UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013 .
o
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: 000-28731
SUNVESTA, INC.
(Exact name of registrant as specified in its charter)
Florida
98-0211356
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
Seestrasse 97, Oberrieden, Switzerland CH-8942
(Address of principal executive offices) (Zip Code)
011 41 43 388 40 60
(Registrants telephone number, including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)
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 o No þ
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 the definitions of large accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer 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
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest
practicable date. The number of shares outstanding of the issuers common stock, $0.01 par value (the only
class of voting stock), at October 10, 2013, was 75,541,600 .
1
TABLE OF CONTENTS
PART 1- FINANCIAL INFORMATION
Item1.
3
Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31,
4
2012
Unaudited Consolidated Statements of Comprehensive Loss for the
5
three months ended March 31, 2013 and March 31, 2012 and cumulative amounts
Unaudited Consolidated Statements of Stockholders Equity (Deficit)
6
Unaudited Consolidated Statements of Cash Flows for the three months ended
7
March 31, 2013 and March 31, 2012 and cumulative amounts
Notes to Unaudited Consolidated Financial Statements
8
Item 2 .
Managements Discussion and Analysis of Financial Condition and Results of
35
Operations
Item 3 .
Quantitative and Qualitative Disclosures about Market Risk
45
Item 4 .
Controls and Procedures
46
PART II-OTHER INFORMATION
Legal Proceedings
47
Item 1A .
Risk Factors
47
Item 2 .
Unregistered Sales of Equity Securities and Use of Proceeds
47
Item 3 .
Defaults Upon Senior Securities
48
Item 4 .
Mine Safety Disclosures
48
Item 5 .
Other Information
48
Item 6 .
Exhibits
48
49
50
2
PART I FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
As used herein, the terms Company, we, our, and us refer to SunVesta, Inc., a Florida
corporation, and its predecessors and subsidiaries, unless otherwise indicated. In the opinion of
management, the accompanying unaudited, consolidated financial statements included in this Form 10-Q
reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of
the results of operations for the periods presented. The results of operations for the periods presented are
not necessarily indicative of the results to be expected for the full year.
3
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
March 31, 2013
December 31, 2012
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$
178,990 $
260,520
Other assets
55,876
39,238
Receivable from related parties
290,971
-
Total current assets
525,837
299,758
Non-current assets
Property and equipment - net
30,610,366
16,799,540
Debt issuance costs - net
1,464,576
1,649,216
Down payment for property and equipment
1,869,836
10,320,144
Restricted cash
980,327
241,500
Total non-current assets
34,925,105
29,010,400
Total assets
$
35,450,942
29,310,158
Liabilities and stockholders' equity (deficit)
Current liabilities
Accounts payable
1,638,571
827,102
Accrued expenses
2,175,163
3,868,914
Note payable
2,000,000
-
Notes payable to related parties
3,247,740
3,432,064
EUR-Bond
12,056,458
14,216,707
Total current liabilities
21,117,932
22,344,787
Non-current liabilities
CHF-Bond
5,566,811
5,689,364
Notes payable to related parties
16,947,284
11,125,741
Fair value of conversion feature
50,181
-
Pension liabilities
70,756
74,075
Total non-current liabilities
22,635,032
16,889,180
Total liabilities
43,752,964
39,233,967
Stockholders' equity (deficit)
Preferred stock, $0.01 par value;
50,000,000 share authorized no shares issued
and outstanding
-
-
Common stock, $0.01 par value;
200,000,000 shares authorized; 75,541,600 and
54,092,186 shares issued and outstanding
755,416
540,922
Additional paid-in capital
20,319,850
19,446,367
Accumulated other comprehensive gain/loss
178,997
(1,102,408)
Retained earnings prior to development stage
1,602
1,602
Deficit accumulated during the development stage
(29,534,132)
(28,786,537)
Treasury stock, 157,220 and 157,220 shares
(23,755)
(23,755)
Total stockholders' equity (deficit)
(8,302,022)
(9,923,809)
Total liabilities and stockholders' equity (deficit) $
35,450,942
29,310,158
The accompanying notes are an integral part of these consolidated financial statements.
4
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three months ended Three months ended
Cumulative
March 31, 2013
March 31, 2012
Amounts*
(unaudited)
(unaudited & restated)
(unaudited)
Revenues
Revenues, net
$
-
-
-
Cost of revenues
-
-
-
Gross profit
-
-
-
Operating income / - expenses
General and administrative expenses
$
(1,304,957)
(971,627)
(22,514,214)
Sales and marketing
-
-
(480,872)
Impairment on property and equipment
-
-
(1,311,000)
Release of accrual for penalty to Mélia
Hotels & Resorts
1,000,000
-
1,000,000
Total operating income / - expenses
$
(304,957)
(971,627)
(23,306,086)
Loss from operations
$
(304,957)
(971,627)
(23,306,086)
Other income / - expenses
Loss on disposals of assets
$
-
-
(3,258)
Loss on sale of investments
-
-
(1,137,158)
Loss on extinguishment of debt
-
-
(1,806,758)
Interest income
174
3,060
168,141
Interest expense
(426,656)
(280,995)
(2,901,639)
Amortization of debt issuance costs
and commissions
(82,815)
712
(887,053)
Exchange differences
143,872
130,272
519,929
Change in fair value of conversion
feature
(50,181)
-
(50,181)
Other income / - expenses
(27,032)
14,053
10,067
Total other income / - expenses
$
(442,638)
(132,898)
(6,087,910)
Loss before income taxes
$
(747,595)
(1,104,525)
(29,393,996)
Income Taxes
-
-
(140,136)
Net loss
$
(747,595)
(1,104,525)
(29,534,132)
Comprehensive income / (loss)
Foreign currency translation
1,281,405
(802,775)
199,997
Comprehensive income / (loss)
$
533,810
(1,907,300)
(29,334,135)
Loss per common share
Basic and diluted
$
(0.01)
(0.02)
Weighted average common shares
Basic and diluted
71,251,720
54,092,186
* Cumulative amounts: January 1, 2005 (date of inception) to March 31, 2013
The accompanying notes are an integral part of these consolidated financial statements.
5
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
January 1, 2005 (Date of Inception) to March 31, 2013
Common
Additional Paid
Accumulated Other
Prior Earnings
Deficit Accumulated
Treasury Stock
Total
Stock
in Capital
Comprehensive
During Development
Stockholders
Income (Loss)
Stage
Equity (Deficit)
January 1, 2005
$
210,000 $
281,521 $
128 $
1,602 $
- $
-
$
493,251
Net loss
-
-
-
-
(807,118)
-
(807,118)
Translation adjustments
-
-
23,149
-
-
-
23,149
December 31, 2005
210,000
281,521
23,277
1,602
(807,118)
-
(290,718)
Net loss
-
-
-
-
(3,575,713)
-
(3,575,713)
Translation adjustments
-
-
(163,151)
-
-
-
(163,151)
December 31, 2006
210,000
281,521
(139,874)
1,602
(4,382,831)
-
(4,029,582)
Net loss
-
-
-
-
(2,912,578)
-
(2,912,578)
Translation adjustments
-
-
35,580
-
-
-
35,580
Acquisition of OpenLimit, Inc.
14,000
(63,080)
-
-
-
-
(49,080)
Issuance of stock for debt
64,312
10,742,025
-
-
-
-
10,806,337
December 31, 2007
288,312
10,960,466
(104,294)
1,602
(7,295,409)
-
3,850,677
Net loss
-
-
-
-
(1,188,377)
-
(1,188,377
Translation adjustments
-
-
(367,601)
-
-
-
(367,601)
Issuance of stock for compensation
417
61,852
-
-
-
-
62,269
Issuance of stock for debt
18,182
2,709,091
-
-
-
-
2,727,273
December 31, 2008
306,911
13,731,409
(471,895)
1,602
(8,483,786)
-
5,084,241
Net loss
-
-
-
-
(2,471,845)
-
(2,471,845)
Translation adjustments
-
-
401,460
-
-
-
401,460
Issuance of stock for compensation
600
44,400
-
-
-
-
45,000
Issuance of stock for cash
10,000
290,000
-
-
-
-
300,000
Issuance of stock for debt
77,259
3,785,668
-
-
-
-
3,862,927
Purchase of treasury stock
-
-
-
-
-
(12,200)
(12,200)
December 31, 2009
394,770
17,851,477
(70,435))
1,602
(10,955,631)
(12,200)
7,209,583
Net loss
-
-
-
-
(1,173,292)
-
(1,173,292)
Translation adjustments
-
-
10,983
-
-
-
10,983
Issuance of stock for debt
146,152
876,914
-
-
-
-
1,023,066
Purchase of treasury stock
-
-
-
-
-
(11,555)
(11,555)
December 31, 2010
540,922
18,728,391
(59,452)
1,602
(12,128,923)
(23,755)
7,058,785
Net loss
-
-
-
-
(10,382,930)
-
(10,382,930)
Translation adjustments
-
-
21,575
-
-
-
21,575
December 31, 2011
540,922
18,728,391
(37,877)
1,602
(22,511,853)
(23,755)
(3,302,570)
Net loss
-
-
-
-
(6,274,684)
-
(6,274,684)
Translation adjustments
-
-
(1,064,531)
-
-
-
(1,064,531)
Issuance of stock for debt
-
717,976
-
-
-
-
717,976
December 31, 2012
540,922
19,466,367
(1,102,408)
1,602
(28,786,537)
(23,755)
(9,923,809)
Net loss
-
-
-
-
(747,595)
-
(747,595)
Translation adjustments
-
-
1,281,405
-
-
1,281,405
Issuance of stock for compensation
35,000
335,000
-
-
-
-
370,000
Issuance of stock for debt
179,494
538,483
-
-
-
-
717,977
March 31, 2013
$
755,416 $
20,319,850 $
178,997 $
1,602 $
(29,534,132) $
(23,755)
$
(8,302,022)
T he accompanying notes are an integral part of these consolidated financial statements.
6
SUNVESTA, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 1 to
January 1 to
Cumulative
31 March 2013
31 March 2012
Amounts*
Unaudited
Unaudited & restated
Unaudited
Cash flows from operating activities
Net loss
$
(747,595)
(1,104,525)
(29,534,132)
Adjustments to reconcile net loss to net cash
Depreciation and amortization
10,198
22,443
330,283
Other income / expenses
-
(60,700)
(60,700)
Release of accrual for penalty to Mélia Hotels & Resorts
(1,000,000)
-
311,000
Amortization of debt issuance cost and commissions
82,815
(712)
894,751
Stock compensation expense
370,000
-
1,195,245
Unrealized exchange differences
(143,872)
(130,272)
(519,929)
Loss on securities acquired as deposit on stock
-
-
1,008,324
Loss on disposal of assets
-
-
3,258
Loss on extinguishment of debt
-
-
1,806,758
Change in fair value of conversion feature
50,181
-
50,181
Increase in pension fund commitments
(3,318)
12,774
70,757
Increase / decrease in:
Other current assets
(16,639)
(14,126)
(66,516)
Accounts payable
811,469
39,106
2,174,388
Accrued expenses
(693,751)
64,462
3,437,893
Net cash used in operating activities
(1,280,513)
(1,171,550)
(18,898,440)
Cash flows from investing activities
Proceeds from securities available-for-sale
-
-
1,740,381
Short term investments
-
75,000
-
Other receivables from related parties
(290,970)
(673,293)
(2,463,304)
Purchase of property and equipment
(753,024)
(1,002,487)
(18,520,832)
Down payments for property and equipment
(2,250,040)
(1,300,082)
(12,320,183)
Restricted cash
(739,327)
-
(980,827)
Net cash used in investing activities
(4,033,361)
(2,900,862)
(32,544,765)
Cash flows from financing activities
Net proceeds from deposit on stock
-
-
3,664,417
Proceeds from stock issuance
-
-
300,000
Proceeds from notes payable related parties
7,256,757
2,178,258
34,476,478
Repayment of notes payable related parties
-
-
(778,243)
Advances from third parties
-
-
700,000
Note payable
-
-
(714,819)
Proceeds from bond issuance, net of commissions
900,853
1,871,681
22,323,654
Repayments of bonds
(2,649,073)
-
(4,123,896)
Payment for debt issuance costs
(269,516)
(316,189)
(3,537,127)
Purchase of treasury stock
-
-
(23,755)
Net cash provided by financing activities
5,239,021
3,733,750
52,286,709
Effect of exchange rate changes
(6,677)
(17,775)
(665,069)
Net decrease in cash
(81,530)
(320,887)
178,435
Cash, beginning of period
260,520
505,500
555
Cash, end of period
$
178,990
184,613
178,990
Additional information
Interest paid
-
-
Income taxes paid
-
-
Conversion of note payable to Mr. Rigendinger to
stockholders' equity (non-cash)
717,977
-
Purchase of property and equipment through a note payable
(non-cash)
2,000,000
-
Reclassification of down payment for property and
equipment to property and equipment
10,200,000
-
Capitalized interest and debt issuance costs for construction
(non-cash)
368,000
314,000
* Cumulative amounts: January 1, 2005 (date of inception) to March 31, 2013
The accompanying notes are an integral part of these consolidated financial statements.
7
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
1.
CORPORATE INFORMATION AND BASIS OF PREPARATION
On August 27, 2007, SunVesta Inc. (SunVesta) acquired SunVesta Holding AG (SunVesta AG)
(collectively the Company). SunVesta AG has three wholly-owned subsidiaries: SunVesta
Projects and Management AG, a Swiss company; Rich Land Investments Limitada, a Costa Rican
company (Rich Land); and SunVesta Costa Rica Limitada, a Costa Rican company.
In January 2005 (date of inception of development stage), the Company changed its business
focus to the development of holiday resorts and investments in the hospitality and related
industry. The Company has not materialized any revenues yet and is therefore a development
stage company.
These consolidated financial statements are prepared in US Dollars (US $) on the basis of
generally accepted accounting principles in the United States of America (US GAAP).
The accompanying unaudited consolidated financial statements have been prepared by
management in accordance with the instructions in Form 10-Q and, therefore, do not include all
information and footnotes required by generally accepted accounting principles and should,
therefore, be read in conjunction with the Companys Form 10-K, for the year ended December
31, 2012, filed with the Securities and Exchange Commission. These statements do include all
normal recurring adjustments which the Company believes necessary for a fair presentation of the
statements. The interim results of operations are not necessarily indicative of the results to be
expected for the full year ended December 31, 2013.
Except as indicated in the notes below, there have been no other material changes in the
information disclosed in the notes to the financial statements included in the Companys Form
10-K for the year ended December 31, 2012, filed with the Securities and Exchange
Commission.
8
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
2.
SIGNIFICANT ACCOUNTING POLICIES
New accounting standards adopted
In February 2013, the FASB released ASU 2013-02 Other comprehensive Income (Topic
220). The amendments in this Update supersede and replace the presentation requirements for
reclassifications out of accumulated other comprehensive income in AUSs 2011-05 (issued in
June 2011) and 2011-12 (issued in December 2011) for all public and private organizations. The
amendments would require an entity to provide additional information about reclassifications out
of accumulated other comprehensive income (loss). This Accounting Standard Update is the final
version of Proposed Accounting Standards Update 2012-240 Comprehensive Income (Topic
220) which has been deleted. The amendments do not change the current requirements for
reporting net income or other comprehensive income (loss) in financial statements. However, the
amendments require an entity to provide information about the amounts reclassified out of
accumulated other comprehensive income (loss) by component. In addition, an entity is required
to present, either on the face of the statement where net income (loss) is presented or in the notes,
significant amounts reclassified out of accumulated other comprehensive income (loss) by the
respective line items of net income but only if the amounts reclassified is required under U.S.
GAAP to be reclassified to net income in its entirety in the same reporting period. For other
amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income,
an entity is required to cross-reference to other disclosures required under U.S. GAAP that
provide additional detail about those amounts. For public entities, the amendments are effective
prospectively for reporting periods beginning after December 15, 2012. The Company adopted
this ASU as of January 1, 2013 and its adoption did not impact the Companys consolidated
financial statements.
9
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
3.
GOING CONCERN
The Company is currently working on building a hotel in the Papagayo Gulf Tourism Project area
of Guanacaste, Costa Rica.
The project is expected to open in the fourth quarter of 2014. Until the completion of the project,
the following expenditures are estimated to be incurred:
Expenditures
USD
a. Gross project cost
195,000,000
b. Less: Proceeds from sale of villas
(24,000,000)
c. Net project cost
171,000,000
d. Overhead expenses
21,000,000
e. Less: Recuperated in gross project cost
(12,000,000)
f
Total, excluding other potential projects
180,000,000
Sixty percent (60%) of the Net project cost is going to be financed by traditional mortgage
loans, for which negotiations have been initiated. The remaining forty percent (40% of the Net
project cost), as well as non-recuperated overhead expenses are going to be financed by the
main shareholders or lenders of the project, i.e. Zypam Ltd., shareholder, Mr. Hans Rigendinger,
shareholder and board member of SunVesta AG, Mr Max Rössler, majority shareholder of Aires
International Investment, Inc., Mr Josef Mettler, shareholder, director and chief executive officer.
On July 16, 2012, certain principal shareholders of the Company or principal lenders to the
project entered into a guaranty agreement in favor of SunVesta AG. The purpose of the guarantee
is to ensure that until such time as financing is secured for the entire project that they will act as a
guarantor to creditors to the extent of the projects ongoing capital requirements. The guaranty
agreement requires that within 30 days of receiving a demand notice, the guarantors are required
to pay to SunVesta AG that amount required for ongoing capital requirements, until such time as
financing of the project is secured. The guaranty may not be terminated until such time as
SunVesta AG has secured financing for the completion of the project.
Based on this guaranty agreement, management believes that available funds are sufficient to
finance cash flows for the twelve months subsequent to March 31, 2013 and the filing date
though future anticipated cash outflows for investing activities will continue to depend on the
availability of financing and can be adjusted as necessary.
10
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
4.
RESTRICTED CASH
As per March 31, 2013 the company has the following restricted cash positions:
Restricted Cash
March 31, 2013
December 31, 2012
$
$
Credit Suisse in favor of
BVK Personalvorsorge des Kantons Zürich
133,574
-
HSBC in favor of
Costa Rican Tourism Board
243,000
241,500
Banco Nacional de Costa Rica in favor of
Costa Rican Environmental Agency SETENA
603,753
-
Gross
980,327
241,500
Restricted cash positions in favor of Costa Rican Tourism Board and Costa Rican Environmental
Agency SETANA are related to the hotel project in Costa Rica and therefore their release is not
expected before finalization of the corresponding project. Due to this fact these restricted cash
positions has been classified as long term.
The restricted cash position in favor of BVK Personalvorsorge des Kantons Zürich is a rental
deposit related to a long term lease contract for office space. Due to this fact this restricted cash
position is also classified as long term.
The balances as of December 31, 2012 were reclassified to conform to the current presentation.
11
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
5.
PROPERTY & EQUIPMENT
Property & equipment
March 31, 2013
December 31, 2012
$
$
Land
19,700,000
7,000,000
IT Equipment
185,846
185,846
Other equipment and furniture
284,901
284,901
Leasehold improvements
66,617
66,617
Construction in-process
10,712,982
9,591,958
Gross
31,203,346
17,129,322
Less accumulated depreciation
(339,980)
(329,782)
Net
30,610,366
16,799,540
Depreciation expenses for the period ended
March 31, 2013
10,198
22,443
Property & equipment is comprised primarily of land held in Costa Rica that is currently being
developed for hotels and capitalized project costs in connection with the Papagayo Gulf Tourism
project. The land amounts to $19.7 million whereas $7 million relates to the concession held by
Richland (~84,000 m2) and $12.7 million held by Altos del Risco (~120,000 m2). The latter was
acquired through the acquisition of the shares of Altos del Risco SA whose only asset is the
concession, which does not qualify as a business. Control over Altos del Risco SA was obtained
on March 8, 2013. The previous down payments were reclassified to property and equipment.
The Richland concession is a right to use the property for a specific period of time of 20 years,
which thereafter will be renewed at no further cost, if the landholder is up to date with its
obligations and if there is no significant change in government policies. The current concession
expires in June 2022.
The Altos del Risco concession is also a right to use the property for a specific period of time of
30 years, which thereafter will be renewed at no further cost, if the landholder is up to date with
its obligations and if there is no significant change in government policies. The current
concession, which was issued in 2006, expires in November 2036. For further information
regarding acquisition of this piece of land see note 13.
The construction in process amount that was spent up to March 31, 2013 is represented primarily
by architectural work related to the hotel and apartments but also to some construction work.
