altering any provision of this Agreement in a manner that adversely alters the powers, preferences or rights of the Preferred Units shall be effective only with the consent of the Members holding at least two-thirds of the Preferred Units and (b) an amendment or modification altering the rights or obligations of any Member in a manner that is disproportionately adverse to other Members holding the same class of Units shall be effective only with that Member’s consent. Notwithstanding the foregoing, amendments to the Member Schedule following any new issuance, redemption, repurchase or Transfer of Units in accordance with this Agreement may be made by the Board without the consent of, or other action by, any of the Members.

Section 15.08. Waiver . No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. For the avoidance of doubt, nothing contained in this Section 15.08 shall diminish any of the explicit and implicit waivers described in this Agreement, including in Sections 8.04(c) and 15.12.

Section 15.09. Governing Law . All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Colorado, without giving effect to any choice or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Colorado.

Section 15.10. Submission to Jurisdiction . The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort or otherwise, shall be brought in the United States District Court for the District of Colorado or in the Court of Chancery of the State of Colorado (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Colorado), so long as one of such courts shall have subject-matter jurisdiction over such suit, action or proceeding, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Colorado. Each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient form. Service of process, summons, notice or other document by registered mail to the address set forth in Section 15.02 shall be effective service of process for any suit, action or other proceeding brought in any such court.

Section 15.11. Waiver of Jury Trial . Each party hereto hereby acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 15.12. Equitable Remedies . Each party hereto acknowledges that a breach or threatened breach by such party of any of its obligations under this Agreement would give rise to irreparable harm to the other parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

Section 15.13. Remedies Cumulative . The rights and remedies under this Agreement are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise, except to the extent expressly provided in Section 14.02 to the contrary.

In Witness Whereof, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

COMPANY:

TR Capital Partners, LLC

By: ___________________________________

Name:

Title:

COMMON MEMBER:

Two Rivers Farming & Water Company

By: ___________________________________

Name:

Title:

Exhibit A

FORM OF JOINDER AGREEMENT

A-1

JOINDER AGREEMENT

Reference is hereby made to the Limited Liability Company Agreement, dated as of January __, 2014, as amended from time to time (the “ Agreement ”), among TR Capital Partners, LLC and the Members Named in Schedule 1 . Pursuant to and in accordance with Section 4.01(b) of the Agreement, the undersigned hereby acknowledges that the undersigned has received and reviewed a complete copy of the Agreement and agrees that, upon execution of this Joinder Agreement by the undersigned and TR Capital Partners, LLC, the undersigned shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed, and is hereby admitted as, a Member for all purposes thereof and entitled to all the rights incidental thereto, and shall hold the status of [MEMBER STATUS].

In Witness Whereof , the parties hereto have executed the Agreement as of the date set forth below. A signed copy of this Joinder Agreement delivered by facsimile, e-mail or other means of Electronic Transmission (as defined in the Agreement) shall be deemed to have the same legal effect as delivery of an original signed copy of this Joinder Agreement.

Date: _____________________ [Name of New Member]

By: ___________________________________

Name:

Title:

Agreed and Accepted:

TR Capital Partners, LLC

By: ________________________________

Name:

Title:

A-2

Schedule 1

MEMBER SCHEDULE

Sch. 1-1

Common Units :

Member Name and Address	Number of Units	Date of Issue	Capital Contribution	Certificate Number
Two Rivers Farming & Water Company 2000 South Colorado Boulevard Tower 1, Suite 3100 Denver, Colorado 80222	50,000, 000	January 13, 2014	_________	CU-1

Preferred Units : None issued.

Incentive Units : None issued.

Sch. 1-2

Exhibit 10.2

[Execution Copy]

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

TR Capital Partners, LLC

and

Investors Named in Exhibit A

January 31, 2014

Table of Contents

Page

Purchase and Sale of Preferred Units

1.1

Issuance and Sale

1.2

Closings

1.3

Closing Deliverables

Representations and Warranties of the LLC

2.1

Organization, Good Standing, Power and Authority

2.2

Capitalization

2.3

Authorization

2.4

Transfers of Preferred Units

2.5

Governmental Consents and Filings

2.6

Litigation

2.7

Compliance with Other Instruments

2.8

Permits

Representations and Warranties of the Investors

3.1

Authorization

3.2

Purchase Entirely for Own Account

3.3

Disclosure of Information

3.4

Restricted Securities

3.5

No Public Market

3.6

Accredited Investor

3.7

No General Solicitation

3.8

Exculpation Among Investors

3.9

Residence

Conditions to the Investors’ Obligations at Closing

4.1

Representations and Warranties

4.2

Performance

Conditions to the LLC’s Obligations at Closing

5.1

Representations and Warranties

5.2

Performance

Miscellaneous

6.1

Survival of Warranties

6.2

Successors and Assigns

6.3

Governing Law

6.4

Counterparts

6.5

Interpretation

6.6

Notices

6.7

Amendments and Waivers

6.8

Severability

6.9

Delays or Omissions

6.10

Entire Agreement

6.11

Dispute Resolution

Exhibit A. List of Investors

Exhibit B. Form of Joinder Agreement

Exhibit C. List of Qualified Assets

Schedule 1. First Closing

Schedule 2. Second Closing

Schedule 3. Third Closing

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “ Agreement ”), is made as of January 31, 2014 by and among TR Capital Partners, LLC, a Colorado limited liability company (the “ LLC ”), and the several investors named in Exhibit A (collectively the “ Investors ”), including persons who become Investors hereunder from time to time after the date hereof by completing and executing joinder agreements hereto in the form attached as Exhibit B (“ Joinder Agreements ”).

The parties hereby agree as follows:

1. Purchase and Sale of Preferred Units .

1.1 Issuance and Sale .

(a) The LLC may issue and sell pursuant to this Agreement up to a total of 32,500,000 Preferred Units of the LLC (“ Preferred Units ”) to be issued under the Limited Liability Company Agreement of the LLC dated as of the date hereof (the “ LLC Agreement ”), of which:

(i)	up to 8,571,429 Preferred Units may be issued and sold for cash at a purchase price of $0.70 per Preferred Unit;

(ii)

1,857,142 Preferred Units shall be issued and sold upon conversion of three convertible promissory notes issued by the LLC on December 31, 2013 in the aggregate principal amount of $1,300,000 (the “ Bridge Notes ”), the principal amount of which Bridge Notes will be applied to acquire all such Preferred Units at a purchase price of $0.70 per Preferred Unit; and

(iii)

the remaining Preferred Units may be issued and sold in exchange for contributions of securities of the types identified in Exhibit C (“ Qualified Assets ”), the Qualified Value (as defined below) of which Qualified Assets will be applied to acquire Preferred Units at a purchase price of $1.00 per Preferred Unit, except that an Investor or its Affiliated Investor Group (as defined below) will be entitled to a purchase price of $0.70 per Preferred Unit for Qualified Assets having a Qualified Value up to a maximum of (A) 1.2988 multiplied by (B) the aggregate purchase price for Preferred Units paid by such Investor or Affiliated Investor Group (as the case may be) in cash pursuant to clause (i) above and by conversion of Bridge Notes pursuant to clause (ii) above.

(b) Subject to the terms and conditions of this Agreement, each Investor agrees to purchase, and the LLC agrees to sell and issue to each Investor, (i) at the First Closing (as defined in Section 1.2(a)), the number of Preferred Units, if any, set forth opposite such Investor’s name on Schedule 1 , for the type and amount of consideration specified therein, (ii) at the Second Closing (as defined in Section 1.2(a)), the number of Preferred Units, if any, set forth opposite such Investor’s name on Schedule 2 , for the type and amount of consideration specified therein, and/or (iii) at the Third Closing (as defined in Section 1.2(a)), the number of Preferred Units, if any, set forth opposite such Investor’s name on Schedule 3 , for the type and amount of consideration specified therein.

(i) “ Affiliate Investor Group ” means two or more Investors who are “affiliates.” For these purposes, (A) “affiliate” means, with respect to any Investor, any other Investor who, directly or indirectly (including through one or more intermediaries), controls, is controlled by, or is under common control with, such initial Investor, and (B) “control” means, with respect to any specified Investor, the power, direct or indirect, to direct or cause the direction of the management and policies of such Investor, whether through ownership of voting securities or partnership or other ownership interests, by contract or otherwise, and the terms “controlling” and “controlled” shall have correlative meanings.

(ii) “ Qualified Value ” means, with respect to Qualified Assets, the dollar amount that will be credited toward payment of the applicable purchase price for Preferred Units upon contribution of such Qualified Assets, determined as set forth in Exhibit B under “Calculation of Qualified Value.”

1.2 Closings . Closings of issuances and sales of Preferred Units, each of which closings shall take place remotely via the exchange of documents and signatures, shall be held at 10:00 a.m., Mountain time, on: (a) January 15, 2014 with the Investors set forth in Schedule 1 (the “ First Closing ”), (b) January 31, 2014 with the Investors set forth in Schedule 2 (the “ Second Closing ”) and (c) June 30, 2014 with the Investors set forth in Schedule 3 (the “ Third Closing, ” and collectively with the First Closing and the Second Closing, the “ Closings ”). The time or date of any Closing may be changed by the LLC upon at least 72 hours’ notice to each of the Investors obligated to purchase Preferred Units at such Closing, provided that the Third Closing may not be postponed beyond September 1, 2014. Schedules 1, 2 and 3 shall be updated from time to time in connection with the execution of Joinder Agreements by additional Investors.

1.3 Closing Deliverables .

(a)	At or prior to each Closing, each Investor purchasing Preferred Units shall deliver to the LLC:

(i)	if such Investor is not a party to this Agreement as of the date hereof, an executed Joinder Agreement;

(ii)	an executed joinder agreement to the LLC Agreement in the form of Exhibit A to the LLC Agreement; and

(iii)

payment of the purchase price for such Preferred Units, in accordance with Schedule 1, 2 or 3 (as applicable), by:

(A)	delivery of a check payable to the LLC or transmission of a wire transfer to a bank account designated by the LLC,

(B)

surrender and cancellation of a converted Bridge Note held by Investors as set forth in Schedule 1 , provided that the LLC shall remain subject to obligations to pay to such Investors in cash the amount of any accrued interest and the amount of any fractional principal payment (as set forth in the footnotes in Schedule 1),

(C)

delivery of an assignment or other original instrument of transfer of the Qualified Assets to be contributed for Preferred Units in favor the LLC, in a form acceptable to the LLC, together with delivery of any certificate or other instrument representing such Qualified Assets (or, if such certificate or instrument cannot be produced or found, an affidavit of loss and indemnity agreement in a form acceptable to the LLC, in its sole discretion), or

(D)	a combination of the foregoing methods.

(b) At each Closing, the LLC shall deliver to each Investor purchasing Preferred Units:

(i)	a complete and correct copy of the LLC Agreement, including Schedule A thereto, amended as of the time of such Closing and reflecting such Investor’s purchase of Preferred Units at such Closing; and

(ii)	a certificate representing the Preferred Units being purchased by such Investor at such Closing.

2. Representations and Warranties of the LLC . The LLC hereby represents and warrants to each Investor acquiring Preferred Units at a Closing that the following representations are true and complete as of the date of such Closing, except to the extent made only as of a specified date, in which case as of such time or date:

2.1 Organization, Good Standing, Power and Authority . The LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Colorado and has all requisite corporate power and authority to carry on its business as presently conducted and as currently proposed to be conducted. The LLC is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, prospects or results of operations of the LLC (a “ Material Adverse Effect ”). The LLC has furnished each Investor with a true and complete copy of its Articles of Organization as initially filed, and such Articles of Organization have not been amended since the date of such filing. The LLC has all requisite corporate power and authority to execute and deliver this Agreement and the LLC Agreement (together, the “ Transaction Agreements ”), to issue and sell the Preferred Units, and to perform its obligations under the Transaction Agreements.

2.2 Capitalization . Immediately prior to the First Closing, the issued and outstanding membership interests of the LLC consisted of 50,000,000 Common Units. Other than this Agreement, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements to purchase or acquire from the LLC any membership interest or any securities convertible into or exchangeable for any membership interest. The LLC has no obligation (contingent or otherwise) to purchase or redeem any of its membership interests. Except as contemplated by the Bridge Notes, no parties have rights to purchase any of the Preferred Units covered by this Agreement.

2.3 Authorization . All corporate action required to be taken by the LLC’s managers and members in order to authorize the LLC to enter into the Transaction Agreements and to issue the Preferred Units at such Closing, has been taken or will be taken prior to such Closing. All action on the part of the officers of the LLC necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of the LLC under the Transaction Agreements to be performed as of such Closing, and the issuance of the Preferred Units has been taken or will be taken prior to such Closing. The Transaction Agreements constitute valid and legally binding obligations of the LLC, enforceable against the LLC in accordance with their respective terms except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The LLC Agreement will not be amended or modified prior to the Third Closing, except as necessary or desirable to reflect the issuance and sale of Preferred Units under this Agreement.

2.4 Transfers of Preferred Units . The Preferred Units, when issued and sold in accordance with the terms and for the consideration set forth in this Agreement, will be free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable state and federal securities laws, and liens or encumbrances created by or imposed by a Investor.

2.5 Governmental Consents and Filings . Assuming the accuracy of the representations made by the Investors in Section 3 , no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the LLC in connection with the consummation of the transactions contemplated by this Agreement, except for filings pursuant to Regulation D of the Securities Act of 1933, as amended (the “ Securities Act ”), and applicable state securities laws, which have been made or will be made in a timely manner.

2.6 Litigation . There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the LLC’s knowledge, currently threatened in writing that questions the validity of the Transaction Agreements or the right of the LLC to enter into them, or to consummate the transactions contemplated by the Transaction Agreements. Neither the LLC nor, to the LLC’s knowledge, any of its officers or managers is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers or managers, such as would affect the LLC). There is no action, suit, proceeding or investigation by the LLC pending or that the LLC intends to initiate.

2.7 Compliance with Other Instruments . The LLC is not in violation or default (a) of any provisions of its Articles of Organization, (b) of any instrument, judgment, order, writ or decree, (c) under any note, indenture or mortgage, (d) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound, the violation of which would have a Material Adverse Effect, or (e) to its knowledge, of any provision of federal or state statute, rule or regulation applicable to the LLC, the violation of which would have a Material Adverse Effect. The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated by the Transaction Agreements will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement or (ii) an event that results in the creation of any lien, charge or encumbrance upon any assets of the LLC or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the LLC.

2.8 Permits . The LLC has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a Material Adverse Effect. The LLC is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.

3. Representations and Warranties of the Investors . Each Investor hereby represents and warrants to the LLC, severally and not jointly, that:

3.1 Authorization . The Investor has full power and authority to enter into the Transaction Agreements. The Transaction Agreements constitute valid and legally binding obligations of the Investor, enforceable against the Investor in accordance with their respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

3.2 Purchase Entirely for Own Account . This Agreement is made with the Investor in reliance upon the Investor’s representation to the LLC, which by the Investor’s execution of this Agreement, the Investor hereby confirms, that the Preferred Units to be acquired by the Investor will be acquired for investment for the Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents that the Investor does not presently have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participations to such person or entity or to any third person or entity, with respect to any of the Preferred Units. The Investor has not been formed for the specific purpose of acquiring the Preferred Units.

3.3 Disclosure of Information . The Investor has had an opportunity to discuss the LLC’s business, management, financial affairs and the terms and conditions of the offering of the Preferred Units with the LLC’s management. The foregoing, however, does not limit or modify the representations and warranties of the LLC in Section 2 or the right of the Investors to rely thereon.

3.4 Restricted Securities . The Investor understands that the Preferred Units have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act that depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Investor’s representations as expressed herein. The Investor understands that the Preferred Units are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Investor must hold the Preferred Units indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Investor acknowledges that the LLC has no obligation to register or qualify the Preferred Units for resale. The Investor further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including the time and manner of sale, the holding period for the Preferred Units, and on requirements relating to the LLC that are outside of the Investor’s control and that the LLC is under no obligation and may not be able to satisfy. The Investor understands that this offering is not intended to be part of the public offering, and that the Investor will not be able to rely on the protection of Section 11 of the Securities Act.

3.5 No Public Market . The Investor understands that no public market now exists for the Preferred Units, and that the LLC has made no assurances that a public market will ever exist for the Preferred Units.

3.6 Accredited Investor . The Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

3.7 No General Solicitation . Neither the Investor, nor any of its managers, officers, employees, agents, shareholders or partners has either directly or indirectly, including, through a broker or finder, (a) engaged in any general solicitation or (b) published any advertisement in connection with the offer and sale of the Preferred Units.

3.8 Exculpation Among Investors . The Investor acknowledges that it is not relying upon any person or entity, other than the LLC and its managers and officers, in making its investment or decision to invest in the LLC. The Investor agrees that neither any Investor nor the respective controlling persons or entities, officers, directors, partners, agents, or employees of any Investor shall be liable to any other Investor for any action heretofore taken or omitted to be taken by any of them in connection with the purchase of the Preferred Units.

3.9 Residence . If the Investor is an individual, then the Investor resides in the state or province identified in the address of the Investor set forth on Exhibit A ; if the Investor is a partnership, corporation, limited liability company or other entity, then the office of the Investor in which its principal place of business is identified in the address of the Investor set forth on Exhibit A .

4. Conditions to t he Investors’ Obligations at Closing . The obligations of each Investor to purchase Preferred Units at any Closing are subject to the fulfillment, on or before such Closing, of each of the following conditions, unless otherwise waived:

4.1 Representations and Warranties . The representations and warranties of the LLC contained in Section 2 shall be true and correct in all respects as of such Closing.