12
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
6.
PLEDGES
March 31, 2013
December 31, 2012
Pledge of shares of Rich Land Investments Ltda.
0%
10%
in favor of Zypam Ltd. for Zypam Ltd's liabilities
(0 shares)
(1 share)
Pledge of shares of Rich Land Investments Ltda.
in favor of Meliá Hotels International for bonds
0%
20%
of EUR 2 million
(0 shares)
(2 shares)
The Company pledged the above shares as part of the bond agreement with Meliá and
corresponding contracts in Zypam Ltd. During the period ended March 31, 2013 the share
pledges were released back to the Company due to the repayment of the bond due to Meliá and
the amendment of the corresponding contracts in Zypam Ltd.
13
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
7.
FAIR VALUE MEASUREMENT
The guidance on fair value measurements defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market
participants. This guidance also specifies a fair value hierarchy based upon the observability of
inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained
from independent sources, while unobservable inputs (lowest level) reflect internally developed
market assumptions. In accordance with this guidance, fair value measurements are classified
under the following hierarchy:
Level 1 Quoted prices for identical instruments in active markets.
Level 2 Quoted prices for similar instruments in active markets, quoted prices for identical
or similar instruments in markets that are not active; and model-derived valuations
in which all significant inputs or significant value drivers are observable in active
markets.
Level 3 Model- deroved valuations in which one or more significant inputs or significant
value-drivers are unobservable.
When available, we use quoted market prices to determine fair value, and we classify such
measurements within Level 1. In some cases where market prices are not available, we make use
of observable market based inputs to calculate fair value, in which case the measurements are
classified within Level 2. If quoted or observable market prices are not available, fair value is
based upon internally developed models that use, where possible, current market-based
parameters such as interest rates, yield curves and currency rates. These measurements are
classified within Level 3.
Fair value measurements are classified according to the lowest level input or value-driver that is
significant to the valuation. A measurement may therefore be classified within Level 3 even
though there may be significant inputs that are readily observable.
Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk
refers to the risk that an obligation (either by counterparty or us) will not be fulfilled. For
financial assets traded in an active market (Level 1), the nonperformance risk is included in the
market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value
calculations have been adjusted accordingly.
As of March 31, 2013 and December 31, 2012, respectively, there are no financial assets or
liabilities measured on a recurring basis at fair value with the exception of fair value of
conversion option.
In addition to the methods and assumptions we use to record the fair value of financial
instruments as discussed above, we used the following methods and assumptions to estimate the
fair value of our financial instruments.
14
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
7.
FAIR VALUE MEASUREMENT - continued
Cash and cash equivalents carrying amount approximated fair value.
Restricted cash carrying amount approximated fair value.
Receivables from related parties (current) - carrying amount approximated fair value due to
the short term nature of the receivables.
Accounts Payable carrying amount approximated fair value.
Note payable - carrying amount approximated fair value due to the short nature of the note
payable.
EUR-Bond The fair values of the bonds payable are classified as level 3 fair values. The
fair values of the bonds have been determined by discounting cash flow projections
discounted at the respective interest rates of 8.25% for EUR bonds, which represents the
current market rate based on the creditworthiness of the Company. Hence, the carrying
values approximate fair value.
CHF-Bond The fair values of the bonds payable are classified as level 3 fair values. The
fair values of the bonds have been determined by discounting cash flow projections
discounted at the respective interest rates of 7.25% for CHF bonds, which represents the
current market rate based on the creditworthiness of the Company. Hence, the carrying
values approximate fair value.
Notes payable to related parties (current) Rigendinger carrying amount approximated fair
value due to the short term nature of the note payable.
Notes payable to related parties (current) other carrying amount approximated fair value
due to the short term nature of the note payable.
Notes payable to related parties Dr. M. Roessler (current) - carrying amount approximated
fair value due to the short term nature of the notes payable and the fair value of the
underlying publicly trades shares
Notes payable to related parties Aires The fair values of the notes payable to Aires
International Investments Inc. is classified as level 3 fair values. The fair values of the notes
were determined by discounting cash flow projections discounted at the respective interest
rates of 7.25%, which represents the current market rate based on the creditworthiness of the
Company. Hence, the carrying value approximates fair value.
Fair value of conversion feature The fair value of the conversion option is classified as
level 3 fair value. The fair value of the option was determined by using Black-Scholes with
the following input data:
- Stock price $0.10
- Exercise price: $1.01
- Expected term in years: 2.5 years
- Volatility 80%
- Annual Rate of quarterly dividends: 0%
- Discount Rate: 0.305%
The fair value of our financial instruments is presented in the table hereinafter:
15
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
7.
FAIR VALUE MEASUREMENT continued
March 31, 2013
December 31, 2012
Fair
Carrying
Fair Value
Carrying
Fair Value
Value
Amount
Amount
Reference
$
$
$
$
Levels
Cash and cash
equivalents
178,990
178,990
260,520
260,520
1
None
Restricted cash
980,327
980,327
241,500
241,500
1
Note 4
Receivable from
related parties
290,971
290,971
-
-
1
Note 8
Accounts Payable
1,638,571
1,638,571
827,102
827,102
1
None
Notes payable
2,000,000
2,000,000
-
-
1
Note 13
Notes payable to
related parties
other (current)
35,706
35,706
149,328
149,328
3
Note 8
Notes payable to
related parties Dr.
M. Roessler
(current)
2,612,034
2,612,034
2,682,736
2,594,284
1
Note 8
Notes payable to
related parties
Rigendinger
(current)
600,000
600,000
600,000
600,000
3
Note 8
EUR-bond
12,056,458
12,056,458
14,216,707
14,216,707
3
Note 10
CHF-bond
5,566,811
5,566,811
5,689,364
5,689,364
3
Note 10
Notes payable to
related parties
Aires (non-current)
16,947,284
16,947,284
10,407,764
10,407,764
3
Note 8
Notes payable to
related parties
Rigendinger Aires
(non-current)
-
-
717,977
717,977
3
Note 9
Fair value of
conversion option
50,181
50,181
-
-
3
Note 8
8.
RECEIVABLES FROM AND PAYABLES TO RELATED PARTIES
16
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Advances from (to) related parties are composed as follows:
Receivables
Payables
Receivables from and notes
March 31,
December 31,
March 31,
December 31,
to related parties
2013
2012
2013
2012
$
$
$
$
01
Hans Rigendinger
-
-
600,000
600,000
02
Josef Mettler
36,000
-
-
-
L 03
Adrian Oehler
-
-
35,706
37,380
o 04
Sportiva
46,976
-
-
31,948
a
n 05
Aires International
-
16,974,284
10,407,764
06
Dr. Max Roessler
-
2,612,034
2,682,736
a 07
Hans Rigendinger
-
-
-
717,977
g 08
Akyinyi Interiors
-
-
-
80,000
r
e 09
4f capital ag
207,995
e
Total excluding
m
interest
290,971
-
20,222,024
14,577,805
e
Accrued interest
-
-
768,245
566,093
n
Total
290,971
-
20,990,269
15,123,898
t
of which non-current
-
-
16,974,284
11,125,741
No
Related party
Capacity
Interest
Repayment
Rate
Terms
Security
01
Hans Rigendinger
Shareholder, director, chief operating
officer (COO)
0.00%
none
none
Shareholder, chairman of the board of
02
Josef Mettler
directors, chief executive officer
(CEO), chief financial officer (CFO)
3.00%
none
none
and principal accounting officer (PAO)
03
Adrian Oehler
Shareholder and SunVesta AG board
member
0.00%
none
none
04
Sportiva
Entity owned by the Companys
director, CEO, CFO and PAO
3.00%
none
none
05
Aires International
*** see hereinafter***
06
Dr. Max Roessler
Shareholder and director
*** see hereinafter ***
07
Hans Rigendinger
Shareholder, director and COO
*** see hereinafter ***
08
Akyinyi Interiors
Entity owned by a directors wife
0.00%
01/31/13
none
09
4f Capital Ag
Entity owned by the Companys
director, CEO, CFO and PAO
0.00%
none
none
8.
RECIEVABLES FROM AND PAYABLE TO RELATED PARTIES - Continued
17
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Loan agreement Aires International Investment Inc.
On July 27, 2011, SunVesta signed a loan agreement with Aires International Investments Inc.
(Aires), a company owned by a board member of the Company, which has been amended and
superseded by an amendment on May 11, 2012 respectively June 21, 2012 and which includes the
following major conditions:
The lender grants the Company a terminable, interest bearing and non-secured loan in the
maximum amount of CHF 10,000,000.
The conversion right granted in the original contract to convert the balance of the line of
credit into a 10% ownership interest in Rich Land was cancelled.
Once the entire amount of CHF 10,000,000 has been drawn down, Aires now has the right to
convert its entire loan of CHF 10,000,000 into 20% shares of SunVesta Inc. (instead of
Richland) whereas 20% shares reflect the number of shares at the time when the entire
amount of CHF 10,000,000 has been drawn down.
In principle, the loan will become due in September 30, 2015, being the latest date on which
Aires can exercise its conversion option
CHF 10,000,000 of this line of credit is subordinated in favour of other creditors.
The interest rate is 7.25% and interest is due on September 30 of each year.
The conditions of the above mentioned conversion option was met during 2012. The Company
has analyzed the accounting treatment of this financial instrument. Based on this analysis the
Company concluded that the conversion option needs to be bifurcated and is to be accounted for
as a derivative under ASC 815. Main factors for this accounting treatment are: the debt is
denominated in CHF while the shares are convertible into shares of the Company, whose
functional currency is USD and whose shares are traded in USD. Based on that, the Company
determined that the conversion feature is not indexed to the Companys shares and it should be
bifurcated and accounted for as a derivative. As of November 13, 2012 (the date when the loan
became convertible) and December 31, 2012 the fair value of the conversion feature was
immaterial. As of March 31, 2013 the fair value of the conversion feature was $50,181 which is
recorded in fair value of conversion option.
The fair value of the call option value has been calculated by using Black-Scholes with the
following assumptions:
- Stock price $0.10
- Exercise price $1.01
- Expected term in years 2.50
- Volatility of 80%
- Annual Rate of quarterly Dividends 0%
- Discount Rate 0.305%
Based on this calculation one call option has a fair value of $0.005 as per March 31, 2013.
Multiplied with number of option granted of 10,818,437 this result in fair value of the conversion
feature of $50,181.
18
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
8.
RECIEVABLES FROM AND PAYABLE TO RELATED PARTIES Continued
Loans Dr. Max Roessler
On June 7, 2012, Dr. Max Roessler (board member of SunVesta AG) gave a short term loan of
$1.81 million that is repayable on May 30, 2013, or on demand within five working days. On this
short term loan the Company is not required to pay any interest and can repay the loan either in
cash or with the delivery of 10,000 shares of Intershop Holding AG, a publically traded entity,
regardless of actual trading value on the date of delivery. The Company therefore might
recognize a gain if the loan is repaid in Intersthop Holding AG shares and the trading price of the
shares is less than the amount due. Based on the trading price for Intershop Holding AG shares on
March 31, 2013 the Company would not have recognized a gain. Therefore the fair value of the
loan approximates the carrying value of the loan.
On July 24, 2012, Dr. Max Roessler (board member of SunVesta AG) gave an additional short
term loan of $0.47 million that is repayable on May 30, 2013, or on demand within five working
days. On this short term loan the Company is not required to pay any interest and can repay the
loan either in cash or with the delivery of 10,000 shares of Schindler Holding AG, a publically
traded entity, regardless of actual trading value on the date of delivery. The Company therefore
might recognize a gain if the loan is repaid in Schindler Holding AG shares and the trading price
of the shares is less than the amount due. Based on the trading price for Schindler Holding AG
shares on March 31, 2013 the Company would not have recognized a gain. Therefore the fair
value of the loan approximates the carrying value of the loan.
On August 8, 2012, Dr. Max Roessler (board member of SunVesta AG) gave a further short term
loan of $0.4 million that is repayable also on May 30, 2013, or on demand within five working
days. On this short term loan the Company is not required to pay any interest and can repay the
loan either in cash or with the delivery of 700 shares of Zug Estates Holding AG, a publically
traded entity, regardless of actual trading value on the date of delivery. The Company therefore
might recognize a gain if the loan is repaid in Zug Estates Holding AG shares and the trading
price of the shares is less than the amount due. Based on the trading price for Zug Estates AG
shares on March 31, 2013, the Company would have recognized a gain, which gain is immaterial.
The Company has not recorded such gain and the fair value of the loan approximates the carrying
value of the loan.
On March 1, 2013, Dr. Max Roessler (board member of SunVesta AG) gave a further short term
loan of $0.05 million that is repayable on July 31, 2013, or on demand within five working days.
On this short term loan the Company is not required to pay any interest and can repay the loan
either in cash or with the delivery of 52,500 shares of Daetwyler Holding AG, a publically traded
entity, regardless of actual trading value on the date of delivery. The Company therefore might
recognize a gain if the loan is repaid in Datewyler Holding AG shares and the trading price of the
shares is less than the amount due. Based on the trading price for Daetwyler Holding AG shares
on March 31, 2013, the Company would not have recognized a gain. Therefore the fair value of
the loan approximates the carrying value of the loan.
19
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
9.
RELATED PARTY TRANSACTIONS
Debt Settlement Agreements
On December 31, 2012 the Company concluded a debt settlement agreement with Hans
Rigendinger. This debt settlement agreement, settled the outstanding balance of $717,977 as of
December 31, 2012 as described hereinafter:
The Company issued 17,949,417 shares of its common stock ($0.01 par value) at a
conversion price of $0.04 to Hans Rigendinger for the purposes of this debt settlement.
The difference between the carrying value of this debt and the fair value of the common
stock issued amounted to $717,976. The difference has been recorded as stock compensation
expense in general and administrative expenses in the year ended December 31, 2012.
To determine the fair value of the common stock issued the quoted market price as of
December 31, 2012 was used.
The shares were not formally issued as of December 31, 2012, and therefore, the note
payable was not eliminated as of December 31, 2012. The satisfaction of the note payable
was recorded on the issuance of the shares as of January 8, 2013.
Comissions paid to related parties
During Quarter ended March 31, 2013 and March 31, 2012 the Company paid commissions to
4f Capital AG in the amount of approximately $108,000 and $0, respectively related to financing
of the Company.
20
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
10.
BONDS
SunVesta Holding AG has a bond outstanding with the following major conditions.
Description
EUR ( ) bond
CHF bond
Issuer:
SunVesta Holding AG
SunVesta Holding AG
Type of securities:
Bond in accordance with
Bond in accordance with
Swiss law
Swiss law
Approval by SunVesta
May 12, 2010
June 3, 2011
Holding AG Board of Directors
Volume:
Up to 25,000,000
Up to CHF 15,000,000
Units:
1,000
CHF 50,000
Offering period:
11/10/2010 04/30/2011
09/01/2011 02/28/2012
Due date:
November 30, 2013
August 31, 2015
Issuance price:
100 %
100%
Issuance day:
December 1, 2010
September 1, 2011
Interest rate:
8.25% p.a.
7.25% p.a.
Interest due dates:
November 30 of each year,
August 31 of each year,
the first time November 30, 2011
the first time August 31, 2012
Applicable law:
Swiss
Swiss
The nominal amounts have changed as follows:
EUR-Bond
CHF Bond
EUR-Bond
CHF Bond
2013
2013
2012
2012
USD
USD
USD
USD
Balances January 1
14,216,707
5,689,364
9,598,537
3,818,898
Cash inflows
792,740
108,113
4,015,549
3,191,888
Cash outflows
(2,649,073)
-
-
1,474,823
Foreign currency adjustments
(239,193)
59,736
692,295
463,849
Sub-total (Fair value)
12,121,181
5,857,113
14,306,380
5,999,813
Commissions paid to bondholders
(248,195)
(417,709)
(248,195)
(417,709)
Amortization of such commissions
183,472
127,307
158,522
107,260
Balance March 31, 2013
December 31, 2012 (Carrying value)
12,056,458
5,566,811
14,216,707
5,689,364
Should the refinancing of the EUR bonds not be completed by November 30, 2013, certain
principal shareholders of the Company or principal lenders to the project would provide bridge
financing according to the guaranty agreement (see Note 3).
21
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
11.
PENSION PLAN
The Company maintains a pension plan covering all employees in Switzerland; it is considered a
defined benefit plan and accounted for in accordance with ASC 715 (compensation retirement
benefits). This model allocates pension costs over the service period of employees in the plan.
The underlying principle is that employees render services rateably over th is period, and
therefore, the income statement effects of pensions should follow a similar pattern. ASC 715
requires recognition of the funded status, or difference between the fair value of plan assets and
the projected benefit obligations of the pension plan on the balance sheet, with a corresponding
adjustment to accumulated other comprehensive income. If the projected benefit obligation
exceeds the fair value of plan assets, then the difference or unfunded status represents the pension
liability.
The Company records a net periodic pension cost in the statement of operations. The liabilities
and annual income or expense of the pension plan is determined using methodologies that involve
several actuarial assumptions, the most significant of which are the discount rate and the long-
term rate of asset return (based on the market-related value of assets). The fair values of plan
assets are determined based on prevailing market prices.
Actuarial valuation
Net periodic pension cost has been included in the Companys results as follows:
Three months ended
Three months ended
Pension expense
March 31, 2013
March 31, 2012
$
$
Current service cost
13,632
25,383
Past service cost
-
-
Net actuarial (gain) loss recognized
(268)
-
Interest cost
1,181
772
Expected return on assets
(1,208)
(692)
Employee contributions
(5,448)
(10,164)
Net periodic pension cost
7,890
15,299
During the three months periods ended March 31, 2013 and March 31, 2012 the Company made
cash contributions of $5,500 and $10,000, respectively, to its defined benefit pension plan.
All of the assets are held under the collective contract by the plans re-insurer Company and are
invested in a mix of Swiss and international bond and equity securities within the limits
prescribed by the Swiss Pension Law.
The expected future cash flows to be paid by the Company in respect of employer contributions
to the pension plan for the year ended December 31, 2013 are $16,500.
22
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
12.
STOCK COMPENSATION
The Company has included share based remuneration based on SunVesta Inc. Stock Option Plan
2013 as part of the total remuneration in some new employment contracts. Based on this stock
option plan the Company has the possibility since January 1, 2013 to issue up to 50,000,000
common stock shares under the plan.
The purpose of these share based remuneration is to advance the interests of the Company by
encouraging its employees to remain associated with the Company and assist the Company in
building value. Such share based remuneration includes either shares or options to acquire shares
of the Companys common stock.
The Company grants equity awards to its employees and directors. Certain employee and director
awards vest over stated vesting periods and others also require achievement of specific
performance. The grant-date fair value of awards to employees and directors will be expensed
over their respective vesting periods. To the extent that employee and director awards vest only
upon the achievement of a specific performance condition, expense is recognized over the period
from the date management determines that the performance condition is probable of achievement
through the date they are expected to be met. The fair value of stock options is estimated using
the Black-Scholes option-pricing model. Option pricing methods require the input of highly
subjective assumptions, including the expected stock price volatility.
Share Grants
On January 1, 2013 the Company issued 3,500,000 common shares, valued at $0.08 which has
been the share price and therefore the fair value on grant date, to Hans Riegendinger in
connection with his employment agreement of even date as so-called signing bonus.
Additionally the Company granted 2,500,000 common shares as so-called retention award for
each completed year of employment (e.g. first time as per January 1, 2014). The employment
contract has been concluded for three years with an additional bilateral option for another two
years. Therefore in total the Company could be requested to issue maximal 12,500,000 common
shares up to January 1, 2018 to Hans Rigendinger related to this retention bonus.
23
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
12.
STOCK COMPENSATION - Continued
Based on this contract the Company has included the following stock-based compensation in the
Companys results:
Three months
Three months
Stock-based compensation (shares)
ended March 31,
ended March 31,
2013
2012
Shares granted
16,000,000 shares
---
Fair Value respectively market price on grant date
$ 0.08
---
Total maximal expenses (2013-2017)
$ 1,280,000
---
Shares vested (signing bonus)
3,500,000 shares
---
Unvested shares (retention award)
12,500,000 shares
---
Expenses recorded under general & administrative
---
expenses
$ 330,000
Unrecorded costs related to unvested share grants
---
(retention bonus)
$ 950,000
Tax benefit associated with compensation expense
$ 0
---
As of March 31, 2013 the Company expects to record compensation expense in the future as
follows:
Through
Year ending December 31,
Stock-based
December 31,
compensation (shares)
2013
2014
2015
2016
2017
$
$
$
$
$
Unrecognized
compensation expense
150,000
200,000
200,000
200,000
200,000
Stock options
The Company granted to Hans Rigendinger in connection with his employment contract
10,000,000 options on January 1, 2013. Each option entitles to buy one Companys share at a
strike price of $0.05. These options will vest in two identical installments (installment A and B)
of 5,000,000 options.