4.2 Performance . The LLC shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the LLC on or before such Closing.

5. Conditions to the LLC’s Obligations at Closing . The obligations of the LLC to sell Preferred Units to any Investor at any Closing are subject to the fulfillment, on or before each Closing, of each of the following conditions, unless otherwise waived:

5.1 Representations and Warranties . The representations and warranties of such Investor contained in Section 3 shall be true and correct in all respects as of such Closing.

5.2 Performance . Such Investor shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by such Investor on or before such Closing.

6. Miscellaneous .

6.1 Survival of Warranties . Unless otherwise set forth in this Agreement, the representations and warranties of the LLC and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and each Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Investors or the LLC.

6.2 Successors and Assigns . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

6.3 Governing Law . This Agreement shall be governed by the internal law of the State of Colorado.

6.4 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the ESIGN Act of 2000, e.g. , www.docusign.com ) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

6.5 Interpretation . As used herein, the singular will include the plural, and the masculine gender will include the feminine and neuter, and vice-versa, unless the context otherwise requires. Any reference in this Agreement to a particular Section, Exhibit or Schedule shall refer to a Section of, or an Exhibit or Schedule to, this Agreement, unless specified otherwise. Section headings are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. The words “include,” “includes” and “including” as used herein shall not be construed so as to exclude any other thing not referred to or described.

6.6 Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt and (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to a party at its address as set forth on the signature page, Exhibit A or a Joinder Agreement, or to such email address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 6.6 . If notice is given to the LLC, a copy shall also be sent to K&L Gates LLP, One Lincoln Street, Boston, Massachusetts 02111, Attention: Mark L. Johnson (facsimile: 617.261.3175, email: mark.johnson@klgates.com,).

6.7 Amendments and Waivers . Except as otherwise expressly provided herein, any term of this Agreement may be amended, terminated or waived only with the written consent of the LLC and Investors purchasing a majority of the Preferred Units issued or to be issued hereunder. Any amendment or waiver effected in accordance with this Section 6.7 shall be binding upon all of the Investors and each transferee of Preferred Units and the LLC.

6.8 Severability . The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

6.9 Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

6.10 Entire Agreement . This Agreement (including the Exhibits and Schedules) and the LLC Agreement constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreements relating to the subject matter hereof existing between the parties are expressly canceled.

6.11 Dispute Resolution . The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Colorado and to the jurisdiction of the United States District Court for the State of Colorado for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Colorado or the United States District Court for the District of Colorado, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

Each party will bear its own costs in respect of any disputes arising under this Agreement. Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in the U.S. District Court for the District of Colorado or any court of the State of Colorado having subject matter jurisdiction.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties have executed this Membership Interest Purchase Agreement as of the date first written above.

TR CAPITAL PARTNERS, LLC

By: ______________________________________

Wayne Harding

Chief Financial Officer

Address:

2000 South Colorado Boulevard

Tower 1, Suite 3100

Denver, Colorado 80222

Facsimile: (303) 845-9400

Email: wharding@2riverswater.com

SIGNATURE PAGE TO PURCHASE AGREEMENT

INVESTORS:

__________________________________________

(Print Name of Investor)

By: ______________________________________

Name: _________________________________

Title: _________________________________

Address:

__________________________________________

Telephone: _________________________________

Facsimile: __________________________________

Email: _____________________________________

SIGNATURE PAGE TO PURCHASE AGREEMENT

Exhibit A

LIST OF INVESTORS

A-1

[Investor]

[Address]

Telephone:

Facsimile:

Email:

[Investor]

[Address]

Telephone:

Facsimile:

Email:

A-2

Exhibit B

FORM OF JOINDER AGREEMENT

JOINDER AGREEMENT

Reference is hereby made to the Membership Interest Purchase Agreement, dated as of January 31, 2014, as amended from time to time (the “ Agreement ”), by and among TR Capital Partners, LLC, a Colorado limited liability company (the “ LLC ”), and the several investors named in Exhibit A thereto.

Pursuant to the terms of the Agreement, the undersigned hereby acknowledges that it has received and reviewed a copy of the Agreement and agrees that, upon execution of this Joinder, the undersigned shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto, and shall be deemed to be an Investor for all purposes thereof and entitled to all the rights incidental thereto.

The undersigned has set forth on the Supplemental Schedule hereto the information with respect to the undersigned’s purchases of Preferred Units that is to be added to, or incorporated by reference in, Schedules 1, 2 and 3 to the Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of ___________, 2014.

__________________________________________

(Print Name)

By: _______________________________________

Name: __________________________________

Title: ___________________________________

Address: ___________________________________

___________________________________________

Telephone: __________________________________

Facsimile: ___________________________________

Email: ______________________________________

Accepted and confirmed as of the date above:

TR CAPITAL PARTNERS, LLC

By: ________________________________________

Name: _________________________________

Title: ___________________________________

B-2

Supplemental Schedule to Joinder Agreement

First Closing:
Purchased for Cash ($0.70 per Preferred Unit)
Purchase Price		Preferred Units

Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]


Purchased for Qualified Assets ($1.00 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

Second Closing:
Purchased for Cash ($0.70 per Preferred Unit)
Purchase Price		Preferred Units

Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]


Purchased for Qualified Assets ($1.00 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

B-3

Third Closing:
Purchased for Cash ($0.70 per Preferred Unit)
Purchase Price		Preferred Units

Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]


Purchased for Qualified Assets ($1.00 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

B-4

Exhibit C

LIST OF QUALIFIED ASSETS

C-1

Qualified Assets
Issuer	Type of Security	Calculation of Qualified Value
ASF Project 1, LLC	8.0% Senior Secured Notes due 2023 (“ ASF Notes ”) 1	At First or Second Closing: Principal amount of contributed ASF Notes At Third Closing: Principal amount, plus accrued interest from June 1, 2014 through Closing, of contributed ASF Notes
Dionisio Farms and Produce, Inc.	Series A Convertible Preferred Stock and related Common Stock Purchase Warrant of Two Rivers Water & Farming Company (each share of such Series A Convertible Preferred Stock together with a warrant to purchase one share of common stock of Two Rivers Water & Farming Company being referred to together as a “ DFP Preferred Unit ”)	$2.00 (original purchase price), plus accrued but undeclared dividends, per contributed DFP Preferred Unit
Two Rivers Farms F-1, Inc.	Series F-1-A Convertible Preferred Stock and related Common Stock Purchase Warrant of Two Rivers Water & Farming Company (each share of such Series F-1-A Convertible Preferred Stock together with a warrant to purchase one-half share of common stock of Two Rivers Water & Farming Company being referred to together as a “ F-1 Preferred Unit ”)	$1.00 (conversion price applied to acquire an F-1 Preferred Unit upon conversion of Series A Secured Convertible Participating Promissory Notes), plus accrued but undeclared dividends, per contributed F-1 Preferred Unit
Two Rivers Farms F-2, Inc.	Series B Secured Convertible Participating Promissory Notes and related Common Stock Purchase Warrant of Two Rivers Water & Farming Company (each $1.00 in principal amount of such Notes together with a warrant to purchase two-fifths of a share of common stock of Two Rivers Water & Farming Company being referred to together as a “ F-2 Note Unit ”)	$1.00, plus accrued interest through Closing, per contributed F-2 Note Unit ( i.e., principal amount plus accrued interest through Closing, provided that a warrant for one share of common stock of Two Rivers Water & Farming Company must be contributed with each $2.50 in principal amount contributed)

__________________________

1 Terms are defined in this column for convenient reference in this Exhibit C and Schedules 1, 2 and 3.

C-2

Qualified Assets
Issuer		Type of Security		Calculation of Qualified Value

Two Rivers Farms F-2, Inc.	Series F-2-B Convertible Preferred Stock and related Common Stock Purchase Warrant of Two Rivers Water & Farming Company (each share of such Series F-2-B Convertible Preferred Stock together with a warrant to purchase one-half share of common stock of Two Rivers Water & Farming Company being referred to together as a “ F-2 Preferred Unit ”)	$1.00 (conversion price applied to acquire an F-2 Preferred Unit upon conversion of Series B Secured Convertible Participating Promissory Notes), plus accrued but undeclared dividends, per contributed F-2 Preferred Unit
Two Rivers Water & Farm Company	Series BL Convertible Preferred Stock and related Common Stock Purchase Warrant of Two Rivers Water & Farming Company (each share of such Series BL Convertible Preferred Stock together with a warrant to purchase one-half share of common stock of Two Rivers Water & Farming Company being referred to together as a “ TRWF Preferred Unit ”)	$1.00 (conversion price applied to acquire a TRWF Preferred Unit upon conversion of Series BL Convertible Preferred Stock), plus accrued but undeclared dividends, per contributed TRWF Preferred Unit
Two Rivers Water & Farm Company	Ellicott second mortgage notes (“ TRWF Notes ”)	Principal amount, plus accrued interest (if any), of contributed TRWF Notes

C-3

Schedule 1

FIRST CLOSING

Sch. 1-1

Investor at First Closing: JMW Fund, LLC
Converted from Bridge Notes ($0.70 per Preferred Unit)
Bridge Note	Principal	Preferred Units
Convertible Promissory Note No. CPN-1 2	$520,000.00	742,857
Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

Investor at First Closing: San Gabriel Fund, LLC
Converted from Bridge Notes ($0.70 per Preferred Unit)
Bridge Note	Principal	Preferred Units
Convertible Promissory Note No. CPN-2 3	$520,000.00	742,857
Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

__________________________

2The LLC shall pay to JMW Fund, LLC, at the First Closing, a total of $2,600.10 in cash, consisting of (a) $2,600.00 in accrued interest on the surrendered Bridge Note and (b) $0.10 for the amount attributable for fractional Preferred Units from the conversion of the principal amount of such Bridge Note.

3The LLC shall pay to San Gabriel Fund, LLC, at the First Closing, a total of $2,600.10 in cash, consisting of (a) $2,600.00 in accrued interest on the surrendered Bridge Note and (b) $0.10 for the amount attributable for fractional Preferred Units from the conversion of the principal amount of such Bridge Note.

Sch. 1-2

Investor at First Closing: Richland Fund, LLC
Converted from Bridge Notes ($0.70 per Preferred Unit)
Bridge Note	Principal	Preferred Units
Convertible Promissory Note No. CPN-3 4	$260,000.00	371,428
Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

Investor at First Closing:
Purchased for Cash ($0.70 per Preferred Unit)
Purchase Price		Preferred Units

Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]


Purchased for Qualified Assets ($1.00 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

_____________________________

4The LLC shall pay to Richland Fund, LLC, at the First Closing, a total of $1,300.40 in cash, consisting of (a) $1,300.00 in accrued interest on the surrendered Bridge Note and (b) $0.40 for the amount attributable for fractional Preferred Units from the conversion of the principal amount of such Bridge Note.

Sch. 1-3

Schedule 2

SECOND CLOSING

Sch. 2-1

Investor at Second Closing:
Purchased for Cash ($0.70 per Preferred Unit)
Purchase Price		Preferred Units

Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]


Purchased for Qualified Assets ($1.00 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

Investor at Second Closing:
Purchased for Cash ($0.70 per Preferred Unit)
Purchase Price		Preferred Units

Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]


Purchased for Qualified Assets ($1.00 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

Sch. 2-2

Schedule 3

THIRD CLOSING

Sch. 3-1

Investor at Third Closing:
Purchased for Cash ($0.70 per Preferred Unit)
Purchase Price		Preferred Units

Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]


Purchased for Qualified Assets ($1.00 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

Investor at Third Closing:
Purchased for Cash ($0.70 per Preferred Unit)
Purchase Price		Preferred Units

Purchased for Qualified Assets ($0.70 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]


Purchased for Qualified Assets ($1.00 per Preferred Unit)
Qualified Asset	Qualified Value	Preferred Units
[To come: description of each Qualified Asset contributed, including name of issuer, type of security, and number or amount]	$ [To come for each Qualified Asset]	[To come, total only (not per Qualified Asset)]

Sch. 3-2

Exhibit 10.3

[ Execution Version ]

EXCHANGE AGREEMENT

among

TR Capital Partners, LLC,

Two Rivers Water & Farms Company

and

Holders Named in Schedule 1

Dated as of January 31, 2014

Table of Contents

Page

ARTICLE I DEFINITIONS	1
Section 1.01. Definitions	1
Section 1.02. Interpretation	4
ARTICLE II PREFERRED HOLDERS AND EXCHANGE HOLDERS	5
	5
	5
	5
ARTICLE III EXCHANGES OF PREFERRED UNITS	5
Section 3.01. Optional Exchanges	5
Section 3.02. Mandatory Exchanges	6
Section 3.03. Exchange Package	7
Section 3.04. Authorized Shares	8
Section 3.05. Amendment	8
Section 3.06. Limitations on Exchanges	9
ARTICLE IV REGISTRATION RIGHTS	10
Section 4.01. Demand Registration Rights	10
Section 4.02. Obligations of Parent	11
Section 4.03. Furnish Information	12
Section 4.04. Expenses of Registration	12
Section 4.05. Delay of Registration	12
Section 4.06. Indemnification	12
Section 4.07. Amendment	14
ARTICLE V MISCELLANEOUS	14
Section 5.01. Notices	14
Section 5.02. Severability	15
Section 5.03. Entire Agreement	15
Section 5.04. Assignment	15
Section 5.05. Third-Party Beneficiaries	16
Section 5.06. Amendment	16
Section 5.07. Waiver	16
Section 5.08. Governing Law	16
Section 5.09. Submission to Jurisdiction	16
Section 5.10. Waiver of Jury Trial	17
Section 5.11. Equitable Remedies	17
Section 5.12. Remedies Cumulative	17
Exhibit A Form of Joinder Agreement
Exhibit B Form of Parent Warrant
Schedule 1 Holder Schedule

This Exchange Agreement is entered into as of January 31, 2014 among TR Capital Partners, LLC, a Colorado limited liability company (the “ Company ”), Two Rivers Water & Farming Company, a Colorado corporation (“ Parent ”), and each other individual or entity that after the date hereof becomes a party hereto by executing a Joinder Agreement (as defined below) upon becoming a Preferred Member of the Company.

Recitals

Whereas , contemporaneously with the execution and delivery hereof, the Company and Parent are entering into a Limited Liability Company Agreement of the Company (the “ LLC Agreement ”) that, among other things, provides for the issuance of membership units designated as Preferred Units;

Whereas , Section 9.01 of the LLC Agreement requires that any individual or entity acquiring such Preferred Units and thereby becoming a member of the Company shall contemporaneously therewith become a party to this Agreement; and

Whereas , the parties wish to provide for terms pursuant to which (a) Preferred Units of the Company may be exchanged, at the option of the owner thereof or the Company, for equity-related securities of Parent and (b) holders of such equity-related securities may require that Parent register such securities under the Securities Act of 1933 for offering and sale to the public;

ARTICLE I

Definitions

Section 1.01. Definitions . The following terms

This “ Agreement ” means this Exchange Agreement, as executed and as it may be amended, modified, supplemented or restated from time to time, as provided herein.

“ Applicable Law ” means all applicable provisions of:

(a)

constitutions, treaties, statutes, laws (including the common law), rules, regulations, decrees, ordinances, codes, proclamations, declarations or orders of any Governmental Authority;

(b)

any consents or approvals of any Governmental Authority; and

(c)

any orders, decisions, advisory or interpretative opinions, injunctions, judgments, awards, decrees of, or agreements with, any Governmental Authority.

“ Company ” has the meaning set forth in the Preamble.

“ Damages ” means any loss, damage, claim or liability (joint or several), actions or proceedings (whether commenced or threatened) and expenses to which a party hereto may become subject under the Securities Act, the Exchange Act or other Applicable Law, insofar as such loss, damage, claim, liability, action or proceeding (whether commenced or threatened), arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of Parent, including any preliminary prospectus or final prospectus contained therein or any amendment or supplement thereto; (ii) any omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law.

“ Demand Notice ” has the meaning set forth in Section 4.01(a)

“ Distribution ” has the meaning set forth in Section 1.01 of the LLC Agreement.

“ Exchange Act ” means the Securities Exchange Act of 1934.

“ Exchange Holder ” means any former Preferred Holder who becomes a holder of Registrable Securities pursuant to Article III.

“ Exchange Package ” has the meaning set forth in Section 3.03(a).

“ Exchange Registration Statement ” has the meaning set forth in Section 3.02(a)(ii).

“ Fiscal Quarter ” means the first three-month period, second three-month period, third three-month period or fourth three-month period of a Fiscal Year.

“ Holder Schedule ” has the meaning set forth in Section 3.01.

“ Initiating Exchange Holders ” means, collectively, Exchange Holders that properly initiate a registration request under this Agreement.

“Joinder Agreement ” means a written undertaking substantially in the form of the joinder agreement attached as Exhibit A .

“ LLC Agreement ” has the meaning set forth in the Recitals.

“ Mandatory Exchange Date ” has the meaning set forth in Section 3.02(a)(iv).

“ Mandatory Exchange Notice ” has the meaning set forth in Section 3.02(d).

“ Maximum Percentage ” has the meaning set forth in Section 3.06(a).

“ Member ” has the meaning set forth in Section 1.01 of the LLC Agreement.

“ Parent ” has the meaning set forth in the Preamble.

“ Parent Shares ” means shares of common stock, $0.001 par value per share, of Parent.