For installment A it is required that the Company complete a financing arrangement with a
specific counterparty. As of grant date the fair value was $300,000. As of March 31, 2013, the
Company assessed that this financing arrangement will not be completed. Therefore, the
Company assessed the probability of completion to be zero and therefore no expense has been
recognized for the stock options associated with installment A as per March 31, 2013.
For installment B it is required that the Company completes the Paradisius Papagayo Bay Resort
& Luxury Villas (see Note 16) by the thereinafter mentioned date of November 1, 2014. The
grant date fair value was $300,000. As of March 31, 2013 the Company assessed that the
probability that this performance condition will be met at 100%.
24
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
12.
STOCK COMPENSATION - Continued
A summary of stock options outstanding as per March 31, 2013, is as follows (during three-
month period ended March 31, 2012, no options were granted):
Options outstanding
Number of Options
Weighted average
Weighted average
exercise price
remaining
contractual life
Outstanding January 1, 2013
None
None
Granted
10,000,000
$ 0.05
9.75 years
Exercised
0
0
Forfeited or expired
0
0
Outstanding March 31, 2013
10,000,000
$ 0.05
9.75 years
Exercisable March 31, 2013
0
The following table depicts the Companys non-vested options as of March 31, 2013 and changes
during the period:
Non-vested options
Shares under Options
Weighted average grant
date fair value
Non-vested at December 31, 2012
0
$ 0.00
Non-vested-granted
10,000,000
$ 0.06
Vested
0
$ 0.00
Non-vested, forfeited or canceled
0
$ 0.00
Non-vested at March 31, 2013
10,000,000
$ 0.06
Under the provisions of FASB ASC Topic 718, the Company is required to measure and
recognize compensation expense related to any outstanding and unvested stock options
previously granted, and thereafter recognize, in its consolidated financial statements,
compensation expense related to any new stock options granted after implementation using a
calculated fair value based option-pricing model. The Company uses the Black-Scholes option-
pricing model to calculate the fair value of all of its stock options and its assumption are based on
historical and or if available market information. The following assumptions were used to
calculate the compensation expense and the calculated fair value of stock options granted:
Assumption
March 31, 2013
March 31, 2012
Dividend yield
None
---
Risk-free interest rate
1.00%
---
Expected market price volatility
80.00%
---
Average expected life of stock options
6.0 years
---
The computation of the expected volatility assumption used in the Black-Scholes calculation for
new grants is based on historical volatilities of a peer group of similar companies in the same
industry. The expected life assumptions are based on underlying contracts.
25
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
12.
STOCK COMPENSATION - Continued
The Company recorded the following amounts related to the expense of the fair values of options
during the quarter ended March 31, 2013:
Stock based compensation (options)
March 31, 2013
March 31, 2013
$
$
Expenses recorded under general &
40,000
---
administrative expenses
Benefit for income taxes
0
---
Effect on net loss
40,000
---
As of March 31, 2013 the Company had unrecognized compensation expenses related to stock
options currently outstanding, to be recognized in future quarters respectively years as follows:
Through December 31,
Year ending December 31,
Stock-based compensation (options)
2013
2014
$
$
Unrecognized compensation expense
120,000
140,000
26
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
13.
AGREEMENT TO PURCHASE NEIGHBORING PIECE OF LAND
In 2010 SunVesta AG entered into a sale and purchase agreement with a company called DIA
S.A. (DIA), domiciled in San José, Costa Rica to acquire a piece of land, neighboring the
Paradisus Papagayo Bay Resort & Luxury Villas development, of approximately 120,000 m2
having direct beach access by purchasing 100% of the shares of Altos del Risco S.A. from DIA.
The total purchase consideration was $12.7 million. On March 9, 2013 the Company concluded
the purchase of this piece of land and ownership has been officially transferred. Up to March 9,
2013 the Company paid $10.7 million in cash.
As part of the completion of the purchase, the parties agreed that a remaining part of the purchase
price of $2,000,000 has been converted into a non interest bearing and uncollateralized loan
payable which is due for payment on March 8, 2014.
14.
MANGEMENT AGREEMENT WITH MELIA HOTELS & RESORTS
In March 2011 the Company concluded a management agreement for the management of the
planned resort in Guanacaste, Costa Rica. This agreement includes a clause saying that if
SunVesta AG were not able to conclude the purchase of the property described in Note 12 by
November 30, 2011, then a penalty of $1 million would become due to Sol Meliá, S.A. Therefore
the Company recorded a liability in accrued expenses in the full amount as of December 31, 2011
with the corresponding expense recorded in general and administrative expense in the year ended
December 31, 2011.
On March 3, 2012, the deadline to pay the penalty of $1 million was extended by Sol Meliá, S.A.
to June 30, 2012. On June 30, 2012 neither the whole penalty nor a part of the penalty has been
paid. Therefore the deadline to pay the penalty of $1 million was extended on June 30, 2012 up to
August 31, 2012.
Neither on August 31, 2012, nor on December 31, 2012, was the whole penalty or a part of the
penalty paid although the deadline of August 31, 2012 to pay the penalty of $1 million has
expired. Hence, the penalty of $1 million remained in accrued expenses as of December 31, 2012.
On February 5, 2013, the Company extended the deadline to complete the purchase of the
property pursuant to the terms of the management agreement with Sol Meliá, S.A., to March 15,
2013 and agreed that the penalty of $1 million would be waived if the purchase was completed by
March 15, 2013. The purchase of the property was concluded on March 9, 2013.
Since the Company concluded the purchase of the property described within the extension period
the penalty otherwise payable to Sol Meliá, S.A. and the corresponding allowance has been
eliminated as of March 9, 2013. Therefore, the Company has released the accrual of $1 million
related to this transaction in the period ended March 31, 2013.
27
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
15.
INTENTION TO PURCHASE TWO ADDITIONAL CONCESSION PROPERTIES AT
POLO PAPAGAYO, GUANACASTE
On April 20, 2012, the Company entered into an agreement to purchase two additional concession
properties located at Polo Papagayo, Guanacaste, with a total surface of approximately 230,000
square meters for a price of $22,895,806, whereof fifty percent is to be paid in cash and the other
fifty percent in ten percent equity of La Punta (the concession properties in Polo Papagayo) and
five percent in equity of Paradisus Papagayo Bay Resort & Luxury Villas (the hotel currently
under construction), both located in Costa Rica. The payment schedule is as follows:
$0.5 million is required as a cash payment by May 16, 2012
$5.0 million is required as a cash payment by August 31, 2012
$5.698 million is required as a cash payment by January 31, 2013
Equity is required to be transferred upon final payment
If the Company elects not to proceed with the purchase, the purchaser is in default and will lose
its funds on deposit.
On November 13, 2012 the above agreement was amended to decrease the total purchase price to
$17.2 million with no equity payment. The terms and conditions of the cash payment were still to
be defined. Furthermore, all payments by the Company to date and in the future are refundable.
Subsequent to signing the agreements, the Company paid down-payments on the purchase of the
properties of approximately $1,400,000 up to March 31, 2013, which is included in down
payment for property and equipment.
Subsequent to the balance sheet date March 31, 2013 the Company entered into a new, revised
agreement regarding the purchase of the two additional concession properties (refer to Note 20).
16.
OPENING DATE Paradisius Papagayo Bay Resort & Luxury Villas
During the 3rd Quarter of 2012, the Company postponed the opening date for Papagayo Gulf
Tourism Project of Costa Rica, which is now scheduled for the winter of 2014. Due to the
postponement an addendum to the original management agreement with Sol Meliá, S.A. was
agreed as follows:
The construction of the Paradisius will be completed by November 1, 2014
Should the Paradisius not be completed by November 1, 2014, (subject to force majeure)
and should an extension date not be agreed, subsequent to November 1, 2014, the Company
will be obligated to pay Sol Meliá, S.A. a daily amount of $2,000 as liquidated damages
Should the Company be unable to complete the construction of the Paradisius by February
28, 2015, Sol Meliá, S.A. can terminate the management agreement obligating the Company to
compensate Sol Meliá, S.A. in the amount of $5,000,000 unless the respective parties agree to
extend such date.
Regarding current situation, subsequent to March 31, 2013, refer to Note 20.
28
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
17.
HOTEL PROJECT ATLANTA
On September 19, 2012, the Company entered into a purchase agreement for a hotel and
entertainment complex in Atlanta, Georgia (United States of America). The entire purchase
amount of $26 million for the assets has no firm financing commitment. Additionally, an
additional amount of approximately $18 million for renovations would need to be invested in the
hotel and entertainment complex. The Company is in negotiations with various parties to finalize
a financing package for this project. Should the Company conclude the transaction on or before
July 10, 2013, those amounts paid on deposit extension will be credited to the purchase price.
Otherwise, the Company will lose non-refundable deposits of $750,000 of which $500,000 was
paid up to March 31, 2013 and $250,000 subsequent to March 31, 2013.
Regarding current situation, subsequent to March 31, 2013, refer to Note 20.
18.
EARNINGS PER SHARE
Basic earnings per share are the result of dividing the Companys net income (or net loss) by the
weighted average number of shares outstanding for the contemplated period. Diluted earnings per
share are calculated applying the treasury stock method. When there is a net income dilutive
effect all stock-based compensation awards or participating financial instruments are considered.
When the Company posts a loss, basis loss per share equals diluted loss per share. The following
table depicts how the denominator for the calculation of basic and diluted earnings per share was
determined under the treasury stock method.
Earnings per share
Three-mont h p eriod ended
March 31, 2013
March 31, 2012
Company posted
Net loss
Net loss
Basic weighted average shares outstanding
71,251,720
54,092,186
Dilutive effect of common stock equivalents
none
none
Dilutive weighted average shares outstanding
71,251,720
54,092,186
The following table shows the number of stock equivalents that were excluded from the
computation of diluted earnings per share for the respective period because the effect would have
been anti-dilutive.
Three-month period
Three-month period
Earnings per share
ended
ended
March 31, 2013
March 31, 2012
Conversion feature loan to Aires International
10,818,437
---
Investment Inc.
Shares to Hans Rigendinger (retention bonus)
12,500,000
---
Options
10,000,000
---
Total
33,318,437
---
29
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
19.
RESTATEMENT
During the year ended December 31, 2012 the Company determined that the interest capitalized
was understated in the quarter ended March 31, 2012. The Company capitalized interest costs on
the carrying value of the construction in progress during the contraction period based on the
contractual rate. However, interest cost as defined in ASC 835-20 includes stated interest,
imputed interest (ASC 835-30), and interest related to a capital lease in accordance with ASC
840-30, as well as amortization of discount, premium and issue costs on debt.
Management has concluded that the impact of the error is not material to the previously filed
quarterly report for the quarter ended March 31, 2012 and therefore has not filed any amendments
to this quarter. The table below summarizes the impact of the restatement, which has been
reflected in the quarterly report for the period ended March 31, 2013:
Quarter to date
Period ended March 31
2012
2012
as reported
as restated
Property and equipment, net
$12,370,324
$12,600,324
Shareholders' equity (deficit)
$(5,439,870)
$(5,209,870)
Total assets
$20,145,618
$20,375,618
Amortization of debt issuance
$(229,288)
$712
costs and commissions
Net loss
$(1,334,525)
$(1,104,525)
Basic and diluted loss per share
$(0.02)
$(0.02)
30
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
20.
SUBSEQUENT EVENTS
Management has evaluated subsequent events after the balance sheet date, through the issuance of
the financial statements, for appropriate accounting and disclosure. The Company has determined
that there were no such events that warrant disclosure or recognition in the financial statements,
except for the below:
Hotel Project Atlanta
The Company has not been able to complete a financing package for this project up to July 10,
2013 and has concluded on July 30, 2013 a new agreement. The Company is requested to pay
another deposit of $250,000 up to August 16, 2013. Therefore, the Company was able to extend
the deadline to finalize a financing package up to September 30, 2013. Additionally the Company
bears taxes of the counterparty for the tax year 2013 of approximately $573,932. Therefore the
Company is requested to pay directly to the counterparty on or before August 30, 2013 $579,932.
The Company has neither remitted the additional deposit of $250,000 nor paid the counterparty
the taxes on the property for the tax year 2013.
Since the Company has not been able to conclude a financing package as of date of this report the
Company is in default and will lose all deposits (including taxes paid for the counterparty) of
$1,329,932 of which $500,000 was paid up to March 31, 2013 and another $250,000 on June 10,
2013, if the Company is not able to extend the deadline.
EUR Bond Offering
The Company initiated a EUR bond offering on December 1, 2010 of up to EUR 25,000,000 in
units of EUR 1,000 that bear 8.25 % interest per annum payable each November 30 over the term
of the bonds due November 30, 2013.
A cumulative amount of EUR 9.45 million ($12.1 million) has been realized by the Company
from the initial date up to the date of this filing.
CHF Bond Offering
The Company initiated a CHF bond offering on September 1, 2011 of up to CHF 15,000,000 in
units of CHF 50,000 that bear 7.25 % interest per annum payable each August 31 over the term of
the bonds due August 31, 2015.
A cumulative amount of CHF 5.60 million ($5.85 million) has been realized by the Company
from the initial date up to the date of this filing.
31
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
20.
SUBSEQUENT EVENTS Continued
Intention to purchase two additional concession properties at Polo Papagayo, Guanacaste
During the 2nd Quarter of 2013 the Company entered into a new, revised agreement regarding the
purchase of two additional concession properties at Polo Papagayo, Guanacaste. The original
contract (refer to Note 15) has been cancelled and replaced by a new contract which includes the
following clauses:
The Company has paid approximately $1,669,000 as of the date of this report which is
refundable.
The total purchase price is $17,500,000 and the remaining balance as of the date of this report is
$15,830,299.
Since the original seller of these two additional concession properties at Polo Papagayo,
Guanacaste owes a third party $8,000,000 the Company will pay $7,700,000 ($ 300,000 already
paid) of the purchase price directly to this third party instead of the original seller. The remaining
$8,130,000 will be paid directly to the original seller of the concession properties.
The payment schedule for these two additional concession properties at Polo Papagayo
Guanacaste is as hereinafter:
Third Party
$300,000 on May 4, 2013 which was paid on May 3, 2013 and is non-refundable
$1,000,000 on June 30, 2013, which is refundable and has not been paid as of the date of this
report
$1,000,000 on July 31, 2013, which is refundable and has not been paid as of the date of this
report
$1,000,000 on August 31, 2013 which is refundable and has not been paid as of the date of this
report
$1,500,000 on September 30, 2013, which is refundable and has not been paid as the date of this report
$1,500,000 on October 31, 2013, which is refundable
$1,700,000 on November 30, 2013, which is refundable
$8,000,000 in total to Third Party
Original Seller
$1,000,000 on January 31, 2014 and is non-refundable
$1,000,000 on February 28, 2014 and is non-refundable
$1,000,000 on March 31, 2014 and is non-refundable
$1,000,000 on April 30, 2014 and is non-refundable
$1,000,000 on May 31, 2014 and is non-refundable
$1,000,000 on June 30, 2014 and is non-refundable
$1,000,000 on July 31, 2014 and is non-refundable
$1,130,000 on August 31, 2014 and is non-refundable
$8, 130,000 in total to Original Seller
Should the Company be able to pay the third party and the original seller all amounts - as above
mentioned - earlier than scheduled, the original seller will give a discount on his remaining
portion of the purchase price as following:
Should the Company complete the remaining balance due to the third party on or before August
31, 2013, the discount will be $3,250,000
Should the Company complete the remaining balance due to the third party on or before
September 30, 2013, the discount will be $2,750,000
Should the Company complete the remaining balance due to the third party on or before October
31, 2013, the discount will be $2,250,000
Should the Company complete the remaining balance due to the third party on or before
November 30, 2013, the discount will be $1,750,000
32
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
20.
SUBSEQUENT EVENTS Continued
Loan Aires International Investment Inc.
As described in Note 8, the Company is still negotiating with Aires International Investment Inc.
a revised conversion option for their loan. Despite of this fact Aires International Investment Inc.
has paid additional amounts to the Company since March 31, 2013.
As of the date of this report the Company has borrowed CHF 23.82 million (approximately
$23.56 million) from Aires.
New Entity
The Company founded on June 26, 2013 a wholly owned new subsidiary in the United States.
Name:
Profunda Capital Partners LLC
Incorporated:
State of Nevada, United States
Manager:
Josef Mettler / Hans Rigendinger
Issuances of securities
On July 4, 2013, the Company authorized the issuance of 5,000,000 shares of restricted common
shares to Josef Mettler valued at Fair Value at the corresponding date. Additionally the Company
granted 12,000,000 options of common stock of the Company as of July 4 , 2013 to Josef
Mettler. These Options shall be exercisable in three portions at an exercise price of $0.05 as
following:
3,000,000 options
On the date that the Company or one of its subsidiaries
completes a bridge financing prior to completion of the
main financing anticipated for the development of the
Paradsius Papagayo Bay.
4,000,000 options
On the date that the Company or one of its subsidiaries
completes a financing for the development of the
Paradsius Papagayo Bay.
5,000,000 options
On the date that Paradisus (Sol Meliá S.A.) assumes
management responsibilities for the Paradisus Papagayo
Bay.
These issuances of securities are in relation with a new employment contract concluded between
Josef Mettler and the Company on July 4, 2013. This employment contract includes a retention
award of 3,000,000 restricted common shares of the Company as of each annual anniversary of
the employment contract, as well as an annual base salary of $144,000.
On July 3, 2013, the Company authorized the issuance of 3,000,000 shares of restricted common
shares to Dr. Roessler, valued at Fair Value at the corresponding date, in relation with his election
as board member of the Company.
33
SUNVESTA, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
20.
SUBSEQUENT EVENTS Continued
OPENING DATE Paradisius Papagayo Bay Resort & Luxury Villas
The official opening of the Paradisius Papagayo Bay Resort & Luxury Villas will be delayed
by a few months due to geological difficulties during earthwork operations in August and
September 2013. Due to these geological difficulties some rock demolition became necessary. On
September 6, 2013 the Company has achieved an agreement in good understanding with Sol
Meliá, S.A. (5 th addendum to the management agreement of March 8, 2011) to postpone the
opening date as follows:
The construction of the Paradisius will be completed by July 1, 2015
Should the Paradisius not be completed by July 1, 2015, (subject to force majeure)
and should an extension date not be agreed, subsequent to July 1, 2015, the Company
will be obligated to pay Sol Meliá, S.A. a daily amount of $2,000 as liquidated
damages
Should the Company be unable to complete the construction of the Paradisius by
October 1, 2015, Sol Meliá, S.A. can terminate the management agreement obligating
the Company to compensate Sol Meliá, S.A. in the amount of $5,000,000 unless the
respective parties agree to extend such date.
34
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Managements Discussion and Analysis of Financial Condition and Results of Operations and other
parts of this quarterly report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can be identified by words such as anticipates, expects, believes,
plans, predicts, and similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such differences include but are not limited to those
discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future
Results and Financial Condition below. The following discussion should be read in conjunction with our
financial statements and notes hereto included in this report. All information presented herein is based on
our three month periods ended March 31, 2013 and March 31, 2012. Our fiscal year end is December 31.
Discussion and Analysis
Business Overview
We are in the process of developing high-end luxury hotels and resorts in emerging tourist destinations.
We are initially concentrating on offering luxury hotel products located in attractive, top-class coastal
vacation destinations in countries such as Costa Rica, Vietnam, and Turkey that are fast emerging as
popular tourist destinations. Country specific conditions are taken into account when properties are
considered for development. General considerations as to where to develop properties include the stability
of local political conditions, geologically useful cultivability, and the types of destinations that attract a
five-star clientele. Each potential investment is first compared against a validation checklist and then, if
warranted, subjected to a substantial due diligence process. Since location is the key to the success of any
tourist based luxury real estate project, each development will be carefully considered during the
eligibility process.
Initial Development
Our initial real estate development, to be constructed on 20.5 hectares of prime land located in
Guanacaste Province, Costa Rica, is the Paradisus Papagayo Bay Resort & Luxury Villas, a five star
luxury hotel scheduled to open in July 2015 subject to requisite financing.