“ Parent Warrants ” means common stock purchase warrants to purchase Parent Shares issued by Parent upon exchanges of Preferred Units in accordance with Article III, each of which common stock purchase warrants shall be substantially in the form of Exhibit B .

“ Person ” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“ Preliminary Exchange Notice ” has the meaning set forth in Section 3.02(a).

“ Preferred Holder ” means any Preferred Member, other than Parent, that becomes a party to this Agreement from time to time.

“ Preferred Members ” means Persons who own Preferred Units as listed in the Member Schedule to the LLC Agreement and in the Holder Schedule.

“ Preferred Units ” means membership interests of the Company having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Preferred Units” in the LLC Agreement.

“ Registrable Securities ” means (a) Parent Shares issued pursuant to Section 3.01 or 3.02 in connection with an exchange of Preferred Units, (b) Parent Shares issued or issuable upon the exercise of any Parent Warrant that was issued pursuant to Section 3.01 or 3.02 in connection with an exchange of Preferred Units, (c) to the extent a Preferred Holder has delivered to Parent a binding written commitment to exchange a Preferred Unit prior to the effective date of a registration statement filed pursuant to Section 2, (i) Parent Shares issuable pursuant to Section 3.01 or 3.02 upon the exchange of such Preferred Unit and (ii) Parent Shares issuable upon the exercise of any Parent Warrant issuable pursuant to Section 3.01 or 3.02 in connection with such exchange, and (d) any Parent Shares issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Parent Shares referenced in clause (a) above, excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned with the consent of Parent.. Any written commitment pursuant to clause (c) above shall be in a form that is reasonably acceptable to Parent and is intended to permit Parent, in compliance with the requirements of the Securities and Exchange Commission, to include the Parent Shares referenced in clause (c) above in a registration statement filed pursuant to Section 2.

“ Registrable Securities then outstanding ” means the number of Parent Shares determined by adding the number of outstanding Parent Shares that are Registrable Securities and the number of Parent Shares that are issuable (directly or indirectly) pursuant to then exercisable or convertible securities and that are Registrable Securities.

“ Regular Daily Accumulation ” has the meaning set forth in Section 7.02(a)(ii) of the LLC Agreement.

“ Regular Quarterly Accumulation ” has the meaning set forth in Section 7.02(a)(ii) of the LLC Agreement.

“ Securities Act ” means the Securities Act of 1933.

“ Selling Expenses ” means all underwriting discounts, selling commissions and share transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Exchange Holder.

“ Trading Conditions ” means, with respect to a specified date:

(a)

Parent Shares are then listed on a National Exchange; and

(b)

for a period of twenty consecutive trading days ending no more than ten trading days before such specified date, (i) the closing or last sale price of a Parent Share on the principal National Exchange on which Parent Shares are then traded was equal to, or greater than, $3.00 (subject to equitable adjustment for any stock dividend, split, recapitalization, combination or exchange or any similar transaction) for each such trading day and (ii) the average daily trading volume of the Parent Shares on such National Exchange during such period equaled or exceeded 250,000 shares (subject to equitable adjustment as aforesaid).

“ Transfer ” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Units owned by a Person or any interest (including a beneficial interest) in any securities owned by a Person. “ Transfer ” when used as a noun shall have a correlative meaning.

Section 1.02. Interpretation . For purposes of this Agreement:

(a)

headings used in this Agreement are for convenience of reference only and shall not, for any purpose, be deemed a part of this Agreement;

(b)

any references herein to an Article, Section or Exhibit refer to an Article or Section of, or Exhibit attached to, this Agreement, unless specified otherwise;

(c)

the word “day” refers to a calendar day;

(d)

the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole;

(e)

the words “include,” “includes” and “including” as used herein shall not be construed so as to exclude any other thing not referred to or described;

(f)

the word “or” is not exclusive;

(g)

the definition given for any term in this Agreement shall apply equally to both the singular and plural forms of the term defined;

(h)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(i)

unless the context otherwise requires, (1) references herein to an agreement, instrument or other document (including this Agreement and the LLC Agreement) mean such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (2) references herein to a statute means such statute as amended from time to time and includes any successor legislation thereto and any rules and regulations promulgated thereunder; and

(j)

this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

ARTICLE II

Preferred Holders and Exchange Holders

Section 2.01. Addition of New Preferred Holders

(a) . Any Person becoming a Preferred Member under the LLC Agreement at any time shall contemporaneously execute a Joinder Agreement and deliver it to the Company and Parent. The Board of Managers of the Company shall maintain a schedule (the “ Holder Schedule ”) setting forth the name and address of each Preferred Holder and each Exchange Holder and such other information as the Board may determine to be desirable. The Company shall update the Holder Schedule upon the issuance, Transfer or exchange of any Preferred Units or Registrable Securities, including the Transfer of Preferred Units to Parent pursuant to Article III. A copy of the Holder Schedule as of the date of this Agreement is attached as Schedule 1. Thereafter, the Board of Managers of the Company shall promptly amend the Holder Schedule to reflect such Person’s status as a Preferred Holder or Exchange Holder for purposes of this Agreement.

Section 2.02. Change to Exchange Holder Status . If a Person that is a Preferred Holder tenders a Preferred Unit in exchange for the Exchange Package in accordance with this Agreement, then upon the effectiveness of such exchange as provided in Article III, such Person thereafter (a) shall constitute a Exchange Holder hereunder with respect to the Registrable Securities included in such Exchange Package and (b) shall no longer constitute a Preferred Holder with respect to such tendered Preferred Unit (although such Person shall continue to be a Preferred Holder with respect to any other Preferred Units that remain outstanding). Following such an exchange, the Board of Managers of the Company shall promptly amend the Holder Schedule to reflect such Person’s change in status for purposes of this Agreement.

Section 2.03. Representations and Warranties of Preferred Holders . By execution and delivery of a Joinder Agreement, each of the Preferred Holders confirms to the Company and Parent that each of the representations and warranties of such Preferred Holder in Section 4.02 of the LLC Agreement is true and correct, as if set forth herein.

ARTICLE III

Exchanges of Preferred Units

Section 3.01. Optional Exchanges . Unless prohibited by Applicable Law, a Preferred Holder may, at its option, exchange 5,000 or more Preferred Units (or, if less, all of the Preferred Units owned by such Preferred Holder), at any time and from time to time, for the Exchange Package with respect to such Preferred Shares. Before any Preferred Holder shall be entitled to exchange Preferred Units for the Exchange Package, such Preferred Holder shall tender the certificate or certificates therefor, duly endorsed (or, if such Preferred Holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such certificate), at the principal office of Parent, and shall give written notice to Parent at its principal office of the election to exchange such Preferred Units. Preferred Unit certificates tendered for exchange shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Company, duly executed by the Preferred Holder or its attorney duly authorized in writing. Effective as of 5 p.m., Mountain time, on the date of receipt by Parent of such certificates (or lost certificate affidavit and agreement) and such notice, (a) the tendered Preferred Units shall be deemed to have been exchanged for their Exchange Package, and all rights with respect to such Preferred Units, including the rights to receive any Distribution, will be Transferred to Parent, other than the rights of the tendering Preferred Holder to receive the Exchange Package with respect thereto, and (b) the Parent Shares and Parent Warrant included in the Exchange Package for such Preferred Units shall be deemed to be outstanding of record. Parent shall, as soon as practicable thereafter deliver to such Preferred Holder a certificate representing the Parent Shares, together with the Parent Warrant and any cash payment included in the Exchange Package.

Section 3.02. Mandatory Exchanges . The Company may, at its option at any time after January 31, 2017, require that Preferred Holders exchange all, but not less than all (subject to Section 3.06(b)), of the then-outstanding Preferred Units for the Exchange Package as follows:

(a) On any day on which the Trading Conditions are satisfied, the Company may deliver to each of the Preferred Holders a written notice (a “ Preliminary Exchange Notice ”) stating that:

(i)	the Company intends to require that Preferred Holders exchange all of the then-outstanding Preferred Units for the Exchange Package pursuant to this Section 3.02;

(ii)	in connection with such proposed mandatory exchange, Parent intends to file under the Securities Act a registration statement (the “ Exchange Registration Statement ”) covering the potential sale of Registrable Securities included in the Exchange Packages to be delivered to the Preferred Holders;

(iii)

the Exchange Registration Statement will cover the Registrable Securities included in the Exchange Package to be delivered to such Preferred Holder if and only if such Preferred Holder delivers to Parent, within ten days of the date on which the Preliminary Exchange Notice is given, a binding written commitment to exchange all of the Preferred Units held by such Preferred Holder immediately prior to the effective date of the Exchange Registration Statement, which commitment shall be in a form that is provided by Parent with the Preliminary Exchange Notice and is intended to permit Parent, in compliance with the requirements of the Securities and Exchange Commission, to include such Preferred Holder’s Registrable Securities in the Exchange Registration Statement prior to the date on which the Exchange Package is delivered to such Preferred Holder (that is, the date on which the Parent Shares and Parent Warrant included in such Exchange Package are issued to such Preferred Holder); and

(iv)

the date of the mandatory exchange (the “ Mandatory Exchange Date ”) will be selected by the Company and set forth in the Mandatory Exchange Notice (as defined below), provided that the Mandatory Exchange Date shall occur (A) after January 31, 2017, (B) no less than seven days, and no more than twenty days, after the effective date of the Exchange Registration Statement and (C) on a day on which the Trading Conditions are satisfied.