Specifications
Paradisus Papagayo Bay Resort & Luxury Villas initial specifications are to be as follows:
eco-luxury all-inclusive resort
381-keys
direct beach access
five restaurants and five bars
Yhi Spa and Health Club
Paradisus adults-only Royal Service level of accommodations
Paradisus Family Concierge program
19,000 square feet of meeting facilities with the business traveler in mind
35
Royal Service
Our Royal Service will include an extensive range of services such as butler service, private pools for
each Garden Villa and/or a Jacuzzi in every suite.
The Royal Service area will include:
112 Junior Suites Grand Deluxe
(53-60* square meters)
3 Junior Suites Grand Deluxe for Handicapped Guests
(53* square meters)
6 Grand Master Suites
(82* square meters)
1 Grand Presidential Suite (4 bedrooms)
(145* square meters)
20 one or two bedroom Garden Villas
(91 117* square meters)
* Room size does not include balconies and terraces.
All ground floor suites will have direct access to swim-up pools. Each of the suites and villas will have a
full view of the sea. Royal Service guests will furthermore have access to restaurants, bars, lounges,
fitness equipment, spas and outside massage areas.
Family Concierge
The Family Concierge will be the family orientated part of the Paradisus Papagayo Bay Resort & Luxury
Villas. The accommodations will be designed to satisfy the needs of the modern family.
166 Junior Suites Deluxe
(47* square meters)
34 Suites Deluxe
(87* square meters)
34 Suites Premium
(93* square meters)
6 Handicapped Junior Suites Deluxe
(47* square meters)
1 Presidential Suite
(189* square meters)
* Room size does not include balconies and terraces.
All ground floor suites will have direct access to swim-up pools. Each of the suites will have a full view
of the sea. Family Concierge guests will furthermore have access to restaurants, bars, and lounges. The
intended Onyx Night Club and the Gabi Club will be located near the beach.
The Paradisus Papagayo Bay Resort & Luxury Villas will feature other highlights including:
over 65 private, swim up and resort pools including the worlds second largest Infinity Pool all
within idyllic landscaped grounds
a wedding chapel with a stunning ocean view
rain forest walkways that permit guests to experience the flora and fauna of the rain forest
a multipurpose convention hall with over 2,000 square meters of space that can be utilized as a
whole or divided to create smaller meeting rooms
a full service spa committed to providing for the wellbeing of our guests. The spa will be located
with a 180 degree sea view within approximately 1,000 square meters that will include 12 large
treatment rooms, a hairdresser, relaxation areas, pools, saunas and steam rooms
the 20 private villas will be located within the Royal Service area of the resort. The present
intention being that these villas will be sold to individuals who will then let them back to the
36
resort when not occupied by the owners.
Management
Overall project development is lead by Josef Mettler, our chief executive officer, Charles Fessel, project
director Paradisus Papagayo Bay Resort & Luxury Villas, Hans Rigendinger, our chief operating officer
and Ernst Rosenberger, the Companys corporate controller. The lead architect is Ossenbach, Pendones &
Bonilla, one of Costa Ricas largest architectural offices with over 45 architects and designers. Civil
engineering services are provided by DEHC Engineers and structural engineering services by IEAC.
Landscape architects are TPA and interior designers are lead by Concreta Srl.
Resort management is to be provided by Meliá Hotel International, S.A. (Sol Meliá). Paradisus is
Meliás five star all-inclusive luxury hotel brand that is well recognized in the hospitality industry around
the world. Sol Meliá was founded in 1956 in Palma de Mallorca, Spain and is today one of the worlds
largest resort hotel chains, as well as Spains leading hotel chain for business or leisure. The company
currently offers more than 300 hotels in 26 countries over four continents under its Gran Sol Meliá, Sol
Meliá, ME by Sol Meliá, Innside by Sol Meliá, Tryp, Sol Meliá, Sol Meliá Vacation Club, and Paradisus
brands. The Paradisus brand represents all-inclusive luxury resorts with hotels in Mexico and the
Dominican Republic, including:
Paradisus Palma Real (Dominican Republic):
496 oversized suites
numerous pools and whirlpools, five tennis courts, casino, beach, golf, meeting space, five
restaurants, two buffets, nine bars, etc.
The Reserve at Palma Real (Dominican Republic):
184 rooms Residential Concierge Suites
private beach, swimming pools, 7800 sq ft Kids Zone, 24,000 sq. ft. Yhi Spa, three
restaurants, two buffets, two bars, etc.
Paradisus Punta Cana (Dominican Republic):
884 oversized suites (500 - 1000+ sq ft)
seven pools, four tennis courts, casino, beach, Kids Zone, Yhi Spa and fitness, meeting
rooms, 12 restaurants, eight bars, etc.
The Reserve at Punta Cana (Dominican Republic):
132 residential suites
pools (with partially underwater pool beds, water features, etc), private beach, spa, cabanas,
etc.
La Esmeralda at Playa del Carmen
512 suites including 56 swim-up suites
spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Perla at Playa
del Carmen).
37
La Perla at Playa del Carmen
394 suites including 60 swim-up suites
Paradisus adults-only Royal Service level of accommodations
spas, meeting spaces, 11 restaurants, 10 bars, etc. (partially shared with La Esmeralda at
Playa del Carmen)
Our Paradisus Papagayo Bay Resort & Luxury Villas development is intended to replace Paradisus
Resorts former Paradisus Playa Conchal in Guanacaste, Costa Rica which property was operated by Sol
Meliá until April 30, 2011. Our project is part of Sol Meliás master expansion plan, which includes the
opening of two resorts in Playa del Carmen, Mexico in November of 2011. Sol Meliá aims to solidify
Paradisus Resorts as a leader in the luxury all-inclusive market segment with the new properties in Playa
del Carman and our own Paradisus Papagayo Bay Resort & Luxury Villas project.
Additional Concession Properties
On April 20, 2012, SunVesta AG entered into an agreement with Meridian IBG (Meridian) to purchase
two additional concession properties in Polo Papagayo, Gunacaste with a total surface of approximately
230,000 square meters, on terms, for a total of $22,895,806. The agreement with Meridian was amended
on November 13, 2012 to do away with the agreed equity payment, decrease the total purchase price to
$17.2 million and to provide that all payments for the purchase of the property were refundable in the
event SunVesta AG determines not to complete the purchase. SunVesta AG had paid down-payments of
approximately $1,400,000 as of March 31, 2013.
Subsequent to period end, on May 7, 2013, SunVesta AG entered into a new agreement with Meridian
that replaced the original contract, with a new total purchase price of $17,500,000 and a remaining
amount due of $15,830,299. The new agreement includes a payment plan for the remainder due divided
amongst Meridian and a third party as follows:
Third Party
$300,000 on May 4, 2013 which was paid on May 7, 2013 and is non-refundable
$1,000,000 on June 30, 2013, which is refundable and has not been paid as of the date of
this report
$1,000,000 on July 31, 2013, which is refundable and has not been paid as of the date of
this report
$1,000,000 on August 31, 2013, which is refundable and has not been paid as of the date of
this report
$1,500,000 on September 30, 2013, which is refundable
$1,500,000 on October 31, 2013, which is refundable
$1,700,000 on November 30, 2013, which is refundable
$8,000,000 in total to Third Party
Original Seller
$1,000,000 on January 31, 2014
$1,000,000 on February 28, 2014
$1,000,000 on March 31, 2014
$1,000,000 on April 30, 2014
38
$1,000,000 on May 31, 2014
$1,000,000 on June 30, 2014
$1,000,000 on July 31, 2014
$1,130,000 on August 31, 2014
$8,130,000 in total to Original Seller
Should SunVesta AG be able to meet the payments due to the third party in advance of the required
payment dates, the new agreement provides for certain discounts against the amount to be paid to
Meridian based on a sliding scale determined as of the full satisfaction date. SunVesta AG has not made
the required June and July payments to the third party as of the filing date of this report.
Hotel and Entertainment Complex (Atlanta, Georgia, U.S.A)
On September 19, 2012, SunVesta AG entered into an agreement with Fundus America (Atlanta) Limited
Partnership (Fundus) to purchase a hotel and entertainment complex in Atlanta, Georgia, U.S.A. for
$26 million. An additional $18 million for renovations would be required to remediate the hotel and
entertainment complex. The Company entered into a series of negotiations with various parties to finalize
a financing package for this project but was unable to procure such financing. On February 6, 2013
SunVesta paid $250,000 to Fundus. A second amendment and reinstatement agreement was entered into
on March 12, 2013, pursuant to which SunVesta AG remitted an additional non-refundable closing
extension fee in the amount of $250,000 to extend the closing date for the transaction to April 1, 2013.
Subsequent to period end, on May 17, 2013, SunVesta AG entered into a third amendment and
reinstatement agreement pursuant to which it remitted an additional non-refundable closing extension fee
in the amount of $250,000 in order to extend the closing date for the transaction to July 10, 2013. A
fourth amendment and reinstatement agreement was entered into on July 30, 2013, pursuant to which
SunVesta was required to remit another deposit of $250,000 on or before August 16, 2013 and to pay the
taxes on the property in the amount of $573,932 by August 30, 2013 in order to extend the closing date to
September 30, 2013. SunVesta AG did not remit the additional deposit of $250,000 nor did SunVesta pay
the taxes due on the property as required by the fourth amendment. Should SunVesta either determine not
to close the purchase or not be able to finance the transaction, said amounts remitted are to be considered
earned by Fundus and definitely non-refundable to SunVesta AG. Should SunVesta be able to finance all
above mentioned amounts, with exception of the taxes, would be offset against the total purchase price of
$26 million.
Finance
The anticipated completion of the Paradisus Papagayo Bay Resort & Luxury Villas in November of 2014
will require a total investment of approximately $180 million of which approximately $28 million has
been expended as of March 31, 2013. We expect to realize a minimum of $80 million in new funding
over the next twelve months, though our actual financing requirements may be adjusted to suit that
amount realized, and an additional $72 million in funding by the time the development is completed. New
funding over the next twelve months is expected to be raised from debt financing through bonds,
construction financing, or shareholder loans, equity placements and, if deemed necessary, the guaranty
agreement as described herein.
SunVesta AG, our wholly owned subsidiary recently completed the offering of fixed-income Euro
denominated bonds and continues to offer fixed income CHF denominated bonds up to an aggregate
amount of CHF 15,000,000 to fund the initial development of the Paradisus Papagayo Bay Resort &
Luxury Villas project.
39
The Euro bonds are unsecured, have a three year term, bear interest at 8.25% per annum payable each
November 30 over the term due November 30, 2013. SunVesta AG has raised $14,834,783 in connection
with the Euro bond offering of which $2,649,073 had been repaid as of March 31, 2013.
The CHF bonds are unsecured, have a three year term, bear interest at 7.25% per annum payable each
August 31 over the term due August 31, 2015. SunVesta AG has raised $ 7,488,871 of which $ 1,474,823
have been repaid as of March 31, 2013, in connection with the CHF bond offering.
On July 27, 2011, SunVesta AG entered into a line of credit agreement with Aires International
Investment, Inc. (Aires), a company owned by a board member of SunVesta AG, which was
subsequently amended on May 11, 2012 and June 21, 2012 to include the following provisions:
the lender grants the Company a terminable, interest bearing and non-secured loan in the
maximum amount of CHF 10,000,000.
the conversion right granted in the original contract to convert the balance of the line of
credit into 10% ownership interest in Rich Land was cancelled.
Once the entire amount of CHF 10,000,000 has been drawn down, Aires now has the right to
convert its entire loan of CHF 10,000,000 into 20% shares of SunVesta Inc. (instead of
Richland) whereas 20% shares reflect the number of shares at the time when the entire
amount of CHF 10,000,000 has been drawn down.
the repayment of the line of credit is due on September 30, 2015, until such time Aires can
exercise its conversion option.
CHF 10,000,000 of this line of credit is subordinated in favour of other creditors.
the interest rate is 7.25% and interest is due on September 30 of each year.
SunVesta AG loaned approximately $6,567,000 against the line of credit for the three month period ended
March 31, 2013, and approximately $10,407,000 as of December 31, 2012, for a total of approximately
$16,974,000 as of March 31, 2013. SunVesta AG had loaned approximately $23,560,000 against the
Aires line of credit as of the filing date of this report.
Since surpassing the maximum amount permitted under the line of credit, SunVesta AG and Aires have
been in discussions in connection with a revised conversion option for that amount due. A conversion
option to replace the one vested according to prior agreement contemplates the conversion of that amount
due to Aires into preferred Company shares with a fixed interest payment with the option to convert into
common Company shares at a discount to market within a limited time frame. No agreement has yet been
reached.
During the second half of 2012 up to the current three month period, SunVesta AG entered into a series of
interest free loans with Dr. Max Roessler, a director of the Company and a principal of Aires. The loans
were originally due either on predetermined dates or on demand, in cash or in a fixed number of shares of
certain publically traded entities. Since the predetermined due dates have now passed the loans have been
extended by verbal agreement on undetermined terms, as follows:
Loan Date
Amount
Shares
Public Entity
June 7, 2012
$
1,733,000
10,000 Intershop Holding AG
July 24, 2012
$
446,000
10,000 Schindler Holding AG
August 8, 2012
$
383,000
700 Zug Estates Holding AG
March 1, 2013
$
50,000
52,500 Datewyler Holding AG
40
On March 8, 2013, SunVesta AG entered into an interest free loan agreement with DIA S.A. in the
amount of $2,000,000 payable on March 8, 2014. The loan was made payable in connection with the
closing of SunVesta AGs purchase of land adjacent to the Paradisus Papagayo Bay Resort & Luxury
Villas from Altos held in the name of Altos del Risco S.A.
Timeline
Our expected timeline for developing the Paradisus Papagayo Bay Resort & Luxury Villas is as follows:
complete architectural plans in the 3 th quarter of 2013
commence onsite (Altos del Risco property) earthwork in the 2 nd quarter of 2013
obtain final building permits in the 3 rd quarter of 2013
secure construction loan in the 4 th quarter of 2013
commence onsite vertical construction in the 4 th quarter of 2013
complete construction in the 1st quarter of 2015
Handover to Sol Meliá on July 1 st of 2015
Results of Operations
During the three month period ended March 31, 2013, our operations were focused on (i) completing the
purchase of an additional 12 hectares contiguous with our existing property in Guanacaste Province,
Costa Rica in connection with the development of the Paradisus Papagayo Bay Resort & Luxury Villas;
(ii) appointing Mr. Rigendinger to the board of directors and engaging him as chief operating officer; (iii)
obtaining building permits for the development of the Paradisus Papagayo Bay Resort & Luxury Villas
property; (iv) commencing earth work excavations on the Paradisus Papagayo Bay Resort & Luxury
Villas property; (v) discussions with prospective project development partners; (vi) pursuing additional
debt and equity financing arrangements including a bond offering through SunVesta AG in Europe and
loans from related parties; and (vii) repaying a portion of the Euro bonds outstanding.
The Company has been funded since inception from debt or equity placements and by shareholders or
partners in the form of loans. All of the capital raised to date has been allocated to the development of the
Costa Rican property including the purchase of the land and general and administrative costs.
Comprehensive Losses
For the period from the date of inception of development stage on January 1, 2005, until March 31, 2013,
the Company had incurred comprehensive losses of $29,334,135. Comprehensive income for the three
months ended March 31, 2013 were $533,810 as compared to a comprehensive loss of $1,907,300 for the
three months ended March 31, 2012. The decrease in comprehensive losses - which resulted in a
comprehensive income - over the comparative three month periods can be attributed to a gain of
$1,000,000 relating to a release of a prior period accrual to satisfy what was to be a penalty payable to Sol
Meliá, S.A. based on the delayed purchase of the Paradisus Papagayo Bay Resort & Luxury Villas
property, and the gain on foreign currency translation of $1,281,405 from a loss of $802,775, which is
due to volatility between Swiss Francs and US Dollars, and the related foreign currency translation
difference on intercompany loans which is classified as a permanent investment and the translation of the
balance sheet and results of operations of our foreign subsidiaries. These positive factors regarding
comprehensive income have been offset partially due to an increase in general and administrative
expenses to $1,304,957 from $971,627, of which a significant component was the additional payroll cost
as a result of hiring new personnel and stock based compensation as a result of granting options and
41
shares to our Chief Operating Officer and board member. Other contributing factors which partially offset
the comprehensive income over the comparative three month periods ended March 31, 2013 and March
31, 2012, respectively, were an increase in interest expense to $426,656 from $280,995 due to maturing
bond and credit line debt obligations, the amortization of debt issuance costs and commissions of $82,815
from a gain of $712, other losses of $27,032 from other gain of $14,053, the loss of $50,181 from zero,
due to an increase in the fair value of the conversion option associated with the Aires credit line and the
decrease in interest income to $174 from $3,060 due to declining cash balances,
We did not generate revenue during this period and we expect to continue to incur losses through the year
ended December 31, 2013.
Income Tax Expense (Benefit)
The Company has a prospective income tax benefit resulting from a net operating loss carry-forward and
startup costs that will offset future operating profits.
Capital Expenditures
The Company expended a significant amount on capital expenditures for the period from January 1, 2005
to March 31, 2013, in connection with the purchase of land that includes a hotel concession in Costa Rica
and expects to incur future cash outflows on capital expenditure as discussed in the "Liquidity and Capital
Resources" and the "Going Concern" paragraphs below.
Liquidity and Capital Resources
The Company has been in the development stage since inception and has experienced significant changes
in liquidity, capital resources, and stockholders equity.
As of March 31, 2013, we had a working capital deficit of $20,592,095. We had current assets of
$525,837 and total assets of $35,450,942. Our current assets consisted of $178,990 in cash, $55,876 in
other assets and $290,971 in receivables from related parties. Our total assets consisted of property and
equipment of $30,610,366 (mainly land and capitalized project costs for Paradisus Papagayo Bay Resort
& Luxury Villas, net debt issuance costs of $1,464,576, down payments for property and equipment of
$1,869,836 and restricted cash of $980,327. We had current liabilities of $21,117,932 and total liabilities
of $43,752,964. Our current liabilities consisted of $1,638,571 in accounts payable, $2,175,163 in accrued
expenses, $2,000,000 in a note payable, $3,247,740 in notes payable to related parties and $12,056,458 in
Euro bond debt. Our total non-current liabilities consisted of CHF bond debt of $5,566,811, notes payable
to related parties of $16,947,284, fair value conversion feature of $50,181 and pension liabilities of
$70,756. Total stockholders deficit in the Company was $8,302,022 at March 31, 2013.
For the period from January 1, 2005 to March 31, 2013, net cash used in operating activities was
$18,898,440.
Net cash used in operating activities for the three months ended March 31, 2013, was $1,280,513 as
compared to $1,171,550 for the three months ended March 31, 2012, which differences reflect the
increase in general and administrative expenses and changes in working capital. Net cash used in
operating activities in the current three month period is comprised of general and administrative expenses
that include but are not limited to, personnel costs, accounting fees, consulting expenses, finders fees and
professional fees, such as for auditing purposes and legal consultation, changes in other assets, accounts
payable and accrued expenses. Net cash used in operating activities in the prior three month period can
42
also be primarily attributed to general and administrative expenses and changes in other assets, accounts
payable and accrued expenses.
We expect to use net cash in operating activities until such time as net losses transition to net income
which transition is not anticipated until we complete the Paradisus Papagayo Bay Resort & Luxury Villas
project.
For the period from January 1, 2005 to March 31, 2013, net cash used in investing activities was
$32,544,765.
Net cash used in investing activities for the three months ended March 31, 2013, was $4,033,361 as
compared to $2,900,862 for the three months ended March 31, 2012. Net cash used in investing activities
in the current three month period can be attributed to receivables from related parties, the purchase of
property and equipment, down payments for property or equipment and restricted cash. Net cash used in
investing activities in the prior three month period ended March 31, 2012 can be attributed to receivables
from related parties, the purchase of property or equipment, down payments for property, offset by net
cash provided by investing activities that can be attributed to short term investments.
We expect negative net cash in investing activities while in the process of developing the Paradisus
Papagayo Bay Resort & Luxury Villas and looking to additional projects.
For the period January 1, 2005 to March 31, 2013, net cash provided by financing activities was
$52,286,709.
Net cash provided by financing activities for the three months ended March 31, 2013, was $5,239,021 as
compared to $3,733,750 for the three months ended March 31, 2012. Net cash provided by financing
activities in the current three month period can be attributed to proceeds from notes payable to related
parties and proceeds from SunVesta AGs bond issuance, offset by the repayment of bonds and the
payment of debt issuance costs. Net cash provided by financing activities in the prior three month period
can be attributed to proceeds from notes payable to related parties, proceeds from SunVesta AGs bond
issuance and notes payable to related parties, offset by the payment of debt issuance costs.
We expect net cash flow provided by financing activities in future periods from those debt and equity
infusions necessary to complete the development of the Paradisus Papagayo Bay Resort & Luxury Villas.
Management believes that our cash on hand in addition to short term related party loans and the guaranty
agreement in place as described in the going concern paragraph below are sufficient for us to conduct
operations over the next twelve months. Current debt financing efforts consist of a CHF bond offering in
progress, and short term related party loans that have permitted us to draw capital as necessary to meet
ongoing operational requirements. The Company has, as of the date of this filing, realized on a net basis
approximately $18,200,000 through its Euro and CHF bond offerings, drawn down approximately
$23,560,448 against the line of credit with Aires, a related party and borrowed on a short term basis
approximately $2,611,034 from Dr. Roessler, a related party.
We had no lines of credit or other bank financing arrangements as of March 31, 2013 other than that in
place with Aires. Since SunVesta AG has borrowed approximately $13 million in excess of that
anticipated by the line of credit agreement, the Company expects that this debt facility is exhausted.
We have commitments for executed purchase orders and agreements in the amount of $30 million as of
March 31, 2013, in connection with the development of the Paradisus Papagayo Bay Resort & Luxury
43
Villas, which commitments are included in the required financing of $180 million to complete the project.
Most material commitments were not contractually agreed as of the end of the period.
The firth addendum (dated September 6, 2013) to the management agreement with Sol Meliá stipulates
that should the completion of the construction not occur by July 1, 2015, and should an extension date not
be agreed, subsequent to July 1, 2015, Sol Meliá will be entitled to receive a daily amount of $2,000 as
liquidated damages. Should the completion of the construction not occur by October 1, 2015 Sol Meliá
will be entitled to terminate the management agreement and to receive a termination amount of $5 million
unless the parties agree in writing to extend such date.
We have cancellable commitments that are not included in the required financing for the development of
the Paradisus Papagayo Bay Resort & Luxury Villas of approximately $41.6 million including
approximately $15.8 million to third parties for the purchase of two additional concession properties in
Polo Papagayo, Guanacaste, Costa Rica and approximately $25.8 million to Fundus for the purchase of a
hotel and entertainment complex in Atlanta, Georgia, U.S.A and the payment of property taxes.
We maintain a defined benefit plan that covers all of our Swiss employees and have an employment
agreement with our chief executive officer and chief financial officer as of March 31, 2013.
We have no current plans for significant purchases or sales of plant or equipment, except in connection
with the planned construction of the Paradisus Papagayo Bay Resort & Luxury Villas and discussed
above.
We have no current plans to make any changes in the number of our employees as of March 31, 2013.
Future Financings
We will continue to rely on debt or equity sales of our shares of common stock to fund our business
operations and may rely on a guaranty agreement to bridge traditional financing for the Paradisus
Papagayo Bay Resort & Luxury Villas.
Off-Balance Sheet Arrangements
As of March 31, 2013, we had no significant off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are
material to stockholders.
Going Concern
The Company intends to build a hotel in the Papagayo Gulf Tourism Project area of Guanacaste, Costa
Rica. The total net investment is estimated to be approximately $180 million.
The project is expected to open in the fourth quarter of 2014. Until the completion of the project, the
following expenditures are estimated to be incurred:
a. Gross project cost
$
195,000,000
b. Less: Proceeds from sale of villas
(24,000,000)
c. Net project cost
171,000,000
44
d. Overhead expenses
21,000,000
e. Less: Recuperated in gross project cost
(12,000,000)
f Total, excluding other potential projects
$
180,000,000
Sixty percent (60%) of Net Project Cost is expected to be financed by traditional mortgage loans, for
which negotiations have been initiated. The remaining forty percent (40%) of the Net Project Cost, as
well as non-recuperated overhead expenses are expected to be financed by the main shareholders of the
project, i.e. Zypam Ltd., shareholder, Mr. Hans Rigendinger, shareholder, director and officer, Mr. Max
Roessler, shareholder, director and majority shareholder of Aires, Mr. Josef Mettler, shareholder, director
and officer.
On July 16, 2012, certain principal shareholders of the Company or principal lenders to the project
entered into a guaranty agreement in favour of SunVesta AG. The purpose of the guarantee is to ensure
that until such time as financing is secured for the entire project that they will act as a guarantor to
creditors to the extent of the projects ongoing capital requirements. The guaranty agreement requires that
within 30 days of receiving a demand notice, the guarantors are required to pay to SunVesta AG that
amount required for ongoing capital requirements, until such time as financing of the project is secured.
The guaranty may not be terminated until such time as SunVesta Holding AG has secured financing for
the completion of the project.
Based on this guaranty agreement, management therefore believes that available funds are sufficient to
finance cash flows for the twelve months subsequent to March 31, 2013 and the filing date though future
anticipated cash outflows for investing activities will continue to depend on the availability of financing
and can be adjusted as necessary.
Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled Managements Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this current report, with the exception of historical
facts, are forward-looking statements. We are ineligible to rely on the safe-harbor provision of the Private
Litigation Reform Act of 1995 for forward looking statements made in this current report. Forward-
looking statements reflect our current expectations and beliefs regarding our future results of operations,
performance, and achievements. These statements are subject to risks and uncertainties and are based
upon assumptions and beliefs that may or may not materialize. These statements include, but are not
limited to, statements concerning:
our anticipated financial performance and business plan
the sufficiency of existing capital resources
our ability to raise additional capital to fund cash requirements for future operations
uncertainties related to our future business prospects
our ability to generate revenues to fund future operations
the volatility of the stock market
general economic conditions
We wish to caution readers that our operating results are subject to various risks and uncertainties that
could cause our actual results to differ materially from those discussed or anticipated. We also wish to
advise readers not to place any undue reliance on the forward-looking statements contained in this report,
which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to
update or revise these forward-looking statements to reflect new events or circumstances or any changes
in our beliefs or expectations, other than as required by law.
45
Recent Accounting Pronouncements
Please see Note 2 to the accompanying consolidated financial statements for recent accounting
pronouncements.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this quarterly report, an evaluation was carried out by the
Companys management, with the participation of the chief executive officer and chief financial officer,
of the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e)
under the Securities Exchange Act of 1934 (Exchange Act)). Disclosure controls and procedures are
designed to ensure that information required to be disclosed in reports filed or submitted under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the
Commissions rules and forms, and that such information is accumulated and communicated to
management, including the chief executive officer and chief financial officer, to allow timely decisions
regarding required disclosures.
Based on that evaluation, the Companys management concluded that due to a lack of independent
oversight, failure to segregate duties, insufficient accounting resources and lack of US GAAP knowledge,
as of the end of the period covered by this report, that the Companys disclosure controls and procedures
were ineffective in recording, processing, summarizing, and reporting information required to be
disclosed, within the time periods specified in the Commissions rules and forms, and such information
was not accumulated and communicated to management, including the chief executive officer and the
chief financial officer, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
During the period ended March 31, 2013, there has been no change in internal control over financial
reporting that has materially affected, or is reasonably likely to materially affect our internal control over
financial reporting.
46
PART II OTHER INFORMATION
ITEM 1.
LEGAL
PROCEEDINGS
None.
ITEM 1A.
RISK
FACTORS
Not required of smaller reporting companies.
ITEM 2.
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 3, 2013, the Company authorized the issuance of 3,000,000 shares of restricted common shares,
valued at $0.05 a share to Max Roessler in connection his appointment to the board of directors on even
date in reliance upon the exemptions from registration provided by Section 4(2) and Regulation S of the
Securities Act of 1933, as amended (Securities Act).
The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on
the following factors: (1) the issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) the offeree had access to the kind of information which registration would
disclose; and (3) the offeree was financially sophisticated.
The Company complied with the exemption requirements of Regulation S by having directed no offering
efforts in the United States, by offering common shares only to an offeree who was outside the United
States at the time of the offering, and ensuring that the offeree to whom the securities were offered and
authorized was a non-U.S. offeree with an address in a foreign country.
On July 4, 2013, the Company authorized the issuance of 5,000,000 shares of restricted common shares,
valued at $0.07 a share, and granted 12,000,000 stock options from the SunVesta, Inc. 2013 Stock Option
Plan, that vest in three parts on the satisfaction of certain criteria tied to the development of the Paradisus
Papagayo Bay Resort & Luxury Villas, to Josef Mettler in connection his employment agreement of even
date in reliance upon the exemptions from registration provided by Section 4(2) and Regulation S of the
Securities Act.
The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on
the following factors: (1) the issuance was an isolated private transaction by the Company which did not
47
involve a public offering; (2) the offeree had access to the kind of information which registration would
disclose; and (3) the offeree was financially sophisticated.
The Company complied with the exemption requirements of Regulation S by having directed no offering
efforts in the United States, by offering common shares only to an offeree who was outside the United
States at the time of the offering, and ensuring that the offeree to whom the securities were offered and
authorized was a non-U.S. offeree with an address in a foreign country.
On January 1, 2013, the Company authorized the issuance of 3,500,000 shares of restricted common
shares, valued at $0.08 a share, and granted 10,000,000 stock options from the SunVesta, Inc. 2013 Stock
Option Plan, that vest in two parts on the satisfaction of certain criteria tied to the development of the
Paradisus Papagayo Bay Resort & Luxury Villas, to Hans Rigendinger in connection his employment
agreement of even date in reliance upon the exemptions from registration provided by Section 4(2) and
Regulation S of the Securities Act.
The Company complied with the exemption requirements of Section 4(2) of the Securities Act based on
the following factors: (1) the issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) the offeree had access to the kind of information which registration would
disclose; and (3) the offeree was financially sophisticated.
The Company complied with the exemption requirements of Regulation S by having directed no offering
efforts in the United States, by offering common shares only to an offeree who was outside the United
States at the time of the offering, and ensuring that the offeree to whom the securities were offered and
authorized was a non-U.S. offeree with an address in a foreign country.
ITEM 3.
DEFAULTS
ON SENIOR SECURITIES
None.
ITEM 4.
MINE
SAFETY DISCLOSURE
Not applicable.
ITEM 5.
OTHER
INFORMATION
None.
ITEM 6.
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the
Index to Exhibits
on page
50 of this Form 10-Q, and are incorporated herein by this reference.
48
Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
the
registrant
has
duly
caused
this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SunVesta, Inc.
Date
/s/ Josef Mettler
October 10, 2013
Josef Mettler
Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer and Director
/s/ Hans Rigendinger
October 10, 2013
Hans Rigendinger
Chief Operating Officer and Director
49
INDEX
TO EXHIBITS
Exhibit
Description
3.1.1*
Articles of Incorporation (incorporated by
reference from the Form 10-SB filed with the
Commission on December 31, 1999).
3.1.2*
Amended Articles of Incorporation (incorporated by reference from the Form 10-KSB filed with
the Commission on April 9, 2003).
3.1.3*
Amended Articles of Incorporation (incorporated by reference from the Form 10-QSB filed with
the Commission on November 17, 2003).
3.1.4*
Amended Articles of Incorporation (incorporated by
reference from the Form 8-K filed with the
Commission on September 27, 2007).
3.2.1*
Bylaws (incorporated by reference from the Form 10-SB filed with the Commission on December
31, 1999).
3.2.2*
Amended Bylaws (incorporated by
reference from the Form 10-QSB filed with the Commission
on November 17, 2003).
10.1*
Securities Exchange Agreement and Plan of Exchange dated June 18, 2007 between the Company
and SunVesta AG (formerly ZAG Holdings AG) (incorporated by reference from the Form 8-K
filed with the Commission on June 21, 2007).
10.2*
Purchase and Sale Agreement between ZAG Holding AG and Trust Rich Land Investments,
Mauricio Rivera Lang dated May 1, 2006 for the acquisition of Rich Land Investments Limitada.
10.3*
Debt Settlement Agreement dated September 29, 2008 with Zypam Ltd. (incorporated by
reference from the Form 10-Q filed with the Commission on November 13, 2008).
10.4*
Debt Settlement Agreement dated April 21, 2009 between the Company
and Zypam, Ltd.
(incorporated by reference from the Form 8-K filed with the Commission on April 30, 2009).
10.5*
Debt Settlement Agreement dated March 1, 2010 between the Company
and Zypam, Ltd.
(incorporated by reference from the Form 8-K filed with the Commission on March 10, 2010).
10.6*
Debt Settlement Agreement dated March 1, 2010 between the Company
and Hans Rigendinger
(incorporated by reference from the Form 8-K filed with the Commission on March 10, 2010).
10.7*
Guaranty
Agreement dated July 16, 2012 between SunVesta AG, Josef Mettler, Hans Rigendinger
and Max Rössler.
10.8*
Employment Agreement dated January 1, 2013 between the Company
and Hans Rigendinger
(incorporated by reference to the Form 8-K filed with the Commission on February
4, 2013.
Employment Agreement dated July 4, 2013 between the Company
and Josef Mettler.
14*
Code of Ethics adopted March 1, 2004 (incorporated by reference from the 10-KSB filed with the
Commission on April 14, 2004).
21*
Subsidiaries of the Company (incorporated by
reference from the Form 10-K filed with the
Commission on June 20, 2013).
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14
of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SunVesta, Inc. 2013 Stock Option Plan
101. INS
XBRL Instance Document
101. PRE
XBRL Taxonomy Extension Presentation Linkbase
101. LAB
XBRL Taxonomy Extension Label Linkbase
101. DEF
XBRL Taxonomy Extension Label Linkbase
101. CAL
XBRL Taxonomy Extension Label Linkbase
101. SCH
XBRL Taxonomy Extension Schema
*
Incorporated by
reference to previous filings of the Company.
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed furnished and
not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the
Securities Act of 1933, or deemed furnished and not filed for purposes of Section 18 of the
Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.
50
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on this 04th day of July, 2013, by
and between SunVesta, Inc., of 97 Seestrasse, Oberrieden, Switzerland CH-8942 (the "Company"), and
Josef Mettler, a Swiss individual, resident at Bachtelstrasse 20, Switzerland, CH-8808 Pfaeffikon
(hereinafter, the Executive).
W I T N E S S E T H :
WHEREAS, the Executive is to be employed as Chief Executive Officer and Chief Financial
Officer of the Company.
WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the
Company, its policies, methods and personnel;
WHEREAS, the Board of Directors of the Company recognizes that Executive will contribute to
the growth and success of the Company, and therefore desires to secure Executive's employment and
quantify his compensation;
WHEREAS, the Board has determined that this Agreement will reinforce and encourage the
Executive's continued attention and dedication to the Company;
WHEREAS, the Executive is willing to make his services available to the Company on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which are mutually
acknowledged, the Company and the Executive hereby agree as follows:
1. Definitions.
When used in this Agreement, the following terms shall have the following meanings:
(a)
Accrued Obligations means :
(i)
all accrued but unpaid Base Salary through the end of the Term of
Employment;
(ii)
any unpaid or un-reimbursed expenses incurred in accordance with
Company policy, including amounts due under Article 5(a) hereof, to the extent incurred during the Term
of Employment; and
(iii)
those vested benefits provided under the Companys employee benefit
plans, stock options plans, deferred compensation plans, programs or arrangements in which the
Executive participates, in accordance with the terms thereof.
(iv)
any earned unpaid Bonus or Retention Award in respect to any
completed fiscal year that has ended on or prior to the end of the Term of Employment; and
(v)
rights to indemnification by virtue of the Executives position as an
officer or director of the Company or its subsidiaries and the benefits under any directors and officers
liability insurance policy maintained by the Company, in accordance with its terms thereof.
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Employment Agreement Josef Mettler
(b)
Affiliate means any entity that controls, is controlled by, or is under common
control with, the Company.
(c)
Base Salary means the salary provided for in Article 4(a) hereof or any
increased salary granted to Executive pursuant to Article 4(a) hereof.
(d)
Beneficial Ownership shall have the meaning ascribed to such term in Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended.
(e)
Board means the Board of Directors of the Company.
(f)
Bonus means any bonus payable to the Executive pursuant to Article 4(b)
hereof.
(g)
Bonus Period means the period for which a Bonus is payable . Unless
otherwise specified by the Board, the Bonus Period shall be the fiscal year of the Company.
(h)
Cause means :
(i)
a conviction of the Executive, or a plea of nolo contendere, to a felony
involving moral turpitude; or
(ii)
willful misconduct or gross negligence by the Executive resulting, in
either case, in material economic harm to the Company or any Related Entities; or
(iii)
a willful continued failure by the Executive to carry out the reasonable
and lawful directions of the Board; or
(iv)
fraud, embezzlement, theft or dishonesty of a material nature by the
Executive against the Company or any Affiliate or Related Entity, or a willful material violation by the
Executive of a policy or procedure of the Company or any Affiliate or Related Entity, resulting, in any
case, in material economic harm to the Company or any Affiliate or Related Entity; or
(v)
a willful material breach by the Executive of this Agreement.
An act or failure to act shall not be willful if (i) done by the Executive in good faith or (ii) the Executive
reasonably believed that such action or inaction was in the best interests of the Company and the Related
Entities.
(i)
Change in Control means:
(i)
The acquisition by any Person of Beneficial Ownership of more than
fifty percent (50%) of the then outstanding shares of common stock of the Company (the Outstanding
Company Common Stock) (the foregoing Beneficial Ownership hereinafter being referred to as a
"Controlling Interest"); provided, however, that for purposes of this definition, the following acquisitions
shall not constitute or result in a Change of Control: (v) any acquisition directly from the Company; (w)
any acquisition by the Company; (x) any acquisition by any person that as of the Commencement Date
owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any subsidiary of the Company; or (z) any
acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) below; or
Page 2
Employment Agreement Josef Mettler
(ii)
During any period of two (2) consecutive years (not including any period
prior to the Commencement Date) individuals who constitute the Board on the Commencement Date (the
Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the Commencement Date whose election,
or nomination for election by the Companys shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii)
Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or
other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or
stock of another entity by the Company or any of its subsidiaries (each a Business Combination), in
each case, unless, following such Business Combination, (A) all or substantially all of the individuals and
entities who were the Beneficial Owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than fifty percent (50%) of the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such transaction owns the Company or
all or substantially all of the Companys assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination beneficially owns, directly or indirectly, twenty
percent (20%) or more of, respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or any Person that as of the Commencement Date owns
Beneficial Ownership of a Controlling Interest beneficially owns, directly or indirectly, more than fifty
percent (50%) of the then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at
least a majority of the members of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination; or
(iv)
approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
(j)
Code means the Internal Revenue Code of 1986, as amended.
(k)
Commencement Date means July 1st, 2013.
(l)
Common Stock means the common stock of the Company, par value $0.01 per
share.
(m)
Competitive Activity means an activity that is in material or direct competition
with the Company in any of the States within the United States, or countries within the world, in which
the Company conducts business with respect to a business in which the Company engaged while the
Executive was employed by the Company.
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Employment Agreement Josef Mettler
(n)
Confidential Information means all trade secrets and information disclosed to
the Executive or known by the Executive as a consequence of or through the unique position of his
employment with the Company or any Related Entity (including information conceived, originated,
discovered or developed by the Executive and information acquired by the Company or any Related
Entity from others) prior to or after the date hereof, and not generally or publicly known (other than as a
result of unauthorized disclosure by the Executive), about the Company or any Related Entity or its
business.
(o)
Disability means the Executives inability, or failure, to perform the essential
functions of his position, with or without reasonable accommodation, for any period of three months or
more in any 12 month period, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not less than
12 months.
(p)
Equity Awards means any stock options, restricted stock, restricted stock units,
stock appreciation rights, phantom stock or other equity based awards granted by the Company or any of
its Affiliates to the Executive.
(q)
Excise Tax means any excise tax imposed by Section 4999 of the Code,
together with any interest and penalties imposed with respect thereto, or any interest or penalties are
incurred by the Executive with respect to any such excise tax.
(r)
Expiration Date means the date on which the Term of Employment, including
any renewals thereof under Article 3(b), shall expire.