(b) Within ten days of the date on which a Preliminary Exchange Notice is given, each Preferred Holder that wishes to include Registrable Securities in the Exchange Registration Statement shall deliver to Parent the executed binding commitment contemplated by Section 3.02(a)(iii) and by the Preliminary Exchange Notice. Any Preferred Holder that does not deliver such a commitment by within such period shall not be entitled to include any Registrable Securities in the Exchange Registration Statement.

(c) Parent shall, as soon as practicable, and in any event within thirty days (or, if Parent is then eligible to register such Registrable Securities on Form S-3, fifteen days) after the date on which the Preliminary Exchange Notice is given, use its commercially reasonable efforts to file the Exchange Registration Statement and cause it to become effective under the Securities Act.

(d) Within two days after the effective date of the Exchange Registration Statement, the Company shall deliver to each of the Preferred Holders a written notice (a “ Mandatory Exchange Notice ”) confirming that the Exchange Registration Statement has been declared effective and specifying the Mandatory Exchange Date (determined in accordance with the requirements of Section 3.02(a)(iv)). In the event the Exchange Registration Statement is not declared effective for any reason, the Company instead shall notify the Preferred Holders that the mandatory exchange contemplated by the Preliminary Exchange Notice will not be completed.

(e) On the Mandatory Exchange Date, effective as of 5 p.m., Mountain time, the Preferred Holders shall exchange all of the then-outstanding Preferred Units for Exchange Packages. On or before the Mandatory Exchange Date, each Preferred Holder shall tender the certificate or certificates therefor, duly endorsed (or, if such Preferred Holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such certificate), to Parent, in the manner and at the place designated in the Mandatory Exchange Notice, and thereupon the Exchange Package for such Preferred Units shall be deliverable and payable to the order of such Preferred Holder. If the Mandatory Exchange Notice shall have been duly given, and if on the Mandatory Exchange Date the Exchange Package for Preferred Units is, to the extent then due, delivered, paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then effective as of 5 p.m., Mountain time, and notwithstanding that any certificates evidencing any of such Preferred Units shall not have been tendered, such Preferred Units shall be deemed to have been exchanged for their Exchange Package, and all rights with respect to such Preferred Units, including the rights to receive any Distribution, will accrue to the benefit of Parent, other than the rights of the tendering Preferred Holder to receive the Exchange Package with respect thereto.

(f) Parent shall use its commercially reasonable efforts to keep the Exchange Registration Statement effective for a period of up to six months or, if earlier, until the distribution contemplated in the Exchange Registration Statement has been completed; provided that in the case of any registration of Registrable Securities on Form S-3, such six-month period shall be extended for up to ninety days, if necessary, to keep the Exchange Registration Statement effective until all such Registrable Securities are sold. Further, the provisions of Sections 4.02(b) through (g) and Sections 4.03 through 4.06 with respect to a registration statement under Section 4.01 shall apply with respect to the Exchange Registration Statement as if, for these purposes, each reference therein to an Exchange Holder instead were to a Preferred Holder whose Registrable Securities are included in the Exchange Registration Statement.

Section 3.03. Exchange Package .

(a) For purposes of Sections 3.01 and 3.02, the “ Exchange Package ” shall mean, with respect to each Preferred Unit tendered or called for exchange, all of the following:

(i)	one fully paid and nonassessable Parent Share;

(ii)	if such Preferred Unit is exchanged on or prior to January 31, 2019, a Parent Warrant exercisable for one-half of a Parent Share;

(iii)

an amount, payable within ten days after a Distribution is made with respect to such Preferred Unit pursuant to Section 7.01(a)(i) or (b)(i) of the LLC Agreement with respect to a Fiscal Quarter, equal to the portion of such Distribution attributable to the portion of such Fiscal Quarter prior to the effective date of the exchange; and

(iv)

an amount, payable within ten days after a Distribution is made with respect to such Preferred Unit pursuant to Section 7.01(a)(ii) or (b)(ii) of the LLC Agreement with respect to a Fiscal Year, equal to the portion of such Distribution attributable to the portion of such Fiscal Year prior to the effective date of the exchange;

(b) The number of Parent Shares included in the Exchange Package and the number of Parent Shares subject to a Parent Warrant included in the Exchange Package shall be subject to equitable adjustment by the Board of Managers of the Company in the event of any change that is made in, or other events that occur with respect to, either Preferred Units or Parent Shares without receipt of consideration by the Company or Parent, respectively, through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or any similar equity restructuring transaction.

(c) Notwithstanding the foregoing, no fractional Parent Shares shall be issued in connection with any exchange of Preferred Units and no Parent Warrant shall be issued for fractional Parent Shares. If the total number of Parent Shares calculated to be issued pursuant to Section 3.03(a)(i) with respect to all of the Preferred Units being exchanged by a Preferred Holder is not a whole number, the Company shall pay in cash the fair market value of any fractional Parent Share promptly following the exchange. If the total number of Parent Shares calculated to be subject to a Parent Warrant pursuant to Section 3.03(a)(ii) with respect to all of the Preferred Units being exchanged by a Preferred Holder is not a whole number, the Company shall pay in cash the fair market value of any fractional Parent Share, net of the related fractional exercise price, promptly following the exchange.

Section 3.04. Authorized Shares . Parent covenants that, during the period that any Preferred Unit or Parent Warrant is outstanding, it will reserve from its authorized and unissued capital stock a sufficient number of Parent Shares to provide for (a) the issuance of Parent Shares upon exchanges of outstanding Preferred Units and (b) the issuance of Parent Shares upon exercises of outstanding Parent Warrants and any additional Parent Warrants issuable upon exchanges of outstanding Preferred Units. Parent will take all such reasonable action as may be necessary to assure that Parent Shares may be issued as contemplated hereby without violation of any Applicable Law or of any requirements of any National Exchange upon which Parent Shares may be listed.

Section 3.05. Amendment . No provision of this Article III may be amended or modified except by an instrument in writing executed by the Company, Parent and Preferred Holders holding two-thirds of the then-outstanding Preferred Units. Any such written amendment or modification will be binding upon the Company, Parent, and each Preferred Holder and each Exchange Holder; provided that any such amendment or modification altering the rights or obligations of any Preferred Holder in a manner that is disproportionately adverse to such Preferred Holder relative to the rights of other Preferred Holders shall be effective only with the consent of that Preferred Holder. Notwithstanding the foregoing, (a) amendments to the Holder Schedule following any issuance, Transfer or exchange of Preferred Units in accordance with the LLC Agreement and this Agreement may be made by the Board of Managers of the Company without the consent of, or other action by, any of the Preferred Holders or Exchange Holders and (b) after the initial filing of the Exchange Registration Statement, Section 3.02(f) may be amended or modified by an instrument in writing executed by the Company, Parent and Preferred Holders holding two-thirds of the Registrable Securities covered by the Exchange Registration Statement.

Section 3.06. Limitations on Exchanges .

(a) Notwithstanding anything to the contrary contained herein, the aggregate number of Parent Shares issuable:

(i)	as part of an Exchange Package and

(ii)	upon exercise of a Parent Warrant issuable as part of such Exchange Package

upon any exchange of a Preferred Unit by a Preferred Holder pursuant to Section 3.01 shall be limited to the extent necessary to ensure that, following such exchange, the total number of Parent Shares then beneficially owned by such Preferred Holder, its affiliates and any other Persons whose beneficial ownership of Parent Shares would be aggregated with such Preferred Holder's for purposes of Section 13(d) of the Exchange Act does not exceed 9.999% (the “ Maximum Percentage ”) of the total number of issued and outstanding Parent Shares (including for such purpose Parent Shares issuable as part of the Exchange Package for such exchange or issuable upon exercise of a Parent Warrant issuable as part of such Exchange Package). Each tender by a Preferred Holder of a Preferred Unit for exchange pursuant to Section 3.01 will constitute a representation by such Preferred Holder that it has evaluated the limitation set forth in this Section 3.06(a) and determined that the issuance of the Exchange Package for such Preferred Unit is permitted under this Section 3.06(a).