(s)
Good Reason means:
(i)
the assignment to the Executive of any duties inconsistent in any material
respect with the Executive's position (including status, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Article 2(b) of this Agreement, or any other action by the Company
that results in a material diminution in such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad faith which is remedied by
the Company promptly after receipt of notice thereof given by the Executive;
(ii)
any material failure by the Company to comply with any of the material
provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in
bad faith that is remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii)
any instruction by the Company to act in any manner that is unlawful or
contrary to Securities and Exchange Commission rules and regulations, other than an isolated,
insubstantial or inadvertent instruction not given in bad faith that is remedied by the Company promptly
after receipt of notice thereof given by the Executive; and
(iv)
any termination by the Company of the Executives employment other
than for Cause pursuant to Article 6(b), or by reason of the Executives Disability pursuant to Article 6(c)
of this Agreement, prior to the Expiration Date
(t)
Group shall have the meaning ascribed to such term in Section 13(d) of the
Securities Exchange Act of 1934.
Page 4
Employment Agreement Josef Mettler
(u)
Initial Term means July 1, 2013 to June 30, 2017.
(v)
Non-qualified Defined Contribution Plan means the Non-Qualified
Contribution Plan adopted by the board of directors of a Related Entity, as amended from time to time,
and any successor thereto.
(w)
Person shall have the meaning ascribed to such term in Section 3(a)(9) of the
Securities Exchange Act of 1934 and used in Sections 13(d) and 14(d) thereof.
(x)
Related Entity means any subsidiary, and any business, corporation,
partnership, limited liability company or other entity designated by Board in which the Company or a
subsidiary holds a substantial ownership interest.
(y)
Restricted Period shall be the Term of Employment and if the Term of
Employment is terminated for any reason other than by the Company for Cause or by the Executive for
Good Reason, the eighteen (18) month period immediately following termination of the Term of
Employment. Notwithstanding the foregoing, the Restricted Period shall end in the event that (i) the
Company fails to make any payments or provide any Benefits required by Article 6 hereof with 15 days
of written notice from the Executive of such failure or (ii) the Company no longer has the rights to the
confidential information.
(z)
Severance Amount shall be in the event of termination of the Executives
employment by the Company without Cause, or by the Executive with Good Reason, an amount equal to
the following based on when the Termination Date occurs after the Commencement Date: a) 0-12 months
-$120,000, b) 13-24 months - $240,000 and c) over 24 months - $360,000. The total amount shall be due
within one month of the effective date of the Termination Date, a minimum of $120,000 which is payable
in cash and the remainder up to an aggregate of $360,000 is payable in shares of the Companys Common
Stock.
(aa)
Severance Term means the one (1) year period following the Termination
Date.
(bb)
Stock Option means a right granted to the Executive under Article 4(d) hereof
to purchase Common Stock under the Companys Stock Option Plan.
(cc)
Stock Option Plan means the 2013 Stock Option Plan Directors adopted by
the Company on January 1, 2013, as amended from time to time, and any successor plan thereto.
(dd)
Term of Employment means the period during which the Executive shall be
employed by the Company pursuant to the terms of this Agreement.
(ee)
Termination Date means the date on which Executives employment ends.
2.
Employment.
(a)
Employment and Term.
The Company hereby agrees to employ the Executive and the Executive hereby agrees to
serve the Company during the Term of Employment on the terms and conditions set forth herein.
Page 5
Employment Agreement Josef Mettler
(b)
Duties of Executive.
During the Term of Employment, the Executive shall be employed and serve as Chief
Operating Officer of the Company, and shall have such duties typically associated with such title,
including, without limitation, coordinating the day to day management of the Company with its Chief
Executive Officer, responsibility for the review of the Companys quarterly and annual financial
statements and reporting to the Chief Executive, and the Board, as necessary. The Executive shall
faithfully and diligently perform all services as may be reasonably assigned to him for his position by the
Board of the Company, and shall exercise such power and authority as may from time to time be
delegated to him by the Board. The Executive shall devote no less than 100% of his business time,
attention and efforts to the performance of his duties under this Agreement, render such services to the
best of his ability, and use his reasonable best efforts to promote the interests of the Company. The
Executive shall not engage in any other business or occupation, other than as declared and existing at the
Commencement Date during the Term of Employment, including, without limitation, any activity that (i)
conflicts with the interests of the Company or its subsidiaries, (ii) interferes with the proper and efficient
performance of his duties for the Company, or (iii) interferes with the exercise of his judgment in the
Companys best interests. Notwithstanding the foregoing or any other provision of this Agreement, it
shall not be a breach or violation of this Agreement for the Executive to (x) serve on civic or charitable
boards or committees, or (y) deliver lectures, or fulfill speaking engagements, (z) advise companies, so
long as such activities do not interfere with or detract from the performance of the Executives
responsibilities to the Company in accordance with this Agreement.
3.
Term.
(a)
Initial Term.
The initial Term of Employment under this Agreement, and the employment of the
Executive hereunder, shall commence on the Commencement Date and shall expire on June 30, 2017,
unless sooner terminated in accordance with Article 6 hereof.
(b)
Renewal Terms.
At the end of the Initial Term, the Term of Employment automatically shall renew for
two (2) successive two (2) year terms (subject to earlier termination as provided in Section 6 hereof),
unless the Company or the Executive delivers written notice to the other at least three (3) months prior to
the Expiration Date of its or his election not to renew the Term of Employment.
4.
Compensation.
(a)
Base Salary.
The Executive shall earn a Base Salary at the annual rate of $144,000 ($12,000 per
month) during the Term of Employment, with such Base Salary payable in installments consistent with
the Company's normal payroll schedule, subject to applicable withholding and other taxes. The Base
Salary shall be reviewed, at least annually, for merit increases and may, by action and at the discretion of
the Board, be increased at any time or from time to time, but may not be decreased from the then current
Base Salary.
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Employment Agreement Josef Mettler
(b)
Bonuses.
(i)
The Executive shall receive such additional bonuses, if any, as the
Compensation Committee and the Board of Directors may in its sole and absolute discretion determine.
(ii)
Any Bonus payable pursuant to this Article 4(b) shall be paid by the
Company to the Executive within 2 months after the end of the Bonus Period for which it is payable.
(c)
Signing Bonus
The Executive shall earn a signing bonus of five million (5,000,000) shares of the Companys Common
Stock to be issued to Executive within 1 month of the Commencement Date and a signing bonus in cash
in the amount of seventy eight thousand United States Dollars (USD 78,000).
(d)
Stock Options.
The Executive shall be granted 12,000,000 Stock Options, from the SunVesta,
Inc. 2013 Stock Option Plan, at an exercise price of $0.05 per share, which Stock Options shall vest as
follows: 3,000,000 Stock Options on that date which the Company or Related Entity completes a bridge
financing before the main financing agreement, 4,000,000 Stock Options on that date which the Company
or Related Entity completes that financing anticipated for the development of the Paradisus Papagayo Bay
with any entity or financing vehicle and 5,000,000 Stock Options on that date which Paradisus (Sol
Meliá, S.A.) assumes management responsibilities for the Paradisus Papagayo Bay, subject to the terms
and conditions of the Stock Option Agreement (attached hereto as Appendix A), the Stock Option Plan
and all rules or regulations of the Securities and Exchange Commission applicable thereto. Future stock
option grants, and the terms and conditions thereof, shall be determined by the Board in its discretion
pursuant to the Stock Option Plan or the plan or arrangement pursuant to which they are granted.
(e)
Retention Award
The Executive shall earn a Retention Award of three million (3,000,000) shares of
Common Stock due and payable within 30 days of each annual anniversary over the Term of
Employment.
5.
Expense Reimbursement and Other Benefits
(a)
Reimbursement of Expenses.
Upon the submission of proper substantiation by the Executive, and subject to such rules
and guidelines as the Company may from time to time adopt with respect to the reimbursement of
expenses of executive personnel, the Company shall reimburse the Executive for all reasonable expenses
actually paid or incurred by the Executive in the course of and pursuant to the business of the Company.
The Executive shall account to the Company in writing for all expenses for which reimbursement is
sought and shall supply to the Company copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.
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Employment Agreement Josef Mettler
(b)
Compensation/Benefit Programs.
During the Term of Employment, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and dismemberment, disability, travel and life insurance
plans, and any and all other plans as are presently and hereinafter offered by the Company or a Related
Entity to its executive personnel, including savings, pension, profit-sharing and deferred compensation
plans, subject to the general eligibility and participation provisions set forth in such plans. During the
Term of Employment the Company shall provide, or through a Related Entity provide health insurance,
which shall include medical, dental, vision and prescription coverage for Executive and his immediate
family on the terms and conditions of the Related Entitys existing health insurance.
(c)
Automobile.
During the Term of Employment, the Company shall furnish the Executive with an
automobile allowance of no less than $1,000.00 per month.
(d)
Other Benefits.
The Executive shall be entitled to four (4) weeks of paid vacation each calendar year
during the Term of Employment on the first anniversary of the Commencement Date, to be taken at such
times as the Executive and the Company shall mutually determine and provided that no vacation time
shall significantly interfere with the duties required to be rendered by the Executive hereunder. Any
vacation time not taken by Executive during any calendar year may be carried forward into any
succeeding calendar year, subject to a maximum accrual of ten (10) weeks. The Executive shall receive
such additional benefits, if any, as the Board of the Company shall from time to time determine.
6.
Termination.
(a)
General.
The Term of Employment shall terminate upon the earliest to occur of (i) the Executives
death, (ii) a termination by the Company by reason of the Executives Disability, (iii) a termination by the
Company with or without Cause, or (iv) a termination by Executive with or without Good Reason. Upon
any termination of Executives employment for any reason, except as may otherwise be requested by the
Company in writing and agreed upon in writing by Executive, the Executive shall resign from any and all
directorships, committee memberships or any other positions Executive holds with the Company or any
Related Entity.
Page 8
Employment Agreement Josef Mettler
(b)
Termination by Company for Cause.
The Company shall at all times have the right, upon written notice to the Executive, to
terminate the Term of Employment, for Cause. In no event shall a termination of the Executives
employment for Cause occur unless the Company gives written notice to the Executive in accordance
with this Agreement stating with reasonable specificity the events or actions that constitute Cause and
providing the Executive with an opportunity to cure (if curable) within a reasonable period of time. No
termination of the Executives employment for Cause shall be permitted unless the Termination Date
occurs during the 120-day period immediately following the date that the events or actions constituting
Cause first become known to the Board. Cause shall in no event be deemed to exist except upon a
decision made by the Board, at a meeting, duly called and noticed, to which the Executive (and the
Executives counsel) shall be invited upon proper notice. If the Executives employment is terminated by
the Company for Cause by reason of Article 6(b) hereof, and the Executives conviction is overturned on
appeal, then the Executives employment shall be deemed to have been terminated by the Company
without Cause in accordance with Article 6(e) below. In the event that the Term of Employment is
terminated by the Company for Cause, Executive shall be entitled only to the Accrued Obligations.
(c)
Disability .
The Executive's employment hereunder shall terminate upon his Disability. The
Executive's employment shall terminate in such a case on the last day of the applicable period;
provided, however, in no event shall the Executive be terminated by reason of Disability unless (i) the
Executive is eligible for the long-term disability benefits set forth in Article 5(b) and (ii) the Executive
receives written notice from the Company, at least 30 days in advance of such termination, stating its
intention to terminate the Executive for reason of Disability and setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for such termination. In the event that the Term of
Employment is terminated due to the Executives Disability, in addition to any benefits available from
applicable insurance, the Executive shall be entitled to:
(i)
the Accrued Obligations, payable as and when those amounts would
have been payable;
(ii)
the continuation of the health benefits provided to Executive and his
covered dependents under the Company or Related Entity health plans as in effect from time to time after
the Termination Date at the same cost applicable to active employees until the expiration of the Severance
Term.
(d)
Death.
In the event that the Term of Employment is terminated due to the Executives death, the
Executive shall be entitled to:
(i)
Accrued Obligations;
(ii)
the continuation of the health benefits provided to the Executives
covered dependents under the Company health plans as in effect from time to time after the Executives
death at the same cost applicable to dependents of active employees until the expiration of the Severance
Term.
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Employment Agreement Josef Mettler
(e)
Termination Without Cause.
The Company may terminate the Term of Employment at any time without Cause, by
written notice to the Executive not less than 30 days prior to the effective date of such termination. In the
event that the Term of Employment is terminated by the Company without Cause (other than due to the
Executives Death or Disability) the Executive shall be entitled to:
(i)
the Accrued Obligations;
(ii)
the Severance Amount, payable in cash in three equal installments
commencing 15 days, 45 days and 75 days after the Termination Date; and
(iii)
the continuation of the health benefits provided to Executive and his
covered dependents under the Related Entity health plans as in effect from time to time after the date of
such termination at the same cost applicable to active employees until the expiration of the Severance
Term.
(f)
Termination by Executive for Good Reason.
The Executive may terminate the Term of Employment for Good Reason by providing
the Company thirty (30) days written notice setting forth in reasonable specificity the event that
constitutes Good Reason, which written notice, to be effective, must be provided to the Company within
one hundred and twenty(120) days of the occurrence of such event. During such thirty (30) day notice
period, the Company shall have a cure right (if curable), and if not cured within such period, the
Executives termination shall be effective upon the date immediately following the expiration of the thirty
(30) day notice period, and the Executive shall be entitled to the same payments and benefits as provided
in Article 6(e) above for a termination without Cause.
(g)
Termination by Executive Without Good Reason.
The Executive may terminate his employment without Good Reason by providing the
Company thirty (30) days written notice of such termination. In the event of a termination of
employment by the Executive under this Section 6(g), the Executive shall be entitled only to the Accrued
Obligations. In the event of termination of the Executives employment under this Article 6(g), the
Company may, in its sole and absolute discretion, by written notice, accelerate such date of termination
and still have it treated as a termination without Good Reason.
(h)
Termination Upon Expiration Date.
In the event that Executives employment with the Company terminates upon the
expiration of the Term of Employment, the Executive shall be entitled to and the Company shall pay the
Executive:
(i)
the Accrued Obligations; and
(ii)
the continuation of the health benefits provided to Executive and his
covered dependants under the Company health plans as in effect from time to time after the date of such
termination at the same cost applicable to active employees until the expiration of the Severance Term.
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Employment Agreement Josef Mettler
(i)
Change in Control of the Company.
If the Executives employment is terminated by the Company without Cause or by the
Executive for Good Reason during (y) the 6-month period preceding the date of the Change in Control or
(z) the two 2 year period immediately following the Change in Control, the Executive shall be entitled to:
(i)
the Accrued Obligations, payable as and when those amounts would
have been payable had the Term of Employment not ended; including the immediate vesting of Stock
Options and Retention Award through the end of the Term of Employment;
(ii)
a payment equal to the maximum Severance Amount of $180,000; and
(iii)
the continuation of the health benefits provided to Executive and his
covered dependants under the Company health plans as in effect from time to time after the date of such
termination at the same cost applicable to active employees until the expiration of the Severance Term.
(j)
Release.
Any payments due to Executive under this Article 6 (other than the Accrued Obligations
or any unpaid expenses or payments due on account of the Executives death) shall be conditioned upon
Executives execution of a general release of claims in the form attached hereto as Exhibit A (subject to
such modifications as the Company reasonably may request).
(k)
Cooperation.
Following the Term of Employment, the Executive shall give his assistance and
cooperation willingly, upon reasonable advance notice with due consideration for his other business or
personal commitments, in any matter relating to his position with the Company, or his expertise or
experience as the Company may reasonably request, including his attendance and truthful testimony
where deemed appropriate by the Company, with respect to any investigation or the Companys defense
or prosecution of any existing or future claims or litigations or other proceedings relating to matters in
which he was involved or potentially had knowledge by virtue of his employment with the Company. In
no event shall his cooperation materially interfere with his services for a subsequent employer or other
similar service recipient. To the extent permitted by law, the Company agrees that (i) it shall promptly
reimburse the Executive for his reasonable and documented expenses in connection with his rendering
assistance and/or cooperation under this Article 6(k) upon his presentation of documentation for such
expenses and (ii) the Executive shall be reasonably compensated for any continued material services as
required under this Article 6(k).
(l)
Return of Company Property.
Following the Termination Date, the Executive or his personal representative shall return
all Company property in his possession, including but not limited to all computer equipment (hardware
and software), telephones, facsimile machines, palm pilots and other communication devices, credit cards,
office keys, security access cards, badges, identification cards and all copies (including drafts) of any
documentation or information (however stored) relating to the business of the Company, its customers
and clients or its prospective customers and clients.
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Employment Agreement Josef Mettler
(m)
Section 409A.
To the extent that the Executive otherwise would be entitled to any payment (whether
pursuant to this Agreement or otherwise) during the six months beginning on the Termination Date that
would be subject to the additional tax imposed under Section 409A of the Code (Section 409A), (x) the
payment shall not be made to the Executive during such six month period and instead shall be made to a
trust in compliance with Revenue Procedure 92-64 (the Rabbi Trust) and (y) the payment shall be paid
to the Executive on the earlier of the six-month anniversary of the Termination Date or the Executives
death or Disability. Similarly, to the extent that the Executive otherwise would be entitled to any benefit
(other than a payment) during the six months beginning on the Termination Date that would be subject to
the Section 409A additional tax, the benefit shall be delayed and shall begin being provided (together, if
applicable, with an adjustment to compensate the Executive for the delay) on the earlier of the six-month
anniversary of the Termination Date, or the Executives death or Disability.
(i)
The Company shall not take any action that would expose any payment
or benefit to the Executive to the additional tax of Section 409A, unless (w) the Company is obligated to
take the action under an agreement, plan or arrangement to which the Executive is a party, (x) the
Executive requests the action, (y) the Company advises the Executive in writing that the action may result
in the imposition of the additional tax, and (z) the Executive subsequently requests the action in a writing
that acknowledges that the Executive shall be responsible for any effect of the action under Section 409A.
(ii)
It is the Companys intention that the benefits and rights to which the
Executive could become entitled in connection with termination of employment comply with Section
409A. If the Executive or the Company believes, at any time, that any of such benefit or right does not
comply, it shall promptly advise the other and shall negotiate reasonably and in good faith to amend the
terms of such benefits and rights such that they comply with Section 409A (with the most limited possible
economic effect on the Executive and on the Company).
(n)
Clawback of Certain Compensation and Benefits.
If within the three year period after the termination of the Executives employment with
the Company for any reason other than by the Company for Cause:
(i)
it is determined in good faith by the Board and in accordance with the
due process requirements of Article 6(b) that the Executives employment could have been terminated by
the Company for Cause under Article 6(b) (unless the Board knew or should have known that as of the
Termination Date the Executives employment could have been terminated for Cause in accordance with
Article 6(b)); or
(ii)
if the Company determines that the Executive has engaged in fraudulent
or intentional misconduct related to or materially affecting the Companys business operations or the
Executives duties at the Company; or
(iii)
the Executive breaches Article 7, then, in addition to any other remedy
that may be available to the Company in law or equity and/or pursuant to any other provisions of this
Agreement, the Executives employment shall be deemed to have been terminated for Cause retroactively
to the Termination Date.
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Employment Agreement Josef Mettler
The Executive also shall be subject to the following provisions:
(a) The Executive shall be required to pay to the Company, immediately upon written demand
by the Board, (a) notwithstanding Article 1 (a)(iii), Article 1(a)(iv) and Article 6(b), the additional
amounts paid to Executive as a Bonus, Deferred Compensation, Retention Award, or Severance; that
Executive would not have received had Executives employment been terminated for Cause; and
(b) The Executive shall be required to pay to the Company any additional amounts paid to
Executive on or after the Termination Date (including the pre-tax cost to the Company of any benefits
that are in excess of the total amount that the Company would have been required to pay and the pre-tax
cost of any benefits that the Company would have been required to provide) that are in addition to those
amounts Executive would have received if the Executives employment with the Company had been
terminated by the Company for Cause in accordance with Article 6(b) above, and;
(c) Notwithstanding Article 1 (a)(iii) and Article 6(b), the Executive shall forfeit at the discretion
of the Board, based on the facts and circumstances surrounding the Executives culpability, all or a
portion of the Stock Options granted pursuant to this Agreement, vested and unvested, or if Stock Options
have been exercised, all or a portion of the shares so issued for cancellation upon payment by Company to
Executive the full exercise price, while any remaining Stock Options, if any, may be rescinded by the
Board.
7.
Restrictive Covenants.
(a)
Non-competition.