(b) Notwithstanding anything to the contrary contained herein, all or a portion of a Preferred Holder’s Preferred Units shall not be subject to exchange pursuant to a Preliminary Exchange Notice and Mandatory Exchange Notice delivered pursuant to Section 3.02 if the Preferred Holder thereof delivers to Parent, no later than the tenth day after such Preliminary Exchange Notice is given, a written representation letter to the effect that it has evaluated the terms of this Section 3.06(b) and determined that the issuance of the Exchange Package for such Preferred Units would result in the total number of Parent Shares then beneficially owned by such Preferred Holder, its affiliates and any other Persons whose beneficial ownership of Parent Shares would be aggregated with such Preferred Holder's for purposes of Section 13(d) of the Exchange Act to exceed the Maximum Percentage of the total number of issued and outstanding Parent Shares (including for such purpose Parent Shares issuable as part of the Exchange Packages to Preferred Holders for such exchange or issuable upon exercise of Parent Warrants issuable as part of such Exchange Packages). For purposes of clarity, it is the intent of this Section 3.06(b) that a portion of such Preferred Holder’s Preferred Units would be subject to exchange pursuant to a Preliminary Exchange Notice and Mandatory Exchange Notice delivered pursuant to Section 3.02 if, and to the extent that, such exchange would not result in such Preferred Holder’s beneficial ownership of Parent Stock (determined as aforesaid) exceeding the Maximum Percentage. In the event that, as the result of this Section 3.06(b), one or more Preferred Holders are unable to exchange Preferred Units in connection with an exchange pursuant to Section 3.02, (i) the Company and Parent shall complete the exchange with respect to other Preferred Units in accordance with the Preliminary Exchange Notice and Mandatory Exchange Notice with respect thereto and (ii) each Preferred Unit not required to be exchanged as a result of the provisions of this Section 3.06(b) instead shall be exchanged, without regard to Section 3.06(a), in accordance with provisions of Section 3.02(e) as of the date that is one year after the Mandatory Redemption Date set forth in such Mandatory Exchange Notice.

(c) By written notice to the Company and Parent, any Preferred Holder may waive the provisions of Section 3.06(a) or (b) or may increase the Maximum Percentage to any other percentage specified in such notice, but any such waiver or increase will not be effective until the sixty-first day after such notice is delivered to the Company and Parent and will apply only to such Preferred Holder and not to any other Preferred Holder. Notwithstanding any other provision hereof, this Section 3.06 may not be amended as to a Preferred Holder without the written consent of such Preferred Holder.

(d) For purposes of this Section 3.06, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(e) For purposes of this Section 3.06, in determining the number of outstanding Parent Shares, a Preferred Holder may rely on the number of outstanding Parent Shares as reflected in (i) Parent’s most recent Form 10-Q, Form 10-K or other public filing with the Securities and Exchange Commission, (ii) a more recent public announcement by Parent, or (iii) any other notice by Parent (or the transfer agent for Parent Shares) setting forth the number of Parent Shares outstanding. Upon the written request of any Preferred Holder, Parent shall promptly, but in no even later than one trading day following the receipt of such notice, confirm in writing to such Preferred Holder the number of Parent Shares then outstanding.

ARTICLE IV

Registration Rights

Section 4.01. Demand Registration Rights . Parent covenants and agrees as follows:

(a) If, at any time, Parent receives a request from Exchange Holders holding at least 1,450,000 Registrable Securities then outstanding that Parent file a registration statement covering the potential sale of all or a portion of the Registrable Securities then outstanding to be offered on a continuous or delayed (non-underwritten) basis, then Parent shall: (i) within five days after the date such request is given, give notice thereof (a “ Demand Notice ”) to all Exchange Holders other than the Initiating Exchange Holders and all Preferred Holders; and (ii) as soon as practicable, and in any event within sixty days (or, if Parent is then eligible to register the Registrable Securities on Form S-3, thirty days) after the date such request is given by the Initiating Exchange Holders, use its commercially reasonable efforts to file and make effective under the Securities Act such registration statement covering all Registrable Securities that the Initiating Exchange Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Exchange Holders (including any Preferred Holders that exchange Preferred Units for the Exchange Package within ten days of the date the Demand Notice is given), as specified by notice given by each such Exchange Holder to Parent within ten days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 4.02 and 4.04.

(b) Notwithstanding the foregoing obligations, if Parent furnishes to Exchange Holders requesting a registration pursuant to this Section 4.01 a certificate signed by Parent’s chief executive officer stating that in the good faith judgment of the board of directors of Parent it would be materially detrimental to Parent and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization or other similar transaction involving Parent, (ii) require premature disclosure of material information that Parent has a bona fide business purpose for preserving as confidential, or (iii) render Parent unable to comply with requirements under the Securities Act or Exchange Act, then Parent shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than sixty days after the request of the Initiating Exchange Holders is given; provided that Parent shall not invoke this right more than once and shall not register any securities for its own account or that of any other stockholder during such sixty-day period other than (A) a registration relating to the sale of securities to employees of Parent or a subsidiary pursuant to an equity incentive, equity purchase or similar plan; (B) a registration relating to a transaction in accordance with Rule 145 under the Securities Act; (C) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (D) a registration in which the only Parent Shares being registered are Parent Shares issuable upon conversion of debt securities that are also being registered.

(c) Parent shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 4.01 (i) during the period that is sixty days before Parent’s good faith estimate of the date of filing of, and ending on a date that is 180 days after the effective date of, a registration initiated by Parent, provided that Parent is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective or (ii) after the Company has effected one registration pursuant to Section 4.01(a).

Section 4.02. Obligations of Parent . Whenever required under Section 4.01 to effect the registration of any Registrable Securities, Parent shall, as expeditiously as reasonably possible:

(a)

prepare and file with the Securities and Exchange Commission a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Exchange Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to six months or, if earlier, until the distribution contemplated in the registration statement has been completed; provided that in the case of any registration of Registrable Securities on Form S-3, such six-month period shall be extended for up to ninety days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

(b)

prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

(c)	furnish to the selling Exchange Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Exchange Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

(d)

use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Exchange Holders; provided that Parent shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless Parent is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(e)

promptly make available for inspection, by the selling Exchange Holders and by any one law firm retained by the selling Exchange Holders, all financial and other records, pertinent corporate documents and properties of Parent, and cause Parent’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller or firm, in each case as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(f)	notify each selling Exchange Holder, promptly after Parent receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

(g)	after such registration statement becomes effective, notify each selling Exchange Holder of any request by the Securities and Exchange Commission that Parent amend or supplement such registration statement or prospectus.

Section 4.03. Furnish Information . It shall be a condition precedent to the obligations of Parent to take any action pursuant to this Article IV with respect to the Registrable Securities of any selling Exchange Holder that such Exchange Holder shall furnish to Parent such information regarding itself, the Registrable Securities held by it and the intended method of disposition of such securities as is reasonably required to effect the registration of such Exchange Holder’s Registrable Securities.

Section 4.04. Expenses of Registration . All expenses (other than Selling Expenses) incurred in connection with registrations, filings or qualifications pursuant to Section 4.01 (including: registration, filing and qualification fees; printers’ and accounting fees; and fees and disbursements of counsel for Parent) shall be borne and paid by Parent or the Company. All Selling Expenses relating to Registrable Securities registered pursuant to Section 4.01 shall be borne and paid by the Exchange Holders pro rata on the basis of the number of Registrable Securities registered on their behalf, except to the extent they agree otherwise in writing.

Section 4.05. Delay of Registration . No Exchange Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to Section 4.01 as the result of any controversy that might arise with respect to the interpretation or implementation of this Article IV.

Section 4.06. Indemnification . If any Registrable Securities are included in a registration statement under Section 4.01:

(a) To the extent permitted by law, Parent will indemnify and hold harmless each selling Exchange Holder, and the general and limited partners, members, officers, directors, fiduciaries, and members of each such Exchange Holder and each other Person, if any, who controls such Exchange Holder, any underwriter (as defined in the Securities Act) for each such Exchange Holder, and each Person, if any, that controls such Exchange Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and Parent will pay to each such Exchange Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding from which Damages may result, as such expenses are incurred; provided that the indemnity agreement contained in this Section 4.06(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of Parent, which consent shall not be unreasonably withheld or delayed, nor shall Parent be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Exchange Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

(b) To the extent permitted by law, each selling Exchange Holder, severally and not jointly, will indemnify and hold harmless Parent, and each of its managing members, each of its officers that has signed the registration statement and each Person (if any) that controls Parent within the meaning of the Securities Act, any underwriter (as defined in the Securities Act), any other Exchange Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Exchange Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Exchange Holder expressly for use in connection with such registration; and each such selling Exchange Holder will pay to Parent and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding from which Damages may result, as such expenses are incurred; provided that (i) the indemnity agreement contained in this Section 4.06(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Exchange Holder, which consent shall not be unreasonably withheld or delayed and (ii) in no event shall the aggregate amounts payable by any Exchange Holder by way of indemnity or contribution under this Section 4.06(b) and Section 4.06(d) exceed the proceeds from the offering received by such Exchange Holder (net of any Selling Expenses paid by such Exchange Holder), except in the case of fraud by such Exchange Holder.

(c) Promptly after receipt by an indemnified party under this Section 4.06 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 4.06, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflicts of interest between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 4.06, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 4.06.

(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 4.06 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 4.06(d) provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 4.06(d), then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided that, in any such case, (x) no Exchange Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Exchange Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person that was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Exchange Holder’s liability pursuant to this Section 4.06(d), when combined with the amounts paid or payable by such Exchange Holder pursuant to Section 4.06(b), exceed the proceeds from the offering received by such Exchange Holder (net of any Selling Expenses paid by such Exchange Holder), except in the case of fraud by such Exchange Holder.

(e) The indemnification provided herein shall be in addition to any other rights of indemnification which any indemnified party may have pursuant to law, contract or otherwise, shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party.

(f) The obligations of Parent and Exchange Holders under this Section 4.06 shall survive the completion of any offering of Registrable Securities in a registration under this Article IV, and otherwise shall survive the termination of this Agreement.

(g) Parent agrees that any permitted assignee of a Parent Warrant shall be entitled to rely upon the provisions of the second paragraph of Section 4 of such Parent Warrant, which provisions refer to Sections 4.02(b) through (g) and Sections 4.03 through 4.06 of this Agreement, regardless of whether such assignee is or was a party to this Agreement.

Section 4.07. Amendment . No provision of this Article IV may be amended or modified except by an instrument in writing executed by Parent and (a) if such amendment or modification relates solely to a registration pursuant to Section 4.01 and at least ten days have elapsed since the date on which a Demand Notice was provided, the Exchange Holders of two-thirds of the Registrable Securities to be included in such registration or (b) otherwise, Exchange Holders of two-thirds of the Registrable Securities then outstanding and the then-outstanding Preferred Units, voting together as a single class on an as-exchanged basis (as if outstanding Preferred Units were exchanged pursuant to Article III as of the date of such consent). Any such written amendment or modification will be binding upon the Company, Parent, and each Preferred Holder and each Exchange Holder; provided that any such amendment or modification altering the rights or obligations of any Preferred Holder or Exchange Holder in a manner that is disproportionately adverse to such Preferred Holder or Exchange Holder relative to the rights of other Preferred Holders and Exchange Holders shall be effective only with the consent of that Preferred Holder or Exchange Holder. Notwithstanding the foregoing, amendments to the Holder Schedule following any issuance, Transfer or exchange of Preferred Units in accordance with the LLC Agreement and this Agreement may be made by the Board of Managers of the Company without the consent of, or other action by, any of the Preferred Holders or Exchange Holders.

ARTICLE V

Miscellaneous

Section 5.01. Notices .

(a) Any notice required or permitted by the provisions of Article III to be given to a holder of Preferred Units shall be mailed, postage prepaid, to the mailing address last shown on the records of the Company, or given by electronic communication in compliance with the provisions of the Colorado Act, and shall be deemed given upon such mailing or Electronic Transmission.

(b) Except as provided in Section 5.01(a), all notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next day (other than a Saturday, Sunday or other day on which commercial banks in the City of Denver are authorized or required to close) if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 5.01):

If to the Company or Parent:	2000 South Colorado Boulevard Tower 1, Suite 3100 Denver, Colorado 80222 Facsimile: (303) 845-9400 E-mail: info@2riverswater.com Attention: Chief Financial Officer
with a copy to:	K&L Gates LLP One Lincoln Street Boston, Massachusetts 02111-2950 Facsimile: (617) 261-3175 E-mail: mark.johnson@klgates.com Attention: Mark L. Johnson

If to a Preferred Holder or a Exchange Holder, to the mailing address set forth on the Holder Schedule

Section 5.02. Severability . If any term or provision of this Agreement is held to be invalid, illegal or unenforceable under Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

Section 5.03. Entire Agreement . This Agreement, including the Exhibits and Schedule hereto, and the LLC Agreement, including the Exhibit and Schedule thereto, constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.

Section 5.04. Assignment . The rights and obligations of Exchange Holders under Article IV may not be assigned, by operation of law or otherwise, without the prior written approval of the Company and Parent, provided that (a) such rights and obligations may be assigned by operation of law upon the death of a Exchange Holder who is an individual and (b) nothing in this Section 5.04 shall limit in any manner the rights of a Preferred Holder to assign or Transfer Preferred Units in accordance with the LLC Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors and administrators and their permitted successors and assigns.

Section 5.05. Third-Party Beneficiaries . Except as contemplated by Section 4.06(g), this Agreement is for the sole benefit of the parties hereto (and their respective heirs, executors and administrators and permitted successors and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 5.06. Amendment . Except as otherwise provided in Section 3.05 or 4.07, no provision of this Agreement may be amended or modified except by an instrument in writing executed by (a) the Company, (b) Parent and (c) Preferred Holders and Exchange Holders of two-thirds of the Registrable Securities then outstanding on an as-exchanged basis (as if outstanding Preferred Units were exchanged pursuant to Article III as of the date of such amendment or modification). Any such written amendment or modification will be binding upon the Company, Parent, and each Preferred Holder and each Exchange Holder; provided that an amendment or modification altering the rights or obligations of any Preferred Holder or Exchange Holder in a manner that is disproportionately adverse to such Preferred Holder or Exchange Holder relative to the rights of other Preferred Holders or Exchange Holders, as the case may be, shall be effective only with the consent of that Preferred Holder or Exchange Holder. Notwithstanding the foregoing, amendments to the Holder Schedule following any issuance, Transfer or exchange of Preferred Units in accordance with the LLC Agreement and this Agreement may be made by the Board of Managers of the Company without the consent of, or other action by, any of the Preferred Holders or Exchange Holders.

Section 5.07. Waiver . No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. For the avoidance of doubt, nothing contained in this Section 5.07 shall diminish any of the explicit and implicit waivers described in this Agreement, including in Section 5.12.

Section 5.08. Governing Law . All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Colorado, without giving effect to any choice or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Colorado.

Section 5.09. Submission to Jurisdiction . The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract, tort or otherwise, shall be brought in the United States District Court for the District of Colorado or in the Court of Chancery of the State of Colorado (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Colorado), so long as one of such courts shall have subject-matter jurisdiction over such suit, action or proceeding, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Colorado. Each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient form. Service of process, summons, notice or other document by registered mail to the address set forth in Section 5.01 shall be effective service of process for any suit, action or other proceeding brought in any such court.

Section 5.10. Waiver of Jury Trial . Each party hereto hereby acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby.

Section 5.11. Equitable Remedies . Each party hereto acknowledges that a breach or threatened breach by such party of any of its obligations under this Agreement would give rise to irreparable harm to the other parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

Section 5.12. Remedies Cumulative . The rights and remedies under this Agreement are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise.

In Witness Whereof, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

TR Capital Partners, LLC

By: ___________________________________

Name:

Title:

Two Rivers Farming & Water Company

By: ___________________________________

Name:

Title:

Exhibit A

FORM OF JOINDER AGREEMENT

A-1

JOINDER AGREEMENT

Reference is hereby made to the Exchange Agreement, dated as of January 31, 2014, as amended from time to time (the “ Agreement ”), among the TR Capital Partners, LLC, Two Rivers Water & Farming Company and the Holders Named in Schedule 1 . Pursuant to and in accordance with Section 2.01 of the Agreement, the undersigned hereby acknowledges that the undersigned has received and reviewed a complete copy of the Agreement and agrees that, upon execution of this Joinder Agreement by the undersigned, the Company, TR Capital Partners, LLC and Two Rivers Water & Farming Company, the undersigned shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be entitled to all the rights incidental thereto, and initially shall hold the status of Preferred Holder.

Date: _______________________ [Name of New Preferred Holder]

By: ___________________________________

Name:

Title:

Agreed and Accepted:

TR Capital Partners, LLC

By: ________________________________

Name:

Title:

Two Rivers Water & Farming Company

By: ________________________________

Name:

Title:

A-2

Exhibit B

FORM OF WARRANT

B-1

Schedule 1

HOLDER SCHEDULE

Sch. 1-1

Preferred Holders : None.

Exchange Holders : None.

Sch. 1-2

Exhibit 31.1

CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John R. McKowen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Two Rivers Water & Farming Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.

Dated: May 13, 2014	By: /s/ John McKowen
	Chief Executive Officer & Chairman of the Board

Exhibit 31.2

CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Wayne Harding, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Two Rivers Water & Farming Company;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.

Dated: May 13, 2014	By: /s/ Wayne Harding,
	Chief Financial Officer & Principal Accounting Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Two Rivers Water & Farming Company on Form 10-Q for the period ended March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John McKowen Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 13, 2014	By: /s/ John McKowen
	Chief Executive Officer & Chairman of the Board

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Two Rivers Water & Farming Company on Form 10-Q for the period ended March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Wayne Harding, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 13, 2014	By: /s/ Wayne Harding
	Chief Financial Officer & Principal Accounting Officer