At all times during the Restricted Period, the Executive shall not, directly or indirectly
(whether as a principal, agent, partner, employee, officer, investor, owner, consultant, board member,
security holder, creditor or otherwise), engage in any Competitive Activity, or have any direct or indirect
interest in any sole proprietorship, corporation, company, partnership, association, venture or business or
any other person or entity that directly or indirectly (whether as a principal, agent, partner, employee,
officer, investor, owner, consultant, board member, security holder, creditor, or otherwise) engages in a
Competitive Activity; provided that the foregoing shall not apply to the Executive's ownership of
Common Stock of the Company or the acquisition by the Executive, solely as an investment, of securities
of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, and
that are listed or admitted for trading on any United States national securities exchange or that are quoted
on the NASDAQ Stock Market, or any similar system or automated dissemination of quotations of
securities prices in common use, so long as the Executive does not control, acquire a controlling interest
in or become a member of a group which exercises direct or indirect control of, more than five percent
(5%) of any class of capital stock of such corporation.
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Employment Agreement Josef Mettler
(b)
Non-solicitation of Employees and Certain Other Third Parties.
At all times during the Restricted Period, the Executive shall not, directly or indirectly,
for himself or for any other person, firm, corporation, partnership, association or other entity (i) employ or
attempt to employ or enter into any contractual arrangement with any employee, consultant or
independent contractor performing services for the Company, or any Affiliate or Related Entity, unless
such employee, consultant or independent contractor, has not been employed or engaged by the Company
for a period in excess of six (6) months, and/or (ii) call on or solicit any of the actual or targeted
prospective customers or clients of the Company or any Affiliate or Related Entity on behalf of any
person or entity in connection with any Competitive Activity, nor shall the Executive make known the
names and addresses of such actual or targeted prospective customers or clients, or any information
relating in any manner to the trade or business relationships of the Company or any Affiliates or Related
Entities with such customers or clients, other than in connection with the performance of the Executives
duties under this Agreement, and/or (iii) persuade or encourage or attempt to persuade or encourage any
persons or entities with whom the Company or any Affiliate or Related Entity does business or has some
business relationship to cease doing business or to terminate its business relationship with the Company
or any Affiliate or Related Entity or to engage in any Competitive Activity on its own or with any
competitor of the Company or any Affiliate or Related Entity.
(c)
Confidential Information.
The Executive shall not at any time divulge, communicate, use to the detriment of the
Company or for the benefit of any other person or persons, or misuse in any way, any Confidential
Information pertaining to the business of the Company. Any Confidential Information or data now or
hereafter acquired by the Executive with respect to the business of the Company (which shall include, but
not be limited to, information concerning the Company's financial condition, prospects, technology,
customers, suppliers, sources of leads and methods of doing business) shall be deemed a valuable, special
and unique asset of the Company that is received by the Executive in confidence and as a fiduciary, and
the Executive shall remain a fiduciary to the Company with respect to all of such information.
Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Executive from disclosing
Confidential Information as required to perform his duties under this Agreement or to the extent required
by law. If any person or authority makes a demand on the Executive purporting to legally compel him to
divulge any Confidential Information, the Executive immediately shall give notice of the demand to the
Company so that the Company may first assess whether to challenge the demand prior to the Executives
divulging of such Confidential Information. The Executive shall not divulge such Confidential
Information until the Company either has concluded not to challenge the demand, or has exhausted its
challenge, including appeals, if any. Upon request by the Company, the Executive shall deliver promptly
to the Company upon termination of his services for the Company, or at any time thereafter as the
Company may request, all memoranda, notes, records, reports, manuals, drawings, designs, computer files
in any media and other documents (and all copies thereof) containing such Confidential Information.
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Employment Agreement Josef Mettler
(d)
Ownership of Developments.
All processes, concepts, techniques, inventions and works of authorship, including new
contributions, improvements, formats, packages, programs, systems, machines, compositions of matter
manufactured, developments, applications and discoveries, and all copyrights, patents, trade secrets, or
other intellectual property rights associated therewith conceived, invented, made, developed or created by
the Executive during the Term of Employment either during the course of performing work for the
Companies or their clients or which are related in any manner to the business (commercial or
experimental) of the Company or its clients (collectively, the Work Product), within the field of use of
wear and corrosion resistant coatings shall belong exclusively to the Company and shall, to the extent
possible, be considered a work made by the Executive for hire for the Company within the meaning of
Title 17 of the United States Code. To the extent the Work Product within the wear and corrosion
coatings field of use may not be considered work made by the Executive for hire for the Company, the
Executive agrees to assign, and automatically assign at the time of creation of the Work Product, without
any requirement of further consideration, any right, title, or interest the Executive may have in such Work
Product. Upon the request of the Company, the Executive shall take such further actions, including
execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment. The Executive shall further: (i) promptly disclose the Work Product to the Company;
(ii) assign to the Company, without additional compensation, all patent or other rights to such Work
Product for the United States and foreign countries; (iii) sign all papers necessary to carry out the
foregoing; and (iv) give testimony in support of his inventions, all at the sole cost and expense of the
Company.
(e)
Books and Records.
All books, records, and accounts relating in any manner to the customers or clients of the
Company, whether prepared by the Executive or otherwise coming into the Executive's possession, shall
be the exclusive property of the Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the Company's request at any time.
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Employment Agreement Josef Mettler
(f)
Acknowledgment by Executive.
The Executive acknowledges and confirms that the restrictive covenants contained in this
Article 7 (including without limitation the length of the term of the provisions of this Article 7) are
reasonably necessary to protect the legitimate business interests of the Company, and are not overbroad,
overlong, or unfair and are not the result of overreaching, duress or coercion of any kind. The Executive
further acknowledges and confirms that the compensation payable to the Executive under this Agreement
is in consideration for the duties and obligations of the Executive hereunder, including the restrictive
covenants contained in this Article 7, and that such compensation is sufficient, fair and reasonable. The
Executive further acknowledges and confirms that his full, uninhibited and faithful observance of each of
the covenants contained in this Article 7 will not cause him any undue hardship, financial or otherwise,
and that enforcement of each of the covenants contained herein will not impair his ability to obtain
employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain
income required for the comfortable support of him and his family and the satisfaction of the needs of his
creditors. The Executive acknowledges and confirms that his special knowledge of the business of the
Company is such as would cause the Company serious injury or loss if he were to use such ability and
knowledge to the benefit of a competitor or were to compete with the Company in violation of the terms
of this Article 7. The Executive further acknowledges that the restrictions contained in this Article 7 are
intended to be, and shall be, for the benefit of and shall be enforceable by, the Companys successors and
assigns. The Executive expressly agrees that upon any breach or violation of the provisions of this Article
6, the Company shall be entitled, as a matter of right, in addition to any other rights or remedies it may
have, to (i) temporary and/or permanent injunctive relief in any court of competent jurisdiction as
described in Article 7(h) hereof, and (ii) such damages as are provided at law or in equity. The existence
of any claim or cause of action against the Company or its affiliates, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the enforcement of the restrictions contained in
this Article 7.
(g)
Reformation by Court.
In the event that a court of competent jurisdiction shall determine that any provision of
this Article 7 is invalid or more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Article 7 within the jurisdiction of such court, such provision shall be
interpreted or reformed and enforced as if it provided for the maximum restriction permitted under such
governing law.
(h)
Extension of Time.
If the Executive shall be in violation of any provision of this Article 7, then each time
limitation set forth in this Article 7 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If the Company seeks injunctive relief from such
violation in any court, then the covenants set forth in this Article 7 shall be extended for a period of time
equal to the duration of such proceeding including all appeals by the Executive.
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Employment Agreement Josef Mettler
(i)
Injunction.
It is recognized and hereby acknowledged by the parties hereto that a breach by the
Executive of any of the covenants contained in Article 7 of this Agreement will cause irreparable harm
and damage to the Company, the monetary amount of which may be virtually impossible to ascertain. As
a result, the Executive recognizes and hereby acknowledges that the Company shall be entitled to an
injunction from any court of competent jurisdiction enjoining and restraining any violation of any or all of
the covenants contained in Article 7 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such right to injunction shall be
cumulative and in addition to whatever other remedies the Company may possess.
8.
Representations and Warranties of Executive.
The Executive represents and warrants to the Company that:
(a)
The Executives employment will not conflict with or result in his breach of any
agreement to which he is a party or otherwise may be bound;
(b)
The Executive has not violated, and in connection with his employment with the
Company will not violate, any non-solicitation, non-competition or other similar covenant or agreement
of a prior employer by which he is or may be bound; and
(c)
In connection with Executives employment with the Company, he will not use
any confidential or proprietary information that he may have obtained in connection with employment
with any prior employer, with the exception of current or former affiliates, parents, or subsidiaries of the
company; and
(d)
The Executive has not committed any criminal act with respect to Executives
current or any prior employment; and
(e)
The Executive is not dependent on alcohol or the illegal use of drugs
9.
Mediation.
Except to the extent the Company has the right to seek an injunction under Article 7(h) hereof, in
the event a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute
cannot be settled through negotiation, the parties hereby agree first to attempt in good faith to settle the
dispute by mediation administered by the American Arbitration Association under its Employment
Mediation Rules before resorting to the jurisdiction of federal or state courts to resolve any dispute.
10.
Taxes.
Anything in this Agreement to the contrary notwithstanding, all payments required to be made by
the Company hereunder to the Executive or his estate or beneficiaries shall be subject to the withholding
of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the
Company may, in its sole discretion, accept other provisions for payment of taxes and withholding as
required by law, provided it is satisfied that all requirements of law affecting its responsibilities to
withhold have been satisfied.
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Employment Agreement Josef Mettler
11.
Assignment.
The Company shall have the right to assign this Agreement and its rights and obligations
hereunder in whole, but not in part, to any corporation or other entity with or into which the Company
may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its
assets, if in any such case said corporation or other entity shall by operation of law or expressly in writing
assume all obligations of the Company hereunder as fully as if it had been originally made a party hereto,
but may not otherwise assign this Agreement or its rights and obligations hereunder. The Executive may
not assign or transfer this Agreement or any rights or obligations hereunder.
12.
Governing Law.
This Agreement shall be governed by and construed and enforced in accordance with the internal
laws of the State of Florida, without regard to principles of conflict of laws.
13.
Jurisdiction and Venue.
The parties acknowledge that a substantial portion of the negotiations, anticipated performance
and execution of this Agreement occurred or shall occur in Miami, Florida, and that, therefore, without
limiting the jurisdiction or venue of any other federal or state courts, each of the parties irrevocably and
unconditionally (i) agrees that any suit, action or legal proceeding arising out of or relating to this
Agreement which is expressly permitted by the terms of this Agreement to be brought in a court of law,
shall be brought in the courts of record of the State of Florida or the court of the United States; (ii)
consents to the jurisdiction of each such court in any such suit, action or proceeding; (iii) waives any
objection which it or he may have to the laying of venue of any such suit, action or proceeding in any of
such courts; and (iv) agrees that service of any court papers may be effected on such party by mail, as
provided in this Agreement, or in such other manner as may be provided under applicable laws or court
rules in such courts.
14.
Survival.
The respective rights and obligations of the parties hereunder shall survive any termination of the
Executives employment hereunder, including without limitation, the Companys obligations under
Article 6 and the Executives obligations under Article 7 above, and the expiration of the Term of
Employment, to the extent necessary to the intended preservation of such rights and obligations.
15.
Notices.
All notices required or permitted to be given hereunder shall be in writing and shall be personally
delivered by courier, sent by registered or certified mail, return receipt requested or sent by confirmed
facsimile transmission addressed as set forth herein. Notices personally delivered, sent by facsimile or
sent by overnight courier shall be deemed given on the date of delivery and notices mailed in accordance
with the foregoing shall be deemed given upon the earlier of receipt by the addressee, as evidenced by the
return receipt thereof, or three (3) days after deposit in the U.S. mail. Notice shall be sent (i) if to the
Company, addressed to 97 Seestrasse, Oberrieden, Switzerland CH-8942 Attention: Josef Mettler, CEO,
and (ii) if to the Executive, to his address as reflected on the payroll records of the Company, or to such
other address as either party shall request by notice to the other in accordance with this provision.
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Employment Agreement Josef Mettler
16.
Benefits; Binding Effect.
This Agreement shall be for the benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors and, where permitted and applicable,
assigns, including, without limitation, any successor to the Company, whether by merger, consolidation,
sale of stock, sale of assets or otherwise.
17.
Right to Consult with Counsel; No Drafting Party.
The Executive acknowledges having read and considered all of the provisions of this Agreement
carefully, and having had the opportunity to consult with counsel of his own choosing, and, given this, the
Executive agrees that the obligations created hereby are not unreasonable. The Executive acknowledges
that he has had an opportunity to negotiate any and all of these provisions and no rule of construction
shall be used that would interpret any provision in favor of or against a party on the basis of who drafted
the Agreement.
18.
Severability.
The invalidity of any one or more of the words, phrases, sentences, clauses, provisions, sections
or articles contained in this Agreement shall not affect the enforceability of the remaining portions of this
Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in
the event that any one or more of the words, phrases, sentences, clauses, provisions, sections or articles
contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid
word or words, phrase or phrases, sentence or sentences, clause or clauses, provisions or provisions,
section or sections or article or articles had not been inserted. If such invalidity is caused by length of
time or size of area, or both, the otherwise invalid provision will be considered to be reduced to a period
or area which would cure such invalidity.
19.
Waivers.
The waiver by either party hereto of a breach or violation of any term or provision of this
Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.
20.
Damages; Attorneys Fees.
Nothing contained herein shall be construed to prevent the Company or the Executive from
seeking and recovering from the other damages sustained by either or both of them as a result of its or his
breach of any term or provision of this Agreement. In the event that either party hereto seeks to collect
any damages resulting from, or the injunction of any action constituting, a breach of any of the terms or
provisions of this Agreement, then the party found to be at fault shall pay all reasonable costs and
attorneys' fees of the other.
21.
No Set-off or Mitigation.
The Companys obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense
or other claim, right or action which the Company may have against the Executive or others.
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Employment Agreement Josef Mettler
22.
Section Headings.
The article, section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
23.
No Third Party Beneficiary.
Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any rights or remedies under or
by reason of this Agreement.
24.
Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to
be an original but all of which together shall constitute one and the same instrument and agreement.
25.
Indemnification.
(a)
Subject to limitations imposed by law, the Company shall indemnify and hold
harmless the Executive to the fullest extent permitted by law from and against any and all claims,
damages, expenses (including attorneys' fees), judgments, penalties, fines, settlements, and all other
liabilities incurred or paid by him in connection with the investigation, defense, prosecution, settlement or
appeal of any threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and to which the Executive was or is a party or is threatened to be made a
party by reason of the fact that the Executive is or was an officer, employee or agent of the Company, or
by reason of anything done or not done by the Executive in any such capacity or capacities, provided that
the Executive acted in good faith, in a manner that was not grossly negligent or constituted willful
misconduct and in a manner he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The Company also shall pay any and all expenses (including attorney's fees)
incurred by the Executive as a result of the Executive being called as a witness in connection with any
matter involving the Company and/or any of its officers or directors.
(b)
Except in the event that the Company is involved in an adversarial claim either
against or initiated by Executive, the Company shall pay any expenses (including attorneys' fees),
judgments, penalties, fines, settlements, and other liabilities incurred by the Executive in investigating,
defending, settling or appealing any action, suit or proceeding described in this Article 25 in advance of
the final disposition of such action, suit or proceeding. Subject to the limited exception conditioned
above, the Company shall promptly pay the amount of such expenses to the Executive, but in no event
later than 10 days following the Executive's delivery to the Company of a written request for an advance
pursuant to this Article 25, together with a reasonable accounting of such expenses.
(c)
The Executive hereby undertakes and agrees to repay to the Company any
advances made pursuant to this Article 25 if and to the extent that it shall ultimately be found that the
Executive is not entitled to be indemnified by the Company for such amounts.
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Employment Agreement Josef Mettler
(d)
The Company shall make the advances contemplated by this Article 25
regardless of the Executive's financial ability to make repayment, and regardless whether indemnification
of the Indemnitee by the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Article 25 shall be unsecured and interest-free. The provisions of this Article 25 shall
survive the termination of the Term of Employment or expiration of the term of this Agreement.
(e)
The provisions of this Article 25 shall survive the termination of the Term of
Employment or expiration of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first
above written.
SUNVESTA, INC.:
EXECUTIVE:
/s/ Hans Rigendinger
/s/ Josef Mettler
Hans Rigendinger
Josef Mettler
Chief Operating Officer, Director
Chief Executive and Chief Financial Officer
President
/s/ Max R ӧ ssler
Director
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Employment Agreement Josef Mettler
EXHIBIT A
FORM OF RELEASE
GENERAL RELEASE OF CLAIMS
Josef Mettler ( Executive ), for himself and his family, heirs, executors, administrators, legal
representatives and their respective successors and assigns, in exchange for the consideration received
pursuant to Articles 6(c) (in the case of Disability), Articles 6(e) or 6(f) (other than the Accrued
Obligations) of the Employment Agreement to which this release is attached as Exhibit A (the
Employment Agreement ), does hereby release and forever discharge SunVesta, Inc. (the Company ),
its subsidiaries, affiliated companies, successors and assigns, and its current or former directors, officers,
employees, shareholders or agents in such capacities (collectively with the Company, the Released
Parties ) from any and all actions, causes of action, suits, controversies, claims and demands whatsoever,
for or by reason of any matter, cause or thing whatsoever, whether known or unknown including, but not
limited to, all claims under any applicable laws arising under or in connection with Executives
employment or termination thereof, whether for tort, breach of express or implied employment contract,
wrongful discharge, intentional infliction of emotional distress, or defamation or injuries incurred on the
job or incurred as a result of loss of employment. Executive acknowledges that the Company encouraged
him to consult with an attorney of his choosing, and through this General Release of Claims encourages
him to consult with his attorney with respect to possible claims under the Age Discrimination in
Employment Act ( ADEA ) and that he understands that the ADEA is a Federal statute that, among other
things, prohibits discrimination on the basis of age in employment and employee benefits and benefit
plans. Without limiting the generality of the release provided above, Executive expressly waives any and
all claims under ADEA that he may have as of the date hereof. Executive further understands that by
signing this General Release of Claims he is in fact waiving, releasing and forever giving up any claim
under the ADEA as well as all other laws within the scope of this paragraph 1 that may have existed on or
prior to the date hereof. Notwithstanding anything in this paragraph 1 to the contrary, this General
Release of Claims shall not apply to (i) any actions to enforce rights arising under, or any claim for
benefits which may be due Executive pursuant to, the Employment Agreement, (ii) any rights or claims
that may arise as a result of events occurring after the date this General Release of Claims is executed,
(iii) any indemnification rights Executive may have as a former officer or director of the Company or its
subsidiaries or affiliated companies, (iv) any claims for benefits under any directors and officers liability
policy maintained by the Company or its subsidiaries or affiliated companies in accordance with the terms
of such policy, and (v) any rights as a holder of equity securities of the Company.
Executive represents that he has not filed against the Released Parties any complaints, charges, or
lawsuits arising out of his employment, or any other matter arising on or prior to the date of this General
Release of Claims, and covenants and agrees that he will never individually or with any person file, or
commence the filing of, any charges, lawsuits, complaints or proceedings with any governmental agency,
or against the Released Parties with respect to any of the matters released by Executive pursuant to
paragraph 1 hereof (a Proceeding ); provided , however, Executive shall not have relinquished his right
to commence a Proceeding to challenge whether Executive knowingly and voluntarily waived his rights
under ADEA.
Executive hereby acknowledges that the Company has informed him that he has up to twenty-one
(21) days to sign this General Release of Claims and he may knowingly and voluntarily waive that
twenty-one (21) day period by signing this General Release of Claims earlier. Executive also understands
that he shall have seven (7) days following the date on which he signs this General Release of Claims
within which to revoke it by providing a written notice of his revocation to the Company.
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Employment Agreement Josef Mettler Exhibit
Executive acknowledges that this General Release of Claims will be governed by and construed
and enforced in accordance with the internal laws of the State of Florida applicable to contracts made and
to be performed entirely within such State.
Executive acknowledges that he has read this General Release of Claims, that he has been advised
that he should consult with an attorney before he executes this general release of claims, and that he
understands all of its terms and executes it voluntarily and with full knowledge of its significance and the
consequences thereof.
This General Release of Claims shall take effect on the eighth day following Executives
execution of this General Release of Claims unless Executives written revocation is delivered to the
Company within seven (7) days after such execution.
____________________________
Josef Mettler
_______________, 20__
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Employment Agreement Josef Mettler Exhibit
EXHIBIT 31
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Josef Mettler, certify that:
1. I have reviewed this report on Form 10-Q of SunVesta, Inc.;
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 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(s) 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 the 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the 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 controls 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 over financial reporting.
Date: October 10, 2013
/s/ Josef Mettler
Josef Mettler
Chief Executive Officer and Chief Financial Officer
EXHIBIT 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report on Form 10-Q of SunVesta, Inc., for the quarterly period ended March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof, I, Josef Mettler, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1)
This report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in this report fairly presents, in all material respects, the financial condition of the registrant at the end of the period covered by this report and results of operations of the registrant for the period covered by this report.
Date: October 10, 2013
/s/ Josef Mettler
Josef Mettler
Chief Executive Officer and Chief Financial Officer
This certification accompanies this report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the registrant for the purposes of §18 of the Securities Exchange Act of 1934, as amended. This certification shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this report), irrespective of any general incorporation language contained in such filing.
A signed original of this written statement required by §906 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 99
SUNVESTA, INC.
2013 STOCK OPTION PLAN
ARTICLE ONE
GENERAL PROVISIONS
I.
PURPOSE OF THE PLAN
This SunVesta, Inc. 2013 Stock Option Plan, is intended to promote the interests of
SunVesta,Inc., a Florida corporation, by providing eligible persons who are employed by or provide
services to the Corporation with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to continue in such employ or
service. Options granted under this Plan are to be considered Non-Statutory Stock Options.
Capitalized terms shall have the meanings assigned to such terms in Article Four of this Plan.
II.
STRUCTURE OF THE PLAN
The Plan shall be an Option Grant Program, under which eligible persons may be granted, at the
discretion of the Plan Administrator, options to purchase shares of Common Stock. The options issued
under this Plan are intended to be Non-Statutory Stock Options exempt from Code Section 409A.
III.
ADMINISTRATION OF THE PLAN
A.
The Plan shall be administered by the Board. However, any or all administrative
functions otherwise exercisable by the Board may be delegated to the Committee. Members of the
Committee shall serve for such period of time as the Board may determine and may be removed by the
Board at any time. Also, the Board at any time may terminate the functions of the Committee and
reassume all powers and authority previously delegated to the Committee.
B.
Within the scope of its administrative jurisdiction under the Plan, the Plan Administrator
shall have full power and authority subject to the provisions of the Plan:
1.
to establish such rules as it may deem appropriate for proper administration of
the Plan, to make all factual determinations, to construe and interpret the provisions of the Plan
and the Awards thereunder and to resolve any and all ambiguities thereunder;
2.
to determine, with respect to Awards made under the Option Grant Program,
which eligible persons are to receive such Awards, the time or times when such Awards are to be
made, the number of shares to be covered by such Awards, the vesting schedule (if any)
applicable to such Awards, the status of a granted option as a Non-Statutory Stock Option, and
the maximum term for which each option is to remain outstanding;
3.
to amend, modify or cancel any outstanding Awards with the consent of the
holder or accelerate the vesting of such Awards; and
4.
to take such other discretionary actions as permitted under applicable law and
pursuant to the terms of the Plan.
Page 1 of 10
Exhibit 99
C.
The Plan Administrator shall have full power and authority to establish such rules and
regulations as it may deem appropriate for proper administration of the Plan and to construe, to make such
determinations under, and to issue such interpretations of, the terms, restrictions and provisions of the
Plan and any outstanding options issued thereunder as it may deem necessary or advisable. The
Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or
any agreements relating to option grants or stock issued thereunder. Decisions of each Plan Administrator
within the scope of its administrative functions under the Plan shall be final and binding on all parties
who have an interest in the Plan or any option issued thereunder.
IV.
ELIGIBILITY
A.
The persons eligible to participate in the Plan are as follows:
1.
Employees;
2.
Members of the Board or the board of directors of any Subsidiary, officers of the
Corporation or any Subsidiary, Employees and Consultants of any Parent or any Subsidiary; and
3.
Consultants.
B.
The Board shall have the sole and absolute discretion to select Employees and other
individuals who will be granted options in accordance with this Plan.
V.
STOCK SUBJECT TO THE PLAN
The stock that may be issued under the Plan shall be shares of authorized but unissued or
reacquired Common Stock of the Corporation. The total number of shares of Common Stock that may be
issued over the term of the Plan shall not exceed fifty million (50,000,000) shares.
ARTICLE TWO
OPTION GRANT PROGRAM
I.
OPTION TERMS
Each option shall be evidenced by one or more documents in the form approved by the Plan
Administrator; provided, however, that each such document shall comply with the terms specified below.
A.
Exercise Price .
1.
The exercise price per share shall be established by the Plan Administrator and
shall be equal to or greater than the Fair Market Value per share of Common Stock on the option
grant date.
2.
The exercise price shall become due immediately upon exercise of the option
and, subject to the provisions of Section I of Article Three and the documents evidencing the
option, shall be payable in cash or check made payable to the Corporation. If the Common Stock
is registered under Section 12 of the 1934 Act at the time the option is exercised, then the
exercise price may also be paid as follows:
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Exhibit 99
(i)
in shares of Common Stock held for the requisite period necessary to
avoid a charge to the Corporations earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date; or
(ii)
to the extent the option is exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee concurrently shall provide
irrevocable written instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchased shares plus all applicable Federal, state and local income
and employment taxes required to be withheld by the Corporation by reason of such
exercise and (b) the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date.
B.
Exercise and Term of Options . Each option shall be exercisable at such time or times,
during such period and for such number of shares as shall be determined by the Plan Administrator and
set forth in the documents evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
C.
Cessation of Service .
The following provisions shall govern the exercise of any options held by the Optionee at the
time of cessation of Service or death:
1.
Upon the Optionees cessation of Service for any reason, the Optionees option
shall terminate immediately and cease to be outstanding with respect to any and all option shares
for which the option is not otherwise at that time exercisable or in which the Optionee is not
otherwise at that time vested (after taking into account any vesting acceleration provisions tied to
the Optionees cessation of Service under this Plan, any option agreement or any other written
agreement between an Optionee and the Corporation); provided, however, should Optionees
Service be terminated for Misconduct, then notwithstanding anything to the contrary herein, all
outstanding options with respect to all unvested shares at the date of such termination held by the
Optionee shall terminate immediately and cease to remain outstanding.
2.
Should the Optionee cease to remain in Service for any reason other than death or
Disability, except as otherwise provided under an option agreement or any other written
agreement between the Optionee and the Corporation, the Optionee shall have a period of three
(3) months following the date of such cessation of Service during which to exercise each
outstanding vested option held by such Optionee and not terminated or cancelled under
subparagraph (1) above.
3.
Should the Optionees Service terminate by reason of Disability, then the
Optionee shall have a period of twelve (12) months following the date of such cessation of
Service during which to exercise each outstanding vested option held by the Optionee and not
terminated or cancelled under subparagraph (1) above.
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Exhibit 99
4.
If, while holding an outstanding vested option, the Optionees Service terminates
by reason of the Optionees death, then the personal representative of his or her estate or the
person or persons to whom the option is transferred pursuant to the Optionees will or the laws of
inheritance shall have a period of twelve (12) months following the date of the Optionees death
to exercise such option.
5.
During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares for which the option is
exercisable on the date of the Optionees cessation of Service, plus any additional option shares
for which vesting is accelerated due to such cessation of Service pursuant to the terms of the
applicable option agreement or any other written agreement between an Optionee and the
Corporation.
6.
Upon the expiration of the applicable exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be outstanding for any
vested shares for which the option has not been exercised. Under no circumstances shall any such
option be exercisable after the specified expiration of the option term.
D.
Shareholder Rights . The holder of an option shall have no shareholder rights with
respect to the shares subject to the option until such person shall have exercised the option, paid the
exercise price, and become the recordholder of the purchased shares.
E.
Limited Transferability of Options . At the discretion of the Plan Administrator and in
connection with the Optionees estate plan, a Non-Statutory Stock Option may be assigned in whole or in
part during the Optionees lifetime to one or more members of the Optionees immediate family or to a
trust established exclusively for one or more such family members. The assigned portion may be
exercised only by the person or persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
II.
CORPORATE TRANSACTION
A.
In the event of any Corporate Transaction and except as otherwise provided in an option
agreement, each outstanding option that is not fully vested automatically shall accelerate so that
immediately prior to the effective date of the Corporate Transaction, all shares subject to the option
automatically shall vest and each such option shall become fully exercisable for all of the shares of
Common Stock at the time subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall not so accelerate if and to the
extent: (i) such option is assumed in connection with the Corporate Transaction, otherwise continued in
full force and effect by the successor corporation (or parent thereof) or replaced with a comparable option
to purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such option is
to be replaced with a cash incentive program of the successor corporation that preserves the financial
spread existing between the exercise price on the option grant date and the Fair Market Value of the
shares subject to the option on the effective date of the Corporate Transaction and provides for subsequent
payout in accordance with the vesting schedule applicable to such option, or (iii) the acceleration of such
option is subject to other limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clauses (i) and (ii) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
Page 4 of 10
Exhibit 99
B.
Immediately following the consummation of the Corporate Transaction, all outstanding
options shall terminate and cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof) or otherwise expressly continued in full force and effect pursuant to the
terms of the Corporate Transaction.
C.
Each option that is assumed, otherwise continued in full force and effect, or replaced with
a comparable option in connection with a Corporate Transaction shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class of securities that would
have been issuable to the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate adjustments to reflect such
Corporate Transaction shall also be made to (i) the number and class of securities available for issuance
under the Plan following the consummation of such Corporate Transaction and (ii) the exercise price
payable per share under each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.
D.
In the event an Optionees Service should terminate by reason of an Involuntary
Termination within eighteen (18) months following the effective date of a Corporate Transaction, the Plan
Administrator shall have the discretion, exercisable at the time the option is granted or at any time while
the option remains outstanding, to provide for the automatic acceleration of one or more outstanding
options that do not otherwise accelerate at that time, as described in Section III.A. of this Article Two.
Any options so accelerated shall remain exercisable until the earlier of (i) the expiration of the option
term, or (ii) the expiration of the one (1) year period measured from the effective date of the Involuntary
Termination.
E.
Upon the occurrence of a Corporate Transaction, the Plan Administrator shall have the
discretion, exercisable either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more outstanding options, as described in
Section III.A. of this Article Two whether or not those options are to be assumed or replaced in the
Corporate Transaction.
F.
The grant of options under the Plan shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or assets.
III.
CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and from time to time, with
the consent of the affected option holders, the cancellation of any or all outstanding options under the
Option Grant Program and to grant in substitution new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of
Common Stock on the new grant date.
ARTICLE THREE
MISCELLANEOUS
I.
EFFECTIVE DATE AND TERM OF THE PLAN
A.
The Plan shall become effective when adopted by the Board. Subject to such limitation,
the Plan Administrator may grant options under the Plan at any time after the effective date of the Plan
and before the date fixed herein for termination of the Plan.
Page 5 of 10
Exhibit 99
B.
In its discretion, the Board may terminate the Plan at any time with respect to any shares
of Common Stock for which Non-Statutory Stock Options have not been granted.
C.
The Plan shall terminate upon the earliest of (i) the expiration of the ten (10) year period
measured from the date the Plan is adopted by the Board, (ii) the date on which all shares available for
issuance under the Plan shall have been issued as fully vested shares, or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such Plan termination, all options
outstanding under the Plan shall continue to have full force and effect in accordance with the provisions
of the documents evidencing such options, except as otherwise provided herein or in any agreements
related to such stock options.
II.
AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to amend or modify the Plan in
any or all respects from time to time. However, no such amendment or modification shall adversely affect
any rights and obligations with respect to options at the time outstanding under the Plan, unless the
Optionee consents to such amendment or modification. In addition, certain amendments may require
shareholder approval pursuant to applicable laws and regulations, including, but not limited to, any
amendment to the Plan that (i) increases the maximum aggregate number of shares that may be issued
under the Plan or (ii) changes the class of individuals eligible to receive an option under the Plan.
III.
USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance of shares of Common Stock
under the Plan shall be used for general corporate purposes.
IV.
WITHHOLDING
The Corporations obligation to deliver shares of Common Stock upon the exercise of any options
issued under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
V.
REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the Plan and the issuance of any
shares of Common Stock upon the exercise of any option shall be subject to the Corporations
procurement of all approvals and permits required by regulatory authorities having jurisdiction over the
Plan, the options granted under the Plan and the shares of Common Stock issued pursuant to the Plan.
VI.
SHARE LEGENDS
In addition to any other legends that the Board determines, in its discretion, are necessary or
appropriate, the Corporation shall cause the legends set forth below, or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the shares of Common Stock issued
under the Option Grant Program, together with any other legends that may be required by the Corporation
or by state or federal securities laws:
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Exhibit 99
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SHARES
OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT THAT IS THEN APPLICABLE TO THE SHARES, AS TO WHICH A PRIOR
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER OR TRANSFER AGENT
MAY BE REQUIRED.
VII.
NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon an Optionee any right to continue in Service for any period
of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee, which rights are hereby
expressly reserved by each.
VIII. UNFUNDED PLAN
The Plan shall be unfunded. The Corporation shall not be required to establish any special or
separate fund or to make any other segregation of funds or assets to insure any payments under this Plan.
IX.
NO RESTRICTION ON CORPORATE ACTION
Nothing contained in the Plan shall be construed to prevent the Corporation (or any Parent or
Subsidiary) from taking any corporate action that is deemed by the Corporation (or such Parent or
Subsidiary) to be appropriate or in its best interest, whether or not such action would have an adverse
effect on the Plan or any option under the Plan. No Employee, Consultant, Board member, beneficiary, or
other person shall have any claim against the Corporation or any Parent or Subsidiary as a result of any
such action.
X.
GOVERNING LAW
The Plan shall be construed in accordance with the laws of Florida.
ARTICLE FOUR
DEFINITIONS
The following definitions shall be in effect under the Plan:
A.
Applicable Laws shall mean the requirements for equity compensation plans and
Awards under federal securities laws, the Code, applicable state corporate and securities laws, and the
rules of any applicable stock exchange or national market system applicable to Awards.
B.
Award shall mean the determination to make one or more grants under the Plan.
C.
Board shall mean the Corporations board of directors.
D.
Code shall mean, the Internal Revenue Code of 1986, as amended.
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Exhibit 99
E.
Committee shall mean a committee of one (1) or more Board members appointed by
the Board to exercise one or more administrative functions under the Plan.
F.
Common Stock shall mean the Corporations voting common stock.
G.
Consultant shall mean any person who is not an Employee and who is providing
services to the Corporation (or any Parent or Subsidiary) as an advisor, consultant, or non-common law
employee.
H.
Corporate Transaction shall mean the occurrence in a single transaction or a series of
related transactions, of any one or more of the following: (i) a sale or other disposition of all or
substantially all of the assets of the Corporation and its Subsidiaries; (ii) a sale or other disposition of
more than fifty percent (50%) of the outstanding stock of the Corporation; (iii) the consummation of a
merger, consolidation or similar transaction after which the Corporation is not the surviving corporation;
(iv) the consummation of a merger, consolidation , or similar transaction after which the Corporation is
the surviving corporation but the shares outstanding immediately preceding the merger, consolidation, or
similar transaction are converted or exchanged by reason of the transaction into other stock, property or
cash; (v) a distribution by the Corporation (excluding an ordinary dividend or a stock split or stock
dividend described in Treasury Regulation section 1.424-1(e)(4)(iv).
I.
Corporation shall mean SunVesta, Inc., a Florida corporation and any corporate
successor to all or substantially all of the assets or voting stock of SunVesta, Inc., which shall by
appropriate action adopt the Plan.
J.
Disability shall mean any physical or mental impairment that has lasted for a
minimum of 2 months and that (i) can be expected to last for an additional period of not less than 10
months and (ii) prevents an Employee from engaging in such Employee's regular duties in furtherance of
the business of the Corporation. Upon request by the Plan Administrator, a disabled Employee shall
promptly submit a physician's statement attesting to or disclaiming the existence of such disability and
shall promptly submit any other information or records deemed necessary by the Plan Administrator in
this regard. The Plan Administrator shall have the right to require an examination of the disabled
Employee by his medical examiner or physician, at the Corporation's expense. If there is disagreement as
to whether an Employee is disabled, then determination of whether such disability exists shall be made by
a physician mutually agreed upon by the physicians previously selected by the disabled Employee and the
Plan Administrator. The decision of the physician appointed under the provisions of this Article shall be
final and binding on the Corporation and the Employee.
K.
Employee shall mean an individual who is a common law employee of the
Corporation (or any Parent or Subsidiary), except any employees excluded in writing by the Plan
Administrator. For example, the Plan Administrator, in its discretion, may exclude from eligibility under
this Plan any individuals who provide services to the Corporation (or any Parent or Subsidiary) through a
labor contractor, staffing firm, temporary employment firm or agency or other third party, regardless of
whether such employees are common law employees of the Corporation.
L.
Exercise Date shall mean the date on which the Corporation shall have received
written notice of the option exercise.
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Exhibit 99
M.
Fair Market Value shall mean, as of any date, the fair market value of a Share
determined as follows:
1.
When there is a public market for the Shares, the Fair Market Value shall be
determined by the closing price for a Share on the market trading day on the date of
determination (and if a closing price was not reported on that date , then the arithmetic mean of
the closing bid and asked prices at the close of the market on that date, and if these prices were
not reported on that date, then the closing price on the last trading date on which a closing price
was reported) on the stock exchange or national market system that is the primary market for the
Shares; or
2.
If the Plan Administrator, in its sole discretion, determines that the foregoing
methods do not apply or produce a reasonable valuation, then Fair Market Value shall be
determined by an independent appraisal that satisfies the requirements of Code Section
401(a)(28)(C) as of a date within twelve (12) months before the date of the transaction for which
the appraisal is used, e.g., the date of the grant of the Award (the Appraisal). If the Plan
Administrator, in its sole discretion determines that he Appraisal does not reflect information
available after the date of the Appraisal that may materially affect the value of the Shares, then
Fair Market Value shall be determined by a new Appraisal.
N.
Involuntary Termination shall mean the termination of the Service of any individual
that occurs by reason of any of an individuals voluntary resignation (a) following (i) a change in the
individuals position with the Corporation (or any Parent or Subsidiary employing the individual) that
materially reduces the individuals duties and responsibilities or the level of management to which the
individual reports, (ii) a reduction in an individuals level of compensation (including base salary, fringe
benefits and target bonus under any corporate performance-based bonus or incentive programs) by more
than fifteen percent (15%), or (iii) a relocation of an individuals place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation is effected by the Corporation
without the individuals consent, or (b) an individuals resignation for good reason. For purposes of this
Plan, the term good reason shall be defined as provided in any written agreement between the
individual and the Corporation.
O.
Misconduct shall mean a determination by the Corporation, pursuant to the procedures
of any written agreement between the Corporation and an Optionee, that an Optionee has: (1) materially
failed, neglected or refused to perform the duties, responsibilities or obligations specifically described in
or assigned to him or her under any written agreement between the Optionee and the Corporation; (2)
engaged in a willful or intentional act that has the effect of substantially injuring the reputation or
business of the Corporation or any of its affiliates and any of their respective affiliates; (3) used illegal
drugs or engaged in repeated drunkenness; (4) been the subject of a plea of nolo contendre , admission of
guilt or conviction by a court of competent jurisdiction for the commission of (i) a felony or (ii) a
misdemeanor involving moral turpitude; (5) engaged in an act of fraud or embezzlement or material
dishonesty against the Corporation or any other person or entity; (6) excessive unexcused absences from
work not related to a disability; (7) engaged in other violations of service policies adopted by the
Corporation that provide for the orderly administration of the workplace; or (8) during the term of any
service, materially violated any obligations not to disclose confidential information of the Corporation
P.
1934 Act shall mean the Securities Exchange Act of 1934, as amended.
Q.
Non-Statutory Stock Option shall mean an option not intended to satisfy the
requirements of Section 422 of the Code.
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Exhibit 99
R.
Option Grant Program shall mean the option grant program in effect under the Plan.
S.
Optionee shall mean any person to whom an option is granted under the Option Grant
Program.
T.
Parent shall mean any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than
the Corporation), owns, at the time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other corporations in such chain.
U.
Plan shall mean the SunVesta, Inc. 2013 Stock Option Plan, as set forth in this
document.
V.
Plan Administrator shall mean either the Board or the Committee, to the extent the
Committee at the time is responsible for the administration of the Plan.
W.
Service shall mean the provision of services to the Corporation (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a non-employee member of the Board, or a
Consultant, except to the extent otherwise specifically provided in the documents evidencing the option
grant.
X.
Share shall mean a share of Common Stock.
Y.
Subsidiary shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each corporation (other than the last
corporation) in the unbroken chain, at the time of the determination, owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.
Page 10 of 10